Share-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

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.

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

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
Beginning of period - January 1, 2022		2,569,613		$	10.08		377,984		$	10.23		950,214		$	11.38
Granted		1,250,000			12.40
Vested		(256,681	)		11.38		(27,984	)		11.38		(950,214	)		11.38
Forfeited		(1,250,000	)		9.04							—			—
End of period – June 30, 2022		2,312,932		$	11.75		350,000		$	10.13		—		$	—

950,214 options vested for the three and six months ended June 30, 2022. None of the 950,214 vested options were exercised during either the three or six months ended June 30, 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		2,269,827			11.20		29,304			11.38		950,214		11.38
Vested		(950,214	)		11.38		—			—		—		—
Forfeited		—			—		(1,056	)		11.38		—		—
Exercised		—			—		—			—		—		—
End of period – June 30, 2021		1,319,613		$	11.07		28,248		$	11.38		950,214	$	11.38