UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File Number: 001-39919

MONTAUK RENEWABLES, INC.

(Exact name of registrant as specified in its charter)

Delaware	85-3189583
(State or Other Jurisdiction of Incorporation or	(IRS Employer Identification No.)
Organization)
680 Andersen Drive, 5th Floor Pittsburgh, Pennsylvania	15220
(Address of Principal Executive Offices)	(Zip Code)

(412) 747-8700

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MNTK	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of outstanding shares of the registrant’s common stock on August 4, 2022 was 143,603,681 shares.

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION			6
ITEM 1.	FINANCIAL STATEMENTS		6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		53
ITEM 4.	CONTROLS AND PROCEDURES		53
PART II OTHER INFORMATION			54
ITEM 1.	LEGAL PROCEEDINGS		54
ITEM 1A.	RISK FACTORS		54
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		54
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		55
ITEM 4.	MINE SAFETY DISCLOSURES		55
ITEM 5.	OTHER INFORMATION		55
ITEM 6.	EXHIBITS		55
SIGNATURES			56

Glossary of Key Terms

This Quarterly Report on Form 10-Q uses several terms of art that are specific to our industry and business. For the convenience of the reader, a glossary of such terms is provided here. Unless we otherwise indicate, or unless the context requires otherwise, any references in this Quarterly Report on Form 10-Q to:

• “ADG” refers to anaerobic digested gas.

• “CARB” refers to the California Air Resource Board.

• “CNG” refers to compressed natural gas.

• “CI” refers to carbon intensity.

• “D3” refers to cellulosic biofuel with a 60% GHG reduction requirement.

• “EPA” refers to the U.S. Environmental Protection Agency.

• “Environmental Attributes” refer to federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy.

• “FERC” refers to the U.S. Federal Energy Regulatory Commission.

• “GHG” refers to greenhouse gases.

• “JSE” refers to the Johannesburg Stock Exchange.

• “LCFS” refers to Low Carbon Fuel Standard.

• “LFG” refers to landfill gas.

• “MMBtu” refers to Metric Million British Thermal Unit.

• “PPAs” refers to power purchase agreements.

• “RECs” refers to Renewable Energy Credits.

• “Renewable Electricity” refers to electricity generated from renewable sources.

• “RFS” refers to the EPA’s Renewable Fuel Standard.

• “RINs” refers to Renewable Identification Numbers.

• “RNG” refers to renewable natural gas.

• “RVOs” refers to renewable volume obligations.

3

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of U.S. federal securities laws that involve substantial risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “assume,” “believe,” “can have,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “would,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operational performance or other events. For example, all statements we make relating to future results of operations, financial condition, expectations and plans of the Company, including expected benefits of the Pico feedstock amendment and the Montauk Ag project in North Carolina, the anticipated completion of the engine repairs at the Security facility, the resolution of gas collection issues at the McCarty facility, our estimated and projected costs, expenditures, and growth rates, our plans and objectives for future operations, growth, or initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect and, therefore, you should not unduly rely on such statements. The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include but are not limited to:

• the impact of the ongoing COVID-19 pandemic on our business, financial condition and results of operations;

• our ability to develop and operate new renewable energy projects, including with livestock farms;

• reduction or elimination of government economic incentives to the renewable energy market;

• delays in acquisition, financing, construction and development of new projects, including expansion plans into new areas such as agricultural waste;

• the inability to complete strategic development opportunities;

• general economic conditions outside our control including the impacts of supply chain disruptions, inflationary cost increases, and other macroeconomic factors;

• the length of development and optimization cycles for new projects, including the design and construction processes for our renewable energy projects;

• dependence on third parties for the manufacture of products and services;

• the quantity, quality and consistency of our feedstock volumes from both landfill and livestock farm operations;

• identifying suitable locations for new projects;

• reliance on interconnections to distribution and transmission products for our Renewable Natural Gas and Renewable Electricity Generation segments;

• our projects not producing expected levels of output;

• the anticipated benefits of the Raeger capital improvement project, Pico feedstock amendment and the Montauk Ag project in North Carolina and the anticipated completion of engine repairs at the Security facility;

• potential benefits associated with the combustion-based oxygen removal condensate neutralization technology;

• resolution of gas collection issues at the McCarty facility;

• concentration of revenues from a small number of customers and projects;

• dependence on our landfill operators;

• our outstanding indebtedness and restrictions under our credit facility;

• our ability to extend our fuel supply agreements prior to expiration;

• our ability to meet milestone requirements under our PPAs;

4

• existing regulations and changes to regulations and policies that effect our operations;

• decline in public acceptance and support of renewable energy development and projects;

• our expectations regarding Environmental Attributes;

• our expectations regarding Environmental Attribute and commodity prices;

• our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act (“JOBS Act”);

• our expectations regarding future capital expenditures, including for the maintenance of facilities;

• our expectations regarding the use of net operating losses before expiration;

• our expectations regarding more attractive CI scores by regulatory agencies for our livestock farm projects;

• market volatility and fluctuations in commodity prices and the market prices of Environmental Attributes and the impact of any related hedging activity;

• regulatory changes in federal, state and international environmental attribute programs;

• profitability of our planned livestock farm projects;

• sustained demand for renewable energy;

• security threats, including cyber-security attacks;

• the need to obtain and maintain regulatory permits, approvals and consents;

• potential liabilities from contamination and environmental conditions;

• potential exposure to costs and liabilities due to extensive environmental, health and safety laws;

• impacts of climate change, changing weather patterns and conditions, and natural disasters;

• failure of our information technology and data security systems;

• increased competition in our markets;

• continuing to keep up with technology innovations;

• concentrated stock ownership by a few stockholders and related control over the outcome of all matters subject to a stockholder vote; and

• other risks and uncertainties detailed in the section titled “Risk Factors” in our latest Annual Report on Form 10-K.

We make many of our forward-looking statements based on our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our other Securities and Exchange Commission (“SEC”) filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties. See the “Risk Factors” section in our latest Annual Report on Form 10-K.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

5

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

	Page
Montauk Renewables, Inc.
Unaudited condensed consolidated financial statements
Condensed consolidated balance sheets		7
Condensed consolidated statements of operations		8
Condensed consolidated statements of stockholders’ equity		9
Condensed consolidated statements of cash flows		10
Notes to condensed consolidated financial statements		11

6

MONTAUK RENEWABLES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data):

	As of June 30, 2022			As of December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	72,195		$	53,266
Accounts and other receivables		23,998			9,338
Related party receivable		8,940			8,940
Current portion of derivative instrument		277			—
Prepaid expenses and other current assets		5,558			2,846
Assets held for sale		—			777
Total current assets	$	110,968		$	75,167
Restricted cash—non-current	$	328		$	328
Property, plant and equipment, net		176,077			180,893
Goodwill and intangible assets, net		13,660			14,113
Deferred tax assets		6,779			10,570
Non-current portion of derivative instrument		536			—
Operating lease right-of-use assets		203			305
Finance lease right-of-use assets		139			—
Other assets		5,561			5,104
Total assets	$	314,251		$	286,480
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,477		$	4,973
Accrued liabilities		17,848			10,823
Income tax payable		134			—
Current portion of operating lease liability		156			296
Current portion of finance lease liability		76			—
Current portion of derivative instrument		1,807			650
Current portion of long-term debt		7,834			7,815
Total current liabilities	$	32,332		$	24,557
Long-term debt, less current portion	$	67,465		$	71,392
Non-current portion of operating lease liability		30			27
Non-current portion of finance lease liability		61			—
Non-current portion of derivative instrument		—			189
Asset retirement obligation		5,368			5,301
Other liabilities		4,125			2,721
Total liabilities	$	109,381		$	104,187
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 690,000,000 shares; 143,603,681 and 143,584,827 shares issued at June 30, 2022 and December 31, 2021, respectively; 141,290,748 and 141,015,213 shares outstanding at June 30, 2022 and December 31, 2021, respectively	$	1,410		$	1,410
Treasury stock, at cost, 959,344 and 950,214 shares June 30, 2022 and December 31, 2021, respectively		(10,904	)		(10,813	)
Additional paid-in capital		200,855			196,224
Retained earnings (deficit)		13,509			(4,528	)
Total stockholders’ equity	$	204,870		$	182,293
Total liabilities and stockholders’ equity	$	314,251		$	286,480

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

7

MONTAUK RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except for share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Total operating revenues	$	67,884		$	31,674		$	100,055		$	63,121
Operating expenses:
Operating and maintenance expenses	$	14,870		$	13,187		$	28,072		$	23,830
General and administrative expenses		8,753			7,341			17,248			27,761
Royalties, transportation, gathering and production fuel		15,090			5,986			22,296			12,204
Depreciation, depletion and amortization		5,134			5,660			10,286			11,396
Gain on insurance proceeds		—			—			(313	)		(82	)
Impairment loss		69			—			120			626
Transaction costs		5			37			32			125
Total operating expenses	$	43,921		$	32,211		$	77,741		$	75,860
Operating income (loss)	$	23,963		$	(537	)	$	22,314		$	(12,739	)
Other expenses (income):
Interest expense	$	271		$	720		$	303		$	1,366
Net loss (gain) on sale of fixed assets		—			22			(293	)		22
Other (income) expense		(25	)		(12	)		(40	)		23
Total other expenses (income)	$	246		$	730		$	(30	)	$	1,411
Income (loss) before income taxes	$	23,717			(1,267	)	$	22,344		$	(14,150	)
Income tax expense		4,565			3,385			4,307			4,767
Net income (loss)	$	19,152		$	(4,652	)	$	18,037		$	(18,917	)
Earnings (loss) per share:
Basic	$	0.14		$	(0.03	)	$	0.13		$	(0.13	)
Diluted	$	0.13		$	(0.03	)	$	0.13		$	(0.13	)
Weighted-average common shares outstanding:
Basic		141,129,457			141,015,213			141,087,699			141,015,213
Diluted		142,462,069			141,015,213			142,220,274			141,015,213

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

8

MONTAUK RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share data):

	Common Stock				Treasury Stock					Members’ Equity		Additional Paid-in Capital		Retained Earnings (Deficit)			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2022		141,057,772	$	1,410		959,344	$	(10,904	)		—	$	198,558	$	(5,643	)	$	183,421
Vesting of stock awards		232,976		—		—		—			—		—		—			—
Net income		—		—		—		—			—		—		19,152			19,152
Stock-based compensation		—		—		—		—			—		2,297		—			2,297
Balance at June 30, 2022		141,290,748	$	1,410		959,344	$	(10,904	)	$	—	$	200,855	$	13,509		$	204,870

	Common Stock				Treasury Stock					Members’ Equity		Additional Paid-in Capital		Retained Earnings (Deficit)			Total Equity
	Shares		Amount		Shares		Amount
Balance at March 31, 2021		141,015,213	$	1,410		950,214	$	(10,813	)	$	—	$	188,403	$	(14,265	)	$	164,735
Net loss		—		—		—		—			—		—		(4,652	)		(4,652	)
Stock-based compensation		—		—		—		—			—		2,541		—			2,541
Balance at June 30, 2021		141,015,213	$	1,410		950,214	$	(10,813	)	$	—	$	190,944	$	(18,917	)	$	162,624

	Common Stock				Treasury Stock					Members’ Equity		Additional Paid-in Capital		Retained Earnings (Deficit)			Total Equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2021		141,015,213	$	1,410		950,214	$	(10,813	)	$	—	$	196,224	$	(4,528	)	$	182,293
Vesting of stock awards		275,535				—		—			—		—		—
Treasury stock		—		—		9,130		(91	)		—		—		—			(91	)
Net income		—		—		—		—			—		—		18,037			18,037
Stock-based compensation		—		—		—		—			—		4,631		—			4,631
Balance at June 30, 2022		141,290,748	$	1,410		959,344	$	(10,904	)	$	—	$	200,855	$	13,509		$	204,870

	Common Stock				Treasury Stock					Members’ Equity			Additional Paid-in Capital		Retained Earnings (Deficit)			Total Equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2020		—	$	—		—	$	—		$	159,622		$	—	$	—		$	159,622
Effect of reorganization transactions		138,312,713		1,383		—		—			(159,622	)		158,239		—
IPO common stock		2,702,500		27		—		—			—			15,566		—			15,593
Treasury stock		—		—		950,214	$	(10,813	)		—			—		—			(10,813	)
Net loss		—		—		—		—			—			—		(18,917	)		(18,917	)
Stock-based compensation		—		—		—		—			—			17,139		—			17,139
Balance at June 30, 2021		141,015,213	$	1,410		950,214	$	(10,813	)		—			190,944	$	(18,917	)	$	162,624

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

9

MONTAUK RENEWABLES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands):

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	18,037		$	(18,917	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		10,286			11,396
Provision for deferred income taxes		3,791			4,262
Stock-based compensation		4,631			17,139
Derivative mark-to-market adjustments and settlements		156			(724	)
Gain on property insurance proceeds		(313	)		(82	)
Earn out increase		1,403			—
Net (gain) loss on sale of assets		(293	)		22
Accretion of asset retirement obligations		127			215
Amortization of debt issuance costs		212			271
Impairment loss		120			626
Changes in operating assets and liabilities:
Accounts and other receivables and other current assets		(17,989	)		(3,553	)
Accounts payable and other accrued expenses		6,604			590
Net cash provided by operating activities	$	26,772		$	11,245
Cash flows from investing activities
Capital expenditures	$	(5,148	)	$	(4,469	)
Asset acquisition		—			(4,142	)
Proceeds from sale of assets		1,088			8
Proceeds from insurance recovery		313			82
Net cash used in investing activities	$	(3,747	)	$	(8,521	)
Cash flows from financing activities:
Repayments of long-term debt	$	(4,000	)	$	(5,000	)
Proceeds from initial public offering		—			15,593
Treasury stock purchase		(91	)		(10,813	)
Loan to Montauk Holdings Limited		—			(7,140	)
Finance lease payments		(4	)		—
Net cash used in financing activities	$	(4,095	)	$	(7,360	)
Net increase (decrease) in cash and cash equivalents and restricted cash	$	18,930		$	(4,636	)
Cash and cash equivalents and restricted cash at beginning of period	$	53,612		$	21,559
Cash and cash equivalents and restricted cash at end of period	$	72,542		$	16,923
Reconciliation of cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	72,195		$	16,350
Restricted cash and cash equivalents - current		19			—
Restricted cash and cash equivalents - non-current		328			573
	$	72,542		$	16,923

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these statements.

10

MONTAUK RENEWABLES, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per-share amounts)

NOTE 1 – DESCRIPTION OF BUSINESS

Operations and organization

Montauk Renewables’ Business

Montauk Renewables, Inc. (the “Company” or “Montauk Renewables”) is a renewable energy company specializing in the management, recovery and conversion of biogas into Renewable Natural Gas (“RNG”). The Company captures methane, preventing it from being released into the atmosphere, and converts it into either RNG or electrical power for the electrical grid (“Renewable Electricity”). The Company, headquartered in Pittsburgh, Pennsylvania, has more than 30 years of experience in the development, operation and management of landfill methane-fueled renewable energy projects. The Company has current operations at 15 operating projects located in California, Idaho, Ohio, Oklahoma, Pennsylvania, North Carolina and Texas. The Company sells RNG and Renewable Electricity, taking advantage of Environmental Attribute premiums available under federal and state policies that incentivize their use.

Two of the Company’s key revenue drivers are sales of captured gas and sales of Renewable Identification Numbers (“RINs”) to fuel blenders. The Renewable Fuel Standard (“RFS”) is an Environmental Protection Agency (“EPA”) administered federal law that requires transportation fuel to contain a minimum volume of renewable fuel. RNG derived from landfill methane, agricultural digesters and wastewater treatment facilities used as a vehicle fuel qualifies as a D3 (cellulosic biofuel with a 60% greenhouse gas reduction requirement) RIN. The RINs are compliance units for fuel blenders that were created by the RFS program in order to reduce greenhouse gases and imported petroleum into the United States.

An additional program utilized by the Company is the Low Carbon Fuel Standard (“LCFS”). This is state specific and is designed to stimulate the use of low-carbon fuels. To the extent that RNG from the Company’s facilities is used as a transportation fuel in states that have adopted an LCFS program, it is eligible to receive an Environmental Attribute additional to the RIN value under the federal RFS.

Another key revenue driver is the sale of captured electricity and the associated environmental premiums related to renewable sales. The Company’s electric facilities are designed to conform to and monetize various state renewable portfolio standards requiring a percentage of the electricity produced in that state to come from a renewable resource. Such premiums are in the form of Renewable Energy Credits (“RECs”). The Company’s largest electric facility, located in California, receives revenue for the monetization of RECs as a part of a purchase power agreement.

Collectively, the Company benefits from federal and state government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy, as Environmental Attributes.

Background and Reorganization Transactions

On January 4, 2021, the Company, Montauk Holdings Limited (“MNK”) and Montauk Holdings USA, LLC (a direct wholly-owned subsidiary of MNK at the time, “Montauk USA”) entered into a series of transactions, including an equity exchange and a distribution collectively referred to as the “Reorganization Transactions,” that resulted in the Company owning all of the assets and entities (other than Montauk USA) previously owned by Montauk USA, and Montauk Renewables became a direct wholly-owned subsidiary of MNK. Prior to the Reorganization Transactions, MNK’s business and operations were conducted entirely through Montauk USA and its U.S. subsidiaries, and MNK held no substantial assets other than equity of Montauk USA. The Company had no significant operations or assets prior to January 4, 2021 when it engaged in the equity exchange with Montauk USA and MNK.

11

After completion of the Reorganization Transactions, (i) Montauk USA ceased to own any substantial assets and (ii) all entities through which MNK’s business and operations were conducted became owned, directly or indirectly, by the Company. MNK adopted a plan contemporaneously with the completion of the Reorganization Transactions that authorized the liquidation and dissolution of MNK.

On January 15, 2021, MNK sold the membership interest of Montauk USA to a third party. On January 26, 2021, MNK distributed all of the outstanding shares of the Company’s common stock as a pro rata dividend to the holders of MNK’s ordinary shares (the “Distribution”), subject to any tax withholding obligations under applicable South African law. Each ordinary share of MNK outstanding on January 21, 2021, the record date for the Distribution (the “Record Date”), entitled the holder thereof to receive one share of the Company’s common stock.

On January 26, 2021, the Company closed the initial public offering of its common stock on the Nasdaq Capital Market (the “IPO”) with the shares traded under the symbol “MNTK”. Montauk Renewables issued 2,702,500 shares at $8.50 per share and received gross proceeds of $22,971. The Company’s common stock was also secondarily listed on the Johannesburg Stock Exchange (“JSE”) under the trading symbol “MKR”.

On January 26, 2021, the Company entered into a Loan Agreement and Secured Promissory Note (as amended on February 22, 2021 and December 22, 2021) with MNK pursuant to which the Company advanced a cash loan to MNK for MNK to pay its dividends tax liability arising from the Reorganization Transactions under the South African Income Tax Act, 1962 (Act No. 58 of 1962), as amended. The terms of the loan following the amendments are substantially similar to the initial loan agreement and were primarily entered into to increase the principal amount outstanding under the loan to $8,940 in the aggregate, in accordance with Montauk Renewables’ obligations set forth in the Transaction Implementation Agreement. MNK is currently an affiliate of the Company and certain of the Company’s directors and executive officers are also directors and executive officers of MNK. See Note 18 for more information.

MNK was delisted from the JSE on January 26, 2021. MNK is expected to be liquidated within 24 months of the Distribution.

12

COVID-19

In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic and recommended containment and mitigation measures worldwide. In response to the COVID-19 pandemic and related mitigation measures, the Company established the Infectious Disease and Response Committee (the “IDRC”) to lead the development and implementation of Montauk Renewables’ Infectious Disease and Response Plan and to oversee the company’s response to any infectious disease event. These measures resulted in additional costs, which is expected to continue in order to address employee safety.

The Company has not experienced any material disruptions in its ability to continue business operations nor did the Company experience material negative impacts to the financial results due to the COVID-19 pandemic for the year ended December 31, 2021 and the six months ended June 30, 2022.

The situation surrounding the COVID-19 pandemic remains uncertain. The extent to which the COVID-19 pandemic may affect the Company’s operating results, financial condition, or liquidity in the future will depend on future developments, including the duration of the pandemic, the emergence of more contagious or virulent strains of the virus, travel restrictions, business and workforce disruptions, the availability, uptake and efficacy of vaccines, and the effectiveness of actions taken to contain and treat the disease. Even after the COVID-19 pandemic has subsided, the Company may experience materially adverse impacts to the business due to any resulting supply chain disruptions or economic downturn. Furthermore, the impacts of potential worsening of global economic conditions, inflation, and continued disruptions to and volatility in the financial markets remain unknown.

13

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the SEC on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2022 (the “2021 Annual Report”). The results of operations for the three months and six months ended June 30, 2022 in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2021, has been derived from the audited financial statements as of that date. For further information, refer to the Company’s audited financial statements and notes thereto included for the year ended December 31, 2021 in the 2021 Annual Report.

Retrospective Presentation

As discussed in Note 1, as a result of the Reorganization Transactions, the Company acquired the assets and entities (excluding Montauk USA) that were previously owned by MNK. As part of the Reorganization Transactions, a 1:1 pro rata distribution of shares of the Company’s common stock was made to holders of MNK’s ordinary shares. This pro rata distribution resulted in the ownership of the Company after the Reorganization Transactions being identical to the ownership of MNK prior to the Reorganization Transactions and was therefore akin to a common control transaction. All members’ equity in the financial statements and notes have been retrospectively adjusted to give effect to the 1:1 distribution ratio, as if such pro rata distribution occurred as of all pre-IPO periods presented.

Segment Reporting

The Company reports segment information in three segments: RNG, Renewable Electricity Generation and Corporate. This is consistent with the internal reporting provided to the chief operating decision maker who evaluates operating results and performance. The aforementioned business services and offerings described in Note 1 are grouped and defined by management as two distinct operating segments: RNG and Renewable Electricity Generation. Below is a description of the Company’s operating segments and other activities.

The RNG segment represents the sale of gas sold at fixed-price contracts, counterparty share RNG volumes and applicable Environmental Attributes. This business unit represents the majority of the revenues generated by the Company. The Renewable Electricity Generation segment represents the sale of captured electricity and applicable Environmental Attributes. Corporate & Other relates to additional discrete financial information for the corporate function. It is primarily used as a shared service center for maintaining functions such as executive, accounting, treasury, legal, human resources, tax, environmental, engineering and other operations functions not otherwise allocated to a segment. As such, the corporate entity is not determined to be an operating segment but is discretely disclosed for purposes of reconciliation to the Company’s consolidated financial statements.

14

Use of Estimates

The preparation of financial statements, in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Equity-Based Compensation

The Company accounts for equity-based compensation under the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation, (“ASC 718”). ASC 718 requires compensation costs related to share-based payment transactions, measured based on the fair value of the instruments issued, be recognized in the consolidated financial statements over the requisite service period of the award. Stock options are initially measured on the grant date using the Black-Scholes valuation model, which requires the use of subjective assumptions related to the expected stock price volatility, term, risk-free interest rate and dividend yield. For restricted stock and restricted stock units, the Company determines the grant date fair value based on the closing market price per share of the stock on the date of the grant.

Recently Issued Accounting Standards

In September 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses. The new guidance changes how entities measure credit losses on financial instruments and the timing of when such losses are recorded. The new standard is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt: Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments and contracts in an entity’s own equity. This guidance is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2020. The Company currently does not anticipate this ASU will have a material impact on its consolidated financial statements or related financial statement disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to the current guidance on contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company’s current debt agreement bears interest at the Bloomberg Short-Term Bank Yield Index Rate plus an applicable margin. LIBOR is no longer utilized as a reference rate.

NOTE 3 – ASSET IMPAIRMENT

The Company recorded $69 and $0 in impairment losses for the three months ended June 30, 2022 and 2021, respectively. Impairment losses of $120 and $626 were recorded for the six months ended June 30, 2022 and 2021, respectively. The 2022 impairments recorded to date relate to computer software and hardware no longer being utilized ($51), an amended customer contract ($27) and miscellaneous capital assets no longer in use under current operations ($42). The 2021 impairment was due to a notice received from a landfill host in February 2021 amending the underlying gas rights agreement to remove and begin decommissioning activities related to one of the Company’s renewable electric generation sites.

NOTE 4 – REVENUES FROM CONTRACTS WITH CUSTOMERS

The following tables display the Company’s revenue by major source, excluding realized and unrealized gains or losses under the Company’s gas hedge program, based on product type and timing of transfer of goods and services for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30, 2022
	Goods transferred at a point in time		Goods transferred over time		Total
Major Goods/Service Line:
Natural Gas Commodity	$	1,250	$	14,637	$	15,887
Natural Gas Environmental Attributes		48,647		—		48,647
Electric Commodity		—		2,648		2,648
Electric Environmental Attributes		1,715		—		1,715
	$	51,612	$	17,285	$	68,897
Operating Segment:
RNG	$	49,897	$	14,637	$	64,534
REG		1,715		2,648		4,363
	$	51,612	$	17,285	$	68,897

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	Three Months Ended June 30, 2021
	Goods transferred at a point in time		Goods transferred over time		Total
Major Goods/Service Line:
Natural Gas Commodity	$	6,332	$	6,627	$	12,959
Natural Gas Environmental Attributes		14,622		—		14,622
Electric Commodity		—		2,299		2,299
Electric Environmental Attributes		1,794		—		1,794
	$	22,748	$	8,926	$	31,674
Operating Segment:
RNG	$	20,954	$	6,627	$	27,581
REG		1,794		2,299		4,093
	$	22,748	$	8,926	$	31,674

	Six Months Ended June 30, 2022
	Goods transferred at a point in time		Goods transferred over time		Total
Major Goods/Service Line:
Natural Gas Commodity	$	1,655	$	24,125	$	25,780
Natural Gas Environmental Attributes		71,357		—		71,357
Electric Commodity		—		5,032		5,032
Electric Environmental Attributes		3,364		—		3,364
	$	76,376	$	29,157	$	105,533
Operating Segment:
RNG	$	73,012	$	24,125	$	97,137
REG		3,364		5,032		8,396
	$	76,376	$	29,157	$	105,533

	Six Months Ended June 30, 2021
	Goods transferred at a point in time		Goods transferred over time		Total
Major Goods/Service Line:
Natural Gas Commodity	$	10,308	$	13,322	$	23,630
Natural Gas Environmental Attributes		32,074		—		32,074
Electric Commodity		—		4,572		4,572
Electric Environmental Attributes		2,845		—		2,845
	$	45,227	$	17,894	$	63,121
Operating Segment:
RNG	$	42,382	$	13,322	$	55,704
REG		2,845		4,572		7,417
	$	45,227	$	17,894	$	63,121

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NOTE 5 – ACCOUNTS AND OTHER RECEIVABLES

The Company extends credit based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. Reserves for uncollectible accounts, if any, are recorded as part of General and administrative expenses in the condensed consolidated statements of operations. For the three and six months ended June 30, 2022 and 2021, there were no reserves for uncollectible accounts.

Accounts and other receivables consist of the following as of June 30, 2022 and December 31, 2021:

	June 30, 2022		December, 31 2021
Accounts receivables	$	23,902	$	9,281
Other receivables		93		26
Reimbursable expenses		3		31
Accounts and other receivables	$	23,998	$	9,338

NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

During the second quarter of 2021, the Company purchased $1,585 in RINs. As of June 30, 2021, the Company assessed the RINs’ carrying value at $875. A $710 reduction to net realizable value was recorded for the three months and six month ended June 30, 2021. This adjustment is included in Operating and maintenance expenses within the Condensed consolidated statements of operations for the three and six months ended June 30, 2021. There were no such adjustments during the three or six months ended June 30, 2022 and the Company did not have any purchased RINs as of June 30, 2022 and December 31, 2021.

NOTE 7 – ASSETS HELD FOR SALE

In 2021, the Company initiated a plan to sell nitrogen oxide (“NOx”) emissions allowances credits. The Company concluded that it met the criteria under applicable guidance for a long-lived asset to be held for sale, and accordingly reclassified the emissions allowances of $777 as current assets held for sale on the Consolidated Balance Sheet at December 31, 2021. The Company estimated the fair value of these assets and concluded that the fair value exceeded the carrying value and no impairment was recorded by the Company for the year ended December 31, 2021. In March 2022, the NOx emissions allowances credits were sold for $1,088. A $311 gain on sale of intangible assets was recorded for the six months ended June 30, 2022.

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NOTE 8 – PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consists of the following as of June 30, 2022 and December 31, 2021:

	June 30, 2022			December 31, 2021
Land	$	595		$	595
Buildings and improvements		29,078			28,693
Machinery and equipment		249,322			246,670
Gas mineral rights		34,551			34,551
Construction work in progress		13,631			12,725
Total		327,177			323,234
Less: Accumulated depreciation and amortization		(151,100	)		(142,341	)
Property, plant & equipment, net	$	176,077		$	180,893

Depreciation expense for property plant and equipment was $4,789 and $4,843 for the three months ended June 30, 2022 and 2021, respectively, and $9,599 and $9,798 for the six months ended June 30, 2022 and 2021, respectively. Amortization expense for gas mineral rights was $129 and $445 for the three months ended June 30, 2022 and 2021, respectively, and $257 and $936 for the six months ended June 30, 2022 and 2021, respectively.

NOTE 9 – GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill and Intangible assets consist of the following as of June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
Goodwill	$	60	$	60
Intangible assets with indefinite lives:
Land use rights		329		329
Intangible assets with finite lives:
Interconnections, net of accumulated amortization of $3,447 and $3,034	$	12,113	$	12,526
Customer contracts, net of accumulated amortization of $16,945 and $17,085	$	1,158	$	1,198
Total intangible assets with finite lives:	$	13,271	$	13,724
Total Goodwill and Intangible assets	$	13,660	$	14,113

The weighted average remaining useful life of the customer contracts and interconnection is approximately 17 years and 16 years, respectively. Amortization expense was $216 and $372 for the three months ended June 30, 2022 and 2021, respectively, and $430 and $662 for the six months ended June 30, 2022 and 2021, respectively.

NOTE 10 – ASSET RETIREMENT OBLIGATIONS

The following table summarizes the activity associated with asset retirement obligations of the Company as of June 30, 2022 and December 31, 2021:

	Six Months Ended June 30, 2022			Year Ended December 31, 2021
Asset retirement obligations - beginning of period	$	5,301		$	5,689
Accretion expense		127			(160	)
Decommissioning		(60	)		(228	)
Asset retirement obligations - end of period	$	5,368		$	5,301

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NOTE 11 – DERIVATIVE INSTRUMENTS

To mitigate market risk associated with fluctuations in energy commodity prices (natural gas) and interest rates, the Company utilizes various derivative contracts to secure energy commodity pricing and interest rates under a board-approved program. The Company does not apply hedge accounting to any of its derivative instruments, and all realized and unrealized gains and losses from changes in derivative values are recognized in earnings each period. As a result of the economic hedging strategies employed, the Company had the following realized and unrealized gains and losses in the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021:​​​​​​​

	Three Months Ended
Derivative Instrument	June 30, 2022			June 30, 2021
Commodity contracts:
Realized natural gas	$	(2,655	)	$	—
Unrealized natural gas		1,644			—
Interest rate swaps		614			306
Net gain (loss)	$	(397	)	$	306

	Six Months Ended
Derivative Instrument	June 30, 2022			June 30, 2021
Commodity contracts:
Realized natural gas	$	(3,671	)	$	—
Unrealized natural gas		(1,807	)		—
Interest rate swaps		1,651			724
Net gain (loss)	$	(3,827	)	$	724

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NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s assets and liabilities that are measured at fair value on a recurring basis include the following as of June 30, 2022 and December 31, 2021, set forth by level, within the fair value hierarchy:

	June 30, 2022
	Level 1			Level 2		Level 3			Total
Commodity derivative liability	$	(1,807	)		—		—		$	(1,807	)
Interest rate swap derivative asset		—			813		—			813
Asset retirement obligations		—			—		(5,368	)		(5,368	)
Earn-out liability		—			—		(4,125	)		(4,125	)
	$	(1,807	)	$	813	$	(9,493	)	$	(10,487	)

	December 31, 2021
	Level 1		Level 2			Level 3			Total
Interest rate swap derivative liability	$	—	$	(839	)	$	—		$	(839	)
Asset retirement obligations		—		—			(5,301	)		(5,301	)
Earn-out liability		—		—			(2,721	)		(2,721	)
	$	—	$	(839	)	$	(8,022	)	$	(8,861	)

A summary of changes in the fair values of the Company’s Level 3 instruments, attributable to asset retirement obligations, for the six months ended June 30, 2022 and the year ended December 31, 2021 is included in Note 10. In addition, certain assets are measured at fair value on a non-recurring basis when an indicator of impairment is identified and the assets’ fair values are determined to be less than its carrying value. See Note 3 for additional information.

NOTE 13 – ACCRUED LIABILITIES

The Company’s accrued liabilities consists of the following as of June 30, 2022 and December 31, 2021:

	June 30, 2022		December 31, 2021
Accrued expenses	$	6,166	$	3,551
Payroll and related benefits		2,346		1,239
Royalty		7,243		4,630
Utility		1,699		1,274
Other		394		129
Accrued liabilities	$	17,848	$	10,823

NOTE 14 – DEBT

The Company’s debt consists of the following as of June 30, 2022 and December 31, 2021:

	June 30, 2022			December 31, 2021
Term loans	$	76,000		$	80,000
Less: current principal maturities		(8,000	)		(8,000	)
Less: debt issuance costs (on long-term debt)		(535	)		(608	)
Long-term debt	$	67,465		$	71,392
Current portion of long- term debt		7,834			7,815
	$	75,299		$	79,207

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Amended Credit Agreement

On December 12, 2018, Montauk Energy Holdings LLC (“MEH”) entered into the Second Amended and Restated Revolving Credit and Term Loan Agreement (as amended, “Credit Agreement”), by and among MEH, the financial institutions from time to time party thereto as lenders and Comerica Bank, as the administrative agent, sole lead arranger and sole bookrunner (“Comerica”). The Credit Agreement (i) amended and restated in its entirety MEH’s prior revolving credit and term loan facility, dated as of August 4, 2017, as amended, with Comerica and certain other financial institutions and (ii) replaced in its entirety the prior credit agreement, dated as of August 4, 2017, as amended, between Comerica and Bowerman Power LFG, LLC, a wholly-owned subsidiary of MEH.

On March 21, 2019, MEH entered into the first amendment to the Credit Agreement (the “First Amendment”), which clarified a variety of terms, definitions and calculations in the Credit Agreement. The Credit Agreement requires the Company to maintain customary affirmative and negative covenants, including certain financial covenants, which are measured at the end of each fiscal quarter.

On August 28, 2019 the Company received a temporary waiver for an anticipated Event of Default (as defined in the Credit Agreement) for the consecutive three-month period ended on August 31, 2019 (the “Specified Event of Default”). The Specified Event of Default was waived through October 1, 2019. On September 12, 2019, the Company entered into the second amendment to the Credit Agreement (the “Second Amendment”). Among other matters, the Second Amendment redefined the Fixed Charge Coverage Ratio (as defined in the Credit Agreement), reduced the commitments under the revolving credit facility to $80,000, redefined the Total Leverage Ratio (as defined in the Credit Agreement) and eliminated the RIN Floor (as defined in the Second Amendment) as an Event of Default. In connection with the Second Amendment, the Company paid down the outstanding term loan by $38,250 and the resulting quarterly principal installments were reduced to $2,500.

In connection with the completion of the Reorganization Transactions and the IPO, the Company entered into the third amendment to the Credit Agreement (the “Third Amendment”). This amendment permitted the Change of Control provisions, as defined in the underlying agreement, to permit the Reorganization Transactions and IPO to be completed.

On December 21, 2021, MEH entered into the Fourth Amendment to the Credit Agreement (the “Fourth Amendment”). The current credit agreement, which is secured by a lien on substantially all assets of the Company and certain of its subsidiaries, provides for a $80,000 term loan and a $120,000 revolving credit facility. The term loan amortizes in quarterly installments of $2,000 through 2024, then increases to $3,000 from 2025 to 2026, with a final payment of $32,000 in late 2026.

As of June 30, 2022, $76,000 was outstanding under the term loan. In addition, the Company had $3,905 of outstanding letters of credit as of June 30, 2022. Amounts available under the revolving credit facility are reduced by any amounts outstanding under letters of credit. As of June 30, 2022, the Company’s capacity available for borrowing under the revolving credit facility was $116,095. Borrowings of the term loans and revolving credit facility bear interest at the Bloomberg Short-Term Bank Yield Index Rate plus an applicable margin. Interest rates as of June 30, 2022 and December 31, 2021 were 3.41% and 2.91%, respectively.

The Company accounted for the Fourth Amendment as both a debt modification and debt extinguishment in accordance with ASC 470, Debt (“ASC 470”). In connection with the Credit Agreement, the Company paid $2,027 in fees. Of this amount, $326 was expensed and $1,701 was capitalized and will be amortized over the life of the Credit Agreement. Amortized debt issuance expense was $104 and $133 for the three months ended June 30, 2022 and 2021, respectively, and $212 and $271 for the six months ended June 30, 2022 and 2021, respectively, and was recorded within interest expense on the condensed consolidated statement of operations.

As of June 30, 2022, the Company was in compliance with all applicable financial covenants under the Credit Agreement.

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NOTE 15 – INCOME TAXES

The Company’s provision for income taxes in interim periods is typically computed by applying the estimated annual effective tax rates to income or loss before income taxes for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. For the three months ended June 30, 2022, the Company utilized full year pre-tax income and calculated an estimated effective tax rate. The Company utilized an estimated effective tax rate for the six months ended June 30, 2022. For the three months ended June 30, 2021, the Company utilized full year pre-tax income and calculated an estimated effective tax rate. The Company utilized an estimated effective tax rate for the six months ended June 30, 2021.

	Three Months Ended
	June 30, 2022			June 30, 2021
Provision for income taxes	$	4,565		$	3,385
Effective tax rate		19	%		(267	)%
	Six Months Ended
	June 30, 2022			June 30, 2021
Provision (benefit) for income taxes	$	4,307		$	4,767
Effective tax rate		19	%		(34	)%

The effective tax rate of 19% for the three months ended June 30, 2022 was higher than the rate for the three months ended June 30, 2021 of (267)% primarily due to the current year permanent disallowance of officers’ compensation being less than the prior year permanent disallowance of officers’ compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The effective tax rate of 19% for the six months ended June 30, 2022 was higher than the effective rate for the six months ended June 30, 2021 of (34)% primarily due to the use of year to date pre-tax income used to complete the effective tax rate calculation and a required Code section 162(m) executive compensation limitation permanent adjustment. The June 30, 2022 tax rate included utilization of production tax credits and certain discrete items.

NOTE 16 – 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 six months ended June 30, 2021.

The board of 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 units and restricted stock awards to the employees of Montauk Renewables and its subsidiaries in January 2021. In connection with the restricted stock awards, 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 over the requisite vesting period, and such awards will be settled in shares of common stock of Montauk Renewables. As of June 30, 2022, unrecognized MRI EICP compensation expense for awards the Company expects to vest approximated $23,132 and will be recognized though 2026.

22

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 were to vest over a five-year period and subject to the achievement of time and performance-based vesting criteria over such period. In May 2022, the RS Awards were amended to remove the performance-based vesting criteria and will only be subject to time-based vesting requirements over a five-year period. The awards were revalued at $15,500. Stock compensation expense related to the two awards were $409 for the three and six months ended June 30, 2022. The amended awards vest through 2026.

Restricted stock, restricted stock unit and option awards are subject to various vesting schedules 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 condensed consolidated statements of operations within general and administrative expenses for the six months ended June 30, 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 date the award was granted and the exercise and settlement of options into shares as of the exercise date. The fair value of the MRI EICP options were 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

23

The following table summarizes the restricted shares, restricted stock units and options outstanding under the MRI EICP as June 30, 2022 and June 30, 2021, respectively:

	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, 2021		2,569,613	$	10.08		377,984	$	10.23		950,214	$	11.38