10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 March 31, 2022

☐	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:

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

May 4

, 2022 was 143,603,681 shares.

Table of Contents

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		27

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		42

ITEM 4.	CONTROLS AND PROCEDURES		42

PART II OTHER INFORMATION			43

ITEM 1.	LEGAL PROCEEDINGS		43

ITEM 1A.	RISK FACTORS		43

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		43

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		44

ITEM 4.	MINE SAFETY DISCLOSURES		44

ITEM 5.	OTHER INFORMATION		44

ITEM 6.	EXHIBITS		44

SIGNATURES			45

Table of Contents

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.

•

“

” refers to carbon intensity.

•

“

CWCs

” refers to cellulosic waiver credits.

•

“

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

•

“

” refers to advanced biofuels with a 50% GHG reduction requirement.

•

“

EHS

” refers to environment, health and safety.

•

“

EIA

” refers to the U.S. Energy Information Administration.

•

“

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.

•

“

LNG

” refers to liquefied natural 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.

•

“

RPS

” refers to Renewable Portfolio Standards.

•

“

RVOs

” refers to renewable volume obligations.

•

“

WRRFs

” refers to water resource recovery facilities.

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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 amendment and the Montauk Ag project in North Carolina, the anticipated completion of the engine repairs and resumption of operations 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;

•

disruptions in our supply chain due to transportation delays, travel restrictions, raw material cost increases and shortages, closures of businesses or facilities, and the associated costs and inflation related thereto;

•

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 Pico feedstock amendment and the Montauk Ag project in North Carolina and the anticipated completion of engine repairs and resumption of operations at the Security facility;

•

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;

Table of Contents

•

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;

•

our belief that the measures taken to remediate the material weakness identified in our internal control over financial reporting will improve our internal control over financial reporting

•

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.

Table of Contents

PART I FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS


	Page
Montauk Renewables, Inc .
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021		7
Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and March 31, 2021		8
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and March 31, 2021		9
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021		10
Notes to Condensed Consolidated Financial Statements		11

Table of Contents

MONTAUK RENEWABLES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data):


	As of March 31, 2022		As of December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	59,794	$	53,266
Accounts and other receivables		5,578		9,338
Related party receivable		8,940		8,940
Prepaid expenses and other current assets		3,655		2,846
Assets held for sale		—		777

Total current assets	$	77,967	$	75,167
Restricted cash - non-current	$	328	$	328
Property, plant and equipment, net		178,263		180,893
Goodwill and intangible assets, net		13,898		14,113
Deferred tax assets		10,806		10,570
Non-current portion of derivative asset		368		—
Operating lease right-of-use assets		231		305
Other assets		5,121		5,104

Total assets	$	286,982

SEC Form 10-Q filed by Montauk Renewables Inc.