Montauk Renewables, Inc. [MNTK] Filings

 

 

 

 

 

 

 

 

 

 

 

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 (§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 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 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 of the Exchange Act).    Yes  ☐    No  ☒

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

 

 

 

 

10-Q

10-Q

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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.

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.

 

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		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			$	286,480
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,118			$	4,973
Accrued liabilities			9,351				10,823
Current portion of lease liability			225				296
Current portion of derivative liability			3,621				650
Current portion of long-term debt			7,828				7,815
Total current liabilities		$	26,143			$	24,557
Long-term debt, less current portion		$	69,427			$	71,392
Non-current portion of lease liability			25				27
Non-current portion of derivative liability			—				189
Asset retirement obligation			5,379				5,301
Other liabilities			2,587				2,721
Total liabilities		$	103,561			$	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 March 31, 2022   and December 31, 2021, respectively ; 141,057,772 and 141,015,213    shares outstanding at March 31, 2022   and December 31, 2021, respectively		$	1,410			$	1,410
Treasury stock, at cost, 959,344 and 950,214 shares at March 31, 2022 and December 31, 2021, respectively			(10,904	)			(10,813	)
Additional paid-in capital			198,558				196,224
Retained deficit			(5,643	)			(4,528	)
Total stockholders’ equity		$	183,421			$	182,293
Total liabilities and stockholders’ equity		$	286,982			$	286,480

		Three Months Ended March 31,
		2022				2021
Total operating revenues		$	32,169			$	31,447
Operating expenses:
Operating and maintenance expenses		$	13,201			$	10,612
General and administrative expenses			8,495				20,452
Royalties, transportation, gathering and production fuel			7,206				6,218
Depreciation, depletion and amortization			5,153				5,737
Gain on insurance proceeds			(313	)			(82	)
Impairment loss			51				626
Transaction costs			27				88
Total operating expenses		$	33,820			$	43,651
Operating loss		$	(1,651	)		$	(12,204	)
Other (income) expenses:
Interest expense		$	32			$	646
Net gain on sale of assets			(293	)			—
Other (income) expense			(17	)			33
Total other (income) expenses		$	(278	)		$	679
Loss before income taxes		$	(1,373	)		$	(12,883	)
Income tax (benefit)   expense			(258	)			1,382
Net loss		$	(1,115	)		$	(14,265	)
Loss per share:
Basic		$	(0.01	)		$	(0.10	)
Diluted		$	(0.01	)		$	(0.10	)
Weighted-average common shares outstanding:
Basic			141,045,477				141,015,213
Diluted			141,045,477				141,015,213

		Common Stock								Treasury Stock												Additional Paid-in Capital				Retained Earnings (Deficit)
		Shares				Amount				Shares				Amount				Member’s Equity												Total Equity
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			—				—				—				—				—				—				(14,265	)			(14,265	)
Stock-based compensation			—				—				—				—				—				14,598				—				14,598
Balance at March 31, 2021			141,015,213			$	1,410				950,214			$	(10,813	)		$	—			$	188,403			$	(14,265	)		$	164,735
Balance at December 31, 2021			141,015,213			$	1,410				950,214			$	(10,813	)		$	—			$	196,224			$	(4,528	)		$	182,293
Vesting of stock awards			42,559				—				—				—				—				—				—				—
Treasury stock			—				—				9,130				(91	)			—				—				—				(91	)
Net loss			—				—				—				—				—				—				(1,115	)			(1,115	)
Stock-based compensation			—				—				—				—				—				2,334				—				2,334
Balance at March 31, 2022			141,057,772			$	1,410				959,344			$	(10,904	)		$	—			$	198,558			$	(5,643	)		$	183,421

		Three Months Ended March 31,
		2022				2021
Cash flows from operating activities:
Net loss		$	(1,115	)		$	(14,265	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization			5,153				5,737
(Benefit) provision for deferred income taxes			(236	)			1,066
Stock-based compensation			2,334				14,598
Derivative mark-to-market and settlements			2,415				(418	)
Gain on property insurance proceeds			(313	)			(82	)
Accretion of asset retirement obligations			98				138
Net gain on sale of assets			(293	)			—
Amortization of debt issuance costs			108				137
Impairment loss			51				626
Changes in operating assets and liabilities:
Accounts and other receivables and other current assets			2,949				2,634
Accounts payable and other accrued expenses			(1,554	)			(2,402	)
Net cash provided by operating activities		$	9,597			$	7,769
Cash flows from investing activities:
Capital expenditures		$	(2,378	)		$	(1,335	)
Proceeds from insurance recovery			313				82
Proceeds from sale of assets			1,088				—
Net cash used in investing activities		$	(977	)		$	(1,253	)
Cash flows from financing activities:
Repayments of long-term debt		$	(2,000	)		$	(2,500	)
Proceeds from initial public offering			—				15,593
Treasury stock purchase			(91	)			(10,813	)
Related party receivable			—				(7,140	)
Net cash used in financing activities		$	(2,091	)		$	(4,860	)
Net increase in cash and cash equivalents and restricted cash		$	6,529			$	1,656
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		$	60,141			$	23,215
Reconciliation of cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents		$	59,794			$	22,643
Restricted cash and cash equivalents - current			19				—
Restricted cash and cash equivalents - non-current			328				572
		$	60,141			$	23,215

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 the selling of captured gas and the selling 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 selling 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.

 

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 17 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.

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, we began implementing changes in our business in March 2020 to protect our employees and customers, and to support appropriate health and safety protocols. For example, we arranged shifts at facilities to stagger employees to assist with following social distancing protocols, utilized overnight and weekend remote facility monitoring during normal operating shifts, implemented extensive cleaning and sanitation processes for both facilities and office spaces, incorporated temperature checks and facial covering requirements, instituted employee and visitor fitness questionnaires, restricted corporate travel and visitor access to sites and implemented work-from-home initiatives for certain employees. Further, we 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 we expect to continue to incur as we work to address employee safety.

While we have not experienced any material disruptions in our ability to continue business operations or experienced a material negative impact to our financial results due to the

COVID-19

pandemic for the year ended December 31, 2021 or the three months ended March 31, 2022, certain aspects of our business, financial condition and results of operations were negatively impacted during the year ended December 31, 2020. These disruptions included the delay of commissioning of development sites for up to five months resulting in delays to registrations and qualifications necessary for EPA pathways and delays in revenue streams from these facilities, contract cancellations, and a decrease in operational efficiency in maintenance and operations.

The situation surrounding the

COVID-19

pandemic remains uncertain. The extent to which the

COVID-19

pandemic may affect our business, operating results, financial condition, or liquidity in the future will depend on future developments, including the duration of the outbreak, 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, we may experience materially adverse impacts to our 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.

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 ended March 31, 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 our audited financial statements and notes thereto included for the year ended December 31, 2021 in the 2021 Annual Report.

Retrospective Presentation of Ownership Exchange

As discussed in Note 1, as a result of the Reorganization Transactions, the Company acquired the assets and entities (excluding Montauk USA) which were previously owned by MNK. As part of the Reorganization Transactions, a 1:1

pro rata exchange of shares of the Company’s common stock was made to holders of MNK’s ordinary shares. The Reorganization Transactions resulted in a pro rata exchange whereby the ownership of the Company after the Reorganization Transactions was identical to the ownership of MNK prior to the Reorganization Transactions and was therefore akin to a common control transaction. All member’s equity in the financial statements and notes have been retrospectively adjusted to give effect to the 1:1 ratio, as if such pro rata exchange occurred as of all pre-IPO periods presented, including periods presented on the unaudited condensed consolidated balance sheets, condensed consolidated statements of operations, consolidated statements of stockholders’ equity and notes to the condensed consolidated financial statements contained herein. 

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.

 

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 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 FASB issued 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 an impairment loss of $51 and $626

for the three months ended March 31, 2022 and 2021, respectively. The first quarter 2022 impairment related to computer software and hardware no longer being utilized. The first quarter 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 months ended March 31, 2022 and 2021:

 

		Three Months Ended March 31, 2022
		Goods transferred at a point in time				Goods transferred over time				Total
Major Goods/Service Line:
Natural Gas Commodity		$	405			$	9,488			$	9,893
Natural Gas Environmental Attributes			22,710				—				22,710
Electric Commodity			—				2,385				2,385
Electric Environmental Attributes			1,649				—				1,649
		$	24,764			$	11,873			$	36,637
Operating Segment:
RNG		$	23,115			$	9,488			$	32,603
REG			1,649				2,385				4,034
		$	24,764			$	11,873			$	36,637

		Three Months Ended March 31, 2021
		Goods transferred at a point in time				Goods transferred over time				Total
Major Goods/Service Line:
Natural Gas Commodity		$	3,976			$	6,695			$	10,671
Natural Gas Environmental Attributes			17,452				—				17,452
Electric Commodity			—				2,273				2,273
Electric Environmental Attributes			1,051				—				1,051
		$	22,479			$	8,968			$	31,447
Operating Segment:
RNG		$	21,428			$	6,695			$	28,123
REG			1,051				2,273				3,324
		$	22,479			$	8,968			$	31,447

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 months ended March 31, 2022 and 2021, there were no reserves for uncollectible accounts.

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

 

		March 31, 2022				December, 31 2021
Accounts receivables		$	5,518			$	9,281
Other receivables			35				26
Reimbursable expenses			25				31
Accounts and other receivables		$	5,578			$	9,338

NOTE 6 – 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 three months ended March 31, 2022.

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT, NET

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

 

		March 31, 2022				December, 31 2021
Land		$	595			$	595
Buildings and improvements			28,967				28,693
Machinery and equipment			247,667				246,670
Gas mineral rights			34,551				34,551
Construction work in progress			12,698				12,725
Total			324,478				323,234
Less: Accumulated depreciation and amortization			(146,215	)			(142,341	)
Property, plant & equipment, net		$	178,263			$	180,893

Depreciation expense for property plant and equipment was $4,810 and $4,955 and amortization expense for gas mineral rights was $128 and $491 for the three months ended March 31, 2022 and 2021, respectively.

NOTE 8 – GOODWILL AND INTANGIBLE ASSETS, NET

Intangible assets consist of the following as of March 31, 2022 and December 31, 2021:

 

		March 31, 2022				December 31, 2021
Goodwill		$	60			$	60
Intangible assets with indefinite lives:
Land use rights			329				329
Intangible assets with finite lives:
Interconnection, net of accumulated amortization of $3,241 and $3,034		$	12,320			$	12,526
Customer contracts, net of accumulated amortization of $17,094 and $17,085		$	1,189			$	1,198
Total intangible assets with finite lives:		$	13,509			$	13,724
Total Goodwill and Intangible assets		$	13,898			$	14,113

The weighted average remaining useful life of the customer contracts and interconnection is approximately 15 years and 17 years, respectively. Amortization expense was $215 and $291 for the three months ended March 31, 2022 and 2021, respectively.

NOTE 9 – ASSET RETIREMENT OBLIGATIONS

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

 

		Three Months Ended March 31, 2022				Year Ended December 31, 2021
Asset retirement obligations - beginning of period		$	5,301			$	5,689
Accretion expense			98				(160	)
Decommissioning			(20	)			(228	)
Asset retirement obligations - end of period		$	5,379			$	5,301

NOTE 10 – 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 months ended March 31, 2022 and 2021:​​​​​​​

 

						Three Months Ended
Derivative Instrument		Location				March 31, 2022				March 31, 2021
Commodity contracts:
Realized natural gas			Gas commodity sales			$	(1,016	)		$	—
Unrealized natural gas			Other income				(3,451	)			—
Interest rate swaps			Interest expense				1,036				418
Net gain (loss)						$	(3,431	)		$	418

NOTE 11 – 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 March 31, 2022 and December 31, 2021, set forth by level, within the fair value hierarchy:

 

		March 31, 2022
		Level 1				Level 2				Level 3				Total
Commodity derivative liability		$	(3,451	)			—				—			$	(3,451	)
Interest rate swap derivative asset			—				368				—				368
Interest rate swap derivative liability			—				(170	)		$	—			$	(170	)
Asset retirement obligations			—				—				(5,379	)			(5,379	)
Earn-out liability			—				—				(2,721	)			(2,721	)
		$	(3,451	)		$	198			$	(8,100	)		$	(11,353	)

 

		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 three months ended March 31, 2022 and the year ended December 31, 2021 is included in Note 9. 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 value are determined to be less than its carrying value. See Note 3 for additional information.

NOTE 12 – ACCRUED LIABILITIES

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

 

		March 31, 2022				December 31, 2021
Accrued expenses		$	4,042			$	3,551
Payroll and related benefits			1,340				1,239
Royalty			2,458				4,630
Utility			1,152				1,274
Other			359				129
Accrued liabilities		$	9,351			$	10,823

NOTE 13 – DEBT

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

 

		March 31, 2022				December 31, 2021
Term Loans		$	78,000			$	80,000
Less: current principal maturities			(8,000	)			(8,000	)
Less: debt issuance costs (on long-term debt)			(573	)			(608	)
Long-term Debt		$	69,427			$	71,392
Current Portion of Long- term Debt			7,828				7,815
		$	77,255			$	79,207