LanzaTech (LNZA) - 2025 Q2 - Quarterly Report

Part I - Financial Information A nature-based carbon refining company facing substantial doubt about its ability to continue as a going concern - The Company is a nature-based carbon refining company that transforms waste carbon into sustainable fuels, fabrics, and packaging using proprietary gas fermentation technology[32] - As of June 30, 2025, the Company's technology was operated by licensees at four commercial-scale ethanol plants in China, one plant in Belgium, one in the commissioning phase in India, with others currently in development[33] - The Company has recurring net losses and an accumulated deficit of $(1.02) billion as of June 30, 2025, along with cash outflows from operations of $(42.8) million for the six months ended June 30, 2025, raising substantial doubt about its ability to continue as a going concern[36][38] - The Company is pursuing capital raising, partnership or asset-related opportunities, and other strategic options, including a Series A Preferred Stock Issuance and a PIPE Warrant, to address liquidity concerns[39][40][41] Item 1. Financial Statements (unaudited) Presents unaudited consolidated financial statements, including balance sheets, operations, equity, cash flows, and notes Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :--------- | | Cash and cash equivalents | $37,367 | $43,499 | $(6,132) | (14.1)% | | Total current assets | $66,151 | $99,334 | $(33,183) | (33.4)% | | Total assets | $116,296 | $174,683 | $(58,387) | (33.4)% | | Total current liabilities | $55,816 | $30,447 | $25,369 | 83.3% | | Total liabilities | $128,311 | $161,236 | $(32,925) | (20.4)% | | Total mezzanine equity | $13,169 | $0 | $13,169 | N/A | | Total shareholders' equity/(deficit)| $(25,184) | $13,447 | $(38,631) | (287.3)% | Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2025 and 2024 | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------- | :--------- | | Total revenues | $9,084 | $17,375 | $(8,291) | (47.7)% | | Total cost and operating expenses | $41,325 | $40,177 | $1,148 | 2.9% | | Loss from operations | $(32,241) | $(22,802) | $(9,439) | 41.4% | | Total other income (expense), net | $3,077 | $(3,278) | $6,355 | (193.9)% | | Net loss | $(32,499) | $(27,799) | $(4,700) | 16.9% | | Comprehensive loss | $(34,417) | $(27,990) | $(6,427) | 22.9% | | Net loss per common share - basic and diluted | $(0.15) | $(0.14) | $(0.01) | 7.1% | | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------- | :--------- | | Total revenues | $18,567 | $27,619 | $(9,052) | (32.8)% | | Total cost and operating expenses | $81,861 | $76,575 | $5,286 | 6.9% | | Loss from operations | $(63,294) | $(48,956) | $(14,338) | 29.3% | | Total other income (expense), net | $21,433 | $(1,951) | $23,384 | (1198.6)% | | Net loss | $(51,728) | $(53,307) | $1,579 | (3.0)% | | Comprehensive loss | $(51,391) | $(53,457) | $2,066 | (3.9)% | | Net loss per common share - basic and diluted | $(0.25) | $(0.27) | $0.02 | (7.4)% | Consolidated Statements of Changes in Mezzanine Equity and Shareholders' Equity/(Deficit) for the three and six months ended June 30, 2025 and 2024 | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :--------------------------------- | :------------------------------- | :--------------------------- | :-------------------- | | Total Shareholders' Equity/(Deficit) | $13,447 | $(25,184) | $(38,631) | | Total Mezzanine Equity | $0 | $13,169 | $13,169 | | Accumulated Deficit | $(969,603) | $(1,021,331) | $(51,728) | | Common Stock Shares Outstanding | 194,915,711 | 231,995,967 | 37,080,256 | Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------- | :--------- | | Net cash used in operating activities | $(42,815) | $(42,942) | $127 | (0.3)% | | Net cash provided by investing activities | $11,529 | $29,502 | $(17,973) | (60.9)% | | Net cash provided by financing activities | $25,619 | $224 | $25,395 | 11337.1% | | Net decrease in cash, cash equivalents and restricted cash | $(6,092) | $(13,393) | $7,301 | (54.5)% | - Non-cash investing and financing activities for the six months ended June 30, 2025, included cashless issuance of equity for Convertible Notes ($8.1 million) and issuance of the Brookfield Loan ($6.2 million)[27] Notes to the Consolidated Financial Statements Note 1 — Description of the Business LanzaTech Global, Inc. converts waste carbon into sustainable fuels and chemicals using proprietary gas fermentation - LanzaTech Global, Inc. (formerly AMCI Acquisition Corp. II) completed its business combination on February 8, 2023, and its common stock trades on Nasdaq under the ticker symbol 'LNZA'[30][31] - The Company's core business is transforming waste carbon into sustainable fuels and chemicals (e.g., ethanol) using proprietary gas fermentation technology, and it also purchases and sells low-carbon chemicals under the brand name CarbonSmart[32] - As of June 30, 2025, LanzaTech's technology is operational in four commercial-scale ethanol plants in China, one in Belgium, and one in commissioning in India, with more under development globally[33] Note 2 — Summary of Significant Accounting Policies Outlines critical accounting policies, going concern, revenue recognition, fair value, and liquidity challenges Going Concern Recurring net losses and insufficient cash raise substantial doubt about the company's going concern ability - LanzaTech had cash and cash equivalents of $37.4 million and an accumulated deficit of $(1.02) billion as of June 30, 2025, with cash outflows from operations of $(42.8) million for the six months ended June 30, 2025[36] - The Company projects its existing cash and short-term debt securities will not be sufficient to fund operations through the next twelve months, raising substantial doubt about its ability to continue as a going concern[38] - The Company is actively pursuing capital raising, partnership opportunities, and other strategic options, but management concludes these plans do not alleviate substantial doubt due to market and other uncontrollable conditions[39][42] Significant Accounting Policies Significant accounting policies are consistent with the 2024 Annual Report, with no material interim changes - The Company's significant accounting policies are consistent with those included in its Annual Report on Form 10-K for the year ended December 31, 2024[46] Use of Estimates Financial statements require significant estimates for revenue recognition and complex financial instrument valuation - Significant estimates include revenue recognized over time, the Brookfield SAFE, the Brookfield Loan, the Forward Purchase Agreement ('FPA'), the Convertible Note, the Series A Preferred Stock and the Private Placement Warrants[47] - The Company uses the input method for revenue recognition, where revenue is recognized based on efforts or inputs to satisfy a performance obligation relative to total expected inputs, requiring judgment and estimation[48] Cash and Cash Equivalents Cash and cash equivalents decreased from $43.5 million (2024) to $37.4 million (2025) - Cash and cash equivalents decreased from $43.5 million at December 31, 2024, to $37.4 million at June 30, 2025[50] Restricted Cash Restricted cash, held as collateral, increased slightly from $2.24 million (2024) to $2.28 million (2025) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $37,367 | $43,499 | | Restricted cash (within Other current assets) | $2,278 | $2,238 | | Total cash, cash equivalents and restricted cash | $39,645 | $45,737 | Forward Purchase Agreement The FPA involves obligations for Maturity and Share Consideration, accelerated by VWAP Trigger Events, and is accounted for as equity, derivative, and debt - The FPA obligates the Company to pay Purchasers Maturity Consideration and Share Consideration, which can be accelerated if the Company's volume-weighted average share price (VWAP) falls below $3.00 for 50 trading days within a 60-day period or if the Company is delisted[53][56] - The FPA is accounted for as a reduction to equity for the prepayment, a derivative instrument (FPA Put Option) recorded as a liability at fair value, and a free-standing debt instrument (Fixed Maturity Consideration) measured using the Fair Value Option (FVO)[58][59][60] - A VWAP Trigger Event occurred on July 1, 2024, leading to Vellar accelerating its portion of the FPA and the reclassification of Maturity and Share Consideration to current liabilities. ACM's portion was fully satisfied in October 2024[61][62] Convertible Note A $40.15 million Convertible Note was issued in August 2024 and converted into 34 million common shares on May 7, 2025 - On August 6, 2024, the Company issued and sold a principal amount of $40.15 million of convertible notes to Carbon Direct Capital, electing the fair value option for accounting[65] - The Convertible Note was mandatorily converted into 34,054,337 shares of common stock on May 7, 2025, following a Qualified Equity Financing with the Series A Preferred Stock Issuance[66] Fair Value of Financial Instruments Fair value is defined by a three-level hierarchy, with most financial instruments approximating carrying amounts - Fair value is measured using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities or observable data), and Level 3 (unobservable inputs)[67][72] - The fair value of most financial instruments approximates their carrying amounts due to their short-term nature, with the exception of warrant liabilities[68] Revenue Recognition Revenue is recognized from biorefining, R&D, grants, and CarbonSmart sales, either over time or at point of control transfer - The Company primarily earns revenue from biorefining services (feasibility studies, engineering, licensing, biocatalyst sales), joint development and contract research activities, and supply of CarbonSmart products[69] - Biorefining services and R&D services are recognized as performance obligations satisfied over time, using cost-to-cost or labor hours input methods, or based on milestone completion[71][75] - CarbonSmart product sales revenue is recognized at a point in time when control transfers to the end customer, with the Company acting as the principal[78] - Grants are recognized as revenue as qualifying costs are incurred, and R&D services under collaborative arrangements are recognized by applying ASC 606[77][79] Cost of Revenues Cost of revenues includes direct R&D, engineering, and service costs related to revenue agreements, covering materials and labor - Cost of revenues represents 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[82] - These costs include both internal and third-party fixed and variable costs, such as materials, supplies, labor, and fringe benefits[82] Research and Development R&D costs are expensed as incurred, unless related to revenue agreements or eligible for capitalization - The Company expenses costs associated with R&D activities as incurred, unless they are related to revenue agreements or are eligible for capitalization under applicable guidance[83] Concentration of Credit Risk and Other Risks and Uncertainties Significant revenue and receivables concentration from international customers and grant providers, with key customers exceeding 10% - Revenue generated from customers and grant providers outside of the United States was approximately 71% for the three months ended June 30, 2025 (up from 36% in 2024), and 70% for the six months ended June 30, 2025 (up from 43% in 2024)[84] - As of June 30, 2025, approximately 52% of trade accounts receivable and unbilled accounts receivable were due from customers and grant providers located outside the United States[85] | Customer | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Customer A | 36 % | — % | 34 % | — % | | Customer B | 13 % | 51 % | 12 % | 35 % | | Customer C | — % | 17 % | — % | 15 % | Recently Issued Accounting Pronouncements, Not Yet Adopted Evaluating recently issued ASUs on convertible debt, income statement disaggregation, and income tax disclosures - ASU 2024-04 (effective for annual periods beginning after December 15, 2025) provides guidance on accounting for induced conversions of convertible debt instruments, requiring any additional value given to debt holders as an inducement to be recorded as an expense[87] - ASU 2024-03 (effective for fiscal years beginning after December 15, 2026) will require the Company to disclose disaggregated amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization, as well as its definition of selling expenses[88][90] - ASU 2023-09 (effective for annual periods beginning after December 15, 2024) requires disaggregated information about a reporting entity's effective tax rate reconciliation and income taxes paid by jurisdiction[91] Note 3 — Net Loss Per Share Basic and diluted net loss per share calculated from net loss and weighted-average shares, excluding anti-dilutive common stock equivalents | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss for basic and diluted EPS (in thousands) | $(32,499) | $(27,799) | $(51,728) | $(53,307) | | Weighted-average shares outstanding (basic and diluted) | 218,121,734 | 197,746,569 | 207,377,690 | 197,360,539 | | Net loss per common share, basic and diluted | $(0.15) | $(0.14) | $(0.25) | $(0.27) | - Common stock equivalents (options, RSUs, Brookfield SAFE, and warrants) are excluded from the computation of diluted loss per share in periods of net loss because their effect would be anti-dilutive[93][94] Note 4 — Revenues Total revenue significantly decreased for Q2 and H1 2025 due to lower licensing and engineering, offset by CarbonSmart sales | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Licensing | $1,050 | $8,541 | $2,101 | $9,121 | | Engineering and other services | $1,893 | $5,122 | $3,695 | $9,578 | | Joint development agreements | $1,313 | $1,333 | $2,363 | $4,205 | | Contract research | $1,010 | $1,441 | $2,386 | $2,914 | | CarbonSmart product | $3,818 | $938 | $8,022 | $1,801 | | Total Revenue | $9,084 | $17,375 | $18,567 | $27,619 | | Geographic Location | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------ | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | North America | $2,649 | $11,131 | $5,614 | $15,589 | | Europe, Middle East, Africa (EMEA) | $1,954 | $5,014 | $4,464 | $9,594 | | Asia | $4,481 | $826 | $8,489 | $2,032 | | Australia | $0 | $404 | $0 | $404 | | Total Revenue | $9,084 | $17,375 | $18,567 | $27,619 | - Contract assets decreased from $19.0 million to $8.0 million, primarily due to billing customers for engineering and other services. Current contract liabilities decreased due to satisfaction of performance obligations, while non-current contract liabilities increased due to revaluation of foreign exchange currency[99][100] - As of June 30, 2025, the Company had approximately $19.2 million in contracted revenue remaining to be recognized, with $12.1 million expected to be recognized in the next twelve months[101] Note 5 — Investments Investments include SGLT equity and LanzaJet equity method, with LanzaJet reduced to zero; held-to-maturity debt securities matured | Investment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | | Equity Method Investment in LanzaJet | $0 | $4,363 | | Equity Security Investment in SGLT | $14,990 | $14,990 | | Total Investment | $14,990 | $19,353 | - The carrying value of the Company's equity method investment in LanzaJet was reduced to zero as of June 30, 2025, due to recording losses against the balance, and the Company will not recognize additional losses until the investment returns to a positive carrying value[111] - Held-to-maturity debt securities, which totaled $12.4 million as of December 31, 2024, had all matured by June 30, 2025[103] Note 6 — Brookfield Instruments Brookfield SAFE terminated and replaced by Brookfield Loan on Feb 14, 2025, resulting in a $6.2 million extinguishment loss - The Brookfield SAFE was terminated on February 14, 2025, and concurrently, the Company entered into the Brookfield Loan, resulting in a $6.2 million loss on extinguishment of the Brookfield SAFE[121] - Under the Brookfield Loan, Brookfield was deemed to have loaned LanzaTech $60.03 million (including accrued interest from the SAFE), accruing interest at 8.00% per annum, with an initial principal payment of $12.5 million made by February 21, 2025[125] - As of June 30, 2025, the fair value of the Brookfield Loan was $19.4 million, classified as a mark-to-market liability[126] - The Brookfield Framework Agreement, which requires LanzaTech to exclusively offer Brookfield investment opportunities in certain projects, remains in full effect, with no investments in projects as of June 30, 2025[122] Note 7 — Convertible Note The $40.15 million Convertible Note was converted into 34 million common shares on May 7, 2025, resulting in a $42.98 million fair value gain - On August 6, 2024, the Company issued and sold a $40.15 million Convertible Note to Carbon Direct Capital, bearing 8.00% annual interest, for which the fair value option was elected[129][130] - On May 7, 2025, the Convertible Note was mandatorily converted into 34,054,337 shares of common stock pursuant to a Qualified Equity Financing with the Series A Preferred Stock Issuance[131] - The conversion resulted in an $8.1 million fair value adjustment booked to common stock and additional paid-in capital, and a $43.0 million gain from the change in fair value for the six months ended June 30, 2025[131] Note 8 — Forward Purchase Agreement The FPA involves prepayment, a Put Option liability, and Fixed Maturity Consideration; Vellar's portion was accelerated, leading to litigation - The FPA consists of a $60.5 million prepayment (recorded as a reduction to additional paid-in capital), an FPA Put Option liability, and Fixed Maturity Consideration, both recorded as liabilities[134] - Vellar purported to accelerate its FPA Maturity Date in July 2024 due to a VWAP Trigger Event, leading to a notice of default and subsequent litigation regarding Vellar's sale of Recycled Shares[135] - ACM's portion of the FPA was fully satisfied in October 2024 with cash payments of $2.5 million for Share Consideration and $7.5 million for Maturity Consideration[136] - As of June 30, 2025, the Fixed Maturity Consideration was valued at $4.1 million (classified as current liability), and the FPA Put Option at $30.0 million (classified as non-current liability)[137] Note 9 — Preferred Stock and PIPE Warrant Issued 20 million Series A Preferred Stock for $40 million, classified as mezzanine equity, and agreed to a contingent PIPE Warrant for 780 million common shares - On May 7, 2025, LanzaTech issued 20,000,000 shares of Series A Preferred Stock for $40.0 million, classified as mezzanine equity due to mandatory redemption provisions upon certain events (e.g., change of control) not solely within the Company's control[139] - The Company agreed to issue a contingent PIPE Warrant for 780,000,000 common shares, exercisable only if specific financing conditions are met prior to May 7, 2026[141] - The PIPE Warrant is classified as a current liability and remeasured at fair value; its fair value increased by approximately $3.4 million to $28.4 million as of June 30, 2025, due to an increase in the Company's common stock price[142][17] - Stockholder approvals were required for the issuance of common stock upon conversion of Series A Preferred Stock, exercise of PIPE Warrants, and a Subsequent Financing, as well as an amendment to effect a reverse stock split and authorize sufficient capital[144] Note 10 — Fair Value Measurement Details fair value hierarchy (Level 1, 2, 3) for assets and liabilities, highlighting changes for Convertible Note, Brookfield SAFE, and Loan | Financial Instrument | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------------- | :--------------------------- | :------------------------------- | | Cash equivalents (Level 1) | $21,522 | $30,136 | | FPA Put Option liability (Level 3) | $30,015 | $30,015 | | Fixed Maturity Consideration (Level 3) | $4,123 | $4,123 | | Brookfield Loan liability (Level 3) | $19,435 | $0 | | PIPE Warrant (Level 3) | $28,350 | $0 | | Private Placement Warrants (Level 3) | $89 | $1,432 | | Public Warrants (Level 1) | $207 | $2,099 | | Convertible Note (Level 3) | $0 | $51,112 | | Brookfield SAFE liability (Level 3) | $0 | $13,223 | - The fair value of the Convertible Note's change was a $43.0 million gain for the six months ended June 30, 2025, with an $8.1 million fair value adjustment upon conversion[131][152] - The Brookfield SAFE was extinguished on February 14, 2025, with its fair value prior to extinguishment estimated at $13.3 million. The Brookfield Loan's fair value was determined using a scenario-weighted discounted cash flow model, with a fair value of $19.4 million as of June 30, 2025[158][161][126] - The PIPE Warrant, classified as a current liability, increased in fair value by approximately $3.4 million to $28.4 million as of June 30, 2025, due to an increase in the Company's common stock price[165] Note 11 — Income Taxes No income tax expense recorded for Q2 and H1 2025/2024, resulting in a 0% effective tax rate due to a full valuation allowance - The Company recorded no income tax expense for the three and six months ended June 30, 2025 and 2024, representing an effective tax rate of 0%[176] - The 0% effective tax rate is primarily due to a full valuation allowance related to the Company's U.S. and foreign deferred tax assets, which is reassessed on a quarterly basis[176] - The Company is subject to periodic income tax examinations by domestic and foreign income tax authorities, with tax years 2018 and onward subject to examination for federal purposes[177] Note 12 — Share-Based Compensation Grants time-based and market-based RSUs and stock options; H1 2025 compensation expenses were $2.1M for time-based RSUs, $0.4M for market-based RSUs, and $2.0M for stock options - The Company grants time-based RSUs (generally vesting over three years) and market-based RSUs (with both time-based and market-based vesting components, market component met if stock price reaches $11.50)[179][180] - Stock options generally vest over two to five years, with exercise prices no less than the fair market value at the grant date[185] | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Time-based RSUs compensation expense | $1,043 | $1,550 | $2,115 | $2,341 | | Market-based RSUs compensation expense | $170 | $387 | $440 | $1,114 | | Stock options compensation expense | $1,080 | $1,735 | $2,049 | $2,842 | - Unrecognized compensation costs as of June 30, 2025, include $4.9 million for time-based RSUs (weighted-average period of 1.34 years), $0.4 million for market-based RSUs (0.68 years), and $4.7 million for stock options (1.36 years)[183][184][188] - Phantom RSUs and Phantom SARs, which are cash-settled and granted to certain non-US employees, are recorded as liabilities and have a graded vesting schedule over three years[189][190] Note 13 — Related Party Transactions Related party transactions with LanzaJet and SGLT involve equity, licensing, engineering, and a note receivable reduced to zero | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------- | :--------------------------- | :------------------------------- | | Accounts receivable | $2,137 | $2,452 | | Contract assets | $0 | $399 | | Notes receivable | $0 | $5,789 | | Accounts payable | $0 | $234 | | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Revenue from related parties, included within Licensing | $1,050 | $8,541 | $2,101 | $9,121 | | Revenue from related parties, included within Engineering and other services | $137 | $332 | $258 | $660 | - The carrying amount of the note receivable from LanzaJet was reduced to zero as of June 30, 2025, reflecting LanzaJet's share of losses attributable to the Company, following the reduction of the equity method investment in LanzaJet to zero[207] - The LanzaJet Stockholders' Agreement governs board composition, share transfers, and change of control transactions, requiring parties to hold and vote shares to maintain designated board seats[198][199][200] Note 14 — Reportable Segment Operates as a single reportable segment, focusing on integrated solutions across biorefining, JDA/contract research, and CarbonSmart sales - LanzaTech operates as one operating segment and therefore one reportable segment, with its Chief Executive Officer serving as the Chief Operating Decision Maker (CODM)[209] - The single operating segment generates revenues from three business lines: biorefining, joint development agreements (JDA) and contract research, and CarbonSmart sales, all sharing technology platforms and operational resources[210] - The CODM primarily uses consolidated revenue and net loss to evaluate the Company's performance, allocate resources, and make strategic decisions[211] | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Consolidated Revenues | $9,084 | $17,375 | $18,567 | $27,619 | | Consolidated Cost of Sales | $6,230 | $5,491 | $13,743 | $12,261 | | Net loss from operations | $(32,241) | $(22,802) | $(63,294) | $(48,956) | | Net Loss | $(32,499) | $(27,799) | $(51,728) | $(53,307) | Note 15 — Commitments and Contingencies Faces lease commitments and litigation, including a class action, FPA disputes, and a Convertible Note conversion lawsuit, with uncertain outcomes - A partial lease termination for the corporate headquarters in May 2025 resulted in a $13.1 million reduction in lease liabilities and a $60 thousand gain recognized in other income (expense), net[216] - The Company is involved in a putative class action lawsuit (Schara litigation) for alleged damages from the Business Combination, with the Company voluntarily dismissed but retaining indemnification obligations for Director Defendants[219][221] - FPA litigation with Vellar involves Vellar's purported acceleration of the FPA Maturity Date and claims of default, which the Company disputes, alleging Vellar breached FPA requirements regarding Recycled Shares[222][223][224] - Carbon Direct Capital filed a lawsuit challenging the mandatory conversion of the Convertible Note, seeking Series A Preferred Stock and PIPE Warrant instead of common stock, which was dismissed by the Supreme Court but is under appeal. A separate lawsuit regarding proxy statement misstatements was voluntarily dismissed[225][227][229] Note 16 — Subsequent Events Subsequent events include the OBBBA tax act, Brookfield agreement amendments, a 1-for-100 reverse stock split, and an executive transition - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, making permanent 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation, with the Company evaluating its impact[231] - On July 10, 2025, the Brookfield Framework Agreement was amended to extend its term to December 3, 2028, and the Brookfield Loan maturity date was extended to December 3, 2029, with revised interest rates (8% then 12% during the extension period)[232][233] - A 1-for-100 reverse stock split became effective on August 18, 2025, decreasing common stock par value, increasing authorized shares, and proportionately adjusting outstanding equity awards and warrant exercise prices[234][237] - Aura Cuellar stepped down from her role as President, effective August 15, 2025, with a separation agreement including cash severance and a consulting agreement[358] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview of LanzaTech's business, financial developments, and performance analysis, highlighting revenue declines, increased expenses, and liquidity challenges - LanzaTech is a nature-based carbon refining company that licenses its proprietary gas fermentation technology to convert waste carbon into sustainable fuels and chemicals, augmenting its model with incremental ownership and operatorship[244][245] - The Company has not achieved operating profitability, reporting net losses of $51.7 million (H1 2025) and $53.3 million (H1 2024), with an accumulated deficit of $1.02 billion as of June 30, 2025[246] - LanzaTech is streamlining business priorities, reducing costs, and pursuing capital raising, partnerships, and other strategic options to address liquidity concerns and continue as a going concern[247][301] - Total revenue decreased by 48% for the three months and 32.8% for the six months ended June 30, 2025, primarily due to lower licensing and engineering service revenues, partially offset by increased CarbonSmart sales[264][271] - Selling, general and administrative (SG&A) expenses increased significantly by 63% (Q2 2025) and 53% (H1 2025), mainly due to higher professional services fees related to business streamlining efforts[267][274] - Net cash used in operating activities remained stable at approximately $(42.8) million for the six months ended June 30, 2025, while net cash provided by financing activities increased substantially to $25.6 million due to preferred stock issuance and PIPE Warrant proceeds[307][309] Overview LanzaTech refines waste carbon into sustainable fuels and chemicals using proprietary gas fermentation and a licensing model with six global plants - LanzaTech transforms waste carbon into chemical building blocks for consumer goods like sustainable fuels, fabrics, and packaging using its proprietary gas fermentation technology, focusing on ethanol[244] - The Company employs a licensing business model where customers build, own, and operate facilities using LanzaTech's technology, paying royalty fees based on revenue, and is augmenting this with incremental ownership and operatorship[245] - LanzaTech has established six commercial plants globally (four in China, one in Belgium, one in India) and is developing capabilities to produce single cell protein and sustainable aviation fuel through a joint offering with LanzaJet (CirculAir™)[245] - The Company has not achieved operating profitability, reporting net losses of $51.7 million for the six months ended June 30, 2025, and an accumulated deficit of $1.02 billion[246] Recent Developments Shifting to global technology deployment, streamlining operations, and pursuing liquidity initiatives, including a $40 million Series A Preferred Stock issuance and Convertible Note conversion - LanzaTech is focused on shifting its core operations from research and development to globally deploying its proven technology, streamlining business priorities, and improving its cost structure[247] - On May 7, 2025, the Company issued and sold 20,000,000 shares of Series A Convertible Senior Preferred Stock for an aggregate purchase price of $40.0 million[248][249] - In connection with the Series A Preferred Stock Issuance, the Company's $40.2 million Convertible Note was converted into 34,054,337 shares of common stock[249] - The Company also agreed to issue a contingent PIPE Warrant to purchase 780,000,000 shares of common stock, exercisable only upon consummation of a Subsequent Financing or Other Financing by May 7, 2026[250] - Stockholder approvals were sought for common stock issuance, a reverse stock split, and an authorized capitalization amendment, with most approvals received at the July 28, 2025 Annual Meeting[251][253] Key Financial Metrics Key financial metrics show significant revenue decline for Q2 and H1 2025, reduced recurring revenue, and worsened Adjusted EBITDA | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Variance (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------------- | :--------- | | Revenue | $9,084 | $17,375 | $(8,291) | (48)% | | Net Loss | $(32,499) | $(27,799) | $(4,700) | 17% | | One-Time Revenue | $7,810 | $8,834 | $(1,024) | (12)% | | Recurring Revenue | $1,274 | $8,541 | $(7,267) | (85)% | | Cost of Revenues (ex. Depreciation) | $6,230 | $5,491 | $739 | 13% | | Selling, general & administrative expense | $19,106 | $11,747 | $7,359 | 63% | | Adjusted EBITDA | $(29,696) | $(17,752) | $(11,944) | 67% | | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Variance (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------------- | :--------- | | Revenue | $18,567 | $27,619 | $(9,052) | (33)% | | Net Loss | $(51,728) | $(53,307) | $1,579 | (3)% | | One-Time Revenue | $16,087 | $18,517 | $(2,430) | (13)% | | Recurring Revenue | $2,480 | $9,102 | $(6,622) | (73)% | | Cost of Revenues (ex. Depreciation) | $13,743 | $12,261 | $1,482 | 12% | | Selling, general & administrative expense | $34,854 | $22,784 | $12,070 | 53% | | Adjusted EBITDA | $(60,203) | $(39,901) | $(20,302) | 51% | Results of Operations — Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Q2 2025 revenue decreased 48% due to lower services; R&D decreased 30%, SG&A increased 63%, and net loss rose 17% | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Variance (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------------- | :--------- | | Total revenue | $9,084 | $17,375 | $(8,291) | (48)% | | Cost of revenue | $6,230 | $5,491 | $739 | 13% | | Research and development | $14,935 | $21,481 | $(6,546) | (30)% | | Selling, general and administrative expense | $19,106 | $11,747 | $7,359 | 63% | | Loss from operations | $(32,241) | $(22,802) | $(9,439) | 41% | | Other income (expense), net | $3,077 | $(3,278) | $6,355 | (194)% | | Net loss | $(32,499) | $(27,799) | $(4,700) | 17% | - The $8.3 million decrease in total revenue was primarily driven by a $7.5 million decline in licensing revenue and a $3.2 million decrease in engineering and other services, partially offset by a $2.9 million increase in CarbonSmart sales[264] - The $7.4 million increase in SG&A expense was mainly due to a $9.5 million rise in professional services fees associated with business streamlining, partially offset by a $3.1 million decrease in personnel and contractor expenses[267] - Other income, net, increased by $6.7 million, primarily due to a $9.4 million increase in the fair value of the Convertible Note[269] Results of Operations — Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 H1 2025 revenue decreased 32.8% due to lower services; R&D decreased 18.5%, SG&A increased 53.0%, and net loss slightly decreased 3.0% due to a Convertible Note gain | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Variance (in thousands) | % Change | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------------- | :--------- | | Total revenue | $18,567 | $27,619 | $(9,052) | (32.8)% | | Cost of revenues | $13,743 | $12,261 | $1,482 | 12.1% | | Research and development | $31,429 | $38,542 | $(7,113) | (18.5)% | | Selling, general and administrative expense | $34,854 | $22,784 | $12,070 | 53.0% | | Loss from operations | $(63,294) | $(48,956) | $(14,338) | 29.3% | | Other income (expense), net | $21,433 | $(3,612) | $24,415 | nm | | Net loss | $(51,728) | $(53,307) | $1,579 | (3.0)% | - The $9.1 million decrease in total revenue was primarily due to a $7.0 million decline in licensing revenue and a $5.9 million decrease in engineering and other services, partially offset by a $6.2 million increase in CarbonSmart sales[271] - Other income, net, increased by $24.4 million, primarily driven by a $43.8 million gain related to the change in fair value of the Convertible Note, partially offset by losses from the Brookfield SAFE extinguishment and fair value changes in the Brookfield Loan[276][277][278] Liquidity and Capital Resources Cash and equivalents decreased to $39.6 million; substantial doubt about going concern due to losses and insufficient capital; recent financing efforts are ongoing | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Variance (in thousands) | % Change | | :-------------------------------------- | :----------------------------- | :------------------------------- | :---------------------- | :--------- | | Total cash, cash equivalents, and restricted cash | $39,645 | $45,737 | $(6,092) | (13.3)% | - The Company has recurring net losses and an accumulated deficit of $(1.02) billion as of June 30, 2025, with cash outflows from operations of $(42.8) million, raising substantial doubt about its ability to continue as a going concern[299][300] - Financing activities provided $25.6 million in cash for the six months ended June 30, 2025, primarily from the $40.0 million Series A Preferred Stock issuance and PIPE Warrant proceeds, partially offset by a $12.5 million partial repayment of the Brookfield Loan[309] - The Company is actively pursuing additional financing, including a Subsequent Financing of $35.0 million to $60.0 million, but cannot assure its timely or favorable consummation[304] - Litigation with Vellar regarding the FPA and with Carbon Direct Capital concerning the Convertible Note conversion introduces financial uncertainty and potential payment obligations[287][225] Critical Accounting Estimates Critical accounting estimates involve significant judgment for Brookfield Loan, Series A Preferred Stock, and PIPE Warrant, relying on future cash flows and market conditions - There have been no significant changes in critical accounting estimates from the 2024 Annual Report, except for the measurement of the Brookfield Loan liability and Series A Convertible Senior Preferred Stock and PIPE Warrant[312] - The Brookfield Loan's fair value is determined using a scenario-weighted discounted cash flow model, requiring judgmental assumptions about the percentage of qualifying projects presented and funded by Brookfield, the weight on business/strategic plans, and the discount rate[313][314] - Series A Preferred Stock is classified as mezzanine equity due to contractual provisions that could require redemption upon certain events (e.g., change of control) not solely within the Company's control, requiring significant judgment in evaluating terms and likelihood of redemption[315][316] - The PIPE Warrant is classified as a current liability and remeasured at fair value using significant unobservable inputs and management judgment, including the probability of warrant issuance and exercisability, and applicable discounts reflecting liquidity, dilution, and financing-related risks[317][318] Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP measure supplementing GAAP results, excluding non-cash and non-recurring items for operating performance insights - Adjusted EBITDA is a non-GAAP financial measure used by management and the Board to understand and evaluate operating performance, establish budgets, and develop operational goals[321] - Adjusted EBITDA is calculated as net loss, excluding depreciation, interest income (net), stock-based compensation expense, change in fair value of warrant liabilities, loss on Brookfield SAFE extinguishment, change in fair value of Brookfield SAFE and Loan liabilities, change in fair value of FPA Put Option liability and Fixed Maturity Consideration, change in fair value of Convertible Note, change in fair value of PIPE Warrant, and loss from equity method investees[321] - Adjusted EBITDA is not a substitute for GAAP measures and has limitations, as it excludes significant non-cash expenses and other items that may differ from those excluded by other companies[322] | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net Loss | $(32,499) | $(27,799) | $(51,728) | $(53,307) | | Depreciation | $1,054 | $1,458 | $1,835 | $2,988 | | Interest income, net | $(192) | $(513) | $(630) | $(1,661) | | Stock-based compensation expense and change in fair value of (1) Brookfield SAFE and warrant liabilities | $2,024 | $(3,344) | $1,372 | $(14,091) | | Loss on Brookfield SAFE extinguishment | $0 | $0 | $6,216 | $0 | | Change in fair value of the FPA Put Option and Fixed Maturity Consideration liabilities (net of interest accretion reversal) | $0 | $10,727 | $0 | $23,770 | | Change in fair value of Convertible Note | $(7,837) | $0 | $(42,980) | $0 | | Change in fair value of PIPE Warrant | $3,400 | $0 | $3,400 | $0 | | Change in fair value of Brookfield Loan | $1,019 | $0 | $12,445 | $0 | | Loss from equity method investees, net | $3,335 | $1,719 | $9,867 | $2,400 | | Adjusted EBITDA | $(29,696) | $(17,752) | $(60,203) | $(39,901) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk - This item is not applicable, indicating no quantitative and qualitative disclosures about market risk are provided[326] Item 4. Controls and Procedures Disclosure controls were ineffective due to material weaknesses in complex transactions and revenue recognition, though financial statements are fairly stated - As of June 30, 2025, disclosure controls and procedures were not effective due to material weaknesses related to accounting for complex transactions and estimates requiring significant judgment, and revenue recognition[328] - Notwithstanding the identified material weaknesses, management concluded that the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP[329](index=329&type=chun