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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-13 · 127 added, 411 removed, 48 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

References in this Quarterly Report on Form 10-Q (this “Quarterly

Report”) to “we,” “our,” “us,” “Verde,” “Verde Clean Fuels” or the “Company”

refer to Verde Clean Fuels, Inc.

(formerly known as CENAQ Energy Corp.).

References to our “management” or our “management

team” refer to our officers and directors.

The following discussion and analysis of the Company’s financial condition and

results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained

elsewhere in this Quarterly Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking

statements that involve risks and uncertainties.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “our,” “us,” “Verde,” “Verde Clean Fuels” or the “Company” refer to Verde Clean Fuels, Inc.

References to our “management” or our “management team” refer to our officers and directors.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special note regarding forward-looking statements

This Quarterly Report includes “forward-looking statements”

for the purposes of federal securities laws that are not historical facts and involve risks and uncertainties that could cause actual

results to differ materially from those expected and projected.

All statements, other than statements of historical fact included in this

Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management

for future operations, are forward-looking statements.

Words such as “expect,” “continue,” “believe,”

“anticipate,” “intend,” “plan,” “potential,” “possible,” “may,”

“focused,” “might,” “predict,” “proposed,” “project,” “should,”

“would,” “will,” “estimate,” “seek” and variations and similar words and expressions are

intended to identify such forward-looking statements.

Such forward-looking statements relate to future events or future performance, but

reflect management’s current beliefs, based on information currently available.

A number of factors could cause actual events, performance

or results to differ materially from the events, performance and results discussed in the forward-looking statements.

Important factors,

among others, that may affect actual results or outcomes include:

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

All statements, other than statements of present or historical fact, included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s expectations and any future financial performance, as well as the Company’s strategy, future operations, financial position, prospects, plans and objectives of management are forward-looking statements.

The words “could,” “should,” "would," “will,” “aim,” “may,” “focus,” “believe,” “anticipate,” ”intend,” “estimate,” “expect,” "advance," ”project,” “plan,” “potential,” "goal,” “strategy,” “proposed,” "positions," the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Such forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of the Company, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.

Important factors, among others, that may affect actual results or outcomes include:

• the financial and business performance of the Company;

the ability to maintain the listing of the Class A common stock and the Verde Clean Fuels warrants on Nasdaq, and the potential liquidity and trading of such securities;

the failure to realize the anticipated benefits of the Business Combination (as defined below) that the Company consummated in February 2023, which may be affected by, among other things, competition;

• the ability to maintain the listing of the Class A common stock and the Verde Clean Fuels Warrants on Nasdaq (each as defined below), and the potential liquidity and trading of such securities;

• the failure to realize the anticipated benefits of the de-SPAC business transaction that the Company consummated in February 2023 (the "Business Combination"), which may be affected by, among other things, competition;

• the Company’s ability to develop and operate anticipated and new projects;

the Company’s ability to obtain financing for any current and future projects;

• the Company’s ability to obtain financing for any current or future projects;

• the reduction or elimination of government economic incentives to the renewable energy market;

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• the Company’s dependence on suppliers;

existing laws and regulations and changes to laws, regulations and policies that affect the Company’s operations;

decline in public acceptance and support of renewable energy development and projects;

• changes in local, state, and federal laws, regulations or policies that may affect our business or our industry (such as the effects of tax law changes, and changes in environmental, health, and safety regulations and regulations addressing climate change, and trade policy);

• decline in public and governmental acceptance and support of renewable energy development and projects;

• demand for renewable energy not being sustained;

impacts of climate change, changing weather patterns and conditions, and natural disasters;

• impacts of changing weather patterns and conditions, natural disasters and climate change;

• the ability to secure necessary governmental and regulatory approvals;

the ability to qualify for federal or state level low-carbon fuel credits or other carbon credits;

• the availability of, and our ability to qualify for, federal or state level low-carbon fuel credits or other carbon credits;

• any decline in the value of federal or state level low-carbon fuel credits or other carbon credits and the development of the carbon credit markets;

1 unchanged sentence

• risks relating to the uncertainty of success, any commercial viability, or delays of the Company’s research and development efforts, including any study in which the Company participates that is funded by the Department of Energy or any other governmental agency;

disruptions in the supply chain, fluctuation in price of product inputs, and market conditions and global and economic factors beyond the Company’s control;

• significant developments in macroeconomic and political conditions beyond the Company’s control, including disruptions in the supply chain, increased costs due to inflation, the imposition of tariffs or trade disputes;

• the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors;

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• competition from companies with greater resources and financial strength in the industries in which the Company operates;

the effect of legal, tax and regulatory changes.

For information identifying important factors that could cause actual

results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors contained in Part

I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The Company’s securities filings

can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.

Except as expressly required by applicable securities

law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information,

future events or otherwise.

On July 29, 2020, Green Energy Partners, Inc.

formed by the Chief Executive Officer of Bluescape Clean Fuels Intermediate Holdings, LLC, a Delaware limited liability company (“Intermediate”),

and an additional individual (the “Founders”), entered into an asset purchase agreement with Primus Green Energy, Inc.

to purchase the assets of Primus.

The assets under the asset purchase agreement included a demonstration facility, a laboratory, office

space and intellectual property including the patented STG+® process technology.

GEP then assigned its rights under the asset purchase agreement to

a newly formed subsidiary of Intermediate.

Immediately following the closing of the asset purchase agreement, the Founders sold 100% of

their membership interests to BEP Clean Fuels Holdings, LLC, a Delaware limited liability company (“BEP”) in exchange for

agreeing to make the payments under the asset purchase agreement as well as other capital contributions and a contingent payment.

ultimately contributed the membership interests to Intermediate.

Intermediate holds the acquired assets through Bluescape Clean Fuels,

Since acquiring the assets from Primus, we have developed the use and application of the technology acquired to focus on the renewable

energy industry.

The Transactions

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

the Company consummated a business combination (the “Business Combination”) pursuant to that certain business combination

agreement, dated as of August 12, 2022 (the “Business Combination Agreement”) by and among CENAQ Energy Corp.

Verde Clean Fuels OpCo, LLC, a Delaware limited liability company and a wholly owned subsidiary of CENAQ (“OpCo”), Bluescape

Clean Fuels Holdings, LLC, a Delaware limited liability company (“Holdings”), Intermediate and CENAQ Sponsor LLC (“Sponsor”).

Immediately upon the completion of the Business Combination, CENAQ was renamed as Verde Clean Fuels, Inc.

The Business Combination is

discussed further in Note 3 in the accompanying unaudited consolidated financial statements.

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

to OpCo (1) all of its assets, excluding its interests in OpCo and the aggregate amount of cash required to satisfy any exercise by CENAQ

stockholders of their redemption rights (the “Redemption Rights”), and (2) 22,500,000 shares of Class C common stock

(the “Holdings Class C Shares”) and (B) in exchange therefor, OpCo issued to CENAQ a number of Class A common units of Opco

(the “Class A OpCo Units”) equal to the number of total shares of Class A common stock issued and outstanding immediately

after the Closing taking into account the private offering of shares of Class A common stock and warrants consummated contemporaneously

with the Closing (the “PIPE Financing”) and the exercise of Redemption Rights (such transactions, the “SPAC Contribution”)

and (ii) immediately following the SPAC Contribution, (A) Holdings contributed to OpCo 100% of the issued and outstanding limited liability

company interests of Intermediate and (B) in exchange therefor, OpCo transferred to Holdings (1) 22,500,000 Class C common units of OpCo

(the “Class C OpCo Units”) and the Holdings Class C Shares.

The Business Combination was accounted for as a common control reverse

recapitalization, with no goodwill or other intangible assets recorded, in accordance with accounting principles generally accepted in

the United States of America (“U.S.

The Business Combination was not a change in control of Intermediate.

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 Company’s Board of Directors through its

majority voting rights.

Under the guidance in Accounting Standards Codification (“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 will be treated as the “acquired” company for financial reporting purposes.

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.

Subsequent to the Business Combination, the Company’s capital

structure is comprised of shares of Class A common stock, par value $0.0001 per share (the “Class A common stock”) and shares

of Class C common stock, par value $0.0001 per share (the “Class C common stock”).

Public stockholders, the Sponsor, and the

investors in the PIPE Financing hold shares of Class A common stock and warrants to purchase shares of Class A common stock, and Holdings

owns the Holdings Class C Shares and an equal number of Class C OpCo Units.

We are a clean fuels company focused on the deployment of our

innovative and proprietary liquid fuels processing technology through development of commercial production plants.

Our synthesis gas

(“syngas”)-to-gasoline plus (STG+®) process converts syngas derived from diverse feedstocks, such as natural gas or

biomass, into fully finished liquid fuels that require no additional refining, such as reformulated blend-stock for oxygenate

blending (“RBOB”) gasoline.

Unlike many other gas-to-liquids technologies, not only can our STG+® process produce

renewable gasoline from syngas, but we expect that it will be able to be applied at other production facilities to produce other end

products, including methanol.

We acquired our STG+® technology from Primus, a company established

in 2007 that developed the patented STG+® technology to convert syngas into gasoline or methanol.

Over $110 million has been invested

in our technology, including our demonstration facility in New Jersey, which has completed over 10,500 hours of operation producing gasoline

Our demonstration facility represents the scalable nature of our operational modular commercial design which has fully integrated

reactors and recycle lines and is designed with key variables, like gas velocity and catalyst bed length, at a 1-to-1 scale with our commercial

We are currently pursuing opportunities to deploy our technology through

development of commercial production plants to deliver scalable and cost-effective gasoline, and we believe that the availability of disadvantaged,

stranded or flared natural gas in various markets coupled with the economic upside and environmental impact of this resource presents

an opportunity to deploy our STG+® process in order to process such natural gas feedstock into full finished liquid fuels.

entered into a joint development agreement (the “JDA”) with Cottonmouth Ventures LLC (“Cottonmouth”), a wholly-owned

subsidiary of Diamondback Energy, Inc.

(“Diamondback”), for the proposed development, construction, and operation of a facility

to produce commodity-grade gasoline using natural gas feedstock supplied from Diamondback’s operations in the Permian Basin.

addition to the project contemplated by the JDA with Cottonmouth, we are also evaluating other potential opportunities to deploy our technology

in other producing basins with similar large quantities of disadvantaged, stranded or flared natural gas.

In addition, we have adapted the application of our STG+® technology

to process various biomass feedstocks into fully finished liquid fuels, including renewable gasoline.

This adaptation requires a third-party

gasification system to produce acceptable syngas from renewable feedstocks.

Our proprietary STG+® system converts the syngas into

We have participated in carbon lifecycle studies to validate the scoring of carbon intensity, which we define as the quantity

of greenhouse gas emissions associated with producing, distributing, and consuming a fuel, per unit of fuel energy (“CI”)

and reduced lifecycle emissions (the greenhouse gas emissions associated with the production, distribution, and consumption of a fuel)

of our renewable gasoline as well as fuel, blending and engine testing to validate the specification and performance of our gasoline product.

Our carbon intensity score is based on an analysis styled after the Department of Energy’s Greenhouse gases Regulated Emissions,

and Energy use in Technologies life-cycle analysis.

We believe our renewable gasoline, when paired with carbon capture and sequestration,

exhibits a significant lifecycle carbon emissions reduction compared to traditional petroleum-based gasoline.

As a result, we believe

our gasoline produced from renewable feedstock, such as biomass, will qualify under the federal renewable fuel standard (“RFS”)

program for the D3 renewable identification number, which could have significant value.

Similarly, gasoline produced from our process

may also qualify for various state carbon programs, including California’s low carbon fuel standard.

In addition to our initial

focus on the production of renewable gasoline, we believe that there is opportunity to continue to develop additional process technology

to produce middle distillates including lower-carbon diesel and aviation fuel.

As with other government programs, the use requirements

of the RFS program and other similar state-level programs are subject to change, which could materially harm our business strategy as

well as any ability to operate profitably.

As of September 30,2024, we are still in the process of developing

our first commercial production facility and have not derived revenue from our principal business activities.

“Clean” or “lower-carbon” as used in relation

to our products refers to the lower CI, lower lifecycle emissions, and lower quantity of greenhouse gas emissions resulting directly from

fuel combustion, relative to conventional gasoline derived from petroleum.

“Renewable” as used in relation to our products

refers to energy or fuel derived from biomass feedstock.

Key Factors Affecting Our Prospects and Future Results

We believe that our performance and future success depend on a number

of factors that present significant opportunities for us but also pose risks and challenges, including competition from other carbon-based

and other non-carbon-based fuel producers, changes to existing federal and state level low-carbon fuel credit systems, and other factors

discussed under the section titled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended

December 31, 2023, and Part II, Item 1A of this Quarterly Report.

• other economic, competitive, governmental, legislative, regulatory, geopolitical, and technological factors that may negatively impact our businesses or operations.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors contained in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.

Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a clean fuels company focused on the deployment of our innovative and proprietary liquid fuels processing technology through development of commercial production plants.

Verde’s synthesis gas ("syngas")-to-gasoline plus (STG+®) process converts syngas, derived from diverse feedstocks, into fully finished liquid fuels that require no additional refining.

Verde is currently focused on opportunities to convert associated natural gas into gasoline, which is expected to provide a market for such natural gas with the added potential benefits of flare mitigation and production of gasoline with a lower carbon intensity than conventional gasoline.

As of March 31, 2025, the Company is still in the process of developing its first commercial production facility and has not derived revenue from its principal business activities.

The Company is managed as an integrated business and there is only one reportable segment.

We acquired our STG+ ® technology from Primus Green Energy in 2020, which was originally founded in 2007 and invested over $110 million in developing and demonstrating such technology, including the construction and operation of

the demonstration plant.

The demonstration plant began operations in 2013, completed over 10,500 hours of operation and is currently maintained in an idle state.

Recent Developments

PIPE Investment

On December 18, 2024, the Company entered into common stock purchase agreement (the "Purchase Agreement") with Cottonmouth Ventures, LLC ("Cottonmouth"), a subsidiary of Diamondback Energy, LLC ("Diamondback"), pursuant to which the Company agreed to issue and sell an aggregate of 12,500,000 shares of its Class A common stock, par value $0.0001 ("Class A common stock") to Cottonmouth at a price of $4.00 per share for an aggregate purchase price of $50 (the “PIPE Investment”) in a private placement.

The Company consummated the transactions contemplated by the Purchase Agreement on January 29, 2025.

In connection with the closing of the PIPE Investment, on January 29, 2025, (i) Cottonmouth and the Company amended that certain equity participation right agreement, dated February 13, 2023 (the “Existing Equity Participation Right Agreement”), to remove certain preemptive rights with respect to the Company’s equity securities granted to Cottonmouth under the Existing Equity Participation Right Agreement and (ii) the Company entered into that certain Second Amended and Restated Registration Rights Agreement with Cottonmouth and the other parties thereto, which amended and restated that certain Amended and Restated Registration Rights Agreement, dated February 15, 2023, by and among the Company and certain stockholders named therein (the “Existing Registration Rights Agreement”), to add Cottonmouth as a party to the Existing Registration Rights Agreement.

Restated Charter

On December 18, 2024, the holder of a majority of the issued and outstanding shares of Class A common stock and Class C common stock, par value $0.0001 ("Class C common stock") adopted resolutions by written consent, in lieu of a meeting of stockholders to, among other things, amend and restate, immediately prior to and contingent upon the consummation of the closing of the PIPE Investment, our fourth amended and restated certificate of incorporation (the "Fourth A&R Charter"), and such amended Fourth A&R Charter is referred to as the “Restated Charter”) to (A) increase the amount of authorized shares of Class C common stock from 25,000,000 to 26,000,000 and (B) increase the size of our Board of Directors (the "Board") from seven to eight and to provide Cottonmouth with certain director designation and board observer rights.

The Restated Charter was approved and recommended by the Board prior to the stockholder action by written consent.

Immediately prior to closing of the PIPE Investment, on January 29, 2025, the Company filed the Restated Charter with the Delaware Secretary of State.

Key Factors and Trends Influencing our Prospects and Future Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including competition from other carbon-based and other non-carbon-based fuel producers, changes to existing federal and state level low-carbon fuel credit systems, and other factors discussed under the section titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

We believe the factors described below are key to our success.

Commencing and Expanding Commercial Operations

Concurrent with the Business Combination, Diamondback through its wholly-owned

subsidiary, Cottonmouth, made a $20 million equity investment in Verde and entered into an equity participation right agreement pursuant

to which Verde must grant Cottonmouth the right to participate and jointly develop facilities in the Permian Basin utilizing Verde’s

STG+® technology for the production of gasoline derived from economically disadvantaged natural gas feedstocks.

Diamondback is an

independent oil and natural gas company headquartered in Midland, Texas, focused on the acquisition, development, exploration and exploitation

of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

The production of gasoline from natural gas

sourced from the Permian Basin is designed to allow Diamondback to mitigate the flaring of natural gas while also producing a high-margin

product from natural gas streams that are subject to being price disadvantaged compared to other natural gas basins.

On February 6, 2024, Verde and Cottonmouth entered into the JDA, which

provides a pathway forward for the parties to reach final definitive documents and final investment decision (“FID”).

JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement,

construction agreement, license agreement and financing agreements as well as conditions precedent to close such as FID.

The expectation

for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+®

We expect that the proposed facility, which is to be located in Martin County, Texas in the heart of the Permian Basin, could

serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins

in the U.S., as well as addressing flared or stranded natural gas opportunities internationally.

On June 4, 2024, we announced the selection of Chemex Global, LLC (“Chemex”)

as the contractor to spearhead the pre-front-end engineering and design (“FEED”) phase of the project contemplated by the

With the selection of Chemex, FEED work commenced and is expected to be completed in mid-2025.

In connection with entering into the

JDA and the commencement of FEED, we began to incur development costs with respect to the project.

Under the terms of the JDA, 65%

of the approved development costs that we incur (which includes the FEED costs) are reimbursed by Cottonmouth.

Upon FEED completion and

reaching FID, it is anticipated that engineering, procurement and construction work will then commence, with the goal to complete construction

In August 2023, we announced a non-binding carbon dioxide management

agreement (the “CDMA”) with Carbon TerraVault JV HoldCo, LLC, a carbon management partnership focused on carbon capture and

sequestration development formed between Carbon TerraVault, a subsidiary of California Resources Corporation (“CRC”), and

Brookfield Renewable Partners.

The CDMA was subsequently amended in December 2023 to extend the term to the earlier of entry into a binding,

definitive agreement or December 31, 2024.

Under the terms of the non-binding CDMA, we would construct a new renewable gasoline production

facility at CRC’s existing Net Zero Industrial Park in Kern County, California, to capture carbon dioxide and produce renewable

gasoline from biomass and other agricultural waste feedstock to help support the further decarbonization of California’s economy

and its transportation sector.

It is anticipated that the project could produce up to 7 million gallons per year of renewable gasoline

for use as transportation fuel.

In addition to the above, we have additional potential production facility

development opportunities in early-stage due diligence.

We have identified opportunities to produce gasoline from natural gas in other

pipeline-constrained production areas as well as opportunities to produce renewable gasoline from biomass in locations with access to

suitable feedstock, carbon sequestration, and markets.

We believe the number of identified and planned potential production facilities

bodes well for our potential growth.

Successful Implementation of the first commercial facility

A critical step in our business strategy will be the successful construction

and operation of the first commercial production facility using our patented STG+® technology.

We believe that the first commercial

production facility could be operational as early as 2027.

Protection and continuous development of our patented technology

Our ability to compete successfully will depend on our ability to protect,

commercialize and further develop our proprietary process technology and commercial facilities in a timely manner, and in a manner technologically

superior to and/or are less expensive than competing processes.

A critical step in our business strategy will be the successful construction and operation of the first commercial production plant using our patented STG+® technology.

Concurrent with the Business Combination, Diamondback, through its wholly-owned subsidiary, Cottonmouth, made a $20 million equity investment in Verde and entered into the Existing Equity Participation Right Agreement pursuant to which Verde must grant Cottonmouth the right to participate and jointly develop facilities in the Permian Basin utilizing Verde’s STG+® technology for the production of gasoline derived from economically disadvantaged natural gas feedstocks (the "Permian Basin Project").

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas, focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

The production of gasoline from natural gas sourced from the Permian Basin is designed to allow Diamondback to mitigate the flaring of natural gas while also producing a high-margin product from natural gas streams that are subject to being price disadvantaged compared to other natural gas basins.

In February 2024, Verde and Cottonmouth entered into a joint development agreement ("JDA"), which provides a pathway forward for the parties to reach final definitive documents and final investment decision ("FID").

The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close such as FID.

The expectation for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+® process.

We expect that the proposed facility, which is to be located in the Permian Basin, could serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins in the U.S., as well as addressing flared or stranded natural gas opportunities internationally.

In June 2024, the Company entered into a contract with Chemex Global, LLC ("Chemex") for a front-end engineering and design ("FEED") study related to the Permian Basin Project.

For the three months ended March 31, 2025, we continued to advance the FEED study related to the Permian Basin Project.

During the three months ended March 31, 2025, a new site was identified for the Permian Basin Project with improved access to key utilities.

Under the terms of the JDA, 65% of the approved development costs that we incur (which includes the FEED costs) are reimbursed by Cottonmouth.

Our construction in progress assets as of March 31, 2025 are comprised of capitalized FEED costs of $4,301,267, net of amounts reimbursable by Cottonmouth of $2,783,228.

Upon FEED completion and reaching FID, it is anticipated that engineering, procurement and construction work will then commence.

It is expected that commercial operations will be achieved within 18-24 months from commencement of engineering, procurement and construction work.

In addition to the Permian Basin Project, we also continue to identify and evaluate other potential opportunities to deploy our technology while remaining disciplined with our resources.

Key Components of Results of Operations

We are an early-stage company with no revenues, and our historical

results may not be indicative of our future results.

Accordingly, the drivers of any future financial results, as well as any components

thereof, may not be comparable to our historical or future results of operations.

We are an early-stage company with no revenues, and our historical results may not be indicative of our future results.

Accordingly, the drivers of any future financial results, as well as any components thereof, may not be comparable to our historical or future results of operations.

We have not generated any revenue to date.

We expect to generate a

significant portion of our future revenue from the sale of renewable RBOB grade gasoline or gasoline derived from natural gas primarily

in markets with federal and state level low-carbon fuel credit systems.

General and Administrative Expense

General and administrative expenses consist of compensation costs including

salaries, benefits and share-based compensation expense, for personnel in executive, finance, accounting and other administrative functions.

General and administrative expenses also include legal fees, professional fees paid for accounting, auditing and consulting services,

and insurance costs.

Following the Business Combination, we incurred and expect to continue to incur higher general and administrative

expenses for public company costs such as compliance with the regulations of the U.S.

Securities and Exchange Commission (the “SEC”)

and the Nasdaq Capital Market.

Research and Development Expense

Our research and development (“R&D”) expenses consist

primarily of internal and external expenses incurred in connection with our R&D activities.

These expenses include labor directly

performed on our projects and fees paid to third parties working on and testing specific aspects of our STG+® design and gasoline

product output.

R&D costs are expensed as incurred.

We expect R&D expenses to grow as we continue to develop the STG+® technology

and develop market and strategic relationships with other businesses.

Contingent consideration

Prior to the Business Combination, we had an arrangement payable to

our Chief Executive Officer and a consultant whereby a contingent payment would become payable if certain return on investment hurdles

were met within five years of an asset purchase arrangement.

The contingent consideration was forfeited in connection with the Closing

of the Business Combination.

Other income primarily consists of interest and dividend income earned

on our cash and cash equivalents balances.

We expect to generate a significant portion of our future revenue from activities related to the proposed Permian Basin Project, which is expected to produce reformulated blendstock for oxygenate blending grade gasoline.

These revenues are currently expected to be comprised of distributions from our share of ownership of the Permian Basin Project as well as fees from our role as operator of such project.

General and Administrative Expenses

General and administrative expenses primarily consist of compensation costs, including salaries, benefits and share-based compensation expense, for personnel in executive, finance, accounting and other administrative functions.

General and administrative expenses also include business development costs, outside service costs, such as legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs.

Following the Business Combination, we incurred and expect to continue to incur higher general and administrative expenses for public company costs such as compliance with the regulations of the U.S.

Securities and Exchange Commission (the “SEC”) and Nasdaq.

Research and Development Expenses

Research and development expenses consist primarily of activities related to the Company’s technology that are not capitalized, including labor (engineers and consultants), engineering software costs, and demonstration plant operations and maintenance costs.

Other income primarily consists of interest and dividend income earned on our cash and cash equivalents balances.

Income Tax Effects

We hold 29.80% of the economic interest in OpCo, which is treated as

a partnership for U.S.

We hold 49.49% of the economic interest in OpCo, which is treated as a partnership for U.S.

federal income tax purposes.

As a partnership, OpCo generally is not subject to U.S.

federal income tax under current

federal income tax under current U.S.

We are subject to U.S.

federal income taxes, in addition to state and local income taxes, with respect to our distributive

share of the net taxable income (loss) and any related tax credits of OpCo.

Intermediate was historically and remains a disregarded subsidiary

of a partnership for U.S.

federal income taxes, in addition to state and local income taxes, with respect to our distributive share of the net taxable income (loss) and any related tax credits of OpCo.

Intermediate was historically and remains a disregarded subsidiary of a partnership for U.S.

Federal income tax purposes.

As a direct result of the Business Combination, OpCo became the sole member of

Intermediate.

As such, OpCo’s distributive share of any net taxable income or loss and any related tax credits of Intermediate are

then distributed to us.

As a direct result of the Business Combination, OpCo became the sole member of Intermediate.

As such, OpCo’s distributive share of any net taxable income or loss and any related tax credits of Intermediate are then distributed to us.

Results of Operations

Comparison of the three months ended September 30, 2024 and September

Comparison of the three months ended March 31, 2025 and March 31, 2024

Three Months Ended

September 30,

General and administrative expenses $ 2,997,522 $ 2,789,376

2 unchanged sentences

Other (income) (530,243) (346,128)

Interest expense

Loss before income taxes 2,650,585 2,529,083

Income tax (benefit)

General and Administrative

General and administrative expenses increased approximately $0.2 million,

or 7%, for the three months ended September 30, 2024 compared to the same period in 2023.

The increase was primarily attributable to higher

salaries and benefits of $0.2 million as a result of an increase in headcount.

Research and Development

R&D expenses for the three months ended September 30, 2024 were

consistent with the same period in 2023.

Other income increased approximately $0.1 million for the three months

ended September 30, 2024 compared to the same period in 2023.

The increase was primarily attributable to higher interest and dividend

income earned from our money market investment, which was approximately $19.9 million as of September 30, 2024.

Interest Expense

Interest expense decreased approximately $0.1 million for the three

months ended September 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to our former land lease

in Maricopa, Arizona, which was classified as a finance lease until the third quarter of 2023, at which time the lease was modified and

reclassified to an operating lease.

The lease was exited on December 31, 2023.

See Note 5 in the accompanying unaudited consolidated financial

statements for further information.

There was no provision for income taxes for the three months ended

September 30, 2024 due to a full valuation allowance that was recorded as of September 30, 2023, and maintained as of September 30, 2024.

The income tax provision for the three months ended September 30, 2023 was due to changes in estimate related to our 2022 tax obligation.

Comparison of the nine months ended September 30, 2024 and September

Nine Months Ended

September 30,

General and administrative expenses

Contingent consideration

Research and development expenses

Total operating loss

Other (income)

Interest expense

Loss before income taxes

Income tax (benefit)

Income tax expense 53,000 —

Net loss $ 2,703,585 $ 2,529,083

General and Administrative

General and administrative expenses decreased approximately $0.8 million,

or 8%, for the nine months ended September 30, 2024 compared to the same period in 2023.

The decrease was primarily due to $2.1 million

of unit-based compensation expense recorded in the nine months ended September 30, 2023 associated with the accelerated vesting of all

the outstanding series A incentive units and Founder incentive units as a result of the Business Combination.

The decrease was partially

offset by higher salaries and benefits expense of $0.6 million attributable to an increase in headcount, higher professional fees of $0.5

million and higher share-based compensation expense of $0.4 million associated with restricted stock units granted in April 2023 and stock

options granted in April 2023 and May 2024.

Contingent Consideration

The $1.3 million change in contingent consideration for the nine months

ended September 30, 2024 compared to the same period in 2023 reflects the reversal during the nine months ended September 30, 2023 of

the remaining accrual made by Holdings for certain contingent payments due to a contractual forfeiture of the payments following the close

of the Business Combination on February 15, 2023.

See Note 2 in the accompanying unaudited consolidated financial statements for further

General and administrative expenses increased approximately $0.2 million, or 8%, for the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily due to additional headcount.

Of our general and administrative expenses for the three months ended March 31, 2025 and 2024, $65,829 and $222,407, respectively, were business development costs.

The decrease was primarily due to development costs associated with the Permian Basin Project incurred in the comparative period prior to our entry into the JDA.

Research and Development

R&D expenses for the nine months ended September 30, 2024 increased

approximately $0.1 million, or 42% compared to the same period in 2023.

The increase was primarily due to higher salaries and benefits

expense attributable to an increase in headcount.

Other income increased approximately $0.7 million for the nine months

ended September 30, 2024 compared to the same period in 2023.

The increase was primarily attributable to higher interest and dividend

income earned from our money market investment.

Interest Expense

Interest expense decreased approximately $0.2 million for the nine

months ended September 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to our former land lease

in Maricopa, Arizona, which was classified as a finance lease until the third quarter of 2023, at which time the lease was modified and

reclassified to an operating lease.

The lease was exited on December 31, 2023.

The income tax benefit for the nine months ended September 30, 2024

consisted of a refund received in connection with a previously paid income tax penalty.

The income tax provision for the nine months ended

September 30, 2023 was due to changes in estimate related to our 2022 tax obligation.

Research and development expenses increased approximately $0.1 million, or 114%, for the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily due to additional headcount and higher software costs.

Other income increased approximately $0.2 million, or 53%, for the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily attributable to higher interest and dividend income earned on our cash and cash equivalents, which increased due to proceeds received from the closing of the PIPE Investment in January 2025.

Income tax expense increased approximately $0.1 million for the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily due to higher interest and dividend income earning on our cash and cash equivalents, which increased due to proceeds received from the closing of the PIPE Investment in January 2025.

Liquidity and Capital Resources

As of September 30, 2024, we are still in the process of developing

our first commercial production facility and have not derived revenue from our principal business activities.

We do not expect to generate

any meaningful revenue unless and until we are able to commercialize our first production facility.

Since inception, we have incurred

operating losses and generated negative operating cash flows primarily attributable to our ongoing general and administrative expenses

and R&D activities.

We measure liquidity in terms of our ability to fund the cash requirements

of our development activities and our near-term business operations, including our contractual obligations and other commitments.

current liquidity needs primarily involve general and administrative expenses and R&D activities for the ongoing development of our

first commercial production facility.

In connection with entering into the JDA with Cottonmouth, a subsidiary of Diamondback, we have

begun to incur development costs with respect to the project, prior to reaching FID and entering into final definitive agreements, irrespective

of whether these events occur.

We plan to invest approximately $3 million, net of the reimbursement from Cottonmouth, for FEED costs in

support of the Permian Basin natural gas-to-gasoline facility.

As of September 30, 2024, we had cash and cash equivalents of $21.7

We expect that our current cash would be sufficient to continue funding ongoing general and administrative expenses and R&D

activities prior to reaching FID for our first commercial production facility and for at least the next 12 months.

We further expect that

additional capital will be required, either in the form of equity or project finance, in order to continue development and construction

of a commercial production facility.

Summary Statement of Cash Flows for the Nine Months Ended September

30, 2024 and September 30, 2023

The following table sets forth the primary sources and uses of cash

and cash equivalents for the periods presented below:

Nine Months Ended

September 30,

As of March 31, 2025, we are still in the process of developing our first commercial production plant and have not derived revenue from our principal business activities.

We do not expect to generate any meaningful revenue unless and until we are able to commercialize our first production plant.

Since inception, we have incurred operating losses and generated negative operating cash flows primarily attributable to our ongoing general and administrative expenses and development activities.

We measure liquidity in terms of our ability to fund the cash requirements of our development activities and our near-term business operations, including our contractual obligations and other commitments.

Our current liquidity needs primarily involve general and administrative expenses and activities related to the ongoing development of our first commercial production plant.

As of March 31, 2025, we had cash and cash equivalents of $65.3 million.

We expect that our cash and cash equivalents will be sufficient to fund our cash requirements, including ongoing general and administrative expenses and planned development activities through the 2025 fiscal year.

However, notwithstanding the PIPE Investment, we further expect that additional capital will be required in order to complete our first commercial production plant.

The exact timing of these additional cash requirements will depend on the pacing of our development activities, which is uncertain and subject to a variety of factors, many of which are outside of our control.

Accordingly, we will likely be required to raise additional funds through the issuance of equity, equity-related or debt securities, through obtaining credit from government or financial institutions or by engaging in joint ventures or other alternative forms of financing.

We cannot be certain that additional funds will be available on favorable terms when required, or at all.

If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could be materially and adversely affected.

Our ability to raise funds through equity offerings may be limited by the significant number of shares that may be publicly sold as well as by the amount of publicly traded Class A common stock as well as outstanding publicly traded warrants ("Warrants"), stock options, restricted stock units ("RSUs") or earn out equity.

As the exercise price of our Warrants is $11.50 per share of Class A common stock, we do not expect that Warrants will be exercised in the foreseeable future.

In addition, to the extent we raise funds through the sale of additional equity securities, our stockholders would experience additional dilution.

If we raise funds through the issuance of debt securities or through loan arrangements, the terms of such debt securities or loan arrangements could require significant interest payments, contain covenants that restrict our business, or contain other unfavorable terms.

The current high interest rate environment adds additional risk and expense to the issuance of debt securities or loan arrangements to fund capital investment.

Summary Statement of Cash Flows for the Three Months Ended March 31, 2025 and March 31, 2024

The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:

Three Months Ended March 31,

Net cash used in operating activities $ (3,701,761) $ (2,829,250)

$ (6,655,262 )

$ (6,793,768 )

Net cash used in investing activities (11,946) (8,323)

Net cash provided by financing activities 49,950,000 -

Net (decrease) increase in cash, cash equivalents and restricted cash

$ (7,106,026 )

Net change in cash, cash equivalents and restricted cash $ 46,236,293 $ (2,837,573)

Cash Flows Used in Operating Activities

Net cash used in operating activities decreased $0.1 million during

the nine months ended September 30, 2024 compared to the same period in 2023.

The decrease was primarily due to an increase in interest

and dividend income and a decrease in cash paid for D&O insurance, mostly offset by higher operating expenses, including salaries

and benefits and professional fees.

Net cash used in operating activities increased approximately $0.9 million during the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily due to cash paid for D&O insurance and excise taxes, partially offset by an increase in interest and dividend income.

Cash Flows Used in Investing Activities

Net cash used in investing activities increased $0.4 million during

the nine months ended September 30, 2024 compared to the same period in 2023.

The increase was primarily attributable to development costs

incurred in connection with the JDA upon commencement of the FEED in June 2024, partially offset by cash reimbursements for such capital

expenditures received from Cottonmouth.

See Notes 6 and 11 in the accompanying consolidated financial statements for further information.

Net cash used in investing activities increased marginally during the three months ended March 31, 2025 as compared to the same period in 2024.

The increase was primarily attributable to development costs incurred in connection with the JDA, partially offset by cash reimbursements for such capital expenditures received from Cottonmouth.

See Note 4 in the accompanying unaudited consolidated financial statements for further information.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was zero for the nine months

ended September 30, 2024 compared to $37.5 million for the same period in 2023.

Net cash provided by financing activities

for the nine months ended September 30, 2023 consisted of the net proceeds received from the Closing of the Business Combination and PIPE

Following the Business Combination and the Closing of the PIPE Financing, we received approximately $37.3 million in cash,

net of approximately $10.0 million of transaction expenses and the repayment of approximately $3.8 million of capital contributions made

by Bluescape Clean Fuels Holdings, LLC since December 2021.

The gross amount, before expenses, was composed of approximately $19.0 million

release from CENAQ’s Trust Account, after payment of approximately $158.8 million to public stockholders who exercised redemption

rights (representing a redemption rate of approximately 89.3%), and $32.0 million of proceeds from the PIPE Financing.

We also received

$0.1 million from the CENAQ operating account.

Net cash provided by financing activities was $49.9 million for the three months ended March 31, 2025 as compared to $0 for the same period in 2024.

The increase was due to the net proceeds from the closing of the PIPE Investment in January 2025.

Commitments and Contractual Obligations

The Company had a restricted cash balance of $100,000 as of both March 31, 2025 and December 31, 2024.

The restricted cash balance is maintained in support of a letter of credit.

Off-Balance Sheet Arrangements

As of September 30, 2024, we have not engaged in any off-balance sheet

arrangements, as defined in the rules and regulations of the SEC.

As of March 31, 2025, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

Our unaudited consolidated financial statements are based on the selection

and application of significant accounting policies.

The preparation of unaudited consolidated financial statements in conformity with

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date

of the unaudited consolidated financial statements and the reported amounts of expenses and allocated charges during the reporting period.

Our unaudited consolidated financial statements are based on the selection and application of significant accounting policies.

The preparation of unaudited 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 at the date of the unaudited consolidated financial statements and the reported amounts of expenses and allocated charges during the reporting period.

Actual results could differ from those estimates.

However, we are not currently aware of any reasonably likely events or circumstances

that would result in materially different results.

We describe our significant accounting policies in Note 3 – Significant

Accounting Policies, of the notes to the consolidated financial statements included in our 2023 Form 10-K.

We discuss our critical

accounting policies and estimates in Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our

2023 Form 10-K.

However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.

We describe our significant accounting policies in Note 2 – Significant Accounting Policies, of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

We discuss our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

See Note 2 in the accompanying unaudited consolidated

financial statements for information regarding recent accounting pronouncements.

See Note 2 in the accompanying unaudited consolidated financial statements for information regarding recent accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the

Exchange Act and are not required to provide the information otherwise required under this item.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis