# LanzaTech Global, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [LanzaTech Global, Inc.](/companies/lnza.md) (CIK 1843724)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 9, 2023, 23:48 ET
- Period: 2023-09-30
- Accession: 0001628280-23-038368
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1843724/000162828023038368/lnza-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1843724/000162828023038368/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $19.6m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $42.2m | us-gaap:Revenues |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $16.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $51.8m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $11.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $41.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$24.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$87.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$25.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$115.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.70 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.70 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 195,869,537 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 169,797,443 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$81.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $7.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $91.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $177.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $246.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $33.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $117.9m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $23.4m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | $128.5m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2023-09-30 | 196,055,228 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 61,243 characters.

*The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes included in the Company’s Form 8-K/A filed with the Securities and Exchange Commission on March 28, 2023. This discussion and analysis may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions, including, but not limited to, risks and uncertainties discussed under the heading ‘Cautionary Note on Forward-Looking Statements,’ in this Quarterly Report and in Part I, Item 1A “Risk Factors” included in our 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.*

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

LanzaTech performs research and development (“R&D”) services related to novel technologies and development of biocatalysts for commercial applications, mainly to produce fuels and chemicals. We primarily employ a licensing business model whereby our customers build, own and operate facilities that use our technology, and in return, we are paid a royalty fee based on the revenue generated from the use of our technology. We began operations in 2005. In 2018, through our joint venture in China (SGLT), we established the world’s first commercial waste gas-to-ethanol plant in China, followed by four more plants between 2021 and 2023 - three in China and one in India, with others currently in development in various countries around the world.

We have not achieved operating profitability since our formation. Our net losses after tax were $(25.3) million for the three months ended September 30, 2023 and $(22.3) million for the three months ended September 30, 2022. As of September 30, 2023 we had an accumulated deficit of $(813.2) million compared to an accumulated deficit of $(456.2) million as of December 31, 2022. We anticipate that we will continue to incur losses until we sufficiently commercialize our technology.

Near-term, we expect engineering services and sales of equipment packages on several key committed and contracted projects to drive higher revenues, along with our CarbonSmart business, which we expect to further improve on our 2022 performance, fueled by planned commercial campaigns from brand partners across many consumer product verticals. This increase in CarbonSmart revenue is also enabled by more plants coming online and LanzaTech securing offtake supply to place into our customers’ and partners’ CarbonSmart supply chains.

### The Business Combination

On March 8, 2022, AMCI entered into the Merger Agreement with LanzaTech NZ, Inc. and AMCI Merger Sub, Inc. (“Merger Sub”). On February 8, 2023, Merger Sub merged with and into LanzaTech NZ, Inc. Upon consummation of the Business Combination, the separate corporate existence of Merger Sub ceased, and LanzaTech NZ, Inc. survived the Business Combination and became a wholly owned subsidiary of AMCI. In connection with the consummation of the Business Combination, the combined company was renamed “LanzaTech Global, Inc.”.

### Accounting Impact of the Business Combination

The Business Combination was accounted for as a reverse recapitalization. LanzaTech NZ, Inc. was deemed the accounting predecessor and the Company is the successor SEC registrant.

Under this method of accounting, AMCI was treated as the acquired company for financial statement reporting purposes. For accounting purposes, LanzaTech NZ, Inc. was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of LanzaTech NZ, Inc. (i.e., a capital transaction involving the issuance of stock by AMCI for the stock of LanzaTech NZ, Inc.). Accordingly, the consolidated balance sheets and results of operations of LanzaTech NZ, Inc. became the historical financial statements of the Company, and AMCI’s assets, liabilities and results of operations were consolidated with LanzaTech NZ Inc.’s beginning on the acquisition date. The net assets of AMCI were recognized at carrying value, with no goodwill or other intangible assets recorded.

### Basis of Presentation

LanzaTech’s condensed consolidated financial statements were prepared in accordance with US GAAP. See Note 2 to our condensed consolidated financial statements for a full description of our basis of presentation.

Prior to filing our third quarter financial statements on Form 10-Q, we determined that our prior interpretation of the accounting guidance applicable to certain elements of the Forward Purchase Agreement (“FPA”) was incorrect. As a result, we have revised the accounting treatment of the FPA in our financial statements as of September 30, 2023 to reclassify the Prepayment Amount of $60.5 million, previously recorded as part of a net non-current derivative asset in the condensed consolidated balance sheet, to the equity section of the condensed consolidated balance sheet. The remaining liability balance of $38.1 million associated with the FPA, including the Minimum Maturity Consideration and the Share Consideration, are now reflected as non-current liabilities in our condensed consolidated balance sheet.

The change in accounting for the FPA did not have any impact on our liquidity, cash flows or results of operations for the third quarter. We intend to restate our financial statements for the quarters ended March 31, 2023 and June 30, 2023 to be consistent with this accounting treatment.

### Key Operational and Business Metrics

In addition to the measures presented in our condensed consolidated financial statements, we review the following key business metrics to measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions that will impact the future operational results of LanzaTech. Increases or decreases in our key business metrics may not correspond with increases or decreases in our revenue.

### Key Financial Metrics:

The key elements of LanzaTech’s performance for the three months ended September 30, 2023 and September 30, 2022 are summarized in the tables below:

*(In thousands, except for percentages)*

| GAAP Measures: | Three Months Ended September 30, 2023 | 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $19,605 | $8,072 | $11,533 | 143% |
| Net Loss | (25,326) | (22,267) | (3,059) | 14% |
| **Key Performance Indicators:** |  |  |  |  |
| One-Time Revenue | 18,075 | 7,334 | 10,741 | 146% |
| Recurring Revenue (1) | 1,530 | 738 | 792 | 107% |
| Total Revenue | $19,605 | $8,072 | $11,533 | 143% |
| Cost of Revenues (ex. Depreciation) (2) | (14,371) | (5,975) | (8,396) | 141% |
| Selling, general & administrative | (11,808) | (7,258) | (4,550) | 63% |
| Adjusted EBITDA (3) | $(19,062) | $(19,508) | 446 | (2)% |

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

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

(3) Adjusted EBITDA, a non-GAAP financial measure, is calculated as net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the prepaid forward contract derivative and Fixed Maturity Consideration, transaction costs on issuance of Forward Purchase Agreement, (loss) gain from equity method investees, net, and other one-time costs related to the Business Combination and initial securities registration. Adjusted EBITDA is a supplemental measure that is not a substitute for, or superior to, measures of financial performance prepared in accordance with US GAAP. Adjusted EBITDA does not represent, and should not be considered, an alternative to net income (loss), as determined in accordance with US GAAP. See “*Non-GAAP Financial Measures”* for additional information and reconciliation of Adjusted EBITDA to net loss, its most directly comparable US GAAP measure.

### Key Financial Metrics:

The key elements of LanzaTech’s performance for the nine months ended September 30, 2023 and September 30, 2022 are summarized in the tables below:

*(In thousands, except for percentages)*

| GAAP Measures: | Nine Months Ended September 30, 2023 | 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | 42,168 | 25,781 | $16,387 | 64% |
| Net Loss | $(115,424) | $(54,974) | (60,450) | 110% |
| **Key Performance Indicators:** |  |  |  |  |
| One-Time Revenue | 38,406 | 23,273 | 15,133 | 65% |
| Recurring Revenue (1) | 3,762 | 2,508 | 1,254 | 50% |
| Total Revenue | 42,168 | 25,781 | $16,387 | 64% |
| Cost of Revenues (ex. Depreciation) (2) | (32,988) | (19,231) | (13,757) | 72% |
| Selling, general & administrative | (41,095) | (19,482) | (21,613) | 111% |
| Adjusted EBITDA (3) | $(66,398) | $(52,153) | (14,245) | 27% |

40

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

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

(3) Adjusted EBITDA, a non-GAAP financial measure, is calculated as net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, transaction costs on issuance of Forward Purchase Agreement, (loss) gain from equity method investees, net, and other one-time costs related to the Business Combination and initial securities registration. Adjusted EBITDA is a supplemental measure that is not a substitute for, or superior to, measures of financial performance prepared in accordance with US GAAP. Adjusted EBITDA does not represent, and should not be considered, an alternative to net income (loss), as determined in accordance with US GAAP. See “*Non-GAAP Financial Measures”* for additional information and reconciliation of Adjusted EBITDA to net loss, its most directly comparable US GAAP measure.

### Key Non-Financial Metrics:

*(in thousands of tonnes per annum)*

|  |  |
| --- | ---: |
| **Capacity as of September 30, 2022** | 150 |
| Additions | 94 |
| **Capacity as of September 30, 2023** | 244 |

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

### Components of Operating Results

While we have offerings in multiple market segments and operate in multiple countries, we operate and manage our business as one reportable operating segment. Nearly all of our service offerings are delivered and supported on a global basis. Additionally, most of our service offerings are deployed in a similar way, and we evaluate our financial information and resources and assess the performance of these resources on a consolidated basis.

### Revenues

We earn revenue through engineering and other services contracts, U.S. government contracts, joint development agreements, and licensing agreements, which, together, represent a single operating segment. Revenues can be viewed as a combination of the following:

- Biorefining which includes feasibility studies and engineering services related to basic design of commercial plants utilizing our technologies, and licensing of intellectual property and software when customers deploy our biorefining technology;
- Joint development and research services related to novel technologies and the development of biocatalysts; and
- Sale of CarbonSmart products to customers.

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

#### Biorefining

We provide feasibility studies and basic design and engineering services used for detailed design, procurement, and construction of commercial plants that utilize our technologies, along with the sale of equipment and microbes. The services provided are recognized as a performance obligation satisfied over time. Revenue is recognized using the output method based on milestone completion, the cost-to-cost input method for certain engineering services, or the percentage of completion method in accordance with Accounting Standards Codification (“ASC”) 606, *Revenue* *from Contracts with Customers (“*ASC 606”). Revenue for the sale of microbes and media is recognized at a point in time, depending on when control transfers to the customer.

We license intellectual property to generate recurring revenue in the case of running royalties, or one-time revenue, in the case of fixed consideration royalties, when our customers deploy our technology in their biorefining plants. When licenses are considered to be distinct performance obligations, the recognition of revenue is dependent on the terms of the contract, which may include fixed consideration or royalties based on sales or usage, in which case, the revenue is recognized when the subsequent sale or usage occurs or when the performance obligation to which some or all of the sales or usage-based royalty is allocated or has been satisfied, whichever is later.

#### Joint Development and Contract Research

We perform R&D services related to novel technologies and the development of biocatalysts for commercial applications, mainly to produce fuels and chemicals. We engage in two main types of R&D services – joint development agreements, and other contract research, including projects with the U.S. Department of Energy. Such services are recognized as a performance obligation satisfied over time. Revenue is recognized based on milestone completion, when payments are contingent upon the achievement of such milestones, or based on stage of contract or phase completion method when enforceable rights to payment exist. When no milestones or stages are clearly defined, management has determined that the cost incurred, input method, is an appropriate measure of progress toward complete satisfaction of the performance obligations under ASC 606 and estimates its variable consideration under the expected value method.

Revenue is not recognized in advance of customer acceptance of a milestone, when such acceptance is contractually required. Payments for R&D services with no contractual payments are not due from customers until a technical report is submitted; therefore, a contract asset is recognized at milestone completion but prior to the submission of a technical report. The contract asset represents the Company’s right to consideration for the services performed at milestone completion. Occasionally, customers provide payments in advance of us providing services which creates a contract liability for the Company. The contract liability represents our obligation to provide services to a customer.

#### CarbonSmart

We sell CarbonSmart products and intermediaries directly to customers purchased from our licensed plants using the Company's proprietary technologies. Revenue is recognized at a point in time when control transfers to the customer, which varies depending on the shipping terms. We generally acts as the principal in such transactions and accordingly, recognizes revenue and cost of revenues on a gross basis.

### Cost of Revenues

Our R&D costs associated with external projects, engineering, and other direct costs of services are related to revenue agreements with customers, related parties, and collaborative partners, and represent costs of revenue. Costs include both internal and third-party fixed and variable costs and include materials, supplies, labor, and fringe benefits.

### Research and Development Expenses

R&D expenses consist of personnel costs and the cost of consultants, materials and supplies associated with internal R&D projects as well as various laboratory activities. Indirect R&D costs include depreciation and other indirect overhead expenses. We expect our R&D activities to increase in the future as revenue grows but decrease as a percentage of our overall cost structure.

### Selling, General and Administrative Expenses

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

Our general and administrative expenses consist primarily of personnel costs for our executive, finance, corporate and other administrative functions, intellectual property and patent costs, facilities and other allocated expenses, other expenses for outside professional services, including legal, human resources, audit and accounting services, and insurance costs. We expect our general and administrative expenses to increase as a result of operating as a public company, including additional costs relating to compliance with the rules and regulations of the SEC and stock exchange rules, legal and audit services, additional insurance, investor relations activities, and other administrative and professional services. We also expect our intellectual property expenses to increase as we expand and increase protection of our intellectual property portfolio.

### Other Expense, Net

Other expense, net relates to miscellaneous other income and expense and foreign currency gains and losses. These items include the mark-to-market adjustments on all liability classified warrants, the FPA Put Option liability, the Fixed Maturity Consideration, and SAFE liabilities. Interest income, net consists of income earned from our cash, cash equivalents and debt security investments. Our interest income has increased following the completion of the Business Combination as we invested the net proceeds in a variety of capital preservation financial instruments, including short and long-term, investment-grade, interest-bearing obligations of the U.S. government and its agencies.

### Loss (Gain) from Equity Investees, Net

We hold interests in LanzaJet located in the United States, and the Shougang Joint Venture (also referred as “SGLT” herein) located in China which we have determined to be variable interest entities (“*VIEs”*) for which it has been determined we are not the primary beneficiary. Our variable interests primarily relate to entities in which we have a non-controlling equity interest. Although these financial arrangements resulted in holding variable interests in these entities, they do not empower us to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, therefore LanzaTech has determined it is not the primary beneficiary and does not currently consolidate these VIEs.

Through our holdings in LanzaJet, our representation on the board of directors and participation in the policy-making process, as well as the material intra-entity transactions, we have determined that we can exercise significant influence over the activities of LanzaJet. Our interest in LanzaJet is accounted for under the equity method of accounting, with income (loss) from equity method investees, net recognized in our consolidated statements of operations and comprehensive loss and equity method investments recognized on our consolidated balance sheets.

As of September 30, 2022, we no longer have significant influence over the activities of SGLT and as a result, our investment is accounted for at cost with adjustments for observable changes in price and impairment (if any) recognized in our consolidated statements of operations and comprehensive loss. Previously to September 30, 2022, we accounted for SGLT under the equity method of accounting, with income (loss) from equity method investees, net, including gain on dilution recognized in our consolidated statements of operations and comprehensive loss and equity method investments recognized on our consolidated balance sheet.

The Company currently has a license agreement with SGLT and a letter agreement with SGLT and Sinopec Capital Co., Ltd related to the use of our intellectual property and potential collaborations. These agreements do not provide LanzaTech with the power to direct the activities that are most significant to the economic performance of these entities.

### Income Tax Expense

Current and deferred taxes are calculated based on tax rates enacted or substantively enacted at the reporting date and are recognized in profit or loss except when the tax relates to items charged or credited to other comprehensive income, in which case the tax is also recognized in other comprehensive income. Deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets including those relating to temporary differences, net operating loss carryforwards and tax credit carryforwards, are only recognized to the extent it is more likely than not that future taxable income will be available to utilize the temporary differences and carryforwards. Our net operating loss carryforwards are subject to shareholder continuity rules, and may be impacted by future fundraising activities.

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

### Results of Operations — Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The results of operations presented below should be reviewed in conjunction with our condensed consolidated financial statements and notes. The following table sets forth our consolidated results of operations for the periods indicated:

*(In thousands, except for per share amounts)*

|  | Three Months Ended September 30, 2023 | 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Total revenue | 19,605 | 8,072 | 11,533 | 143% |
| Cost of revenue (exclusive of depreciation shown below) | (14,371) | (5,975) | (8,396) | 141% |
| **Operating expenses:** |  |  |  |  |
| Research and development | (16,645) | (14,260) | (2,385) | 17% |
| Depreciation expense | (1,376) | (1,211) | (165) | 14% |
| Selling, general and administrative expense | (11,808) | (7,258) | (4,550) | 63% |
| **Total operating expenses** | **$(29,829)** | **$(22,729)** | **$(7,100)** | **31%** |
| Loss from operations | (24,595) | (20,632) | (3,963) | 19% |
| Interest income (expense), net | 1,249 | $8 | 1,241 | N/M |
| Other expense, net | (1,517) | $(1,176) | (341) | 29% |
| Total other expense, net | (268) | (1,168) | 900 | N/M |
| **Loss before income taxes** | **$(24,863)** | **$(21,800)** | **$(3,063)** | **14%** |
| Income tax benefit | — | — | — | N/M |
| Loss from equity method investees, net | (463) | (467) | 4 | (1)% |
| **Net loss** | **$(25,326)** | **$(22,267)** | **$(3,059)** | **14%** |
| Other comprehensive loss: |  |  |  |  |
| Foreign currency translation adjustments | (1,001) | (384) | (617) | (161)% |
| **Comprehensive loss** | **$(26,327)** | **$(22,651)** | **$(3,676)** | **16%** |
| Net loss per share - basic and diluted | (0.13) | (3.47) |  |  |
| Weighted-average number of common shares outstanding - basic and diluted | 195,869,537 | 9,229,781 |  |  |

### Revenue

Total revenue increased $11.5 million, or 143%, in the three months ended September 30, 2023, compared to the same period in 2022. The increase was primarily driven by engineering and other services with an increase of $7.4 million in revenue from contracts with existing customers whose projects have moved to the next phase of development and an increase of $0.4 million from contracts with new customers. Additionally, we had a $1.0 million increase in licensing revenue, a $1.7 million increase in other contract research and a $0.4 million increase in revenue from joint development agreements. CarbonSmart products revenue increased $0.6 million in the three months ended September 30, 2023 compared to the same period in 2022.

### Cost of Revenue

Cost of revenue increased $8.4 million, or 141%, in the three months ended September 30, 2023, compared to the same period in 2022. The increase is primarily driven by the higher revenue performance from engineering and other services, mostly from projects that moved to the next phase of development, and inflation in costs and wages.

### Research and Development

R&D expense increased $2.4 million, or 17%, in the three months ended September 30, 2023 compared to the same period in 2022. This was primarily due to $1.2 million in incremental stock compensation expense associated with 2023 equity awards, an increase of $0.8 million in R&D personnel/contractors, external services and consumables expenses to accelerate growth, and an increase of $0.4 million for facilities expenses.

### Selling, General and Administrative Expense

SG&A expense increased $4.6 million, or 63%, in the three months ended September 30, 2023 compared to the same period in 2022. This was primarily due to an increase of $2.6 million in SG&A external services and contractors driven by increases in professional services fees, board expenses, and business insurance, $1.6 million in incremental stock compensation expense associated with 2023 equity awards, an increase of $0.3 million in SG&A personnel expenses to support our growth, and an increase of $0.2 million in facilities expenses. The increase was offset by a recovery of bad debt of $(0.1) million.

### Interest income, net

Interest income, net increased $1.2 million in the three months ended September 30, 2023 compared to the same period in 2022. The increase is primarily attributable to interest earned on higher cash balances held in savings and money market accounts subsequent to the Business Combination and the amortization of the discount on the held-to-maturity securities.

### Other Expense, Net

Other expense, net increased $0.3 million, in the three months ended September 30, 2023 compared to the same period in 2022. The increase is primarily due to an overall net loss on changes in the fair value of our financial instruments.

### Results of Operations — Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The results of operations presented below should be reviewed in conjunction with our condensed consolidated financial statements and notes. The following table sets forth our consolidated results of operations for the periods indicated:

*(In thousands, except for per share amounts)*

|  | Nine Months Ended September 30, 2023 | 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Total revenue | 42,168 | 25,781 | 16,387 | 64% |
| Cost of revenues (exclusive of depreciation shown below) | (32,988) | (19,231) | (13,757) | 72% |
| **Operating expenses:** |  |  |  |  |
| Research and development | (51,839) | (39,858) | (11,981) | 30% |
| Depreciation expense | (3,981) | (3,433) | (548) | 16% |
| Selling, general and administrative expense | (41,095) | (19,482) | (21,613) | 111% |
| **Total operating expenses** | **$(96,915)** | **$(62,773)** | **$(34,142)** | **54%** |
| Loss from operations | (87,735) | (56,223) | (31,512) | 56% |
| Interest income, net | 3,164 | 3 | 3,161 | N/M |
| Other expense, net | (29,912) | (1,100) | (28,812) | N/M |
| Total other expense, net | (26,748) | (1,097) | (25,651) | N/M |
| **Loss before income taxes** | **$(114,483)** | **$(57,320)** | **$(57,163)** | **100%** |
| Income tax benefit | — | — | — | N/M |
| (Loss) gain from equity method investees, net | (941) | 2,346 | (3,287) | (140)% |
| **Net loss** | **$(115,424)** | **$(54,974)** | **$(60,450)** | **110%** |
| Other comprehensive loss: |  |  |  |  |
| Foreign currency translation adjustments | (954) | (767) | (187) | (24)% |
| **Comprehensive loss** | **$(116,378)** | **$(55,741)** | **$(60,637)** | **109%** |
| Net loss per share - basic and diluted | (0.70) | (9.10) |  |  |
| Weighted-average number of common shares outstanding - basic and diluted | 169,797,443 | 9,223,884 |  |  |

### Revenue

Total revenue increased $16.4 million, or 64%, in the nine months ended September 30, 2023 compared to the same period in 2022. The increase was primarily driven by engineering and other services with an increase of $11.4 million in revenue from contracts with existing customers whose projects have moved to the next phase of development and an increase of $1.5 million from contracts with new customers. Additionally, we had a $1.3 million increase in revenue from licensing, a $1.0 million increase in revenue from joint development agreements and $1.3 million in other contract research, partially offset by a decrease of $(0.1) million in CarbonSmart revenue.

### Cost of Revenues

Cost of revenue increased $13.8 million, or 72%, in the nine months ended September 30, 2023 compared to the same period in 2022. The increase is primarily driven by the higher revenue performance from engineering and other services, mostly from projects that moved to the next phase of development, and inflation in costs and wages.

### Research and Development

R&D expense increased $12.0 million, or 30%, in the nine months ended September 30, 2023 compared to the same period in 2022. This was primarily due to an increase of $5.4 million in R&D personnel/contractors and consumables expenses to accelerate growth, an increase in stock compensation expense consisting of $2.9 million in incremental expense associated with stock compensation granted in 2023 and $1.2 million resulting from the vesting of RSAs in connection with the Business Combination, an increase of $1.2 million in external R&D service provider costs, and an increase of $1.3 million in facilities expenses.

### Selling, General and Administrative Expense

SG&A expense increased $21.6 million, or 111%, in the nine months ended September 30, 2023 compared to the same period in 2022. This was primarily due to an increase of $10.1 million of external services and contractors mostly driven by one-time professional services fees related to the Business Combination, as well as $3.9 million resulting from the vesting of RSAs and one-time employee transition arrangements related to the Business Combination. The increase is also attributed to $3.8 million in incremental expense associated with stock compensation granted in 2023, an increase of $2.6 million in personnel and consumables expenses to support our growth, an increase of $0.7 million related to an allowance for a customer receivable, and an increase of $0.5 million in facilities expenses.

### Interest income, net

Interest income, net increased $3.2 million in the nine months ended September 30, 2023 compared to the same period in 2022. The increase is primarily attributable to interest earned on higher cash balances held in savings and money market accounts subsequent to the Business Combination. The increase is additionally attributable to the amortization of the discount and accrued interest on the held-to-maturity securities.

### Other Expense, Net

Other expense, net increased $(28.8) million, in the nine months ended September 30, 2023 compared to the same period in 2022. The increase is primarily due to an overall net loss on changes in the fair value of our financial instruments.

### Liquidity and Capital Resources

### 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 September 30, 2023 and December 31, 2022:

*(In thousands, except for percentages)*

|  | As of September 30, 2023 | December 31, 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Total cash, cash equivalents, and restricted cash | $92,070 | $83,710 | $8,360 | 10% |

As of September 30, 2023, as compared to December 31, 2022, LanzaTech’s cash, cash equivalents, and restricted cash increased by $8.4 million, or 10%, primarily due to the closing of the Business Combination and PIPE financing, net of funding of the Forward Purchase Agreement. The increase was also partially offset by cash usage (see Cash flow section below) to fund working capital, the net loss adjusted for non-cash charges, purchase of debt security investments, purchases of property, plant and equipment and the repurchase of equity instruments of the Company.

### Debt Security Investments

Debt security investments comprise held-to-maturity U.S. Treasury securities that the Company has both the ability and intent to hold to maturity. These securities all mature within thirteen months and will provide additional liquidity upon maturity. As of September 30, 2023, held-to-maturity security investments totaled $44.8 million. The Company did not have any held-to-maturity security investments as of December 31, 2022.

### Sources and Uses of Capital

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

Our ability to successfully develop products and expand our business depends on many factors, including our ability to meet working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations. We manage our capital to ensure that LanzaTech can continue as a going concern while maximizing the return to stakeholders through the optimization of debt and equity balances. Following completion of the Business Combination, the Company may change its capital risk strategy related to use of capital proceeds from the Business Combination to increase its product offerings or for business growth purposes.

As of September 30, 2023, our capital structure consists of equity (comprising issued capital, and accumulated deficit) and the Brookfield SAFE. We are not subject to any externally imposed capital requirements.

Prior to the Business Combination, LanzaTech had six outstanding series of redeemable preferred stock. LanzaTech preferred shares were convertible at the holder’s option into shares of common stock, on a share-for-share basis, using a conversion rate determined by dividing the original issue price by the conversion price. Each LanzaTech preferred share was automatically converted into a common share of LanzaTech on the Closing Date.

On October 2, 2022, LanzaTech entered into the Brookfield SAFE with Brookfield and received a cash payment of $50.0 million as the Initial Purchase Amount. In exchange, the Company granted to Brookfield the right to certain shares of the Company's common stock. Following the closing of the Business Combination, Brookfield may, at any time at its option, convert all or a portion of the Initial Purchase Amount less any amount that has already been converted or repaid into shares of common stock.

LanzaTech does not have any outstanding debt, other than the Brookfield SAFE and the Fixed Maturity Consideration, which are both classified as liabilities for accounting purposes, on its condensed consolidated balance sheet as of September 30, 2023.

On November 9, 2022, LanzaTech committed to purchase $5.5 million of Subordinated Secured Notes in a funding for LanzaJet's subsidiary Freedom Pines Fuels LLC, which occurred on May 1, 2023. The Subordinated Secured Notes are secured by a security interest over the intellectual property owned or in-licensed by LanzaJet. LanzaJet also provides a guarantee of any costs and expenses required to complete the initial facility and achieve commercial operation.

LanzaTech, AMCI and ACM executed the Forward Purchase Agreement on February 3, 2023. Pursuant to the Forward Purchase Agreement, ACM obtained 5,916,514 shares of common stock on the open market for $10.16 per share (“Redemption Price”), and such purchase price of $60.1 million was funded by the use of Trust Account proceeds as a prepayment (“Prepayment Amount”) for the Forward Purchase Agreement redemption at the end of three years (“Maturity Date”). ACM has the right at the end of three years to return the shares and keep the Prepayment Amount plus the fees described below, or may, at ACM’s sole discretion, partially or fully terminate this transaction over the course of the three-year term by returning cash in an amount equal to the number of shares terminated (“Terminated Shares”) multiplied by the Redemption Price, which may be reduced in the case of certain dilutive events (“Reset Price”). At the end of the three-year term, New LanzaTech is obligated to pay ACM an amount equal to the product of (1) 7,500,000 less (b) the number of Terminated Shares multiplied by (2) $2.00 (the “Maturity Consideration”). In addition to the Prepayment Amount and the Maturity Consideration, on the Maturity Date, New LanzaTech will pay to ACM an amount equal to the product of (x) 500,000 and (y) the Redemption Price, totaling $5.1 million (the “Share Consideration”). However, at the time, the Company may not have sufficient funds or be able to obtain financing from third parties to pay such amounts. The Company also may not have sufficient shares authorized to pay the Maturity Consideration in shares. Breach by the Company of any of these obligations could constitute an event of default under the Forward Purchase Agreement, which could subject the Company to financial exposure thereunder (including arising from potential indemnification claims by the Seller). In addition, future debt or other contractual agreements may contain cross-default or cross-acceleration provisions that could be triggered if we defaulted on our obligations to the Purchasers. Any or all of these consequences could have material adverse impact on us.

On February 8, 2023, LanzaTech completed the Business Combination and related transactions. The completion of the Business Combination and related transactions resulted in $153.3 million of cash proceeds to LanzaTech. The amount released to LanzaTech is net of the transaction expenses related to the Business Combination and the amount paid to the Purchasers in relation to the Forward Purchase Agreement. Pursuant to the Forward Purchase Agreement, the Purchasers purchased 5,916,514 Class A common shares on the open market for approximately $10.16 per share, and such purchase price of $60.1 million was deposited with the Purchasers as a prepayment for the Forward Purchase Agreement redemption at the end of three years.

In the normal course of our business, we also enter into purchase commitments or other transactions in which we make representations and warranties that relate to the performance of our goods and services. We do not expect material losses related to these transactions.

We believe our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date of this Quarterly Report. However, our liquidity assumptions may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors”.

If we determine that we require additional financing to meet our operating requirements, we may be unable to secure such financing on acceptable terms, or at all. If we raise additional funds by issuing equity and/or convertible debt securities, dilution to our existing stockholders will result. If we raise additional financing and incur indebtedness, we would be subject to increased fixed payment obligations and could also be subject to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain additional funds, we will have to reduce our operating costs, which will cause a delay or reduction in our technology development and commercialization programs.

### Cash Flows

### For the nine months ended September 30, 2023 and 2022

The following table provides a summary of our cash flows for the nine months ended September 30, 2023 and September 30, 2022:

*(In thousands, except for percentages)*

| Net cash provided by (used in): | Nine Months Ended September 30, 2023 | 2022 | Change 2023 vs. 2022 |  |
| --- | ---: | ---: | ---: | ---: |
| Operating activities | $(81,565) | $(71,336) | $(10,229) | 14% |
| Investing activities | (116,591) | (6,530) | (110,061) | 1,685% |
| Financing activities | 207,368 | 23 | 207,345 | N/M |
| Effects of currency translation | (852) | 145 | (997) | 688% |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $8,360 | $(77,698) |  |  |

49

### Cash Flows Used in Operating Activities

For the nine months ended September 30, 2023, net cash used in operating activities was $(81.6) million. This was primarily driven by a net loss of $(115.4) million, adjusted for the loss on change in fair value of the FPA Put Option liability and Fixed Maturity Consideration of $44.7 million, share-based compensation expense of $11.9 million, depreciation of property, plant and equipment of $4.0 million, non-cash lease expense of $0.9 million, the non-cash loss from equity method investees, net of $0.9 million, and provision for losses on trade and other receivables of $0.7 million. The additional impact to net cash usage is related to the adjustments for net cash changes in operating assets and liabilities of $(12.8) million, the gain on change of fair value of SAFE and warrant liabilities of $(14.2) million, the non-cash recognition of licensing revenue of $(1.7) million, amortization of the discount on the debt security investment of $(0.9) million, and non-cash foreign currency exchange gain of $0.4 million.

For the nine months ended September 30, 2022, net cash used in operating activities was $(71.3) million. This was primarily driven by a net loss of $(55.0) million, adjusted for share-based compensation expense of $2.1 million, depreciation of property, plant and equipment of $3.4 million, the loss from equity method investees, net of $(2.3) million, non-cash lease expense of $1.3 million and non-cash foreign currency exchange loss of $1.3 million. The additional net cash usage is related to the adjustments for net cash changes in operating assets and liabilities of $(20.2) million, non-cash recognition of licensing revenue of $(1.6) million, and the gain on change in fair value of SAFE and warrant liabilities of $(0.3) million.

### Cash Flows Used in Investing Activities

For the nine months ended September 30, 2023, net cash used in investing activities was $(116.6) million, driven by the investment in debt securities of $(93.9) million, the Forward Purchase Agreement prepayment amount of $(60.1) million, the purchase of property, plant and equipment of $(7.1) million, the funding of the loan commitment to LanzaJet of $(5.2) million, and the purchase of additional interests in our equity method investment in the form of warrants which were accounted as in-substance common stock of $(0.3) million, partially offset by $50 million of maturities from the investment in debt securities.

For the nine months ended September 30, 2022, net cash used in investing activities was $(6.5) million, driven by the purchase of property, plant and equipment.

### Cash Flows from Financing Activities

For the nine months ended September 30, 2023, net cash provided by financing activities was $207.4 million. This was driven by $213.4 million in proceeds from the Business Combination, PIPE financing and the Forward Purchase Agreement and proceeds of $1.6 million from the exercise of options to acquire shares of common stock of the Company. This was partially offset by the repurchase of equity instruments of $(7.7) million.

For the nine months ended September 30, 2022, net cash provided by financing activities was not significant.

### Off-Balance Sheet Arrangements

As of September 30, 2023 and December 31, 2022, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

### Critical Accounting Policies and Management Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements that have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. We consider an accounting estimate to be critical to the condensed 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. A discussion of our critical accounting policies and estimates may be found in the Company’s prospectus filed with the SEC on May 25,

2023 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Policies and Management Estimates”. There have been two changes to our critical accounting policies and estimates since the filing of the aforementioned prospectus that are discussed below:

### Forward Purchase Agreement Valuation

The Company has determined that the FPA Put Option, including the Variable Maturity Consideration, within the Forward Purchase Agreement is (i) a freestanding financial instrument and (ii) a derivative (i.e., an in-substance written put option). This derivative, referred to throughout as the prepaid forward contract derivative was recorded as an asset at fair value on the condensed consolidated balance sheet as of the reporting date. The fair value of the derivative was estimated using a Monte-Carlo Simulation in a risk-neutral framework. Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”). For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted back to present. Finally, the value of the forward is calculated as the average present value over all simulated paths.

The Company separately identified two other freestanding financial instruments in the Forward Purchase Agreement, the Share Consideration and the Minimum Maturity Consideration. As both of these payments are for a fixed amount at the Maturity Date, we have accounted for these cash outflows as debt-like instruments. In accordance with ASC 825, *Financial Instruments*, we have elected to account for these instruments under the Fair Value Option. As the terms and conditions of these payments are the same, they are accounted for together on the condensed consolidated balance sheet as of September 30, 2023 as the Fixed Maturity Consideration. The fair value of the Fixed Maturity Consideration was estimated within the same Monte-Carlo simulation as the prepaid forward contract to effectively model the potential acceleration of the Maturity Date and the corresponding acceleration in the payment of the Fixed Maturity Consideration.

### Stock-Based Compensation

In exchange for certain employee and director services, compensation is given in the form of equity-based awards. The Company accounts for equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Accordingly, equity-classified awards are recorded based on the grant date fair value and expensed over the requisite service period for the respective award. Liability-classified awards are remeasured at the end of each reporting period and expensed based on the percentage of requisite service that has been rendered.

The Company’s equity-based awards include stock option awards, restricted stock units (“RSUs”), stock-appreciation rights (“SARs”) and restricted stock (“RSAs”) issued by the Company, which vest based on either time and/or the achievement of certain market or performance conditions. We have elected not to estimate forfeitures which means compensation expenses may be reversed in the period in which the forfeiture occurs. Compensation expense is recognized in the Company’s consolidated statements of operations and comprehensive loss, primarily within research and development expenses. For awards with only service conditions that have a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. For awards with market or performance conditions that have a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for each tranche of the award. Compensation expense resulting from performance awards is recognized over the requisite service period when it is probable that the performance condition will be met. The recognized compensation expense for performance awards is adjusted based on an estimate of awards ultimately expected to vest.

We mostly apply judgment for stock-based awards with performance conditions, because compensation expense is recognized only when it is probable the performance conditions will be met (i.e. occurrence of a liquidity event). Management determined that the occurrence of the liquidity event is probable when the event is consummated, as such, compensation expense related to the RSAs was recorded at the time of the Business Combination.

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

- Expected Term — We have opted to use the “simplified method” for estimating the expected term of plain-vanilla options and SARs, whereby the expected term equals the arithmetic average of the vesting term and

LanzaTech’s contractual term of the option (generally 10 years). We use peer data to estimate the expected term of options and SARs that do not have plain-vanilla characteristics.

- Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. Treasury zero-coupon instruments with maturities similar to the expected term of LanzaTech’s stock options and SARs.
- Expected Dividend — We have not issued any dividends and do not anticipate issuing dividends on LanzaTech’s common stock. As a result, we have estimated the dividend yield to be zero.
- Expected Volatility — Due to our limited operating history and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the various companies' shares during the equivalent period of the estimated expected term of the stock-based awards.

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

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

### Filing Status

Section 102(b)(1) of the JOBS Act exempts “emerging growth companies” or “EGCs”(as defined in Section 2(a) of the Securities Act) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to not take advantage of the extended transition period is irrevocable. AMCI was an emerging growth company and elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Business Combination, LanzaTech continued to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare LanzaTech’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Additionally, following the consummation of the Business Combination LanzaTech was a “smaller reporting company” or “SRC” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

There are several requirements to continue to qualify as an EGC and/or SRC, which much be assessed at various points throughout the year. The market value of LanzaTech’s common stock that was held by non-affiliates (i.e. public float) exceeded $700 million as of the last business day of the Company’s 2023 second fiscal quarter which will result in the following changes to LanzaTech’s filing status:

- LanzaTech will become a large accelerated filer as of 12/31/2023.
- LanzaTech will lose EGC status as of 12/31/2023.
- LanzaTech no longer qualifies as an SRC as of the last business day of the Company’s second fiscal quarter. LanzaTech may continue to use the scaled disclosures permitted for SRCs through the 2023 annual report on Form 10-K, and must begin providing non-scaled larger company disclosures in its quarterly report on Form 10-Q for the first quarter of 2024. To the extent LanzaTech takes advantage of such reduced disclosure obligations prior to the first quarter of 2024, it may also make comparison of its financial statements with other public companies difficult or impossible.

### Recently Issued and Adopted Accounting Standards

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

### Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with US GAAP and to provide investors with additional information regarding our financial results, we have presented adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by US GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

We define adjusted EBITDA as our net loss, excluding the impact of depreciation, interest income, net, stock-based compensation, change in fair value of warrant liabilities, change in fair value of SAFE liabilities, change in fair value of the FPA Put Option liability and Fixed Maturity Consideration, transaction costs on issuance of Forward Purchase Agreement, (loss) gain from equity method investees and other one-time costs related to the Business Combination and initial securities registration. We monitor and have presented in this Quarterly Report adjusted EBITDA because it is a key measure used by our management and the Board to understand and evaluate our operating performance, to establish budgets, and to develop operational goals for managing our business. We believe adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we include in net loss. Accordingly, we believe adjusted EBITDA provides useful information to investors, analysts, and others in understanding and evaluating our operating results and enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with US GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with US GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with US GAAP. For example, adjusted EBITDA: (i) excludes stock-based compensation expense because it is a significant non-cash expense that is not directly related to our operating performance; (ii) excludes depreciation expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future; (iii) excludes gain or losses on equity method investee; and (iv) excludes certain income or expense items that do not provide a comparable measure of our business performance. In addition, the expenses and other items that we exclude in our calculations of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results. In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

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

### Reconciliation of Net Loss to Adjusted EBITDA

*(In thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Net Loss** | $(25,326) | $(22,267) | $(115,424) | $(54,974) |
| Depreciation | 1,376 | 1,211 | 3,981 | 3,433 |
| Interest income (expense), net | (1,249) | (8) | (3,164) | (3) |
| Stock-based compensation expense and change in fair value of SAFE and warrant liabilities (1) | (6,368) | 1,089 | (2,316) | 1,737 |
| Change in fair value of the FPA Put Option and Fixed Maturity Consideration liabilities | 11,632 | — | 44,661 | — |
| Transaction costs on issuance of Forward Purchase Agreement | — | — | 451 | — |
| Loss (gain) from equity method investees, net | 463 | 467 | 941 | (2,346) |
| One-time costs related to the Business Combination and initial securities registration(2) | 410 | — | 4,472 | — |
| **Adjusted EBITDA** | **$(19,062)** | **$(19,508)** | **$(66,398)** | **$(52,153)** |

(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 initial securities registration.

## Market risk

As filed, 2,315 characters.

We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation and foreign currency translation and transaction risks, as well as risks to the availability of funding sources, hazard events and specific asset risks.

### Interest Rate Fluctuation Risk

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because of our cash equivalents and debt security investments. Our investments are made through our commercial and investment banks and, by policy, we limit the amount of risk by investing primarily in money market funds, United States Treasury obligations, and high quality corporate bonds. Additionally, we primarily invest in short-term securities. Because of the short-term nature of the majority of our financial instruments in our investment portfolio, an immediate change in market interest rates of 100 basis points would not have a material impact on the fair market value of our cash and cash equivalents or on our financial position or results of operations.

### Foreign Currency Fluctuation Risk

We are subject to foreign currency exchange risk from the translation of the financial statements of our foreign subsidiaries, whose financial condition and results of operations are reported in their local currencies and then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements. Foreign currency translation adjustments were $(1.00) million and $(0.38) million for the three months ended September 30, 2023 and 2022, and were $(0.95) million and $(0.77) million for the nine months ended

September 30, 2023 and 2022, respectively. Additionally, we have contracted with and may continue to contract with foreign vendors.

### Inflation Fluctuation Risk

Inflation generally affects us by increasing our cost of labor, laboratory supplies, consumables and equipment. We believe that inflation had a material effect on our business, more specifically on our costs of revenues as discussed in the sections results of operations for the three and nine months ended September 30, 2023 of our management’s discussion and analysis of our financial condition and results of operations.

## Controls and procedures

As filed, 5,117 characters.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource

constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

### Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) as of September 30, 2023.Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of September 30, 2023. We are in the process of implementing measures designed to improve our disclosure controls and procedures.

### Changes in Internal Control over Financial Reporting

As noted previously, subsequent to September 30, 2023 and prior to filing, we have revised the accounting treatment of the FPA to reclassify the prepaid forward contract from being presented as a net derivative asset on our condensed consolidated balance sheet to equity and non-current liability on the condensed consolidated balance sheet. We intend to restate our financial statements for the quarters ended March 31, 2023 and June 30, 2023 to be consistent with this accounting treatment. In connection with these determinations, we have concluded that the failure of our internal controls designed to ensure appropriate accounting for complex technical arrangements like the forward purchase agreement is representative of the material weakness in our internal control over financial reporting.

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate the material weakness. We believe the measures that we implement will contribute toward the remediation of the control deficiency we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review, optimize, enhance, and test our controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures. This material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Accordingly, the material weakness was not remediated as of September 30, 2023.

Notwithstanding the material weaknesses in internal control over financial reporting described above, our management has concluded that our consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP.

### PART II - OTHER INFORMATION

### LEGAL MATTERS

The Company may be involved in legal proceedings and exposed to potential claims in the normal course of business. Although we cannot predict the ultimate outcome of any legal matter with certainty, we do not believe the outcome of any of our pending legal proceedings will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

## Risk factors

As filed, 1,193 characters.

Our risk factors are disclosed in Part I, Item 1A of our Annual Report on Form 10-K. Except as set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, there have been no material changes during the nine months ended September 30, 2023 from or updates to the risk factors discussed in Part I, Item 1A. Risk Factors, of our Annual Report on Form 10-K, except for the addition of the following risk factor:

***Our revenue is relatively concentrated within a small number of key customers, and the loss of one or more of such key customers may adversely affect our business, financial condition, and results of operations.***

For the fiscal year ended December 31, 2022, our largest customer accounted for 22% of our revenue. For the nine months ended September 30, 2023, our largest customer accounted for 39% of our revenue. Customer mix can change rapidly, and we may see changes in customer concentrations in the future. If or when any of our significant customer relationships terminate for any reason, and we are not able to replace those customers and associated revenues, our business, financial condition, and results of operations may be adversely affected.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001628280-23-038368. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.