What changed in this filing

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Item 1. Financial Statements

2023-05-16 compared with 2022-11-21 · 995 added, 1003 removed, 50 unchanged (98% of the section changed)

Financial Statements

CENAQ ENERGY CORP.

CONDENSED BALANCE SHEETS

September 30,

VERDE CLEAN FUELS, INC.

BALANCE SHEETS

Current assets:

Cash and cash equivalents

Restricted cash

Prepaid expenses

Total current assets

Deferred transaction costs

Deferred financing costs

Marketable securities held in trust account

$ 174,921,864

$ 174,958,342

Liabilities, Redeemable Common Stock and Stockholders’ Deficit

Total current assets

Non current assets:

Security deposits

Property, plant and equipment, net

Operating lease right-of-use assets, net

Finance lease right of use assets, net

Intellectual patented technology

Total Non-current assets

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:

Accounts payable and accrued expenses

Income taxes payable

Interest payable

Accounts payable

Accrued liabilities

Operating lease liabilities – current portion

Finance lease liabilities – current portion

Notes payable – insurance premium financing

Promissory note – related party

Income taxes payable

Total Current liabilities

Deferred underwriters’ discount

Non-current liabilities:

Contingent consideration

Other accrued expenses – long term

Operating lease liabilities

Finance lease liabilities – long term

Total Non-liabilities

Total liabilities

Commitments and Contingencies (Note 6)

Class A common stock subject to possible redemption, 17,250,000 shares at $ 10.13 and $ 10.10 redemption value at September 30, 2022 and December 31, 2021, respectively

Stockholders’ Deficit:

Preferred stock, $ 0.0001 par value;

1,000,000 shares authorized;

none issued and outstanding

Class A common stock, $ 0.0001 par value;

200,000,000 shares authorized;

189,750 issued and outstanding (excluding 17,250,000 shares subject to possible redemption) at September 30, 2022 and December 31, 2021

Class B common stock, $ 0.0001 par value;

20,000,000 shares authorized;

4,312,500 shares issued and outstanding at September 30, 2022 and December 31, 2021

Stockholders’ equity

Intermediate Member’s Equity

Class A common stock, par value $ 0.0001 per share, 9,358,620 shares issued and outstanding as of March 31, 2023

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

Additional paid in capital

2 unchanged sentences

( 11,672,537 )

Total Stockholders’ Deficit

( 9,612,990 )

( 5,545,737 )

Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit

$ 174,921,864

$ 174,958,342

The accompanying notes are an integral part of

these unaudited condensed financial statements.

CENAQ ENERGY CORP.

CONDENSED STATEMENTS OF OPERATIONS

Noncontrolling interest

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes to the unaudited consolidated financial

statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three-months ended

September 30,

Nine Months Ended

September 30,

General and administrative costs

Loss from operations

Three-months ended

General and administrative expenses

Contingent Consideration

( 1,299,000 )

Research and development expenses

Total Operating (income) loss

Provision for income taxes

Net income (net loss)

( 3,117,127 )

Other income:

Interest earned on marketable securities held in Trust Account

Interest expense on promissory note - related party

Unrealized loss on marketable securities held in Trust Account

Total other income, net

Loss before provision for income taxes

( 1,425,277 )

Net income (loss) attributable to noncontrolling interest

( 2,542,666 )

Provision for income taxes

Net income (loss) attributable to Verde Clean Fuels, Inc.

$ ( 574,461 )

$ ( 1,425,277 )

Basic and diluted weighted average shares outstanding, common stock subject to redemption

Basic and diluted net loss per common stock subject to redemption

Basic and diluted weighted average shares outstanding, non-redeemable common stock

Basic and diluted net loss per non-redeemable common stock

The accompanying notes are an integral part of

these unaudited condensed financial statements.

CENAQ ENERGY CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

Additional Paid-in

Earnings per share

Weighted average Class A common stock outstanding, basic and diluted

Loss per Share of Class A common stock

The accompanying notes to the unaudited

consolidated financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Statement of Stockholders’ Equity for the Three months ending

March 31, 2023

Preferred stock

Class A Common

Class C Common

Total Stockholders’

Balance — January 1, 2022

$ ( 5,546,187 )

$ ( 5,545,737 )

Balance - December 31, 2022

Retroactive application of recapitalization

Adjusted beginning balance

Reversal of Intermediate original equity

Recapitalization transaction

Class A Sponsor earn out shares

Class C Sponsor earn out shares

Stock-based compensation

Net income (loss)

Balance - March 31, 2023

( 6,481,593 )

( 6,481,143 )

Balance — June 30, 2022

( 6,725,323 )

( 6,724,873 )

Remeasurement adjustment of Class A common stock subject to possible redemption

( 2,387,015 )

Balance — September 30, 2022

$ ( 9,613,440 )

Statement of Member’s Equity for the Three Months Ending March

Member’s Equity

Accumulated Deficit

Total Member’s Equity

Balance - December 31, 2021

$ ( 14,391,830 )

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

Additional Paid-in

Total Stockholders’

Balance as of January 1, 2021

Balance as of March 31, 2021

Balance — June 30, 2021

Issuance of 189,750 representative shares to underwriters

Excess of fair value of Anchor Shares

Fair value of 12,937,500 Public Warrants net of allocated offering costs

Proceeds of 6,625,000 Private Placement Warrants net of allocated offering costs

Measurement adjustment of Class A common stock subject to possible redemption

$ ( 6,786,461 )

Capital contribution

Unit-based compensation expense

( 1,425,277 )

Balance — September 30, 2021

Balance March 31, 2022

$ ( 15,817,107 )

$ ( 6,359,240 )

The accompanying notes are an integral part of

these unaudited condensed financial statements.

CENAQ ENERGY CORP.

CONDENSED STATEMENTS OF CASH FLOWS

Nine months Ended

September 30,

The accompanying notes to the unaudited consolidated financial

statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

Cash flows from operating activities:

$ ( 3,117,127 )

$ ( 1,425,277 )

Adjustments to reconcile net loss to net cash used in operating activities

Interest earned on marketable securities held in Trust Account

Payment made on behalf of the SPAC by related party

Contingent consideration

( 1,299,000 )

Unit-based compensation expense

Finance lease amortization

Changes in operating assets and liabilities

Prepaid expenses

Accounts payable and accrued expenses

Interest payable

Income taxes payable

( 1,457,643 )

Accounts payable

Accrued liabilities

Net cash used in operating activities

Cash Flows from Investing Activities:

Principal deposited in Trust Account

( 2,846,040 )

Cash withdrawn from Trust Account to pay franchise and income taxes

Investing activities

Purchases of property, equipment and improvements

Net cash used in investing activities

Financing activities

PIPE proceeds

Cash received from Trust

Transaction expenses

( 10,043,793 )

Cash Flows from Financing Activities:

Proceeds from Initial Public Offering, net of underwriters’ fees

Proceeds from private placement

Proceeds from issuance of promissory note to related party

Repayment of promissory note to related party

Payment of deferred offering costs

BCF Holdings capital repayment

( 3,750,000 )

Repayments of notes payable - insurance premium financing

Repayments of the principal portion of finance lease liabilities

Deferred financing costs

Capital Contribution

Net cash provided by financing activities

Net Change in Cash

Cash – Beginning of period

Cash – End of period

Supplemental disclosure of noncash investing and financing activities:

Deferred financing costs included in accounts payable and accrued expenses

Deferred underwriting commissions charged to additional paid in capital

Due from related party

Remeasurement adjustment of Class A common stock subject to possible

The accompanying notes are an integral part of

these unaudited condensed financial statements.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Net change in cash and restricted cash

Cash, beginning of year

CENAQ operating cash balance acquired

Cash and restricted cash, end of year

Supplemental cash flows

Income tax payable (non-cash)

Non-cash impact of debt issuance through the business combination

The accompanying notes to the unaudited

consolidated financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

and Business Operations

CENAQ Energy Corp.

“Company”) is a newly organized blank check company incorporated as a Delaware corporation on June 24, 2020.

The Company was

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

business combination with one or more businesses (the “Business Combination”).

On November 10, 2022, the Company filed

a definitive proxy statement with the SEC in connection with the Business Combination Agreement (as defined below).

As of September 30, 2022,

the Company has neither engaged in any operations nor generated any revenues.

All activity for the period from June 24, 2020 (inception)

through September 30, 2022 relates to the Company’s formation and the initial public offering (“IPO”), described below,

and identifying a target company for a Business Combination, in particular, activities in connection with the potential transaction with

Bluescape (see Note 6).

The Company will not generate any operating revenues until after the completion of its initial Business Combination,

at the earliest.

The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO.

The Company has selected December 31 as its fiscal year end.

The Company’s sponsor

is CENAQ Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).

The registration statement

for the Company’s IPO was declared effective on August 12, 2021 (the “Effective Date”).

On August 17, 2021, the Company

consummated its IPO of 15,000,000 units (the “Units”).

Each Unit consists of one Class A common stock of the Company,

par value $ 0.0001 per share (the “Class A common stock”), and three-quarters of one redeemable warrant of the Company

(“Warrant”), each whole Warrant entitling the holder thereof to purchase one Class A common stock for $ 11.50 per share.

The Units were sold at a price of $ 10.00 per unit, generating gross proceeds to the Company of $ 150,000,000 , which is discussed

Certain qualified institutional

buyers or institutional accredited investors which are not affiliated with any member of the Company’s management (the “Anchor

Investors”) have purchased up to 1,485,000 Units in the IPO at the offering price of $ 10.00 per Unit, generating

gross proceeds to the Company of $ 14,850,000 included in the gross proceeds from units offered to the public of $ 150,000,000 .

In connection with the

closing of the IPO, the Sponsor sold membership interest reflecting an allocation of 75,000 founder shares, or an aggregate

of 825,000 founder shares, to each anchor investor at their original purchase price of approximately $ 0.0058 per share.

The Company estimated the

aggregate fair value of these founder shares attributable to anchor investors to be $6,270,000, or $7.60 per share.

allocated $ 6,265,215 , the excess of the fair value over the gross proceeds from these anchor investors, among Class A common stock, Public

Warrants and Private Placement Warrants (defined below).

Simultaneously with the

closing of the IPO, the Company completed the private sale of an aggregate of 6,000,000 warrants (the “Private Placement

Warrants”) to the Sponsor and the Underwriters at a purchase price of $ 1.00 per Private Placement Warrant, generating gross

proceeds to the Company of $ 6,000,000 .

The Private Placement Warrants are identical to the Warrants sold in the IPO, except that the

Sponsor and the Underwriters agreed not to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted

transferees) until 30 days after the completion of the Company’s initial Business Combination.

The underwriters had a 45-day

option from the date of the Company’s IPO (August 17, 2021) to purchase up to an additional 2,250,000 Units to cover over-allotments,

On August 19, 2021, the underwriters exercised the over-allotment in full, at $ 10.00 per Unit, generating additional gross

proceeds of $ 22,500,000 .

Simultaneously with the closing of the over-allotment, the Company consummated the sale of additional 450,000 Private

Placement Warrants to the Sponsor, and additional 225,000 Private Placement Warrants to the Underwriters, at $ 1.00 per

warrant, generating gross proceeds to the Company of $ 675,000 .

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Transaction costs of the

IPO and the over-allotment amounted to $ 17,771,253 consisting of $ 3,450,000 of underwriting discount, $ 6,037,500 of deferred

underwriting discount, an excess of fair value of the founder shares acquired by the Anchor Investors of $ 6,265,215 , fair value of the

189,750 representative shares of $ 1,442,100 and $ 576,438 of other cash offering costs were charged to additional paid in capital.

Following the closing of

the IPO on August 17, 2021 and over-allotment on August 19, 2021, $ 174,225,000 ($ 10.10 per Unit) from the net proceeds of the

sale of the Units in the IPO, and a portion of the proceeds from the sale of the Private Placement Warrants, was deposited in a trust

account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as

trustee, and may only be invested in U.S.

government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company

Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated

under the Investment Company Act which invest only in direct U.S.

government treasury obligations.

Except with respect to interest earned

on the funds held in the Trust Account that may be released to the Company to pay franchise and income tax obligations as well as expenses

relating to the administration of the Trust Account, the proceeds from the IPO and the sale of the Private Placement Warrants will not

be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the

any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate

of incorporation (a) to modify the substance or timing of the Company’s obligation to redeem 100 % of its public shares if

the Company does not complete initial Business Combination within 12 months (or within 18 months if the Company extends the period of

time to consummate its initial Business Combination) from August 17, 2021, or (b) relating to any other provisions relating to stockholders’

rights or permitted pre-initial business combination activity, or (iii) the redemption of the Company’s public shares if the Company

is unable to complete its Business Combination within 12 months (or within 18 months if the Company extends the period of time to consummate

its initial Business Combination) from August 17, 2021, subject to applicable law.

The period of time for the Company to complete a business

combination under its amended and restated certificate of incorporation is extended for a period of 3 months from August 17, 2022 to

November 16, 2022 based upon the filing of a proxy statement for an initial business combination on August 12, 2022.

The proceeds deposited

in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the

claims of the Company’s public stockholders, according to the investment management trust agreement.

As of the date of the filing

of these financial statements, the period of time for the Company to complete a business combination under its amended and restated certificate

of incorporation is extended for a period of 3 months from November 16, 2022 to February 16, 2023.

In connection with the Extension, the

Sponsor has deposited $1,725,000, representing 1% of the gross proceeds of the IPO, into the Trust Account for its public stockholders

The Company must complete

one or more initial Business Combinations having an aggregate fair market value of at least 80 % of the value of the assets held

in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the income earned on the

Trust Account) at the time of the agreement to enter into the initial Business Combination.

However, the Company will only complete a

Business Combination if the post-transaction company owns or acquires 50 % or more of the outstanding voting securities of the target

or otherwise acquires a controlling interest in the target sufficient for the post-transaction company not to be required to register

as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).

There is no assurance

that the Company will be able to complete a Business Combination successfully.

The Company will provide

its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business

Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender

The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer

will be made by the Company, solely in its discretion.

The stockholders will be entitled to redeem all or a portion of their public shares

upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on

deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest

earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes as well

as expenses relating to the administration of the Trust Account, divided by the number of then outstanding public shares, subject to

the limitations described herein.

The amount in the Trust Account was $ 10.10 per public share.

The per-share amount the Company

will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company

will pay to the underwriters.

The shares of common stock

subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance

with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case,

the Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 upon such consummation

of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted

in favor of the Business Combination.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

The Company will have until August 17, 2022, 12 months from the closing

of the IPO, to complete the initial Business Combination (the “Combination Period”).

If the Company anticipates that it may

not be able to consummate its initial Business Combination within the Combination Period, it may, but not obligated to, extend the Combination

Period two times by an additional three months each time (for a total of up to 18 months to complete a Business Combination);

that the Sponsor (or its designees) must deposit into the trust account funds equal to one percent ( 1 %) of the gross proceeds of the offering

(including such proceeds from the exercise of the underwriters’ over-allotment option, if exercised) for each 3-month extension

of the time period to complete the initial Business Combination, in exchange for a non-interest bearing, unsecured promissory note.

if the Company filed a proxy statement, registration statement or similar filing for an initial business combination within the initial

12-month period, we may extend the period of time to consummate a business combination by three months (or up to 15 months to complete

a business combination) without depositing the Additional Funds.

The period of time for the Company to complete a business combination

under its amended and restated certificate of incorporation is extended for a period of 3 months from August 17, 2022 to November 16,

2022 based upon the filing of a proxy statement for an initial business combination on August 12, 2022.

of the date of the filing of these financial statements, the period of time for the Company to complete a business combination under its

amended and restated certificate of incorporation is extended for a period of 3 months from November 16, 2022 to February 16, 2023.

connection with the Extension, the Sponsor has deposited $ 1,725,000 , representing 1 % of the gross proceeds of the IPO, into the Trust

Account for its public stockholders (Note 8).

If the Company is unable

to complete the initial Business Combination within the Combination Period, by February 16, 2023, the Company will (i) cease all operations

except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the

public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest

earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes as well

as expenses relating to the administration of the Trust Account (less up to $ 100,000 of interest released to the Company to pay dissolution

expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’

rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii)

as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and

the Company’s board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware

law to provide for claims of creditors and the requirements of other applicable law.

The Sponsor, officers and

directors, as well as the Anchor Investors, have agreed to (i) waive their redemption rights with respect to any Founder Shares held by

them in connection with the completion of the initial Business Combination, (ii) waive their rights to liquidating distributions from

the Trust Account with respect to any Founder Shares held by them if the Company fails to complete the initial Business Combination within

the Combination Period, by February 16, 2023, and (iii) vote any Founder Shares held by them and any public shares purchased during or

after the IPO in favor of the initial Business Combination.

The Anchor Investors are

not required to vote any of their public shares (as opposed to their Founder Shares) in favor of our initial business combination or

for or against any other matter presented for a stockholder vote.

The Sponsor has agreed

that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent auditors)

for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering

into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $ 10.10 per public share

and (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to

reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes as well as expenses

relating to the administration of the Trust Account, except as to any claims by a third party who executed a waiver of any and all rights

to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the IPO against

certain liabilities, including liabilities under the Securities Act.

In the event that an executed waiver is deemed to be unenforceable

against a third party, then the Sponsor will not be responsible to the extent of any liability for such third-party claims.

will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring

to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute

agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Risks and Uncertainties

Management is continuing

to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus

could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,

the specific impact is not readily determinable as of the date of this financial statement.

The financial statement does not include

any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian

Federation and Belarus commenced a military action with the country of Ukraine.

As a result of this action, various nations, including

the United States, have instituted economic sanctions against the Russian Federation and Belarus.

Further, the impact of this action

and related sanctions on the world economy are not determinable as of the date of these condensed financial statements.

impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these

condensed financial statements.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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,

federal 1 % excise tax on certain repurchases of stock by publicly traded U.S.

domestic corporations and certain U.S.

subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023.

The excise tax is imposed on the repurchasing

corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1 % of the fair

market value of the shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing

corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases

during the same taxable year.

In addition, certain exceptions apply to the excise tax.

Department of the Treasury (the “Treasury”)

has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Any redemption or other

repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject

to the excise tax.

Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination,

extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases

in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and

amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection

with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and

other guidance from the Treasury.

In addition, because the excise tax would be payable by the Company and not by the redeeming holder,

the mechanics of any required payment of the excise tax have not been determined.

The foregoing could cause a reduction in the cash available

on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

Going Concern

As of September 30, 2022,

the Company had $ 8,242 in its operating bank account, and a working capital deficit of $ 3,600,490 .

Until the consummation

of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective

acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target

business to acquire, and structuring, negotiating and consummating the Business Combination.

In order to finance transaction

costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s

officers and directors committed to provide the Company with Working Capital Loans up to $ 1,500,000 , as defined later (see Note 5) .

This commitment extends through February 16, 2023.

To date, there were no amounts outstanding under any Working Capital Loans.

If the Company’s

estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are

less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the

Business Combination.

Moreover, the Company may need to obtain additional financing either to complete its Business Combination or because

it becomes obligated to redeem a significant number of its public shares upon consummation of the Business Combination, in which case

the Company may issue additional securities or incur debt in connection with such Business Combination.

Subject to compliance with applicable

securities laws, the Company would only complete such financing simultaneously with the completion of the Business Combination.

Company is unable to complete its Business Combination because it does not have sufficient funds available to it, the Company will be

forced to cease operations and liquidate the Trust Account.

In addition, following the Business Combination, if cash on hand is insufficient,

the Company may need to obtain additional financing in order to meet its obligations.

We cannot assure you that

our plans to raise capital or to consummate an initial business combination will be successful.

These factors, among others, raise substantial

doubt about our ability to continue as a going concern, which is considered to be one year from the issuance of the financial statements.

The financial statements contained elsewhere in this Quarterly Report on Form 10-Q do not include any adjustments that might result from

our inability to continue as a going concern.

In connection with the Company’s

assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update

(“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,”

the Company has until February 16, 2023 to consummate a Business Combination.

It is uncertain whether the Company will be able to consummate

a Business Combination by this time.

If a Business Combination is not consummated by this date, there will be a mandatory liquidation

and subsequent dissolution of the Company.

Management has determined that the liquidity condition and the mandatory liquidation, should

a Business Combination not occur and the deadline to complete a Business Combination not be extended, and potential subsequent dissolution

raise substantial doubt about the Company’s ability to continue as a going concern.

No adjustments have been made to the carrying

amounts of assets or liabilities should the Company be required to liquidate after February 16, 2023.

The Company intends to continue

to search for and seek to complete a Business Combination before the mandatory liquidation date.

The Company is within 12 months

of its mandatory liquidation date as of the time of filing of this Quarterly Report on Form 10-Q.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 2 — Significant Accounting

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

Verde Clean Fuels, Inc.

(the “Company” or “Verde Clean Fuels”) finalized a business combination (“Business

Combination”) pursuant to that certain business combination agreement, dated as of August 12, 2022 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”),

, Bluescape Clean Fuels Holdings, LLC, a Delaware limited liability company, Bluescape Clean (“Holdings”) Fuels Intermediate

Holdings, LLC, a Delaware limited liability company (“Intermediate”), and, solely with respect to Section 6.18 thereto, CENAQ

Sponsor LLC (“Sponsor”).

Immediately upon the completion of the Business Combination, CENAQ was renamed to Verde Clean Fuels,

The Business Combination is documented in greater detail in Note 3.

Following the completion of the Business Combination,

the combined company is organized in an “Up-C” structure and the only direct assets of Verde Clean Fuels, consists of equity

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

Immediately following the Business Combination,

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

As of the year ended December 31, 2022, prior

to the Business Combination, and up to the transaction close on February 15, 2023, Verde, previously CENAQ Acquisition Corp., was a blank

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

similar business combination with one or more businesses.

Following the Business Combination, Verde Clean

Fuels is a renewable energy company specializing in the conversion of synthesis gas, or syngas, derived from diverse feedstocks, such

as biomass, municipal solid waste (“MSW”) and mixed plastics, as well as natural gas (including synthetic natural gas) and

other feedstocks, into liquid hydrocarbons that can be used as gasoline through an innovative and proprietary liquid fuels technology,

the STG+® process.

Through Verde Clean Fuel’s STG+® process, Verde Clean Fuels converts syngas into Reformulated Blend-stock for

Oxygenate Blending (“RBOB”) gasoline.

Verde Clean Fuels is focused on the development of technology and commercial facilities

aimed at turning waste and other bio-feedstocks into a usable stream of syngas which is then transformed into a single finished fuel,

such as gasoline, without any additional refining steps.

The availability of biogenic MSW and the economic and environmental drivers that

divert these materials from landfills will enable us to utilize these waste streams to produce renewable gasoline from modular production

The Company is monitoring the ongoing COVID-19 pandemic,

which has disrupted the global economy and financial markets.

There is a significant amount of uncertainty about the length and severity

of the consequences caused by the pandemic.

While governmental and non-governmental organizations are engaging in efforts to combat the

spread and severity of the COVID-19 pandemic and related public health issues, the full extent to which the outbreak of COVID-19 could

impact the Company’s business, results of operations and financial condition is still unknown and will depend on future developments,

which are highly uncertain and cannot be predicted.

The Company has considered information available to it as of the date of issuance

of these financial statements and has not currently experienced significant negative impact to its operations, liquidity or capital resources

as a result of the COVID-19 pandemic.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited

condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America

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

The accompanying unaudited financial statements

should be read in conjunction with the audited financial statements of Intermediate included in the Current Report on Form 8-K/A filed

on April 7, 2023 and are presented in conformity with accounting principles generally accepted in the United States of America (“US

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

Securities and Exchange Commission (“SEC”).

Accordingly, they do not include all of the information and footnotes required by US GAAP.

In the opinion of management, the unaudited

condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement

of the balances and results for the period presented.

Operating results for the three and nine months ended September 30, 2022 are not

necessarily indicative of the results that may be expected through December 31, 2022.

The accompanying unaudited

condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the

Annual Report on Form 10-K filed by the Company with the SEC on March 30, 2022.

Emerging Growth Company Status

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 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.

Further, 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 (that is, those that have not had a Securities Act registration statement declared effective or do not have a class

of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging

growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such 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, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised

This may make comparison of the Company’s financial statements with another public company which is neither an emerging

growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because

of the potential differences in accounting standards used.

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

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

The results of operations for an interim period may not

give a true indication of results for a full year.

Risks and uncertainties

The Company is currently in

the development stage and has not yet commenced principal operations or generated revenue.

The development of the Company’s projects

are 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, the availability and ability to obtain the necessary

financing for the construction and development of projects.

Use of Estimates

The preparation of unaudited

condensed financial statements in conformity with 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 unaudited

condensed 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 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 that affected the financial

statements as of September 30, 2022 and December 31, 2021 are the calculations of the fair values of the over-allotment option, fair

values of the representative shares and the fair values of the anchor shares.

Such estimates may be subject to change as more current

information becomes available.

The preparation of financial statements in conformity

with 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 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 financial statements, which management considered in formulating its estimate, could change in the near

term due to one or more future confirming events.

Such estimates may be subject to change as more current information becomes

Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all

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

As of September

30, 2022 and December 31, 2021, the Company has cash of $ 8,242 and $ 505,518 , respectively.

The Company did not have any cash equivalents

as of September 30, 2022 and December 31, 2021.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Marketable Securities held in Trust Account

As of September 30, 2022,

the Company had $ 174,873,584 in Marketable Securities held in the Trust Account which was invested in US Treasury bills.

of the IPO, $ 10.10 per Unit sold in the IPO, including the proceeds of the sale of the Private Placement Warrants, were held in a trust

account (“Trust Account”) and may be invested only in U.S.

government securities with a maturity of 185 days or less or in

money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S.

treasury obligations.

Principles of Consolidation

The Company’s policy is to consolidate

all entities that the Company controls by ownership interest or other contractual rights giving the Company control over the most significant

activities of an investee.

The consolidated financial statements include the accounts of Verde Clean Fuels, and its subsidiaries OpCo,

LLC, Intermediate, Bluescape Clean Fuels Employee Holdings, LLC, Bluescape Clean Fuels EmployeeCo., LLC, Bluescape Clean Fuels, LLC,

and Maricopa Renewable Fuels I, LLC 1 .

All intercompany balances and transactions have been eliminated in consolidation.

Cash Equivalents

The Company considers all short-term investments

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

The Company has a restricted cash balance

of $ 100,000 as of March 31, 2023 for a letter of credit which is included in the determination of cash and restricted cash in the

Statement of Cash Flows.

There were no other cash equivalents as of March 31, 2023, or December 31, 2022.

Concentration of Credit Risk

Financial instruments that

potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,

may exceed the Federal Deposit Insurance Corporation coverage limit of $ 250,000 .

At September 30, 2022, the Company has not experienced

losses on this account.

Offering Costs associated with the Initial

Public Offering

Offering costs consist

of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO.

Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—“Expenses

of Offering”.

Offering costs are allocated to the separable financial instruments issued in the IPO based on a relative fair value

basis compared to total proceeds received.

Deferred Financing Costs

Deferred financing costs

consists of legal expenses incurred through the balance sheet date that are directly related to a proposed financing agreement of a Business

As of September 30, 2022, there were $ 25,000 of deferred financing costs recorded in the accompanying condensed balance

Financial instruments that potentially subject the

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

Depository Insurance Corporation limit of $ 250,000 .

As of March 31, 2023, the Company has not experienced losses on this account and management

believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The fair value of the Company’s

assets and liabilities, other than the over-allotment option, which qualify as financial instruments under FASB ASC 820, “Fair

Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term

The net asset value for the investments held in the trust account as of September 30, 2022 and December 31, 2021 was $ 174,873,584

and $ 174,229,680 , respectively.

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 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.

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.

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.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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.

The fair value of the Company’s assets and

liabilities which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates

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

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.

inputs are further defined as observable and unobservable inputs.

Observable inputs are those that 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.

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.

The fair value of certain of the Company’s

assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the balance

The fair values of cash, prepaid expenses, and accrued expenses are estimated to approximate the carrying values as of September

30, 2022 and December 31, 2021 due to the short maturities of such instruments.

The Company valued the

over-allotment option using the Black Scholes model and the over-allotment option liability is recorded as a Level 3 financial instrument

due to the unobservable inputs.

At August 17, 2021, the Company recorded $ 157,500 of over-allotment liability.

On August 19, 2021, in

connection with the fully exercise of over-allotment option by the underwriters, the Company recorded changes of fair value of over-allotment

option of $ 22,500 , and reclassified $ 180,000 of over-allotment liability into equity.

Over-allotment Option Liability

The Company accounted for

the over-allotment option (Note 6) in accordance with the guidance contained in ASC 480.

The over-allotment is not considered indexed

to the Company’s own common stock, and as such, it does not meet the criteria for equity treatment and is recorded as a liability.

The fair value changes of over-allotment option liability between IPO closing date and the option exercise date was recorded in operations.

Class A common stock Subject to Possible Redemption

The Company accounts for

its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities

from Equity.” Common stock subject to mandatory redemption (if any) are classified as a liability instrument and measured at fair

Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control

of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified

as temporary equity.

At all other times, common stock is classified as stockholders’ equity.

At September 30, 2022 and December

31, 2021, 17,250,000 Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside

of the stockholders’ equity section of the Company’s balance sheets.

All of the 17,250,000 shares

of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public

shares if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments

to the Company’s certificate of incorporation.

The Class A common stock

sold as part of the Units in the IPO is subject to ASC 480-10-S99.

If it is probable that the equity instrument will become redeemable,

the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date

that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to

recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption

value at the end of each reporting period.

The Company recognizes changes in redemption value immediately as they occur.

upon the closing of the IPO, the Company recognized the subsequent re-measurement under ASC 480-10-S99 from initial carrying amount to

redemption value.

The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital

and accumulated deficit.

The representative shares

and Class B common stock are non-redeemable.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the

balance sheet.

The fair values of cash, prepaid expenses, and accrued expenses are estimated to approximate the carrying values as of

March 31, 2023, and December 31, 2022, due to the short maturities of such instruments.

Net Loss Per Common Stock

The Company has two classes

of common stock, which are referred to as Class A common stock and Class B common stock.

Earnings and losses are shared pro rata between

the two classes of shares.

The 19,612,500 potential common stock for outstanding warrants to purchase the Company’s common stock were

excluded from diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 because the warrants are contingently

exercisable, and the contingencies have not yet been met and its inclusion would be anti-dilutive.

As a result, diluted net loss per

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

The table below presents a reconciliation of the numerator

and denominator used to compute basic and diluted net loss per share for each class of common stock:

Three Months Ended September 30,

Nine Months Ended September 30,

Basic and diluted net loss per share:

Allocation of net loss

$ ( 1,892,954 )

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 shareholders, the Sponsor,

and the investors in the private offering of securities of Verde Clean Fuels in connection with the Business Combination (the “PIPE

Financing”) hold shares of Class A common stock and warrants, and Holdings owns shares of Class C common stock and Class C units

of OpCo (the “Class C OpCo Units”).

Class C common stock represents the right to cast one vote per share at the Verde Clean

Fuels level, and carry no economic rights, including rights to dividends and distributions upon liquidation.

Thus, Class C common stock

are not participating securities per ASC 260-10-20.

As the Class A common stock represent the only participating securities, the application

of the two-class method is not required.

Antidilutive instruments including outstanding

warrants and earn out shares were excluded from diluted earnings per share for the three-months ended March 31, 2023, because such instruments

are contingently exercisable, the contingencies have not yet been met, and the inclusion of such instruments would be anti-dilutive.

a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods.

The Company accounts for warrants as either equity-classified

or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance

in the Accounting Standards Codification (“ASC”) 480 - Distinguishing Liabilities from Equity (“ASC 480”)

and ASC 815 - Derivatives and Hedging (“ASC 815”).

Management’s assessment considers whether the warrants

are freestanding financial instruments pursuant to ASC 480, whether they 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 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 statement of operations.

The warrants meet the equity classification criteria.

Operating segments are defined as components of

an entity for which separate financial information is available and that is regularly reviewed by the 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 Chief Executive

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 follows the asset and liability method

of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for

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

and 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.

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.

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

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023, and December 31, 2022.

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.

The Company’s management does not believe

that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying

financial statement.

Reverse recapitalization

The Business Combination was accounted for according

to a common control reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP.

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

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

Further, Holdings continues to have control of

the board of directors through its majority voting rights.

Under the guidance in the Financial Accounting

Standards Board (“FASB”) ASC 805, Business Combinations, 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

Under this method of accounting, CENAQ is treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the business combination is treated as the equivalent of Intermediate issuing stock for the net

assets of CENAQ, accompanied by a recapitalization.

The net assets of Intermediate are stated at their historical value within the financial

statements with no goodwill or other intangible assets recorded.

Property, Equipment, and Improvements

Property, equipment, and improvements 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

Furniture and fixtures

Machinery and equipment

Leasehold improvements

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

Maintenance and repairs are charged to expense as

incurred, and improvements are capitalized.

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

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

Accrued Liabilities

Accrued liabilities consist of the following:

Accrued bonuses

Accrued legal Fees

Accrued professional fees

Other Accrued Expenses

The Company accounts for leases under Accounting Standards Update (“ASU”)

2016-02, Leases (Topic 842).

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

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

asset representing its right to use the underlying asset for the lease term.

In accordance with the guidance of Topic 842, leases are

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

Certain lease arrangements

may contain renewal options.

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

by the Company.

The Company elected the practical expedient to

not separate non-lease 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 services are included in the

classification of the lease and the calculation of the right-of-use 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 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 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.

Impairment of Intangible Assets

The Company’s intangible asset consists of

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

As of March 31, 2023, and December 31, 2022, the gross and carrying amount of this intangible asset was $ 1,925,151 .

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 under the quantitative analysis, intellectual property and patents

During the three months ended March 31, 2023,

and 2022, the Company did not record any impairment charges.

Impairment of Long-Term 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.

During the three months ended March 31, 2023 and 2022,

the Company did not record any impairment charges.

Emerging Growth Company Accounting Election

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 at least

through 2023.

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.

Unit-Based Compensation

The Company applies ASC 718, Compensation — Stock

Compensation (“ASC 718”), in accounting for unit-based compensation to employees.

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.

Prior to closing of the Business Combination,

certain subsidiaries of the Company, including Bluescape Clean Fuels Intermediate Holdings, LLC, were wholly-owned subsidiaries of

Holdings, which was outside of the Business Combination perimeter, had entered into several compensation related arrangements

with management of Bluescape Clean Fuels Intermediate Holdings, LLC.

Compensation costs associated with those arrangements were allocated

by Holdings to Bluescape Clean Fuels Intermediate Holdings, LLC as the employees were rendering services to Bluescape Clean Fuels Intermediate

Holdings, LLC.

However, the ultimate contractual obligation related to these awards, including any future settlement, rested and continues

to rest with Holdings.

On August 5, 2022, Holdings entered into an agreement

with our management team whereby, all outstanding unvested Series A Incentive Units and Founder Incentive Units became fully vested on

the closing of the Business Combination.

As part of the agreement, the priority of distributions under the Series A Incentive Units and

Founders Incentive Units was also revised such that participants receive 10 % of distributions after a specified return to Holdings’

Series A Preferred Unit holders (instead of 20%).

Series A Incentive Units refers to 800 incentive units issued by Holdings on August 7,

2020 to certain members of management of Intermediate in compensation for their services.

Founder Incentive Units refers to 1,000 incentive

units issued by Holdings on August 7, 2020 to certain members of management of Intermediate in compensation for their services.

In connection with the Close of the Business Combination,

the Company accelerated the unvested service and performance-based units and recorded share-based payment expense of $ 2,146,792 during

the three-months ended March 31, 2023.

The share-based payment expense was included in general and administrative expenses for the

three-month period ended March 31, 2023.

Performance conditions for the performance-based Founder Incentive Units had not, and were unlikely

to be met as of March 31, 2023.

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

Contingent Consideration

Holdings had an arrangement payable to the Company’s

CEO and a consultant whereby a contingent payment could become payable in the event that certain return on investment hurdles were met

within 5 years of the closing date of the Primus asset purchase.

On August 5, 2022, Holdings entered into an agreement with the Company’s

management and CEO whereby, if the Business Combination discussed below reaches closing, the Contingent Consideration as discussed below

will be forfeited.

The Company did not recognize expense related

to the contingent payments for the three months ended March 31, 2022.

The Business Combination closed on February 15,

2023, and therefore the contingent consideration arrangement was terminated and no payments were made.

Thus, the Company reversed the

entire $ 1,299,000 during the three months ended March 31, 2023.

NOTE 3 – BUSINESS COMBINATION

On August 12, 2022, the Company entered into

a business combination agreement (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, Bluescape Clean Fuels Holdings, LLC, a Delaware

limited liability company, Bluescape Clean Fuels Intermediate Holdings, LLC, a Delaware limited liability company, and CENAQ Sponsor LLC.

The Company consummated the Business Combination on February 15, 2023 (the “Closing Date”).

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) the

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 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 PIPE Financing and following 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 the

Holdings OpCo Units and the Holdings Class C Shares.

Holdings holds 22,500,000 OpCo Units and an equal number of shares

of Class C common stock.

Pursuant to ASC 805 – Business Combinations

(“ASC 805”), the Business Combination is accounted for as a common control reverse recapitalization where Intermediate is

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

in accordance with GAAP.

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

This determination reflects Holdings

holding a majority of the voting power of Verde Clean Fuels, Intermediate’s Pre-Business Combination operations being the majority

post-Business Combination operations of Verde Clean Fuels, and Intermediate’s management team retaining similar roles at Verde

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

Under ASC 805,

the assets, liabilities, and noncontrolling interests of Intermediate are recognized at their carrying amounts on the date of the Business

The Business Combination includes:

● Holdings contributing 100% of the issued and outstanding limited liability

company interests of Intermediate to OpCo in exchange for 22,500,000 Class C OpCo Units and an equal number of shares of Class C common

The issuance and sale of 3,200,000 shares of Class A common stock for

a purchase price of $10.00 per share, for an aggregate purchase price of $32,000,000 in the PIPE Financing pursuant to the Subscription

● Delivery of $19,031,516 of proceeds from CENAQ’s Trust Account

related to non-redeeming Holders of 1,846,120 of Class A common stock;

● Repayment of $3,750,000 of capital contributions made by

Holdings since December 2021 and payment of $10,043,793 of transaction expenses including deferred underwriting fees of $1,700,000 ;

The following summarizes the

Verde Clean Fuels Common Stock outstanding as of February 15, 2023.

The percentage of beneficial ownership is based on 31,858,620

shares of Company’s Class A common stock and Class C common stock issued and outstanding as of February 15, 2023.

CENAQ Public Stockholders (a)

New PIPE Investors (excluding

Holdings) (c)

Sponsor and Anchor Investors (d)

Earn Out shares (e)

Total Shares of Common Stock

Out Equity shares (f)

diluted shares at Closing (including shares above) (g)

(a) CENAQ Public Stockholders holding 15,403,880 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account.

Excludes 189,750 Underwriters Forfeited Shares owned by Imperial Capital, LLC and I-Bankers Securities, Inc.

that were forfeited as of Closing pursuant to the Underwriters Letter.

(b) Includes (i) 22,500,000 shares of Class C common stock issued to Holdings at Closing, representing 100 % of the shares of Class C common stock outstanding as of February 15, 2023, and (ii) 800,000 shares of Class A common stock acquired by Holdings in the PIPE Financing.

(d) Includes 253,125 and 825,000 shares of Class A common stock issued to the Sponsor and Anchor Investors, respectively, upon conversion of a portion of their current Class B common stock at Closing.

(e) Includes 3,234,375 shares of Class A common stock issued to the Sponsor that are subject to forfeiture pursuant to the Sponsor Letter.

These shares will no longer be subject to forfeiture upon the occurrence of the Triggering Events.

Excludes 2,475,000 shares of Class A common stock issuable upon the exercise of the Private Placement Warrants held by Sponsor.

(f) Includes 3,500,000 shares of Class C common stock issuable to Holdings upon the occurrence of the Triggering Events.

(g) Excludes 12,937,479 and 2,475,000 shares of Class A common stock issuable upon the exercise of the Public Warrants and Private Placement Warrants, respectively.

Total proceeds raised from the business combination

were $ 37,329,178 consisting of $ 32,000,000 in PIPE Financing proceeds, $ 19,031,516 from the CENAQ trust, and $ 91,454 from the CENAQ operating

account offset by $ 10,043,793 in transaction expenses which were recorded as a reduction to additional paid in capital, and offset by

a $ 3,750,000 capital repayment to Holdings.

NOTE 4 – RELATED PARTY TRANSACTIONS

The Company follows FASB ASC subtopic 850-10,

Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Prior to the Business

Combination, the Company entered into multiple loan arrangements with related parties as further discussed below.

In connection with the Closing, and based on the

$ 158,797,476 of redemptions, the Sponsor was due $ 184,612 under a promissory note.

At closing, Sponsor was also due $ 100,000 and $ 125,000

under two separate promissory notes (that were created to provide working capital to SPAC operations prior to closing of the business

combination).

However, on February 15, 2023, in lieu of repayment of these promissory notes, the Company entered into a new promissory

note with the Sponsor totaling $ 409,612 (“New Promissory Note”).

The New Promissory Note, cancels and supersedes all prior

promissory notes.

The New Promissory note is non-interest bearing and the entire principal balance of the New Promissory Note is payable

on or before February 15, 2024.

The New Promissory Note is payable at Verde Clean Fuel’s election in cash or in Class A common stock

at a conversion price of $ 10.00 per share.

Subsequent to the Business Combination, in addition

to the New Promissory Note with the Sponsor, the combined company has a related party relationship with Holdings whereby Holdings holds

a majority ownership in the Company via voting shares and has control of the Board of Directors.

Further, Holdings possesses 3,500,000

earn out shares.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

The core principle of Topic 842 is that a lessee

should recognize the assets and liabilities that arise from leases, by recognizing in the consolidated balance sheet a liability to make

lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

accordance with the guidance of Topic 842, leases are classified as finance or operating leases, and both types of leases are recognized

on the consolidated balance sheet.

The Company determines if an arrangement

is, or contains, a lease at 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 leases.

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 right-of-use 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 leases office space and other

office equipment under operating lease arrangements, with initial terms greater than twelve months.

The lease was extended until 2024.

Office space is leased to provide adequate workspace for all employees in disclose location.

The office space lease is accounted for as

an operating lease.

In October of 2022,

the Company entered into a 25-year land lease in Maricopa, Arizona with the intent of building a biofuel processing facility.

The commencement

date of the lease is in February of 2023 as control of the identified asset did not transfer to the Company on the effective date of the

As such, the Company did not record a ROU asset nor a lease liability as of December 31, 2022, specific to the land lease.

of the facility is expected to commence in fiscal year 2024 and the Company expects to incur an asset retirement obligation throughout

the construction period as the Company is obligated to return the land to its original state upon exit of the lease.

The fair value of

the asset retirement obligation is zero as of March 31, 2023 and December 31, 2022, as construction has not commenced.

The present value

of the minimum lease payments exceeds the fair value of the land, and, accordingly, the lease is classified as a finance lease under ASC

The lease expires in 2047 and contains a single four-year renewal option.

The exercise of the lease renewal is at the Company’s

however, management is not reasonably expected to exercise the option;

thus, the option is not included within the lease term.

Renewal periods 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

for real estate lease arrangements to not separate non-lease components from lease components as the lease component is the predominant

Under the practical expedient, as a lessee, the Company combines the lease and non-lease component into a single accounting unit

and accounts for the unit under ASC 842.

As such, lease and non-lease services are included in the classification of the lease and the

calculation of the right-of-use 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;

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 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 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.

Supplemental information related to operating lease arrangements

was as follows:

Lease costs for the three-months ended March 31, 2023.

Statements of Operations Classification

Finance lease cost

Amortization of right-of-use assets

General and administrative expense

Interest on lease liabilities

General and administrative expense

Total finance lease cost

General and administrative expense

Operating lease cost

General and administrative expense

Variable lease cost

General and administrative expense

Total lease cost

Lease costs for the three-months ended March 31, 2022.

Statements of Operations Classification

Operating lease cost

General and administrative expense

Variable lease cost

General and administrative expense

Total lease cost

Five year table, operating and finance leases as of March 31, 2023.

As of March 31, 2023

Maturity of lease liabilities

Total future minimum lease payments

( 6,512,867 )

Present value of lease liabilities

Three months ended

Operating lease - supplemental information

Right-of-use assets obtained in exchange for operating lease

Remaining lease term - operating lease

Discount rate - operating lease

Finance lease - supplemental information

Right-of-use assets

Remaining lease term - finance lease

Discount rate - finance lease

Contingencies

The Company is not party to any litigation.

NOTE 6 – PROPERTY, EQUIPMENT

AND IMPROVEMENTS

Major classes of property, equipment, and improvements are

Computers, office equipment and hardware

Furniture and fixtures

Machinery and equipment

Property, equipment, and improvements

accumulated depreciation

Property, equipment and improvements, net

Depreciation expense was $ 580 and $ 2,714 for the three months ended

March 31, 2023 and 2022, respectively.

NOTE 7 – STOCKHOLDER’S EQUITY

Earn-out consideration

Earnout Shares potentially issuable as part

of the Business Combination are recorded within equity as the instruments are deemed to be indexed to the Company’s common stock

and met the equity classification criteria under ASC 815-40-25.

Earnout Shares contain market conditions for vesting and were awarded

to eligible shareholders, as described further below, and not to current employees.

As consideration for the contribution of the equity

interests in Intermediate, Holdings received earnout consideration (“Holdings earnout”) 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.

half of the Holdings earnout 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 earnout consideration

(“Sponsor earnout”) 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 earnout 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.

Notwithstanding the forgoing, the Holdings

earnout and Sponsor earnout shares will vest in the event of a sale of the Company at a price that is equal to or greater than the redemption

price payable to the buyer of the company.

The earn out consideration was issued in connection with the Business Combination on February

Holding earn out shares are neither issued nor outstanding as of March 31, 2023 as the performance requirements for vesting

were not achieved.

All Sponsor Shares granted in connection with the Business Combination are issued and outstanding as of March 31, 2023.

Sponsor Shares subject to forfeiture pursuant to the above terms that do not vest in accordance with such terms shall be forfeited.

The grant-date fair value of the Earnout Shares attributable to Holdings

and the Sponsor, using a Monte Carlo simulation model, was $ 10,594,000 , and $ 5,791,677 , respectively.

The following table provides a summary

of key inputs utilized in the valuation of the Earnout Shares as of February 15, 2023:

Expected volatility

Expected dividends

Remaining expected term (in years)

Risk-free rate

Discount Rate (WACC)

Payment Probability

12.6 % to 18.3 %

based on triggering event

The earnout arrangements are akin to a distribution

to our shareholders, similar to the declaration of a pro rata dividend, and the fair value of the shares are a reduction to retained earnings.

Based on the Class A common stock trading price the market

conditions were not met and no Earnout Shares vested as of March 31, 2023.

Share-based compensation

The Company follows the provisions of FASB ASC Topic 718,

Compensation — Stock Compensation, as applicable to incentive units and the Company’s recognition of compensation

Prior to closing of the business combination,

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 management of Intermediate.

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

The Holdings equity compensation instruments consisted

of 1,000 authorized and issuable Series A Incentive Units and 1,000 authorized and issuable Founder Incentive Units.

Both Series A Incentive

Unit holders and Founders Incentive Unit holders participated in earnings and distributions after a specified return to the Series A Preferred

Unit holders.

The Series A Incentive Units were deemed to be Service-Based awards under ASC 718 due to vesting conditions.

the service-based units was to occur in equal installments of 25 % on each of the first through fourth anniversaries of the August 7, 2020

grant date subject to the participant’s continuous service through such dates.

The Founder Incentive Units were deemed to be Performance-Based

based units as no vesting conditions existed.

The Company classified these units as equity awards

and measured their fair value at the grant date.

The fair value of each award was estimated on the grant date using a Black-Scholes option

valuation model that used the assumptions noted below and other valuation techniques.

Expected volatility was based on historical volatility

for guideline public companies that operate in the Company’s industry.

The expected term of awards granted represents management’s

estimate for the number of years until a liquidity event as of the grant date.

The risk-free rate for the period of the expected

term was based on the U.S.

Treasury yield curve in effect at the time of grant.

In addition, management considered the distribution

priority schedule or “waterfall calculation” in its estimation process.

There were 800 Series A Incentive Units granted

by Holdings in August of 2020 and 600 and 400 were unvested as of December 31, 2021 and 2022, respectively.

As the award recipients

resided on subsidiaries of Intermediate and provided service to the Company, the Company recognized $602,498 of compensation expense related

to the awards during the three months ended March 31, 2022.

There were 1,000 Founder Incentive Units issued

in August of 2020 by Holdings and 1,000 were unvested as of December 31, 2021 and 2022, respectively.

No compensation expense was recorded

related to these awards during the three months ended March 31, 2022 as performance conditions had not, and were unlikely to be met.

On August 5, 2022, certain amendments to the existing

Series A Incentive Units and Founder Incentive Units were made whereby all outstanding unvested Series A Incentive Units and Founders

Incentive Units would become fully vested upon completion of the Business Combination.

Additionally, as part of the amendment to these

agreements, the priority of distributions under the Series A Incentive Units and Founders Incentive Units was also revised such that participants

receive 10 % of distributions after a specified return to BCF Holdings’ Series A Incentive Unit holders (instead of 20 %).

The modifications

to the Series A Incentive Units and Founders Units did not result in any incremental unit-based compensation expense in connection with

the August 2022 modification.

In connection with the closing of the Business

Combination, and as a result of the August 5, 2022 amendments, all of the outstanding and unvested the Series A Incentive Units and Founder

Incentive Units became fully vested.

As such, the Company accelerated the remaining service-based share-based payment expense related

to these awards of $ 2,146,792 .

The share-based payment expense was included in general and administrative expenses for the three-month

period ended March 31, 2023.

Performance conditions for the performance-based Founder Incentive Units had not, and were unlikely to be

met as of March 31, 2023.

As such, no share-based compensation cost was recorded for these units.] 2

Recast of Intermediate Equity

The Business Combination was structured as a reverse

merger and recapitalization which results in a common control arrangement where Holdings, the party that controls the reporting entity

prior to the Business Combination, continues to control the Company immediately after the Business Combination.

As such, there is not

a new basis of accounting and the financial statements of the combined company represent a continuation of the financial statements of

Intermediate where assets and liabilities of Intermediate continue to be reported at historical value.

However, the reverse recapitalization

requires a recast of Intermediate’s equity and EPS and is adjusted to reflect the par value of the outstanding capital stock of

For periods before the reverse recapitalization, shareholders’ equity of Intermediate is presented based on the historical

equity of Intermediate restated using the exchange ratio to reflect the equity structure of CENAQ.

Management evaluated the impact of the number

of shares issued by CENAQ to affect the Business Combination in exchange for the shares of Intermediate (“the exchange ratio”)

and concluded the recast of historical equity based on the exchange ratio did not result in a significant impact to historical equity.

Management recorded a $ 3,509 increase to Class A common stock with an offset to additional paid in capital.

NOTE 8 – WARRANTS

There are 15,412,479 warrants currently

outstanding, including 12,937,479 public warrants and 2,475,000 Private Placement 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, at any time commencing 30 days after the completion of our initial business combination.

However, no warrants will be exercisable

for cash unless we have 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 public warrants is not effective within a specified

period following the consummation of our initial 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.

exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

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 5 trading days ending on the trading day prior to the date of exercise.

The warrants will expire

on the fifth anniversary of our completion of an initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption

or liquidation.

We 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;

● 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.

The Private Placement Warrants, as well as warrants

the Company issued to the Sponsor, officers, directors, initial stockholders or their affiliates in payment of Working Capital Loans made

to the Company, are identical to the public warrants issued in connection with the CENAQ initial public offering.

NOTE 9 – INCOME TAX

Intermediate was historically and remains a

disregarded subsidiary of a partnership for U.S.

federal income tax purposes with each partner being separately taxed on its share of

taxable income or loss.

Verde Clean Fuels is subject to U.S.

federal income taxes, in addition to state and local income

taxes, with respect to its distributive share of any net taxable income or loss and any related tax credits of OpCo.

The effective tax rate was 0 % for the three

months ended March 31, 2023.

The effective income tax rate differed significantly from the statutory rates, primarily due to the losses

allocated to NCI and the recognition of a valuation allowance as a result of the Company’s new tax structure following the Business

The Company has assessed the realizability of

the net deferred tax assets and in 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.

The Company has recorded a full valuation

allowance against the deferred tax assets at Verde as of March 31, 2023, which will be maintained until there is sufficient evidence to

support the reversal of all or some portion of these allowances.

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.

federal, state and local income tax returns are currently under examination by the

respective taxing authorities.

For the year ended December 31, 2022, CENAQ’s

former Trust assets were invested in income generating US Treasury bills.

As a result of the investment income, $ 312,446 of estimated

Federal income taxes payable survived the Business Combination and remained on the Company’s balance sheets as of March 31, 2023.

The Company’s net deferred tax assets are

Deferred tax asset

Outside basis difference in partnership investment

Organizational costs / startup expenses

Accrued Interest - Trust

Federal Net Operating loss

Total deferred tax asset

Valuation allowance

( 8,365,896 )

Deferred tax asset, net of allowance

As of March 31, 2023, and December 31, 2022, the

Company had $ 234,026 and $ 0 , respectively of U.S.

federal operating loss carryovers available to offset future taxable income, which

do not expire.

In assessing the realization of the deferred tax

assets, management considers whether it is more likely than not that some portion of 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

temporary differences representing net future deductible amounts become deductible.

Management considers the scheduled reversal of deferred

tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

After consideration of all of

the information available, management believes that significant uncertainty exists with respect to future realization of the deferred

tax assets and has therefore established a full valuation allowance.

As of December 31, 2022, the valuation allowance on deferred tax

assets was $ 0 .

Reconciliations of the federal income tax rate to

the Company’s effective tax rate as of March 31, 2023, and year-ended December 31, 2022 are as follows:

Statutory federal income tax rate

State taxes, net of federal tax benefit

Permanent Book/Tax Differences

Pass-through income – not taxable

Deferred tax impact of acquisition of Bluescape

Change in valuation allowance

( 1,244.42 )%

Weighted Average Shares Outstanding including common stock subject to redemption

Basic and diluted net loss per share

The Company accounts for

income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities

for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities

and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

ASC 740 additionally requires a valuation

allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.

ASC 740-270-25-2 requires

that an annual effective tax rate be determined and such annual effective rate applied to year to date income in interim periods under

ASC 740-270-30-5.

The Company’s effective tax rate was 5.61 % and 0.00 % for the three months ended September 30, 2022 and 2021,

respectively, and 3.84 % and 0.00 % for the nine months ended September 30, 2022 and 2021, respectively.

The effective tax rate differs

from the statutory tax rate of 21 % for the three and nine months ended September 30, 2022 and 2021, due to merger and acquisition expenses

and the valuation allowance on the deferred tax assets.

ASC 740 also clarifies

the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition

threshold and measurement process for financial statement recognition and measurement of a tax position 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.

ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period,

disclosure and transition.

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 September 30, 2022 and December 31, 2021.

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 has identified

the United States as its only “major” tax jurisdiction.

The Company is subject to income taxation by major taxing authorities

since inception.

These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax

jurisdictions and compliance with federal and state tax laws.

The Company’s management does not expect that the total amount of

unrecognized tax benefits will materially change over the next twelve months.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

In August 2020, the FASB

issued Accounting Standards Update (“ASU”) No.

2020-06, Debt —debt with Conversion and Other Options (Subtopic 470-20)

and Derivatives and Hedging —Contracts in Entity’ Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and

Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing

major separation models required under current GAAP.

The ASU also removes certain settlement conditions that are required for equity-linked

contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

The guidance was adopted starting January 1, 2022.

Adoption of the ASU did not impact the Company’s financial position, results

of operations or cash flows.

In May 2021, the FASB issued

ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock

Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging

Issues Task Force).

This guidance clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer’s

accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain

equity classified after modification or exchange.

The amendments in this update are effective for all entities for fiscal years beginning

after December 15, 2021, including interim periods within those fiscal years.

The guidance was adopted starting January 1, 2022.

of the ASU did not impact the Company’s financial position, results of operations or cash flows.

The Company’s management

does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material

effect on the accompanying unaudited condensed financial statement.

Note 3 — Initial Public

On August 17, 2021, Company

consummated its IPO of 15,000,000 Units.

Each Unit consists of one Class A common stock and three-quarters of one redeemable

Warrant, each whole Warrant entitling the holder thereof to purchase one Class A common stock for $ 11.50 per share.

The Units were

sold at a price of $ 10.00 per unit, generating gross proceeds to the Company of $ 150,000,000 .

The warrants will become exercisable

on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO, and will expire

five years after the completion of the initial Business Combination or earlier upon redemption or liquidation.

The underwriters had a

45-day option from the date of the Company’s IPO (August 17, 2021) to purchase up to an additional 2,250,000 Units to

cover over-allotments.

On August 19, 2021, the over-allotments were exercised in full, at $ 10.00 per Unit, generating additional

proceeds of $ 22,500,000 .

Note 4 — Private Placement

Simultaneously with the

closing of the IPO, the Company’s Sponsor purchased an aggregate of 4,500,000 warrants at a price of $ 1.00 per warrant,

for an aggregate purchase price of $ 4,500,000 and the Company’s underwriters purchased an aggregate of 1,500,000 warrants

at a price of $ 1.00 per whole warrant (for an aggregate purchase price of $ 1,500,000 ) in a private placement.

On August 19, 2021, simultaneously

with the closing of the over-allotments, the Sponsor purchased an additional 450,000 Private Placement Warrants, and the underwriters

purchased an additional 225,000 Private Placement Warrants, at $ 1.00 per warrant, generating gross proceeds to the Company

of $ 675,000 .

The Private Placement Warrants

are identical to the warrants sold as part of the Units in the IPO.

The Sponsor and the underwriters have agreed, subject to certain

limited exceptions, that the Private Placement Warrants will not be transferred, assigned or sold until 30 days after the completion

of the Company’s initial Business Combination and that they will be entitled to certain registration rights.

Note 5 — Related Party

Founder Shares

On December 31, 2020, the

Sponsor paid $ 25,000 , or approximately $ 0.006 per share, to cover certain offering costs in consideration for 4,312,500 Class

B common stocks, par value $ 0.0001 (the “Founder Shares”).

Up to 562,500 Founder Shares were subject to forfeiture

by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised.

On August 19, 2021, the underwriters

exercised the over-allotment option in full.

As a result, these 562,500 founder shares are no longer subject to forfeiture.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Additionally, upon consummation

of the IPO, the Sponsor sold 75,000 Founder Shares to each of the 11 Anchor Investors that purchased at least 9.9% of the units sold

in the IPO, at their original purchase price of approximately $0.0058 per share.

The aggregate fair value of these founder shares attributable

to anchor investors is $6,270,000, or $7.60 per share.

The Company allocated $6,265,215, the excess of the fair value over the gross

proceeds from these Anchor Investors, among Class A common stock, Public Warrants and Private Placement Warrants.

The initial stockholders

and the Anchor Investors have agreed not to transfer, assign or sell any of their Founder Shares and any Class A common stock issuable

upon conversion thereof until the earlier to occur of:

(A) six months after the completion of the initial Business Combination or

(B) subsequent to the initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or

exceeds $ 12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20

trading days within any 30-trading day period commencing at least 75 days after the initial Business Combination, or (y) the date on

which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its stockholders

having the right to exchange their shares of common stock for cash, securities or other property (the “Lock-up” ).

Notwithstanding

the foregoing, if (1) the closing price of the Company’s Class A common stock equals or exceeds $ 12.00 per share (as adjusted for

stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day

period commencing at least 75 days after the initial Business Combination, or (2) the Company completes a liquidation, merger, capital

stock exchange or other similar transaction that results in all of its stockholders having the right to exchange their shares of common

stock for cash, securities or other property, the Founder Shares will be released from the Lock-up.

Promissory Note — Related Party

On May 31, 2022, the Sponsor

agreed to loan the Company $ 125,000 pursuant to a promissory note (the “Promissory Note”).

The Promissory Note bears an interest

of 10 % per annum, payable on the earlier of (i) February 17, 2023 or (ii) the closing date on which the Company consummates an initial

business combination.

As of September 30, 2022, there was $ 125,000 outstanding under the Promissory Note.

Working Capital Loans

In addition, in order to

finance transaction costs in connection with an intended Business Combination, on November 11, 2021 the Sponsor signed a commitment letter

to provide loans of up to an aggregate of $ 1,500,000 to the Company (“Working Capital Loans”).

This commitment extends through

August 17, 2022.

These loans will be non-interest bearing, unsecured and will be repaid upon the consummation of a Business Combination.

If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans.

In the event that the initial

Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the

Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans.

Up to $ 1,500,000 of

such Working Capital Loans may be convertible into Private Placement Warrants at a price of $ 1.00 per warrant at the option of the

Such warrants would be identical to the Private Placement Warrants.

As of September 30, 2022 and December 31, 2021, the Company

had no borrowings under the Working Capital Loans.

Note 6 — Commitments and Contingencies

Registration Rights

The holders of the Founder

Shares, the Class A representative shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital

Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued

upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a

registration rights agreement signed on the IPO closing date of the IPO, requiring the Company to use its best efforts to register such

securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A common stock).

of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers

such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration statements

filed subsequent to the completion of the initial Business Combination and rights to require the Company to register for resale such

securities pursuant to Rule 415 under the Securities Act.

However, the registration rights agreement provides that the Company will

not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up

period, which occurs (i) in the case of the Founder Shares, on the earlier of (A) six months after the completion of the initial Business

Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of our Class A common stock equals or exceeds

$12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading

days within any 30-trading day period commencing at least 75 days after the initial Business Combination, or (y) the date on which the

Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the

Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property and (ii)

in the case of the Private Placement Warrants and the respective Class A common stock underlying such warrants, 30 days after the completion

of the initial Business Combination.

The Company will bear the expenses incurred in connection with the filing of any such registration

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Underwriters Agreement

The Company granted the

underwriters a 45-day option from the date of our IPO to purchase up to an additional 2,250,000 units to cover over-allotments,

On August 19, 2021, the over-allotments were exercised in full.

Simultaneously with the

closing of the IPO and the over-allotment, the underwriters were paid an underwriting discount of two percent ( 2 %) of the gross

proceeds of the IPO and the over-allotment, or $ 3,450,000 .

Additionally, the underwriters will be entitled to a deferred underwriting

discount of 3.5 % of the gross proceeds of the IPO and the over-allotment upon the completion of the Company’s initial Business

Representative Shares

Simultaneously with the closing

of the IPO, the Company issued to Imperial Capital LLC and/or its designees, 165,000 shares of Class A common stock (the “Representative

On August 19, 2021, the over-allotments were exercised in full and the Company issued additional 24,750 Representative

Shares to Imperial Capital LLC and/or its designees.

The aggregate fair value of the Representative shares was $1,442,100, or $7.60 per

share and recorded as offering costs, which was treated as transaction cost of offering.

Imperial Capital LLC has

agreed not to transfer, assign or sell any such shares of common stock until the completion of an initial business combination.

Imperial Capital LLC has agreed (i) to waive its redemption rights with respect to such shares of common stock in connection with the

completion of our initial business combination;

and (ii) to waive its rights to liquidating distributions from the trust account with

respect to such shares of common stock if the Company fails to complete an initial business combination within the Combination Period,

until February 16, 2023.

The representative shares may be deemed compensation by FINRA and are

therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of the registration statement

for the IPO pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules.

Pursuant to FINRA Rule 5110(e)(1), these securities may not

be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction

that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective

date of the registration statement for the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180

days immediately following the commencement of sales of the IPO except to any underwriter and selected dealer participating in the offering

and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).

Business Combination Agreement

On August 12, 2022, the Company, Verde Clean Fuels OpCo, LLC, a Delaware

limited liability company and wholly-owned subsidiary of the Company (“OpCo”), and, for a limited purpose, the Sponsor, entered

into a business combination agreement (as the same may be amended from time to time, the “Business Combination Agreement”)

with Bluescape Clean Fuels Holdings, LLC, a Delaware limited liability company (“Holdings”), and Bluescape Clean Fuels Intermediate

Holdings, LLC, a Delaware limited liability company (“Intermediate”).

The transactions contemplated by the Business Combination

Agreement are collectively referred to herein as the “business combination.” In connection with the closing of the business

combination (the “Closing”), the Company will change its name to Verde Clean Fuels, Inc.

(“Verde Inc.”).

to the Business Combination Agreement, during the period between the consummation of the business combination and the earlier of the five

year anniversary from the consummation of the business combination or the date of the consummation of a sale of the post combination company

(the “Earn Out Period”), OpCo may transfer up to 3,500,000 Class C common units of OpCo and a corresponding number of shares

of Class C common stock, par value $ 0.0001 per share (“Class C common stock”), of the post combination company to Holdings

within five business days after the occurrence of certain triggering events.

Sponsor Letter

In connection with the execution of the Business Combination Agreement,

on August 12, 2022, the Sponsor entered into a letter agreement with Intermediate, Holdings and the Company, pursuant to which, among

other things, the Sponsor agreed to (i) forfeit 2,475,000 of its Private Placement Warrants, (ii) comply with the lock-provisions in the

Letter Agreement, dated August 12, 2021, by and among the Company, the Sponsor and the Company’s directors and officers, (iii) vote

all of its shares of Class A common stock and Founder Shares in favor of the adoption and approval of the Business Combination Agreement

and the business combination, (iv) not redeem any of its shares of Class A common stock in connection with such stockholder approval,

(v) waive its anti-dilution rights with respect to its Founder Shares in connection with the consummation of the business combination

and (vi) subject a portion of the shares of Class A common stock as a result of the conversion of its Founder Shares to forfeiture if

certain triggering events do not occur during the Earn Out Period.

Underwriters Letter

connection with the execution of the Business Combination Agreement, on August 12, 2022, the Company, Intermediate and Holdings entered

into a letter agreement with the underwriters, pursuant to which, among other things, (i) Imperial Capital, LLC agreed to forfeit all

of its 1,423,125 Private Placement Warrants and all of its 156,543 Representative Shares, (ii) I-Bankers Securities, Inc.

agreed to forfeit

all of its 301,875 Private Placement Warrants and all of its 33,207 Representative Shares and (iii) the underwriters agreed to reduce

their deferred underwriting fees related to the IPO from $6,037,500 to $4,312,500.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Subscription Agreements

connection with the execution of the Business Combination Agreement, on August 12, 2022, the Company entered into separate subscription

agreements with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, and the

Company agreed to sell to the PIPE Investors, an aggregate of 8,000,000 shares of Class A common stock for a purchase price of $ 10.00

per share and an aggregate purchase price of $ 80,000,000 in a private placement (the “PIPE Financing”).

Of the $ 80,000,000

of commitments, Holdings has agreed to purchase 800,000 shares to be sold in the PIPE Financing for an aggregate commitment of $ 8,000,000 .

Arb Clean Fuels Management LLC (“Arb Clean Fuels”), an entity affiliated with a member of the Sponsor, has agreed to purchase

7,000,000 shares to be sold in the PIPE Financing for an aggregate commitment of $ 70,000,000 ;

provided, that, to the extent funds in

the Trust Account immediately prior to the consummation of the business combination, after giving effect to the Company stockholders’

redemption rights, exceed $17,420,000, each $10.00 increment of such excess funds shall reduce Arb Clean Fuels’ commitment by $10.00

up to a maximum reduction of $20,000,000.

Additionally, an entity unaffiliated with the Sponsor has agreed to purchase 200,000 shares

for an aggregate commitment of $2,000,000.

Lock-Up Agreement

connection with the execution of the Business Combination Agreement, on August 12, 2022, Holdings entered into a Lock-Up Agreement, pursuant

to which Holdings agreed to subject its shares of common stock received in connection with the business combination to the lock-up provisions

Agreements to be Executed at Closing

The Business Combination

Agreement also contemplates the execution by the parties of various agreements at the Closing, including, among others, those below.

Tax Receivable

connection with the business combination, the Company will enter into the 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 therein), which will generally provide for the payment by Verde Inc.

to each TRA Holder of 85 % of the net cash savings, if

federal, state and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state

and local taxes) that Verde Inc.

realizes (or is deemed to realize in certain circumstances) in periods after the business combination

as a result of (i) certain increases in tax basis that occur as a result of Verde Inc.’s acquisition (or deemed acquisition for

federal income tax purposes) of all or a portion of such TRA Holder’s Class C OpCo Units pursuant to an OpCo Holder Exchange

set forth in the A&R LLC Agreement, and (ii) imputed interest deemed to be paid by Verde Inc.

as a result of, and additional tax

basis arising from, any payments Verde Inc.

makes under the Tax Receivable Agreement.

will retain the benefit of the remaining

15 % of these net cash savings.

generally will be made under the Tax Receivable Agreement as Verde Inc.

realizes actual cash tax savings in periods after the consummation

of the business combination from the tax benefits covered by the Tax Receivable Agreement.

However, if the Tax Receivable Agreement terminates

early (at Verde Inc.’s election or due to other circumstances, including Verde Inc.’s breach of a material obligation thereunder

or upon certain changes of control described in the Tax Receivable Agreement), Verde Inc.

would be required to make an immediate payment

to each TRA Holder equal to the present value of the anticipated future payments to be made by it under the Tax Receivable Agreement

(based upon certain valuation assumptions and deemed events set forth in the Tax Receivable Agreement), such payments not to exceed $ 50

million, in the aggregate, in the case of certain changes of control.

will depend on OpCo to make distributions to Verde Inc.

in an amount sufficient to cover Verde Inc.’s obligations under the

Income tax provision

The Company files income tax returns in the U.S.

jurisdiction and is subject to examination by the taxing authorities.

Tax receivable agreement

A&R LLC Agreement

the Closing, Verde Inc.

will operate its business through OpCo.

On the Closing Date, Verde Inc.

and Holdings will enter into an amended

and restated limited liability company agreement of OpCo (the “A&R LLC Agreement”).

The A&R LLC Agreement will provide,

among other things, that each Class C OpCo Unit will be exchangeable, subject to certain conditions, for one share of Class A common stock,

and a corresponding share of Class C common stock will be cancelled in connection with such exchange, pursuant to and in accordance with

the terms of the A&R LLC Agreement.

A&R Registration

Rights Agreement

connection with the Closing, that certain Registration Rights Agreement dated August 17, 2021 (the “IPO Registration Rights Agreement”)

will be amended and restated and Verde Inc., certain stockholders of CENAQ prior to the Closing (the “Initial Holders”) and

certain stockholders receiving Class A common stock and Class C common stock pursuant to the business combination (the “New Holders”

and together with the Initial Holders, the “Reg Rights Holders”) will enter into an amended and restated IPO Registration

Rights Agreement (the “A&R Registration Rights Agreement”).

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

to the A&R Registration Rights Agreement, Verde Inc.

will agree that, within thirty (30) days after the Closing, it will use its

commercially reasonable efforts to file with the SEC (at Verde Inc.’s sole cost and expense) a registration statement registering

the resale of certain securities held by or issuable to the Reg Rights Holders (the “Resale Registration Statement”), and

will use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as reasonably

practicable after the filing thereof.

In certain circumstances, the Reg Rights Holders can demand Verde Inc.’s assistance with

underwritten offerings and block trades, and the Reg Rights Holders will be entitled to certain piggyback registration rights.

Note 7 — Stockholders’

Preferred stock — The

Company is authorized to issue 1,000,000 preferred stock with a par value of $ 0.0001 and with such designations, voting

and other rights and preferences as may be determined from time to time by the Company’s board of directors.

As of September 30,

2022 and December 31, 2021, there were no preferred stock issued and outstanding.

Class A common

stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of

$ 0.0001 per share.

At September 30, 2022 and December 31, 2021, there were 189,750 shares of Class A common stock issued or outstanding

excluding 17,250,000 shares of Class A common stock subject to redemption.

Class B common

stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of

$ 0.0001 per share.

Holders are entitled to one vote for each share of Class B common stock.

At September 30, 2022 and December 31,

2021, there were 4,312,500 shares of Class B common stock issued and outstanding.

Of the 4,312,500 shares of

Class B common stock, an aggregate of up to 562,500 shares were subject to forfeiture to the Company for no consideration

to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the initial stockholders

will collectively own 20 % of the Company’s issued and outstanding common stocks after the IPO.

On August 19, 2021, the over-allotments

were exercised in full, hence the 562,500 Founder Shares were no longer subject to forfeiture.

Holders of Class A common

stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s

stockholders except as required by law.

Unless specified in the Company’s amended and restated certificate of incorporation or

bylaws, or as required by applicable provisions of the Delaware General Corporation Law (“DGCL”) or applicable stock exchange

rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such

matter voted on by its stockholders.

The Class B common stock will automatically convert into Class A common

stock at the time of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends,

reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein.

In the case that additional shares

of Class A common stock or equity-linked securities are issued or deemed issued in excess of the amounts offered in our IPO and related

to the closing of the Business Combination, including pursuant to a specified future issuance, the ratio at which shares of Class B common

stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of

Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future

issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,

in the aggregate, on an as-converted basis, 20 % of the sum of the total number of all shares of common stock outstanding upon completion

of the IPO plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Business

Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Business Combination).

of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock,

subject to adjustment as provided above, at any time.

There are 19,612,500 warrants currently outstanding, including 12,937,500 public warrants and 6,675,000 Private

Placement 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, at any time commencing 30 days after the completion of our initial business combination.

However, no warrants will be exercisable for cash unless we have 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

public warrants is not effective within a specified period following the consummation of our initial 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 5 trading days ending on the trading day

prior to the date of exercise.

The warrants will expire on the fifth anniversary of our completion of an initial business combination,

at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

CENAQ ENERGY CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

We may call the warrants

for redemption, in whole and not in part, at a price of $0.01 per warrant:

after the warrants become exercisable;

upon not less

than 30 days’ prior written notice of redemption to each warrant holder;

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

● 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.

The Private Placement Warrants, as well as any warrants the Company

issues to the Sponsor, officers, directors, initial stockholders or their affiliates in payment of Working Capital Loans made to the Company,

will be identical to the public warrants underlying the Units being offered in the IPO.

On the Closing Date, in connection with the

consummation of the Business Combination and as contemplated by the Business Combination Agreement, Verde Clean Fuels 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

Pursuant to the Tax Receivable Agreement, Verde Clean Fuels is required to pay each TRA Holder 85 % of the amount of net

cash savings, if any, in U.S.

federal, state and local income and franchise tax that Verde Clean Fuels actually realizes (computed

using certain simplifying assumptions) or is deemed to realize in certain circumstances in periods after the Closing as a result of,

as applicable to each such TRA Holder, (i) certain increases in tax basis that occur as a result of Verde Clean Fuels’

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 Verde Clean Fuels as a result of, and additional

tax basis arising from, any payments Verde Clean Fuels makes under the Tax Receivable Agreement.

Verde Clean Fuels will retain the

benefit of the remaining 15 % of these net cash savings.

The Tax Receivable Agreement contains a payment cap of $ 50,000,000 ,

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.

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company does not have assets or liabilities

that are measured at fair value on a recurring basis as earn out shares, public warrants, and private placement warrants are equity classified.

The Company measured the contingent consideration as of December 31, 2022 using level 3 inputs and valued the contingent consideration

at $1,299,000.

NOTE 11 – LOSS PER SHARE

Prior to the reverse recapitalization in connection

with the Closing, all net loss was attributable to the noncontrolling interest.

For the periods prior to February 15, 2023, earnings per

share was not calculated because net income prior to the Business Combination was attributable entirely to Intermediate.

Further, prior

to the consummation of the Business Combination, the Intermediates ownership structure included equity interests held solely by Holdings.

The Company analyzed the calculation of earnings per share for comparative periods presented and determined that it resulted in values

that would not be meaningful to the users of these condensed consolidated financial statements.

Therefore, the earnings per share

information has not been presented for the three-months ended March 31, 2022.

Basic net loss per share has been computed by dividing net

loss attributable to class A common shareholders for the period subsequent to the business combination by the weighted average number

of shares of common stock outstanding for the same period.

Diluted earnings per share of Class A common stock were computed by dividing

net loss available to the Company by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect

to potentially dilutive securities.

The Company’s potentially dilutive securities,

which include warrants, Holdings and Sponsor earn-out shares, and convertible debt have been excluded from the computation of diluted

net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted average number of common shares outstanding

used to calculate both basic and diluted net loss per share is the same.

The following table sets forth the computation of net loss used

to compute basic net loss per share of Class A common stock for the period ended March 31, 2023.

Net income (loss)

$ ( 574,461 )

Basic weighted-average shares outstanding

Dilutive effect of share-based awards

Diluted weighted-average shares outstanding

Basic income per share

Diluted income per share

The Company’s stock options, warrants, and earnouts 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 common stock during the period, because their inclusion

would result in an antidilutive effect on per share amounts.

The following amounts were not included in the calculation

of net income per diluted share because their effects were anti-dilutive:

Public warrants

Private placement warrants

Earnout Shares

Convertible debt

Total antidilutive instruments

As a result of incurring a net loss for the three

months ended March 31, 2023, 18,687,817 potential anti-dilutive common shares were excluded from the above earnings per share calculation.

NOTE 12 – SUBSEQUENT EVENTS

The Company evaluated subsequent

events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were

Based upon this review, other than as described below, the Company did not identify any other subsequent events that would have

required adjustment in these unaudited condensed financial statements.

On October 26, 2022, in

accordance with the third amended and restated certificate of incorporation of the Company, the Sponsor elected to convert 3,487,500 of

its shares of Class B Common Stock into shares of Class A common stock on a one-for-one basis.

Proxy Statement

November 10, 2022, the Company filed a Definitive Proxy Statement seeking to obtain stockholder approval to consider and vote upon certain

proposals, including proposals to (a) approve and adopt the Business Combination Agreement and Plan of Reorganization, dated as of

August 12, 2022, and (b) approve and adopt, the fourth amended and restated certificate of incorporation, which, if approved, would

take effect upon Closing.

November 15, 2022, the Company’s board of directors has elected to extend the date by which the Company has to consummate a business

combination from November 16, 2022 to February 16, 2023 (the “Extension”), as permitted under the Company’s third amended

and restated certificate of incorporation.

The Extension is the second of two three-month extensions permitted under the Charter.

connection with the Extension, the Sponsor has deposited $ 1,725,000 , representing 1 % of the gross proceeds of the IPO, into the Trust

Account for its public stockholders.

Promissory Notes

— Related Party

November 15, 2022, the Company issued an unsecured promissory note (the “Extension Note”) in the principal amount of $ 1,725,000

to the Sponsor in connection with the Extension.

The Extension Note bears no interest and is due and payable upon the earlier to occur

of (i) the date on which CENAQ’s initial business combination is consummated and (ii) the liquidation of the Company on or before

February 16, 2023 or such later liquidation date as may be approved by the Company’s stockholders.

If the Business Combination is

consummated, the amount repayable under the Extension Note will be reduced by a percentage equal to the aggregate amount of cash proceeds

required to satisfy any exercise by the Company’s eligible stockholders of their redemption rights provided for in the Company’s

third amended and restated certificate of incorporation divided by the total amount required if all eligible holders of Class A common

stock, par value $ 0.0001 per share, of the Company elected to exercise their redemption rights with respect to all eligible shares of

Class A common stock held by such holders in accordance with Section 8.03 of the Business Combination Agreement.

November 15, 2022, the Company issued an unsecured promissory note (the “Sponsor Note”) in the principal amount of $ 467,500

to the Sponsor.

The Sponsor Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which CENAQ’s

initial business combination is consummated and (ii) the liquidation of the Company on or before February 16, 2023 or such later liquidation

date as may be approved by the Company’s stockholders.

The Company evaluated subsequent events and transactions

that occurred after the balance sheet date, up to the date which the financial statements were issued.

Employment Agreements

The Company entered into employment agreements

with each of Ernest Miller and John Doyle on April 12, 2023 (respectively, the “Miller Agreement” and the “Doyle Agreement”,

and collectively, the “Agreements”).

The Agreements each provide for an initial four-year term ending on February 15, 2027

(the “Initial Term”).

The Miller Agreement provides for, among other

things, (i) an annualized base salary of $ 508,000 , (ii) eligibility to receive an annual cash incentive bonus in an amount up to 75 % of

his then-applicable base salary, based upon the achievement of certain performance objectives established by the Board at its sole discretion,

which goals may extend over multiple years, (iii) participation in the Company’s employee benefit and welfare plans, and (iv) an

initial option grant under the Company’s 2023 Omnibus Incentive Plan (the “2023 Plan”) with an aggregate grant date

fair value of $ 889,000 , which will have an exercise price per share equal to the greater of (a) $ 11.00 per-share or (b) the per-share

trading price of the Company common stock on the date of grant.

Pursuant to the Miller Agreement, if Mr.

Miller’s employment is

terminated by the Company during the Initial Term without “cause” (and other than as a result of his death or disability)

Miller resigns for “good reason” (each as defined in the Miller Agreement), Mr.

Miller will receive, subject to

his execution and non-revocation of a release of claims against the Company and his continued compliance with restrictive covenants:

a cash severance payment equal to 1.5 times his then-current base salary, payable in substantially equal installments over a period of

18 months, and (II) a cash severance payment equal to 2.625 times his then-current base salary, payable in a lump sum within 60 days following

the termination date, if such qualifying termination occurs within 24 months following a Change in Control (as defined in the 2023 Plan).

The Doyle Agreement provides for, among other

things, (i) an annualized base salary of $400,000, (ii) eligibility to receive an annual cash incentive bonus in an amount up to 50% of

his then-applicable base salary, based upon the achievement of certain performance objectives established by the Board at its sole discretion,

which goals may extend over multiple years, (iii) participation in the Company’s employee benefit and welfare plans, and (iv) an

initial option grant under the 2023 Plan with an aggregate grant date fair value of $600,000, which will have an exercise price per share

equal to the greater of (a) $11.00 per-share or (b) the per-share trading price of the Company common stock on the date of grant.

to the Doyle Agreement, if Mr.

Doyle’s employment is terminated by the Company during the Initial Term without “cause”

(and other than as a result of his death or disability) or if Mr.

Doyle resigns for “good reason” (each as defined in the

Doyle Agreement), Mr.

Doyle will receive, subject to his execution and non-revocation of a release of claims against the Company and his

continued compliance with restrictive covenants:

(I) a cash severance payment equal to 1.5 times his then-current base salary, payable

in substantially equal installments over a period of 18 months, and (II) a cash severance payment equal to 2.25 times his then-current

base salary, payable in a lump sum within 60 days following the termination date, if such qualifying termination occurs within 24 months

following a Change in Control.

Following the expiration of the Initial Term,

the employment relationship will continue on an “at-will” basis, and the Company will have no obligation to provide the severance

benefits described above upon any termination of employment.

Additionally, the Agreements contain certain restrictive covenants regarding

confidential information, non-competition, non-solicitation, and non-disparagement.

In connection with the Business Combination, we

adopted the 2023 Plan.

The 2023 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted

stock units, performance awards, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards to our

employees (including our Named Executive Officers), consultants and directors and is intended to align the interests of our service providers

with those of our stockholders.

We granted stock option awards to our management team (including our Named Executive Officers, consistent

with the terms of the Agreements described above) in April 2023.

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 1. Financial Statements