What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 418 added, 293 removed, 621 unchanged (53% of the section changed)

4 unchanged sentences

Cash and cash equivalents

Accounts receivable – other

Restricted cash

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Stockholders’ equity

Class A common stock, par value $ 0.0001 per share, 9,428,797 and 9,387,836 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Class C common stock, par value $ 0.0001 per share, 22,500,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Class A common stock, par value $ 0.0001 per share, 9,549,621 and 9,387,836 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Class C common stock, par value $ 0.0001 per share, 22,500,000 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid in capital

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Three Months Ended

Six Months Ended

General and administrative expenses

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( 2,550,250 )

Provision for income taxes

( 5,374,669 )

( 5,667,377 )

Income tax (benefit)

$ ( 2,831,720 )

$ ( 2,550,250 )

$ ( 5,360,803 )

$ ( 5,667,377 )

Net loss attributable to noncontrolling interest

1 unchanged sentence

$ ( 1,801,103 )

$ ( 3,684,725 )

$ ( 4,343,770 )

Net loss attributable to Verde Clean Fuels, Inc.

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$ ( 749,147 )

$ ( 1,676,078 )

$ ( 1,323,607 )

Earnings per share

Weighted average Class A common stock outstanding, basic and diluted

Net loss per share of Class A common stock

Loss per Share of Class A common stock

The accompanying notes to the unaudited consolidated

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Statement of Stockholders’ Equity for the Three Months Ended

March 31, 2024

June 30, 2024

Stockholders’

Balance – March 31, 2024

$ ( 24,695,101 )

Conversion of restricted stock units

Stock-based compensation

Rebalancing of ownership percentage for issuance of Class A shares

( 1,928,013 )

( 2,831,720 )

Balance – June 30, 2024

$ ( 25,598,808 )

Statement of Stockholders’ Equity for the Three Months Ended

June 30, 2023

Stockholders’

Balance – March 31, 2023

$ ( 21,753,603 )

Stock-based compensation

Warrant exercise

( 1,801,103 )

( 2,550,250 )

Balance – June 30, 2023

$ ( 22,502,750 )

The accompanying notes to the unaudited consolidated

financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Statement of Stockholders’ Equity for the Six Months Ended

June 30, 2024

Stockholders’

Balance – December 31, 2023

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Related party promissory note settlement

Conversion of restricted stock units

Stock-based compensation

Rebalancing of ownership percentage for issuance of Class A

( 1,676,078 )

( 3,684,725 )

Balance – March 31, 2024

( 5,360,803 )

Statement of Stockholders’ Equity for the Three Months Ended

March 31, 2023

Balance – June 30, 2024

$ ( 25,598,808 )

Statement of Stockholders’ Equity for the Six Months Ended

June 30, 2023

Stockholders’

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$ ( 11,672,536 )

application of recapitalization

Retroactive application of recapitalization

Adjusted beginning balance

( 11,672,536 )

Reversal of Intermediate original

Reversal of Intermediate original equity

( 12,775,901 )

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Stock-based compensation

Warrant Exercise

( 1,323,607 )

( 4,343,770 )

Balance – March 31, 2023

( 5,667,377 )

Balance – June 30, 2023

$ ( 22,502,750 )

The accompanying notes to the unaudited consolidated

financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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( 1,299,000 )

Unit-based compensation expense

Share-based compensation expense

Finance lease amortization

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( 1,001,239 )

( 1,457,643 )

Accounts payable

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Repayments of the principal portion of finance lease liabilities

Warrant exercises

Deferred financing costs

Net cash provided by financing activities

Net change in cash and restricted cash

Net change in cash, cash equivalents and restricted cash

( 5,569,276 )

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Non-cash impact of debt issuance through the business combination

Capital expenditures in accounts payable and accrued expenses (at period

Accounts receivable for reimbursement of capital expenditures (at period end)

The accompanying notes to the unaudited consolidated

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Verde Clean Fuels, Inc.

(the “Company”,

“Verde” and “Verde Clean Fuels”) is a clean energy technology company specializing in the conversion of synthesis

gas, or syngas, derived from diverse feedstocks, such as biomass or natural gas and other feedstocks, into liquid hydrocarbons, primarily

gasoline, through an innovative and proprietary liquid fuels technology, the STG+® process.

Through Verde Clean Fuels’ STG+®

process, Verde Clean Fuels converts syngas into Reformulated Blend-stock for Oxygenate Blending (“RBOB”) gasoline.

Clean Fuels is focused on the development of technology and commercial facilities aimed at turning waste and other feedstocks into a usable

stream of syngas, which is then transformed into a single finished fuel, such as gasoline, without any additional refining steps.

availability of biogenic feedstocks and the economic and environmental drivers that divert these materials from landfills will enable

us to utilize these waste streams to produce renewable gasoline from modular production facilities.

(the “Company”, “Verde”

and “Verde Clean Fuels”) is a renewable energy company specializing in the conversion of synthesis gas, or syngas, derived

from diverse feedstocks, such as biomass or natural gas and other feedstocks, into liquid hydrocarbons, primarily gasoline, through an

innovative and proprietary liquid fuels technology, the STG+® process.

Through Verde Clean Fuels’ STG+® process, Verde Clean

Fuels converts syngas into Reformulated Blend-stock for Oxygenate Blending (“RBOB”) gasoline.

Verde Clean Fuels is focused

on the development of technology and commercial facilities aimed at turning waste and other feedstocks into a usable stream of syngas,

which is then transformed into a single finished fuel, such as gasoline, that does not require any additional refining steps.

On February 15, 2023 (the “Closing Date”), the Company

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Following the completion of the Business Combination, the combined

company is organized under an umbrella partnership C corporation (“Up-C”) structure and the only direct assets of the Company

consists of equity interests in OpCo, whose only direct assets consists of equity interests in Intermediate.

Immediately following the

Business Combination, Verde Clean Fuels is the sole manager of and controls OpCo.

Prior to the Business Combination, and up to the transaction close

on February 15, 2023, Verde Clean Fuels, previously CENAQ Energy Corp., was a special purpose acquisition company (“SPAC”)

incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business

combination with one or more businesses.

company is organized under an umbrella partnership C corporation (“Up-C”) structure and the direct assets of the Company consists

of equity interests in OpCo, whose direct assets consists of equity interests in Intermediate.

Immediately following the Business Combination,

Verde Clean Fuels is the sole manager of and controls OpCo.

Prior to the Business Combination, and up to the Closing Date, Verde

Clean Fuels, previously CENAQ Energy Corp., was a special purpose acquisition company (“SPAC”) incorporated for the purpose

of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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The accompanying unaudited consolidated financial statements should

be read in conjunction with the audited financial statements included in the Annual Report on Form 10-K filed on March 28, 2024 and are

presented in conformity with accounting principles generally accepted in the United States of America (“U.S.

pursuant to the rules and regulations of the U.S.

be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed on March

28, 2024 and are presented in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (the “SEC”).

In the opinion of management,

all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position,

and the results of its operations and its cash flows.

The results of operations for an interim period may not give a true indication of

results for a full year.

the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly

the financial position, and the results of its operations and its cash flows.

The results of operations for an interim period may not

give a true indication of results for a full year.

Risks and uncertainties

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to go forward with the projects, the availability and ability to obtain the necessary financing for the construction and development of

The Company’s ability to develop and operate

commercial production facilities, as well as expand production at future commercial production facilities, is subject to many risks beyond

its control, including regulatory developments, construction risks, and global and regional macroeconomic developments.

The Company’s ability to develop and operate commercial production

facilities, as well as expand production at future commercial production facilities, is subject to many risks beyond its control, including

regulatory developments, construction risks, and global and regional macroeconomic developments.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act

of 2022 (the “IR Act”) was signed into federal law.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR

Act”) was signed into federal law.

The IR Act provides for, among other things, a new U.S.

excise tax on certain repurchases of stock, in which the cumulative fair market value is greater than $ 1 million in a calendar year,

by publicly traded U.S.

federal 1 % excise tax on certain

repurchases of stock, in which the cumulative fair market value is greater than $ 1 million in a calendar year, by publicly traded

domestic corporations and certain U.S.

domestic subsidiaries of publicly traded foreign corporations occurring

on or after January 1, 2023.

The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares

are repurchased.

The amount of the excise tax is generally 1 % of the fair market value of the shares repurchased at the time of the

The amount of repurchases applicable to the excise tax can be reduced by the fair market value of any issuances at the time

of issuance that occurred during the year, as well as certain exceptions provided by the U.S.

domestic subsidiaries of publicly traded foreign corporations occurring on or after January

The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased.

amount of the excise tax is generally 1 % of the fair market value of the shares repurchased at the time of the repurchase.

of repurchases applicable to the excise tax can be reduced by the fair market value of any issuances at the time of issuance that occurred

during the year, as well as certain exceptions provided by the U.S.

Department of the Treasury (the “Treasury”).

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procedural guidance on how and when companies should pay the tax.

The proposed regulations are open for comment until May 13 th ,

2024, and the actual excise tax calculation is open for comment until June 11, 2024.

In connection with the Business Combination, the Company incurred

an excise tax of $ 1.6 million based on the redemption of $ 158.9 million at the request of the Common A shareholders.

excise tax is expected to be paid no earlier than the fourth quarter of 2024 or the first quarter of 2025, depending on the date of

the final regulations.

The excise tax is recorded within accrued liabilities on the unaudited consolidated balance sheets.

Other than the 1 % excise tax, the IR Act has not had a material impact on the Company’s consolidated

financial statements.

Final regulations providing procedural guidance have been issued, however

final regulations regarding the excise tax computation have not yet been issued.

In connection with the Business Combination, the Company incurred an

excise tax of $ 1.6 million based on the redemption of $ 158.9 million at the request of the Common A shareholders.

tax is expected to be paid in the fourth quarter of 2024.

The excise tax is recorded within accrued liabilities on the unaudited consolidated

balance sheets.

Other than the 1 % excise tax, the IR Act has not had a material impact on the Company’s consolidated financial

Use of Estimates

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Cash Equivalents

The Company considers all short-term investments

with an original maturity of three months or less when purchased to be cash equivalents.

As of March 31, 2024 and December 31, 2023, the

Company had cash equivalents of $ 23,882,130 and $ 26,155,789 , respectively, which were comprised of funds held in a short-term money market

fund having investments in high-quality short-term securities that are issued or guaranteed by the U.S.

The Company considers all short-term investments with an original maturity

of three months or less when purchased to be cash equivalents.

As of June 30, 2024 and December 31, 2023, the Company had cash equivalents

of $ 21,273,924 and $ 26,155,789 , respectively, which were comprised of funds held in a short-term money market fund having investments

in high-quality short-term securities that are issued or guaranteed by the U.S.

government or by U.S.

agencies and instrumentalities.

government agencies and instrumentalities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to

concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal

Depository Insurance Corporation (“FDIC”) limit of $ 250,000 .

Additionally, the majority of the Company’s cash

balances are held in a short-term money market fund that is not guaranteed by the FDIC.

As of March 31, 2024 and December 31, 2023,

the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on

such accounts.

Financial instruments that potentially subject the Company to concentrations

of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation

(“FDIC”) limit of $ 250,000 .

Additionally, the majority of the Company’s cash balances are held in a short-term money

market fund that is not guaranteed by the FDIC.

As of June 30, 2024 and December 31, 2023, the Company had not experienced losses on these

accounts and management believes the Company is not exposed to significant risks on such accounts.

Accounts Receivable – Other

Accounts receivable – other consists of amounts to be reimbursed

to the Company from Cottonmouth Ventures LLC (“Cottonmouth”) in connection with the terms of the joint development agreement

(“JDA”) between the Company and Cottonmouth.

See Notes 6 and 11 for further information.

In accordance with Accounting Standards

Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments”, the Company’s accounts receivable are required to be presented at the net amount expected to be collected through

an allowance for credit losses that are expected to occur over the life of the remaining life of the asset, rather than incurred losses.

The Company considers the amounts due from Cottonmouth to be fully collectible and, accordingly, there was no allowance for credit losses

recorded by the Company as of June 30, 2024.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities which

qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820,

“Fair Value Measurements and Disclosures” (“ASC 820”) approximates the carrying amounts represented in the balance

sheet, primarily due to its short-term nature.

The fair values of cash, restricted cash, cash equivalents, prepaid expenses, and accrued

expenses are estimated to approximate their respective carrying values as of March 31, 2024 and December 31, 2023 due to the short-term

maturities of such instruments.

The fair value of the Company’s assets and liabilities,

which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”),

approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.

The fair values of

cash, restricted cash, cash equivalents, receivables, prepaid expenses, accounts payable and accrued expenses are estimated to

approximate their respective carrying values as of June 30, 2024 and December 31, 2023 due to the short-term maturities of such

In determining fair value, the valuation techniques consistent with

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circumstances.

The fair value hierarchy is categorized into three levels based on

the inputs as follows:

The fair value hierarchy is categorized into three levels based

on the inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices

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Antidilutive instruments, including outstanding warrants, stock options,

restricted stock units (“RSUs”) and earn out shares, were excluded from diluted earnings per share for the three months ended

March 31, 2024 and March 31, 2023 because the inclusion of such instruments would be anti-dilutive.

As a result, diluted net loss per

common stock is the same as basic net loss per common stock for the periods presented.

certain restricted stock units (“RSUs”) and earn out shares, were excluded from diluted earnings per share for the three and

six months ended June 30, 2024 and June 30, 2023 because the inclusion of such instruments would be anti-dilutive.

As a result, diluted

net loss per common stock is the same as basic net loss per common stock for all periods presented.

The Company accounts for warrants as either equity-classified or liability-classified

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Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”).

Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they

The Company’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they

meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification

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Deferred tax assets and liabilities are recognized for the

estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and

estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and

liabilities and their respective tax bases.

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There were no unrecognized tax benefits and

no amounts accrued for interest and penalties as of March 31, 2024 and December 31, 2023.

no amounts accrued for interest and penalties as of June 30, 2024 and December 31, 2023.

The Company is currently not aware of any issues

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tax examinations by major taxing authorities since inception.

Reverse recapitalization

The Business Combination was accounted for according to a common control

reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S.

This determination

reflects Holdings having a majority of the voting power of Intermediate’s pre and post Business Combination operations and Intermediate’s

management team retaining similar roles at Verde Clean Fuels.

Further, Holdings continues to have control of the Company’s Board

of Directors through its majority voting rights.

Under the guidance in ASC 805, “Business Combinations”

(“ASC 805”), for transactions between entities under common control, the assets, liabilities and noncontrolling interests

of CENAQ and Intermediate are recognized at their carrying amounts on the date of the Business Combination.

Under this method of accounting,

CENAQ is treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the Business

Combination was treated as the equivalent of Intermediate issuing stock for the net assets of CENAQ, accompanied by a recapitalization.

The net assets of Intermediate are stated at their historical value within the consolidated financial statements with no goodwill or other

intangible assets recorded.

Property, Plant and Equipment

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Shorter of the lease term (including estimated renewals) or the estimated useful lives of the improvement

Maintenance and repairs are charged to expense as incurred, and improvements

are capitalized.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts,

and any resulting gain or loss is reflected in the accompanying statements of operations in the period realized.

Directly identifiable costs incurred in connection with constructing

an asset are capitalized to the extent that the construction project is probable of occurring.

Depreciation expense is not recorded for

construction in progress assets until construction is completed and the assets are placed into service.

Maintenance and repairs are charged

to expense as incurred, and improvements are capitalized.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation

are removed from the accounts, and any resulting gain or loss is reflected in the accompanying statements of operations in the period

Accrued Liabilities

Accrued liabilities consist of the following:

Accrued bonuses

Accrued construction in progress assets

Accrued legal fees

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The Company accounts for leases under ASU 842, “Leases”

The core principle of this standard is that a lessee should recognize the assets and liabilities that arise from

leases by recognizing in the consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset

(“ROU asset”) representing the lessee’s right to use the underlying asset for the lease term.

In accordance with the

guidance of ASC 842, leases are classified as finance or operating leases, and both types of leases are recognized on the consolidated

balance sheet.

Certain lease arrangements may contain renewal

Renewal options are included in the expected lease term only if they are reasonably certain of being exercised by the Company.

The core principle of ASC 842 is that a lessee should recognize the assets and liabilities that arise from leases

by recognizing in the consolidated balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset (“ROU

asset”) representing the lessee’s right to use the underlying asset for the lease term.

In accordance with the guidance of

ASC 842, leases are classified as finance or operating leases, and both types of leases are recognized on the consolidated balance sheet.

Certain lease arrangements may contain renewal options.

Renewal options

are included in the expected lease term only if they are reasonably certain of being exercised by the Company.

The Company elected the practical expedient to not separate non-lease

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and patented technology and is considered an indefinite lived intangible and is not subject to amortization.

As of March 31, 2024, and

December 31, 2023, the gross and carrying amount of this intangible asset was $ 1,925,151 .

As of June 30, 2024 and December

31, 2023, the gross and carrying amount of this intangible asset was $ 1,925,151 .

A qualitative assessment of indefinite-lived intangible assets is performed

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or carrying amount of net assets.

During the three months ended March 31, 2024 and 2023, the Company

During the three and six months ended June 30, 2024 and 2023, the Company

did not record any impairment charges.

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cash flows discounted at a rate commensurate with the risk involved.

During the three months ended March 31, 2024 and 2023, the Company

did not record any impairment charges.

During the three and six months ended June 30, 2024 and 2023, the

Company did not record any impairment charges.

Emerging Growth Company Accounting Election

The Company is an “emerging

growth company,” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, (the “Securities Act”), as

modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions

from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but

not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced

disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements

of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously

Additionally,

section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting

standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides

that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging

growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

The Company expects to

be an emerging growth company through 2026.

Prior to the Business Combination, CENAQ elected to irrevocably opt out of the extended transition

period, which means that when a standard is issued or revised and it has different application dates for public or private companies,

the Company will adopt the new or revised standard when those standards are effective for public registrants.

The Company is an “emerging growth company,” as defined

in Section 2(a)(19) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business

Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements

that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required

to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding

executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory

vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Additionally, section 102(b)(1) of the JOBS Act exempts emerging growth

companies from being required to comply with new or revised financial accounting standards until private companies are required to comply

with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect not to take advantage of the extended

transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage

of the extended transition period is irrevocable.

The Company expects to be an emerging growth company through 2026.

Prior to the Business

Combination, CENAQ elected to irrevocably opt out of the extended transition period, which means that when a financial accounting standard

is issued or revised and it has different application dates for public or private companies, the Company will adopt the new or revised

standard when those standards are effective for public registrants.

Equity-Based Compensation

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Unit-Based Compensation

Service-based units compensation cost is measured at the grant date

Service-based unit compensation cost is measured at the grant date

based on the fair value of the equity instruments awarded and is recognized over the period during which an employee is required to provide

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accelerated the unvested service and performance-based units and recorded share-based payment expense within general and administrative

expense of $ 2,146,792 during the three months ended March 31, 2023.

expense of $ 2,146,792 during the six months ended June 30, 2023.

Performance conditions for the performance-based Founder Incentive

Units had not and were unlikely to be met as of March 31, 2024.

Units had not and were unlikely to be met as of June 30, 2024.

As such, no share-based compensation cost was recorded for these units.

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2023 Omnibus Incentive Plan (the “2023 Plan”).

On April 25, 2023, the Company granted stock options to certain

employees and officers and granted RSUs to non-employee directors, consistent with the terms of the 2023 Plan.

The Company estimates the

fair value of stock options on the date of grant using the Black-Scholes model and the fair value of RSUs on the date of grant based on

the value of the stock price on that date, subject to a discount for lack of marketability.

The Company estimates the fair value of stock options on the date of

grant using the Black-Scholes model and the fair value of RSUs on the date of grant based on the value of the stock price on that date,

subject to a discount for lack of marketability.

The cost of awarded equity instruments is recognized based on each

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Thus, $ 1,299,000 of accrued contingent consideration

was reversed through earnings during the three months ended March 31, 2023.

No contingent consideration was recorded during the three

months ended March 31, 2024.

was reversed through earnings during the three and six months ended June 30, 2023.

No contingent consideration was recorded during the

three and six months ended June 30, 2024.

Recent Accounting Standards

In November 2023, the FASB issued Accounting Standards Update (“ASU”)

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

ASU 2023-07 enhances segment

reporting under Topic 280 by expanding the breadth and frequency of segment disclosures.

ASU 2023-07 requires disclosure of

significant expenses that are regularly provided to an entity’s CODM and included in the reported measure(s) of a segment’s

profit or loss.

When applying this disclosure requirement, an entity identifies the segment expenses that are regularly provided to the

CODM or easily computable from information that is regularly provided to the CODM.

Entities are also required to disclose other segment

items, i.e., the difference between reported segment revenue less the significant segment expenses and the reported measure(s) of a segment’s

profit or loss.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 enhances segment reporting

under Topic 280 by expanding the breadth and frequency of segment disclosures.

ASU 2023-07 requires disclosure of significant expenses

that are regularly provided to an entity’s CODM and included in the reported measure(s) of a segment’s profit or loss.

applying this disclosure requirement, an entity identifies the segment expenses that are regularly provided to the CODM or easily computable

from information that is regularly provided to the CODM.

Entities are also required to disclose other segment items, i.e., the difference

between reported segment revenue less the significant segment expenses and the reported measure(s) of a segment’s profit or loss.

ASU 2023-07 also clarifies that single reportable segment entities are subject to Topic 280 in its entirety.

is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after

December 15, 2024.

ASU 2023-07 is effective

for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15,

The amendments in ASU 2023-07 should be adopted retrospectively unless impracticable.

Early adoption is permitted.

The Company is currently evaluating the impact that ASU 2023-07 will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes

Improvements to Income Tax Disclosures”.

ASU 2023-09 requires public entities, on an annual basis, to provide:

a tabular rate reconciliation (using both percentages and reporting currency amounts) of (1) the reported income tax expense (or benefit)

from continuing operations, to (2) the product of the income (or loss) from continuing operations before income taxes and the applicable

statutory federal (national) income tax rate of the jurisdiction (country) of domicile using specific categories, and separate disclosure

for any reconciling items within certain categories that are equal to or greater than a specified quantitative threshold.

annual period presented, ASU 2023-09 also requires all reporting entities to disclose the year-to-date amount of income taxes paid (net

of refunds received) disaggregated by federal (national), state, and foreign.

It also requires additional disaggregated information on

income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5 % of total income taxes paid

(net of refunds received).

ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024.

is to be applied on a prospective basis with the option to apply the standard retrospectively.

Early adoption is permitted.

is currently evaluating the impact that ASU 2023-07 will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 requires public entities, on

an annual basis, to provide:

a tabular rate reconciliation (using both percentages and reporting currency amounts) of (1) the reported

income tax expense (or benefit) from continuing operations, to (2) the product of the income (or loss) from continuing operations before

income taxes and the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile using specific

categories, and separate disclosure for any reconciling items within certain categories that are equal to or greater than a specified

quantitative threshold.

For each annual period presented, ASU 2023-09 also requires all reporting entities to disclose the year-to-date

amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign.

It also requires additional

disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5 %

of total income taxes paid (net of refunds received).

ASU 2023-09 is effective for public entities for fiscal years beginning after

December 15, 2024.

ASU 2023-09 is to be applied on a prospective basis with the option to apply the standard retrospectively.

adoption is permitted.

The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statements.

The Company considers the applicability and impact of all ASUs issued

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NOTE 3 – BUSINESS COMBINATION

Prior to the Business Combination, and up to the

transaction close on February 15, 2023, Verde Clean Fuels, previously CENAQ Energy Corp., was a SPAC incorporated for the purpose of effecting

a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

Prior to the Business Combination, and up to the Closing Date, Verde

Clean Fuels, previously CENAQ Energy Corp., was a SPAC incorporated for the purpose of effecting a merger, share exchange, asset acquisition,

share purchase, reorganization or similar business combination with one or more businesses.

Pursuant to the Business Combination Agreement, (i) (A) CENAQ

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number of shares of Class C common stock.

Pursuant to ASC 805, the Business Combination was accounted for as

a common control reverse recapitalization where Intermediate is deemed the accounting acquirer and the Company is treated as the accounting

acquiree, with no goodwill or other intangible assets recorded, in accordance with U.S.

The Business Combination is not treated

as a change in control of Intermediate.

This determination reflects Holdings holding a majority of the voting power of Verde Clean Fuels,

Intermediate’s Pre-Business Combination operations being the majority post-Business Combination operations of Verde Clean

Fuels, and Intermediate’s management team retaining similar roles at Verde Clean Fuels.

Further, Holdings continues to have control

of the Board of Directors through its majority voting rights.

Under ASC 805, the assets, liabilities, and noncontrolling interests of

Intermediate are recognized at their carrying amounts on the date of the Business Combination.

Pursuant to ASC 805, “Business Combinations” (“ASC

805”), the Business Combination was accounted for as a common control reverse recapitalization where Intermediate is deemed the

accounting acquirer and the Company is treated as the accounting acquiree, with no goodwill or other intangible assets recorded, in accordance

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Intermediate issuing stock

for the net assets of CENAQ, accompanied by a recapitalization.

The Business Combination is not treated as a change in control of Intermediate.

This determination reflects Holdings holding a majority of the voting power of Verde Clean Fuels, Intermediate’s Pre-Business Combination

operations being the majority post-Business Combination operations of Verde Clean Fuels, and Intermediate’s management team

retaining similar roles at Verde Clean Fuels.

Further, Holdings continues to have control of the Board of Directors through its majority

voting rights.

Under ASC 805, the assets, liabilities, and noncontrolling interests of Intermediate are recognized at their respective

carrying amounts on the date of the Business Combination.

The Business Combination includes:

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Total proceeds raised from the business combination were $ 37,329,178 ,

consisting of $ 32,000,000 in PIPE Financing proceeds, $ 19,031,516 from the CENAQ trust, and $ 91,454 from the CENAQ operating account offset

by $ 10,043,793 in transaction expenses that were recorded as a reduction to additional paid in capital and offset by a $ 3,750,000 capital

repayment to Holdings.

consisting of $ 32,000,000 in PIPE Financing proceeds, $ 19,031,516 from the CENAQ trust, and $ 91,454 from the CENAQ operating account,

offset by $ 10,043,793 in transaction expenses that were recorded as a reduction to additional paid-in capital and offset by a $ 3,750,000

capital repayment to Holdings.

NOTE 4 – RELATED PARTY TRANSACTIONS

Promissory Note

ASC 850, “Related Party Disclosures” (“ASC 850”)

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On February 15,

2024, the Company settled the New Promissory Note through the issuance of its Class A common stock at a conversion price of $ 10.00 per

As a result, during the three months ended March 31, 2024, the Company issued 40,961 shares of Class A common stock and recorded

an increase to additional paid-in capital of $ 409,608 .

2024, the Company settled the New Promissory Note through the issuance of shares of its Class A common stock at a conversion price of

$ 10.00 per share.

As a result, during the six months ended June 30, 2024, the Company issued 40,961 shares of its Class A common

stock and recorded an increase to additional paid-in capital of $ 409,608 .

The Company has a related party relationship with Holdings whereby

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3,500,000 earn out shares.

On June 3, 2024, the Company entered into a contract for a front-end

engineering and design (“FEED”) study with Chemex Global, LLC (“Chemex”), a Shaw Group company (“Shaw Group”).

On June 5, 2024, the parent organization of Holdings, through a separate subsidiary, made an unrelated preferred equity investment in

Shaw Group and, in connection with the investment, Jonathan Siegler (a Company director) was appointed as a director of Shaw Group.

incurred for the FEED study as of June 30, 2024 were $ 0.3 million, net of reimbursement from Cottonmouth, and are recorded to Construction

in Progress within Property, Plant and Equipment, Net on the Company’s consolidated balance sheet.

See Notes 6 and 11 for further

NOTE 5 – COMMITMENTS AND CONTINGENCIES

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a lease liability, which is a lessee’s obligation to make

lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s

lease payments arising from a lease, measured on a discounted basis, and a ROU asset, which is an asset that represents the lessee’s

right to use, or control the use of, a specified asset for the lease term.

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to provide adequate workspace for all employees.

In October 2022, the Company entered into a 25-year land lease in Maricopa,

In February 2023, the Company commenced a 25 -year land lease in Maricopa,

Arizona with the intent of building a renewable gasoline processing facility.

The commencement date of the lease was in February 2023

as control of the identified asset did not transfer to the Company on the effective date of the lease.

On the commencement date, the present

value of the minimum lease payments exceeded the fair value of the land, and, accordingly, the lease was classified as a finance lease.

On August 31, 2023, the Company terminated the land lease in Maricopa,

In connection with the termination, the Company incurred a termination fee of three months’ base rent.

The termination

was effective four months after the termination notice;

thus, the Company had a continued right-of-use and obligation to make rental payments

for use of the land through December 31, 2023.

The Company accounted for the termination with a continued right-of-use as a lease modification

resulting in a reclassification of the lease from finance to operating as of the lease modification date.

Accordingly, the Company incurred

finance lease costs up to the modification date and operating lease costs subsequent to the modification until lease termination.

Company exited the lease as of December 31, 2023.

On the commencement date, the present value of the minimum

lease payments exceeded the fair value of the land, and, accordingly, the lease was classified as a finance lease.

On August 31, 2023,

the Company terminated the land lease in Maricopa, Arizona.

In connection with the termination, the Company incurred a termination fee

of three months’ base rent.

The termination was effective four months after the termination notice;

thus, the Company had a continued

right-of-use and obligation to make rental payments for use of the land through December 31, 2023.

The Company accounted for the termination

with a continued right-of-use as a lease modification resulting in a reclassification of the lease from finance to operating as of the

lease modification date.

Accordingly, the Company incurred finance lease costs up to the modification date and operating lease costs subsequent

to the modification until lease termination.

The Company exited the lease as of December 31, 2023.

Lease costs for the Company’s operating and finance leases are

presented below.

Statements of Operations Classification

of Operations

Ended June 30,

Months Ended June 30,

Classification

Operating lease cost

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