LanzaTech (LNZA) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents LanzaTech Global, Inc.'s unaudited condensed consolidated financial information for Q1 2023 and Q1 2022 ITEM 1. FINANCIAL STATEMENTS This section presents LanzaTech Global, Inc.'s unaudited condensed consolidated financial statements and related notes for Q1 2023 and Q1 2022 Condensed Consolidated Balance Sheets This section provides a snapshot of LanzaTech's financial position, detailing assets, liabilities, and shareholders' equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Unaudited, in thousands): | Item | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $145,118 | $83,045 | | Debt security investments | $49,103 | — | | Total current assets | $240,647 | $123,897 | | Total assets | $307,957 | $176,856 | | Liabilities | | | | Total current liabilities | $34,077 | $55,981 | | Total liabilities | $78,145 | $124,947 | | Shareholders' Equity (Deficit) | | | | Total shareholders' equity (deficit) | $229,812 | $(428,722) | | Accumulated deficit | $(761,086) | $(456,245) | - Total assets increased by $131.1 million (74%) from December 31, 2022, to March 31, 2023, primarily due to a significant increase in cash and cash equivalents and the introduction of debt security investments[13] - Total liabilities decreased by $46.8 million (37.5%) from December 31, 2022, to March 31, 2023, largely due to the conversion of AM SAFE liability and redeemable convertible preferred stock[13] Condensed Consolidated Statements of Operations and Comprehensive Loss This section outlines LanzaTech's financial performance, including revenue, expenses, and net loss for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited, in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenue | $9,646 | $7,857 | | Total cost and operating expenses | $(42,168) | $(24,327) | | Loss from operations | $(32,522) | $(16,470) | | Total other expense, net | $(30,182) | $(26) | | Net loss | $(63,312) | $(16,778) | | Net loss per common share - basic and diluted | $(0.58) | $(2.85) | | Weighted-average number of common shares outstanding | 116,530,963 | 9,219,499 | - Total revenue increased by $1.8 million (23%) year-over-year[15] - Net loss significantly widened to $(63.3) million in Q1 2023 from $(16.8) million in Q1 2022, primarily due to a substantial increase in 'Total other expense, net' related to the Forward Purchase Agreement and fair value adjustments[15][199] - Despite the increased net loss, net loss per common share decreased from $(2.85) to $(0.58) due to a significant increase in the weighted-average number of common shares outstanding following the Business Combination[15][83] Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Shareholders' Equity/Deficit This section details changes in LanzaTech's preferred stock and shareholders' equity/deficit, reflecting the impact of the Business Combination and net loss - The Business Combination on February 8, 2023, led to the conversion of all 129,148,393 outstanding redeemable convertible preferred shares into common stock, eliminating the preferred stock balance[17][155] - Additional paid-in capital increased significantly from $24.8 million at December 31, 2022, to $988.2 million at March 31, 2023, primarily due to the recapitalization from the Business Combination and PIPE financing[17][80] - Accumulated deficit increased from $(456.2) million to $(761.1) million, reflecting the net loss for the period and the in-kind payment of preferred dividends[17][155] Condensed Consolidated Statements of Cash Flows This section presents LanzaTech's cash inflows and outflows from operating, investing, and financing activities for Q1 2023 and Q1 2022 Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands): | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(33,810) | $(18,118) | | Net cash used in investing activities | $(110,566) | $(1,891) | | Net cash provided by financing activities | $206,477 | $7 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $62,101 | $(20,002) | | Cash, cash equivalents and restricted cash at end of period | $145,786 | $108,627 | - Net cash used in operating activities increased by 87% to $(33.8) million in Q1 2023, primarily due to a higher net loss, partially offset by non-cash adjustments[217] - Net cash used in investing activities significantly increased to $(110.6) million in Q1 2023, driven by investments in debt securities ($49.1 million) and the Forward Purchase Agreement prepayment ($60.1 million)[219] - Net cash provided by financing activities was $206.5 million in Q1 2023, mainly from the Business Combination and PIPE financing proceeds ($213.4 million), partially offset by equity instrument repurchases[220] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations of LanzaTech's accounting policies, financial instruments, and significant transactions impacting the financial statements Note 1 — Description of the Business LanzaTech Global, Inc. completed its business combination on February 8, 2023, and converts waste carbon into sustainable fuels and chemicals - LanzaTech Global, Inc. completed its business combination with Legacy LanzaTech on February 8, 2023, becoming the reporting entity[24] - The company utilizes proprietary gas fermentation technology to transform waste carbon into sustainable fuels and chemicals[25] - As of March 31, 2023, LanzaTech's partners operate three commercial-scale waste-to-gas ethanol plants in China, an increase from two plants as of March 31, 2022[25] Note 2 — Summary of Significant Accounting Policies This note details LanzaTech's significant accounting policies, including reverse recapitalization, VIEs, and revenue recognition methods - The Business Combination was accounted for as a reverse recapitalization, with Legacy LanzaTech identified as the accounting acquirer[28][29] - The company operates as a single operating segment, with most service offerings delivered and supported globally[39][40] - Revenue is primarily earned from Biorefining (feasibility studies, engineering, licensing, biocatalyst sales), Joint Development and Contract Research, and CarbonSmart product sales[58] Note 3 — Reverse Recapitalization This note explains the Business Combination as a reverse recapitalization, impacting common shares and additional paid-in capital - The Business Combination on February 8, 2023, was treated as a reverse recapitalization, with Legacy LanzaTech as the accounting acquirer[76] - Immediately after the Business Combination, 196,222,737 shares of common stock were outstanding[75] Reconciliation of Business Combination and PIPE Financing to Additional Paid-in Capital (in thousands): | Item | Amount | | :------------------------------------------------ | :----- | | Cash - AMCI trust account | $64,090 | | Public Warrants and Private Placement Warrants recorded | $(4,624) | | Cash - PIPE financing | $155,000 | | Conversion of the AM SAFE | $29,730 | | Transaction costs allocated to equity | $(7,223) | | 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 This note details net loss per common share, which improved to $(0.58) in Q1 2023 due to increased shares outstanding Net Loss Per Common Share (Unaudited, in thousands, except per share amounts): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss allocated to common shareholders | $(67,429) | $(26,301) | | Weighted-average shares outstanding | 116,530,963 | 9,219,499 | | Net loss per common share - basic and diluted | $(0.58) | $(2.85) | - Potential common shares, including options, warrants, and the Brookfield SAFE, were excluded from diluted EPS calculation due to their anti-dilutive effect in periods of net loss[84][86] - The preferred shares automatically converted into common shares upon the Business Combination at a 1:1 ratio, and cumulative accrued dividends were paid in-kind, resulting in an additional 24,152,942 common shares[84] Note 5 — Revenues Total revenue increased by 23% to $9.6 million in Q1 2023, driven by engineering and joint development services Disaggregated Revenue by Contract Type (Unaudited, in thousands): | Contract Type | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Biorefining: carbon capture and transformation revenue | $6,354 | $4,848 | | Joint development and Contract research revenue | $3,292 | $2,269 | | CarbonSmart (tangible product) | — | $740 | | Total Revenue | $9,646 | $7,857 | Disaggregated Revenue by Customer Location (Unaudited, in thousands): | Region | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | North America | $4,232 | $4,039 | | Europe, Middle East, Africa (EMEA) | $4,711 | $2,823 | | Asia | $50 | $410 | | Australia | $653 | $585 | | Total Revenue | $9,646 | $7,857 | - Contract assets increased to $18.5 million (from $18.0 million) due to unbilled accounts receivable from engineering and other services, while contract liabilities decreased to $3.0 million (from $3.1 million) due to revenue recognition from advance payments[89] Note 6 — Investments This note details LanzaTech's investments, including U.S. Treasury debt securities and equity stakes in LanzaJet and SGLT - Held-to-maturity debt securities, consisting of U.S. Treasury securities, totaled $49.1 million as of March 31, 2023, with all maturing within one year[93] Equity Investments (Unaudited, in thousands): | Investment | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Equity Method Investment in LanzaJet | $9,835 | $10,561 | | Equity Security Investment in SGLT | $14,990 | $14,990 | | Total Investment | $24,825 | $25,551 | - The company accounts for its 25% interest in LanzaJet using the equity method, recognizing revenue from licensing and technical support services[96][97] Note 7 — AM SAFE This note explains the AM SAFE liability's conversion into 3 million common shares on February 8, 2023, at $29.7 million fair value - The AM SAFE liability converted into 3,000,000 shares of common stock on the Business Combination Closing Date (February 8, 2023)[104] - The fair value of the AM SAFE was $29.730 million at conversion, up from $28.986 million as of December 31, 2022[104] Note 8 — Warrants This note details the accounting and fair value changes for various warrants, including preferred, AM SAFE, Shortfall, Public, and Private Placement - Warrants on preferred shares were cashless-exercised on February 8, 2023, for 594,309 preferred shares, which then converted to common stock[106] - The AM SAFE warrant was reclassified from a liability to additional paid-in capital on the Closing Date (February 8, 2023) as it became exercisable for a fixed number of 300,000 common shares at $10.00 per share[108] - Shortfall Warrants (4,083,486 warrants) were issued on March 27, 2023, as derivative liabilities with a fair value of $5.104 million, but were reclassified to equity on May 13, 2023[109][110] Note 9 — Forward Purchase Agreement This note describes the Forward Purchase Agreement, comprising a prepaid forward contract and Fixed Maturity Consideration, valued at $16.0 million and $7.0 million respectively - The FPA, entered on February 3, 2023, involves a prepayment of $60.096 million for 5,916,514 common shares[53][116] - The FPA is comprised of a prepaid forward contract (derivative asset) and Fixed Maturity Consideration (debt instrument)[56][57] Fair Value of Prepaid Forward Contract (in thousands): | Item | March 31, 2023 | | :------------------------------------ | :------------- | | Prepayment Amount | $60,096 | | Less: Value of derivative and Variable Maturity Consideration | $(44,142) | | Fair value of prepaid forward contract | $15,954 | Fixed Maturity Consideration: $6,967 (as of March 31, 2023) Note 10 — Fair Value This note outlines the fair value hierarchy for assets and liabilities, detailing Level 3 valuations for key financial instruments Fair Value Measurement as of March 31, 2023 (in thousands): | Item | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :------ | :------ | :------ | :------ | | Assets: | | | | | | Cash equivalents | $31,397 | $— | $— | $31,397 | | Prepaid forward contract | $— | $— | $15,954 | $15,954 | | Total assets | $31,397 | $— | $15,954 | $47,351 | | Liabilities: | | | | | | Fixed Maturity Consideration | $— | $— | $6,967 | $6,967 | | Shortfall Warrants | $— | $— | $5,104 | $5,104 | | Brookfield SAFE liability | $— | $— | $19,400 | $19,400 | | Private placement warrants | $— | $— | $2,626 | $2,626 | | Public warrants | $2,189 | $— | $— | $2,189 | | Total liabilities | $2,189 | $— | $34,097 | $36,286 | - The fair value of the FPA (prepaid forward contract and Fixed Maturity Consideration) was estimated using a Monte-Carlo Simulation, with a stock price of $3.88 and expected volatility of 55.0% as of March 31, 2023[120][121] - The Brookfield SAFE liability, a Level 3 liability, was valued at $19.4 million as of March 31, 2023, based on the expectation of conversion into shares at the liquidity price[129][130] Note 11 — Income Taxes This note explains the 0% effective tax rate due to a full valuation allowance against deferred tax assets - Income tax expense was $0 for both Q1 2023 and Q1 2022, resulting in a 0% effective tax rate[136] - The 0% effective tax rate is primarily due to a full valuation allowance against the company's U.S. and foreign deferred tax assets[137] Note 12 — Share-Based Compensation This note details share-based compensation expense of $3.5 million in Q1 2023, including stock options and RSA vesting - Total share-based compensation expense was $3.505 million for Q1 2023, compared to $738 thousand for Q1 2022[22] - Stock option compensation expense was $764 thousand for Q1 2023, with $4.321 million in unrecognized costs to be expensed over a weighted average of 2.37 years[141] - The vesting of Restricted Stock Awards (RSAs) due to the Business Combination resulted in a compensation expense of $2.741 million in Q1 2023[144] Note 13 — Related Party Transactions This note outlines related party transactions, primarily with LanzaJet and SGLT, including revenue and future note purchases Related Party Transactions (Unaudited, in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenues | $973 | $654 | | Accounts receivable (as of period end) | $626 | $1,821 | | Purchases and open accounts payable (as of period end) | $3,048 | $3,195 | - The company recognized $338 thousand in revenue from LanzaJet for engineering and other services in Q1 2023, a significant increase from $23 thousand in Q1 2022[148] - LanzaTech committed to purchase $5.5 million of Subordinated Secured Notes from LanzaJet Freedom Pines Fuels LLC, with funding occurring on May 1, 2023[149][160] Note 14 — Redeemable, Convertible Preferred Stock This note details the conversion of all preferred stock into common shares on the Business Combination Closing Date, including in-kind dividend payments - All 129,148,393 shares of redeemable convertible preferred stock were converted into common shares on a 1:1 basis on the Business Combination Closing Date[155] - Cumulative dividends totaling $241.529 million were declared and paid in-kind, resulting in the issuance of an additional 24,152,942 common shares[155] Redeemable, Convertible Preferred Stock as of December 31, 2022 (in thousands, except share and per share amounts): | Series | Shares Issued and Outstanding | Carrying Amount | | :------- | :---------------------------- | :-------------- | | Series A | 20,414,445 | $12,230 | | Series B | 7,582,934 | $18,000 | | Series C | 18,121,698 | $60,850 | | Series D | 44,452,681 | $188,402 | | Series E | 22,678,139 | $118,076 | | Series F | 15,898,496 | $83,073 | | Total | 129,148,393 | $480,631 | Note 15 — Commitments and Contingencies This note covers commitments, including a new real estate lease and a note purchase agreement, with no material litigation losses - No reasonably possible or probable losses from legal proceedings as of March 31, 2023[158] - Entered into a new real estate lease for headquarters expansion in Skokie, Illinois, commencing May 1, 2024[159] - Expected total lease payments for the new headquarters are $3.287 million for 2024, 2025, and 2026[159] Note 16 — Subsequent Events This note details subsequent events, including a $5.5 million note purchase and the reclassification of Shortfall Warrants to equity - On May 1, 2023, the company purchased $5.5 million in Subordinated Secured Notes as part of the LanzaJet Note Purchase Agreement[160] - On May 13, 2023, the Shortfall Warrant agreement was amended, leading to the reclassification of these warrants to equity, to be reflected in the period ended June 30, 2023[161] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses LanzaTech's financial condition and operational results for Q1 2023, highlighting the Business Combination's impact and key metrics Overview This section provides an overview of LanzaTech's business as a carbon refining company and its historical operating profitability - LanzaTech is a nature-based carbon refining company that converts waste carbon into sustainable fuels and chemicals using proprietary gas fermentation technology[164] - The company primarily employs a licensing business model, earning royalty fees based on revenue generated from customers using its technology[165] - LanzaTech has not achieved operating profitability since its formation, reporting net losses of $(63.3) million for Q1 2023 and $(16.8) million for Q1 2022, with an accumulated deficit of $(761.1) million as of March 31, 2023[166] The Business Combination This section details the merger of AMCI Acquisition Corp. II with LanzaTech NZ, Inc. on February 8, 2023 - On February 8, 2023, AMCI Acquisition Corp. II completed its merger with LanzaTech NZ, Inc., with LanzaTech NZ, Inc. surviving as a wholly-owned subsidiary and the combined company renamed 'LanzaTech Global, Inc.'[167] Accounting Impact of the Business Combination This section explains the Business Combination's accounting as a reverse recapitalization, with Legacy LanzaTech as the accounting acquirer - The Business Combination was accounted for as a reverse recapitalization, with LanzaTech NZ, Inc. deemed the accounting acquirer and its financial statements continuing as the historical financial statements of the Company[168][169] - AMCI's net assets were recognized at carrying value, with no goodwill or other intangible assets recorded[169] Basis of Presentation This section states that LanzaTech's condensed consolidated financial statements are prepared in accordance with US GAAP - LanzaTech's condensed consolidated financial statements are prepared in accordance with US GAAP[170] Key Operational and Business Metrics This section presents key financial and non-financial metrics, including revenue, net loss, and cumulative capacity additions Key Financial Metrics (Unaudited, in thousands, except percentages): | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (2023 vs. 2022) | Percentage Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------------------- | :---------------- | | Revenue | $9,646 | $7,857 | $1,789 | 23 % | | Net Loss | $(63,312) | $(16,778) | $(46,534) | 277 % | | One-Time Revenue | $8,889 | $6,957 | $1,932 | 28 % | | Recurring Revenue | $757 | $900 | $(143) | (16) % | | Cost of Revenues (ex. Depreciation) | $(7,790) | $(5,829) | $(1,961) | 34 % | | Selling, general & administrative | $(16,835) | $(5,078) | $(11,757) | 232 % | | Adjusted EBITDA | $(27,575) | $(14,759) | $(12,816) | 87 % | Key Non-Financial Metrics (in thousands of tonnes per annum): | Metric | As of March 31, 2023 | As of March 31, 2022 | Change (2023 vs. 2022) | Percentage Change | | :-------------------------- | :------------------- | :------------------- | :--------------------- | :---------------- | | New Capacity Additions | 60 | 0 | 60 | N/M | | Cumulative Capacity Additions | 150 | 90 | 60 | 67 % | - Installed capacity, including equity and cost method investees and customers, is a key driver for licensing revenues[175] Components of Operating Results This section breaks down LanzaTech's operating results, analyzing revenue, cost of revenues, and various expense categories Revenue Revenue is generated from biorefining, joint development, and CarbonSmart product sales, with recognition varying by contract type - Revenue streams include Biorefining (feasibility studies, engineering, licensing, equipment/microbe sales), Joint Development and Contract Research, and CarbonSmart product sales[177][178][179][180][182] - Licensing revenue, a recurring component, is recognized when customers deploy carbon capture and transformation plants, based on fixed consideration or royalties[179] Cost of Revenues Cost of revenues includes direct service costs for R&D, engineering, and customer agreements, covering materials, labor, and benefits - Costs of revenues include internal and third-party fixed and variable costs such as materials, supplies, labor, and fringe benefits, associated with R&D, engineering, and direct services[183] Research and Development Expenses R&D expenses cover personnel, materials, and laboratory activities, with substantial increases expected for technology scaling and new products - R&D expenses consist of personnel costs, consultants, materials, supplies for internal projects, and laboratory activities, including indirect overhead[184] - The company expects R&D activities and associated expenses to increase substantially with technology scaling and new product development[184] Selling, General and Administrative Expenses SG&A expenses include personnel, business development, and public company operating costs, with expected increases due to growth and compliance - SG&A expenses include personnel costs, business development, travel, and indirect overhead[185] - Expected increases in SG&A are driven by expanding sales, commercial capabilities, brand awareness, and public company operating costs (compliance, legal, audit, investor relations, IP protection)[186] Other Expense, Net Other expense, net, includes mark-to-market adjustments for warrants, derivatives, and SAFE liabilities, with expected increased interest income - Other expense, net, includes mark-to-market adjustments on liability-classified warrants, the prepaid forward contract derivative, Fixed Maturity Consideration, and SAFE liabilities[187] - Interest income is expected to increase after the Business Combination due to investments in capital preservation financial instruments[187] Gain from Equity Investees, Net This section details equity investments in LanzaJet (equity method) and SGLT (cost method), both classified as VIEs - LanzaTech holds non-controlling equity interests in LanzaJet and SGLT, both determined to be VIEs where the company is not the primary beneficiary[188] - The investment in LanzaJet is accounted for under the equity method due to significant influence[189] - As of September 30, 2022, the investment in SGLT is accounted for at cost (with adjustments for observable changes) due to a loss of significant influence[190] Income Tax Expense (Benefit) Income tax expense is zero due to a full valuation allowance against deferred tax assets, as future taxable income is not probable - Deferred tax assets are recognized only to the extent that future taxable income is probable[192] - A full valuation allowance is maintained against the net deferred tax assets, as management believes recoverability is not more likely than not[193] Results of Operations — Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 This section provides a comparative analysis of LanzaTech's operational results for Q1 2023 versus Q1 2022, detailing revenue, expenses, and net loss changes Consolidated Results of Operations (Unaudited, in thousands, except per share amounts): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (2023 vs. 2022) | Percentage Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------------------- | :---------------- | | Total revenue | $9,646 | $7,857 | $1,789 | 23 % | | Cost of revenues | $(7,790) | $(5,829) | $(1,961) | 34 % | | Gross Profit | $1,856 | $2,028 | $(172) | (8)% | | Research and development | $(16,286) | $(12,361) | $(3,925) | 32 % | | Depreciation expense | $(1,257) | $(1,059) | $(198) | 19 % | | Selling, general and administrative expense | $(16,835) | $(5,078) | $(11,757) | 232 % | | Loss from operations | $(32,522) | $(16,470) | $(16,052) | 97 % | | Total other expense, net | $(30,182) | $(26) | $(30,156) | N/M | | Net loss | $(63,312) | $(16,778) | $(46,534) | 277 % | | Net loss per share - basic and diluted | $(0.58) | $(2.85) | | | - Total revenue increased by $1.8 million (23%) due to higher engineering and other services revenue ($1.5 million) and joint development agreements ($1.0 million), partially offset by a decrease in CarbonSmart product sales ($(0.7) million)[195] - Cost of revenue increased by $2.0 million (34%), outpacing revenue growth, primarily due to increased customer projects and a shift in sales mix for engineering and other services[196] - SG&A expense surged by $11.8 million (232%), mainly driven by one-time professional services fees and employee transition arrangements related to the Business Combination, as well as increased personnel costs and an allowance for a customer receivable[198] Liquidity and Capital Resources This section discusses LanzaTech's liquidity and capital resources, including cash, debt investments, and funding sources post-Business Combination Cash and Cash Equivalents Cash, cash equivalents, and restricted cash increased by $62.1 million to $145.8 million in Q1 2023, driven by Business Combination proceeds Cash, Cash Equivalents, and Restricted Cash (Unaudited, in thousands): | Item | March 31, 2023 | December 31, 2022 | Change (2023 vs. 2022) | Percentage Change | | :------------------------------------ | :------------- | :---------------- | :--------------------- | :---------------- | | Total cash, cash equivalents, and restricted cash | $145,786 | $83,710 | $62,076 | 74 % | - The increase in cash was primarily driven by the closing of the Business Combination and PIPE financing, which provided $153.3 million in cash proceeds[201][212] Debt Security Investments LanzaTech held $49.1 million in short-term U.S. Treasury debt securities as of March 31, 2023, enhancing liquidity - Debt security investments, consisting of held-to-maturity U.S. Treasury securities, totaled $49.1 million as of March 31, 2023[202] - All debt securities mature within twelve months, providing additional liquidity[202] Sources and Uses of Capital This section details LanzaTech's capital structure, including $153.3 million from the Business Combination and future commitments - The company's capital structure as of March 31, 2023, consists of equity and the Brookfield SAFE[205] - The Business Combination and PIPE financing provided $153.3 million in cash proceeds to LanzaTech[212] - Obligations under the Forward Purchase Agreement include potential future payments of Maturity Consideration and Share Consideration, totaling $5.1 million, which could pose financial exposure[210][211] Cash Flows Cash flows show $(33.8) million used in operations, $(110.6) million in investing, and $206.5 million provided by financing in Q1 2023 Summary of Cash Flows (Unaudited, in thousands): | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (2023 vs. 2022) | Percentage Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------------------- | :---------------- | | Operating activities | $(33,810) | $(18,118) | $(15,692) | 87 % | | Investing activities | $(110,566) | $(1,891) | $(108,675) | 5,747 % | | Financing activities | $206,477 | $7 | $206,470 | N/M | - Net cash used in operating activities increased by 87% to $(33.8) million, primarily due to a higher net loss[217] - Investing activities saw a substantial increase in cash usage, primarily due to $49.1 million in debt security investments and a $60.1 million prepayment for the Forward Purchase Agreement[219] Off-Balance Sheet Arrangements LanzaTech had no off-balance sheet arrangements as of March 31, 2023, or December 31, 2022 - The company did not engage in any off-balance sheet arrangements as of March 31, 2023, and December 31, 2022[222] Critical Accounting Policies and Management Estimates This section outlines LanzaTech's critical accounting policies and management estimates, including the valuation of the Forward Purchase Agreement Forward Purchase Agreement Valuation This section details the valuation of the FPA's prepaid forward contract and Fixed Maturity Consideration using a Monte-Carlo Simulation - The prepaid forward contract within the FPA is classified as a derivative asset and valued using a Monte-Carlo Simulation[224] - The Share Consideration and Minimum Maturity Consideration are accounted for as debt-like instruments (Fixed Maturity Consideration) under the Fair Value Option (ASC 825) and valued within the same Monte-Carlo simulation[225] Emerging Growth Company Status LanzaTech maintains its 'emerging growth company' status, utilizing extended transition periods for accounting standards until 2026 or threshold changes - LanzaTech is an 'emerging growth company' and has elected to use the extended transition period for new or revised financial accounting standards[226] - This status allows for reduced compliance requirements but may impact comparability with other public companies[226] - The company will remain an emerging growth company until the earliest of reaching $700 million market value, $1.235 billion annual revenue, issuing over $1 billion in non-convertible debt, or December 31, 2026[227] Implications of being a Smaller Reporting Company LanzaTech's 'smaller reporting company' status allows reduced disclosure obligations, including two years of audited financial statements - LanzaTech is a 'smaller reporting company,' which allows for reduced disclosure obligations, including providing only two years of audited financial statements[228] - This status will be maintained until the market value of common stock held by non-affiliates exceeds $250 million, or annual revenues exceed $100 million and market value exceeds $700 million[228] Recently Issued and Adopted Accounting Standards No recently adopted or issued accounting pronouncements are expected to materially impact LanzaTech's financial statements - No recently adopted or issued accounting pronouncements are expected to have a material impact on the company[73][229] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, specifically Adjusted EBITDA, to provide additional insight into operating performance - Adjusted EBITDA is presented as a non-GAAP financial measure to supplement US GAAP financial statements and provide additional insight into operating performance[230][231] - Adjusted EBITDA is calculated as net loss, excluding depreciation, interest income (expense), stock-based compensation, changes in fair value of warrant and SAFE liabilities, changes in fair value of the prepaid forward contract derivative and Fixed Maturity Consideration, transaction costs on FPA issuance, and loss/(gain) from equity method investees[174][231] Reconciliation of Net Loss to Adjusted EBITDA (Unaudited, in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net Loss | $(63,312) | $(16,778) | | Depreciation | $1,257 | $1,059 | | Interest income | $(214) | $— | | Stock-based compensation expense and change in fair value of SAFE and warrant liabilities | $(17,474) | $678 | | Change in fair value of the prepaid forward contract derivative and Fixed Maturity Consideration | $51,109 | $— | | Transaction costs on issuance of Forward Purchase Agreement | $451 | $— | | Loss from equity method investees, net | $608 | $282 | | Adjusted EBITDA | $(27,575) | $(14,759) | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK LanzaTech faces market risks from interest rate fluctuations and foreign currency, with no material impact from inflation in Q1 2023 - Primary market risk exposure is interest rate sensitivity, particularly from short-term U.S. Treasury and government obligations[237] - A 100 basis point change in market interest rates would not materially impact the fair market value of cash and cash equivalents or financial results[237] - Foreign currency translation adjustments resulted in losses of $(0.05) million in Q1 2023 and $(0.03) million in Q1 2022[238] ITEM 4. CONTROLS AND PROCEDURES Management concluded LanzaTech's disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[242] - Controls and procedures provide only reasonable assurance of achieving objectives and do not prevent all errors or fraud due to inherent limitations and resource constraints[241] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[243] PART II - OTHER INFORMATION This section provides additional information beyond the financial statements, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS LanzaTech does not anticipate any material adverse impact from pending legal proceedings on its financial position or operations - The company does not believe the outcome of any pending legal proceedings will have a material adverse impact on its consolidated financial position, results of operations, or cash flows[245] ITEM 1A. RISK FACTORS No material changes or updates to the risk factors previously discussed in the Annual Report on Form 10-K for Q1 2023 - No material changes or updates to the risk factors discussed in the Annual Report on Form 10-K for the three months ended March 31, 2023[246] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No unregistered sales of equity securities occurred during the period, other than those previously reported on Form 8-K - No unregistered sales of equity securities occurred during the period, other than those previously reported on Form 8-K[247] ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities[248] ITEM 4. MINE SAFETY DISCLOSURES No mine safety disclosures are required or reported - No mine safety disclosures[249] ITEM 5. OTHER INFORMATION No other information is reported in this section - No other information to report[250] ITEM 6. EXHIBITS This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL documents Key Exhibits Filed: | Exhibit | Description | | :------ | :---------- | | 31.1* | Certification of Principal Executive Officer | | 31.2* | Certification of Principal Financial Officer | | 32.1*+ | Certification of Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101.INS | XBRL Instance Document | | 104 | Cover Page Inline XBRL File | SIGNATURES The Form 10-Q was signed by LanzaTech's CEO and CFO on May 15, 2023 - The Form 10-Q was signed by Jennifer Holmgren, Ph.D., CEO and Director, and Geoff Trukenbrod, CFO, on May 15, 2023[256]