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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-29 · 434 added, 111 removed, 3 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this section to the “Company,” “AMCI Acquisition Corp.

II,” “AMCI,” “our,” “us” or “we” refer to AMCI Acquisition Corp.

II prior to the consummation of the Business Combination.

In connection with the consummation of the Business Combination, AMCI’s Class A common stock, par value $0.0001 per share (“Class A common stock”), and AMCI’s Class B common stock, par value $0.0001 per share (“Class B common stock”) were reclassified into a single class of common stock, par value $0.0001 per share, of LanzaTech.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Prior to February 8, 2023, the Company was a blank check company.

The Company was originally incorporated as a Delaware corporation on January 28, 2021.

On the Closing Date, the Company consummated its Business Combination with Legacy LanzaTech.

The Business Combination is a subsequent event that occurred after the periods for which the financial information herein is presented.

The Company’s financial statement presentation to be included in quarterly and annual filings with the Securities and Exchange Commission (“SEC”) on Forms 10-Q and 10-K with respect to periods subsequent to the Business Combination will include the consolidated financial statements of Legacy LanzaTech and its subsidiaries for periods prior to the completion of the Business Combination and of LanzaTech Global, Inc.

for periods from and after the Closing Date.

The financial information included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects the historical operations of AMCI, the legal acquirer, unless otherwise noted.

Our sponsor was AMCI Sponsor II LLC (the “Sponsor”).

Results of Operations

Our entire activity from inception up to December 31, 2022 was in preparation for our formation, the initial public offering, identifying the target for the Business Combination and consummating the Business Combination.

We did not generate any operating revenues prior to the consummation of the Business Combination.

For the year ended December 31, 2022, we had a net loss of approximately $1.4 million, which consisted of approximately a $3.0 million gain from changes in fair value of derivative warrant liabilities, approximately $172,000 gain from extinguishment of deferred underwriting commissions on public shares and approximately $2.3 million of income from investments held in the trust account, partially offset by approximately $5.9 million in general and administrative expenses, $120,000 in general and administrative expenses - related party, approximately $246,000 in capital based tax expenses, approximately $200,000 in franchise tax expenses, and approximately $309,000 in income tax expenses.

For the period from January 28, 2021 (inception) through December 31, 2022, we had net income of approximately $47,000, which consisted of approximately a $1.9 million gain from changes in fair value of derivative warrant liabilities and approximately $6,000 of income from investments held in the trust account, partially offset by approximately $951,000 in general and administrative expenses, $50,000 in general and administrative expenses - related party, approximately $198,000 in capital base tax expenses, approximately $188,000 in franchise tax expenses, and approximately $476,000 in offering costs allocated to derivative warrant liabilities.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report, and our audited consolidated financial statements.

This discussion and analysis may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions, including, but not limited to, risks and uncertainties discussed under the heading ‘Cautionary Note on Forward-Looking Statements,’ and in Part I, Item 1A “Risk Factors” included in this Annual Report .

In this section, unless otherwise indicated or the context otherwise requires, references in this section to “LanzaTech,” the “Company,” “we,” “us,” “our” and other similar terms refer to LanzaTech Global, Inc.

and its consolidated subsidiaries, including LanzaTech NZ, Inc.

and its consolidated subsidiaries subsequent to the Business Combination and LanzaTech NZ, Inc.

and its consolidated subsidiaries prior to the Business Combination.

References to “AMCI” refer to AMCI Acquisition Corp.

II prior to the Business Combination.

We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations of LanzaTech NZ, Inc.

for the year ended December 31, 2022,” included as Exhibit 99.6 to our Current Report on Form 8-K/A, filed with the SEC on March 28, 2023, for reference to discussion of the fiscal year ended December 31, 2021, the earliest of the three fiscal years presented.We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations of LanzaTech NZ, Inc.

We are a nature-based carbon refining company that develops technology to transform waste carbon into the chemical building blocks for consumer goods such as sustainable fuels, fabrics, and packaging that people use in their daily lives.

Our customers leverage our proven proprietary gas fermentation technology platform to convert certain feedstock, including waste carbon gases, into sustainable fuels and chemicals such as ethanol.

Today, we are focused on taking advantage of the many uses of ethanol while capitalizing on the growing preference among major companies for renewable products and environmentally-conscious manufacturing processes.

We have also been developing the capabilities to produce single cell protein as a primary product from our gas fermentation platform.

LanzaTech performs research and development (“R&D”) services related to novel technologies and development of biocatalysts for commercial applications, mainly to produce fuels and chemicals.

We primarily employ a licensing business model whereby our customers build, own and operate facilities that use our technology, and in return, we are paid a royalty fee based on the revenue generated from the use of our technology.

We began operations in 2005.

In 2018, through our joint venture with Shougang LanzaTech (also referred as “SGLT” herein), we established the world’s first commercial waste gas-to-ethanol plant in China, followed by five more plants between 2021 and 2023 - three in China, one in India, and one in Belgium with others currently in development in various countries around the world.

We have not achieved operating profitability since our formation.

Our net losses after tax were $(134.1) million for the year ended December 31, 2023 and $(76.4) million for the year ended December 31, 2022.

As of December 31, 2023 we had an accumulated deficit of $(831.9) million compared to an accumulated deficit of $(456.2) million as of December 31, 2022.

We anticipate that we will continue to incur losses until we sufficiently commercialize our technology.

Near-term, we expect engineering services and sales of equipment packages on several projects to drive higher revenues.

The Business Combination

On March 8, 2022, AMCI entered into the Merger Agreement with LanzaTech NZ, Inc.

and AMCI Merger Sub, Inc.

(“Merger Sub”).

On February 8, 2023, Merger Sub merged with and into LanzaTech NZ, Inc.

Upon consummation of the Business Combination, the separate corporate existence of Merger Sub ceased, and LanzaTech NZ, Inc.

survived the Business Combination and became a wholly owned subsidiary of AMCI.

In connection with the consummation of the Business Combination, the combined company was renamed “LanzaTech Global, Inc.”.

Accounting Impact of the Business Combination

The Business Combination was accounted for as a reverse recapitalization.

LanzaTech NZ, Inc.

was deemed the accounting predecessor and the Company is the successor SEC registrant.

Under this method of accounting, AMCI was treated as the acquired company for financial statement reporting purposes.

For accounting purposes, LanzaTech NZ, Inc.

was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of LanzaTech NZ, Inc.

(i.e., a capital transaction involving the issuance of stock by AMCI for the stock of LanzaTech NZ, Inc.).

Accordingly, the consolidated balance sheets and results of operations of LanzaTech NZ, Inc.

became the historical financial statements of the Company, and AMCI’s assets, liabilities and results of operations were consolidated with LanzaTech NZ Inc.’s beginning on the acquisition date.

The net assets of AMCI were recognized at carrying value, with no goodwill or other intangible assets recorded.

Basis of Presentation

LanzaTech’s consolidated financial statements were prepared in accordance with US GAAP.

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements for a full description of our basis of presentation.

Key Financial Metrics:

The key elements of LanzaTech’s performance for the years ended December 31, 2023 and December 31, 2022 are summarized in the tables below:

Year Ended December 31, Change

(In thousands, except for percentages) 2023 2022 2023 vs.

GAAP Measures:

Revenue $ 62,631 $ 37,343 $ 25,288 68 %

Net Loss (134,098) $ (76,356) (57,742) 76 %

Key Performance Indicators:

One-Time Revenue 57,754 33,764 23,990 71 %

Recurring Revenue (1)

4,877 3,579 1,298 36 %

Total Revenue $ 62,631 $ 37,343 $ 25,288 68 %

Cost of Revenues (ex.

Depreciation) (2)

(44,979) (28,287) (16,692) 59 %

Selling, general & administrative (50,438) (26,804) (23,634) 88 %

Adjusted EBITDA (3)

$ (80,144) $ (69,220) $ (10,924) 16 %

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(1) Includes revenue from licensing and sales of microbes and media.

(2) Consists of cost of revenues from contracts with customers and grants (exclusive of depreciation), cost of revenue from collaboration agreements (exclusive of depreciation) and cost of revenue from related party transactions (exclusive of depreciation).

(3) Adjusted EBITDA, a non-GAAP financial measure, is calculated as net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, transaction costs on issuance of Forward Purchase Agreement, (loss) gain from equity method investees and other one-time costs related to the Business Combination and securities registration on Form S-4 and our registration statement on Form S-1.

Adjusted EBITDA is a supplemental measure that is not a substitute for, or superior to, measures of financial performance prepared in accordance with US GAAP.

Adjusted EBITDA does not represent, and should not be considered, an alternative to net income (loss), as determined in accordance with US GAAP.

See “ Non-GAAP Financial Measures ” for additional information and reconciliation of Adjusted EBITDA to net loss, its most directly comparable US GAAP measure.

Key Non-Financial Metrics:

(in thousands of tonnes per annum)

Capacity as of December 31, 2022 150

Capacity as of December 31, 2023 244

Capacity based on LanzaTech’s technology includes capacity by customers and our cost method investee, is one of the key drivers for the Company's licensing revenues given that they are usually contracted on a percentage-of-revenue, a dollars-per-tonne, or fixed-consideration basis.

Components of Operating Results

While we have offerings in multiple market segments and operate in multiple countries, we operate and manage our business as one reportable operating segment.

Nearly all of our service offerings are delivered and supported on a global basis.

Additionally, most of our service offerings are deployed in a similar way, and we evaluate our financial information and resources and assess the performance of these resources on a consolidated basis.

We earn revenue through engineering and other services contracts, U.S.

government contracts, joint development agreements, and licensing agreements, which, together, represent a single operating segment.

Revenues can be viewed as a combination of the following:

• Biorefining which includes feasibility studies and engineering services related to basic design of commercial plants utilizing our technologies, and licensing of intellectual property and software when customers deploy our biorefining technology;

• Joint development and research services related to novel technologies and the development of biocatalysts;

• Sale of CarbonSmart products to customers.

Revenue is measured based on the consideration specified in customer contracts and excludes amounts collected on behalf of third parties.

We provide feasibility studies and basic design and engineering services used for detailed design, procurement, and construction of commercial plants that utilize our technologies, along with the sale of equipment and microbes.

The services provided are recognized as a performance obligation satisfied over time.

Revenue is recognized using the cost-to-cost input method for certain engineering services or the percentage of completion method in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue for the sale of microbes and media is recognized at a point in time, depending on when control transfers to the customer.

We license intellectual property to generate recurring revenue in the case of running royalties, or one-time revenue, in the case of fixed consideration royalties, when our customers deploy our technology in their biorefining plants.

When licenses are considered to be distinct performance obligations, the recognition of revenue is dependent on the terms of the contract, which may include fixed consideration or royalties based on sales or usage, in which case, the revenue is recognized when the subsequent sale or usage occurs or when the performance obligation to which some or all of the sales or usage-based royalty is allocated or has been satisfied, whichever is later.

Joint Development and Contract Research

We perform R&D services related to novel technologies and the development of biocatalysts for commercial applications, mainly to produce fuels and chemicals.

We engage in two main types of R&D services – joint development agreements, and other contract research, including projects with the U.S.

Department of Energy.

Such services are recognized as a performance obligation satisfied over time.

Revenue is recognized based on milestone completion, when payments are contingent upon the achievement of such milestones, or based on stage of contract or phase completion method when enforceable rights to payment exist.

When no milestones or stages are clearly defined, management has determined that the cost incurred, input method, is an appropriate measure of progress toward complete satisfaction of the performance obligations under ASC 606 and estimates its variable consideration under the expected value method.

Revenue is not recognized in advance of customer acceptance of a milestone, when such acceptance is contractually required.

Payments for R&D services with no contractual payments are not due from customers until a technical report is submitted;

therefore, a contract asset is recognized at milestone completion but prior to the submission of a technical report.

The contract asset represents the Company’s right to consideration for the services performed at milestone completion.

Occasionally, customers provide payments in advance of us providing services which creates a contract liability for the Company.

The contract liability represents our obligation to provide services to a customer.

We sell CarbonSmart products and intermediaries directly to customers purchased from our licensed plants using the Company's proprietary technologies.

Revenue is recognized at a point in time when control transfers to the customer, which varies depending on the shipping terms.

We generally acts as the principal in such transactions and accordingly, recognize revenue and cost of revenues on a gross basis.

Cost of Revenues

Our R&D costs associated with external projects, engineering, and other direct costs of services are related to revenue agreements with customers, related parties, and collaborative partners, and represent costs of revenue.

Costs include both internal and third-party fixed and variable costs and include materials, supplies, labor, and fringe benefits.

Research and Development Expenses

R&D expenses consist of personnel costs, external services, materials and supplies associated with internal R&D projects as well as various laboratory activities.

Indirect R&D costs include depreciation and other indirect overhead expenses.

We expect our R&D activities to increase in the future as revenue grows but decrease as a percentage of our overall cost structure.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") consist primarily of personnel costs, costs of general corporate development activities, travel-related expenses, and other indirect overhead costs.

Our general and administrative expenses consist primarily of personnel costs for our executive, finance, corporate and other administrative functions, intellectual property and patent costs, facilities and other allocated expenses, other expenses for outside professional services, including legal, human resources, audit and accounting services, and insurance costs.

Our general and administrative expenses have increased in 2023 as a result of

becoming a public company, including additional costs relating to compliance with the rules and regulations of the SEC and stock exchange rules, legal and audit services, additional insurance, investor relations activities, and other administrative and professional services.

We expect these costs to stabilize, but remain at higher levels than they were prior to the Business Combination.

We also expect our intellectual property expenses to increase as we expand and increase protection of our intellectual property portfolio.

Other Expense, Net

Other expense, net relates to miscellaneous other income and expense and foreign currency gains and losses.

These items include the mark-to-market adjustments on all liability classified warrants, the FPA Put Option liability, the Fixed Maturity Consideration, and SAFE liabilities.

Interest income, net consists of income earned from our cash, cash equivalents and debt security investments.

Our interest income has increased following the completion of the Business Combination as we invested the net proceeds in a variety of capital preservation financial instruments, including short-term, investment-grade, interest-bearing obligations of the U.S.

government and its agencies.

Loss (Gain) from Equity Investees, Net

We hold interests in LanzaJet located in the United States, and the Shougang Joint Venture (SGLT) located in China which we have determined to be variable interest entities (“ VIEs ”) for which it has been determined we are not the primary beneficiary.

Our variable interests primarily relate to entities in which we have a non-controlling equity interest.

Although these financial arrangements resulted in holding variable interests in these entities, they do not empower us to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, therefore LanzaTech has determined it is not the primary beneficiary and does not currently consolidate these VIEs.

Through our holdings in LanzaJet, our representation on the board of directors and participation in the policy-making process, as well as the material intra-entity transactions, we have determined that we can exercise significant influence over the activities of LanzaJet.

Our interest in LanzaJet is accounted for under the equity method of accounting, with income (loss) from equity method investees, net recognized in our consolidated statements of operations and comprehensive loss and equity method investments recognized on our consolidated balance sheets.

As of September 30, 2022, we no longer have significant influence over the activities of SGLT and as a result, our investment is accounted for at cost with adjustments for observable changes in price and impairment (if any) recognized in our consolidated statements of operations and comprehensive loss.

Prior to September 30, 2022, we accounted for SGLT under the equity method of accounting, with income (loss) from equity method investees, net, including gain on dilution recognized in our consolidated statements of operations and comprehensive loss and equity method investments recognized on our consolidated balance sheet.

The Company currently has a license agreement with SGLT and a letter agreement with SGLT and Sinopec Capital Co., Ltd related to the use of our intellectual property and potential collaborations.

These agreements do not provide LanzaTech with the power to direct the activities that are most significant to the economic performance of these entities.

Current and deferred taxes are calculated based on tax rates enacted or substantively enacted at the reporting date and are recognized in profit or loss except when the tax relates to items charged or credited to other comprehensive income, in which case the tax is also recognized in other comprehensive income.

Deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax assets including those relating to temporary differences, net operating loss carryforwards and tax credit carryforwards, are only recognized to the extent it is more likely than not that future taxable income will be available to utilize the temporary differences and carryforwards.

Our net operating loss carryforwards are subject to shareholder continuity rules, and may be impacted by future fundraising activities.

We maintain a valuation allowance against the full value of our net deferred tax assets because management believes the recoverability of the tax assets is not more likely than not.

Results of Operations — Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

The results of operations presented below should be reviewed in conjunction with our consolidated financial statements and notes.

The following table sets forth our consolidated results of operations for the periods indicated:

Year Ended December 31,

2023 2022 2023 vs.

(In thousands, except for per share amounts)

Total revenue 62,631 37,343 25,288 68 %

Cost of revenues (exclusive of depreciation shown below)

(44,979) (28,287) (16,692) 59 %

Operating expenses:

Research and development (68,142) (53,191) (14,951) 28 %

Depreciation expense (5,452) (4,660) (792) 17 %

Selling, general and administrative expense (50,438) (26,804) (23,634) 88 %

Total operating expenses $ (124,032) $ (84,655) $ (39,377) 47 %

Loss from operations (106,380) (75,599) (30,781) 41 %

Interest income, net 4,572 8 4,564 N/M

Other expense, net

(29,388) (2,757) (26,631) N/M

Total other expense, net

(24,816) (2,749) (22,067) N/M

Loss before income taxes $ (131,196) $ (78,348) $ (52,848) 67 %

Income tax benefit — — — N/M

(Loss) gain from equity method investees, net (2,902) 1,992 (4,894) (246) %

Net loss $ (134,098) $ (76,356) $ (57,742) 76 %

Other comprehensive loss:

Foreign currency translation adjustments (376) (1,449) 1,073 74 %

Comprehensive loss $ (134,474) $ (77,805) $ (56,669) 73 %

Net loss per share - basic and diluted (0.79) (12.37)

Weighted-average number of common shares outstanding - basic and diluted 176,023,219 9,302,080

Total revenue increased $25.3 million, or 68%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase was primarily driven by engineering and other services with an increase of $16.6 million in revenue from contracts with existing customers and governmental entities whose projects have moved to the next phase of development and an increase of $3.6 million from contracts with new customers.

Add itionally, we had a $2.4 million increase in revenue from joint development agreements, a $1.3 million increase in revenue from licensing mainly driven by paid-up sublicensing fees, a $1.3 million increase in CarbonSmart revenue and a $0.1 million increase in other contract research.

Cost of Revenues

Cost of revenue increased $16.7 million, or 59%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase is primarily driven by the higher revenue performance from engineering and other services, mostly from projects that moved to the next phase of development, and inflation in costs and wages.

Research and Development

R&D expense increased $15.0 million, or 28%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

This was primarily due to an increase in stock compensation expense consisting of $4.1 million in incremental expense associated with stock compensation granted in 2023 and $1.2 million resulting from the vesting of RSAs in connection with the Business Combination, an increase of $4.1 million in R&D personnel and contractors expenses to accelerate growth, an increase of $2.8 million in consumables expenses, an increase of $1.2 million in external R&D service provider costs, and an increase of $1.6 million in facilities expenses.

Selling, General and Administrative Expense

SG&A expense increased $23.6 million, or 88%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.

This was primarily due to an increase of $13.0 million of external services and contractors mostly driven by one-time professional services fees related to the Business Combination, as well as $3.9 million resulting from the vesting of RSAs and one-time employee transition arrangements related to the Business Combination.

The increase is also attributed to $5.3 million in incremental expense associated with stock compensation granted in 2023, an increase of $0.7 million in bad debt expense related to an allowance for a customer receivable, and an increase of $0.7 million in facilities and consumables expenses.

Interest income, net

Interest income, net increased $4.6 million in the year ended December 31, 2023 compared to the year ended December 31, 2022.

The increase is primarily attributable to interest earned on higher cash balances held in savings and money market accounts subsequent to the Business Combination.

The increase is additionally attributable to the amortization of the discount and accrued interest on the held-to-maturity securities.

Other Expense, Net

Other expense, net increased $26.6 million, in the year ended December 31, 2023 compared to the same period in 2022.

The increase is primarily due to an overall net loss on changes in the fair value of our financial instruments.

Liquidity and Capital Resources

As of December 31, 2022, we had approximately $7,000 in operating cash and a working capital deficit of approximately $5.9 million.

On January 29, 2021, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the initial public offering

Our liquidity needs up to December 31, 2022 have been satisfied through a contribution of $25,000 from the Sponsor to cover certain offering costs in exchange for the issuance of founder shares, and the Sponsor’s loan to the Company of up to $300,000 (the “Note”).

In addition to the Note, the Sponsor also paid certain administrative expenses and offering costs on behalf of the Company.

Subsequent to the initial public offering, net proceeds from the private sale of an aggregate of 3,500,000 warrants (the “private placement warrants”) to the Sponsor (the “private placement”) of $0.9 million were placed in the operating account for working capital purposes.

In addition, in order to finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but were not obligated to, loan the Company funds as may be required on a non-interest basis (“Working Capital Loans”).

On March 28, 2022, the Company entered into a

noninterest-bearing Working Capital Loan with its Sponsor for the principal amount of up to $1.5 million.

As of December 31, 2022 and 2021, there were no amounts outstanding under any Working Capital Loan.

In connection with the execution of the Merger Agreement, AMCI entered into subscription agreements (as amended on December 7, 2022, the “Initial Subscription Agreements”) with certain investors (the “Initial PIPE Investors”).

AMCI entered into additional subscription agreements with certain institutional and accredited investors (the “PIPE Investors”) on October 8, 2022 (as amended on December 7, 2022) and February 6, 2022 (collectively, the “PIPE Subscription Agreements” and together with the subscription agreement between AMCI and ArcelorMittal, the “Subscription Agreements”).

Pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 18,500,000 shares of common stock in a private placement at a price of $10.00 per share for an aggregate purchase price of $185 million (the “PIPE Investment”).

Such aggregate number of shares and aggregate purchase price include 3,000,000 shares of common stock issued to ArcelorMittal pursuant to the AM SAFE with Legacy LanzaTech, as a result of which such PIPE Investor entered into a Subscription Agreement prior to the closing of the Business Combination.

The PIPE Investment was consummated in connection with the consummation of the Business Combination.

Upon closing of the Business Combination, the Company retained $153 million net of transaction expenses as working capital.

Upon closing of the Business Combination, the Company’s immediate sources of liquidity include cash generated from operations, accounts receivable, and existing credit facilities of LanzaTech.

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through one year from this filing..

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Contractual Obligations

Registration Rights Agreement

In connection with the consummation of the Business Combination, AMCI and Legacy LanzaTech entered into a Registration Rights Agreement that AMCI, the Sponsor, certain stockholders of AMCI, Legacy LanzaTech, and certain stockholders of Legacy LanzaTech.

Pursuant to the Registration Rights Agreement, we granted the parties thereto certain customary registration rights with respect to certain shares of common stock and warrants.

In addition, the Registration Rights Agreement provides that the Sponsor, then-holders of all outstanding shares of AMCI Class B common stock, and certain holders of shares of Legacy LanzaTech capital stock will be subject to certain restrictions on transfer with respect to their shares of common stock and LanzaTech warrants.

Such restrictions will end (i) with respect to the Sponsor and the holders of AMCI Class B common stock, on the earlier of (a) the date that is one year following the closing of the Business Combination, (b) such date upon which the closing price per share of common stock equals or exceeds $12.00 per share for any 20 trading days within any 30 day trading period commencing at least 150 days after the closing of the Business Combination and (c) the date on which LanzaTech completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the Business Combination that results in all of LanzaTech’s stockholders having the right to exchange their shares of common stock for cash, securities or other property, and (ii) with respect to the holders of shares of Legacy LanzaTech capital stock, on the date that is six months following the closing of the Business Combination.

Underwriting Agreement

We granted the underwriters a 45-day option from the date of the underwriting agreement to purchase up to an additional 2,250,000 units to cover over-allotments, if any.

On September 17, 2021, the over-allotment option expired unexercised, resulting in the forfeiture of 562,500 shares of Class B common stock.

The underwriters were paid an underwriting discount of 1%of the gross proceeds of the initial public offering, or $1,500,000.

Additionally in connection with the initial public offering, the Company agreed to pay the underwriters a deferred underwriting discount of 3.5% of the gross proceeds, or $5,250,000, of the initial public offering upon the completion of our initial business combination.

On September 29, 2022, Evercore Group L.L.C.

(“Evercore”), the representative of the underwriters of our initial public offering, waived their deferred underwriting fee that accrued from its participation in our initial public offering.

The Company recognized approximately $4.9 million of the commissions waiver as a reduction to additional paid-in capital in the statements of changes in stockholders’ deficit for the year ended December 31, 2022, as this portion represents an extinguishment of deferred underwriting commissions on public shares which was originally recognized in accumulated deficit.

The remaining balance of approximately $172,000 is recognized as a gain from extinguishment of deferred underwriting commissions on public shares in the statements of operations, which represents the original amount expensed in the Company’s initial public offering.

On September 27, 2022 and September 29, 2022, the Company received notice and a formal letter, respectively, from Evercore, advising, among other things, that it had, among other things, (i) resigned from and ceased or refused to act in, its roles as co-placement agent, co-capital markets advisor and exclusive financial advisor to the Company in connection with the Business Combination and as underwriter in the Company’s initial public offering and (ii) waived its right to receive an aggregate of $13,050,000 in fees, all of which were contingent upon and payable upon the closing of the Business Combination, consisting of $500,000 for its role as co-placement agent, $7,500,000 for its role as exclusive financial advisor and $5,050,000 of deferred underwriting fees accrued from its participation in the Company’s initial public offering, as well as any expense reimbursements owed to it under those arrangements.

Administrative Service Fee

Subsequent to the closing of the initial public offering, we have agreed to pay our Sponsor $10,000 per month for office space and secretarial and administrative services provided to members of the management team.

Upon completion of the initial business combination or our liquidation, we will cease paying these monthly fees.

For the year ended December 31, 2022 and for the period from January 28 (inception) through December 31, 2021, we incurred $120,000 and $50,000 of such fees, respectively, which are included as general and administrative fees - related party on the accompanying statement of operations.

Critical Accounting Policies Prior to the Business Combination

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses.

We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We have identified the following as our critical accounting policies:

Class A Common Stock Shares Subject to Possible Redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and is measured at fair value.

Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity.

At all other times, Class A common stock are classified as stockholders’ equity.

Our Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events.

Accordingly, as of the initial public offering, 15,000,000 shares of Class

A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.

Under ASC 480-10-S99, we have elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of the reporting period.

This method would view the end of the reporting period as if it were also the redemption date of the security.

Effective with the closing of the initial public offering, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The public warrants and the private placement warrants are recognized as derivative liabilities in accordance with ASC 815.

Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the carrying value of the instruments to fair value at each reporting period until they are exercised.

The initial fair value of the public warrants issued in connection with the initial public offering was estimated using a Monte-Carlo simulation model.

The fair value of the public warrants as of December 31, 2022 and 2021 is based on observable listed prices for such warrants.

The fair value of the private placement warrants as of December 31, 2022 and 2021 is determined using a Black-Scholes option pricing model.

The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and, accordingly, the actual results could differ significantly.

Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Net Income (Loss) Per Share of Common Stock

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Prior to the Business Combination, we had two classes of shares, which are referred to as Class A common stock and Class B common stock.

Income and losses are shared pro rata between the two classes of shares.

Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.

The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the units sold in the initial public offering and the private placement warrants to purchase an aggregate of 11,000,000 warrants in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method.

As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the period from January 28, 2021 (inception) through December 31, 2021.

Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”.

The ASU amends ASC 820 to clarify that a contractual sales restriction is not considered in measuring an equity security at fair value and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value.

The ASU applies to both holders and issuers of equity and equity-linked securities measured at fair value.

The amendments in this ASU are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.

The Company is still evaluating the impact of this pronouncement on the financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on our financial statements.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand, demand deposits at banks, and other short-term, highly liquid investments with original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

The following table shows the balances of our cash, cash equivalents and restricted cash as of December 31, 2023 and December 31, 2022:

(In thousands, except for percentages) December 31, 2023 December 31, 2022 2023 vs.

Total cash, cash equivalents, and restricted cash $ 76,284 $ 83,710 $ (7,426) (9) %

As of December 31, 2023, compared to December 31, 2022, LanzaTech’s cash, cash equivalents, and restricted cash decreased by $7.4 million, or 9%, primarily due to the net loss adjusted for non-cash charges (see cash flow section below), the partial prepayment for the FPA, purchases of debt security investments, purchases of property, plant and equipment and the repurchase of equity instruments of the Company.

The decrease is offset by cash received from the closing of the Business Combination and PIPE financing.

Debt Security Investments

Debt security investments comprise mainly held-to-maturity U.S.

Treasury and high quality corporate securities that the Company has both the ability and intent to hold to maturity.

These securities all mature within one year and will provide additional liquidity upon maturity.

As of December 31, 2023, held-to-maturity security investments

totaled $45.2 million.

The Company did not have any held-to-maturity security investments as of December 31, 2022.

Sources and Uses of Capital

Since inception, we have financed our operations primarily through equity and debt financing.

Our ability to successfully develop products and expand our business depends on many factors, including our ability to meet working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.

We manage our capital to ensure that LanzaTech can continue as a going concern while maximizing the return to stakeholders through the optimization of debt and equity balances.

Following completion of the Business Combination, the Company may change its capital risk strategy related to use of capital proceeds from the Business Combination to increase its product offerings or for business growth purposes.

As of December 31, 2023, our capital structure consists of equity (comprising issued capital, and accumulated deficit) and the Brookfield SAFE.

We are not subject to any externally imposed capital requirements.

Prior to the Business Combination, LanzaTech had six outstanding series of redeemable preferred stock.

LanzaTech preferred shares were convertible at the holder’s option into shares of common stock, on a share-for-share basis, using a conversion rate determined by dividing the original issue price by the conversion price.

Each LanzaTech preferred share was automatically converted into a common share of LanzaTech on the Closing Date.

On October 2, 2022, LanzaTech entered into the Brookfield SAFE with Brookfield and received a cash payment of $50.0 million as the Initial Purchase Amount.

In exchange, the Company granted to Brookfield the right to certain shares of the Company's common stock.

Following the closing of the Business Combination, Brookfield may, at any time at its option, convert all or a portion of the Initial Purchase Amount less any amount that has already been converted or repaid into shares of common stock.

LanzaTech does not have any outstanding debt, other than the Brookfield SAFE and the FPA Put Option Liability and Fixed Maturity Consideration, which are all classified as liabilities for accounting purposes, on its consolidated balance sheets as of December 31, 2023.

On November 9, 2022, LanzaTech committed to purchase $5.5 million of Subordinated Secured Notes in a funding for LanzaJet's subsidiary Freedom Pines Fuels LLC, which occurred on May 1, 2023.

The Subordinated Secured Notes are secured by a security interest over the intellectual property owned or in-licensed by LanzaJet.

LanzaJet also provides a guarantee of any costs and expenses required to complete the initial facility and achieve commercial operation.

LanzaTech, AMCI and ACM executed the Forward Purchase Agreement on February 3, 2023.

Pursuant to the Forward Purchase Agreement, ACM obtained 5,916,514 shares of common stock on the open market for $10.16 per share (“Redemption Price”), and such purchase price of $60.1 million was funded by the use of Trust Account proceeds as a partial prepayment (“Prepayment Amount”) for the Forward Purchase Agreement redemption at the end of three years (“Maturity Date”).

ACM has the right at the end of three years to return the shares and keep the Prepayment Amount plus the fees described below, or may, at ACM’s sole discretion, partially or fully terminate this transaction over the course of the three-year term by returning cash in an amount equal to the number of shares terminated (“Terminated Shares”) multiplied by the Redemption Price, which may be reduced in the case of certain dilutive events (“Reset Price”).

At the end of the three-year term, LanzaTech is obligated to pay ACM an amount equal to the product of (1) 7,500,000 less (b) the number of Terminated Shares multiplied by (2) $2.00 (the “Maturity Consideration”).

In addition to the Prepayment Amount and the Maturity Consideration, on the Maturity Date, New LanzaTech will pay to ACM an amount equal to the product of (x) 500,000 and (y) the Redemption Price, totaling $5.1 million (the “Share Consideration”).

However, at the time, the Company may not have sufficient funds or be able to obtain financing from third parties to pay such amounts.

The Company also may not have sufficient shares authorized to pay the Maturity Consideration in shares.

Breach by the Company of any of these obligations could constitute an event of default under the Forward Purchase Agreement, which could subject the Company to financial exposure thereunder (including arising from potential indemnification claims by the Seller).

In addition, future debt or other contractual agreements may contain cross-default or cross-acceleration provisions

that could be triggered if we defaulted on our obligations to the Purchasers.

Any or all of these consequences could have material adverse impact on us.

On February 8, 2023, LanzaTech completed the Business Combination and related transactions.

The completion of the Business Combination and related transactions resulted in $153.3 million of cash proceeds to LanzaTech.

The amount released to LanzaTech is net of the transaction expenses related to the Business Combination and the amount paid to the Purchasers in relation to the Forward Purchase Agreement.

Pursuant to the Forward Purchase Agreement, the Purchasers purchased 5,916,514 Class A common shares on the open market for approximately $10.16 per share, and such purchase price of $60.1 million was deposited with the Purchasers as a partial prepayment for the Forward Purchase Agreement redemption at the end of three years.

In the normal course of our business, we also enter into purchase commitments or other transactions in which we make representations and warranties that relate to the performance of our goods and services.

We do not expect material losses related to these transactions.

We believe our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date of this Annual Report.

However, our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors”.

If we determine that we require additional financing to meet our operating requirements, we may be unable to secure such financing on acceptable terms, or at all.

If we raise additional funds by issuing equity and/or convertible debt securities, dilution to our existing stockholders will result.

If we raise additional financing and incur indebtedness, we would be subject to increased fixed payment obligations and could also be subject to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

If we are unable to obtain additional funds, we will have to reduce our operating costs, which will cause a delay or reduction in our technology development and commercialization programs.

For the years ended December 31, 2023 and 2022

The following table provides a summary of our cash flows for the years ended December 31, 2023 and December 31, 2022:

Year Ended December 31, Change

(In thousands, except for percentages) 2023 2022 2023 vs.

Net cash provided by (used in):

Operating activities $ (97,296) $ (84,703) $ (12,593) 15 %

Investing activities (57,911) (10,686) (47,225) 442 %

Financing activities 148,185 50,545 97,640 N/M

Effects of currency translation (404) (178) (226) (127) %

Net decrease in cash, cash equivalents, and restricted cash

$ (7,426) $ (45,022)

Cash Flows Used in Operating Activities

For th e year ended December 31, 2023, net cash used in operating activities was $(97.3) million.

This was primarily driven by a net loss of $(134.1) million, adjusted for the loss on change in fair value of t he FPA Put Option liability and F ixed Maturity Consideration of $44.3 million, share-based compensation expense of $15.2 million, depreciation of property, plant and equipment of $5.5 million, non-cash lease expense of $1.5 million, the non-cash loss from equity method investees, net of $2.9 million, provision for losses on trade and other receivables of $0.7 million, and non-cash foreign currency exchange gain of $0.2 million.

The additional impact to net cash usage is

related to the adjustments for net cash changes in operating assets and liabilities of $(15.9) million, the gain on change of fair value of SAFE and warrant liabilities of $(14.5) million, the non-cash recognition of licensing revenue of $(1.8) million, and amortization of the discount on the debt security investment of $(1.3) million.

Fo r the year ended December 31, 2022, net cash used in operating activities was $(84.7) million.

This was primarily driven by a net loss of $(76.4) million, adjusted for share-based compensation expense of $2.5 million, depreciation of property, plant and equipment of $4.7 million, the loss from equity method investees, net of $(2.0) million, non-cash lease expense of $1.8 million and non-cash foreign currency exchange loss of $0.7 million.

The additional net cash usage is related to the adjustments for net cash changes in operating assets and liabilities of $(15.8) million, non-cash recognition of licensing revenue of $(2.2) million, and the gain on change in fair value of SAFE and warrant liabilities of $1.9 million.

Cash Flows Used in Investing Activities

For the year ended December 31, 2023, net cash used in investing activities was $(57.9) million, primarily driven by the investment in debt securities of $(93.9) million, the purchase of property, plant and equipment of $(8.6) million, the funding of the loan commitment to LanzaJet of $(5.2) million, and the purchase of additional interests in our equity method investment in the form of warrants which were accounted as in-substance common stock of $(0.3) million.

These outflows are partially offset by $50 million of maturities from the investment in debt securities

For th e year ended December 31, 2022, net cash used in investing activities was $(10.7) million, driven by the purchase of property, plant and equipment.

Cash Flows from Financing Activities

For the year ended December 31, 2023, net cash provided by financing activities was $148.2 million.

This was driven by $213.4 million in proceeds from the Business Combination and PIPE financing and proceeds of $2.6 million from the exercise of options to acquire shares of common stock of the Company.

This was partially offset by the Forward Purchase Agreement prepayment amount of $(60.1) million and by the repurchase of equity instruments of $(7.7) million.

For the year ended December 31, 2022, net cash provided by financing activities was not significant.

Off-Balance Sheet Arrangements

As of December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(b)(1)(ii)(B) of Regulation S-K.

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we will not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the executive compensation to median employee compensation.

These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

As of December 31, 2023 and December 31, 2022, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Critical Accounting Policies and Management Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared in accordance with US GAAP.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures.

We consider an accounting estimate to be critical to the consolidated financial statements if the estimate is complex in nature or requires a high degree of judgment and actual results may differ from these estimates with any such differences being potentially material.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances.

We evaluate our estimates and assumptions on an ongoing basis.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe that the accounting policies discussed below are critical to understanding our historical and future performance:

Revenue Recognition

We recognize revenue from our contracts with customers in accordance with ASC 606.

The Company also has certain partnership agreements that are within the scope of ASC 808 and contract with governmental entities that are

accounted for as grant contributions.

We primarily earn revenue from services related to feasibility studies and basic engineering design of commercial plants, joint development, and contract R&D activities to develop novel biocatalysts and related technologies.

When accounting for these arrangements, we must develop assumptions that require judgment such as determining the performance obligations in the contract, determining the transaction price for the contract and stand-alone selling price for each performance obligation identified, and measuring progress towards satisfaction of the performance obligations.

The determination of whether goods and services qualify as distinct performance obligations is based on the contract terms and our view of the business.

Typically, our goods and services provided under a contract with a customer are viewed as a single performance obligation.

Most of our arrangements provide fixed consideration, however, when there are variable consideration elements, we estimate the transaction price and whether revenue should be constrained.

Significant estimates and judgments are also used when a material right is provided to the customer.

In these instances, management estimates the stand-alone selling price and apportions the total transaction price to this material right.

Most performance obligations on our non-governmental arrangements are recognized over time.

We typically use percentage completion when certain revenue recognition requirements are met.

We exercise judgment when determining the percentage of completion against the total transaction price initially estimated.

For arrangements with government agencies, we measure the satisfaction of performance obligations over time using the input method which requires judgment when selecting the most indicative measure of such performance.

Grant Revenue

Grants received, including cost reimbursement agreements, are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution.

An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred.

Contributions are recognized as grant revenue when all donor-imposed conditions have been met.

Forward Purchase Agreement Valuation

The Company has determined that the FPA Put Option, including the Variable Maturity Consideration, within the Forward Purchase Agreement is (i) a freestanding financial instrument and (ii) a derivative (i.e., an in-substance written put option).

This derivative was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date.

The fair value of the derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework.

Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”).

For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted back to present.

Finally, the value of the forward is calculated as the average present value over all simulated paths.

The methodology and main assumptions remained constant during the period in 2023.

The Company separately identified two other freestanding financial instruments in the Forward Purchase Agreement, the Share Consideration and the Minimum Maturity Consideration.

As both of these payments are for a fixed amount at the Maturity Date, we have accounted for these cash outflows as debt-like instruments.

In accordance with ASC 825, Financial Instruments , we have elected to account for these instruments under the Fair Value Option.

As the terms and conditions of these payments are the same, they are accounted for together on the consolidated balance sheet as the Fixed Maturity Consideration.

The fair value of the Fixed Maturity Consideration was estimated within the same Monte-Carlo simulation as the FPA Put Option to effectively model the potential acceleration of the Maturity Date and the corresponding acceleration in the payment of the Fixed Maturity Consideration.

The methodology and main assumptions remained constant during the period in 2023.

Stock-Based Compensation

In exchange for certain employee and director services, compensation is given in the form of equity-based awards.

The Company accounts for equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation.

Accordingly, equity-classified awards are recorded based on the grant date fair value and expensed over the requisite service period for the respective award.

Liability-classified awards are remeasured at the end of each reporting period and expensed based on the percentage of requisite service that has been rendered.

The Company’s equity-based awards include stock option awards, restricted stock units (“RSUs”), stock-appreciation rights (“SARs”) and restricted stock (“RSAs”) issued by the Company, which vest based on either time and/or the achievement of certain market or performance conditions.

We have elected not to estimate forfeitures which means compensation expenses may be reversed in the period in which forfeiture occurs.

Compensation expense is recognized in the Company’s consolidated statements of operations and comprehensive loss, primarily within research and development expenses.

For awards with only service conditions that have a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award.

For awards with market or performance conditions that have a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for each tranche of the award.

Compensation expense resulting from performance awards is recognized over the requisite service period when it is probable that the performance condition will be met.

The recognized compensation expense for performance awards is adjusted based on an estimate of awards ultimately expected to vest.

We mostly apply judgment for stock-based awards with performance conditions, because compensation expense is recognized only when it is probable the performance conditions will be met (i.e.

occurrence of a liquidity event).

Management determined that the occurrence of the liquidity event is probable when the event is consummated, as such, compensation expense related to the RSAs was recorded at the time of the Business Combination.

We estimate the fair value of service and performance-based options and SARs using a Black-Scholes option pricing model, which requires the use of highly subjective assumptions including:

• Expected Term — We have opted to use the “simplified method” for estimating the expected term of plain-vanilla options and SARs, whereby the expected term equals the arithmetic average of the vesting term and LanzaTech’s contractual term of the option (generally 10 years).

We use peer data to estimate the expected term of options and SARs that do not have plain-vanilla characteristics.

• Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S.

Treasury zero-coupon instruments with maturities similar to the expected term of LanzaTech’s stock options and SARs.

• Expected Dividend — We have not issued any dividends and do not anticipate issuing dividends on LanzaTech’s common stock.

As a result, we have estimated the dividend yield to be zero.

• Expected Volatility — Due to our limited operating history and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

The historical volatility data was computed using the daily closing prices for the various companies' shares during the equivalent period of the estimated expected term of the stock-based awards.

Changes in the assumptions above can have an impact on the result of the valuation.

We estimate the fair value of market-based RSUs using the Monte Carlo simulation model that uses assumptions including expected volatility, and the derived service period.

Please refer to the expected volatility discussion above.

We estimate the fair value of the RSAs and RSUs with only service conditions using the fair value of common stock on the date of measurement.

Brookfield SAFE Valuation

The Brookfield SAFE was classified as a liability on our consolidated balance sheets as of December 31, 2023 and 2022.

The company elected to record the instrument using the fair value option under ASC 825.

The Brookfield SAFE was issued on October 2, 2022.

As of its issuance date, the Company determined the fair value was equal to the investment amount of $50 million based on the orderly nature of the transaction.

The value as of December 31, 2022 remained the same due to the proximity of the valuation date to the issuance date (i.e., less than two months) and the absence of events which would indicate a change in expected payoffs to the investor.

As of December 31, 2023, the Company expects to present sufficient projects to Brookfield to result in the Brookfield SAFE being automatically converted into shares.

We determined this by evaluating the pipeline of

potential Brookfield projects in various stages of development, and determining the likelihood that a sufficient number of projects should meet the criteria for investment prior to maturity of the note.

Since the liquidity price is not expected to change during the life of the Brookfield SAFE, the number of shares that Brookfield receives is fixed.

Based on this expectation, the company determined the fair value of the Brookfield SAFE using the as-converted value, which is calculated as the initial purchase amount, divided by the liquidity price, times the stock price, resulting in an estimated fair value of $25 million recorded on the consolidated balance sheet as of December 31, 2023.

Preferred Stock Warrant Liabilities

Warrants to purchase shares of redeemable convertible preferred stock were classified as liabilities on our consolidated balance sheets as of December 31, 2022.

These warrants were recognized at fair value with subsequent changes recorded in other income (expense), net, in the statements of operations and comprehensive loss.

We utilized the Black-Scholes option-pricing model, which incorporates management’s assumptions and estimates, to value the preferred stock warrants.

Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying redeemable convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock.

We determined the fair value per share of the underlying preferred stock by taking into consideration our most recent issuance of our preferred stock with additional factors deemed relevant, because at the time we were a private company and lacked company-specific historical and implied volatility information of our stock.

We determined the remaining contractual term based on the contract term of the warrants adjusted for the probability of a liquidity event.

Expected stock volatility was based on the historical volatility of publicly traded peer companies for a similar remaining contractual term.

In connection with the closing of the Business Combination, all warrants to purchase preferred stock were exercised on a cashless basis for shares of preferred stock, which were converted at the closing of the Business Combination into shares of common stock.

Immediately before the exercise of these warrants, the associated warrant liability was marked-to-market a final time.

After the preferred stock warrants were exercised and converted, the estimates used in the periodic valuation of the preferred stock warrants were no longer considered critical.

Common Stock Valuation

Prior to the Business Combination, there was no public market for our equity instruments and the estimated fair value of our shares of common stock was determined by management and approved by the LanzaTech Board as of the grant date.

The LanzaTech Board considered our most recently available independent third-party valuation of the common stock and additional objective and subjective factors that it believed were relevant at the date of the grant.

The valuation of our common stock is one of the key inputs in the valuation of our preferred stock warrant instruments as of December 31, 2022, which are classified as liabilities in our consolidated balance sheet and fully exercised in 2023 at the close of the Business Combination.

Additionally, the valuation of common stock is one of the key inputs in the valuation of share-based compensation granted prior to the close of the Business Combination.

The independent third-party valuations of the common stock were performed in accordance with the guidance outlined in the AICPA Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (“AICPA’s Practice Aid”).

The specialist considered all objective and subjective factors, including management’s best estimate of our business condition, prospects, and operating performance at each valuation date.

Other significant factors included:

• The rights, preferences, and privileges of our preferred stock as compared to those of our common stock, including the liquidation preferences of our preferred stock;

• Our results of operations, and financial position;

• Arms-length transactions involving recent rounds of preferred stock financings;

• The lack of liquidity of our common stock;

• Our stage of development and business strategy and the material risks related to our business and industry;

• The valuation of publicly traded companies in relevant industry sectors, as well as recently completed mergers and acquisitions of peer companies;

• The likelihood of achieving a liquidity event, such as an initial public offering or a sale of our company, given prevailing market conditions;

In valuing our common stock, the fair value of our business was determined using an option pricing model to backsolve the value of the security from our most recent round of financing which implies a total equity value as well as a per-share common stock value at the valuation date.

Following the Business Combination, the fair market value of the common stock will be determined based on the quoted market price of the common stock.

After the close of the Business Combination which established a public market for our common stock, the estimates used in the valuation of our common stock were no longer considered critical.

Filing Status

The market value of LanzaTech’s common stock that was held by non-affiliates (i.e.

public float) exceeded $700 million as of the last business day of the Company’s 2023 second fiscal quarter which resulted in the following changes to LanzaTech’s filing status:

• LanzaTech became a large accelerated filer as of 12/31/2023.

• LanzaTech lost emerging growth company status as of 12/31/2023.

• LanzaTech no longer qualified as an smaller reporting company as of the last business day of the Company’s second fiscal quarter.

LanzaTech continued to use the scaled disclosures permitted for SRCs through this Form 10-K, and must begin providing non-scaled larger company disclosures in its quarterly report on Form 10-Q for the first quarter of 2024.

The use of reduced disclosure obligations in this Form 10-K may also make comparison of LanzaTech’s financial statements with other public companies difficult or impossible.

Recently Issued and Adopted Accounting Standards

See Note 2 to our consolidated financial statements for a description of recent accounting pronouncements, including the actual and expected dates of adoption and estimate effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with US GAAP and to provide investors with additional information regarding our financial results, we have presented adjusted EBITDA, a non-GAAP financial measure.

Adjusted EBITDA is not based on any standardized methodology prescribed by US GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

We define adjusted EBITDA as our net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, transaction costs on issuance of Forward Purchase Agreement, (loss) gain from equity method investees and other one-time costs related to the Business Combination and securities registration on Form S-4 and our registration statement on Form S-1.

We monitor and have presented in this Annual Report adjusted EBITDA because it is a key measure used by our management and the Board to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business.

We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we include in net loss.

Accordingly, we believe adjusted EBITDA provides useful information to investors, analysts, and others in

understanding and evaluating our operating results and enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with US GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with US GAAP.

There are a number of limitations related to the use of adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with US GAAP.

For example, adjusted EBITDA:

(i) excludes stock-based compensation expense because it is a significant non-cash expense that is not directly related to our operating performance;

(ii) excludes depreciation expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;

(iii) excludes gain or losses on equity method investee;

and (iv) excludes certain income or expense items that do not provide a comparable measure of our business performance.

In addition, the expenses and other items that we exclude in our calculations of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.

In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

The following table reconciles adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with US GAAP.

Reconciliation of Net Loss to Adjusted EBITDA

Year Ended December 31,

(In thousands) 2023 2022

$ (134,098) $ (76,356)

Depreciation 5,452 4,660

Interest income, net

Stock-based compensation expense and change in fair value of SAFE and warrant liabilities (1)

Change in fair value of the FPA Put Option and Fixed Maturity Consideration liabilities

Transaction costs on issuance of Forward Purchase Agreement 451 —

Loss (gain) from equity method investees, net

2,902 (1,992)

One-time costs related to the Business Combination, initial securities registration and non-recurring regulatory matters (2)

Adjusted EBITDA

$ (80,144) $ (69,220)

__________________

(1) Stock-based compensation expense represents expense related to equity compensation plans

(2) Represents costs incurred related to the Business Combination that do not meet the direct and incremental criteria per SEC Staff Accounting Bulletin Topic 5.A to be charged against the gross proceeds of the transaction, but are not expected to recur in the future, as well as costs incurred subsequent to deal close related to our securities registration on Form S-4 and our registration statement on Form S-1.Regulatory matters includes fees related to non-recurring items during the year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis