Notes to the Unaudited Consolidated Financial Statements
Note 1—Organization and Basis of Presentation
Background
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 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 unaudited consolidated financial statements to “we,” “us,” or “our” and similar expressions refer to Heliogen.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, these unaudited consolidated financial statements do not include all information or notes required by GAAP for annual financial statements. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair statement.
The results reported in these unaudited consolidated financial statements are not necessarily indicative of the results that may be reported for the entire year. These unaudited consolidated financial statements should be read in conjunction with the annual financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2024.
Certain immaterial prior period amounts, such as severance costs, have been reclassified to conform to current period presentation. These changes did not have a material impact on our financial position or results of operations.
Liquidity and Going Concern
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 September 30, 2024, the Company had liquidity of $44.6 million, consisting of cash and cash equivalents and no debt. During the nine months ended September 30, 2024, the Company incurred a net loss of $46.3 million and used cash in operations of $31.1 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 unaudited 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.
Notes to the Unaudited Consolidated Financial Statements
On May 16, 2024, the Company made the strategic decision to implement a targeted plan, which included a workforce reduction, the closing of the Company’s manufacturing facility in Long Beach, California, (the “Manufacturing Facility”) and a reduction in third-party costs. These actions are intended to further reduce structural costs and operating expenses and better align the Company’s operating structure for commercialization with a technology-centric and capital light model, as the Company continues to explore and evaluate strategic alternatives with its third-party financial advisor. Refer to Note 12—Impairment and Other Charges—Manufacturing Facility Closure for additional information.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in our unaudited consolidated financial statements and the accompanying notes. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions.
Note 2—Revenue
Disaggregated Revenue
The following table provides information about disaggregated revenue:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands
2024
2023
2024
2023
Project revenue
$
420
$
950
$
1,395
$
2,401
Engineering services revenue
14
146
779
473
Total services revenue
434
1,096
2,174
2,874
Grant revenue
616
1,177
2,665
2,730
Total revenue
$
1,050
$
2,273
$
4,839
$
5,604
Services Revenue
Project revenue consists of amounts recognized under contracts with customers for the development, construction and delivery of commercial-scale concentrated solar energy facilities. The Company’s recognized project revenue is associated with a commercial-scale demonstration agreement (“CSDA”) executed with Woodside Energy (USA) Inc. (“Woodside”) in March 2022 for the engineering, procurement and construction of a 5 MWe concentrated solar energy facility to be built in Mojave, California (the “Capella Project”) for the customer’s use in research, development and testing.
Engineering services revenue consists of amounts recognized under contracts with customers for the provision of engineering, research and development (“R&D”), or other similar services in our field of expertise. The Company’s recognized engineering services revenue is associated with engineering studies and projects in the United States (“U.S.”) and Europe.
Grant Revenue
The Company’s grant revenue is primarily related to the Company’s award (the “DOE Award”) from the U.S. Department of Energy (the “DOE”) for costs incurred during such periods that are reimbursable under the DOE Award. During the second quarter of 2024, the proposed budget modification was approved by the DOE for the Capella Project, which did not change the DOE Award amount but resulted in updated cost sharing ratios and indirect rates.
Notes to the Unaudited Consolidated Financial Statements
Contract Estimates
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. As a result, the actual cost for the Capella Project could vary from our current estimate.
During the three and nine months ended September 30, 2023, we recognized a reduction in contract loss provisions of $0.5 million and $0.1 million, respectively, associated with our projects in Germany. No provision for contract losses was recognized during the three and nine months ended September 30, 2024.
We amortized $0.5 million and $1.1 million during the three and nine months ended September 30, 2024, respectively, and $0.3 million and $1.6 million during the three and nine months ended September 30, 2023, 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.
Performance Obligations
Revenue recognized under contracts with customers, which excludes amounts to be received from government grants, relates solely to the performance obligations satisfied during the three and nine months ended September 30, 2024 and 2023 with no revenue recognized from performance obligations satisfied in prior periods.
As of September 30, 2024, we had approximately $36.8 million of the transaction price allocated to the remaining performance obligation from our contract for the Capella Project. Currently, we are unable to estimate the timing of recognition of revenue for the remaining transaction price.
Notes to the Unaudited Consolidated Financial Statements
Contract Liabilities
The following table outlines the activity related to contract liabilities:
$ in thousands
Balance as of December 31, 2023
$
17,008
Payments received in advance of performance
4,336
Revenue recognized
(1,395)
Recognition of consideration payable associated with Project Warrants
(135)
Other
4
Balance as of September 30, 2024
$
19,818
During the three and nine months ended September 30, 2024, we recognized revenue of $0.4 million and $1.4 million, respectively, that was included in contract liabilities as of December 31, 2023.
Customer Concentrations
The following table shows the customers, including governmental entities, who accounted for greater than 10% of our total revenue:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Customer A
39
%
42
%
41
%
43
%
Customer B
59
%
52
%
55
%
48
%
The following table shows the customers, including governmental entities, who accounted for greater than 10% of our total receivables:
September 30, 2024
December 31, 2023
Customer B
59
%
77
%
Customer C
29
%
12
%
Note 3—Warrants
Public Warrants and Private Warrants
The Company’s warrant liabilities as of September 30, 2024 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 Public and Private Warrants 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.
Notes to the Unaudited Consolidated Financial Statements
Project Warrants
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. The Project Warrants are recorded as equity on the consolidated balance sheets.
During the three and nine months ended September 30, 2024, $41 thousand and $0.1 million, respectively, was recognized as additional paid-in capital related to the vesting of Project Warrants. During the three and nine months ended September 30, 2023, $0.1 million and $0.2 million, respectively, was recognized as additional paid-in capital related to the vesting of Project Warrants. As of September 30, 2024, vested Project Warrants were exercisable for 14,978 shares of the Company’s common stock.
Collaboration Warrants
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 are recorded as equity on the consolidated balance sheets and the related expense is recognized ratably as selling, general and administrative (“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 $0.5 million and $1.5 million, respectively, during the three and nine months ended September 30, 2023, respectively. During the fourth quarter of 2023, we fully impaired the Collaboration Warrants and recognized the remaining expense as an impairment charge on our consolidated statements of operations.
Note 4—Fair Value of Financial Instruments
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:
$ in thousands
Level
September 30, 2024
December 31, 2023
Assets:
Investments
1
$
—
$
12,386
Liabilities:
Public Warrants (1)
1
$
26
$
97
Private Warrants (1)
2
1
3
________________
(1)Included in other long-term liabilities on the consolidated balance sheets.
Notes to the Unaudited Consolidated Financial Statements
Private Warrants. The fair value of the Private Warrants approximates the fair value of the Public Warrants due to the existence of similar redemption provisions. As a result, the Company has determined that the fair value of the Private Warrants at a specific date would be similar to that of the Public Warrants, and thus the fair value is determined by using the closing price of the Public Warrants, which was $0.003 as of September 30, 2024.
Contingent Consideration. In connection with the acquisition of HelioHeat GmbH in September 2021, part of the fair value of the consideration transferred was contingent consideration. The contingent consideration was classified as Level 3 in the fair value hierarchy and measured at fair value using a probability-weighted discounted cash flow model utilizing estimated timing for the commissioning and required operational period of a commercial facility using the acquired particle receiver technology.
As of September 30, 2024 and December 31, 2023, the fair value of the contingent consideration was zero. The following table summarizes the activities of our Level 3 fair value measurement for the three and nine months ended September 30, 2023:
Three Months Ended
Nine Months Ended
$ in thousands
September 30, 2023
September 30, 2023
Beginning balance
$
1,590
$
353
Change in fair value (1)
52
1,289
Ending balance
$
1,642
$
1,642
________________
(1)The changes in the fair value of the contingent consideration are included in other income, net on our consolidated statements of operations.
Note 5—Inventories
Inventories consisted of the following:
$ in thousands
September 30, 2024
December 31, 2023
Raw materials
$
—
$
1,870
Finished goods
—
2,424
Work in process
—
53
Reserve for excess and obsolete inventory
—
(2,391)
Total inventories, net
$
—
$
1,956
During the second quarter of 2024, we recorded an inventory reserve of $1.7 million, included in cost of services revenue on our consolidated statements of operations, to adjust for excess and obsolete inventories based on our current future project needs.
During the third quarter of 2024, in connection with the closure of our Manufacturing Facility, the Company sold the excess and obsolete inventory and wrote-off the corresponding $4.1 million reserve.
Notes to the Unaudited Consolidated Financial Statements
Note 6—Property, Plant & Equipment
Major classes of property, plant and equipment, consisted of the following:
$ in thousands
Estimated Useful Lives in Years
September 30, 2024
December 31, 2023
Leasehold improvements
5 — 7
$
740
$
3,107
Computer equipment
2 — 3
2,105
2,165
Machinery, vehicles and other equipment
5 — 7
894
4,307
Furniture and fixtures
2 — 5
538
664
Construction in progress
—
125
Total property, plant and equipment
4,277
10,368
Accumulated depreciation
(3,650)
(4,791)
Total property, plant and equipment, net
$
627
$
5,577
Depreciation expense for property, plant and equipment was $0.1 million and $0.5 million for the three months ended September 30, 2024 and 2023, respectively, and $0.8 million and $1.6 million for the nine months ended September 30, 2024 and 2023, respectively, and is recorded in SG&A expense with a portion allocated to cost of services revenue.
During the second quarter of 2024, we recorded an impairment of property, plant and equipment of $3.4 million, included in impairment and other charges on our consolidated statements of operations. Refer to Note 12—Impairment and Other Charges—Manufacturing Facility Closure for additional information.
Asset Sales
During the second quarter of 2024, we began to sell assets located at our Manufacturing Facility as a result of the decision to close the facility. Refer to Note 1—Organization and Basis of Presentation—Liquidity and Going Concern for additional information. During the three months and nine months ended September 30, 2024, we received $0.4 million and $0.8 million, respectively, in proceeds from the sale of property, plant and equipment and recognized losses of $0.1 million and $0.1 million, respectively, from disposal of assets, which is recorded in SG&A expense.
Note 7—Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
$ in thousands
September 30, 2024
December 31, 2023
Payroll and other employee benefits
$
588
$
1,084
Professional fees
1,126
1,913
Research, development and project costs
4,892
3,658
Inventory in-transit
—
29
Operating lease liabilities, current portion
2,387
1,792
Other accrued expenses
802
431
Total accrued expenses and other current liabilities
Notes to the Unaudited Consolidated Financial Statements
Note 8—Leases
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.
As discussed in Note 1—Organization and Basis of Presentation—Liquidity and Going Concern, on May 16, 2024, the Company made the decision to implement a targeted plan, which included a workforce reduction, the closing of its Manufacturing Facility and a reduction in third-party costs. Due to the decision to close the Manufacturing Facility, the Company no longer anticipates utilizing the five-year renewal option for the manufacturing space in Long Beach, California (the “Long Beach Lease”). As a result, during the nine months ended September 30, 2024, our right-of-use asset and operating lease liabilities for the Long Beach Lease were both decreased by $6.4 million. As of September 30, 2024, the Company still has a $1.5 million standby letter of credit outstanding associated with the Long Beach lease, included in restricted cash on the consolidated balance sheet. No amounts have been drawn under the standby letter of credit.
The following table provides information on the amounts of our right-of-use assets and liabilities included on our consolidated balances sheets:
$ in thousands
Financial Statement Line
September 30, 2024
December 31, 2023
Operating lease right-of-use assets
Operating lease right-of-use assets
$
6,166
$
13,909
Operating lease liabilities, current
Accrued expenses and other current liabilities
2,387
1,792
Operating lease liabilities, non-current
Operating lease liabilities, non-current
4,531
12,878
The following table summarizes the components of lease costs:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands
2024
2023
2024
2023
Operating lease cost
$
676
$
688
$
2,079
$
2,040
Sublease income
(43)
(45)
(125)
(114)
Total lease cost
$
633
$
643
$
1,954
$
1,926
The Company has variable and other related lease costs which were not considered material for the three and nine months ended September 30, 2024 and 2023.
The weighted-average remaining lease terms and discount rates for the Company’s operating leases were as follows:
September 30, 2024
December 31, 2023
Weighted-average remaining lease term (years)
3.2
7.0
Weighted-average discount rate
7.9
%
7.4
%
The following table summarizes the supplemental cash flow information related to leases:
Nine Months Ended
September 30,
$ in thousands
2024
2023
Cash paid for amounts included in the measurement of operating lease liabilities
$
2,089
$
2,003
Right-of-use assets obtained in exchange for new operating lease liabilities
132
187
Decrease in right-of-use asset and operating lease liabilities due to lease remeasurement
Notes to the Unaudited Consolidated Financial Statements
As of September 30, 2024, the maturities of our future undiscounted cash flows associated with our operating lease liabilities were as follows:
$ in thousands
2024 (remaining months)
$
730
2025
2,854
2026
2,372
2027
967
2028
539
Thereafter
549
Total future lease payments
$
8,011
Less: Imputed interest
(1,093)
Present value of future lease payments
$
6,918
Note 9—Equity
Stockholder Matters
As previously reported, on November 7, 2023, the NYSE notified the Company that it had determined to commence proceedings to delist the Company’s common stock and Public Warrants from the NYSE. Trading in these securities was immediately suspended. The NYSE reached its decision to delist these securities pursuant to Section 802.01B of the NYSE Listed Company Manual. On April 15, 2024, the Company notified the NYSE that the Company intended to withdraw its appeal of the delisting determination and on June 10, 2024, the NYSE filed with the SEC a Notification of Removal From Listing and/or Registration under Section 12(b) of the Exchange Act on Form 25 in order to delist the Company’s common stock and Public Warrants from the NYSE and deregister the Company’s common stock and Public Warrants under Section 12(b) of the Exchange Act. The delisting became effective on June 20, 2024.
The Company’s common stock is currently quoted on the OTCQX, the highest market tier operated by the OTC Markets Group, Inc. The Company intends to continue to comply with public company SEC regulations and other NYSE listing requirements, including filing quarterly financial statements, having independently audited financials, and maintaining an independent board of directors with corporate governance rules and oversight committees.
Stockholders Rights Plan
On April 16, 2023, the Company’s Board of Directors (the “Board”) declared a dividend of one preferred share purchase right (“Right”) for each outstanding share of the Company’s common stock to the stockholders of record as of the close of business on April 28, 2023, and adopted a limited duration stockholder rights plan, as set forth in the Rights Agreement, dated as of April 16, 2023 (the “Rights Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, as rights agent. The Rights will be exercisable only if a person or group (an “acquiring person”) acquires or launches a tender or exchange offer to acquire beneficial ownership (which includes certain synthetic equity interests) of 12.5% or more of the Company’s outstanding common stock (20% for certain passive institutional investors as described in the Rights Agreement) without the approval of the Board. Under the original terms of the Rights Agreement, once the Rights become exercisable, each Right will entitle its holder (other than the acquiring person, whose rights will become void) to purchase for $122.50, subject to adjustment, additional shares of our common stock having a market value of twice such exercise price. In addition, the Rights Agreement has customary flip-over and exchange features.
Notes to the Unaudited Consolidated Financial Statements
On April 16, 2024, we entered into Amendment No. 1 (the “Amendment”) to the Rights Agreement. The Amendment extends the final expiration date of the Rights Agreement by one year such that the Rights will now expire on April 17, 2025. The Amendment also changes the definition of “Exercise Price” from $122.50 to $26.40 and amends the definition of “acquiring person” to reflect the terms and conditions of the limited waiver previously granted by us to Nant Capital, LLC and certain of its affiliates, as previously disclosed on the Company’s Current Report on Form 8-K dated February 15, 2024. The Rights Agreement otherwise remains unmodified and in full force and effect in accordance with its terms.
The Rights Agreement will reduce the likelihood that any entity, person or group gains control of Heliogen through open market accumulation without paying all stockholders an appropriate control premium or without providing our Board sufficient time to make informed judgments and take actions that are in the best interests of all stockholders.
Note 10—Loss per Share
Basic and diluted losses per share (“EPS”) were as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands, except share and per share data
2024
2023
2024
2023
Numerator:
Net loss
$
(11,815)
$
(18,570)
$
(46,322)
$
(50,797)
Denominator:
Weighted-average common shares outstanding
6,016,299
5,865,954
5,981,790
5,698,405
Weighted-average impact of warrants (1)
70,083
69,869
69,239
66,951
Denominator for basic EPS – weighted-average shares
6,086,382
5,935,823
6,051,029
5,765,356
Effect of dilutive securities
—
—
—
—
Denominator for diluted EPS – weighted-average shares
6,086,382
5,935,823
6,051,029
5,765,356
EPS – Basic and Diluted
$
(1.94)
$
(3.13)
$
(7.66)
$
(8.81)
________________
(1)Warrants that have a $0.35 exercise price per common share are assumed to be exercised when vested because common shares issued for little consideration upon exercise are included in outstanding shares for the purposes of computing basic and diluted EPS.
The following securities were excluded from the calculation of losses per share as their impact would be anti-dilutive:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Stock options
172,453
239,424
172,453
239,424
Shares issuable under the employee stock purchase plan
Notes to the Unaudited Consolidated Financial Statements
Note 11—Share-based Compensation
The Heliogen, Inc. 2021 Equity Incentive Plan aims to incentivize employees, directors and consultants who render services to the Company through the granting of stock awards, including stock options, stock appreciation right awards, restricted stock awards, restricted stock unit (“RSU”) awards, performance awards, and other stock-based awards.
The following table summarizes our share-based compensation expense by the affected line on our consolidated statements of operations:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands
2024
2023
2024
2023
Cost of services revenue
$
44
$
197
$
152
$
442
Selling, general and administrative
826
199
2,497
(7,344)
Research and development
(161)
(91)
27
824
Total share-based compensation expense
$
709
$
305
$
2,676
$
(6,078)
The following table summarizes our share-based compensation expense by grant type:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands
2024
2023
2024
2023
Stock options
$
107
$
172
$
353
$
(11,883)
Restricted stock units
590
75
2,293
5,449
Employee stock purchase plan
12
49
30
240
Vendor Warrants
—
9
—
116
Total share-based compensation expense
$
709
$
305
$
2,676
$
(6,078)
Stock Options
The following table summarizes the Company’s stock option activity:
$ in thousands, except share and per share data
Number of Shares
Weighted Average Exercise Price ($)
Weighted Average Remaining Contractual Life (Years)
Aggregate Intrinsic Value ($)
Outstanding balance as of December 31, 2023
204,394
$
12.64
5.82
$
6
Exercised
(3,818)
0.70
Forfeited
(3,985)
53.95
Expired
(24,138)
30.13
Outstanding balance as of September 30, 2024
172,453
$
9.50
4.03
$
1
Exercisable as of September 30, 2024
162,696
$
9.12
3.89
$
1
As of September 30, 2024, the unrecognized compensation cost related to stock options was $0.2 million which is expected to be recognized over a weighted-average period of 0.5 years.
Notes to the Unaudited Consolidated Financial Statements
Restricted Stock Units
The following table summarizes the Company’s RSU award activity:
Number of Shares
Weighted Average Grant Date Fair Value ($)
Unvested as of December 31, 2023
339,287
$
58.92
Granted
523,702
1.54
Vested
(129,505)
42.92
Forfeited
(162,963)
38.24
Unvested as of September 30, 2024
570,521
$
15.58
As of September 30, 2024, the unrecognized compensation cost related to unvested RSU awards was $4.4 million which is expected to be recognized over a weighted-average period of 2.1 years.
Note 12—Impairment and Other Charges
Impairment and other charges consisted of the following:
Three Months Ended
Nine Months Ended
September 30,
September 30,
$ in thousands
2024
2023
2024
2023
Property, plant and equipment
$
—
$
—
$
3,354
$
—
Goodwill
—
—
—
1,008
Severance costs
202
115
847
587
Manufacturing Facility closing costs
—
—
161
—
Total impairment and other charges
$
202
$
115
$
4,362
$
1,595
Manufacturing Facility Closure
As discussed in Note 1—Organization and Basis of Presentation—Liquidity and Going Concern, on May 16, 2024, the Company made the strategic decision to implement a targeted plan, which included a workforce reduction, the closing of its Manufacturing Facility and a reduction in third-party costs. Costs and charges related to the implementation of the Company’s targeted plan, are accrued when probable and reasonably estimable or at the time of program announcement. The Company expects to incur the costs associated with its targeted plan over the remainder of 2024 and possibly into the first quarter of 2025, however the ultimate amount and timing of total costs and charges in connection with the Company’s targeted plan may vary due to a variety of factors, including the finalization of the closure of the Manufacturing Facility and continued sales of property, plant and equipment located at the Manufacturing Facility.
During the second quarter of 2024, management concluded that these actions constituted a triggering event and as a result, we performed an impairment assessment for our long-lived assets, including right-of-use assets. During the second quarter of 2024, we recorded impairments of $3.4 million to property, plant and equipment related to leasehold improvements, machinery and equipment and other fixed assets located at our Manufacturing Facility.
During the second quarter of 2024, we recorded severance costs of $0.6 million related to employee transition, severance and related benefits, primarily associated with the workforce reduction mentioned above.
Notes to the Unaudited Consolidated Financial Statements
During the second quarter of 2024, we recorded reorganization costs of $0.2 million associated with closing our Manufacturing Facility. We estimate that we could incur between $0.2 million to $2.0 million of costs associated with closing the Manufacturing Facility, including lease termination costs and other related costs, over the remainder of 2024 and possibly into the first quarter of 2025.
As of September 30, 2024, the reorganization costs liability decreased to $0.1 million due to payments made during the three months ended September 30, 2024, associated with closing our Manufacturing Facility. The reorganization costs liability is included in accrued expenses and other current liabilities on our consolidated balance sheets.
Goodwill Impairment
During the first quarter of 2023, we assessed our goodwill for impairment due to a sustained decrease in the Company’s market capitalization. The Company concluded that it was more likely than not that the fair value of its reporting unit was less than its carrying amount as of March 31, 2023. As a result, we fully impaired goodwill and recorded an impairment of $1.0 million during the first quarter of 2023.
Reorganization Costs
During the three months ended September 30, 2024, we recorded additional severance costs of $0.2 million related to employee severance and related benefits. In October 2024, we initiated additional workforce reductions which resulted in severance costs of approximately $0.6 million for employee severance and related benefits.
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 three and nine months ended September 30, 2023, we recorded severance costs of $0.1 million and $0.6 million, respectively, for employee severance and related benefits.
Note 13—Income Taxes
We calculate our quarterly tax provision pursuant to the guidelines in Accounting Standards Codification (“ASC”) 740, Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. The estimated annual effective tax rate represents the Company’s estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision. The relationship between our income tax provision or benefit and our pre-tax book income or loss can vary significantly from period to period considering, among other factors, the overall level of pre-tax book income or loss and changes in the blend of jurisdictional income or loss that is taxed at different rates and changes in valuation allowances. The income tax provision was $1 thousand and $5 thousand for the three and nine months ended September 30, 2024, respectively. The income tax provision was $1 thousand and $3 thousand for the three and nine months ended September 30, 2023, respectively. Any income tax benefit associated with the pre-tax loss for the three and nine months ended September 30, 2024 and 2023, resulting primarily from the U.S. jurisdiction, is offset by a full valuation allowance.
The Company is under audit by the Internal Revenue Services for the year ended December 31, 2022. We believe that we have made adequate provision for all income tax uncertainties.
Notes to the Unaudited Consolidated Financial Statements
Note 14—Related Party Transactions
NantG Power, LLC
On March 24, 2023, Heliogen 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. During the three and nine months ended September 30, 2024, the Company recognized $20 thousand and $0.2 million, respectively, of services revenue from NantG. During the three and nine months ended September 30, 2023, the Company recognized $15 thousand of services revenue from NantG. As of September 30, 2024 and December 31, 2023, we had outstanding accounts receivable of $20 thousand and $0.1 million, respectively, with NantG.
Note 15—Commitments and Contingencies
From time to time, we are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims and other miscellaneous claims. We recognize a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our unaudited consolidated financial statements as of and for the nine months ended September 30, 2024.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions, including those described in “Cautionary Note Regarding Forward-Looking Statements” included in the fore-part in this Quarterly Report on Form 10-Q (our “Quarterly Report”) and included in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “Annual Report”), as filed with the SEC on March 26, 2024.
The following MD&A should be read in conjunction with our unaudited consolidated financial statements and related notes included in Part I Item 1 in this Quarterly Report and our audited consolidated financial statements as of December 31, 2023, included in our Annual Report.
Overview
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, artificial intelligence enabled, concentrated solar energy plant that uses 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 or power, dispatchable around the clock using thermal energy storage based on proven technology. 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 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), and clean power (electricity) for a variety of applications, based on a customer’s needs.
Recent Developments
In May 2024, we implemented a targeted plan, which included a workforce reduction, the closing of our manufacturing facility in Long Beach, California, (the “Manufacturing Facility”) and a reduction in third-party costs. These actions are intended to further reduce structural costs and operating expenses and better align our operating structure for commercialization with a technology-centric and capital light model, as we continue to explore and evaluate strategic alternatives with our third-party financial advisor.
We estimate that we could incur the following charges in connection with the targeted plan; $0.2 million to $2.0 million of costs associated with closing the manufacturing facility, including lease termination costs and other related costs, in addition to the $3.4 million of asset impairment charges and $0.6 million of employee transition, severance payments and related benefits that were incurred during the second quarter of 2024. We have incurred $4.2 million of these costs during the nine months ended September 30, 2024, which were recorded as impairment and other charges on our consolidated statements of operations. We expect to incur the remainder of these costs through the end of 2024 and possibly into the first quarter of 2025. Refer to Note 12—Impairment and Other Charges—Manufacturing Facility Closure for additional information.
How We Generate Revenue
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 are 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.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023
Three Months Ended
September 30,
$ in thousands
2024
2023
$ Change
% Change
Revenue:
Services revenue
$
434
$
1,096
$
(662)
(60)
%
Grant revenue
616
1,177
(561)
(48)
%
Total revenue
1,050
2,273
(1,223)
Cost of revenue:
Cost of services revenue (including depreciation)
494
1,220
(726)
(60)
%
Cost of grant revenue
616
1,177
(561)
(48)
%
Contract loss (adjustments) provisions
—
(538)
538
(100)
%
Gross profit (loss)
(60)
414
(474)
Operating expenses:
Selling, general and administrative
7,854
14,882
(7,028)
(47)
%
Research and development
4,509
5,162
(653)
(13)
%
Impairment and other charges
202
115
87
76
%
Operating loss
(12,625)
(19,745)
7,120
Interest income, net
535
335
200
60
%
Gain on warrant remeasurement
53
74
(21)
(28)
%
Other income, net
223
767
(544)
(71)
%
Net loss before taxes
(11,814)
(18,569)
6,755
Provision for income taxes
(1)
(1)
—
—
%
Net loss
$
(11,815)
$
(18,570)
$
6,755
Revenue and Gross Loss
During the three months ended September 30, 2024, we recognized total revenue of $1.1 million, a decrease of $1.2 million compared to total revenue of $2.3 million for the three months ended September 30, 2023.
We recognized services revenue of $0.4 million during the three months ended September 30, 2024, a decrease of $0.7 million compared to services revenue of $1.1 million for the three months ended September 30, 2023. The decrease in services revenue is primarily due to a reduction in revenue recognized on the engineering, procurement and construction of a 5 MWe concentrated solar energy facility to be built in Mojave, California (the “Capella Project”) during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, resulting from a decrease in the cost incurred on the project.
We recognized grant revenue of $0.6 million during the three months ended September 30, 2024, a decrease of $0.6 million compared to grant revenue of $1.2 million for the three months ended September 30, 2023. The decrease was driven by a decrease in reimbursable costs incurred on the Capella Project under the award (the “DOE Award”) received from the U.S. Department of Energy (the “DOE”) for the three months ended September 30, 2024.
During the three months ended September 30, 2024, we recognized a gross loss of $0.1 million, a change of $0.5 million compared to gross profit of $0.4 million for the three months ended September 30, 2023. The change was primarily driven by the recognition of a reduction in our contract loss provision during the three months ended September 30, 2023 of $0.5 million associated with our projects in Germany.
Selling, General and Administrative
The following table summarizes selling, general and administrative (“SG&A”) expenses:
During the three months ended September 30, 2024, we recognized SG&A expense of $7.9 million, a decrease of $7.0 million compared to SG&A expense of $14.9 million for the three months ended September 30, 2023. The decrease was primarily driven by a decrease of $2.9 million in professional and consulting fees as we focused on reducing third-party costs, a decrease of $2.8 million in employee compensation primarily driven by headcount reductions and a decrease of $1.2 million in other SG&A expense as we focused on reducing discretionary spending.
Research and Development
The following table summarizes research and development (“R&D”) expenses:
During the three months ended September 30, 2024, we recognized R&D expense of $4.5 million, a decrease of $0.7 million compared to R&D expense of $5.2 million for the three months ended September 30, 2023. The decrease was primarily driven by a decrease of $1.7 million in employee compensation primarily due to headcount reductions, partially offset by an increase in other R&D costs associated with the construction of our steam plant, located in Plains, Texas (the “Texas Steam Plant”).
Other Income, Net
During the three months ended September 30, 2024, we recognized other income of $0.2 million, a decrease of $0.5 million compared to other income of $0.8 million for the three months ended September 30, 2023. The decrease is primarily attributable to a decrease of $0.8 million in accretion income related to our investments in available-for-sale securities, which was partially offset by a cash prize award of $0.2 million received for our heliostats during the three months ended September 30, 2024.
Comparison of the Nine Months Ended September 30, 2024 and 2023
Nine Months Ended
September 30,
$ in thousands
2024
2023
$ Change
% Change
Revenue:
Services revenue
$
2,174
$
2,874
$
(700)
(24)
%
Grant revenue
2,665
2,730
(65)
(2)
%
Total revenue
4,839
5,604
(765)
Cost of revenue:
Cost of services revenue (including depreciation)
3,851
3,221
630
20
%
Cost of grant revenue
2,665
2,690
(25)
(1)
%
Contract loss (adjustments) provisions
—
(148)
148
(100)
%
Gross profit (loss)
(1,677)
(159)
(1,518)
Operating expenses:
Selling, general and administrative
29,714
36,227
(6,513)
(18)
%
Research and development
13,051
15,368
(2,317)
(15)
%
Impairment and other charges
4,362
1,595
2,767
173
%
Operating loss
(48,804)
(53,349)
4,545
Interest income, net
1,893
888
1,005
113
%
Gain on warrant remeasurement
74
326
(252)
(77)
%
Other income, net
520
1,341
(821)
(61)
%
Net loss before taxes
(46,317)
(50,794)
4,477
Provision for income taxes
(5)
(3)
(2)
67
%
Net loss
$
(46,322)
$
(50,797)
$
4,475
Revenue and Gross Loss
During the nine months ended September 30, 2024, we recognized total revenue of $4.8 million, a decrease of $0.8 million compared to total revenue of $5.6 million for the nine months ended September 30, 2023.
We recognized services revenue of $2.2 million during the nine months ended September 30, 2024, a decrease of $0.7 million compared to services revenue of $2.9 million for the nine months ended September 30, 2023. The decrease in services revenue is primarily due to a reduction in revenue recognized on the Capella Project during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, resulting from a decrease in the cost incurred on the project, which was partially offset by an increase in engineering services performed during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
We recognized grant revenue of $2.7 million during the nine months ended September 30, 2024, a decrease of $0.1 million compared to grant revenue of $2.7 million for the nine months ended September 30, 2023. The decrease was driven by a decrease in reimbursable costs incurred on the Capella Project under the DOE Award, which was partially offset by the approval of the proposed budget modification by the DOE for the Capella Project, which did not change the DOE Award amount but resulted in more favorable cost sharing ratios and indirect rates for the nine months ended September 30, 2024.
During the nine months ended September 30, 2024, we recognized a gross loss of $1.7 million, a change of $1.5 million compared to gross loss of $0.2 million for the nine months ended September 30, 2023. The change was primarily driven by an inventory reserve of $1.7 million recorded during the nine months ended September 30, 2024 to adjust for excess and obsolete inventories based on our current future project needs. The decrease was partially offset by the recognition of a contract loss provision during the nine months ended September 30, 2023 of $0.1 million primarily related to our German operations.
During the nine months ended September 30, 2024, we recognized SG&A expense of $29.7 million, a decrease of $6.5 million compared to SG&A expense of $36.2 million for the nine months ended September 30, 2023. The decrease was primarily driven by a decrease of $6.5 million in professional and consulting fees as we focused on reducing third-party costs, a decrease of $6.0 million in employee compensation primarily driven by headcount reductions, a decrease of $1.5 million in Collaboration Warrants because they were fully impaired in the fourth quarter of 2023 and a decrease of $1.6 million in other SG&A expense as we focused on reducing discretionary spending. The decrease was partially offset by a $9.8 million increase in share-based compensation primarily due to a one-time reversal of share-based compensation 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.
During the nine months ended September 30, 2024, we recognized R&D expense of $13.1 million, a decrease of $2.3 million compared to R&D expense of $15.4 million for the nine months ended September 30, 2023. The decrease was driven by a decrease of $3.5 million in employee compensation primarily due to headcount reductions and a decrease of $0.8 million in share-based compensation expense due to forfeitures, partially offset by an increase in other R&D costs associated with the construction of our Texas Steam Plant.
Impairment and Other Charges
During the nine months ended September 30, 2024, we recognized impairment and other charges of $4.4 million, consisting of $3.4 million to property, plant and equipment related to leasehold improvements, machinery and equipment and other fixed assets located at our Manufacturing Facility, $0.8 million of employee severance and related benefits associated with workforce reductions and $0.2 million of reorganization costs associated with closing our Manufacturing Facility. Refer to Note 12—Impairment and Other Charges for additional information.
During the nine months ended September 30, 2023, we recognized impairment and other charges of $1.6 million, consisting of an impairment charge of $1.0 million to fully impair goodwill due to a sustained decrease in our market capitalization and $0.6 million expense for employee severance and related benefits.
During the nine months ended September 30, 2024, we recognized interest income of $1.9 million, an increase of $1.0 million compared to interest income of $0.9 million for the nine months ended September 30, 2023. The increase is primarily attributable to the rising interest rate environment for our investments, partially offset by the decrease in our average investment balance.
Other Income, Net
During the nine months ended September 30, 2024, we recognized other income of $0.5 million, a decrease of $0.8 million compared to other income of $1.3 million for the nine months ended September 30, 2023. The decrease is primarily attributable to a decrease of $2.5 million in accretion income related to our investments in available-for-sale securities, partially offset by a gain of $1.3 million for the nine months ended September 30, 2023 in the estimated fair value of the contingent consideration associated with the acquisition of HelioHeat GmbH based on the revised probability of payment, which was partially offset by a cash prize award of $0.2 million received for our heliostats during the nine months ended September 30, 2024.
Liquidity and Capital Resources
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.
As of September 30, 2024, the Company had liquidity of $44.6 million, consisting of cash and cash equivalents and no debt. As of November 4, 2024, the Company had liquidity of $40.7 million, consisting of cash and cash equivalents and no debt.
Going Concern
The accompanying financial statements have been prepared assuming we will continue as a going concern. As of September 30, 2024, our liquidity was $44.6 million and we had an accumulated deficit of $484.5 million. During the nine months ended September 30, 2024, we incurred a net loss of $46.3 million and used cash in operations of $31.1 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 September 30, 2024 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 Quarterly 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 into the second half of 2025.
On May 16, 2024, the Company made the strategic decision to implement a targeted plan, which included a workforce reduction, the closing of the Manufacturing Facility, and a reduction in third-party costs. These actions are intended to further reduce structural costs and operating expenses and better align the Company’s operating structure for commercialization with a technology-centric and capital light model, as the Company continues to explore and evaluate strategic alternatives with its third-party financial advisor.
The following table provides a summary of our cash flows:
Nine Months Ended
September 30,
$ in thousands
2024
2023
Net cash used in operating activities
$
(31,110)
$
(54,922)
Net cash provided by investing activities
13,083
70,598
Net cash provided by (used in) financing activities
(57)
1,336
Net Cash from Operating Activities. Net cash used in operating activities was $31.1 million for the nine months ended September 30, 2024 compared to net cash used in operating activities of $54.9 million for the nine months ended September 30, 2023. The $23.8 million decrease in the net cash used in operating activities was primarily driven by reductions in headcount and discretionary spending as we focused on cost saving opportunities.
Net Cash from Investing Activities. Net cash provided by investing activities was $13.1 million for the nine months ended September 30, 2024 compared to net cash provided by investing activities of $70.6 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, we received proceeds from the maturities of available-for-sale securities of $12.5 million to fund our operations and proceeds from the sale of property, plant and equipment of $0.8 million, partially offset by capital expenditures of $0.3 million. For the nine months ended September 30, 2023, we received net proceeds from the maturities of available-for-sale securities of $71.7 million, partially offset by capital expenditures of $1.1 million.
Net Cash from Financing Activities. Net cash used in financing activities was $57 thousand for the nine months ended September 30, 2024 compared to net cash provided by financing activities of $1.3 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, we paid $73 thousand related to taxes for net-share settlement of share-based compensation, partially offset by proceeds of $13 thousand associated with our employee stock purchase plan. For nine months ended September 30, 2023, we received proceeds of $1.2 million from stock option exercises and proceeds of $0.2 million associated with our employee stock purchase plan.
Cash Requirements
Our material cash requirements from known contractual and other obligations consist of our long-term operating leases, which are primarily for real estate. Refer to Note 8—Leases for additional information regarding maturity analysis of our operating leases.
Critical Accounting Estimates
There have been no material changes to our discussion of critical accounting estimates from those set forth in our Annual Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in our internal control over financial reporting described in our Annual Report, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
Other than executing upon the implementation of the remediation measures described in our Annual Report and the associated changes to our internal control over financial reporting, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.