QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or |
(IRS Employer Identification No.) | |
Organization) |
||
(Address of Principal Executive Offices) |
(Zip Code) |
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered | ||
The |
Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company |
Page |
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6 | ||||||
ITEM 1. |
6 | |||||
ITEM 2. |
27 | |||||
ITEM 3. |
42 | |||||
ITEM 4. |
42 | |||||
43 | ||||||
ITEM 1. |
43 | |||||
ITEM 1A. |
43 | |||||
ITEM 2. |
43 | |||||
ITEM 3. |
44 | |||||
ITEM 4. |
44 | |||||
ITEM 5. |
44 | |||||
ITEM 6. |
44 | |||||
45 |
• | “ ADG |
• | “ CARB |
• | “ CNG |
• | “ CI |
• | “ CWCs |
• | “ D3 |
• | “ D5 |
• | “ EHS |
• | “ EIA |
• | “ EPA |
• | “ Environmental Attributes |
• | “ FERC |
• | “ GHG |
• | “ JSE |
• | “ LCFS |
• | “ LFG |
• | “ LNG |
• | “MMBtu” refers to Metric Million British Thermal Unit. |
• | “ PPAs |
• | “ RECs |
• | “ Renewable Electricity |
• | “ RFS |
• | “ RINs |
• | “ RNG |
• | “ RPS |
• | “ RVOs |
• | “ WRRFs |
• | 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; |
• | 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. |
ITEM 1. |
FINANCIAL STATEMENTS |
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Montauk Renewables, Inc |
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Unaudited Condensed Consolidated Financial Statements |
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8 | ||||
9 | ||||
10 | ||||
11 |
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As of March 31, 2022 |
As of December 31, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts and other receivables |
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Related party receivable |
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Prepaid expenses and other current assets |
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Assets held for sale |
— | |||||||
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Total current assets |
$ | $ | ||||||
Restricted cash - non-current |
$ | $ | ||||||
Property, plant and equipment, net |
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Goodwill and intangible assets, net |
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Deferred tax assets |
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Non-current portion of derivative asset |
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— |
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Operating lease right-of-use |
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Other assets |
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Total assets |
$ |
$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
Accrued liabilities |
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Current portion of lease liability |
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Current portion of derivative liability |
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Current portion of long-term debt |
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Total current liabilities |
$ | $ | ||||||
Long-term debt, less current portion |
$ | $ | ||||||
Non-current portion of lease liability |
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Non-current portion of derivative liability |
— | |||||||
Asset retirement obligation |
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Other liabilities |
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Total liabilities |
$ | $ | ||||||
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STOCKHOLDERS’ EQUITY |
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Common stock, $ and issued at March 31, 2022and December 31, 2021, respectively ; and shares outstanding at March 31, 2022and December 31, 2021, respectively |
$ | $ | ||||||
Treasury stock, at cost, and shares at March 31, 2022 and December 31, 2021, respectively |
( |
) | ( |
) | ||||
Additional paid-in capital |
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Retained deficit |
( |
) | ( |
) | ||||
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Total stockholders’ equity |
$ | $ | ||||||
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Total liabilities and stockholders’ equity |
$ |
$ |
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Three Months Ended March 31, |
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2022 |
2021 |
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Total operating revenues |
$ | $ | ||||||
Operating expenses: |
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Operating and maintenance expenses |
$ | $ | ||||||
General and administrative expenses |
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Royalties, transportation, gathering and production fuel |
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Depreciation, depletion and amortization |
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Gain on insurance proceeds |
( |
) | ( |
) | ||||
Impairment loss |
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Transaction costs |
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Total operating expenses |
$ | $ | ||||||
Operating loss |
$ | ( |
) | $ | ( |
) | ||
Other (income) expenses: |
||||||||
Interest expense |
$ | $ | ||||||
Net gain on sale of assets |
( |
) | ||||||
Other (income) expense |
( |
) | ||||||
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Total other (income) expenses |
$ | ( |
) | $ | ||||
Loss before income taxes |
$ | ( |
) | $ | ( |
) | ||
Income tax (benefit) expense |
( |
) | ||||||
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Net loss |
$ | ( |
) | $ | ( |
) | ||
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Loss per share: |
||||||||
Basic |
$ | ( |
) | $ | ( |
) | ||
Diluted |
$ | ( |
) | $ | ( |
) | ||
Weighted-average common shares outstanding: |
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Basic |
||||||||
Diluted |
Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Retained Earnings (Deficit) |
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Shares |
Amount |
Shares |
Amount |
Member’s Equity |
Total Equity |
|||||||||||||||||||||||||||
Balance at December 31, 2020 |
— |
$ |
— |
— |
$ |
— |
$ |
$ |
— |
$ |
— |
$ |
||||||||||||||||||||
Effect of reorganization transactions |
— | — | ( |
) | — | |||||||||||||||||||||||||||
IPO common stock |
— | — | — | — | ||||||||||||||||||||||||||||
Treasury stock |
— | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Balance at March 31, 2021 |
$ |
$ |
( |
) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||||||||||
Balance at December 31, 2021 |
$ |
$ |
( |
) |
$ |
— |
$ |
$ |
( |
) |
$ |
|||||||||||||||||||||
Vesting of stock awards |
— |
— |
— |
— |
— |
— |
— |
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Treasury stock |
— | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Balance at March 31, 2022 |
$ |
$ |
( |
) |
$ |
$ |
$ |
( |
) |
$ |
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Three Months Ended March 31, |
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2022 |
2021 |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation, depletion and amortization |
||||||||
(Benefit) provision for deferred income taxes |
( |
) | ||||||
Stock-based compensation |
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Derivative mark-to-market |
( |
) | ||||||
Gain on property insurance proceeds |
( |
) | ( |
) | ||||
Accretion of asset retirement obligations |
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Net gain on sale of assets |
( |
) | — |
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Amortization of debt issuance costs |
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Impairment loss |
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Changes in operating assets and liabilities: |
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Accounts and other receivables and other current assets |
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Accounts payable and other accrued expenses |
( |
) | ( |
) | ||||
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Net cash provided by operating activities |
$ | $ | ||||||
Cash flows from investing activities: |
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Capital expenditures |
$ | ( |
) | $ | ( |
) | ||
Proceeds from insurance recovery |
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Proceeds from sale of assets |
— |
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Net cash used in investing activities |
$ | ( |
) | $ | ( |
) | ||
Cash flows from financing activities: |
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Repayments of long-term debt |
$ | ( |
) | $ | ( |
) | ||
Proceeds from initial public offering |
— | |||||||
Treasury stock purchase |
( |
) | ( |
) | ||||
Related party receivable |
— |
( |
) | |||||
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Net cash used in financing activities |
$ | ( |
) | $ | ( |
) | ||
Net increase in cash and cash equivalents and restricted cash |
$ | $ | ||||||
Cash and cash equivalents and restricted cash at beginning of period |
$ | $ | ||||||
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Cash and cash equivalents and restricted cash at end of period |
$ | $ | ||||||
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Reconciliation of cash, cash equivalents, and restricted cash at end of period: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash and cash equivalents - current |
— | |||||||
Restricted cash and cash equivalents - non-current |
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$ |
$ |
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Three Months Ended March 31, 2022 |
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Goods transferred at a point in time |
Goods transferred over time |
Total |
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Major Goods/Service Line: |
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Natural Gas Commodity |
$ | $ | $ | |||||||||
Natural Gas Environmental Attributes |
— | |||||||||||
Electric Commodity |
— | |||||||||||
Electric Environmental Attributes |
— | |||||||||||
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$ | $ | $ | ||||||||||
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Operating Segment: |
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RNG |
$ | $ | $ | |||||||||
REG |
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$ | $ | $ | ||||||||||
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Three Months Ended March 31, 2021 |
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Goods transferred at a point in time |
Goods transferred over time |
Total |
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Major Goods/Service Line: |
||||||||||||
Natural Gas Commodity |
$ | $ | $ | |||||||||
Natural Gas Environmental Attributes |
— | |||||||||||
Electric Commodity |
— | |||||||||||
Electric Environmental Attributes |
— | |||||||||||
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$ | $ | $ | ||||||||||
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Operating Segment: |
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RNG |
$ | $ | $ | |||||||||
REG |
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$ | $ | $ | ||||||||||
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March 31, 2022 |
December, 31 2021 |
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Accounts receivables |
$ | $ | ||||||
Other receivables |
||||||||
Reimbursable expenses |
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Accounts and other receivables |
$ | $ | ||||||
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March 31, 2022 |
December, 31 2021 |
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Land |
$ | $ | ||||||
Buildings and improvements |
||||||||
Machinery and equipment |
||||||||
Gas mineral rights |
||||||||
Construction work in progress |
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Total |
||||||||
Less: Accumulated depreciation and amortization |
( |
) | ( |
) | ||||
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Property, plant & equipment, net |
$ | $ | ||||||
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March 31, 2022 |
December 31, 2021 |
|||||||
Goodwill |
$ | $ | ||||||
Intangible assets with indefinite lives: |
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Land use rights |
||||||||
Intangible assets with finite lives: |
||||||||
Interconnection, net of accumulated amortization of $ |
$ | $ | ||||||
Customer contracts, net of accumulated amortization of $ |
$ | $ | ||||||
Total intangible assets with finite lives: |
$ | $ | ||||||
Total Goodwill and Intangible assets |
$ |
$ |
||||||
Three Months Ended March 31, 2022 |
Year Ended December 31, 2021 |
|||||||
Asset retirement obligations - beginning of period |
$ | $ | ||||||
Accretion expense |
( |
) | ||||||
Decommissioning |
( |
) | ( |
) | ||||
Asset retirement obligations - end of period |
$ | $ |
Three Months Ended |
||||||||||||
Derivative Instrument |
Location |
March 31, 2022 |
March 31, 2021 |
|||||||||
Commodity contracts: |
||||||||||||
Realized natural gas |
Gas commodity sales | $ | ( |
) | $ | |||||||
Unrealized natural gas |
Other income | ( |
) | |||||||||
Interest rate swaps |
Interest expense | |||||||||||
Net gain (loss) |
$ | ( |
) | $ | ||||||||
March 31, 2022 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Commodity derivative liability |
$ | ( |
) | $ | ( |
) | ||||||||||
Interest rate swap derivative asset |
||||||||||||||||
Interest rate swap derivative liability |
( |
) | $ | $ | ( |
) | ||||||||||
Asset retirement obligations |
( |
) | ( |
) | ||||||||||||
Earn-out liability |
( |
) | ( |
) | ||||||||||||
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||
December 31, 2021 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Interest rate swap derivative liability |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
Asset retirement obligations |
( |
) | ( |
) | ||||||||||||
Earn-out liability |
( |
) | ( |
) | ||||||||||||
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
March 31, 2022 |
December 31, 2021 |
|||||||
Accrued expenses |
$ | |
$ | |||||
Payroll and related benefits |
||||||||
Royalty |
||||||||
Utility |
||||||||
Other |
||||||||
Accrued liabilities |
$ | $ | ||||||
March 31, 2022 |
December 31, 2021 |
|||||||
Term Loans |
$ | $ | ||||||
Less: current principal maturities |
( |
) | ( |
) | ||||
Less: debt issuance costs (on long-term debt) |
( |
) | ( |
) | ||||
Long-term Debt |
$ | $ | ||||||
Current Portion of Long- term Debt |
||||||||
$ |
$ |
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Three Months Ended |
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March 31, 2022 |
March 31, 2021 |
|||||||
(Benefit) expense provision for income taxes |
$ | ( |
) | $ | ||||
Effective tax rate |
% | ( |
)% |
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Grant Date |
||||
Risk-free interest rate |
% | |||
Expected volatility |
% | |||
Expected option life (in years) |
||||
Grant-date fair value |
$ |
Restricted Shares |
Restricted Stock Units |
Options |
||||||||||||||||||||||
Number of Shares |
Weighted Average Grant Date Fair Value |
Number of |
Weighted Average Grant Date Fair Value |
Number of Shares |
Weighted Average Exercise Price |
|||||||||||||||||||
End of period - December 31, 2021 |
$ |
$ |
$ |
|||||||||||||||||||||
Beginning of period - January 1, 2022 |
$ | $ | $ | |||||||||||||||||||||
Granted |
||||||||||||||||||||||||
Vested |
( |
) |
( |
) | ( |
) | ||||||||||||||||||
Forfeited |
||||||||||||||||||||||||
Exercised |
||||||||||||||||||||||||
End of period - March 31, 2022 |
$ |
$ |
$ |
|||||||||||||||||||||
Restricted Shares |
Restricted Stock Units |
Options |
||||||||||||||||||||||
Number of Shares |
Weighted Average Grant Date Fair Value |
Number of Shares |
Weighted Average Grant Date Fair Value |
Number of Shares |
Weighted Average Exercise Price |
|||||||||||||||||||
End of period - December 31, 2020 |
— |
$ |
— |
— |
$ |
— |
— |
$ |
— |
|||||||||||||||
Beginning of period - January 1, 2021 |
$ | $ | $ | |||||||||||||||||||||
Granted |
||||||||||||||||||||||||
Vested |
( |
) | — | — | ||||||||||||||||||||
Forfeited |
— | — | ( |
) | ||||||||||||||||||||
Exercised |
— |
— |
— |
— |
— |
— |
||||||||||||||||||
End of period – March 31, 2021 |
$ |
$ |
$ |
|||||||||||||||||||||
Three Months Ended March 31, 2022 |
||||||||||||||||
RNG |
REG |
Corporate |
Total |
|||||||||||||
Total Revenue |
$ | $ | $ | ( |
) | $ | ||||||||||
Net Income (Loss) |
( |
) | ( |
) | ( |
) | ||||||||||
EBITDA |
( |
) | ||||||||||||||
Adjusted EBITDA (1) |
( |
) | ||||||||||||||
Total Assets |
||||||||||||||||
Capital Expenditure |
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Three Months Ended March 31, 2022 |
||||||||||||||||
RNG |
REG |
Corporate |
Total |
|||||||||||||
Net Income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
Depreciation and amortization |
||||||||||||||||
Interest expense |
— | — | ||||||||||||||
Income tax benefit |
— | — | ( |
) | ( |
) | ||||||||||
|
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|
|
|
|
|
|||||||||
EBITDA |
$ | $ | $ | ( |
) | $ | ||||||||||
|
|
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|
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|
|||||||||
Impairment loss |
— | — | ||||||||||||||
Net gain on sale of assets |
( |
) | ( |
) | ||||||||||||
Transaction costs |
— | — | ||||||||||||||
Non cash hedging charges |
— | — | ||||||||||||||
|
|
|
|
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|
|
|
|||||||||
Adjusted EBITDA |
$ | $ | $ | ( |
) | $ | ||||||||||
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|
Three Months Ended March 31, 2021 |
||||||||||||||||
RNG |
REG |
Corporate |
Total |
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Total Revenue |
$ | $ | $ | — | $ | |||||||||||
Net Income (Loss) |
( |
) | ( |
) | ( |
) | ||||||||||
EBITDA |
( |
) | ( |
) | ( |
) | ||||||||||
Adjusted EBITDA (1) |
( |
) | ( |
) | ( |
) | ||||||||||
Total Assets |
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Capital Expenditure |
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Three Months Ended March 31, 2021 |
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RNG |
REG |
Corporate |
Total |
|||||||||||||
Net Income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
Depreciation and amortization |
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Interest expense |
— | — | ||||||||||||||
Income tax expense |
— | |||||||||||||||
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EBITDA |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
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Impairment loss |
— | — | ||||||||||||||
Transaction costs |
— | — | ||||||||||||||
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Adjusted EBITDA |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
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Three Months Ended March 31, 2022 |
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RNG |
REG |
Corporate |
Total |
|||||||||||||
Customer A |
% | — | — | % | ||||||||||||
Customer B |
% | — | — | % | ||||||||||||
Customer C |
% | — | % | |||||||||||||
Customer D |
% | — | — | % | ||||||||||||
Customer E |
% | % |
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Three Months Ended March 31, 2021 |
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RNG |
REG |
Corporate |
Total |
|||||||||||||
Customer A |
% | — | — | % | ||||||||||||
Customer B |
% | — | — | % | ||||||||||||
Customer C |
% | — | — | % | ||||||||||||
Customer D |
% | % | ||||||||||||||
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Three Months Ended March 31, |
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2022 |
2021 |
|||||||
Cash paid for amounts included in the measurement of operating lease liabilities |
$ | $ | ||||||
Weighted average remaining lease term (in years) |
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Weighted average discount rate |
% | % |
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|
|
Year Ending |
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Remainder of 2022 |
$ | |||
2023 |
||||
2024 |
||||
Interest |
( |
) | ||
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|||
Total |
$ |
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|
Three months ended March 31, 2022 |
Three months ended March 31, 2021 |
|||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Basic weighted-average shares outstanding |
||||||||
Dilutive effect of share-based awards |
||||||||
Diluted weighted-average shares outstanding |
||||||||
Basic loss per share |
$ | ( |
) | $ | ( |
) | ||
Diluted loss per share |
$ | ( |
) | $ | ( |
) |
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Regulatory or policy initiatives, including the federal RFS program and state-level low-carbon fuel programs in states such as California and Oregon, that drive demand for RNG and its derivative Environmental Attributes (as further described below). |
• | Efficiency, mobility and capital cost flexibility in RNG operations enable them to compete successfully in multiple markets. Our operating model is nimble, as we commonly use modular equipment; our RNG processing equipment is more efficient than its fossil-fuel counterparts. |
• | Demand for compressed natural gas (“CNG”) from natural gas-fueled vehicles. The RNG we create is pipeline quality and can be used for transportation fuel when converted to CNG. CNG is commonly used by medium-duty fleets that are close to fueling stations, such as city fleets, local delivery trucks and waste haulers. |
• | Regulatory requirements, market pressure and public relations challenges increase the time, cost and difficulty of permitting new fossil fuel-fired facilities. |