Verde Clean Fuels, Inc. 10-K

ITEM 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Verde Clean Fuels, Inc Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Verde Clean Fuels, Inc and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in stockholders' equity , and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Dallas, Texas March 27, 2026 We have served as the Company's auditor since 2022. F-1 Table of Contents VERDE CLEAN FUELS, INC. CONSOLIDATED BALANCE SHEETS As of December 31, (in thousands, except share and per share amounts) 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 57,215 $ 19,044 Restricted cash 100 100 Accounts receivable – other 145 226 Prepaid expenses and other current assets 466 804 Total current assets 57,926 20,174 Non-current assets: Property, plant and equipment, net 62 1,096 Intellectual property and patented technology 1,925 1,925 Operating lease right-of-use assets, net 173 216 Deposits 161 161 Total non-current assets 2,321 3,398 Total assets $ 60,247 $ 23,572 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 985 $ 734 Accrued liabilities 906 1,907 Operating lease liabilities 174 154 Other current liabilities 35 16 Total current liabilities 2,100 2,811 Non-current liabilities: Operating lease liabilities 12 78 Total non-current liabilities 12 78 Total liabilities 2,112 2,889 Commitments and contingencies (see Note 8) Stockholders’ equity Class A common stock, par value $ 0.0001 per share, 22,049,621 and 9,549,621 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively 2 1 Class C common stock, par value $ 0.0001 per share, 22,500,000 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively 2 2 Additional paid in capital 64,070 37,503 Accumulated deficit ( 34,215 ) ( 27,257 ) Noncontrolling interest 28,276 10,434 Total stockholders’ equity 58,135 20,683 Total liabilities and stockholders’ equity $ 60,247 $ 23,572 The accompanying notes are an integral part of these consolidated financial statements. F-2 Table of Contents VERDE CLEAN FUELS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For The Year Ended December 31, (in thousands, except share and per share amounts) 2025 2024 General and administrative expenses $ 11,927 $ 11,206 Research and development expenses 591 451 Impairment of property, plant and equipment 3,936 — Total operating loss 16,454 11,657 Other (income) ( 2,425 ) ( 1,193 ) Loss before income taxes ( 14,029 ) ( 10,464 ) Income tax expense 106 51 Net loss $ ( 14,135 ) $ ( 10,515 ) Net loss attributable to noncontrolling interest $ ( 7,177 ) $ ( 7,181 ) Net loss attributable to Verde Clean Fuels, Inc. $ ( 6,958 ) $ ( 3,334 ) Earnings per share Weighted average Class A common stock outstanding, basic and diluted 17,842,927 6,286,033 Loss per share of Class A common stock $ ( 0.39 ) $ ( 0.53 ) The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents VERDE CLEAN FUELS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Consolidated Statement of Stockholders’ Equity for the Year Ended December 31, 2025 (in thousands, except share and per share amounts) Class A Common Class C Common Additional Paid In Capital Accumulated Deficit Non controlling Interest Total Stockholders’ Equity Shares Values Shares Values Balance – December 31, 2024 9,549,621 $ 1 22,500,000 $ 2 $ 37,503 $ ( 27,257 ) $ 10,434 $ 20,683 Issuance of Class A common stock to Cottonmouth 12,500,000 1 - - 49,345 - - 49,346 Share-based compensation - - - - 2,185 - - 2,185 Rebalancing of ownership percentage for issuance of Class A shares - - - - ( 25,019 ) - 25,019 - Equity offering cost adjustment - - - - 56 - - 56 Net loss - - - - - ( 6,958 ) ( 7,177 ) ( 14,135 ) Balance – December 31, 2025 22,049,621 $ 2 22,500,000 $ 2 $ 64,070 $ ( 34,215 ) $ 28,276 $ 58,135 The accompanying notes are an integral part of these consolidated financial statements. VERDE CLEAN FUELS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Consolidated Statement of Stockholders’ Equity for the Year Ended December 31, 2024 (in thousands, except share and per share amounts) Class A Common Class C Common Additional Paid In Capital Accumulated Deficit Non controlling Interest Shares Values Shares Values Total Stockholders’ Equity Balance – December 31, 2023 9,387,836 $ 1 22,500,000 $ 2 $ 35,014 $ ( 23,923 ) $ 17,730 $ 28,824 Related party promissory note settlement 40,961 - - - 410 - - 410 Conversion of restricted stock units 120,824 - - - - - - - Share-based compensation - - - - 1,354 - - 1,354 Rebalancing of ownership percentage for issuance of Class A shares - - - - 115 - ( 115 ) - Adjustment of excise tax accrual - - - - 610 - - 610 Net loss - - - - - ( 3,334 ) ( 7,181 ) ( 10,515 ) Balance – December 31, 2024 9,549,621 $ 1 22,500,000 $ 2 $ 37,503 $ ( 27,257 ) $ 10,434 $ 20,683 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents VERDE CLEAN FUELS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For The Year Ended December 31, (in thousands) 2025 2024 Cash flows from operating activities: Net loss $ ( 14,135 ) $ ( 10,515 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 16 13 Impairment of property, plant and equipment 3,936 — Share-based compensation expense 2,185 1,354 Amortization of right-of-use assets 352 309 Changes in operating assets and liabilities Prepaid expenses 294 ( 431 ) Accounts payable ( 218 ) 144 Accrued liabilities ( 992 ) 540 Operating lease liabilities ( 355 ) ( 297 ) Other changes in operating assets and liabilities 28 3 Net cash used in operating activities ( 8,889 ) ( 8,880 ) Cash flows from investing activities: Additions to property, plant and equipment ( 7,685 ) ( 2,550 ) Reimbursements of development costs in accordance with the JDA 5,299 1,695 Net cash used in investing activities ( 2,386 ) ( 855 ) Cash flows from financing activities: Issuance of Class A common stock to Cottonmouth 50,000 - Payment of equity issuance costs ( 554 ) - Net cash provided by financing activities 49,446 - Net change in cash, cash equivalents and restricted cash 38,171 ( 9,735 ) Cash, cash equivalents and restricted cash, beginning of year 19,144 28,879 Cash, cash equivalents and restricted cash, end of period $ 57,315 $ 19,144 Supplemental cash flows: Capital expenditures in accounts payable and accrued liabilities (at period end) $ 459 $ 406 Accounts receivable for reimbursement of capital expenditures (at period end) $ 141 $ 214 Cash paid for income taxes $ 192 $ 46 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents VERDE CLEAN FUELS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share amounts) NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION Overview Verde Clean Fuels, Inc. (the “Company”, “Verde” and “Verde Clean Fuels”) owns an innovative and proprietary gas-to-liquids processing technology capable of converting low-value or stranded feedstocks into higher-value clean transportation fuels. Verde's synthesis gas (“syngas”)-to-gasoline plus (STG+®) process is designed to convert syngas, derived from a variety of feedstocks, including natural gas and biomass, into fully finished liquid fuels that require no additional refining. The STG+® technology is engineered for industrial-scale deployment and intended to be delivered in standardized modular units. The technology has been validated through a fully integrated demonstration plant that has completed over 10,000 hours of operation. The Company is a Delaware corporation headquartered in Houston, Texas. The Company also has an office and demonstration plant in Hillsborough, New Jersey. See Notes 8 and 14 for further information. The Company’s shares of Class A common stock, par value $ 0.0001 per share (the “Class A common stock”), and warrants that were issued in the public offering are listed on Nasdaq under the symbols “VGAS” and “VGASW,” respectively. The Company’s primary stockholders are Bluescape Clean Fuels Holdings, LLC (“Holdings”) and Cottonmouth Ventures, LLC (“Cottonmouth”). Holdings is an affiliate of Bluescape Energy Partners, an alternative investment firm. Cottonmouth is a wholly-owned subsidiary of Diamondback Energy, Inc. (“Diamondback”). See Notes 3 and 7 for further information. Business Combination On February 15, 2023 (the “Closing Date”), the Company consummated (the “Closing”) 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. (“CENAQ”), Verde Clean Fuels OpCo, LLC, a Delaware limited liability company and a wholly owned subsidiary of CENAQ (“OpCo”), Holdings, Bluescape Clean Fuels Intermediate Holdings, LLC, a Delaware limited liability company (“Intermediate”), and CENAQ Sponsor LLC (“Sponsor”). Immediately upon the completion of the Business Combination, CENAQ was renamed to Verde Clean Fuels, Inc. Following the completion of the Business Combination, the combined company is organized under an umbrella partnership C corporation structure, and the direct assets of the Company consist of equity interests in OpCo, whose direct assets consist 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 businesses. Basis of Presentation The accompanying consolidated financial statements 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”). Risks and Uncertainties The Company is currently in the development stage and has not yet commenced principal operations or generated revenue. The Company's ability to deploy its STG+® technology is subject to a number of risks and uncertainties including, but not limited to, the receipt of the necessary permits and regulatory approvals, commodity price risk impacting the decision to go forward with the projects, and the availability and ability to obtain the necessary financing for the construction and development of projects. The Company’s ability to operate and/or provide services to commercial production plants that F-6 Table of Contents utilize the STG+® technology is subject to many risks beyond its control, including regulatory developments, construction risks, and global and regional macroeconomic developments. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. The most significant estimates pertain to the calculations of the fair values of equity instruments, impairment of intangible and long-lived assets and income taxes. Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ significantly from those estimates. Principles of Consolidation The Company consolidates all entities that it controls by ownership interest or other contractual rights giving the Company control over the most significant activities of an investee. The Company’s consolidated financial statements include its subsidiaries as follows: • OpCo; • Intermediate; • Bluescape Clean Fuels Employee Holdings, LLC; • Bluescape Clean Fuels EmployeeCo., LLC; • Bluescape Clean Fuels, LLC; and • Maricopa Renewable Fuels I, LLC. All intercompany balances and transactions have been eliminated in consolidation. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenues The Company has not generated any revenue to date. The Company expects that future revenue generation opportunities would result from capital-lite opportunities to deploy its STG+® technology. Such opportunities include licensing technology and providing engineering, technical, and operational services. 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 outside service costs, such as legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs. Research and Development Expenses Research and development expenses primarily consist 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. F-7 Table of Contents Other Income Other income primarily consists of interest and dividend income earned from the Company's cash and cash equivalents. Cash and Cash Equivalents Cash and cash equivalents include bank deposits as well as short-term, highly liquid investments with original maturities of three months or less. Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which, at times, may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit of $ 250 . Additionally, the Company’s investments held in a short-term money market fund are not guaranteed by the FDIC. As of December 31, 2025, the Company had not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts. Restricted Cash The Company has restricted cash, which is maintained in support of a letter of credit. Accounts Receivable – Other Accounts receivable – other primarily consists of costs reimbursable by Cottonmouth in accordance with the joint development agreement (“JDA”) between the Company and Cottonmouth. See Notes 3, 5, and 14 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 December 31, 2025 and 2024. Other Current Assets Other current assets primarily consist of deferred equity issuance costs and prepaid expenses. As of December 31, 2024, the Company had $ 470 of deferred equity issuance costs in connection with the Company’s issuance of shares of its Class A common stock to Cottonmouth in January 2025. There were no deferred equity issuance costs as of December 31, 2025, as the deferred equity issuance costs were recorded within additional paid-in capital for the year ended December 31, 2025 as a reduction to the proceeds received from the issuance of the Class A common stock to Cottonmouth. See Note 3 for further information. 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 consolidated balance sheets, 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 December 31, 2025 and 2024 due to the short-term maturities of such instruments. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that the buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances. F-8 Table of Contents The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Net Loss Per Share of Common Stock Subsequent to the Business Combination, the Company’s capital structure is comprised of shares of 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 private offering of shares of Class A common stock hold shares of Class A common stock and Warrants (as defined below), and Holdings owns shares of Class C common stock and Class C units of OpCo (the “Class C OpCo Units”). Holders of Class C OpCo Units, other than Verde Clean Fuels, have the right, subject to certain limitations, to exchange all or a portion of its Class C OpCo Units and a corresponding number of shares of Class C common stock for, at OpCo’s election, (i) shares of Class A common stock on a one -for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) an equivalent amount of cash. Each share of Class C common stock represents the right to cast one vote per share at the Verde Clean Fuels level and carries no economic rights, including rights to dividends or distributions upon liquidation. Thus, shares of Class C common stock are not participating securities per ASC 260, “Earnings Per Share”. As the shares of Class A common stock represent the only participating securities, the application of the two-class method is not required. Basic net loss per share is computed by dividing net loss attributable to Class A common stockholders by the weighted average number of shares of Class A common stock outstanding for the same period. Diluted loss per share of Class A common stock is computed by dividing net loss attributable to Class A common stockholders by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. Antidilutive instruments, including outstanding warrants, stock options, certain restricted stock units (“RSUs”) and Sponsor earn out shares, were excluded from diluted earnings per share for the years ended December 31, 2025 and 2024 because the inclusion of such instruments would be anti-dilutive. As a result, diluted net loss per share of common stock is the same as basic net loss per share of common stock for all periods presented. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and the applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). 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 under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value on the date of issuance and are subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as a non-cash gain or loss in the consolidated statements of operations. See Note 10 for further information. F-9 Table of Contents Income Taxes The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. The Company has elected to use the outside basis approach to measure the deferred tax assets or liabilities based on its investment in its subsidiaries without regard to the underlying assets or liabilities. In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2025 and 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. The estimated useful lives of assets are as follows: Computers, office equipment and hardware 3 – 5 years Furniture and fixtures 7 years Machinery and equipment 7 years Leasehold improvements Shorter of the lease term (including estimated renewals) or the estimated useful lives of the improvement Project development and construction costs are capitalized as construction in progress assets to the extent that they are directly identifiable and once the project is determined to be probable. Depreciation expense is not recorded for construction in progress assets until construction is completed and the assets are placed into service. Cost reimbursements from project participants related to construction in progress assets are recorded as an offset to the construction in progress assets. Upon entry into the JDA with Cottonmouth, the Company determined that the Permian Basin Project (as defined in Note 3) was probable and began capitalizing associated directly identifiable costs as construction in progress assets, net of costs reimbursable to the Company by Cottonmouth in accordance with the JDA. See Notes 3, 5, and 14 for further information. Maintenance and repairs are charged to expense as incurred, and improvements that increase the useful life of the asset 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 recorded in the consolidated statements of operations in the period realized. Indefinite-Lived Intangible Assets The Company’s intangible assets consist of its intellectual property and patented technology associated with its patented STG+® process technology. These assets are considered to be indefinite-lived intangible assets and, as such, are not subject to amortization. F-10 Table of Contents Impairments Long-Lived Assets The Company evaluates the carrying value of long-lived assets when indicators of impairment exist. The carrying value of a long-lived asset is considered impaired when the estimated separately identifiable, undiscounted cash flows from such asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the estimated cash flows discounted at a rate commensurate with the risk involved. See Notes 4, 5 and 14 for further information. Intangible Assets A qualitative assessment of indefinite-lived intangible assets is performed in order to determine whether further impairment testing is necessary. In performing this analysis, macroeconomic conditions, industry and market conditions are considered in addition to current and forecasted financial performance, entity-specific events and changes in the composition or carrying amount of net assets. Following our analysis of qualitative impairment indicators, intellectual property is tested for impairment using certain valuation methods, such as the discounted cash flow or relief-from-royalty methods. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference. See Note 4 for further information. Leases The Company accounts for leases under ASC 842, “Leases” (“ASC 842”). The core principle of this standard is that a lessee should recognize the assets and liabilities that arise from leases by recognizing a liability to make lease payments (the lease liability) and a right-of-use asset (“ROU asset”) representing the lessee’s right to use, or control the use of, 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 in the consolidated balance sheets. 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 components from lease components for real estate lease arrangements. The Company combines the lease and non-lease component into a single accounting unit and accounts for the unit under ASC 842 where lease and non-lease components are included in the classification of the lease and the calculation of the ROU asset and lease liability. In addition, the Company has elected the practical expedient to not apply lease recognition requirements to leases with a term of one year or less. Under this expedient, lease costs are not capitalized; rather, are expensed on a straight-line basis over the lease term. The Company’s leases do not contain residual value guarantees or material restrictions or covenants. The Company determines if an arrangement is, or contains, a lease at contract inception based on whether that contract conveys the right to control the use of an identified asset in exchange for consideration for a period of time. Leases are classified as either finance or operating. This classification dictates whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. For all lease arrangements with a term of greater than 12 months, the Company presents at the commencement date: a lease liability, which is a lessee’s obligation to make 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. The Company uses either the rate implicit in the lease, if readily determinable, or the Company’s incremental borrowing rate for a period comparable to the lease term in order to calculate the net present value of the lease liability. The incremental borrowing rate represents the rate that would approximate the rate to borrow funds on a collateralized basis over a similar term and in a similar economic environment. Other Current Liabilities Other current liabilities primarily consist of deferred income and deposits associated with a sublease arrangement. Emerging Growth Company Accounting Election The Company is an “emerging growth company,” as defined in Section 2(a) 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 F-11 Table of Contents 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 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 The Company applies ASC 718, “Compensation — Stock Compensation” (“ASC 718”), in accounting for its unit and share-based compensation arrangements. Unit-Based Compensation Service-based units 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 service in exchange for the award, or the requisite service period, which is usually the vesting period. Performance-based unit compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is expensed over the requisite service period, based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment to earnings in the period of the change. If the performance goal is not met, no unit-based compensation expense is recognized and any previously recognized unit-based compensation expense is reversed. Forfeitures of service-based and performance-based units are recognized upon the time of occurrence. Equity-Based Awards In March 2023, the Company authorized and approved the Verde Clean Fuels, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan”), which authorizes certain shares that may be granted under the 2023 Plan in connection with equity-based compensation awards. Under the terms of the 2023 Plan, the Company may, from time to time, grant stock options and/or RSUs to certain employees, officers, and non-employee directors. In addition to stock options and RSUs, the 2023 Plan authorizes for the future potential grant of stock appreciation rights, restricted stock, performance awards, stock awards, dividend equivalents, other stock-based awards, cash awards, and substitute awards to certain employees (including executive officers), consultants and non-employee directors, and is intended to align the interests of the Company’s service providers with those of the stockholders. Stock options represent the contingent right of award holders to purchase shares of the Company’s Class A common stock at a stated price for a limited time. Stock options granted to employees and officers will generally vest at a rate of 25 % on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued service through the vesting dates. Stock options granted to non-employee directors will generally vest 100 % on the first anniversary of the date of grant, subject to continued service through the vesting date. Forfeitures are recognized as they occur. 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. The cost of awarded equity instruments is recognized based on each instrument’s grant-date fair value over the period during which the grantee is required to provide service in exchange for the award. Equity-based compensation is recorded as a general and administrative expense in the consolidated statements of operations. The determination of fair value of stock options requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions. The key assumptions for the Black-Scholes model include the expected term, risk- F-12 Table of Contents free interest rate, volatility, and dividend yield. The Company estimates the key assumptions for the Black-Scholes model as follows: • expected term is based on peer benchmarking and expectations; • risk-free interest rate is based on U.S. Treasury yield curve rates with maturities similar to the expected term; and • volatility is based on the volatility of various publicly traded peer companies. The Company currently uses an expected dividend yield of zero. The Company also assesses whether or not a discount for lack of marketability is applied based on certain liquidity factors. RSUs represent an unsecured right to receive one share of the Company’s Class A common stock equal to the per share value of the Class A common stock on the settlement date. RSUs have a zero-exercise price and vest over time in whole after the first anniversary of the date of grant subject to continuous service through the vesting date. See Note 9 for further information. Noncontrolling Interest Following the Business Combination, holders of Class A common stock own a direct controlling interest in the results of the Company, while Holdings own an economic interest in the Company, which is presented as noncontrolling interest (“NCI”). NCI is classified as permanent equity within the consolidated balance sheets. Income or loss is attributed to NCI based on their contractual distribution rights and the relative percentages of equity interests held during the period. The Company’s equity attributable to NCI and the Class A common stockholders are rebalanced to reflect changes in ownership, as applicable. Recent Accounting Standards In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): 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. Early adoption is permitted. The Company adopted ASU 2023-09 for the year ended December 31, 2025, and the required disclosures are included in Note 12. In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the income statement. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its disclosures. The Company considers the applicability and impact of all ASUs issued by the FASB. There are no other accounting pronouncements which have been issued but are not yet effective that would have a material impact on the consolidated financial statements when adopted. NOTE 3 – COTTONMOUTH AND PERMIAN BASIN PROJECT Overview F-13 Table of Contents Cottonmouth is the Company’s second largest stockholder. and is a wholly-owned subsidiary of Diamondback, 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. See Note 1 for further information. Initial Investment In connection with the Closing of the Business Combination, the Company issued and sold to Cottonmouth 2,000,000 shares of its Class A common stock in a private placement for an aggregate purchase price of $ 20,000 and entered into an equity participation right agreement, dated as of February 13, 2023 (“Existing Equity Participation Right Agreement”), by and among the Company and Cottonmouth, pursuant to which Verde granted Cottonmouth the right to participate and jointly develop natural gas-to-gasoline plants in the Permian Basin utilizing Verde’s STG+® technology and associated natural gas from Diamondback’s operations. Permian Basin Project In February 2024, Verde and Cottonmouth entered into a JDA related to the proposed development, construction, and operation of a natural gas-to-gasoline plant in the Permian Basin utilizing Verde’s STG+® technology and associated natural gas from Diamondback’s operations (the “Permian Basin Project”). The JDA frames the contracts contemplated to be entered into between the parties and outlines the conditions precedent for the parties to enter into definitive documents and achieve final investment decision (“FID”) to proceed with the Permian Basin Project. The JDA conditions precedent include finalizing applicable project contracts, obtaining necessary permits, obtaining project financing on terms satisfactory to each party, and receiving FID by each party. In June 2024, the Company entered into a contract with Chemex Global, LLC (“Chemex”), a Shaw Group company (“Shaw”), for a front-end engineering and design (“FEED”) study related to the Permian Basin Project. In connection with entering into the JDA and the commencement of the FEED study, the Company began to incur development costs with respect to the project. Under the terms of the JDA, 65 % of the approved development costs incurred by the Company (which include costs associated with the FEED study) are reimbursed by Cottonmouth. The FEED study was completed in December 2025. On February 6, 2026, the Company announced the suspension of development of the Permian Basin Project primarily as a result of changing market conditions driven by increasing demand for natural gas in the Permian Basin. For the year ended December 31, 2025, the Company recorded an impairment of property, plant and equipment of $ 3,936 , which represented the full value of the Company's construction in progress assets. See Notes 4, 5, 7 and 14 for further information. Second Investment In December 2024, the Company entered into a Class A common stock purchase agreement (the “Purchase Agreement”) with Cottonmouth pursuant to which the Company agreed to issue and sell to Cottonmouth in a private placement an aggregate of 12,500,000 shares of its Class A common stock at a price of $ 4.00 per share for an aggregate purchase price of $ 50,000 (the “PIPE Investment”). Closing of the PIPE Investment occurred on January 29, 2025. In connection with the closing of the PIPE Investment, on January 29, 2025, (i) Cottonmouth and the Company amended 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 a 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. Additionally, in connection with the consummation of the transactions contemplated by the Purchase Agreement, the Company amended and restated its fourth amended and restated certificate of incorporation (the “Restated Charter”). In accordance with the Restated Charter, effective January 29, 2025, the Company (i) increased the number of authorized shares of Class C common stock from 25,000,000 to 26,000,000 and (ii) increased the size of its Board of Directors 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 stockholder action by written consent. NOTE 4 – IMPAIRMENTS F-14 Table of Contents Long-Lived Assets As of December 31, 2025, the Company evaluated the recoverability of its construction in progress (“CIP”) assets associated with the Permian Basin Project as a result of changing market conditions driven by increasing demand for natural gas in the Permian Basin. The Company determined that such factors that ultimately led to the suspension of the Permian Basin Project in February 2026 were present as of December 31, 2025. The Company further determined that the carrying value of its CIP assets related to the Permian Basin Project were not likely to be recoverable. The Company determined the fair value of its CIP assets using a Level 3 non-recurring fair value measurement based on the Company’s estimate of the assets’ remaining fair value, considering the suspension of the Permian Basin Project and the limited alternative use of the underlying assets. Accordingly, for the year ended December 31, 2025, the Company recorded an impairment of $ 3,936 , representing 100 % of the carrying value of its CIP assets, reducing the carrying value of such assets to zero as of December 31, 2025. See Notes 3, 5, and 14 for additional detail. Intangible Assets As of December 31, 2025, the Company also evaluated the recoverability its intellectual property (“IP”) intangible assets in light of changing market conditions driven by increasing demand for natural gas in the Permian Basin. The Company determined that changing market conditions related to natural gas in the Permian Basin were specific to a particular feedstock and region whereas its IP assets that support the STG+® technology can be applied to produce fully finished liquid fuels from diverse feedstocks in various regions where low-value or stranded feedstocks may be present. The Company further determined that the fair value of its IP assets exceeded its carrying value and did not record an impairment. NOTE 5 – PROPERTY, PLANT AND EQUIPMENT The Company's major classes of property, plant and equipment are as follows: As of December 31, (in thousands) 2025 2024 Construction in progress, net $ — $ 1,029 Computers, office equipment and hardware 42 34 Furniture and fixtures 47 47 Machinery and equipment 44 44 Property, plant and equipment 133 1,154 Less: accumulated depreciation 71 58 Property, plant and equipment, net $ 62 $ 1,096 For the year ended December 31, 2025, the Company recorded an impairment for the full value of its CIP assets. Prior to the impairment, the Company's CIP assets were comprised of capitalized development costs (which include costs associated with the FEED study) related to the Permian Basin Project, net of costs reimbursable by Cottonmouth in accordance with the JDA. See Notes 4, 7 and 14 for further information. Depreciation expense was $ 16 and $ 13 for the years ended December 31, 2025 and 2024, respectively. Depreciation expense of $ 14 and $ 2 is included in general and administrative and research and development expense, respectively, for the year ended December 31, 2025. Depreciation expense of $ 10 and $ 3 is included in general and administrative and research and development expense, respectively, for the year ended December 31, 2024. NOTE 6 - ACCRUED LIABILITIES The Company’s accrued liabilities are as follows: F-15 Table of Contents (in thousands) As of December 31, 2025 2024 Accrued compensation $ 468 $ 331 Accrued construction in progress 9 - Accrued legal fees 261 468 Accrued professional fees 120 68 Accrued excise tax liability - 978 Other accrued expenses 48 62 Total accrued liabilities $ 906 $ 1,907 Inflation Reduction Act of 2022 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. federal 1 % excise tax on certain repurchases of stock occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its stockholders 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 repurchase. 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. Department of the Treasury. As of December 31, 2024, the Company had recorded an accrual for an excise tax liability of $ 978 . During the year ended December 31, 2024, the Company reduced the estimated excise tax liability by $ 610 , which was recorded as an increase to additional paid in capital within stockholders’ equity upon finalization of the calculation of the amount owed and ultimate submission of the excise tax return filed. During the year ended December 31, 2025, the accrued excise tax liability was paid in full. NOTE 7 – RELATED PARTY TRANSACTIONS Holdings The Company has a related party relationship with Holdings whereby Holdings holds a majority ownership in the Company via voting shares and has control of its Board of Directors. Further, Holdings possesses 3,500,000 earn out shares. The Holdings equity compensation instruments consist of 1,000 authorized and issuable Series A Incentive Units (the “Series A Incentive Units”) and 1,000 authorized and issuable Founder Incentive Units (the “Founder Incentive Units”). Certain of the Company’s management hold Series A Incentive Units and Founder Incentive Units that entitle them to participate in the earnings of and distributions by Holdings after a specified return to the Series A Preferred Unit holders. See Notes 1, 9, 11 and 14 for further information. Cottonmouth The Company has a related party relationship with Cottonmouth due to its ownership interest in the Company’s Class A common stock. See Notes 1 and 3 for further information. Shaw In June 2024, the Company entered into a contract with Chemex, a Shaw company, for a FEED study related to the Permian Basin Project. Also in June 2024, the parent organization of Holdings, through a separate subsidiary, made an unrelated preferred equity investment in Shaw and, in connection with the investment, Jonathan Siegler, a Company director, was appointed as a director of Shaw. The FEED study was completed in December 2025; however, the Permian Basin Project was suspended in February 2026. See Notes 3, 5 and 14 for further information. Five Star Clean Fuels A subsidiary of the Company is a party to a letter agreement with Five Star Clean Fuels LLC, formerly known as Arb Clean Fuels Management LLC (“Five Star Clean Fuels”). The letter agreement purports to grant Five Star Clean Fuels certain non-exclusive rights to utilize the STG+® technology and reflects an intent to enter into mutually acceptable to be F-16 Table of Contents negotiated agreements related to a potential site in Odessa, Texas. Martijn Dekker, a Company director, is an officer and director of Five Star Clean Fuels and his affiliate has an ownership interest in Five Star Clean Fuels. See Note 14 for further information. Promissory Note On February 15, 2023, the Company entered into a promissory note with the Sponsor for $ 410 (the “Promissory Note”). The Promissory Note canceled and superseded all prior promissory notes. The Promissory Note was non-interest bearing and the entire principal balance of the Promissory Note was payable on or before February 15, 2024 in cash or shares at the Company’s election. On February 15, 2024, the Company settled the 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 year ended December 31, 2024, 2024, the Company issued 40,961 shares of its Class A common stock and recorded an increase to additional paid-in capital of $ 410 . NOTE 8 – COMMITMENTS AND CONTINGENCIES Leases The Company leases its office in Houston, Texas and its office and demonstration plant in Hillsborough, New Jersey. The Company's lease for its office in Houston is through February 2027 and its lease for its office and demonstration plant in Hillsborough, New Jersey is through April 2026. Subsequent to the year ended December 31, 2025, the Company extended its lease for its office and demonstration plant in Hillsborough, New Jersey for an additional year through April 2027. See Notes 1 and 13 for further information. For the years ended December 31, 2025 and 2024, the Company determined that the rent portion of such leases qualified as an operating lease under ASC 842. For the years ended December 31, 2025 and 2024, the Company had expenses related to its operating leases as follows: (in thousands) Statements of Operations For The Year Ended December 31, Lease Cost Classification 2025 2024 Operating lease cost General and administrative expense $ 377 $ 336 Variable lease cost General and administrative expense 189 170 Total operating lease cost $ 566 $ 506 As of December 31, 2025, maturities of the Company’s operating leases are as follows: F-17 Table of Contents (in thousands) Maturity of lease liabilities Operating Leases 2026 $ 178 2027 12 Total future minimum lease payments 190 Less: interest ( 4 ) Present value of lease liabilities $ 186 For the years ended December 31, 2025 and 2024, supplemental information related to the Company’s operating lease arrangements are as follows: (in thousands) For The Year Ended December 31, Operating lease – supplemental information 2025 2024 ROU assets obtained in exchange for operating lease $ 309 $ 353 Weighted average remaining lease term – operating leases 0.7 years 1.4 years Discount rate – operating leases 7.50 % 7.50 % Commitments As of December 31, 2025 and 2024, the Company had restricted cash of $ 100 . Contingencies As of December 31, 2025 and 2024, the Company was not party to any litigation and has not recorded any contingent liabilities. Subsequent to December 31, 2025, Five Star Clean Fuels filed an original petition against the Company seeking a declaratory judgment that a letter agreement between a subsidiary of the Company and a predecessor of Five Star Clean Fuels constituted a binding contract that effectuates a grant to Five Star Clean Fuels of certain non-exclusive rights to utilize the STG+® technology. See Note 14 for further information. NOTE 9 – STOCKHOLDERS' EQUITY Earn Out Consideration Earn out shares potentially issuable as part of the Business Combination are recorded within stockholders’ equity as the instruments are deemed to be indexed to the Company’s common stock and meet the equity classification criteria under ASC 815. Earn out shares contain market conditions for vesting and were awarded to eligible stockholders, as described further below, and not to current employees. As consideration for the contribution of the equity interests in Intermediate, Holdings received earn out consideration (“Holdings earn out”) of 3,500,000 shares of Class C common stock and a corresponding number of Class C OpCo Units subject to vesting with the achievement of separate market conditions. One half of the Holdings earn out shares will meet the market condition when the volume-weighted average share price (“VWAP”) of the Class A common stock is greater than or equal to $ 15.00 for any 20 trading days within any period of 30 consecutive trading days within five years of the Closing Date. The second half will vest when the VWAP of the Class A common stock is greater than or equal to $ 18.00 over the same measurement period. Additionally, the Sponsor received earn out consideration (“Sponsor earn out” and, together with Holdings earn out, the “Earn Out Equity”) of 3,234,375 shares of Class A common stock subject to forfeiture which will no longer be subject to forfeiture with the achievement of separate market conditions (the “Sponsor Shares”). One half of the Sponsor earn out will no longer be subject to forfeiture if the VWAP of Class A common stock is greater than or equal to $ 15.00 for any 20 trading days within any period of 30 consecutive trading days within five years of the Closing Date. The second half will no longer be subject to forfeiture when the VWAP of the Class A common stock is greater than or equal to $ 18.00 over the same measurement period. F-18 Table of Contents Notwithstanding the foregoing, the shares of Earn Out Equity will vest in the event of a sale of the Company at a price that is equal to or greater than the applicable trigger price payable to the buyer of the Company. The Earn Out Equity was issued in connection with the Business Combination on February 15, 2023. Holdings earn out shares are neither issued nor outstanding as of December 31, 2025 as the performance requirements for vesting were not achieved. All Sponsor Shares granted in connection with the Business Combination were issued and outstanding as of December 31, 2025 and 2024. Sponsor Shares subject to forfeiture pursuant to the above terms that do not vest in accordance with such terms shall be forfeited. Based on the trading price of the Company's Class A common stock, the market conditions were not met and no shares of Earn Out Equity were vested as of December 31, 2025. Share-based Compensation The Company records compensation expense related to share-based compensation arrangements within general and administrative expenses. The total compensation expense incurred related to the Company’s equity-based compensation plans was $ 2,185 and $ 1,354 for the years ended December 31, 2025 and 2024, respectively. No related income tax benefits were recognized during the years ended December 31, 2025 and 2024. Stock Options On June 2, 2025, the Company awarded additional stock options to certain employees and officers and to non-employee directors, consistent with the terms of the 2023 Plan. The stock options granted in 2025 have an exercise price of $ 4.76 per share and will expire 7 years from the date of grant. Stock options granted to employees and executive officers will vest at a rate of 25 % on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued service through the vesting dates. Stock options granted to non-employee directors will vest one year from the date of grant, subject to continued service through the vesting date. The fair value of stock options granted during 2025 was $ 1.43 per option for options granted to both employees and officers and to non-employee directors. The fair value of stock options granted in 2025 was determined using the following assumptions as of the grant date: Risk-free interest rate 4.5 % Expected term 3.5 years Volatility 40 % Dividend yield zero Discount for lack of marketability zero During the year ended December 31, 2025, the Company had changes in stock options as follows: F-19 Table of Contents Number of options Weighted average exercise price per share Weighted average remaining contractual life (years) Outstanding as of December 31, 2024 3,387,638 $ 7.82 5.7 Granted 2,726,306 $ 4.76 7.0 Exercised - - - Forfeited / expired ( 192,288 ) $ 5.99 - Outstanding as of December 31, 2025 5,921,656 $ 6.47 5.6 Unvested as of December 31, 2025 4,483,397 $ 5.93 5.9 Exercisable as of December 31, 2025 820,253 $ 5.99 5.4 As of December 31, 2025, there were 4,927,397 options granted to employees and officers outstanding, of which 3,929,700 were unvested, and 994,259 options granted to non-employee directors outstanding, of which 553,697 were unvested. See Notes 2 and 11 for further information. As of December 31, 2025, unrecognized compensation expense related to unvested stock options was $ 4,848 , and the remaining compensation cost is expected to be recognized over a weighted-average period of 1.78 years. There was no cash received from the exercise of stock options for the years ended December 31, 2025 and 2024. There was no intrinsic value for all stock option awards as of December 31, 2025. RSUs In April 2023, the Company granted 141,656 RSUs to non-employee directors. In April 2024, all of the previously granted RSUs vested. In May 2024, the Company settled 120,824 of the vested RSUs through issuance of 120,824 shares of Class A common stock. As of December 31, 2025, the Company has not yet settled 20,832 of the vested RSUs, as the awardee elected to defer receipt. The Company includes the vested and deferred RSUs within weighted-average shares outstanding for the computation of basic and diluted loss per share. RSU compensation expense was $ 0 and $ 198,125 for the years ended December 31, 2025 and 2024, respectively. See Notes 2 and 11 for further information. Incentive Units Prior to Closing, certain subsidiaries of the Company, including Intermediate, were wholly owned subsidiaries of Holdings. Holdings, which was outside of the Business Combination perimeter, had entered into several compensation-related arrangements with certain of Intermediate’s management and employees. Compensation costs associated with those arrangements were allocated by Holdings to Intermediate as the employees were rendering services to Intermediate. However, the ultimate contractual obligation related to these awards, including any future settlement, rested and continues to rest with Holdings. The Holdings equity compensation instruments consist of 1,000 Series A Incentive Units and 1,000 Founder Incentive Units. The Series A Incentive Unit holders are entitled to participate in the earnings of and distributions by Holdings after a specified return threshold to the Series A Preferred Unit holders has been achieved. The Founder Incentive Unit holders are entitled to receive a certain aggregate distribution amount by Holdings after a specified aggregate distribution amount has been received by the Series A Preferred Unit holders. The Series A Incentive Units were deemed to be service-based awards and the Founder Incentive Units were deemed to be performance-based awards. On August 7, 2020, Holdings issued 800 Series A Incentive Units and 1,000 Founder Incentive Units to certain of Intermediate’s management and employees in compensation for their services. In August 2022, certain amendments were made to the Series A Incentive Units and Founder Incentive Units whereby such units would become fully vested upon completion of the Business Combination. In connection with the Closing of the Business Combination, all of the outstanding and unvested Series A Incentive Units and Founder Incentive Units became fully vested. For the year ended December 31, 2023, the Company accelerated the F-20 Table of Contents remaining share-based payment expense for the Series A Incentive Units and recorded such expense in general and administrative expenses. For the years ended December 31, 2025, 2024 and 2023, the Company did not record additional share-based compensation expense for the Founder Incentive Units as certain conditions had not been met. The Company continues to evaluate the conditions related to the Founder Incentive Units. As of December 31, 2025, such conditions continue to not have been met. See Notes 7 and 14 for further information. NOTE 10 – WARRANTS There were 15,383,263 warrants outstanding as of December 31, 2025 (the “Warrants”). Each Warrant entitles the registered holder to purchase one share of Class A common stock at a price of $ 11.50 per share, subject to adjustment as discussed below. However, no Warrants will be exercisable for cash unless there is an effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants is not effective within a specified period following the consummation of the Business Combination, Warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their Warrants on a cashless basis. In the event of such cashless exercise, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of Class A common stock for the five trading days ending on the trading day prior to the date of exercise. The Warrants will expire on February 15, 2028, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The Company may call the Warrants for redemption, in whole and not in part, at a price of $ 0.01 per warrant: • at any time after the Warrants become exercisable; • upon not less than 30 days’ prior written notice of redemption to each Warrant holder; • if, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 -trading day period commencing at any time after the Warrants become exercisable and ending on the third business day prior to the notice of redemption to Warrant holders; and • if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such Warrants. If and when the Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. No Warrants were exercised during the years ended December 31, 2025 and 2024. NOTE 11 – LOSS PER SHARE Loss per share The following table sets forth the computation of net loss used to compute basic net loss per share of Class A common stock: F-21 Table of Contents For The Year Ended December 31, (in thousands, except share and per share amounts) 2025 2024 Net loss attributable to Verde Clean Fuels, Inc. $ ( 6,958 ) $ ( 3,334 ) Basic weighted-average shares outstanding 17,842,927 6,286,033 Dilutive effect of share-based awards - - Diluted weighted-average shares outstanding 17,842,927 6,286,033 Basic loss per share $ ( 0.39 ) $ ( 0.53 ) Diluted loss per share $ ( 0.39 ) $ ( 0.53 ) The Company’s Warrants, Sponsor earn out shares and stock options could have the most significant impact on diluted shares should the instruments represent dilutive instruments. However, securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s Class A common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts. As of December 31, 2025, the Company has not yet settled 20,832 of the vested RSUs, as the awardee elected to defer receipt. The Company includes the vested and deferred RSUs within weighted-average shares outstanding for the computation of basic and diluted loss per share. See Note 9 for further information. The following amounts were not included in the calculation of net loss per diluted share for the periods presented because their effects were anti-dilutive: As of December 31, 2025 2024 Warrants 15,383,263 15,383,263 Sponsor earn out shares (1) 3,234,375 3,234,375 Stock options 5,921,656 3,387,638 Total anti-dilutive instruments 24,539,294 22,005,276 (1) Excludes 3,500,000 Class C earn out shares convertible into shares of Class A common stock. Shares of Class C common stock are not participating securities; thus, the application of the two-class method is not required. See Note 9 for further information. Noncontrolling Interests As of December 31, 2024, the ownership interests of the Class A common stockholders and the NCI were 29.80 % and 70.20 %, respectively. As of December 31, 2025, the ownership interests of the Class A common stockholders and the NCI were 49.49 % and 50.51 %, respectively. The change in ownership interests was due to the issuance of Class A common stock to Cottonmouth during the year ended December 31, 2025. See Note 3 for further information. NOTE 12 – INCOME TAX As of December 31, 2025, the Company holds 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 U.S. tax laws. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of the net taxable income (loss) and any related tax credits of OpCo. The components of the Company's income tax expense are as follows: F-22 Table of Contents For The Year Ended December 31, (in thousands) 2025 2024 Current: Federal $ 74 $ 50 State 32 1 Total current 106 51 Deferred: Federal — — State — — Total deferred — — Total income tax expense $ 106 $ 51 The Company’s effective tax rate was ( 0.8 )% for the year ended December 31, 2025 and was ( 0.5 )% for the year ended December 31, 2024. The effective income tax rates for each period differed significantly from the statutory rate primarily due to the losses allocated to NCI and the recognition of a valuation allowance as a result of the Company’s tax structure. F-23 Table of Contents For the year ended December 31, 2025, a reconciliation of income tax expense following adoption of ASU 2023-09 is as follows: For The Year Ended December 31, 2025 (in thousands) Amount Rate Tax provision at statutory rate $ ( 2,946 ) 21.00 % State taxes, net of federal benefit 25 ( 0.17 ) % Valuation allowance 1,737 ( 12.38 ) % Nontaxable or nondeductible items: Non-controlling interests 1,507 ( 10.74 ) % Other adjustments: Share-based compensation ( 218 ) 1.55 % Other items 1 ( 0.02 ) % Income tax expense $ 106 ( 0.76 ) % For the year ended December 31, 2025, the amounts of cash paid for income taxes were as follows: (in thousands) For The Year Ended December 31, 2025 U.S. Federal $ 137 U.S. State 55 Income tax cash payments $ 192 For the year ended December 31, 2024, a reconciliation of income tax expense prior to the adoption of ASU 2023-09 is as follows: For The Year Ended December 31, (in thousands) 2024 Computed tax (21%) $ ( 2,197 ) Income tax benefits attributable to noncontrolling interests 1,509 Change in tax basis of OpCo 1,555 Change in valuation allowance ( 755 ) Other items ( 61 ) Income tax expense $ 51 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Noncurrent deferred tax assets (liabilities) were as follows: F-24 Table of Contents As of December 31, (in thousands) 2025 2024 Deferred tax liabilities: Total deferred tax liabilities $ — $ — Deferred tax assets: Intangible assets $ 197 $ 193 Stock-based compensation 316 99 Investment in OpCo 9,407 7,891 Net operating losses 1 — Total deferred tax assets 9,921 8,183 Valuation allowance ( 9,921 ) ( 8,183 ) Total net deferred tax assets $ — $ — The Company has assessed the realizability of its net deferred tax assets and that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As of December 31, 2025, the Company has maintained a full valuation allowance against its deferred tax assets, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of the allowance. The Company’s income tax filings will be subject to audit by various taxing jurisdictions. The Company will monitor the status of U.S. Federal, state and local income tax returns that may be subject to audit in future periods. No U.S. Federal, state and local income tax returns are currently under examination by the respective taxing authorities. On July 4, 2025, the “One Big, Beautiful Bill Act” (“OBBB Act”) was signed into federal law. The OBBB Act included multiple provisions applicable to U.S. income tax for businesses, including bonus depreciation for qualified tangible property, immediate expensing of research expenditures, and updates to the calculation of disallowed interest. For the year ended December 31, 2025, the Company recognized the provisions of the OBBB Act in determining its income tax expense, including immediate expensing of research expenditures. Tax Receivable Agreement On the Closing Date, in connection with the consummation of the Business Combination and as contemplated by the Business Combination Agreement, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with Holdings (together with its permitted transferees, the “TRA Holders,” and each a “TRA Holder”) and the Agent (as defined in the Tax Receivable Agreement). Pursuant to the Tax Receivable Agreement, the Company is required to pay each TRA Holder 85 % of the amount of realized tax benefit, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using certain simplifying assumptions) or is deemed to realize in certain circumstances in periods after the Closing Date as a result of, as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s Class C OpCo Units pursuant to the exercise of the OpCo Exchange Right, a Mandatory Exchange or the Call Right (each as defined in the Amended and Restated LLC Agreement of OpCo) and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15 % of these net cash savings. The Tax Receivable Agreement contains a payment cap of $ 50,000 , which applies only to certain payments required to be made in connection with the occurrence of a change of control. The payment cap would not be reduced or offset by any amounts previously paid under the Tax Receivable Agreement or any amounts that are required to be paid (but have not yet been paid) for the year in which the change of control occurs or any prior years. As of December 31, 2025 and 2024, the Company did not record a tax receivable liability. NOTE 13 - SEGMENT INFORMATION F-25 Table of Contents Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by its Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its CEO. The Company has determined that it operates in one operating segment, as the CODM reviews financial information presented on a combined basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company’s segment reporting is consistent with its internal reporting to its CODM. The operating loss of the segment is the same as the Company’s consolidated operating loss as reported in the consolidated statements of operations. The measure of segment assets is reported in the Company’s consolidated balance sheets as total assets. The following table presents information about the Company’s significant expenses. A significant segment expense is an expense that is significant to the segment considering qualitative and quantitative factors, regularly provided or easily computed from information regularly provided to the CODM and is included in the reported measure of segment profit or loss. The Company’s significant expenses are aggregated and presented as general and administrative and research and development financial statement line items in the consolidated statements of operations. Other segment items represent the difference between reported significant segment expenses and consolidated operating loss. For the years ended December 31, 2025 and 2024, the Company's operating loss by significant segment expenses were as follows: For The Year Ended December 31, (in thousands) 2025 2024 Outside services $ 4,253 $ 4,948 Employee compensation-related 3,308 2,632 Insurance 1,066 1,395 Share-based compensation 2,185 1,354 Rent, property and office 1,307 888 Other segment items (1) 399 440 Impairment of property, plant and equipment 3,936 — Total operating loss $ 16,454 $ 11,657 (1) Other segment items primarily include depreciation and amortization, meals, travel, and conference expense, and franchise taxes. NOTE 14 – SUBSEQUENT EVENTS On February 6, 2026, the Company announced the suspension of development of the Permian Basin Project primarily as a result of changing market conditions driven by increasing demand for natural gas in the Permian Basin. See Notes 3, 4 and 5 for further information. On February 18, 2026, the Company announced a revised strategy to deploy its innovative and proprietary liquid fuels processing technology through capital-lite opportunities. The shift in strategy is intended to identify the most effective pathways to commercialize the STG+® technology with a disciplined approach to capital allocation. Related to its revised strategy, the Company has implemented and intends to continue implementing aggressive cost savings initiatives targeting a 50% reduction in costs in 2026 as compared to 2025. In connection with this initiative, the Company’s Board of Directors has created a Restructuring Committee and appointed director Jonathan Siegler as the sole member of that committee. The Restructuring Committee’s mandate includes overseeing all aspects of the Company’s revised strategy and evaluation of strategic alternatives while ensuring the Company remains fully NASDAQ-compliant. In connection with its cost savings initiatives, the Company is streamlining its Board of Directors. Related thereto, current directors Martijn Dekker and Dail St. Claire will not be standing for re-election at the end of their term. See Note 7 for further information. On February 27, 2026, Five Star Clean Fuels filed an original petition against the Company seeking a declaratory judgment that a letter agreement between a subsidiary of the Company and a predecessor of Five Star Clean Fuels constituted a binding contract that effectuates a grant to Five Star Clean Fuels of certain non-exclusive rights to utilize the STG+® F-26 Table of Contents technology. The petition primarily seeks non-monetary relief other than court costs and attorney fees. The Company intends to defend its position against the claim. At this time, the Company is unable to reasonably estimate a possible financial loss or range of financial loss, if any, that may be incurred to resolve this matter. See Note 7 for further information. On March 20, 2026, the Company announced the appointment of George Burdette as Chief Executive Officer (“CEO”) and engagement of Roth Capital Partners (“Roth”) as financial advisor to assist the Company in evaluating strategic alternatives. These announcements are part of the Company’s continued advancement of its previously announced restructuring and cost reduction initiatives. Mr. Burdette succeeds Ernie Miller who is stepping down from his role as CEO to pursue another opportunity. Mr. Miller will remain with the Company as a senior advisor. Mr. Burdette, who has served as the Company’s Chief Financial Officer (“CFO”) since October 2024, will also continue in that role. See Notes 7 and 9 for further information. Also subsequent to the year ended December 31, 2025, the Company extended its lease for its office and demonstration plant in Hillsborough, New Jersey for an additional year through April 2027. See Notes 1 and 8 for further information. F-27 Table of Contents ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.