LanzaTech Global, Inc. 10-K

Item 8. Financial Statements and Supplementary Data LanzaTech Global, Inc. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB Firm ID # 34 ) 91 Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting 94 C onsolidated Balance Sheets as of December 31, 2023 and 2022 96 Consolidated Statements of Operat ions and Comprehensi ve Loss for the Years Ended December 31, 2023 and 2022 97 Consolida ted Statements of Changes in Redeemable Preferred Stock and Shareholders ’ Equity/ Deficit for the Years Ended December 31, 2023 and 2022 98 C onsolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 100 Notes to Con solidated Financial Statements 102 Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of LanzaTech Global, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of LanzaTech Global, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, the consolidated statement of cash flows, and the consolidated statements of changes in redeemable convertible preferred stock and shareholders' equity (deficit), for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition – Identification and evaluation of relevant terms and conditions in new or amended contracts with customers and application to such contracts of Accounting Standards Codification (ASC) Topic 606 – Revenue From Contracts With Customers (ASC 606) - Refer to Notes 2 and 5 to the financial statements Description of Critical Audit Matter The Company earns revenue from the sale of a variety of products and services to its customers including services related to biorefining which includes feasibility studies and basic engineering design of commercial plants, licensing of technologies and sales of biocatalysts. The other two revenue streams are: (1) joint development and contract research activities to develop and optimize novel biocatalysts, related processes and technologies, and (2) supply of chemical building blocks for sustainable products produced using the Company’s proprietary technologies (referred to as CarbonSmart). The terms and conditions of the Company’s contracts with its customers vary and assessing the accounting impact of the terms and conditions of each individual contract requires judgment as contracts may contain provisions unique to that arrangement. We identified our assessment of the Company’s identification and evaluation of relevant contract terms and conditions and application of ASC 606 to new or amended contracts with customers as a critical audit matter because it required significant audit effort and auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s conclusions on the identification and evaluation of relevant contract terms and conditions and the appropriate application of ASC 606 to new or amended contracts with customers included the following, among others: – We obtained new or amended contracts with customers and performed the following procedures, among others: – Inspected the terms and conditions contained in the contract and supporting documents and, where necessary, confirmed the terms of the contract directly with the customer. – For certain new or amended contracts, assessed the Company’s application of ASC 606 by: ◦ Evaluating the Company’s identification of the performance obligation or obligations in the contract. ◦ Evaluating the Company’s conclusions regarding the timing of recognizing revenue in accordance with ASC 606. Accounting for the Forward Purchase Agreement (FPA) Put Option - Refer to Notes 2 and 9 to the financial statements Description of Critical Audit Matter On February 3, 2023, the Company entered into an FPA with Atalaya Capital Management LP (“ACM”). The FPA Put Option, which includes both the In-substance Written Put Option and the Variable Maturity Consideration, is recorded as a derivative liability measured at fair value in the consolidated balance sheet. The Company’s evaluation of the appropriate accounting model to apply to the FPA Put Option required significant judgment. We determined our audit of the Company’s evaluation of the appropriate accounting model to apply to the FPA Put Option was a critical audit matter because it involved a high degree of auditor subjectivity and required significant audit effort, including the need to involve professionals in our firm with expertise in accounting for complex financial instruments. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the accounting for the FPA Put Option included the following, among others: – With the assistance of professionals in our firm having expertise in accounting for complex financial instruments, we assessed the reasonableness of the Company’s conclusions as to the appropriate accounting for the FPA Put Option in accordance with accounting principles generally accepted in the United States by: ◦ Evaluating the Company’s identification of relevant terms and conditions of the FPA. ◦ Evaluating the Company's application of available accounting guidance to the FPA Put Option. – We evaluated the accuracy and completeness of the disclosures related to the accounting for the FPA Put Option in the financial statements. Brookfield SAFE Liability – Conversion to Equity Assumption– Refer to Notes 2 and 7 to the financial statements Description of Critical Audit Matter On October 2, 2022, the Company entered into a Simple Agreement for Future Equity (the “Brookfield SAFE Agreement”) and a framework agreement (the “Brookfield Framework Agreement”) with BGTF LT Aggregator LP (“Brookfield”). Pursuant to the Brookfield SAFE Agreement, the Company received $50 million (the “Initial Purchase Amount”) which is repayable in cash, plus interest of 8% per annum, on the fifth anniversary of the Brookfield Safe Agreement. The Company accounts for the Brookfield SAFE liability at fair value which was $25.2 million as of December 31, 2023. Pursuant to the Brookfield Framework Agreement, the Company agreed to present Brookfield, on an exclusive basis, the opportunity to provide equity financing for carbon capture and transformation projects in the Company’s development pipeline once those projects meet certain defined investment criteria (“Qualified Projects”). A key input into the valuation of the Brookfield SAFE liability is the assumption regarding the portion of the Initial Purchase Amount that will be converted to equity (and the corresponding portion of accrued interest that will be forgiven) as a result of presentation of Qualified Projects to Brookfield. The valuation of the Brookfield SAFE liability is highly sensitive to such assumption and selection of such assumption is subjective and requires a high degree of judgment by management of the Company. We identified the valuation of the Brookfield SAFE Liability as a critical audit matter because its value is highly sensitive to changes in the assumption regarding the portion of the Initial Purchase Amount that will be converted to equity (and the corresponding portion of accrued interest that will be forgiven). Evaluating this assumption required a high degree of auditor judgment and significant audit effort to evaluate the sufficiency of audit evidence relating to the Company’s estimate. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of the Brookfield SAFE liability included the following, among others: – We inspected the Brookfield Framework Agreement and obtained an understanding of its key terms, including the investment criteria that need to be met for a project to be considered a Qualifying Project. – We inspected the Company’s project development pipeline to assess the nature and quantity of projects that could be developed into Qualifying Projects. – We made selections of projects from the project development pipeline and made inquiries of project managers to understand the status of the project relative to meeting the investment criteria and evaluated the reasonableness of the Company’s assessment of the probability the selected project will become a Qualifying Project prior to the fifth anniversary of the Brookfield SAFE Agreement. – We performed a lookback analysis on the status of the projects included in the project development pipeline to evaluate for management bias in developing its assumption. /s/ Deloitte & Touche LLP Chicago, IL February 29, 2024 We have served as the Company's auditor since 2021. Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting To the shareholders and the Board of Directors of LanzaTech Global, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of LanzaTech Global, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 29, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Material Weaknesses A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment: • The Company has not effectively designed and implemented internal controls related to accounting for complex transactions and estimates requiring significant judgment. • The Company’s controls over revenue recognition were not designed and operating at the appropriate level of precision to address the complexity inherent in their revenue cycle. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2023, of the Company, and this report does not affect our report on such financial statements. /s/ Deloitte & Touche LLP Chicago, IL February 29, 2024 LANZATECH GLOBAL, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 75,585 $ 83,045 Held-to-maturity investment securities 45,159 — Trade and other receivables, net of allowance 11,157 11,695 Contract assets 28,238 18,000 Other current assets 12,561 11,157 Total current assets 172,700 123,897 Property, plant and equipment, net 22,823 19,689 Right-of-use assets 18,309 6,969 Equity method investment 7,066 10,561 Equity security investment 14,990 14,990 Other non-current assets 5,736 750 Total assets $ 241,624 $ 176,856 Liabilities, Contingently Redeemable Preferred Stock, and Shareholders’ Deficit Current liabilities: Accounts payable $ 4,060 $ 7,455 Other accrued liabilities 7,316 4,502 AM SAFE liability — 28,986 Warrants 7,614 4,108 Contract liabilities 3,198 3,101 Accrued salaries and wages 5,468 7,031 Current lease liabilities 126 798 Total current liabilities 27,782 55,981 Non-current lease liabilities 19,816 6,615 Non-current contract liabilities 8,233 10,760 Fixed Maturity Consideration 7,228 — FPA Put Option liability 37,523 — Brookfield SAFE liability 25,150 50,000 Other long-term liabilities 1,421 1,591 Total liabilities 127,153 124,947 Contingently Redeemable Preferred Stock Redeemable convertible preferred stock, $ 0.0001 par value; 20,000,000 and 130,133,670 shares authorized, — and 129,148,393 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively — 480,631 Shareholders’ Deficit Common stock, $ 0.0001 par value; 400,000,000 and 158,918,093 shares authorized, 196,642,451 and 10,422,051 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 19 1 Additional paid-in capital 943,960 24,782 Accumulated other comprehensive income 2,364 2,740 Accumulated deficit ( 831,872 ) ( 456,245 ) Total shareholders’ equity (deficit) $ 114,471 $ ( 428,722 ) Total liabilities, contingently redeemable preferred stock, and shareholders' equity $ 241,624 $ 176,856 See the accompanying Notes to the Consolidated Financial Statements. LANZATECH GLOBAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Year Ended December 31, 2023 2022 Revenue: Revenue from contracts with customers and grants $ 45,953 $ 27,798 Revenue from sales of CarbonSmart products 5,337 4,000 Revenue from collaborative arrangements 5,529 2,575 Revenue from related party transactions 5,812 2,970 Total revenue 62,631 37,343 Cost and operating expenses: Cost of revenue from contracts with customers and grants (exclusive of depreciation shown below) ( 37,653 ) ( 22,912 ) Cost of revenue from sales of CarbonSmart products (exclusive of depreciation shown below) ( 4,889 ) ( 3,648 ) Cost of revenue from collaborative arrangements (exclusive of depreciation shown below) ( 2,265 ) ( 1,250 ) Cost of revenue from related party transactions (exclusive of depreciation shown below) ( 172 ) ( 477 ) Research and development expense ( 68,142 ) ( 53,191 ) Depreciation expense ( 5,452 ) ( 4,660 ) Selling, general and administrative expense ( 50,438 ) ( 26,804 ) Total cost and operating expenses ( 169,011 ) ( 112,942 ) Loss from operations ( 106,380 ) ( 75,599 ) Other income (expense): Interest income, net 4,572 8 Other expense, net ( 29,388 ) ( 2,757 ) Total other expense, net ( 24,816 ) ( 2,749 ) Loss before income taxes ( 131,196 ) ( 78,348 ) Income tax expense — — (Loss) gain from equity method investees, net ( 2,902 ) 1,992 Net loss $ ( 134,098 ) $ ( 76,356 ) Other comprehensive loss: Foreign currency translation adjustments ( 376 ) ( 1,449 ) Comprehensive loss $ ( 134,474 ) $ ( 77,805 ) Unpaid cumulative dividends on preferred stock ( 4,117 ) ( 38,672 ) Net loss allocated to common shareholders $ ( 138,215 ) $ ( 115,028 ) Net loss per common share - basic and diluted $ ( 0.79 ) $ ( 12.37 ) Weighted-average number of common shares outstanding - basic and diluted 176,023,219 9,302,080 See the accompanying Notes to the Consolidated Financial Statements. LANZATECH GLOBAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY/ DEFICIT Redeemable Convertible Preferred Stock Common Stock Outstanding Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Shareholders' Equity / (Deficit) Shares Amount Shares Amount Balance as of December 31, 2022 29,521,810 $ 480,631 2,382,358 $ — $ 24,783 $ ( 456,245 ) $ 2,740 $ ( 428,722 ) Retroactive application of recapitalization 99,626,583 — 8,039,693 1 ( 1 ) — — — Adjusted balance, beginning of period 129,148,393 480,631 10,422,051 1 24,782 ( 456,245 ) 2,740 ( 428,722 ) Stock-based compensation expense — — — — 14,957 — — 14,957 RSA vesting — — 2,535,825 — — — — — Repurchase of equity instruments — — ( 771,141 ) — ( 7,650 ) — — ( 7,650 ) Net loss — — — — — ( 134,098 ) — ( 134,098 ) Issuance of common stock upon exercise of options — — 1,661,698 — 2,550 — — 2,550 Exercise of a warrant, Series C and D Preferred Stock 594,309 5,890 — — — — — — In-kind payment of preferred dividend — 241,529 — — — ( 241,529 ) — ( 241,529 ) Conversion of preferred stock into common stock ( 129,742,702 ) ( 728,050 ) 153,895,644 15 728,035 — — 728,050 Recapitalization, net of transaction expenses (Note 3) — — 28,898,374 3 236,970 — — 236,973 Forward Purchase Agreement prepayment — — — — ( 60,547 ) — — ( 60,547 ) Reclassification of warrants to equity — — — — 4,863 — — 4,863 Foreign currency translation — — — — — — ( 376 ) ( 376 ) Balance as of December 31, 2023 — $ — 196,642,451 $ 19 $ 943,960 $ ( 831,872 ) $ 2,364 $ 114,471 LANZATECH GLOBAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY/ DEFICIT Redeemable Convertible Preferred Stock Common Stock Outstanding Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Shareholders' Equity / (Deficit) Shares Amount Shares Amount Balance as of December 31, 2021 29,521,810 $ 480,631 2,106,934 $ — $ 21,711 $ ( 379,889 ) $ 3,261 $ ( 354,917 ) Retroactive application of recapitalization 99,626,583 — 7,110,226 1 ( 1 ) — — — Adjusted balance, beginning of period 129,148,393 480,631 9,217,160 1 21,710 ( 379,889 ) 3,261 ( 354,917 ) Share-based compensation expense — — — — 2,527 — — 2,527 Repurchase of equity instruments — — — — ( 649 ) — — ( 649 ) Net loss — — — — — ( 76,356 ) — ( 76,356 ) Issuance of common stock upon exercise of options — — 1,204,891 — 1,194 — — 1,194 Transfer from foreign currency translation to investment — — — — — — 928 928 Foreign currency translation — — — — — — ( 1,449 ) ( 1,449 ) Balance as of December 31, 2022 129,148,393 $ 480,631 10,422,051 $ 1 $ 24,782 $ ( 456,245 ) $ 2,740 $ ( 428,722 ) See the accompanying Notes to the Consolidated Financial Statements. LANZATECH GLOBAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2023 2022 Cash Flows From Operating Activities: Net loss $ ( 134,098 ) $ ( 76,356 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation expense 15,199 2,527 (Gain) loss on change in fair value of SAFE and warrant liabilities ( 14,471 ) 1,949 Loss on change in fair value of the FPA Put Option and the Fixed Maturity Consideration liabilities 44,300 — Provision for losses on trade and other receivables 700 — Depreciation of property, plant and equipment 5,452 4,660 Amortization of discount on debt security investment ( 1,301 ) — Non-cash lease expense 1,526 1,825 Non-cash recognition of licensing revenue ( 1,805 ) ( 2,160 ) Loss (gain) from equity method investees, net 2,902 ( 1,992 ) Gain from disposal of property, plant and equipment — ( 49 ) Net foreign exchange loss 182 668 Changes in operating assets and liabilities: Accounts receivable, net 104 ( 8,817 ) Contract assets ( 10,049 ) ( 6,246 ) Accrued interest on debt investment ( 266 ) — Other assets ( 2,658 ) ( 5,127 ) Accounts payable and accrued salaries and wages ( 4,991 ) 8,243 Contract liabilities 95 ( 488 ) Operating lease liabilities ( 337 ) ( 2,028 ) Other liabilities 2,220 ( 1,312 ) Net cash used in operating activities $ ( 97,296 ) $ ( 84,703 ) Cash Flows From Investing Activities: Purchase of property, plant and equipment ( 8,553 ) ( 10,735 ) Proceeds from disposal of property, plant and equipment — 49 Purchase of debt securities ( 93,858 ) — Proceeds from maturity of debt securities 50,000 — Purchase of additional interest in equity method investment ( 288 ) — Origination of related party loan ( 5,212 ) — Net cash used in investing activities $ ( 57,911 ) $ ( 10,686 ) Cash Flows From Financing Activities: Proceeds from issue of equity instruments of the Company — 1,194 Proceeds from the Business Combination and PIPE, net of transaction expenses (Note 3) 213,381 — Forward Purchase Agreement prepayment ( 60,096 ) Proceeds from exercise of options 2,550 — Proceeds from issue of SAFE and warrant instruments — 50,000 Repurchase of equity instruments of the Company ( 7,650 ) ( 649 ) Net cash provided by financing activities $ 148,185 $ 50,545 Net decrease in cash, cash equivalents and restricted cash ( 7,022 ) ( 44,844 ) Cash, cash equivalents and restricted cash at beginning of period 83,710 128,732 Effects of currency translation on cash, cash equivalents and restricted cash ( 404 ) ( 178 ) Cash, cash equivalents and restricted cash at end of period $ 76,284 $ 83,710 Supplemental disclosure of non-cash investing and financing activities: Acquisition of property, plant and equipment under accounts payable 279 246 Receipt of common shares as payment for option exercises — 1,944 Right-of-use asset additions 12,866 4,108 Reclassification of capitalized costs related to the business combination to equity 1,514 — Cashless conversion of warrants on preferred shares 5,890 — Recognition of public and private warrant liabilities in the Business Combination 4,624 — Reclassification of AM SAFE warrant to equity 1,800 — Conversion of AM SAFE liability into common stock 29,730 — Conversion of Legacy LanzaTech NZ, Inc. preferred stock and in-kind dividend into common stock 722,160 — Reclassification of Shortfall warrant to equity 3,063 — LANZATECH GLOBAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS See the accompanying Notes to the Consolidated Financial Statements. LANZATECH GLOBAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LANZATECH GLOBAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Description of the Business LanzaTech Global, Inc., formerly known as AMCI Acquisition Corp. II (“AMCI”) prior to February 8, 2023 (the “Closing Date”) was incorporated as a Delaware corporation on January 28, 2021. On March 8, 2022, LanzaTech NZ, Inc. ("Legacy LanzaTech") entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AMCI and AMCI Merger Sub, Inc. a Delaware corporation and a wholly owned subsidiary of AMCI (“Merger Sub”). On February 8, 2023, Legacy LanzaTech completed its business combination with AMCI by which the Merger Sub merged with and into Legacy LanzaTech, with Legacy LanzaTech continuing as the surviving corporation and as a wholly owned subsidiary of AMCI (the “Business Combination”). The reporting entity is LanzaTech Global, Inc. and its subsidiaries (collectively referred to herein as “the Company”, "LanzaTech", “we”, “us”, “our”). For more information on the Business Combination, see Note 3 - Reverse Recapitalization . The Company is headquartered in Skokie, Illinois. The Company is a nature-based carbon refining company that transforms waste carbon into the chemical building blocks for consumer goods such as sustainable fuels, fabrics, and packaging that people use in their daily lives. The Company’s customers leverage its proven proprietary gas fermentation technology platform to convert certain feedstock, including waste carbon gases, into sustainable fuels and chemicals such as ethanol. The Company performs related services such as feasibility studies, engineering services, and research and development ("R&D") in biotechnology for commercial and government entities. The Company also purchases low carbon chemicals produced at customer facilities employing the Company’s technology and sells it under the brand name CarbonSmart. We have also been developing the capabilities to produce single cell protein as a primary product from our gas fermentation platform. As of December 31, 2023, licensees of the Company’s technology operate four commercial-scale waste-to-gas ethanol plants in China, one plant in India, and one plant in Belgium with others currently in development in various countries, compared to three commercial scale waste-to-gas ethanol plants in China as of December 31, 2022. As a result of the Business Combination, the Company’s common stock trades under the ticker symbol “LNZA” and its Public Warrants trade under the ticker symbol “LNZAW” on the Nasdaq Stock Market. Prior to the consummation of the Business Combination, the Company’s common shares were listed on Nasdaq Stock Market under the symbol “AMCI” and the Public Warrants were listed on the Nasdaq Stock Market under the symbol “AMCI-W”. Unless otherwise indicated, amounts in these financial statements are presented in thousands, except for share and per share amounts. Note 2 — Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of LanzaTech Global, Inc. and its wholly-owned consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Following the consummation of the Business Combination LanzaTech was a “smaller reporting company” or “SRC” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. 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 (the measurement date). As a result, LanzaTech no longer qualified as a SRC as of the measurement date. LanzaTech has elected to continue using the scaled disclosures permitted for SRCs in this annual report, and will begin providing non-scaled larger company disclosures in the Form 10-Q as of and for the period ended March 31, 2024. The Business Combination is accounted for as a reverse recapitalization as Legacy LanzaTech was determined to be the accounting acquirer under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) based on the evaluation of the following facts and circumstances: • Legacy LanzaTech stockholders have the largest portion of voting rights ( 85.3 % at the closing of the Business Combination) in the Company; • Legacy LanzaTech’s existing senior management team comprise senior management of the Company; • The operations of the Company primarily represent operations of Legacy LanzaTech; and • In comparison with AMCI, Legacy LanzaTech has significantly more revenue and total assets. For more information on the Business Combination, see Note 3 - Reverse Recapitalization . The Company has reclassified its warrants on preferred shares, for $ 2,119 as of December 31, 2022, from Other accrued liabilities to Warrants on the consolidated balance sheet to conform with current period presentation. Revision of previously issued financial statements The Forward Purchase Agreement prepayment is presented as a cash outflow from financing activities within the consolidated statement of cash flows for the year ended December 31, 2023. In the Company’s quarterly reports for the year-to-date periods ended March 31, 2023, June 30, 2023, and September 30, 2023, it was classified as a cash outflow from investing activities. During Q4 2023, the company identified the error and updated the presentation in the annual financial statements. The Company will revise this presentation in the 2023 comparative periods presented in its quarterly reports for the year-to-date periods ended March 31, 2024, June 30, 2024, and September 30, 2024 filed for the quarters. The Company has determined the incorrect classification was not material to the respective quarterly reports. Variable Interest Entity (“VIE”) The Company makes judgments in determining whether an entity is a VIE and, if so, whether it is the primary beneficiary of the VIE and is thus required to consolidate the entity. A VIE is a legal entity that has a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. The Company’s variable interest arises from contractual, ownership or other monetary interests in the entity, which changes with fluctuations in the fair value of the entity’s net assets. A VIE is consolidated by its primary beneficiary, the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates a VIE when the Company is deemed to be the primary beneficiary. The Company assesses whether or not the Company is the primary beneficiary of a VIE on an ongoing basis. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable US GAAP. The Company holds interests in certain VIEs for which it has been determined the Company is not the primary beneficiary. The Company's variable interests primarily relate to entities in which the Company has a non-controlling equity interest. Although these financial arrangements resulted in holding variable interests in these entities, they do not empower the Company to direct the activities of the VIEs that most significantly impact the VIEs' economic performance. The Company's interests in the VIEs are, therefore, accounted for under the equity method of accounting or at fair value (including, when applicable, the practicability exception to fair value under ASC 321-10-35). Refer to Note 6 - Investments , for further information. The Company is exposed to the VIEs’ losses and other impairment losses up to the carrying value of each investment and any amounts receivable from the VIE, less amounts payable. Refer to Note 15 - Related Party Transactions , for further details on the transactions with VIEs. Going Concern The accompanying consolidated financial statements of the Company have been prepared in accordance with US GAAP and assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company had cash and cash equivalents of $ 75,585 , short and long-term held-to-maturity debt investments of $ 45,159 and an accumulated deficit of $( 831,872 ) as of December 31, 2023 and cash outflows from operations of $( 97,296 ) and a net loss of $( 134,098 ) for the twelve months ended December 31, 2023. As a result of the Business Combination described in Note 1 closing on February 8, 2023, the Company received $ 153,285 , which represents the proceeds from the Business Combination received net of (1) transaction expenses, (2) the PIPE investment and (3) the amount paid to ACM ARRT H LLC (“ACM”) and Vellar Opportunity Fund SPV LLC - Series 10 (“Vellar”) in relation to the Forward Purchase Agreement (see below). The Company has historically funded its operations through debt financing and issuances of equity securities. Based on the Company’s financial position as of the date the consolidated financial statements were issued, the Company projects that it will be able to cover its liquidity needs for the next twelve months. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include fair value of equity awards granted to both employees and non-employees, valuation of common stock prior to the close of the Business Combination, revenue recognized over time, AM SAFE and Brookfield SAFE obligations, AM SAFE warrants, the Forward Purchase Agreement and the Private Placement Warrants. The Company uses the percentage of completion for the input method to recognize revenue over time for certain contracts with customers. Under the input method, the Company exercises judgment and estimation when selecting the most indicative measure of such performance. Most of our arrangements provide fixed consideration, however, when there are variable consideration elements, the Company estimates 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, the Company estimates the stand-alone selling price and apportions the total transaction price to this material right. Refer to the Revenue Recognition section in Note 2 - Summary of Significant Accounting Policies hereunder. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Segment Information The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance. While the Company offers a variety of services and operates in multiple countries, the Company’s business operates in one operating segment because most of the Company’s service offerings are delivered and supported on a global basis, most of the Company’s service offerings are deployed in a similar way, and the Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. There are no segment managers who are held accountable by the CODM, or anyone else, for operations, operating results, and planning for components below the consolidated level. Accordingly, the Company has determined that it has a single reportable and operating segment. See Note 5 - Revenues , for disaggregation of the Company’s revenues by customer location and contract type. Foreign Currencies The Company’s reporting currency is the U.S. Dollar. The Company has certain foreign subsidiaries where the functional currency is the local currency. All of the assets and liabilities of these subsidiaries are translated to U.S. dollars at the exchange rate in effect at the balance sheet date, income and expense accounts are translated at average rates for the period, and shareholders’ equity accounts are translated at historical rates. The effects of translating financial statements of foreign operations into the Company’s reporting currency are recognized in other comprehensive income. The Company also has foreign subsidiaries that have a functional currency of the U.S. dollar. Purchases and sales of assets and income and expense items denominated in foreign currencies are remeasured into U.S. dollar amounts on the respective dates of such transactions. Net realized and unrealized foreign currency gains or losses relating to the differences between these recorded amounts and the U.S. dollar equivalent actually received or paid are included within other expense, net in the consolidated statements of operations and comprehensive loss. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2023 and December 31, 2022 , the Company had $ 75,585 and $ 83,045 of cash and cash equivalents, respectively. Restricted Cash The Company is required to maintain a cash deposit with a bank which consists of collateral on certain travel and expense programs maintained by the bank. The following represents a reconciliation of Cash and cash equivalents in the consolidated balance sheets to total cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of December 31, 2023 and December 31, 2022. As of December 31, 2023 December 31, 2022 Cash and cash equivalents $ 75,585 $ 83,045 Restricted cash (presented within Other current assets) 699 665 Cash, cash equivalents and restricted cash $ 76,284 $ 83,710 Trade and Other Receivables Receivables are reported net of allowances for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The Company estimates the allowance for doubtful accounts based on a variety of factors including the length of time receivables are past due, the financial health of customers, unusual macroeconomic conditions, and historical experience. As of December 31, 2023 and December 31, 2022, the Company recognized an allowance for doubtful accounts of $ 1,751 and $ 1,051 , respectively. Other Current Assets Other current assets consist of prepaid expenses, materials and supplies, inventory and other assets. Material and supplies consist of spare parts and consumables used for research and research equipment and is stated at the weighted average cost. Inventory consists of CarbonSmart products and biocatalysts to be sold to biorefining customers. Property, Plant and Equipment, net Property, plant and equipment are stated at cost and include improvements that significantly increase capacities or extend the useful lives of existing plant and equipment. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. Useful lives range from three to five years for instruments and equipment, three to five years for office equipment and furniture and software, five years for vehicles and, for leasehold improvements, the shorter of the life of the improvement or the remaining term of the lease. The Company reviews the remaining useful life of its assets on a regular basis to determine whether changes have taken place that would suggest that a change to depreciation policies is warranted. Upon retirement or disposal of property, plant and equipment, the cost and related accumulated depreciation are removed from the account, and the resulting gains or losses, if any, are recorded in the consolidated statements of operations and comprehensive loss. Net gains or losses related to asset dispositions are recognized in earnings in the period in which dispositions occur. Routine maintenance, repairs and replacements are expensed as incurred. Leases The Company determines if an arrangement is a lease at inception. Lease agreements under which the Company is a lessee are evaluated to classify the lease as a finance or operating lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As most leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the Company’s consolidated balance sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component. Impairment of Long-Lived Assets The Company performs a recoverability assessment of each of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indicators may include, but are not limited to, adverse changes in the regulatory environment in a jurisdiction where the Company operates, a decision to discontinue the development of a long-lived asset, early termination of a significant customer contract, or the introduction of newer technology. When performing a recoverability assessment, the Company measures whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its carrying value. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge. Management develops the assumptions used in the recoverability assessment based on active contracts as well as information received from third-party industry sources. The Company did not record an impairment during the years ended December 31, 2023 and 2022. Equity Method Investments Investments in entities over which the Company has significant influence, but not control, are accounted for using the equity method of accounting. Gain or loss from equity method investees, net, represents the Company’s proportionate share of net income or loss of its equity method investees and any gains or losses resulting from transactions in the investee's equity. Our equity method investment is assessed for impairment whenever changes in the facts and circumstances indicate a loss in value may have occurred. When a loss is deemed to have occurred and is other than temporary, the carrying value of the equity method investment is written down to fair value. In evaluating whether a loss is other than temporary, the Company considers the length of time for which the conditions have existed and its intent and ability to hold the investment. Equity Security Investments Investments in entities over which the Company has neither significant influence, nor control, are accounted for as equity security investments. For investments where the fair value is not readily determinable, the Company will account for its investment using the alternative measurement principals as permitted under Accounting Standards Codification ("ASC") 321, Investments — Equity Securities . Subsequently, under the alternative measurement method, the Company will adjust the carrying value for observable changes in price and will reassess whether its investment continues to qualify for such method. Additionally, the Company will perform a qualitative assessment and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than its carrying value. The changes in value and impairment charges (if any), are recorded in Other expense, net in the consolidated statements of operations and comprehensive loss. ArcelorMittal Simple Agreement for Future Equity ("AM SAFE") In December 2021, the Company issued a SAFE that allowed an investor to participate in future equity financings through a share-settled redemption of the amount invested (such notional being the “invested amount”). The Company determined that the AM SAFE was not legal form debt (i.e., no creditors’ rights). The AM SAFE includes a provision allowing for cash redemption upon the occurrence of a change of control, the occurrence of which is outside the control of the Company. Therefore, the AM SAFE was classified as mark-to-market liability pursuant to ASC 480, Distinguishing Liability from Equity ("ASC 480") as of December 31, 2022. On the Closing Date of the Business Combination, the AM SAFE converted into 3,000,000 shares of common stock. The AM SAFE was adjusted to its fair value on the Closing Date prior to settlement. Brookfield SAFE On October 2, 2022, the Company entered into a SAFE with Brookfield (the "Brookfield SAFE"). Under the Brookfield SAFE, the Company agreed to issue to Brookfield the right to certain shares of its capital stock, in exchange for the payment of $ 50,000 (the “Initial Purchase Amount”). The Brookfield SAFE is legal form debt. Management has elected to apply the Fair Value Option ("FVO") under ASC 825, Financial Instruments . As the Brookfield SAFE is accounted for under the FVO, the Brookfield SAFE is classified as mark-to-market liability. Investment securities The Company classifies investment securities according to their purpose and holding period. All investment securities are debt securities that have been classified as held-to-maturity (“HTM”) because the Company has both the ability and intent to hold the securities to maturity. HTM debt securities are comprised of U.S. Treasury bills, U.S. Treasury notes, Yankee bonds, and corporate debt. HTM debt securities are carried at amortized cost, which is original cost net of periodic principal repayments and amortization of premiums and accretion of discounts. Accrued interest receivable is recorded within trade and other receivables, net of allowance on the consolidated balance sheets. Amortization of premiums and accretion of discounts are computed using the contractual level-yield method (contractual interest method), adjusted for actual prepayments. The contractual interest method recognizes the income effects of premiums and discounts over the contractual life of the securities based on the actual behavior of the underlying assets, including adjustments for actual prepayment activities, and reflects the contractual terms of the securities without regard to changes in estimated prepayments based on assumptions about future borrower behavior. Held-to-maturity securities are evaluated individually on a quarterly basis for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense). The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815-40”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815-40, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded at fair value as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance and adjusted to the current fair value at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in Other expense, net on the consolidated statements of operations and comprehensive loss (see Note 8 - Warrants ). Forward Purchase Agreement On February 3, 2023, the Company entered into a Forward Purchase Agreement (“FPA”) with ACM . On the same date, ACM partially assigned its rights under the FPA to Vellar. ACM and Vellar are together referred to as the “Purchasers”. Pursuant to the Forward Purchase Agreement, the Purchasers obtained 5,916,514 common shares (“Recycled Shares”) on the open market for $ 10.16 per share (“Redemption Price”), and such purchase price of $ 60,096 was funded by the use of AMCI trust account proceeds as a partial prepayment (“Prepayment Amount”) for the Forward Purchase Agreement redemption 3 years from the date of the Business Combination (“Maturity Date”). The Maturity Date may be accelerated, at the Purchasers discretion, if the Company share price trades below $ 3.00 per share for any 50 trading days during a 60 day consecutive trading-day period or the Company is delisted. On any date following the Business Combination, the Purchasers also have the option to early terminate the arrangement in whole or in part by providing optional early termination notice to the Company (the “Optional Early Termination”). For those shares early terminated (the “Terminated Shares”), the Purchasers will owe the Company an amount equal to the Terminated Shares times the Redemption Price, which may be reduced in the case of certain dilutive events (“Reset Price”). At the Maturity Date, the Company is obligated to pay the Purchasers 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 Maturity Consideration, on the Maturity Date, the Company shall pay to the Purchasers an amount equal to the product of (x) 500,000 and (y) the Redemption Price, totaling $ 5,079 (the “Share Consideration”). If the Purchasers were to utilize their Optional Early Termination to terminate the FPA early in its entirety, neither the Maturity Consideration nor the Share Consideration would be due to the Purchasers. The Purchasers’ Optional Early Termination economically results in the prepaid forward contract being akin to a written put option with the Purchaser’s right to sell all or a portion of the 5,916,514 common shares to the Company. The Company is entitled over the 36-month maturity period to either a return of the prepayment or the underlying shares, which the Purchasers will determine at their sole discretion. The FPA consists of three freestanding financial instruments which are accounted for as follows: 1) The total prepayment of $ 60,547 (“Prepayment Amount”), which is accounted for as a reduction to equity to reflect the substance of the overall arrangement as a net repurchase of the Recycled Shares and sale of shares to the Purchasers pursuant to a subscription agreement. 2) The “FPA Put Option” which includes both the in-substance written put option and the portion of the Maturity Consideration in excess of the Minimum Maturity Consideration (the “Variable Maturity Consideration”). The FPA Put Option is a derivative instrument the Company has recorded as a liability and measured at fair value. The initial fair value of the FPA Put Option and subsequent changes in fair value of the FPA Put Option are recorded within Other expense, net on the consolidated statements of operations and comprehensive loss. 3) The “Fixed Maturity Consideration,” which includes the minimum portion of the Maturity Consideration (the “Minimum Maturity Consideration”), calculated as 7,500,000 less 5,916,513 multiplied by $ 2.00 or $ 3,167 , and the Share Consideration. Both the Minimum Maturity Consideration and the Share Consideration are considered to be free-standing debt instruments and as both will be paid on the same terms and at the same time, these are accounted for together. The Company has elected to measure these using the FVO under ASC 825, Financial Instruments (“ASC 825”). The Fixed Maturity Consideration is recorded as a long-term liability on the consolidated balance sheets. The initial fair value of the Fixed Maturity Consideration and subsequent changes in fair value of the Fixed Maturity Consideration are recorded within Other expense, net on the consolidated statements of operations and comprehensive loss. Revenue Recognition The Company recognizes revenue from exchange transactions in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company primarily earns revenue from services related to biorefining (formerly known as carbon capture and transformation) which includes feasibility studies and basic engineering design of commercial plants, licensing of technologies and sales of biocatalysts. The other two revenue streams are: (1) joint development and contract research activities to develop and optimize novel biocatalysts, related processes and technologies, and (2) supply of chemical building blocks for sustainable products produced using the Company’s proprietary technologies (referred to as CarbonSmart). Revenue is measured based on the consideration specified in a contract with a customer. The Company records taxes collected from customers and remitted to governmental authorities on a net basis. The Company’s payment terms are between 30-60 days and can vary by customer type and products offered. Management has evaluated the terms of the Company’s arrangements and determined that they do not contain significant financing components. Biorefining The Company provides feasibility studies and basic design and engineering services used for detailed design, procurement, and construction of commercial plants that utilize the Company’s technologies, along with the sale of microbes and media. 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 as performance obligations are satisfied. Revenue for the sale of microbes and media is at a point in time, depending on when control transfers to the customer. The Company licenses intellectual property to generate recurring revenue, in the case of running royalties, or one-time revenue, in the case of fixed consideration royalties, when its customers deploy the Company’s 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 has been satisfied, whichever is later. Grants received to perform engineering services, 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 as the qualifying costs related to the grant have been incurred. Joint Development and Contract Research The Company performs R&D services related to novel technologies and development of biocatalysts for commercial applications, mainly to produce fuels and chemicals. The Company engages in two main types of R&D services – joint development agreements, and contract research, including projects with the U.S. Department of Energy and other US or foreign government agencies. 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 percentage-completion method when enforceable rights to payment exist. When no milestones or phases are clearly defined, management has determined that the cost incurred, input method, is an appropriate measure of progress towards 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 the Company providing services which creates a contract liability for the Company. The contract liability represents the Company's obligation to provide services to a customer. CarbonSmart The Company purchases chemical building blocks from the customers who have deployed our proprietary technologies in their biorefining plants and sells them as CarbonSmart products. Revenue is recognized at a point in time when control transfers to our end customer, which varies depending on the shipping terms. The Company acts as the principal in such transactions and accordingly, recognizes revenue and cost of revenues on a gross basis. Amounts received for sales of CarbonSmart products are classified as Revenue from sales of CarbonSmart products in the consolidated statements of operations and comprehensive loss. Collaboration Arrangements The Company has certain partnership agreements that are within the scope of ASC 808, Collaborative Arrangements , which provides guidance on the presentation and disclosure of collaborative arrangements. Generally, the classification of the transaction under the collaborative arrangements is determined based on the nature of the contractual terms of the arrangement, along with the nature of the operations of the participants. The Company’s collaborative agreements generally include a provision of R&D services related to novel technologies and biocatalysts. Amounts received for these services are classified as Revenue from collaborative arrangements in the consolidated statements of operations and comprehensive loss. The Company's R&D services are a major part of the Company's ongoing operations and therefore ASC 606 is applied to recognize revenue. Cost of Revenues The Company’s R&D, engineering, and other direct costs of services and goods related to revenue agreements with customers, related parties, and collaborative partners represent cost of revenue. Costs include both internal and third-party fixed and variable costs and include materials, supplies, labor, and fringe benefits. Research and Development We incur costs associated with various R&D activities and expense them as incurred. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows: Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access; Level 2 — Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 — Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, Fair Value Measurement , approximates the carrying amounts represented in the accompanying consolidated balance sheets, primarily due to their short-term nature, except for the warrant liability. Concentration of Credit Risk and Other Risks and Uncertainties Revenue generated from the Company’s contracting entities outside of the United States for the twelve months ended December 31, 2023 and 2022 was approximately 73 % and 61 %, respectively. As of December 31, 2023 and December 31, 2022, approximately 49 % and 35 %, respectively, of trade accounts receivable and unbilled accounts receivable were due from contracting entities located outside the United States. As of December 31, 2023 and December 31, 2022, the value of property, plant, and equipment outside the United States was immaterial. The Company’s revenue by geographic region based on the contracting entities’ location is presented in Note 5 - Revenues . Our largest c ontracting entities represent 10% or greater of revenue and were as follows for the twelve months ended months ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Customer A 38 % 10 % Customer B 6 % 22 % 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, stock-appreciation rights (“SARs”) and restricted stock issued by the Company, which vest based on either time and/or the achievement of certain market or performance conditions. The Company records forfeitures as they occur. 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. The Company estimates the fair value of service and performance-based options and SARs using a Black-Scholes option pricing model that uses assumptions including expected volatility, expected term, and the expected risk-free rate of return. The Company estimates the fair value of market-based RSUs using the Monte Carlo simulation model that uses assumptions including expected volatility, and the derived service period. The Company uses peer data to determine expected volatility and expected term. The Company estimates the fair value of RSUs based on the closing market price of its common stock on the date of measurement. Benefit Plans The Company sponsors a 401(k) defined contribution retirement plan for the benefit of its employees, substantially all of whom are eligible to participate after meeting minimum qualifying requirements. Contributions to the plan are at the discretion of the Company. For the years ended December 31, 2023 and 2022, the Company contributed $ 1,253 and $ 987 , respectively, to the plan, which contributions are included within Cost of revenue, Research and development expense and Selling, general and administrative expense in the consolidated statements of operations and comprehensive loss. Income Taxes The Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes . Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred income tax assets are evaluated to determine if valuation allowances are required or should be adjusted. Valuation allowances are established based on a more likely than not standard. The ability to realize deferred tax assets depends on the Company’s ability to generate sufficient taxable income within the carry back or carryforward periods provided for in the tax law for each tax jurisdiction. The Company considers the various possible sources of taxable income when assessing the realization of its deferred tax assets. The valuation allowances recorded against deferred tax assets generated by taxable losses in certain jurisdictions will affect the provision for income taxes until the valuation allowances are released. The Company’s provision for income taxes will include no tax benefit for losses incurred and no tax expense with respect to income generated in these jurisdictions until the respective valuation allowance is eliminated. The Company records uncertain tax positions on the basis of a two-step process whereby it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and for those tax positions that meet the more likely than not criteria, the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority is recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. Related Party Transactions The Company follows ASC 850-10, Related Party Transactions , for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. Refer to Note 6 - Investments , and Note 15 - Related Party Transactions , for further information. Net Loss Per Share Basic net loss per share is computed by dividing net loss attributable to participating stock by the weighted average number of shares of participating stock outstanding during the period. Diluted net loss per share reflects potential dilution and is computed by dividing net loss attributable to participating stock by the weighted average number of shares of participating stock outstanding during the period. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per share by application of the treasury stock method or if-converted method, as applicable. Refer to Note 4 - Net Loss Per Share , for additional information. Shareholders' Equity The securities of the Company are represented by common shares, par value $ 0.0001 per share. Each common share is entitled to one vote. With respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, all common shares shall participate pro rata in such payment whenever funds are legally available and when declared by the Board of Directors of the Company, subject to the prior rights of holders of all classes of stock outstanding. Recently Issued Accounting Pronouncements Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative issued in August 2018 In October 2023, the FASB issued ASU 2023-06, which amends U.S. GAAP to reflect updates and simplifications to certain disclosure requirements referred to FASB by the SEC. The targeted amendments incorporate 14 of the 27 disclosures referred by the SEC into Codification. Some of the amendments represent clarifications to, or technical corrections of, the current requirements. Each amendment in ASU 2023-06 will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulation by June 30, 2027. Because the company is subject to the SEC’s disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from regulation S-X or Regulation S-K becomes effective, and will be applied prospectively, with early adoption prohibited. No amendments were effective at December 31, 2023. The Company is still currently evaluating the impact of the adoption of the new standard but does not expect a significant impact on the consolidated financial statements. ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”) In November 2023, the FASB issued ASU No. 2023-07, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. This ASU is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within annual period beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of the ASU will have on the consolidated financial statements. ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”) In December 2023, the FASB issued ASU No. 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to help investors better assess how a company’s operations and related tax risks and tax planning and operational opportunities affect the company’s tax rate and prospects for future cash flows. ASU 2023-09 improves disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption of the standard in the income tax footnote disclosures. Note 3 — Reverse Recapitalization On February 8, 2023, Legacy LanzaTech and AMCI consummated the merger contemplated by the Merger Agreement (see Note 1 - Description of the Business ). Immediately following the Business Combination, there were 196,222,737 shares of common stock outstanding with a par value of $ 0.0001 . Additionally, there were outstanding warrants to purchase 12,574,200 shares of common stock. As discussed in Note 2 - Summary of Significant Accounting Policies , the Business Combination was accounted for as a reverse recapitalization in accordance with US GAAP. Under this method, while AMCI was the legal acquirer, it has been treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of pre-combination Legacy LanzaTech issuing stock for the net assets of AMCI, accompanied by a recapitalization. The net assets of AMCI were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of pre-combination Legacy LanzaTech. Reported shares and earnings per share available to holders of the Company’s common stock and preferred shares, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the Business Combination (approximately one pre-combination Legacy LanzaTech share to 4.3747 of the Company’s shares). Upon closing of the Business Combination, the shareholders of AMCI, including AMCI founders, were issued 10,398,374 shares of common stock of the Company. In connection with the closing, holders of 8,351,626 shares of common stock of AMCI were redeemed at a price per share of approximately $ 10.16 . In connection with the Closing, 18,500,000 shares of common stock of the Company were issued to PIPE investors. 15,500,000 of those shares were issued at a price per share of $ 10.00 . The remaining 3,000,000 shares were issued upon conversion of the AM SAFE liability. The Company incurred $ 7,223 in transaction costs relating to the Business Combination and recorded those costs against Additional paid-in capital in the consolidated balance sheets. The number of shares of Class A common stock issued and outstanding immediately following the consummation of the Business Combination and PIPE financing were: Shares Percentage Legacy LanzaTech shares 167,324,363 85.3 % Public stockholders 10,398,374 5.3 % PIPE shares 18,500,000 9.4 % Total 196,222,737 100 % The following table reconciles the elements of the Business Combination and PIPE financing to the consolidated statements of cash flows: Recapitalization Cash - AMCI trust account 1 $ 64,090 Cash - PIPE financing 155,000 Less: Transaction costs allocated to equity ( 5,709 ) Effect of the Business Combination and PIPE financing $ 213,381 __________________ (1) The cash from the AMCI trust account is net of redemptions and the payment of pre-combination AMCI expenses. The following table reconciles the elements of the Business Combination and PIPE financing to the change in Additional paid-in capital on the consolidated statement of changes in redeemable preferred stock and shareholders' equity/deficit: Recapitalization Cash - AMCI trust account $ 64,090 Public Warrants and Private Placement Warrants recorded on the Closing Date ( 4,624 ) Cash - PIPE financing 155,000 Conversion of the AM SAFE 29,730 Transaction costs allocated to equity ( 7,223 ) $ 236,973 Less: par value of shares held by PIPE investors and public stockholders ( 3 ) Total additional paid-in capital from recapitalization $ 236,970 Note 4 — Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all common stock equivalents of the Company, including equity-classified share-based compensation, the Brookfield SAFE, warrants, and contingently redeemable preferred stock, to the extent dilutive. Earnings per share calculation for all periods prior to the Business Combination have been retrospectively restated to the equivalent number of shares reflecting the exchange ratio established in the Merger Agreement of 4.3747 . The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock (in thousands, except shares and per share amounts): Year Ended December 31, 2023 2022 Numerator: Net loss for basic and diluted earnings per common share $ ( 134,098 ) $ ( 76,356 ) Unpaid cumulative dividends on preferred stock ( 4,117 ) ( 38,672 ) Net loss allocated to common shareholders $ ( 138,215 ) ( 115,028 ) Denominator: Weighted-average shares used in calculating net loss per share, basic and diluted 176,023,219 9,302,080 Net loss per common share, basic and diluted (1) $ ( 0.79 ) $ ( 12.37 ) __________________ (1) In periods in which the Company reports a net loss, all common stock equivalents are excluded from the calculation of diluted weighted average shares outstanding because of their anti-dilutive effect on loss per share. As of December 31, 2023 and 2022, common stock equivalents not included in the computation of loss per share because their effect would be antidilutive include the following: December 31, 2023 2022 Redeemable convertible preferred stock (if converted) — 129,148,393 Options 16,411,978 14,661,253 RSUs 7,084,967 — RSAs — 2,535,825 Brookfield SAFE 5,000,000 — Warrants 16,657,686 985,278 Total 45,154,631 147,330,749 The preferred shares automatically converted into common shares upon the Business Combination at a 1 :1 ratio. On February 8, 2023, upon conversion of the preferred shares, the cumulative accrued, declared and unpaid dividends on the preferred shares became payable. The total amount of cumulative accrued, undeclared and unpaid dividends was approximately $ 241,529 on the Closing Date. As stipulated by the Merger Agreement, this amount was divided by 10 and resulted in the issuance of an additional 24,152,942 common shares. Prior to the Business Combination, the additional 129,148,393 of common stock equivalents resulting from any such conversion are not included in the computation of diluted net loss per share because doing so would be anti-dilutive. In connection with the AM SAFE and Brookfield SAFE, see Note 10 - Fair Value , the Company could issue additional potential shares of common stock. Shares related to the AM SAFE were issued on the Closing Date. Shares related to the Brookfield SAFE and AM SAFE warrant have not been issued as of December 31, 2023. The AM SAFE warrant became exercisable for a fixed number of shares as of the Closing Date, see Note 8 - Warrants . As a result, these common stock equivalents are included in the warrants line item in the potential share table above as of December 31, 2023. The per share issuance price for the Brookfield SAFE upon closing of the Business Combination is the liquidity price as defined in the Brookfield SAFE agreement. As a result of the Business Combination, the Brookfield SAFE became convertible into a maximum number of shares, which is included in the table above as of December 31, 2023. None of these common stock equivalents are included in the computation of diluted net loss per share until actually issued because doing so would be anti-dilutive. Note 5 — Revenues Disaggregated Revenue The following table presents disaggregated revenue in the following categories (in thousands): Year Ended December 31, 2023 2022 Contract Types: Licensing $ 3,449 $ 2,160 Engineering and other services 39,196 19,061 Biorefining revenue $ 42,645 $ 21,221 Joint development agreements 8,416 6,021 Contract research 6,233 6,101 Joint development and contract research revenue $ 14,649 $ 12,122 CarbonSmart product 5,337 4,000 Total Revenue $ 62,631 $ 37,343 The following table presents revenue from partners in collaborative arrangements and from grant contributions which are included in the table above as follows (in thousands): Year Ended December 31, 2023 2022 Revenue from partners in collaborative agreements included in the Joint development agreements above 5,529 2,575 Revenue from grant contributions included in the Engineering and other services above 24,146 6,026 The following table presents disaggregation of the Company’s revenues by customer location for the twelve months ended months ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 North America $ 17,618 $ 17,149 Europe, Middle East, Africa (EMEA) 37,447 11,500 Asia 3,570 5,752 Australia 3,996 2,942 Total Revenue $ 62,631 $ 37,343 Contract balances The following table provides changes in contract assets and liabilities (in thousands): Current Contract Assets Current Contract Liabilities Non-current Contract Liabilities Balance as of December 31, 2022 $ 18,000 $ 3,101 $ 10,760 Additions to unbilled accounts receivable 61,453 — — Increases due to cash received — 10,058 — Unbilled accounts receivable recognized in trade receivables ( 51,405 ) — — Decrease on revaluation on currency 190 — 160 Reclassification from long-term to short-term — 2,687 ( 2,687 ) Reclassification to revenue as a result of performance obligations satisfied — ( 12,648 ) — Balance as of December 31, 2023 $ 28,238 $ 3,198 $ 8,233 The increase in contract assets was mostly due to unbilled accounts receivable resulting from revenue recorded under contracts with customers and grants where the Company performed engineering and other services, and primarily relates to contracts with government entities. The decrease in contract liabilities was primarily due to the recognition of revenue during the period related to advance payments previously received by the Company for engineering and other services contracts with customers. As of December 31, 2023 and December 31, 2022 the Company had $ 11,157 and $ 11,695 , respectively, of billed accounts receivable, net of allowance. The contract liability balance comprises unconditional payments received from the Company’s customers prior to the satisfaction of the related performance obligations. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. The Company expects to recognize the amounts classified as current contract liabilities in revenue within one year or less and those classified as non-current within two to three years. Remaining performance obligations Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue that will be recognized as revenue in future periods. Transaction price allocated to remaining performance obligations is influenced by several factors, including the length of the contract term compared to the research term and the existence of customer specific acceptance rights. Remaining performance obligations consisted of the following (in thousands): As of December 31, 2023 December 31, 2022 Current $ 3,198 $ 3,101 Non-current 8,233 10,760 Total $ 11,431 $ 13,861 Note 6 — Investments HTM Debt Securities HTM debt securities are comprised of U.S. Treasury bills and notes, Yankee debt securities, and corporate debt securities. HTM debt securities are classified as short-term or long-term based upon the contractual maturity of the underlying investment. December 31, 2023 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Accrued Interest Short-term US Treasury bills and notes 20,423 6 $ — $ 20,429 $ 14 Corporate debt securities 21,736 14 ( 33 ) 21,717 209 Yankee debt securities 3,000 — ( 8 ) 2,992 43 Total debt securities due within a year $ 45,159 $ 20 $ ( 41 ) $ 45,138 $ 266 Total HTM Debt Securities 45,159 20 ( 41 ) 45,138 266 The Company regularly reviews held-to-maturity securities for declines in fair values that are determined to be credit related. As of December 31, 2023, the Company did not have an allowance for credit losses related to held-to-maturity securities. Equity investments The Company’s equity investments consisted of the following (in thousands): As of December 31, 2023 December 31, 2022 Equity Method Investment in LanzaJet $ 7,066 $ 10,561 Equity Security Investment in SGLT 14,990 14,990 Total Investment $ 22,056 $ 25,551 LanzaJet On May 13, 2020, the Company contributed $ 15,000 in intellectual property in exchange for a 37.5 % interest (“Original Interest”) of LanzaJet, Inc. (“LanzaJet”) in connection with an investment agreement (“Investment Agreement”). The Company accounts for the transaction as a revenue transaction with a customer under ASC 606. The licensing and technical support services provided are recognized as a single combined performance obligation satisfied over the expected period of those services, beginning May 2020 through December 2025. During the years ended December 31, 2023 and December 31, 2022, the Company recognized revenue from this arrangement of $ 2,249 and $ 2,160 respectively, net of intra-entity profit elimination and has associated deferred revenue of $ 5,375 and $ 8,062 , as of December 31, 2023 and December 31, 2022, respectively. Intra-entity profits related to this arrangement are $ 437 and $ 527 for the years ended December 31, 2023 and 2022, respectively. Intra-entity profits are amortized over a 15-year period through 2034. Between February 1, 2021 and April 4, 2021, LanzaJet closed two additional rounds of investment which reduced the Company's Original Interest to approximately 23 %. In connection with the LanzaJet Note Purchase Agreement as described in Note 15 - Related Party Transactions , LanzaJet issued warrants that are exercisable for $ 0.01 by the holder when the related funds are drawn by LanzaJet. The warrants held by LanzaTech and other lenders meet the accounting criteria for in-substance common stock at the time the related note commitment is drawn by LanzaJet and the warrants become exercisable. As of December 31, 2023, LanzaTech’s ownership was diluted to 23.06 % because LanzaTech received proportionally fewer warrants than the other investors. The Company recorded a gain on dilution of $ 532 . LanzaTech’s ownership is subject to further dilution to 22.38 % if LanzaJet draws additional funds committed in the LanzaJet Note Purchase Agreement and the remaining warrants are exercisable by the holders. Under the LanzaJet Investment Agreement, certain other LanzaJet shareholders agreed to make an additional cash investment following the achievement of certain development milestones relating to the demonstration facility. If made, these additional investments would fund the development and operation of commercial facilities that would sublicense the relevant fuel production technology from LanzaJet. Upon the closing of each of the first three of these additional investments and no later than the sublicensing of the relevant facility, LanzaTech has a right to receive additional LanzaJet shares of up to 45 million shares in the aggregate for no additional consideration. To date, these shares have not been issued. The carrying value of our equity method investment in LanzaJet as of December 31, 2023 and December 31, 2022 was approximately $ 3,400 and $ 3,700 less than our proportionate share of our equity method investees’ book values, respectively. The basis differences are largely the result of a difference in the timing of recognition of variable consideration to which we may become entitled in exchange for our contribution of intellectual property to LanzaJet. The variable consideration we may receive will be in the form of additional ownership interests and the majority of the basis difference will reverse in connection with recognition of that variable consideration. In connection with a sublicense agreement to LanzaJet under our license agreement with Battelle Memorial Institute (“Battelle”), LanzaTech remains responsible for any failure by LanzaJet to pay royalties due to Battelle. The fair value of LanzaTech’s obligation under this guarantee was immaterial as of December 31, 2023 and December 31, 2022. SGLT On September 28, 2011, the Company contributed RMB 25,800 (approx. $ 4,000 ) in intellectual property in exchange for 30 % of the registered capital of Beijing Shougang LanzaTech Technology Co., LTD (“SGLT”). As of December 31, 2022, the Company’s interest in SGLT’s registered capital is approximately 9.31 % as a result of the admittance of new investors during the year. As of September 30, 2022 , the Company no longer had significant influence over the operating and financial policies of SGLT due to the significant and sustained decrease in SGLT's technological dependence on LanzaTech. As such, the Company ceased applying the equity method and from October 1, 2022 and forward, the Company accounts for its investment in equity security of SGLT using the alternative measurement principals as permitted under ASC 321, Investments - Equity Securities, because SGLT's fair value is not readily determinable. For the years ended December 31, 2023 , there was no change in the value of the investment in SGLT. As of December 31, 2023 and December 31, 2022, there were no impairments of equity investments. During the years ended December 31, 2023 and 2022, the Company received no dividends from equity investments. See Note 15 - Related Party Transactions , for information on revenues, accounts receivable, contract assets and purchases and open accounts payable with its equity investments. The following table presents summarized aggregated financial information of the equity method investments: Year Ended December 31, 2023 2022 Selected Statement of Operations Information (1) : Revenues 4,542 40,985 Gross profit 2,526 7,319 Net loss ( 14,881 ) ( 6,221 ) Net loss attributable to the Company ( 3,432 ) ( 1,422 ) Year Ended December 31, 2023 2022 Selected Balance Sheet Information (2) : Current assets 79,843 72,711 Non-current assets 185,720 114,736 Current liabilities 44,145 15,534 Non-current liabilities 175,899 114,934 __________________ (1) As of September 30, 2022 the Company no longer accounts for the investment in SGLT under the equity method. As such, the 2022 income statement amounts reflect SGLT activity for the nine months ended September 30, 2022 and LanzaJet activity for the year ended December 31, 2022. The 2023 income statement amounts reflect LanzaJet activity for the year ended December 31, 2023. (2) The balance sheet information reflects LanzaJet as of December 31, 2023 and 2022. As of December 31, 2023 and 2022, there were no impairments of equity method investees. During 2023 and 2022, the Company received no dividends from equity method investments. See Note 15 - Related Party Transactions, for information on sales, accounts receivable, contract assets and purchases and open accounts payable with equity method investees. Note 7 — SAFE AM SAFE As of December 31, 2022, the AM SAFE had a fair value of $ 28,986 and was recorded within AM SAFE liability on the consolidated balance sheets. On the Closing Date of the Business Combination, the AM SAFE converted into 3,000,000 shares of common stock. As of the Closing Date, the AM SAFE had a fair value of $ 29,730 , which equals the closing price of approximately $ 9.91 on the Closing Date, multiplied by the number of shares issued. The AM SAFE was adjusted to its fair value on the Closing Date prior to settlement. As of December 31, 2022, the AM SAFE had a fair value of $ 28,986 . Brookfield SAFE On October 2, 2022, LanzaTech entered into the Brookfield SAFE and received cash proceeds of $ 50,000 as the Initial Purchase Amount. In exchange, the Company granted to Brookfield the right to certain shares of the Company's capital stock. On the fifth anniversary of the Brookfield SAFE, LanzaTech is required to repay in cash the Initial Purchase Amount less any Non-Repayable Amount (the “Remaining Amount”), as well as interest on such Remaining Amount in the high single digits, compounded annually. For each $ 50,000 of aggregate equity funding required for qualifying projects presented to Brookfield in accordance with the Brookfield Framework Agreement (discussed below), the Remaining Amount will be reduced by $ 5,000 (such cumulative reductions the “Non-Repayable Amount”) and converted into LanzaTech Shares at $ 10.00 per share, which is the share price paid by the PIPE investors in the Business Combination. Interest on the corresponding amount will be forgiven. Each project presented must meet certain criteria in order to be considered a qualifying project. Additionally, 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 LanzaTech capital stock at the same $ 10.00 per share price. The Brookfield SAFE has not yet converted as a qualifying financing has not yet occurred and no qualified project investments have been presented to Brookfield as of December 31, 2023 or 2022. As of December 31, 2023 and 2022, the fair value of the Brookfield SAFE was $ 25,150 and $ 50,000 respectively and was recorded within Brookfield SAFE liability on the consolidated balance sheets. Brookfield Framework Agreement On October 2, 2022, LanzaTech entered into a framework agreement with Brookfield (the “Brookfield Framework Agreement”). Under such agreement, LanzaTech agreed to exclusively offer Brookfield the opportunity to acquire or invest in certain projects to construct commercial production facilities employing carbon capture and transformation technology in the U.S., the European Union, the United Kingdom, Canada or Mexico for which LanzaTech is solely or jointly responsible for obtaining or providing equity financing, subject to certain exceptions. LanzaTech agreed to present Brookfield with projects that over the term of the agreement require equity funding of at least $ 500,000 in the aggregate. With respect to projects acquired by Brookfield, LanzaTech is entitled to a percentage of free cash flow generated by such projects determined in accordance with a hurdle-based return waterfall. Brookfield has no obligation under the Brookfield Framework Agreement to invest in any of the projects. There have been no investments in projects as of December 31, 2023 or 2022 . Note 8 — Warrants Warrants on preferred shares In connection with certain loan borrowing agreements and equity raises, the Company had issued warrants to purchase its preferred shares representing 985,278 preferred shares. The warrants were accounted for as liabilities in accordance with ASC 480, and were presented within Warrants on the consolidated balance sheets as of December 31, 2022. The warrant liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value presented within Other expense, net on the consolidated statements of operations and comprehensive loss. In connection with the closing of the Business Combination, all warrants were exercised on a cashless basis and are no longer outstanding. The warrants were exercised for 594,309 shares of preferred stock, which were converted at the closing of the Business Combination into shares of common stock. The exercise prices of the warrants ranged from $ 3.36 to $ 4.56 as of the closing of the Business Combination. Immediately before the exercise of these warrants, the associated warrant liability was marked-to-market a final time to $ 5,890 , which is equal to the number of shares issued multiplied by the share price of $ 9.91 on the date of exercise, February 8, 2023. AM SAFE warrant The warrant related to the AM SAFE (“AM SAFE warrant”) was accounted for as a liability in accordance with ASC 480 prior to the consummation of the Business Combination and was presented within warrants on the consolidated balance sheet as of December 31, 2022. As a result of the Business Combination and issuance of the PIPE shares, the number of common shares available under the AM SAFE warrant equals 300,000 . The exercise price of the AM SAFE warrant is $ 10.00 per share as determined on the Closing Date. The AM SAFE warrant expires at the earliest of (a) the fifth anniversary of the Business Combination, (b) the consummation of a dissolution event and (c) a change of control. Due to the AM SAFE warrant becoming exercisable for a fixed number of shares at a fixed exercise price, it no longer meets the criteria for liability accounting under ASC 480 and meets the criteria for equity classification under ASC 815-40. As a result, on the Closing Date, the AM SAFE warrant was marked-to-market a final time to $ 1,800 through Other expense, net on the consolidated statements of operations and comprehensive loss and reclassified to Additional paid-in capital on the consolidated balance sheets. Shortfall Warrants On March 27, 2023, the Company issued an aggregate of 2,073,486 warrants to ACM and 2,010,000 warrants to Vellar pursuant to the Forward Purchase Agreement (collectively, the “Shortfall Warrants”), as further described in Note 2 - Summary of Significant Accounting Policies . Each Shortfall Warrant entitles the registered holder to purchase one share of common stock at a price of $ 10.00 per share, subject to adjustment in the event that the Company sells, grants or otherwise issues common stock or common stock equivalents at an effective price less than the then current exercise price of the Shortfall Warrants, at any time commencing on or after March 27, 2023. A holder of a Shortfall Warrant may exercise such warrants on a cashless basis. The Shortfall Warrants expire on the fifth anniversary of their issuance. On the issuance date, the Shortfall Warrants met the definition of a derivative but did not qualify for the exception from derivative accounting under the indexation guidance and therefore met the criteria for liability classification under ASC 815. On May 13, 2023, the Company amended the Shortfall Warrant agreement. Under the amended agreement, the Shortfall Warrants meet the requirements for equity classification under ASC 815-40. Consequently, the Company recorded a gain of $ 2,042 as of the date of the amendment to reflect the fair value of $ 3,063 at the date of the amendment through Other expense, net on the consolidated statements of operations and comprehensive loss and reclassified the Shortfall Warrants to Additional paid-in capital on the consolidated balance sheets. Public Warrants and Private Placement Warrants As part of AMCI’s initial public offering (“IPO”), AMCI issued warrants to third-party investors where each whole warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $ 11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, AMCI completed the private sale of warrants where each warrant allows the holder to purchase one share of the Company’s common stock at $ 11.50 per share. Additionally, prior to the consummation of the Business Combination, AMCI issued warrants for the settlement of a working capital loan. The working capital warrants have the same terms as the private sale of warrants issued at the IPO. Warrants sold in the private sale at the IPO and the warrants issued to convert the working capital loan are collectively referred to as the “Private Placement Warrants”. On the Closing Date and as of December 31, 2023 , 7,499,924 Public Warrants and 4,774,276 Private Placement Warrants remained outstanding. These warrants expire on the fifth anniversary of the Business Combination or earlier upon redemption or liquidation and are exercisable commencing 30 days after the Business Combination, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Once the Public Warrants become exercisable, the Company may redeem the outstanding warrants: a. in whole and not in part; b. at a price of $ 0.01 per warrant; c. upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and d. if, and only if, the closing price of the common stock equals or exceeds $ 18.00 per share for any 20 trading days within a 30 -trading day period ending three trading days before we send the notice of redemption to the warrant holders. The Company additionally has the ability to redeem the Public Warrants at the option of the Company when the price of common stock exceeds $ 10.00 per share at a price of $ 0.10 per warrant. In this scenario, warrant holders may choose to exercise their warrants on a cashless basis during the minimum 30 -day notice period, and receive common stock in exchange for their warrants at a rate based on fair value of the common stock and the proximity to the expiration date of the warrants. As long as the Private Placement warrants are held by AMCI Sponsor II LLC (the “Sponsor”) or its permitted transferees, they are not redeemable by LanzaTech. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by LanzaTech in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants. The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. The Public Warrants and Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognized the warrant instruments as liabilities at fair value as of the Closing Date, with an offsetting entry to Additional paid-in capital and adjusts the carrying value of the instruments to fair value through Other expense, net on the consolidated statements of operations and comprehensive loss at each reporting period until they are exercised. As of December 31, 2023, the Public Warrants and Private Placement Warrants are presented within Warrants on the consolidated balance sheets . Note 9 — Forward Purchase Agreement As discussed in Note 2 - Summary of Significant Accounting Policies , the FPA consists of the Prepayment Amount, the FPA Put Option and the Fixed Maturity Consideration. The Prepayment Amount of $ 60,547 is presented as a reduction to Additional paid-in capital in our consolidated balance sheets. The value of the FPA Put Option represents the economics of the written put option, inclusive of the Variable Maturity Consideration, and is valued at $ 37,523 as of December 31, 2023. The Fixed Maturity Consideration is valued at $ 7,228 as of December 31, 2023. This represents the fair value of the Share Consideration and Fixed Maturity Consideration and is measured in accordance with the FVO. Expensed transaction costs, representing the stock acquisition fees, in the amount of $ 451 are recorded in Other expense, net on the consolidated statements of operations and comprehensive loss. Note 10 — Fair Value The following table presents the Company’s fair value hierarchy for its assets and liabilities measured at fair value as of December 31, 2023 and December 31, 2022 (in thousands): Fair Value Measurement as of December 31, 2023 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 28,058 $ — $ — $ 28,058 Total assets $ 28,058 $ — $ — $ 28,058 Liabilities: FPA Put Option liability $ — $ — $ 37,523 $ 37,523 Fixed Maturity Consideration — — 7,228 7,228 Brookfield SAFE liability — — 25,150 25,150 Private placement warrants — — 3,915 3,915 Public warrants 3,699 — — 3,699 Total liabilities $ 3,699 $ — $ 73,816 $ 77,515 Fair Value Measurement as of December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 523 $ — $ — $ 523 Liabilities: Warrants on preferred shares — — 2,119 2,119 Brookfield SAFE liability — — 50,000 50,000 AM SAFE warrant — — 1,989 1,989 AM SAFE liability — — 28,986 28,986 Total Liabilities $ — $ — $ 83,094 $ 83,094 Forward Purchase Agreement The fair value upon issuance of the FPA (both the FPA Put Option liability and Fixed Maturity Consideration) and the change in fair value from issuance to December 31, 2023, is included in Other expense, net in the consolidated statements of operations and comprehensive loss. The fair value of the FPA 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 Fixed Maturity Consideration was also valued as part of this model as the timing of the payment of the Fixed Maturity Consideration may be accelerated if the Maturity Date is accelerated. The following table represents the weighted average inputs used in calculating the fair value of the prepaid forward contract and the Fixed Maturity Consideration as of December 31, 2023: December 31, 2023 Stock price $ 5.03 Term (in years) 2.11 Expected volatility 50.0 % Risk-free interest rate 4.16 % Expected dividend yield — % Warrants on preferred shares The fair value of the warrants on preferred shares was estimated using a Black-Scholes option pricing model. Since the warrants were exercised on February 8, 2023 (see Note 8 - Warrants, for a description of the valuation on that date), the following table represents the weighted average inputs used in calculating the fair value of the preferred share warrants outstanding as of December 31, 2022: December 31, 2022 Stock price $ 5.21 Weighted average exercise price $ 3.96 Term (in years) 1.1 Expected volatility 73.4 % Risk-free interest rate 4.47 % Expected dividend yield — % Shortfall Warrants The fair value of the Shortfall Warrants was estimated using a Black-Scholes option pricing model. The following table represents the weighted average inputs used in calculating the fair value of the Shortfall Warrants as of May 13, 2023 when the Shortfall Warrant Agreement was amended and the Shortfall Warrants were marked-to-market and reclassified to Additional paid-in capital on the consolidated balance sheets: May 13, 2023 Stock price $ 3.42 Weighted average exercise price $ 10.00 Term (in years) 4.87 Expected volatility 54.0 % Risk-free interest rate 3.46 % Expected dividend yield — % SAFE Liabilities and AM SAFE Warrant The change in fair value between reporting periods for the Brookfield SAFE liability is included in Other expense, net in the consolidated statements of operations and comprehensive loss for years ended December 31, 2023 and 2022. The change in fair value between December 31, 2022 and the Closing Date for the AM SAFE liability is included in Other expense, net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023. See below for further details on the AM SAFE liability and see Note 8 - Warrants for further details on the AM SAFE warrant. The Company’s AM SAFE liability (until conversion to shares on the Closing Date), AM SAFE warrant (until conversion to an equity classified warrant on the Closing Date) and Brookfield SAFE liability are mark-to-market liabilities and are classified within Level 3 of the fair value hierarchy as the Company is using a scenario-based approach which allowed the Company to estimate the implied value of the business based on the terms of the SAFE. Significant unobservable inputs included probability and expected term. Probability was based upon the likelihood of the Company closing a transaction with a special purpose acquisition company. The expected term was based on the anticipated time until the SAFE investments would have a conversion event. As of December 31, 2022, the AM SAFE had a fair value of $ 28,986 and was recorded within AM SAFE liability on the consolidated balance sheets. Significant inputs for Level 3 AM SAFE liability fair value measurement at December 31, 2022 are as follows: Near Term Long-Term Key assumptions: Probability weighting 61 % 39 % Time to conversion (in years) 0.1 0.8 Liquidity price 100 % 90 % Discount rate 24.7 % 24.7 % At conversion to equity classification on February 8, 2023, the AM SAFE warrant was valued usin g a Black-Scholes option pricing model as the warrant became exercisable for a fixed number of shares at a fixed price as described in Note 8 - Warrants . The following table represents the weighted average inputs used in calculating the fair value of the AM SAFE warrants outstanding at conversion to equity on February 8, 2023: February 8, 2023 Stock price $ 9.91 Term (in years) 5.00 Expected volatility 70.0 % Risk-free interest rate 3.82 % Expected dividend yield — % Significant inputs for Level 3 AM SAFE warrant fair value measurement at December 31, 2022 are as follows (in thousands): Near Term Long-Term Key assumptions: Probability weighting 61 % 39 % Remaining life (in years) 5.0 5.0 Volatility 75 % 75 % Interest rate 3.99 % 3.99 % Time to conversion (in years) 0.1 0.8 Risk-free interest rate 4.12 % 4.75 % Dividend yield — % — % The Brookfield SAFE is legal form debt that the Company has elected to measure using the FVO under ASC 825. As of December 31, 2023, no part of the Brookfield SAFE has converted to Company common shares as a qualifying financing had not yet occurred and no project investments were presented. There were no cash flows associated with the Brookfield SAFE in the year ended December 31, 2023. As of its issuance date, the fair value of the Brookfield SAFE was equal to the investment amount of $ 50,000 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, 2022 the same expectations about sufficient projects meeting the agreed-upon investment criteria pursuant to the Brookfield Framework Agreement are maintained. As such the Brookfield SAFE’s fair value was estimated to be $ 50,000 , as of December 31, 2022. 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. 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 value of the Brookfield SAFE is equal to the Brookfield SAFE's as-converted value, which is the initial purchase amount, divided by the liquidity price, times the stock price, resulting in an estimated fair value of $ 25,150 recorded on the consolidated balance sheet. Significant inputs for Level 3 Brookfield SAFE measurement at December 31, 2023 are as follows: December 31, 2023 Initial purchase amount $ 50,000 Liquidity price $ 10.00 Stock price $ 5.03 Public Warrants and Private Placement Warrants For the Public Warrants, the Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value and recognized an increase in the fair value of the liability of approximately $ 1,224 on the consolidated statements of operations and comprehensive loss within Other expense, net representing the change in fair value from the Closing Date to December 31, 2023. The fair value of the Private Placement Warrants was estimated using a Black-Scholes option pricing model. For the year ended December 31, 2023, the Company recognized an increase in the fair value of liabilities of approximately $ 1,766 on the consolidated statements of operations and comprehensive loss within Other expense, net representing the change in fair value from the Closing Date to December 31, 2023. The following table represents the weighted average inputs used in calculating the fair value of the Private Placement Warrants outstanding as of December 31, 2023: December 31, 2023 Stock price $ 5.03 Exercise price $ 11.50 Term (in years) 4.11 Expected volatility 45.0 % Risk-free interest rate 3.92 % Expected dividend yield — % The following tables represent reconciliations of the fair value measurements of the assets and liabilities using significant unobservable inputs (Level 3) (in thousands): FPA Put Option Fixed Maturity Consideration Shortfall Warrants Warrants on Preferred Shares AM SAFE liability AM SAFE warrant Brookfield SAFE Private placement warrants Balance as of January 1, 2023 $ — $ — $ — $ ( 2,119 ) $ ( 28,986 ) $ ( 1,989 ) $ ( 50,000 ) $ — Recognized as a result of the Business Combination — — — — — — — ( 2,148 ) (Loss) gain recognized in other expense, net on the consolidated statement of operations and comprehensive loss ( 37,523 ) ( 7,228 ) ( 3,063 ) ( 3,770 ) ( 744 ) 189 24,850 ( 1,766 ) Conversion of warrants to preferred shares — — — 5,889 — — — — Conversion of SAFE liability to equity classification — — — — 29,730 — — — Reclassification of warrant to equity — — 3,063 — — 1,800 — — Balance as of December 31, 2023 $ ( 37,523 ) $ ( 7,228 ) $ — $ — $ — $ — $ ( 25,150 ) $ ( 3,914 ) Warrants on Preferred Shares AM SAFE liability AM SAFE warrant Brookfield SAFE Balance as of January 1, 2022 $ ( 1,145 ) $ ( 28,271 ) $ ( 1,729 ) $ — Issuance of Brookfield SAFE Liability — — — ( 50,000 ) Gain (loss) recognized in other expense, net on the consolidated statement of operations and comprehensive loss ( 974 ) ( 715 ) ( 260 ) — Balance as of December 31, 2022 $ ( 2,119 ) $ ( 28,986 ) $ ( 1,989 ) $ ( 50,000 ) Note 11 — Other Current Assets As of December 31, 2023 and 2022 other current assets consisted of the following (in thousands): As of December 31, 2023 December 31, 2022 Inventory $ 1,750 $ 1,129 Materials and supplies 3,595 3,035 Prepaid assets 3,698 2,833 Other 3,518 4,160 $ 12,561 $ 11,157 Note 12 — Property, Plant, and Equipment, net The Company’s property, plant and equipment, net consisted of the following (in thousands): As of December 31, 2023 December 31, 2022 Land $ 64 $ 64 Leasehold improvements 4,837 4,126 Instruments and equipment 40,827 33,093 Vehicles 92 85 Office Equipment and furniture 2,103 1,719 Other 900 871 Construction in progress 6,287 6,780 $ 55,110 $ 46,738 Less accumulated depreciation and amortization $ 32,287 $ 27,049 Total property, plant and equipment, net $ 22,823 $ 19,689 Depreciation for the years ended December 31, 2023 and December 31, 2022 totaled $ 5,452 and $ 4,660 , respectively. Note 13 — Income Taxes The Company is subject to federal and state income taxes in the United States, as well as income taxes in foreign jurisdictions in which it conducts business. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely. The Company and its foreign subsidiaries have historically been loss generating entities that have resulted in no excess earnings to consider for repatriation and accordingly there are no deferred income taxes recognized for the years ended December 31, 2023 and 2022. The Company recorded an income tax expense of $ 0 for the twelve months ended December 31, 2023 and 2022, representing an effective tax rate of 0 %. The difference between the U.S. federal statutory rate of 21 % and the Company's effective tax rate in the twelve months ended ended December 31, 2023 and 2022 is primarily due to a full valuation allowance related to the Company's U.S. and foreign deferred tax assets. The Company reassesses the need for a valuation allowance on a quarterly basis. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made. The Company conducts business in multiple jurisdictions within and outside the United States. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. The Company is subject to audits for tax years 2017 and onward for federal purposes. There are tax years which remain subject to examination in various other state and foreign jurisdictions that are not material to the Company's financial statements. The components of (loss) income before income taxes and gain from equity method investees, net are as follows (in thousands): Year Ended December 31, 2023 2022 United States $ ( 134,020 ) $ ( 73,271 ) Foreign ( 78 ) ( 3,085 ) Total $ ( 134,098 ) $ ( 76,356 ) The Company does not have any current or deferred taxes in either the United States or our foreign operations. The following table is a reconciliation of income taxes computed at the statutory federal income tax rate ( 21.0 % federal income tax rate in the United States for 2023 and 2022) to the income tax expense (benefit) reflected in the consolidated statement of operations and comprehensive loss (in thousands, except percentages): Year Ended December 31, 2023 2022 Income tax (benefit) at the statutory federal income tax rate $ ( 28,145 ) 21.0 % $ ( 16,035 ) 21.0 % Foreign tax rate differential ( 15 ) — % ( 72 ) 0.1 % State and local taxes ( 9,757 ) 7.3 % ( 6,961 ) 9.1 % Share Based Compensation 197 ( 0.1 )% 288 ( 0.4 )% Nondeductible loss on stock 6,324 ( 4.7 )% — — % Equity method investment — — % ( 701 ) 0.9 % Valuation allowance 31,661 ( 23.6 )% 26,286 ( 34.4 )% Deferred True-Up — — % ( 2,836 ) 3.7 % Other ( 265 ) 0.2 % 31 — % Total income tax expense (benefit) $ — — % $ — — % Deferred Taxes Significant components of deferred tax assets and liabilities were as follows (in thousands): Year Ended December 31, Deferred tax assets: 2023 2022 Net operating loss and credit carryforwards 134,609 133,537 Stock-based compensation 4,526 2,071 Operating lease liability 6,281 2,473 Accrued bonus — 1,514 Accrued expenses — 239 Deferred revenue 148 126 Equity method investment 3,051 2,040 R&D capitalization 26,725 — Other 1,051 460 $ 176,391 $ 142,460 Valuation allowance ( 171,223 ) ( 139,562 ) Net deferred tax asset 5,168 2,898 Deferred tax liabilities: Operating lease asset ( 5,584 ) ( 2,125 ) Other 416 ( 773 ) Total deferred tax liabilities ( 5,168 ) ( 2,898 ) Net deferred income tax assets and liabilities: $ — $ — At December 31, 2023 and 2022, the Company had $ 395,590 and $ 391,759 , respectively, of tax losses and credits carried forward subject to shareholder continuity and acceptance in the countries where the Company has tax losses carried forward. R&D tax credits included within these amounts are $ 35,147 for both periods, which may be available to offset future income tax liabilities. At December 31, 2023 and 2022, the net operating loss and credit carryforwards are comprised of $ 321,743 and $ 318,382 in the United States,$ 30,011 and $ 29,691 in state and local, $ 43,805 and $ 43,655 in foreign jurisdictions, respectively. At December 31, 2023 and 2022, the Company had net operating loss carryforwards of approximately $ 145,090 and $ 146,467 , respectively, that expire in various years from 2024 through 2038, plus $ 215,388 and $ 210,145 , respectively, for which there is no expiration date. Section 382 of the Internal Revenue Code imposes an annual limitation on the utilization of net operating loss carryforwards based on a statutory rate of return and the value of the corporation at the time of a “change of ownership” as defined by Section 382. The Company had a change in ownership in November 2014. T herefore, the Company’s ability to utilize its net operating loss carryforwards incurred prior to the 2014 ownership change, will be subject in future periods to annual limitations. In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2023 and 2022, a valuation allowance of $ 171,223 and $ 139,562 , respectively, was recorded against certain deferred tax assets based on this assessment. The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes. The Company and its foreign subsidiaries have historically been loss generating entities that have resulted in no excess earnings to consider for repatriation and accordingly there are no deferred income taxes recognized as of December 31, 2023 and 2022. At December 31, 2023 and 2022, the Company had no tax liability or benefit related to uncertain tax positions. No interest or penalties related to uncertain taxes have been recognized on the accompanying consolidated statements of operations. Management does not expect a significant change in uncertain tax positions during the twelve months subsequent to December 31, 2023. The Company conducts business in multiple jurisdictions within and outside the United States. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. During December 2021, the Internal Revenue Service completed an income tax examination of the Company’s U.S. federal income tax return for the year ended December 31, 2016, which resulted in no impact to the Company’s consolidated financial statements. The Company has no other ongoing tax examinations with domestic or foreign taxing authorities. During 2021, the Company migrated its country of domicile from New Zealand to Delaware in the United States. On migration, the Company was deemed to have disposed of all its assets and liabilities to a third-party at market value which resulted in taxable income to the Company for New Zealand income tax purposes. The migration to Delaware is classified as a tax-free reorganization for U.S. federal income tax purposes. The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2.0), with certain aspects of Pillar 2.0 effective January 1, 2024 and other aspects effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. We do not anticipate Pillar 2.0 to have material impacts on our effective tax rate, financial position or cash flows. Note 14 — Share-Based Compensation The Company adopted the LanzaTech 2023 Long-Term Incentive Plan (the “LTIP”) in conjunction with the closing of the Business Combination. The LTIP provides for grants of a variety of awards to employees, directors, and other service providers to the Company, including, but not limited to stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock-based awards or cash incentives. Prior to the effective date of the closing of the Business Combination, the Company granted awards under the LanzaTech NZ Inc. 2013 Stock Plan, the LanzaTech NZ Inc. 2015 Stock Plan, and the LanzaTech NZ, Inc. 2019 Stock Plan, (collectively, the “Prior Stock Plans”). Equity Classified Awards: RSUs Under the LTIP, the Company has granted two types of RSUs: time-based RSUs, and market-based RSUs. Time-based RSUs granted to employees and other service providers (other than directors) are generally subject to a three-year annual pro-rata vesting schedule whereby the awards generally vest in 3 equal tranches on the first, second, and third anniversaries of the vesting commencement date, subject to grantee’s continued service through each vesting date. However, vesting will accelerate in certain circumstances (e.g., retirement, death, disability, or a qualified termination in connection with a change in control). Time-based RSUs granted to directors are subject to a one-year vesting schedule and the full award vests on the first anniversary of the vesting commencement date, subject to the director’s continued service through the vesting date. However, vesting will accelerate in certain circumstances (e.g., removal in connection with a change in control). The market-based RSUs have both a time-based and a market-based vesting component. Both components must be met for the award to vest. The market-based RSUs are subject to the same three-year annual pro-rata vesting schedule as the employee time-based RSUs. The market-based vesting component is satisfied if on any date during the period beginning on the 151 st date following the vesting commencement date and ending on the fifth anniversary of the vesting commencement date, the average closing price of a share of the Company’s common stock, equals or exceeds $ 11.50 , determined using the closing share price from the 20 trading days preceding such determination date. The following assumptions were used in the lattice-based option valuation model for market-based RSUs granted during the year ended December 31, 2023. There were no market-based RSUs granted during the year ended December 31, 2022. 2023 Derived service period in years 1.54 - 2.76 Expected volatility 50 % Expected dividends — Risk-free rate 3.45 % - 4.44 % A summary of the unvested time-based and market-based equity-classified RSUs are presented in the following table: Time-based RSUs Market-based RSUs Shares (in thousands) Weighted Average Grant Date Fair Value Shares (in thousands) Weighted Average Grant Date Fair Value January 1, 2023 — — — $ — Granted 3,185 3.51 3,930 1.69 Vested ( 2 ) 3.45 — — Cancelled/forfeited ( 28 ) 3.43 — December 31, 2023 3,155 3.51 3,930 $ 1.69 The Company recorded compensation expense related to the time-based RSUs of $ 3,153 for the year ended December 31, 2023. Unrecognized compensation costs as of December 31, 2023 was $ 7,919 and will be recognized over a weighted average of 2.20 years. The Company recorded compensation expense related to the market-based RSUs of $ 3,440 for the year ended December 31, 2023. Unrecognized compensation costs as of December 31, 2023 was 3,198 and will be recognized over a weighted average of 1.57 years. Stock Options In accordance with the LTIP and Prior Stock Plans, grantees have also been granted stock options to purchase common shares. The exercise prices of each stock option was no less than the fair market value price of the Company’s common shares determined as of the date of grant. The stock options generally vest over the course of two to five years , subject to the service provider’s continued service through each vesting date. Upon termination of service, unvested stock options are forfeited in accordance with their terms unless the award agreement provides for accelerated vesting (e.g., due to retirement). The below tables reflect the stock options granted prior to the Business Combination multiplied by the exchange ratio and the weighted average exercise price divided by the exchange ratio. The following assumptions were used in the option valuation model for options granted during the year ended December 31, 2023. There were no options granted during the year ended December 31, 2022. 2023 Expected term in years 5.98 - 6.00 Expected volatility 76.70 % - 76.80 % Expected dividends — Risk-free rate 3.45 % - 3.60 % Stock option awards outstanding as of December 31, 2023 and changes during the period ended December 31, 2023 were as follows: Shares subject to option (thousands) Weighted average exercise price Weighted average remaining contractual term (years) Aggregate intrinsic value (thousands) Outstanding at January 1, 2023 14,661 $ 1.48 Vested and expecting to vest at January 1, 2023 14,661 1.48 Exercisable at January 1, 2023 11,203 $ 1.44 Granted 3,556 3.77 Exercised ( 1,659 ) 1.54 Cancelled/forfeited ( 146 ) 2.08 Outstanding at December 31, 2023 16,412 $ 1.96 6.13 $ 51,601 Vested and expecting to vest at December 31, 2023 16,412 1.96 6.13 51,601 Exercisable at December 31, 2023 10,869 $ 1.49 4.95 $ 38,691 The Company recorded compensation expense related to the options of $ 5,623 and $ 2,527 for the years ended December 31, 2023 and 2022. Unrecognized compensation costs as of December 31, 2023 was $ 8,321 and will be recognized over a weighted average of 2.07 years. Restricted Stock Awards (“RSAs”) Under the Prior Stock Plans, the Company granted RSAs which become eligible to vest upon the satisfaction of a time-based service condition. However, in order to vest, a liquidity event, defined as acquisition, asset transfer, or initial listing, must occur within 10 years from the grant date. Upon a liquidity event, if the participant’s service has not terminated, the entire RSA award vests in full, whether or not previously eligible for vesting. If the participant’s service has terminated and they have satisfied the time-based service condition, the RSAs that are outstanding and eligible for vesting immediately vest in full upon liquidity event. The time-based service requirements of the RSAs have a maximum term of three years from the date of grant. As of December 31, 2022, there were 2,535,825 outstanding unvested RSAs with a weighted average grant date fair value of $ 1.08 . The Business Combination constituted a “liquidity event” which caused the vesting of all such outstanding, unvested RSAs. The vesting of the RSAs resulted in compensation expense of $ 2,741 for the year ended December 31, 2023, respectively. There was no compensation expense recorded in the comparable periods in 2022, because the Company concluded that the liquidity event performance condition was not probable of being satisfied at the time. In connection with the vesting of these RSAs, certain holders of the RSAs surrendered 771,141 shares in a withhold to cover transaction to fund the payment of applicable tax withholding on their behalf by the Company. This resulted in a total cash payment of $ 7,650 by the Company to the Internal Revenue Service for the applicable tax withholding associated with this vesting event. Liability-Classified Awards Phantom RSUs Under a phantom equity sub-plan of the LTIP, certain non-US employees of the Company were provided with Phantom RSUs that can only be settled in cash and are therefore recorded as a liability. The Phantom RSUs have a graded vesting schedule and vest in 3 equal tranches on the first, second, and third anniversaries of the vesting commencement date, subject to the employee meeting the requisite service requirements. Grantees are entitled to receive a cash payment equal to the fair market value of a share multiplied by the number of vested RSUs as of the applicable vesting date. Phantom SARs Under a phantom equity sub-plan of the LTIP, certain non-US employees of the company were provided with Phantom SARs that can only be settled in cash and are therefore recorded as a liability. The Phantom SARs have a graded vesting schedule and vest in three equal tranches on the first, second, and third anniversaries of the vesting commencement date, subject to the employee meeting the requisite service requirements. Phantom SARs expire 10 years after the grant date and entitle the grantee to receive a cash payment upon exercise of the award equal to the excess of the fair market value of a share on the date of exercise over the exercise price multiplied by the number of SARs exercised. Note 15 — Related Party Transactions As of December 31, 2023 and December 31, 2022, the Company has an equity ownership in LanzaJet and SGLT (see Note 6 - Investments for further details). The table below summarizes amounts related to transactions with these related parties (in thousands) : As of December 31, 2023 December 31, 2022 Accounts receivable $ 2,190 $ 1,821 Contract Assets 659 — Notes receivable 5,436 — Accounts payable 582 3,195 The following table presents revenue from related parties per disaggregated revenue categories: Year Ended December 31, 2023 2022 Revenue from related parties, included within Licensing $ 3,449 $ 2,160 Revenue from related parties, included within Engineering and other services 2,363 810 The main transactions with related parties are described below: LanzaJet The Company and LanzaJet have entered into a master service agreements defining the terms when LanzaJet is a subcontractor for some of the Company’s projects, and conversely, when the Company is a subcontractor for LanzaJet’s projects. The accounts payable balance is for work that LanzaJet performed as a subcontractor to the Company. In connection with the formation of LanzaJet, the Company entered into a transition services agreement with LanzaJet, refer to Note 6 - Investments , for more information. The transition services agreement generally sets out the respective rights, responsibilities and obligations of the Company and LanzaJet with respect to R&D services, access to office and laboratory space, business development and other administrative support services. The transition services agreement may be terminated by mutual consent of the Company and LanzaJet, by LanzaJet at any time, and by the Company upon breach or non-payment by LanzaJet. There are no substantive termination penalties in the event the Company terminates. For the years ended December 31, 2023 and 2022, the Company recognized revenue from related parties of approximately $ 245 and $ 185 , respectively, under the transition services agreement. The Company also provides certain engineering and other services related to a gas-to-jet demonstration plant currently in development by LanzaJet pursuant to the Investment Agreement described in Note 6 - Investments and other projects whereby LanzaJet is the customer. The Company recognized revenue of $ 468 for the year ended December 31, 2023 and an immaterial amount of revenue for the year ended December 31, 2022. In 2023, LanzaTech additionally sold LanzaJet the right to utilize some of LanzaTech’s completed engineering work as a basis for future LanzaJet projects and recorded revenue of $ 2,000 , net of $ 461 of intra-entity profit elimination, with deferred payment terms no later than December 2024. LanzaJet Note Purchase Agreement On November 9, 2022, the Company and the other LanzaJet shareholders entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which LanzaJet Freedom Pines Fuels LLC (“FPF”), a wholly owned subsidiary of LanzaJet, will issue, from time to time, notes in an aggregate principal amount of up to $ 147.0 million (the “Notes”), comprised of approximately $ 113.5 million aggregate principal amount of 6.00 % Senior Secured Notes maturing December 31, 2043 and $ 33.5 million aggregate principal amount of 6.00 % Subordinated Secured Notes maturing December 31, 2043. The Company committed to purchase $ 5.5 million of Subordinated Secured Notes, which was funded on May 1, 2023. The Senior Secured Notes are secured by a security interest over substantially all assets of FPF, and both the Senior Secured Notes and the Subordinated Secured Notes are secured by a security interest over the intellectual property owned or in-licensed by LanzaJet. Each purchaser of Notes under the Note Purchase Agreement also received a warrant for the right to purchase 575,000 shares of common stock of LanzaJet for each $ 10 million of Notes purchased by such purchaser for an exercise price of $ 0.01 per share. The warrants are exercisable when the related loan commitment is funded, and may be exercised until the earlier of the third anniversary following the date the holder’s loan commitment is fully funded, or the end of the availability period as defined in the Note Purchase Agreement if the commitment has not been fully funded. In the case of the Company, LanzaTech received warrants to purchase 316,250 shares of common stock of LanzaJet, which became exercisable by the Company when the note was funded on May 1, 2023. Upon funding of the Notes, the warrants meet the accounting criteria to be considered in-substance common stock, and are accounted for as part of the equity-method investment. Refer to Note 6 - Investments. The Note Purchase Agreement may be amended with the approval of holders of at least 66 2∕3% of the Notes, except with respect to certain rights that require approval of all holders to amend. Upon an event of default under the Note Purchase Agreement, each purchaser may accelerate the payment of its own Notes. Enforcement against the collateral securing the Notes requires the approval of certain holders as specified in the Notes. SGLT The Company supplies SGLT with certain water-soluble organic compounds required in the Company's proprietary gas fermentation process, small-size equipment and consulting services. For the years ended December 31, 2023 and 2022, the Company recognized revenue of approximately $ 75 and $ 289 , respectively. The Company also provided engineering services and incurred costs of $ 853 and $ 645 for the years ended December 31, 2023 and 2022, respectively. Additionally, LanzaTech and SGLT entered into a license agreement in 2019, subsequently amended in August 2023, to provide SGLT with the right to sublicense the intellectual property that LanzaTech previously licensed to SGLT. In exchange, the Company is entitled to receive fixed licensing consideration, calculated as a percentage of the maximum amount of royalties owed to SGLT from its sublicenses. For the year ended December 31, 2023, the Company recognized sublicensing revenue of $ 1,200 . Prior to June 2023, the Company was only entitled to royalties from SGLT if SGLT received sublicense royalty payments. For the twelve months ended months ended December 31, 2022, the Company did not recognize any sublicensing revenue as no royalties were received by SGLT. Note 16 — Redeemable, Convertible Preferred Stock Prior to the Business Combination, the Company had six outstanding series of contingently redeemable convertible preferred stock. The dollar amounts and share counts in the table below are adjusted to reflect the impact of the exchange ratio on the shares authorized, shares issued and outstanding, and issue price. The authorized, issued and outstanding shares, issue price, and carrying value as of December 31, 2022 are as follows (in thousands, except share and per share amounts): Shares Authorized Shares Issued and Outstanding Issue Price Carrying Amount Series A 20,414,445 20,414,445 $ 0.40 - $ 0.90 $ 12,230 Series B 7,582,934 7,582,934 2.37 18,000 Series C 18,613,084 18,121,698 3.36 60,850 Series D 44,946,572 44,452,681 4.56 188,402 Series E 22,678,139 22,678,139 5.23 118,076 Series F 15,898,496 15,898,496 5.23 83,073 130,133,670 129,148,393 $ 480,631 All redeemable, convertible preferred stock was converted into common shares on the Closing Date of the Business Combination on a 1 :1 basis. Immediately before the conversion, all cumulative dividends were declared, totaling a dividend payable of $ 241,529 . This dividend was paid in-kind and subsequently converted, as a result of the Business Combination, into an additional 24,152,942 common shares. After the in-kind dividend payment and the conversion, the former preferred shareholders held 153,895,644 common shares. Prior to the Business Combination, redemption features of the preferred shares were not fixed and did not have a determinable price on fixed or determinable dates. As of December 31, 2022, the preferred shares were not currently redeemable, and it was not probable that the preferred shares would become redeemable, since it was uncertain whether or when circumstances exist that would constitute a deemed liquidation event. Accordingly, the Company did not adjust the carrying value of the preferred shares to their redemption values. Note 17 — Commitments and Contingencies Litigation The Company may be involved in legal proceedings and exposed to potential claims in the normal course of business. As of December 31, 2023 and December 31, 2022, the Company does not have any reasonably possible or probable losses from such claims. Commitments In November 2022, the Company entered into a lease for real estate to expand its headquarters in Skokie, Illinois. The lease was subsequently amended in December 2023. The lease contains multiple lease components, and the commencement date for some lease components will occur in April and May 2024. Accordingly, for these lease components where the lease has not commenced, there are no right-of-use assets or lease liabilities recorded on the consolidated balance sheets as of December 31, 2023. Total lease payments through 2036 for these lease components are expected to be $ 17,216 . Note 18 — Leases The Company leases certain office space and laboratory facilities. The Company’s lease agreements typically do not contain any significant guarantees of asset values at the end of a lease, renewal options or restrictive covenants. Pursuant to ASC 842, Leases , all leases are classified as operating leases. Total operating lease costs and variable lease costs for the years ended December 31, 2023 and 2022 were $ 2,702 and $ 2,167 and $ 3,205 and $ 2,227 , respectively. Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2023 and 2022 was $ 1,857 and $ 2,370 , respectively. As of December 31, 2023, lease payments for operating leases for the Company’s office facility and laboratories are shown below (in thousands): Year ending December 31, 2024 $ 111 2025 602 2026 704 2027 3,101 2028 3,141 Thereafter 27,039 Total lease payments $ 34,698 Less: imputed interest 14,756 Total lease liabilities $ 19,942 The following is a summary of weighted average remaining lease term and discount rate for all of the Company’s operating leases: Year Ended December 31, 2023 2022 Weighted average remaining lease term (years) 12.7 3.5 Weighted average discount rate 7.50 % 7.50 % Lessor accounting In May 2020, the Company executed an agreement to lease certain land to a subsidiary of LanzaJet for a period of 10 years with an option to renew this lease for five additional periods of one year with minimum annual rent due. This agreement is accounted for as an operating lease. In February 2022, the lease agreement with LanzaJet was amended to extend the pre-development term of the lease until the earlier of commencement of construction of the alcohol-to-jet fuel facility on the leased land or December 31, 2023, increased the annual base rent amount and increased the term from 10 years to 12 years. Additionally, the subsidiary of LanzaJet was granted an option to renew this lease for thirteen additional periods of one year . In August 2022, the lease agreement was amended further to increase the annual rent due upon commencement of construction of the alcohol-to-jet fuel facility. We recognize lease revenue on a straight-line basis over the life of the lease agreement. The following future minimum lease payments due to us from the lease agreement at December 31, 2023, is as follows (in thousands) Year ending December 31, 2024 $ 155 2025 155 2026 155 2027 155 2028 155 Thereafter 1,088 $ 1,863 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None