# OPAL Fuels Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [OPAL Fuels Inc.](/companies/opal.md) (CIK 1842279)
- Form: 10-Q
- Filed: 2023-11-14
- Accepted by EDGAR: Nov 14, 2023, 16:50 ET
- Period: 2023-09-30
- Accession: 0001842279-23-000092
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1842279/000184227923000092/wdq-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1842279/000184227923000092/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $70.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $166.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $13.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $41.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $1.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$15.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $227.0k | us-gaap:ProfitLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $106.9m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.59 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 26,978,969 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 27,683,855 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $4.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $92.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $15.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $105.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $690.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $56.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $253.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $174.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-09-30 | −$852.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,792 characters.

*In this section, references to "OPAL", "we", "us", "our", and the "Company" refer to* OPAL Fuels Inc. *and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022, and the audited consolidated financial statements and notes thereto included in the Company's Annual Report. In addition to historical information, this discussion and analysis includes certain forward-looking statements which reflect our current expectations. The Company's actual results may materially differ from these forward-looking statements.*

### Overview

We are a renewable energy company specializing in the capture and conversion of biogas for the (i) production of RNG for use as a vehicle fuel for heavy and medium-duty trucking fleets, (ii) generation of electricity generated from renewable sources ("Renewable Power") for sale to utilities, (iii) generation and sale of Environmental Attributes (as defined below) associated with RNG and Renewable Power, and (iv) sales of RNG as pipeline quality natural gas. We also design, develop, construct, operate and service Fueling Stations for trucking fleets across the country that use natural gas to displace diesel as their transportation fuel. The Biogas Conversion Projects currently use LFG and dairy manure as the source of the biogas. In addition, we have recently begun implementing design, development, and construction services for hydrogen Fueling Stations, and we are pursuing opportunities to diversify our sources of biogas to other waste streams. The term “Environmental Attributes” refers to federal, state and local government incentives in the United States, provided in the form of RINs, RECs, LCFS credits, ISCC Carbon Credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects.

#### Recent developments

On October 5, 2023, Ms. Ann Anthony gave notice of her intention to resign as Chief Financial Officer ("CFO") of the Company to pursue another professional opportunity. Ms. Anthony’s departure date was at the time not yet determined. Ms. Anthony will, also resign from her positions as the Company’s Principal Financial Officer and Principal Accounting Officer. On October 10, 2023, the board of directors of the Company appointed Mr. Scott Contino as Interim Chief Financial Officer. Mr. Contino will assist Ms. Anthony during the transition and assume the CFO role on the date of Ms. Anthony’s departure. The Company has entered into an interim services agreement (the “Interim Services Agreement”) with Fortistar in accordance with the terms and conditions of the existing Administrative Services Agreement between the Company and Fortistar. Pursuant to the Interim Services Agreement, the Company will pay Fortistar a services fee as described below, which is substantially the same as the cash compensation that was paid to Ms. Anthony.

On October 19, 2023, Ms. Anthony signed a separation agreement with the Company, pursuant to which Ms. Anthony has agreed to serve in her current role until November 15, 2023. Certain equity incentive awards that were granted to Ms. Anthony, and that would have otherwise been forfeited due to her resignation, will vest on March 31, 2024 in accordance with the Separation Agreement. These equity awards consist of 33,328 restricted stock units and options to purchase 5,545 shares of Class A Common Stock at an exercise price of $6.97.

On October 20, 2023 (the “Effective Date”), a wholly-owned subsidiary of the Company entered into an Asset Purchase and Sale Agreement (for the purposes of this paragraph, the “Agreement”) with Washington Gas Light Company ("WGL"). The subsidiary is currently constructing a production facility (the “Facility”) at the Prince William County landfill located in Manassas, Virginia, on a parcel located on the landfill, to process LFG into RNG. The Agreement obligates the subsidiary to develop, plan and permit a gas pipeline extension and associated interconnection facilities (the “Project”) to deliver RNG from the Facility to an interconnection point on WGL’s pipeline. Per the terms and conditions of the Agreement, WGL will purchase the Project from the subsidiary after the final completion of same at a purchase price of $25 million. The closing is contingent upon approval of the Agreement by the Virginia State Corporation Commission, as well as the satisfaction of customary closing conditions, and the outside closing date is on or prior to the 12-month anniversary of the Effective Date.

#### Impact of COVID-19

In response to the COVID-19 pandemic, we instituted a safety committee to oversee our compliance with federal, state, and local government mandates, and ensure that the Company adheres to Centers for Disease Control guidelines to maintain safe working conditions for our employees. Some of the protocols we implemented include limiting in-person work to essential personnel and performing temperature checks. Since March 2020, where practicable, our employees have worked remotely and minimized travel and other non-essential contact. Additionally, we are providing our employees with COVID-19 testing at no cost and personal protective equipment for their safety and well-being.

As of the date of this report, the COVID-19 pandemic has had a relatively minimal economic impact on our results of operations.

The duration and future economic severity of the COVID-19 remains uncertain, and our results of operations and financial condition could potentially face material adverse effect(s) in the future due to COVID-19.

#### Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our interim unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC, which apply to interim financial statements. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues, expenses and warrants and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. As the discussion and analysis of our financial condition and results of operations are based upon our interim unaudited condensed consolidated financial statements, they do not include all of the information on critical accounting policies normally included in consolidated financial statements. Accordingly, a detailed description of these critical accounting policies and the consolidated financial statements and notes thereto are included in the Company’s Annual Report.

#### Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the Company relate to the useful lives of property, plant and equipment, fair value of the deconsolidated VIEs, the value of stock-based compensation and the fair value of derivatives including warrant liabilities, earnout liabilities, put option on a forward purchase agreement, interest rate swaps and commodity swap contracts.

### Key Factors and Trends Influencing our Results of Operations

The principal factors affecting our results of operations and financial condition are the markets for RNG, Renewable Power, and associated Environmental Attributes, and access to suitable biogas production resources. Additional factors and trends affecting our business are discussed in "*Risk Factors*" elsewhere in this report.

#### Market Demand for RNG

Demand for our converted biogas and associated Environmental Attributes, including RINs and LCFS credits, is heavily influenced by United States federal and state energy regulations together with commercial interest in renewable energy products. Markets for RINs and LCFS credits arise from regulatory mandates that require refiners and blenders to incorporate renewable content into transportation fuels. The EPA annually sets proposed renewable volume obligations ("RVOs") for D3 (cellulosic biofuel with a 60% greenhouse gas (“GHG”) reduction requirement) RINs in accordance with the mandates established by the Energy Independence and Security Act of 2007. In June 2023, the EPA set RVOs for 2023 through 2025 via a new Set rule. This 3 year RVO is expected to reduce volatility in RIN pricing for the associated period. On the state level, the economics of RNG are enhanced by low-carbon fuel initiatives, particularly well-established programs in California and Oregon (with several other states also actively considering LCFS initiatives similar to those in California, Washington and Oregon). Federal and state regulatory developments could result in significant future changes to market demand for the RINs and LCFS credits we produce. This would have a corresponding impact to our revenue, net income, and cash flow.

Transportation, including heavy-duty trucking, generates approximately 30% of overall CO₂ and other climate-harming GHG emissions in the United States, and transitioning this sector to low and negative carbon fuels is a critical step towards reducing overall global GHG emissions. The adoption rate of RNG-powered vehicles by commercial transportation fleets will significantly impact demand for our products.

We are also exposed to the commodity prices of natural gas and diesel, which serve as alternative fuel for RNG and therefore impact the demand for RNG.

#### Renewable Power Markets

We also generate revenues from sales of Renewable Power generated by our biogas-to-Renewable Power projects, and associated ISCC Carbon Credits and RECs. ISCC Carbon Credits and RECs exist because of legal and governmental regulatory requirements in Europe and the United States, respectively, and a change in law or in governmental policies concerning Renewable Power, LFG, or ISCC Carbon Credits or RECs could affect the market for, and the pricing of, such power and credits.

We periodically evaluate opportunities to convert existing Renewable Power projects to RNG production. We have been negotiating with several of our landfill and Renewable Power counterparties to enter into arrangements that would enable the LFG resource to produce RNG. Changes in the price we receive for Renewable Power, associated ISCC Carbon Credits and RECs, together with the revenue opportunities and conversion costs associated with converting our LFG sites to RNG production, could have a significant impact on our future profitability.

### Key Components of Our Results of Operations

We generate revenues from the sale of RNG fuel, Renewable Power, and associated Environmental Attributes, as well as from the construction, fuel supply, and servicing of Fueling Stations for commercial transportation vehicles using natural gas to power their fleets. These revenue sources are presented in our statement of operations under the following captions:

- **RNG Fuel.** The RNG Fuel segment includes RNG supply as well as the associated generation and sale of commodity natural gas and environmental credits, and consists of:
- RNG Production Facilities – the design, development, construction, maintenance and operation of facilities that convert raw biogas into pipeline quality natural gas; and
- The Company's interests in both operating and construction projects.
- **Fuel Station Services.** Through its Fuel Station Services segment**, t**he Company provides construction and maintenance services to third-party owners of vehicle Fueling Stations and performs fuel dispensing activities including generation and minting of environmental credits. This segment includes:
- Manufacturing division that builds Compact Fueling Systems and Defueling systems;
- Design/Build contracts where the Company serves as general contractor for construction of Fueling Stations, typically structured as Guarantee Maximum Price or fixed priced contracts for customers, generally lasting less than one year;
- Service and maintenance contracts for RNG/CNG Fueling Stations; and
- RNG and CNG Fuel Dispensing Stations - This includes both the dispensing (or sale) of RNG, commodity natural gas, and environmental credit generation and monetization. The Company operates Fueling Stations that dispense both CNG and RNG fuel for vehicles.
- **Renewable Power Portfolio.** The Renewable Power portfolio segment generates renewable power and associated environmental attributes such as ISCC Carbon Credits and RECs through combustion of biogas from landfills which is then sold to public utilities throughout the United States.

Our costs of sales associated with each revenue category are as follows:

- **RNG Fuel.** Includes royalty payments to biogas site owners for the biogas we use; service provider costs; salaries and other indirect expenses related to the production process, utilities, transportation, storage, and insurance; and depreciation of production facilities.
- **Fuel Station Services.** Includes equipment supplier costs; service provider costs; and salaries and other indirect expenses.
- **Renewable Power.** Includes royalty payments, land usage costs; service provider costs; salaries and other indirect expenses related to the production process; utilities; and depreciation of production facilities.

Selling, general, and administrative expense consists of costs involving corporate overhead functions, including the cost of services provided to us by an affiliate, and marketing costs.

Depreciation and amortization primarily relate to depreciation associated with property, plant, and equipment and amortization of acquired intangibles arising from PPAs and interconnection contracts. We are in the process of expanding our RNG and Renewable Power production capacity and expect depreciation costs to increase as new projects are placed into service.

### Results of Operations for the three and nine months ended September 30, 2023 and 2022:

### Operational Results

The following table summarizes the operational data achieved for the three and nine months ended September 30, 2023 and 2022:

| RNG Fuel Capacity and Utilization | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Design Capacity (Million MMBtus)(1) | 1.3 | 1.0 | 3.9 | 2.9 |
| Volume of Inlet Gas (Million MMBtus) | 0.8 | 0.7 | 2.2 | 1.7 |
| Inlet Design Capacity Utilization % (2) (3) | 79% | 78% | 77% | 72% |
| RNG Fuel volume produced (Million MMBtus) | 0.7 | 0.6 | 2.0 | 1.5 |
| Utilization of Inlet Gas % (3) (4) | 84% | 85% | 85% | 87% |

(1) Design Capacity for RNG facilities is measured as the volume of feedstock biogas that the facility is capable of accepting at the inlet and processing during the associated period. Design Capacity is presented as OPAL’s ownership share (i.e., net of joint venture partners’ ownership) of the facility and is calculated based on the number of days in the period. New facilities that come online during a quarter are pro-rated for the number of days in commercial operation.

(2) Inlet Design Capacity Utilization is measured as the weighted average of Volume of Inlet Gas, divided by the total Design Capacity. The Volume of Inlet Gas varies over time depending on, among other factors, (i) the quantity and quality of waste deposited at the landfill, (ii) waste management practices by the landfill, and (iii) the construction, operations and maintenance of the landfill gas collection system used to recover the landfill gas. The Design Capacity for each facility will typically be correlated to the amount of landfill gas expected to be generated by the landfill during the term of the related gas rights agreement. The Company expects Inlet Design Capacity Utilization to be in the range of 75-85% on an aggregate basis over the next several years. Typically, newer facilities perform at the lower end of this range and demonstrate increasing utilization as they mature.

(3) Data not available for the Company's dairy projects, i.e., Sunoma and Biotown.

(4) Utilization of Inlet Gas is measured as weighted average of RNG Fuel Produced divided by Volume of Inlet Gas. Utilization of Inlet Gas varies over time depending on availability and efficiency of the facility and the quality of landfill gas (i.e., concentrations of methane, oxygen, nitrogen, and other gases). The Company generally expects Utilization of Inlet Gas to be in the range of 80% - 90%.

| Renewable Power | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Design Capacity (MW per hour)(1) | 83.6 | 112.5 | 102.8 | 112.5 |
| Design Capacity for the period (Millions MWh) (1) | 0.25 | 0.25 | 0.73 | 0.73 |
| Renewable Power produced ( Millions MWh) | 0.11 | 0.11 | 0.35 | 0.37 |
| Design Capacity Utilization (%) (2) | 44% | 44% | 48% | 51% |

(1) Design Capacity for Renewable Power facilities is the manufacturer’s expected capacity at ISO conditions for each facility and may not reflect actual production from the projects, which depends on many variables including, but not limited to, (i) quantity and quality of the biogas, (ii) operational up-time of the facility, including dispatch and maintenance downtime and (iii) actual efficiency of the facility.

(2) Design Capacity Utilization for Renewable Power facilities is measured as Renewable Power Produced divided by Design Capacity for the period. Given (i) built-in un-utilized capacity from historical designs, (ii) availability (a function of higher maintenance requirements compared to RNG facilities) and (iii) commencement of operations of the Emerald RNG facility, which will result in low levels of dispatch for the Arbor Hills facility (which will operate on a standby basis but remain in the operating portfolio), the Company’s Design Capacity Utilization is expected to remain below 50%.

### RNG Projects

Below is a table setting forth the RNG projects in operation and construction in our portfolio:

| RNG Projects in Operation: | OPAL's Share of Design Capacity (MMbtus per year) (1) | Source of Biogas | Ownership | Expected Commercial Operation Date (5) |
| --- | ---: | --- | ---: | --- |
| Greentree | 1,061,712 | LFG | 100% | N/A |
| Imperial | 1,061,712 | LFG | 100% | N/A |
| Emerald (2) (3) | 1,327,140 | LFG | 50% | N/A |
| New River | 663,570 | LFG | 100% | N/A |
| Noble Road (2) | 464,499 | LFG | 50% | N/A |
| Pine Bend (2) | 424,685 | LFG | 50% | N/A |
| Biotown (2) | 48,573 | Dairy | 10% | N/A |
| Sunoma (4) | 192,350 | Dairy | 90% | N/A |
| **Sub total** | 5,244,241 |  |  |  |
| **RNG Projects in Construction:** |  |  |  |  |
| Prince William | 1,725,282 | LFG | 100% | First quarter 2024 |
| Hilltop (6) | 255,500 | Dairy | 100% | Third quarter 2024 |
| Vander Schaaf (6) | 255,500 | Dairy | 100% | Fourth quarter 2024 |
| Polk County | 1,060,000 | LFG | 100% | Fourth quarter 2024 |
| Sapphire (2) | 796,284 | LFG | 50% | Third quarter 2024 |
| Atlantic | 331,785 | LFG | 50% | Mid 2025 |
| **Sub total** | 4,424,351 |  |  |  |
| **Total** | 9,668,592 |  |  |  |

**(1)** Reflects the Company’s ownership share of design capacity for projects that are not 100% owned by the Company (i.e., net of joint venture partners’ ownership). Design capacity is measured as the volume of feedstock biogas that the plant is capable of accepting at the inlet and processing and may not reflect actual production of RNG from the projects, which will depend on many variables including, but not limited to, (i) quantity and quality of the biogas, (ii) operational up-time of the facility and (iii) actual efficiency of the facility.

(2) We record our ownership interests in these projects as equity method investments in our condensed consolidated financial statements.

(3) Emerald completed commissioning and commenced operations during the third quarter of 2023.

(4) This project has provisions that will adjust or “flip” the percentage of distributions to be made to us over time, typically triggered by achievement of hurdle rates that are calculated as internal rates of return on capital invested in the project.

(5) Expected Commercial Operation Date (“COD”) for commencement of the RNG projects in construction is based on the Company’s estimate as of the date of this report. CODs are estimates and are subject to change as a result of, among other factors out of the Company’s control: (i) regulatory/permitting approval timing, (ii) disruption in supply chains and (iii) construction timing.

(6) Achievement of these commissioning dates is subject to receipt of certain permits and successful resolution of a series of change order requests from the Engineering, Procurement and Construction contractor responsible for the design and construction of the projects’ facilities, which the Company has disputed. For additional information, please see Note 17 *Commitments and contingencies* to the financial statements.

### Renewable Power Projects

Below is a table setting forth the Renewable Power projects in operation in our portfolio:

|  | Nameplate capacity (MW per hour) (1) | Current RNG conversion candidate (2) |
| --- | ---: | --- |
| Sycamore | 5.2 | Yes |
| Lopez | 3.0 | — |
| Miramar Energy | 3.2 | Yes |
| San Marcos | 1.8 | — |
| Santa Cruz | 1.6 | — |
| San Diego - Miramar | 6.5 | Yes |
| West Covina | 6.5 | — |
| Port Charlotte | 2.9 | — |
| Taunton | 3.6 | — |
| Arbor Hills (3) | 28.9 | N/A |
| C&C | 6.3 | Yes |
| Albany | 5.9 | — |
| Concord and CMS | 14.4 | Yes |
| Pioneer | 8.0 | — |
| Prince William I (4) | 1.9 | Yes |
| Prince William II (5) | 4.8 | Yes |
| Old Dominion | 8.0 | Yes |
| **Total** | 112.5 |  |

(1) Nameplate capacity is the manufacturer’s expected capacity at ISO conditions for each facility and may not reflect actual production from the projects, which depends on many variables including, but not limited to, (i) quantity and quality of the biogas, (ii) operational up-time of the facility and (iii) actual productivity of the facility.

(2) We have determined that some of our Renewable Power Projects are currently RNG conversion candidates. The Company identifies suitable RNG conversion candidates based on highest return of capital which is driven by certain factors including, but not limited to (i) the quantity and quality of LFG, (ii) the proximity to pipeline interconnect and (iii) the ability to enter into contracts, including site leases and gas rights agreements, with host sites. The Company may change its decision to convert a Renewable Power Project into an RNG project in the future. The Company believes disclosing renewable power conversion candidates provides visibility into the effect of those conversions on the existing Renewable Power portfolio.

(3) Although the RNG conversion is completed, it is currently contemplated that the Arbor Hills renewable power plant will continue limited operations on a stand-by, emergency basis through March of 2031.

(4) It is currently contemplated that the Prince William I renewable power plant will continue operations through approximately December 2023.

(5) It is currently contemplated that the Prince William II renewable power plant will continue operations through approximately December 2023.

### Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

The following table presents the period-over-period change for each line item in the Company's statement of operations for the three and nine months ended September 30, 2023 and 2022.

*(in thousands)*

| Revenues: | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change 2023 | Nine Months Ended September 30, 2022 |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| RNG fuel | $20,088 | $18,293 | $1,795 | 10% | $37,468 | $48,815 | $(11,347) | (23)% |
| Fuel station services | 37,305 | 35,771 | 1,534 | 4% | 88,089 | 87,376 | 713 | 1% |
| Renewable Power | 13,708 | 12,486 | 1,222 | 10% | 43,543 | 32,623 | 10,920 | 33% |
| Total revenues | 71,101 | 66,550 | 4,551 | 7% | 169,100 | 168,814 | 286 | —% |
| **Operating expenses:** |  |  |  |  |  |  |  |  |
| Cost of sales - RNG fuel | 8,896 | 10,872 | 1,976 | 18% | 24,303 | 27,043 | 2,740 | 10% |
| Cost of sales - Fuel station services | 31,887 | 30,837 | (1,050) | (3)% | 79,655 | 74,130 | (5,525) | (7)% |
| Cost of sales - Renewable power | 11,112 | 7,645 | (3,467) | (45)% | 28,251 | 23,593 | (4,658) | (20)% |
| Selling, general, and administrative | 13,594 | 15,751 | 2,157 | 14% | 41,729 | 34,561 | (7,168) | (21)% |
| Depreciation, amortization, and accretion | 3,739 | 3,380 | (359) | (11)% | 10,934 | 10,101 | (833) | 8% |
| Total expenses | 69,228 | 68,485 | (743) | 1% | 184,872 | 169,428 | (15,444) | 9% |
| Operating income (loss) | 1,873 | (1,935) | 3,808 | 197% | (15,772) | (614) | (15,158) | (2469)% |
| **Other income (expense)** |  |  |  |  |  |  |  |  |
| Interest and financing expense, net | (2,885) | (790) | (2,095) | (265)% | (4,482) | (7,212) | 2,730 | 38% |
| Loss on debt extinguishment | (953) | — | (953) | (100)% | (2,848) | — | (2,848) | (100)% |
| Change in fair value of derivative instruments, net | (138) | (1,908) | 1,770 | 93% | 4,955 | (1,580) | 6,535 | 414% |
| Other income | 604 | 6,308 | (5,704) | (90)% | 123,645 | 6,308 | 117,337 | 1860% |
| Income (loss) income from equity method investments | 1,726 | 3,694 | (1,968) | (53)% | 1,433 | 3,658 | (2,225) | (61)% |
| Net income (loss) before provision for income taxes | 227 | 5,369 | (5,142) | (96)% | 106,931 | 560 | 106,371 | 18995% |
| Provision for income taxes | — | — | — | —% | — | — | — | —% |
| Net income (loss) | 227 | 5,369 | (5,142) | (96)% | 106,931 | 560 | 106,371 | 18995% |
| Net (loss) income attributable to redeemable non-controlling interests | (2,104) | 4,161 | (6,265) | (151)% | 83,123 | (2,584) | 85,707 | 3317% |
| Net loss attributable to non-redeemable non-controlling interests | (51) | (325) | 274 | 84% | (531) | (824) | 293 | 36% |
| Paid-in-kind preferred dividends | 2,782 | 2,658 | 124 | 5% | 8,394 | 5,093 | 3,301 | 65% |
| **Net income attributable to Class A Common stockholders** | (400) | (1,125) | 725 | 64% | 15,945 | (1,125) | 17,070 | 1,517% |

60

### Revenues

The following table shows revenues earned by product for the three and nine months ended September 30, 2023 and 2022:

*(in thousands)*

| RNG Fuel | Three Months Ended September 30, 2023 | 2022 | $ Change | Nine Months Ended September 30, 2023 | 2022 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Brown gas sales | 972 | 4,251 | (3,279) | 3,403 | 9,390 | (5,987) |
| Environmental Attributes (1) | 19,116 | 14,042 | 5,074 | 34,065 | 39,425 | (5,360) |
| **Total RNG Fuel** | 20,088 | 18,293 | 1,795 | 37,468 | 48,815 | (11,347) |
| **Fuel Station Services** |  |  |  |  |  |  |
| OPAL owned stations | 4,895 | 7,014 | (2,119) | 13,421 | 13,099 | 322 |
| RNG marketing | 11,956 | 5,710 | 6,246 | 21,728 | 19,005 | 2,723 |
| Third party station service and maintenance | 5,270 | 4,835 | 435 | 15,489 | 14,196 | 1,293 |
| Construction | 15,184 | 18,212 | (3,028) | 37,451 | 41,076 | (3,625) |
| **Total Fuel Station Services** | 37,305 | 35,771 | 1,534 | 88,089 | 87,376 | 713 |
| **Renewable Power** |  |  |  |  |  |  |
| Electricity sales | 9,170 | 10,943 | (1,773) | 27,760 | 30,095 | (2,335) |
| Environmental Attributes (2) | 4,538 | 1,543 | 2,995 | 15,783 | 2,528 | 13,255 |
| **Total Renewable Power** | 13,708 | 12,486 | 1,222 | 43,543 | 32,623 | 10,920 |
| **Total Revenues** | 71,101 | 66,550 | 4,551 | 169,100 | 168,814 | 286 |

(1) Revenues from Environmental Attributes in RNG Fuel segment relate to revenues earned from sales of RINs and LCFSs.

(2) Revenues from Environmental Attributes in Renewable Power segment include revenues earned from sales of ISCC carbon sales and RECs.

#### RNG Fuel

Revenue from RNG Fuel increased by $1.8 million, or 10% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to an increase of $5.1 million from the sale of Environmental Attributes consisting of a $0.3 million increase from the sale of 5,192 LCFS credits in the current quarter. There were no LCFS credit sales in 2022. There was a net increase of $4.8 million from the sale of an additional 2.0 million RINs offset by lower pricing in the current quarter compared to the third quarter of 2022. This was offset by a decrease in revenues of $3.3 million from the sale of brown gas due to lower commodity pricing.

Revenue from RNG Fuel decreased by $11.3 million, or 23%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease is primarily due to a decrease of $5.4 million from sale of environmental credits ($1.4 million volume variance from sale of 0.4 million less RINs sold in 2023 compared to 2022 and decrease of $4.0 million from price variance as a result of decrease of RIN pricing year over year). There was a decrease of $6.0 million from brown gas sales due to lower pricing year over year.

#### Fuel Station Services

Revenue from Fuel Station Services increased by $1.5 million, or 4%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to increase of $6.2 million in RNG marketing revenues out of which $3.5 million is from volume variance from delivering 1.2 million additional RINs, $2.5 million increase in RIN minting services offset by negative pricing variance of $0.4 million representing a decrease of $0.32 per RIN and $0.5 million increase in service revenues. There was a decrease of $2.1 million from brown gas sales at OPAL owned station due to lower pricing year over year and a decrease of $2.8 million in construction revenues due to timing of recognition of revenues in construction projects.

Revenue from Fuel Station Services increased by $0.7 million, or 1%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This was primarily attributable to $1.3 million increase in service revenues due to nine new service and ownership sites, $2.7 million increase in RNG marketing revenues from RIN and LCFS generation revenues from new supply contracts and release of stored gas, $0.3 million increase in brown gas sales at OPAL owned stations due to higher volumes from six new ownership sites offset by decrease of $3.4 million construction revenues due to timing of construction projects.

#### Renewable Power

Revenue from Renewable Power increased by $1.2 million, or 10%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to increase of $3.0 million from the sale of ISCC Carbon Credits and REC sales offset by loss of revenues of $1.2 million from the planned shutdown of one Renewable Power facility in September 2022 and $0.6 million from another Renewable Power facility as it converted to an RNG facility.

Revenue from Renewable Power increased by $10.9 million, or 33%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This change was attributable primarily to increase of $13.2 million from ISCC Carbon Credit sales and REC sales offset by decrease of $2.3 million from the planned shutdown of one of the Renewable Power facility.

### Cost of sales

#### RNG Fuel

Cost of sales from RNG Fuel decreased by $2.0 million, or 18%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to the decrease of $0.6 million in start-up costs in New River as the facility came online in second quarter of 2022 and decrease in royalty expenses from lower RIN pricing.

Cost of sales from RNG Fuel decreased by $2.7 million, or 10%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to a decrease in royalty expenses from lower RIN pricing, lower development costs from deconsolidation of Emerald and Sapphire and lower dispensing fees.

#### Fuel Station Services

Cost of sales from Fuel Station Services increased by $1.1 million, or 3%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to $2.5 million increase in cost of goods sold for third party inventory of environmental credits, $3.0 million increase in rebates and dispensing fees for environmental credits, offset by a $1.9 million decrease in brown gas pricing, $2.8 million decrease in construction costs in line with the decrease in construction revenues.

Cost of sales from Fuel Station Services increased by $5.5 million, or 7%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This change was attributable primarily to a $6.7 million increase in dispensing and cost of goods sold on third party inventory of environmental credits, a $2.2 million increase in service costs for new sites offset by decrease of $2.7 million in construction costs and a $0.9 million decrease in brown gas costs from lower commodity pricing.

#### Renewable Power

Cost of sales from Renewable Power increased by $3.5 million, or 45%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to a $1.3 million termination payment made on a power purchase agreement at one our Renewable Power facilities and $1.2 million of expenses related to a facility which was converted to an RNG project.

Cost of sales from Renewable Power increased by $4.7 million, or 20%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to a $1.3 million termination payment made on a power purchase agreement at one our Renewable Power facilities, $1.7 million increase in major maintenance expense, $1.4 million increase in royalty expense related to ISCC Carbon Credits and $1.2 million of expenses related to a facility which was converted to an RNG project offset by savings from planned shut down of one of our Renewable Power facilities.

### Selling, general, and administrative

Selling, general, and administrative expenses decreased by a total of $2.2 million, or 14%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to higher insurance cost of $5.0 million in the third quarter of 2022 on directors and officers tail policy offset by increase in stock-based compensation expense of $1.5 million, $0.6 million increase in legal and third party fees related to debt extinguishment and $0.7 million increase in compensation costs year over year.

Selling, general, and administrative expenses increased by a total of $7.2 million, or 21%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to an increase in costs from compensation and benefits by $5.0 million, $0.6 million increase in legal and third party fees related to debt extinguishment, $1.1 million increase in legal fees and stock-based compensation expense of $4.1 million offset by savings in insurance expense on directors and officers tail policy of $3.1 million and $0.7 million savings in audit fees.

### Depreciation, amortization, and accretion

Depreciation, amortization, and accretion marginally increased by a total of $0.4 million, or 11%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Depreciation, amortization, and accretion increased by a total of $0.8 million, or 8%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to increase in depreciation expense in OPAL Fuel Station Services segment due to increase in owned stations and $0.3 million increase as New River came online in second quarter of 2022.

### Interest and financing expense, net

Interest and financing expenses, net increased by $2.1 million, or 265%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to $2.7 million of negative mark to market change recorded in the third quarter of 2022 on Convertible Note Payable when 50% of it was converted to equity upon closing of the Business Combination and the 10% premium on the remaining outstanding balance expired. This was offset by savings of $1.1 million on the Senior Secured Credit Facility as the debt was fully repaid in first quarter of 2023 and there was an increase in interest expense on the OPAL Term Loan of $0.5 million as interest rates as well as the outstanding debt increased year over year.

Interest and financing expenses, net decreased by $2.7 million, or 38%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to savings of $2.3 million on the Senior Secured Credit Facility as the loan was fully repaid in the first quarter of 2023, $1.4 million savings on the OPAL Term Loan due to capitalized interest offset by increase in interest rates and debt outstanding year over year, an increase in interest income of $0.9 million offset by increase of $1.7 million in the interest expense of Convertible Note Payable as there was a negative mark to market change in the comparable quarter in the prior year.

### Loss on debt extinguishment

On May 30, 2023, OPAL Intermediate Holdco 2 assigned to Paragon its rights and obligations under OPAL Term Loan II. The joint venture partner of Paragon reimbursed the Company $0.8 million as its portion of the transaction costs incurred.

The Company expensed the remaining deferred financing costs of $1.9 million as loss on debt extinguishment in its condensed consolidated statement of operations for the three and nine months ended September 30, 2023. Additionally, the Company completed a debt restructuring of the OPAL Term Loan in third quarter of 2023 which was accounted for as a debt modification and the Company recorded a loss on debt extinguishment of $0.9 million.

There was no loss on debt extinguishment for the three and nine months ended September 30, 2022.

### Change in fair value of derivatives, net

Change in fair value of derivatives, net decreased by $1.8 million, or 93%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily because there were public and private warrants and put options outstanding as of September 30, 2022. However, the warrants were exchanged in the fourth quarter of 2022 and the put option expired in January 2023. The change in fair value for current quarter includes only earnout liabilities.

Change in fair value of derivatives, net increased by $6.5 million, or 414%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. In 2023, the change in fair value of derivative instruments represents mark to market change on earnout liabilities which decreased in value. In 2022, the Company had additional derivative instruments including public and private warrants, put options and interest rate swaps on the Senior Secured Credit Facility.

### Other income

Other income decreased by $5.7 million, or (90)%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This is primarily due to $4.3 million gain recorded on extinguishment of contingent liability and $1.9 million gain on repayment of a note receivable recorded in third quarter of 2022. The other income in the current quarter represents gain on transfer of RINs as consideration for services rendered in our OPAL Fuel Station Services segment.

Other income increased by $117.3 million or 1860%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily attributable to $122.9 million gain recorded on deconsolidation of VIEs offset by $6.3 million gain on extinguishment of a contingent liability and repayment of note receivable recorded prior year.

### Income (loss) from equity method investments

Net income attributable to equity method investments decreased by $2.0 million, or 53%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This change was attributable to a $3.2 million gain on settlement of commodity swap contracts as our portion from GREP in the prior year quarter.

Net loss attributable to equity method investments decreased by $2.2 million or 61% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily because we recorded $3.2 million gain on settlement of commodity swap contracts as our portion from GREP in the third quarter of 2022 and increase in net income from Pine Bend and Noble Road offset by the amortization of basis differences of $1.6 million in 2023.

### Net income attributable to redeemable non-controlling interests

Net income attributable to redeemable non-controlling interests decreased by $6.3 million or 151%. The net income for the three months ended September 30, 2023 and 2022 reflects the portion of earnings belonging to OPAL Fuels equity holders.

Net income attributable to redeemable non-controlling interests increased by $85.7 million or 3317% and reflects the portion of earnings belonging to OPAL Fuels equity holders.

### Net loss attributable to non-redeemable non-controlling interests

Net loss attributable to non-redeemable non-controlling interests for the three months ended September 30, 2023 decreased compared to three months ended September 30, 2022. This reflects the joint venture partners' loss in certain RNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the three months ended September 30, 2023 were Sunoma and Central Valley and in 2022 we had Emerald, Sapphire, Sunoma and Central Valley.

Net loss attributable to non-redeemable non-controlling interests for the nine months ended September 30, 2023 decreased marginally compared to nine months ended September 30, 2022. This reflects the joint venture partners' loss in certain RNG facilities in which we sold a portion of our ownership interests but are consolidated in our financial statements. These entities for the nine months ended September 30, 2023 were Sunoma, Central Valley and five months of Emerald and Sapphire and in 2022, we had Emerald, Sapphire, Sunoma and Central Valley.

### Paid-in-kind preferred dividends

On November 29, 2021, we entered into an Exchange Agreement with Hillman whereby Hillman exchanged its ownership interests in the four RNG projects of $30.0 million into 300,000 series A-1 preferred units at a par value of $100 per unit and 1.4% of the common units of OPAL Fuels. On the same day, we entered into a Subscription Agreement with NextEra for up to 1,000,000 Series A preferred units, which were issued to NextEra during first and second quarters of 2022 for total proceeds of $100.0 million. Upon completion of the Business Combination, these were converted to redeemable preferred non-controlling interests.

Redeemable preferred non-controlling interests carry an interest of 8% dividend payable quarterly either in cash or paid-in-kind for the first eight quarters at the option of the Company. The Company recorded the dividends payable of $2.8 million and $8.4 million for the three and nine months ended September 30, 2023, respectively. The Company recorded the dividends payable of $2.7 million and $5.1 million for the three and nine months ended September 30, 2022, respectively as to be paid-in-kind.

During the third quarter of 2023, the Company repaid $16.5 million of paid-in-kind preferred dividends and as of September 30, 2023, the principal amount of $130.0 million of Redeemable preferred non-controlling interests is outstanding.

### Liquidity and Capital Resources

### Liquidity

As of September 30, 2023, our liquidity consisted of cash and cash equivalents including restricted cash of $21.6 million and $18.0 million of short term investments. Additionally, we have availability of $285.9 million under the delayed draw term loan and $41.0 million under the revolver facility under the OPAL Term Loan.

We expect that our available cash together with our other assets, expected cash flows from operations, and access to expected sources of capital will be sufficient to meet our existing commitments for a period of at least twelve months from the date of this report. Any reduction in demand for our products or our ability to manage our production facilities may result in lower cash flows from operations which may impact our ability to make investments and may require changes to our growth plan.

To fund future growth, we anticipate seeking additional capital through equity or debt financings. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our project development efforts. We may be unable to obtain any such additional financing on acceptable terms or at all. Our ability to access capital when needed is not assured and, if capital is not available when, and in the amounts, needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition, and operating results.

As of September 30, 2023, we had total indebtedness excluding deferred financing costs of $187.1 million in principal amount which primarily consists of $164.1 million under the OPAL Term Loan and $23.0 million under Sunoma Loan.

As part of our operations we have arrangements for office space for our corporate headquarters under the Administrative Services Agreement as well as operating leases for office space, warehouse space, and our vehicle fleet.

We intend to make payments under our various debt instruments when due and pursue opportunities for earlier repayment and/or refinancing if and when these opportunities arise.

See Note 7. *Borrowings,* to our condensed consolidated financial statements.

### Cash Flows

The following table presents the Company's cash flows for the nine months ended September 30, 2023 and 2022:

*(in thousands)*

|  | Nine Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by (used in) from operating activities | $4,827 | $(22,004) |
| Net cash used in investing activities | (44,918) | (219,215) |
| Net cash (used in) provided by from financing activities | (15,542) | 270,525 |
| Net (decrease) increase in cash, restricted cash, and cash equivalents | $(55,633) | $29,306 |

#### Net Cash Provided by Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2023 was $4.8 million, an increase of $26.8 million compared to net cash used in operations of $22.0 million for the nine months ended September 30, 2022.

The increase in cash provided by operating activities was attributable to an increase in net income and positive working capital changes primarily from decrease in accounts receivable, related party.

#### Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 was $44.9 million, a decrease of $174.3 million compared to the $219.2 million used in investing activities for the nine months ended September 30, 2022. This was primarily due to a decrease in cash invested in short term investments of $193.8 million, deconsolidation of VIEs net cash of $11.9 million and an increase in distribution from equity method investment of $11.2 million offset by an increase in payments made for the construction of various RNG generation and dispensing facilities of $7.0 million and the repayment of Note receivable of $10.8 million in the third quarter of 2022.

#### Net Cash Provided by Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 was $15.5 million, a decrease of $286.1 million compared to the $270.5 million provided from financing activities for the nine months ended September 30, 2022. This was primarily due to a decrease of $138.9 million from closing of Business Combination and $100.0 million decrease from proceeds from issuance of Redeemable Preferred Units to NextEra in the prior year, repayments of $19.1 million of Senior Secured Facility, the repurchase of $16.4 million of shares of our Class A common stock in connection with the exercise of the put option and decrease of $10.4 million proceeds from non-redeemable non-controlling interests.

### Capital expenditures and other cash commitments

We require cash to fund our capital expenditures, operating expenses and working capital and other requirements, including costs associated with fuel sales; outlays for the design and construction of new Fueling Stations and RNG production facilities; debt repayments and repurchases; maintenance of our electrification production facilities supporting our operations, including maintenance and improvements of our infrastructure; supporting our sales and marketing activities, including support of legislative and regulatory initiatives; any investments in other entities; any mergers or acquisitions, including acquisitions to expand our RNG production capacity; pursuing market expansion as opportunities arise, including geographically and to new customer markets; and to fund other activities or pursuits and for other general corporate purposes.

As of September 30, 2023, we anticipate spending approximately $179.3 million in capital expenditures for the next 12 months for projects and fuel stations currently under construction and our share of contributions in our equity method investment projects. These expenditures do not include any expected contributions from our joint venture partners and primarily relate to our development and construction of new renewable energy facilities and the purchase of equipment used in our Fueling Station services and Renewable Power operations.

In addition to the above, we also have lease commitments on our vehicle fleets and office leases and quarterly amortization payment obligations under various debt facilities. Please see Note 7. *Borrowings* and Note 8. *Leases* to our condensed consolidated financial statements for additional information.

We believe that our cash and cash equivalents on hand, anticipated cash flows from operations and our access to expected sources of capital will be sufficient to meet our anticipated funding needs. We continue to pursue additional funding opportunities for growth and streamlining of our capital structure.

## Controls and procedures

As filed, 8,567 characters.

#### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Co-Chief Executive Officers and our Chief Financial Officer (our co-principal executive officers and principal financial officer, respectively), evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in the

Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation of our disclosure controls and procedures as of September 30, 2023, our Co-Chief Executive Officers and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were ineffective for the period covered by this report based on the material weakness in our internal control over financial reporting described below.

#### Previously Reported Material Weakness

In connection with the preparation and audit of our consolidated financial statements for each of the years ended December 31, 2022 and 2021, material weaknesses were identified in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim consolidated financial statements will not be prevented, or detected and corrected, on a timely basis.

The material weaknesses identified were as follows:

- There is a lack of an adequate control environment, including internal communications, to allow for timeliness of reviews for the accounting and disclosures of significant and unusual transactions and contracts;
- We did not have timely and effective reviews over standard account reconciliations and related accounting analysis which resulted in various audit adjustments that we corrected; and
- Review controls over application of ASC-606 were not designed and implemented appropriately during the current year.

We performed additional analysis and procedures with respect to accounts impacted by the material weakness in order to conclude that our consolidated financial statements in this report, and for the three and nine months ended September 30, 2023 and 2022, are fairly presented, in all material respects, in accordance with GAAP.

Under “*Changes in Internal Controls over Financial Reporting”* and “Remediation Plans” below, we describe our remediation plan to address the identified material weakness.

#### Management's Quarterly Report on Internal Control over Financial Reporting

This Quarterly Report on Form 10-Q does not include a report of management's assessment regarding internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

#### Changes in Internal Controls over Financial Reporting

The design and implementation of internal controls over financial reporting for the Company subsequent to the Business Combination has required and will continue to require significant time and resources from management and other personnel. The changes to our internal control over financial reporting commenced during the period covered by this report and after will materially affect, or are reasonably likely to materially affect, our internal control over financial reporting by establishing new controls and procedures appropriate to the operating business we have become as a result of the Business Combination.

#### Remediation Plans

We continue to take steps to remediate the identified material weaknesses and will take such necessary steps until such remediation is complete. These steps included the following:

a) Hiring additional accounting and financial reporting personnel with appropriate technical accounting knowledge to identify and review accounting conclusions on all complex technical accounting matters that impact our financial statements. We obtain assistance from third party resources on as needed basis.

b) Designing and implementing new controls for capturing and identifying significant and unusual transactions in a timely manner.

c) Designing and implementing new controls to strengthen the internal review processes for accounting of significant and unusual transactions.

d) Designing and implementing new controls by creating new or enhancing existing reconciliation templates for balance sheet accounts including accrued construction in progress, accrued dispensing payables and inter company eliminations.

e) Creating a robust account reconciliation review process by enhancing the review procedures performed to validate the accuracy of the account balances.

f) Implementing general information technology controls over our financial reporting system by disabling the functionality for the same employee to prepare and post journal entries.

g) Designing and implementing new controls over revenue accounting and application of ASC 606. An inventory of all revenue contracts and corresponding accounting treatment as per ASC 606 has been prepared and periodic training to all accounting personnel is being performed. Implemented detailed account reconciliation template to validate accurate reporting of revenue accounts for environmental credit monetization services and gain on transfer of RINs and LCFSs between Fuel Station Services and equity method investments.

h) Performing a quarterly review of all contracts entered into by the Company and assessing ASC 606 impact and confirming that the revenue has been recorded correctly in the reporting periods.

i) Reporting regularly to the Company's Audit Committee on the progress and results of the remediation plan, including the identification, status and resolution of internal control deficiencies.

The above stated controls have been implemented during the first three quarters of 2023. As we work to improve our internal control environment over financial reporting, we may modify our remediation plan and implement additional controls as we continue to enhance our financial reporting controls. The material weaknesses will not be considered remediated until the remediated controls have been operating effectively for sufficient time and evaluated through testing of operating effectiveness.

The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we are unable to remediate the material weaknesses identified, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, may adversely affect our reputation and business and the market price of our securities, including the Class A common stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.

## Risk factors

As filed, 509 characters.

There have been no material changes from the “Risk Factors” previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 29, 2023. The risks described in the Annual Report on Form 10-K for the year ended December 31, 2022 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Filed Nov 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001842279-23-000092. Last ingested by Listed: Nov 10, 2026, 04:33 ET. No prices; not investment advice.