Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

NOTE 1

—SHARE-BASED COMPENSATION

In January 2021, Montauk Renewables undertook the Reorganization Transactions which resulted in the Company owning all of the assets and entities (excluding Montauk USA) through which MNK’s business and operations were conducted. As a result of the Distribution, the options outstanding under MNK’s Employee Share Appreciation Rights Scheme (the “SAR Plan”) were cancelled. The Company recorded $2,050 of

accelerated compensation expense in its consolidated statements of operations within general and administrative expenses in connection with the cancellation of the options under the SAR Plan for the year ended December 30, 2021.

The board

directors of Montauk Renewables adopted the Montauk Renewables, Inc. Equity and Incentive Compensation Plan (“MRI EICP”) in January 2021. Following the closing of the IPO, the board of directors of Montauk Renewables approved the grant of

non-qualified

stock options, restricted stock unit and restricted stock awards to the employees of Montauk Renewables and its subsidiaries in January 2021. In connection with the restricted stock grants the officers of the Company made elections under Section 83(b) of the Code. Pursuant to such elections, the Company withheld 950,214 shares of common stock from such awards at a price of $11.38 per share from such awards. The Company records and reports share-based compensation for stock options, restricted stock, and restricted stock units when vested, in the case of restricted stock and restricted stock units, and when exercised, in the case of options, and such awards will be settled in shares of common stock of Montauk Renewables. As of December 31, 2021, unrecognized MRI EICP compensation expense for awards the Company expects to vest approximated $12,263 and will be recognized over approximately 5 years.

In connection with a May 2021 asset acquisition, 1,250,000 restricted stock awards (“RS Awards”) were granted to two

employees of the Company in connection with their respective employment. The RS Awards vest over a five-year period and are subject to the achievement of time and performance based vesting criteria over such period. The performance targets in the RS Awards relate to the attainment of three EBITDA goals as

defined in the underlying agreements beginning on or after the third anniversary of the grant date. The Company completed its assessment

and no compensation expense for the RS Awards has been recorded for the year ended December 31, 2021. The grant date fair value of the RS Awards is $11,300.

The restricted stock

, restricted stock unit and option awards are subject to vesting schedules that commence or conclude, in the case of the op

tio

n and restricted stock unit awards, on the

one-year

anniversary of the grant date and are subject to the terms and conditions of the MRI EICP and related award agreements including, in the case of the restricted stock awards, each officer having made an election under Section 83(b) of the Code. The Company recorded $

10,813

of compensation expense in its consolidated statements of operations within general and administrative expenses for the year ended December 31, 2021 in connection with the withheld

950,214

shares associated with the Section 83(b) elections.

Options granted under the MRI EICP allow the recipient to receive the Company’s common stock equal to the appreciation in the fair market value of the Company’s common stock between the grant date and the exercise and settlement of options into shares as of the exercise date(s). The fair value of the MRI EICP options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions (no dividends were expected):


	Grant Date
Risk-free interest rate		0.5	%
Expected volatility		32.0	%
Expected option life (in years)		5.5
Grant-date fair value	$	3.44

The following table summarizes the restricted shares, restricted stock units and options outstanding under the MRI EICP as of December 31, 2021:


	Restricted Shares					Restricted Stock Units					Options
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Exercise Price
End of period—December 31, 2020		—		$	—		—		$	—		—	$	—

Beginning of period—January 1, 2021		—		$	—		—		$	—		—	$	—
Granted		3,869,827			10.40		29,304			11.38		950,214		11.38
Vested		(950,214	)		11.38		—			—		—		—
Forfeited		—			—		(1,320	)		11.38		—		—
Exercised		—			—		—			—		—		—

End of period—December 31, 2021		2,919,613		$	10.09		27,984		$	11.38		950,214	$	11.38

The following table summarizes the options and restricted stock under the SAR Plan as of December 31, 2020:


	Options					Restricted Stock
	Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Grant Date Fair Value
End of period—December 31, 2019		1,872,534		$	1.18		1,939,200	$	0.95

Beginning of period—January 1, 2020		1,872,534		$	1.18		1,939,200	$	0.95
Granted		924,779			0.90		—		—
Forfeited		(166,666	)		0.62		—		—
Exercised		(50,000	)		0.44		—		—

End of period—December 31, 2020		2,580,647		$	1.13		1,939,200	$	0.95
Vested and exercisable—December 31, 2020		50,000		$	0.56		1,939,200	$	0.95

During the

year ended December 31, 2020, the intrinsic value of the 50,000 options exercised was $50. The Company received $56 related to the exercise of a portion of these options. At December 31, 2020 the aggregate intrinsic value (difference between exercise price and closing price at that date) of all options outstanding was $14,945.

Stock-based compensation expense for the years ended December 31, 2021, 2020, and 2019 was $9,474, $762 and $570, respectively, and is included in general and administrative expense in the Consolidated Statement of Operations.