Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes thereto included in Part II, “Item 8-Financial Results and Supplementary Data” of this Annual Report on Form 10-K. In this section, unless otherwise indicated or the context otherwise requires, references in this section to “LanzaTech,” the “Company,” “we,” “us,” “our” and other similar terms refer to LanzaTech Global, Inc. and its consolidated subsidiaries, including LanzaTech NZ, Inc. and its consolidated subsidiaries subsequent to the Business Combination and LanzaTech NZ, Inc. and its consolidated subsidiaries prior to the Business Combination. References to “AMCI” refer to AMCI Acquisition Corp. II prior to the Business Combination. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include without limitation those discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and those identified in Part I, “Item 1A-Risk Factors” of this Annual Report on Form 10-K.
Overview
We are a nature-based carbon refining company that develops technology to transform waste carbon into the chemical building blocks for consumer goods such as sustainable fuels, fabrics, and packaging that people use in their daily lives. Our customers leverage our proven proprietary gas fermentation technology platform to convert certain feedstock, including waste carbon gases, into sustainable fuels and chemicals such as ethanol. Today, we are focused on taking advantage of the many uses of ethanol while capitalizing on the growing preference among major companies for renewable products and environmentally-conscious manufacturing processes. We have also developed the capabilities to produce single cell protein as a primary product from our gas fermentation platform.
LanzaTech employs a licensing business model whereby our customers build, own and operate facilities that use our technology, and in return, we are paid a royalty fee based on the revenue generated from the use of our technology. We are augmenting our technology licensing business model to incorporate incremental ownership and operatorship in the biorefining value chain, enabling greater control over development, financing, and product access. We began operations in 2005. In 2018, through our joint venture with Shougang LanzaTech (also referred as “SGLT” herein), we established the world’s first commercial waste gas-to-ethanol plant in China, followed by three more plants between 2021 and 2023. With additional partnerships, we established two more commercial plants, one in India, and one in Belgium, respectively, and we currently have other plants in various states of development in various countries around the world. We also perform research and development (“R&D”) services related to novel technologies and development of biocatalysts for commercial applications, mainly to produce fuels and chemicals. Recently, the Company and LanzaJet launched CirculAir™, a new joint offering and end-to-end solution utilizing LanzaTech’s gas fermentation technology in conjunction with LanzaJet’s Alcohol-to-Jet (“ATJ”) platform to produce sustainable aviation fuel and renewable diesel from a wide range of waste feedstocks.
We have not achieved operating profitability since our formation. Our net losses after tax were $137.7 million for the year ended December 31, 2024 and $134.1 million for the prior year. As of December 31, 2024 we had accumulated deficit of $969.6 million compared to an accumulated deficit of $831.9 million as of December 31, 2023. We anticipate that we will continue to incur losses until we sufficiently commercialize our technology.
Recent Developments
As previously announced, LanzaTech is focused on shifting its core operations from research and development to globally deploying the Company’s proven technology. We are streamlining our priorities to sharpen our business focus and improve our cost structure and evaluating other liquidity enhancing initiatives, including pursuing capital raising, partnership or asset-related opportunities, and other strategic options.
On April 3, 2025, our Board received a preliminary, nonbinding proposal from Carbon Direct Capital to acquire all of the outstanding shares of the Company’s common stock for $0.02 per share (the “Take-Private Proposal”). Carbon Direct Capital is the holder of the Company’s outstanding $40.2 million Convertible Note, excluding payment-in-kind interest from the issue date, which upon conversion, would entitle it to receive shares of common stock representing approximately 14.6% of our common stock based on the total number of shares of common stock of the Company outstanding on April 10, 2025 (see “—Liquidity and Capital Resources—Sources
62
and Uses of Capital” herein). The Strategic Committee of the Board (the “Strategic Committee”) is currently reviewing, evaluating and negotiating the Take-Private Proposal in consultation with the Company’s financial advisor and legal counsel. There is no guarantee that the Take-Private Proposal will be accepted by the Strategic Committee or the Board, that definitive documentation relating to any such transaction will be executed, or that a transaction will be consummated in accordance with that documentation, if at all.
The Business Combination
On March 8, 2022, AMCI entered into the Merger Agreement with LanzaTech NZ, Inc. and AMCI Merger Sub, Inc. (“Merger Sub”). On February 8, 2023, Merger Sub merged with and into LanzaTech NZ, Inc. Upon consummation of the Business Combination, the separate corporate existence of Merger Sub ceased, and LanzaTech NZ, Inc. survived the Business Combination and became a wholly owned subsidiary of AMCI. In connection with the consummation of the Business Combination, the combined Company was renamed “LanzaTech Global, Inc.”
Basis of Presentation
LanzaTech’s consolidated financial statements were prepared in accordance with GAAP. See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements for a full description of our basis of presentation.
Key Financial Metrics:
The key elements of LanzaTech’s performance for the years ended December 31, 2024 and December 31, 2023 are summarized in the tables below:
Years Ended December 31,
(In thousands, except for percentages) 2024 2023 Variance
% Change
GAAP Measures:
Revenue $ 49,592 $ 62,631 $ (13,039) (21) %
Net Loss (137,731) (134,098) (3,633) 3 %
Key Performance Indicators:
One-Time Revenue (1)
37,868 57,754 (19,886) (34) %
Recurring Revenue (2)
11,724 4,877 6,847 140 %
Total Revenue 49,592 62,631 (13,039) (21) %
Cost of Revenues (ex. Depreciation) (3)
25,970 44,979 (19,009) (42) %
Selling, general & administrative 49,981 50,438 (457) (1) %
Adjusted EBITDA (4)
$ (88,212) $ (80,144) $ (8,068) 10 %
__________________
(1) One-time revenue includes all other revenue other than licensing and sales of microbes and media
(2) Includes revenue from licensing and sales of microbes and media.
(3) Consists of cost of revenues from contracts with customers and grants (exclusive of depreciation), cost of revenue from collaboration agreements (exclusive of depreciation) and cost of revenue from related party transactions (exclusive of depreciation).
(4) Adjusted EBITDA, a non-GAAP financial measure, is calculated as net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, change in fair value of the Convertible Note and associated transaction costs, transaction costs on issuance of FPA, loss from equity method investees, net and other one-time costs related to the Business Combination and securities registration on Form S-4, our registration statement on Form S-1, and non-recurring regulatory matters. Adjusted EBITDA is a supplemental measure that is not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA does not represent, and should not be considered, an alternative to net income (loss), as determined in accordance with GAAP. See “ Non-GAAP Financial Measures ” for additional information and reconciliation of Adjusted EBITDA to net loss, its most directly comparable GAAP measure.
63
Results of Operations
The results of operations presented below should be reviewed in conjunction with our consolidated financial statements and notes. The following table sets forth our consolidated results of operations for the periods indicated:
Years Ended December 31,
2024 2023 Variance
% Change
(In thousands, except for per share amounts)
Total revenue $ 49,592 $ 62,631 $ (13,039) (21) %
Cost of revenues (exclusive of depreciation shown below)
25,970 44,979 (19,009) (42) %
Operating expenses:
Research and development 77,007 68,142 8,865 13 %
Depreciation expense 5,567 5,452 115 2 %
Selling, general and administrative expense 49,981 50,438 (457) (1) %
Total operating expenses $ 132,555 $ 124,032 8,523 7 %
Loss from operations (108,933) (106,380) (2,553) 2 %
Other income (expense):
Interest income, net 3,162 4,572 (1,410) (31) %
Other expense, net (17,726) (29,388) 11,662 (40) %
Total other expense, net
(14,564) (24,816) 10,252 (41) %
Loss before income taxes (123,497) (131,196) 7,699 (6) %
Loss from equity method investees, net
(14,234) $ (2,902) (11,332) 390 %
Net loss $ (137,731) $ (134,098) $ (3,633) 3 %
Other comprehensive loss:
Changes in credit risk of fair value instruments (1,096) — (1,096) nm
Foreign currency translation adjustments 124 (376) 500 (133) %
Comprehensive loss $ (138,703) $ (134,474) $ (4,229) 3 %
Net loss per share - basic and diluted $ (0.70) (0.79)
Weighted-average number of common shares outstanding - basic and diluted 197,579,945 176,023,219
Revenue
Total revenue decreased $13.0 million, or 21%, in the year ended December 31, 2024, compared to the prior year. Engineering and other services revenue decreased by $19.4 million, mainly due to a reduction of $28.8 million in revenue from projects with existing customers, which includes a decrease of $19.6 million from three large projects. This decrease in engineering was offset by an increase from existing projects of $3.2 million and from projects with new customers of $6.2 million in 2024. The decline in revenue from engineering was offset by an increase in revenue from licensing of $7.8 million and CarbonSmart sales of $2.6 million. Revenues from Joint Development Agreements (“JDA”) and other contract research decreased by $2.2 million and $1.9 million, respectively.
64
Cost of Revenues
Cost of revenue decreased $19.0 million, or 42%, in the year ended December 31, 2024, compared to the prior year, primarily due to the decrease in sales from engineering and other services, with a corresponding decrease in cost of sales of $19.9 million. Similarly, the decrease in sales of JDAs and other contract research drove a decrease of $1.2 million and $0.6 million in cost of sales, respectively. These decreases in cost of sales were offset by an increase related to CarbonSmart sales of $2.7 million.
Research and Development
R&D expense increased $8.9 million, or 13%, in the year ended December 31, 2024, compared to the prior year, primarily due to an increase of $10.5 million in external R&D services related to project development costs that are not currently eligible for capitalization nor tied to revenue agreements. Additionally, there was an increase of $0.2 million in consumables and facilities expenses, compared to the same period last year. These increases were offset by a decrease of $1.8 million in personnel and contractors expenses related to R&D projects.
Selling, general and administrative expense
SG&A expense decreased $0.5 million, or 1%, in the year ended December 31, 2024, compared to the prior year . This was primarily due to a decrease of $0.2 million in professional fees associated with the Business Combination, a decrease of $0.2 million in personnel expenses and contractors, and a decrease of $0.5 million in bad debt expense recorded in the prior year and recovered in the current year. These decreases were offset by an increase of $0.4 million for facilities and consumable expenses compared to the prior year .
Interest income, net
Interest income, net decreased $1.4 million in the year ended December 31, 2024 compared to the prior year . This was primarily attributable to interest earned on lower cash balances held in savings and money market accounts.
Other expense, net
Other expense, net decreased $11.7 million, in the year ended December 31, 2024 compared to the prior year , due to a lower net loss from the change in fair value of our financial instruments in the year ended December 31, 2024, compared to the prior year .
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, demand deposits at banks, and other short-term, highly liquid investments with original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
The following table shows the balances of our cash, cash equivalents and restricted cash as of December 31, 2024 and December 31, 2023:
Years Ended December 31,
(In thousands, except for percentages) 2024 2023 Variance
% Change
Total cash, cash equivalents, and restricted cash $ 45,737 $ 76,284 $ (30,547) (40) %
As of December 31, 2024, compared to December 31, 2023, LanzaTech’s cash, cash equivalents, and restricted cash decreased by $30.5 million, or 40%, primarily due to funding the net loss adjusted for non-cash charges (see cash flow section below) and purchases of property, plant and equipment. The decrease was offset by the proceeds from the maturity of certain debt securities and the issuance of the Convertible Note.
65
Debt Security Investments
Debt security investments comprise mainly held-to-maturity U.S. Treasury and high quality corporate securities that the Company has both the ability and intent to hold to maturity. These securities all mature within one year and will provide additional liquidity upon maturity. As of December 31, 2024, held-to-maturity security investments totaled $12.4 million, compared to $45.2 million as of December 31, 2023.
Sources and Uses of Capital
Since inception, we have financed our operations primarily through equity and debt financing. Our ability to successfully develop products and expand our business depends on many factors, including our ability to meet working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
As of December 31, 2024, our capital structure consisted of equity (comprising issued capital, and accumulated deficit), the Brookfield SAFE and the Convertible Note. We are not subject to any externally imposed capital requirements. As of December 31, 2024, LanzaTech’s outstanding debt comprised the Convertible Note, the Brookfield SAFE, the FPA Put Option liability and the Fixed Maturity Consideration, which are all classified as liabilities for accounting purposes, on its consolidated balance sheets as of December 31, 2024. On February 14, 2025, the Company and Brookfield entered into a loan agreement and terminated the Brookfield SAFE. Refer to Note 19 - Subsequent Events in our consolidated financial statements for further information.
On February 3, 2023, LanzaTech, AMCI and ACM ARRT H LLC (“ACM”) executed a Forward Purchase Agreement (the “FPA”). On the same date, ACM partially assigned its rights under the FPA to Vellar Opportunity Fund SPV LLC - Series 10 (“Vellar”). ACM and Vellar are together referred to as the “Purchasers”. Pursuant to the FPA, the Purchasers obtained 5,916,514 shares of common stock (the “Recycled Shares”) on the open market for approximately $10.16 per share (the “Redemption Price”), and the purchase price of approximately $60.1 million was funded by the use of AMCI trust account proceeds as a partial prepayment (the “Prepayment Amount”) for the FPA redemption three years from the date of the Business Combination (the “FPA Maturity Date”). The FPA Maturity Date may be accelerated, at the Purchasers’ discretion, if the Company’s volume-weighted average share price is below $3.00 per share for any 50 trading days during a 60 day consecutive trading-day period (the “VWAP Trigger Event”) or if the Company is delisted. On any date following the Business Combination, the Purchasers also had 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 would owe the Company an amount equal to the Terminated Shares times the Redemption Price, which could be reduced in the case of certain dilutive events (“Reset Price”).
At the FPA Maturity Date, the Company is obligated to pay the Purchasers an amount equal to the product of (1) 7,500,000 less the number of Terminated Shares multiplied by (2) $2.00 (the “Maturity Consideration”), which under the FPA is payable at the Company’s option in cash or shares of common stock valued at the average daily VWAP Price (as defined in the FPA) over the 30 scheduled trading days ending on the FPA Maturity Date. In addition to the Maturity Consideration, on the FPA Maturity Date, the Company is obligated to pay the Purchasers an amount equal to the product of (x) 500,000 and (y) the Redemption Price, totaling $5.1 million (the “Share Consideration”), which under the FPA is payable in cash.
The Company’s volume-weighted average share price was below $3.00 per share for 50 trading days during the 60 day consecutive trading period ended on July 1, 2024. On July 22, 2024, Vellar notified the Company of the satisfaction of a VWAP Trigger Event, purporting to accelerate the FPA Maturity Date of its portion of the Recycled Shares (i.e., 2,990,000 shares) to July 22, 2024. Vellar asserts that it is entitled to: (i) Maturity Consideration of $7.5 million (payable at the Company’s option in cash or shares of common stock valued at the average daily VWAP Price (as defined in the FPA) over 30 scheduled trading days ending on the accelerated FPA Maturity Date of July 22, 2024 of $1.91 per share) and (ii) Share Consideration of approximately $2.5 million, payable in cash, each due and payable on July 24, 2024. On July 25, 2024, the Company received a notice from Vellar pursuant to the FPA, stating that the Company is in default of its payment obligations. On July 30, 2024, the Company received a notice of an event of default under the FPA from Vellar that (i) designated such date as the early termination date
66
of the FPA and (ii) purports to result in an early termination cash payment of approximately $4.2 million becoming due to Vellar (equating to the sum of the Maturity Consideration and the Share Consideration minus the VWAP Price (as defined in the FPA) (as of July 29, 2024) of Vellar’s portion of the Recycled Shares).
On July 24, 2024, LanzaTech filed suit against Vellar, primarily in connection with Vellar’s sale of Recycled Shares, which LanzaTech alleges is in breach of the FPA’s requirement that Recycled Shares be held in a bankruptcy remote special purpose vehicle for the benefit of the Company unless the sale is notified to the Company as part of an early termination, which Vellar did not do. The outcome of the lawsuit is uncertain, and in the event that the Company does not succeed, the Company may not have sufficient funds or be able to obtain financing from third parties to pay amounts related to the lawsuit. See Note 17 - Commitments and Contingencies in our consolidated financial statements for further information.
On October 4, 2024, ACM delivered to the Company notice of satisfaction of the VWAP Trigger Event which accelerated the FPA Maturity Date with respect to ACM’s portion of the FPA. On October 15, 2024 and October 21, 2024, the Company paid in cash to ACM $2.5 million in Share Consideration and $7.5 million in Maturity Consideration, respectively, and ACM subsequently returned its Recycled Shares to the Company. As a result, the Company’s and ACM’s obligations under the FPA have been fully satisfied and settled as of December 31, 2024.
On May 9, 2024, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) and a Terms Agreement (the “Terms Agreement” and, together with the Sales Agreement, the “ATM Agreements”) with B. Riley Securities, Inc. (“B. Riley Securities”), pursuant to which the Company may, from time to time and subject to certain conditions such as a floor price, offer and sell through or to B. Riley Securities, as sales agent or principal, shares of the Company’s common stock, having an aggregate offering price of up to $100 million. The shares will be offered through or to B. Riley Securities, acting as agent in connection with agency transactions or as principal in connection with any principal transactions. Pursuant to the Terms Agreement, the Company will have the right, but not the obligation, from time to time at its sole discretion, for as long as the Sales Agreement remains effective, to direct B. Riley Securities on any trading day to act on a principal basis and purchase up to the maximum of the lesser of a) 50% of the prior daily trading volume, or b) approximately $0.2 million per day as long as the closing price on the day prior exceeds $1, and approximately up to $0.9 million per week, and up to $40 million per twelve-month period, subject to any applicable limitations pursuant to the rules and regulations of Nasdaq (the aggregate amount so purchased by B. Riley Securities under the Terms Agreement, the “Commitment”), which Commitment will be included within the aggregate offering price of up to $100 million of common stock sold pursuant to the ATM Agreements; provided, however, that only one principal sale may be requested per day unless otherwise agreed to by B. Riley Securities. As of December 31, 2024, the full capacity of our current ATM equity offering program remained available for issuance.
On August 5, 2024, the Company entered into a Convertible Note Purchase Agreement (the “Convertible Note Purchase Agreement”) with Carbon Direct Capital pursuant to which the Company agreed to sell and issue to Carbon Direct Capital and other purchasers in a private placement transaction (the “Private Placement”) in one or more closings up to an aggregate principal amount of $150 million of convertible notes. On August 6, 2024, we issued and sold $40.2 million of convertible notes to Carbon Direct Capital pursuant to the Convertible Note Purchase Agreement (the “Convertible Note”). The gross proceeds from the initial closing was approximately $40 million, before deducting estimated offering expenses.
The Convertible Note bears interest at a fixed rate of 8.00% per annum and will mature on August 6, 2029 (the “Convertible Note Maturity Date”), unless earlier redeemed or converted in accordance with its terms. The Convertible Note is subject to mandatory conversion for shares of the Company’s common stock upon the completion by the Company of an equity financing prior to the Convertible Note Maturity Date that results in the Company receiving minimum gross proceeds in an amount that is equal to the greater of (i) $40 million and (ii) 50% of the total principal amount under the outstanding Convertible Note immediately following the final closing under the Convertible Note Purchase Agreement (a “Qualified Equity Financing”) at a conversion price equal to the lower of (i) the lowest per-share selling price per share in the Qualified Equity Financing, less a 10% discount and (ii) the Valuation Cap (as defined below). The Convertible Note is also convertible at the option of the holder upon the completion by the Company of an equity financing prior to the Convertible Note Maturity Date that does not meet
67
the definition of a Qualified Equity Financing (a “Non-Qualified Equity Financing”) at a conversion price equal to the lower of (i) the lowest per-share selling price in the Non-Qualified Equity Financing and (ii) the Valuation Cap. The Convertible Note also convertible at the option of the holders any time prior to the Convertible Note Maturity Date at a conversion price equal to the Valuation Cap of $1.25 per share. The Valuation Cap is subject to adjustment based on the Company’s holdings in LanzaJet, and t he conversion price in all cases is subject to adjustment for stock splits, reclassifications, redesignations, subdivisions, recapitalizations, and dividends. As of December 31, 2024, no Qualified Equity Financing nor Non-Qualifying Financing events have occurred.
In the normal course of our business, we also enter into purchase commitments or other transactions in which we make representations and warranties that relate to the performance of our goods and services. We do not expect material losses related to these transactions.
Going Concern
We have recurring net losses and anticipate continuing to incur losses. We had cash and cash equivalents of $43.5 million, short-term held-to-maturity debt securities of $12.4 million and an accumulated deficit of $(969.6) million as of December 31, 2024, along with cash outflows from operations of $(89.1) million and net loss of $(137.7) million for the year ended December 31, 2024. We have historically funded our operations through the Business Combination, issuances of equity securities, debt financing, as well as from revenue generating activities with commercial and governmental entities.
In light of the our projected capital expenditures and operating requirements under our current business plan, we are projecting that our existing cash and short-term held-to-maturity debt securities will not be sufficient to fund our operations through the next twelve months from the date of issuance of the consolidated financial statements for the year ended December 31, 2024 included in this Annual Report. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
We are focusing on streamlining our business priorities, taking actions to reduce our cost structure and evaluating other liquidity enhancing initiatives, including pursuing capital raising, partnership or asset-related opportunities, and other strategic options. In accordance with Accounting Standards Update ("ASU") No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40),” management has evaluated in aggregate the conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern through the next twelve months from the date of issuance of the consolidated financial statements for the year ended December 31, 2024 included in this Annual Report and has determined that the Company’s ability to continue as a going concern is dependent on its ability to execute its business plan, raise significant amounts of additional capital and/or implement other strategic options.
On April 3, 2025, the Board received a preliminary, nonbinding proposal from Carbon Direct to acquire all of the outstanding shares of our common stock for $0.02 per share (the “Take-Private Proposal”). Carbon Direct Capital is the holder of the Company’s outstanding $40.2 million Convertible Note, excluding payment-in-kind interest from the issue date, which upon conversion, would entitle it to receive shares of common stock representing approximately 14.6% of our common stock based on the total number of shares of our common stock outstanding on April 10, 2025. The Strategic Committee is currently reviewing, evaluating and negotiating the Take-Private Proposal in consultation with our financial advisor and legal counsel.
We are actively pursuing the above actions. However, because certain of the actions described above are subject to market and other conditions not within the Company’s control, management has concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern.
The consolidated financial statements for the year ended December 31, 2024 included in this Annual Report do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty
Cash Flows
The following table provides a summary of our cash flows for the years ended December 31, 2024 and December 31, 2023:
68
Years Ended December 31,
(in thousands)
2024 2023
Net cash used in operating activities $ (89,060) $ (97,296)
Net cash provided by/(used in) investing activities 28,352 (57,911)
Net cash provided by financing activities 30,213 148,185
Effects of currency translation on cash, cash equivalents and restricted cash
(52) (404)
Net decrease in cash, cash equivalents and restricted cash
$ (30,547) $ (7,426)
Cash Flows Used in Operating Activities
Cash flows used in operating activities decreased $8.2 million, or 8%, in the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease is primarily attributable to the lower net loss, net of non-cash items in the year ended December 31, 2024 compared to the prior year. Additionally, the Company had cash outflows of $4.7 million related to costs incurred for the Business Combination that were classified as cash flows from operating activities during the year ended December 31, 2023, which did not recur in the current year.
Cash Flows Provided by Investing Activities
In the year ended December 31, 2024, net cash provided by investing activities was $28.4 million, compared to net cash used by investing activities of $(57.9) million in the year ended December 31, 2023. The change is primarily driven by the net cash inflows of $33.6 million from more debt securities maturing in the year ended December 31, 2024.
Cash Flows from Financing Activities
In the year ended December 31, 2024, net cash from financing activities was $30.2 million , compared to net cash provided by financing activities of $148.2 million in the year ended December 31, 2023. The cash inflow in the prior year was mainly driven by $213.4 million in proceeds from the Business Combination and PIPE financing, partially offset by the FPA prepayment amount of $60.1 million . In the year ended December 31, 2024, the cash inflow was mainly due to $40.0 million received from the Convertible Note, offset by the settlement of a portion of the FPA for $(10.0) million.
Off-Balance Sheet Arrangements
As of December 31, 2024 and December 31, 2023, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We consider an accounting estimate to be critical to the consolidated financial statements if the estimate is complex in nature or requires a high degree of judgment and actual results may differ from these estimates with any such differences being potentially material. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe that the accounting policies discussed below are critical to understanding our historical and future performance:
Revenue Recognition
69
We recognize revenue from our contracts with customers in accordance with ASC 606. The Company also has certain partnership agreements that are within the scope of ASC 808 and contracts with governmental entities that are accounted for as grant contributions. We primarily earn revenue from services related to feasibility studies and basic engineering design of commercial plants, joint development, and contract R&D activities to develop novel biocatalysts and related technologies. When accounting for these arrangements, we must develop assumptions that require judgment such as determining the performance obligations in the contract, determining the transaction price for the contract and stand-alone selling price for each performance obligation identified, and measuring progress towards satisfaction of the performance obligations.
The determination of whether goods and services qualify as distinct performance obligations is based on the contract terms and our view of the business. Typically, our goods and services provided under a contract with a customer are viewed as a single performance obligation. Most of our arrangements provide fixed consideration, however, when there are variable consideration elements, we estimate the transaction price and whether revenue should be constrained. Significant estimates and judgments are also used when a material right is provided to the customer. In these instances, management estimates the stand-alone selling price and apportions the total transaction price to this material right. We regularly reassess our estimates and assumptions and any changes in these estimates are reflected in our revenue from contracts with customers in the period in which they occur.
Most performance obligations on our non-governmental arrangements are recognized over time. We typically use percentage completion when certain revenue recognition requirements are met. We exercise judgment when determining the percentage of completion against the total transaction price initially estimated. For arrangements with government agencies, we measure the satisfaction of performance obligations over time using the input method which requires judgment when selecting the most indicative measure of such performance.
Convertible Note
The Company has elected to measure the Convertible Note using the fair value option under ASC 825. The fair value of the Convertible Note is remeasured at each reporting date using a binomial lattice model. This model incorporates transaction details such as stock price, contractual terms, conversions scenarios, dividend yield, risk-free rate, adjusted equity volatility, credit rating, market credit spread, and estimated yield. We regularly reassess our estimates and assumptions as new information becomes available. Any changes in these estimates are reflected in our financial statements in the period in which they occur. The effective debt yield and volatility involve unobservable inputs classified as Level 3 of the fair value hierarchy. The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions.
Brookfield SAFE Valuation
Under the Brookfield SAFE, we agreed to issue to Brookfield the right to certain shares of Legacy LanzaTech’s capital stock, in exchange for the payment of $50.0 million. The Brookfield SAFE was classified as a liability on our consolidated balance sheets as of December 31, 2024 and 2023. The Company elected to record the instrument using the fair value option under ASC 825. The Brookfield SAFE was terminated on February 14, 2025. Refer to Note 19 - Subsequent Events in our consolidated financial statements for further information.
As of December 31, 2024, we expected to present projects to Brookfield to result in the Brookfield SAFE liability being automatically converted into shares at 75% with the remaining portion to be outstanding until maturity. We determined the value of the conversion portion, by evaluating the pipeline of potential Brookfield projects in various stages of development, and determining the likelihood that a sufficient number of projects should meet the criteria for investment prior to maturity of the note. Since the liquidity price was not expected to change during the life of the Brookfield SAFE, the number of shares that Brookfield would receive was fixed.
With respect to the maturity portion, the Brookfield SAFE would not automatically be converted prior to maturity and at maturity, the holder could either convert or receive the remaining principal and interest in cash. To determine the fair value of the maturity portion, we use the Black-Scholes option pricing model. The main key inputs to this model is the strike price which is the stated strike price grown at the compounded interest rate until
70
maturity, the stock price which is the current value of the shares that Brookfield would receive at conversion, the risk-free rate and the expected volatility.
The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions.
Filing Status
LanzaTech’s revenue was less than $100 million for the year ended December 31, 2023, and the market value of its common stock that was held by non-affiliates (i.e. public float) did not exceed $560 million as of the last business day of the Company’s second fiscal quarter in 2024, which resulted in the following changes to LanzaTech’s filing status:
• LanzaTech is no longer a large accelerated filer and qualified as a non-accelerated filer as of December 31, 2024.
• LanzaTech qualified as a smaller reporting company as of the last business day of the Company’s second fiscal quarter.
LanzaTech uses certain scaled disclosures as permitted for smaller reporting companies in this Form 10-K, including presenting only the two most recent fiscal years of audited financial statements. The use of reduced disclosure obligations in this Form 10-K may also make comparison of LanzaTech’s financial statements with other public companies difficult or impossible.
Recently Issued and Adopted Accounting Standards
See Note 2 to our consolidated financial statements for a description of recent accounting pronouncements, including the actual and expected dates of adoption and estimate effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.
We define Adjusted EBITDA as our net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, change in fair value of the Convertible Note and associated transaction costs, transaction costs on issuance of FPA, loss from equity method investees, net and other one-time costs related to the Business Combination and securities registration on Form S-4, our registration statement on Form S-1, and non-recurring regulatory matters. We monitor and have presented in this Annual Report Adjusted EBITDA because it is a key measure used by our management and the Board to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we include in net loss. Accordingly, we believe Adjusted EBITDA provides useful information to investors, analysts, and others in understanding and evaluating our operating results and enhancing the overall understanding of our past performance and future prospects.
Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. For example, Adjusted EBITDA: (i) excludes stock-based compensation expense because it is a significant non-cash expense that is not directly related to our operating performance; (ii) excludes depreciation expense and, although this is a non-cash expense, the assets being depreciated and amortized
71
may have to be replaced in the future; (iii) excludes gain or losses on equity method investee; and (iv) excludes certain income or expense items that do not provide a comparable measure of our business performance. In addition, the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results. In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP:
Reconciliation of Net Loss to Adjusted EBITDA
Years Ended December 31,
(In thousands) 2024 2023
Net Loss
$ (137,731) $ (134,098)
Depreciation 5,567 5,452
Interest income, net
(3,162) (4,572)
Stock-based compensation expense and change in fair value of SAFE and warrant liabilities (1)
(4,679) 728
Change in fair value of the FPA Put Option and Fixed Maturity Consideration liabilities (net of interest accretion reversal)
23,283 44,300
Change in fair value of Convertible Note and related transaction costs
14,276 —
Transaction costs on issuance of FPA
— 451
Loss from equity method investees, net
14,234 2,902
One-time costs related to the Business Combination, initial securities registration and non-recurring regulatory matters (2)
— 4,693
Adjusted EBITDA
$ (88,212) $ (80,144)
__________________
(1) Stock-based compensation expense represents expense related to equity compensation plans.
(2) Represents costs incurred related to the Business Combination that do not meet the direct and incremental criteria per SEC Staff Accounting Bulletin Topic 5.A to be charged against the gross proceeds of the transaction, but are not expected to recur in the future, as well as costs incurred subsequent to deal close related to our securities registration on Form S-4 and our registration statement on Form S-1. Regulatory matters includes fees related to non-recurring items during the year ended December 31, 2023.
72