What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-14 compared with 2023-05-16 · 586 added, 534 removed, 511 unchanged (69% of the section changed)

Financial Statements

VERDE CLEAN FUELS, INC.

BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

Current assets:

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Total non-current assets

LIABILITIES AND STOCKHOLDER’S EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Finance lease liabilities – long term

Total Non-liabilities

Total non-current liabilities

Total liabilities

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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

Class A common stock, par value $ 0.0001 per share, 9,387,836 shares issued and outstanding as of June 30, 2023

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

Additional paid in capital

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Total liabilities and stockholders’ equity

The accompanying notes to the unaudited consolidated financial

statements are an integral part of these statements.

The accompanying notes to the unaudited consolidated

financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

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Three months ended

Three-months ended

Six months ended

General and administrative expenses

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( 1,893,000 )

( 1,299,000 )

( 1,893,000 )

Research and development expenses

Total Operating (income) loss

Other (income)

Interest Expense

Provision for income taxes

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$ ( 5,667,377 )

$ ( 747,568 )

Net income (loss) attributable to noncontrolling interest

$ ( 1,801,103 )

$ ( 4,343,770 )

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

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$ ( 1,323,607 )

$ ( 747,568 )

Earnings per share

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Loss per Share of Class A common stock

The accompanying notes to the unaudited

consolidated financial statements are an integral part of these statements.

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

Statement of Stockholders’ Equity for the Three months ended

June 30, 2023

Class A Common

Class C Common

Total Stockholders’

Stockholders’

Balance - March 31, 2023

Stock-based compensation

Warrant exercise

Net income (loss)

Balance – June 30, 2023

Statement of Stockholders’ Equity for the Six months ended

June 30, 2023

Class A Common

Class C Common

Stockholders’

Balance - December 31, 2022

$ ( 11,672,536 )

Retroactive application of recapitalization

Adjusted beginning balance

( 11,672,536 )

Reversal of Intermediate original equity

( 9,500,000 )

( 3,272,392 )

( 1,103,365 )

Recapitalization transaction

( 4,793,143 )

Class A Sponsor earn out shares

( 5,792,000 )

Class C Sponsor earn out shares

( 10,594,000 )

Stock-based compensation

Warrant Exercise

Net income (loss)

( 1,323,607 )

( 4,343,770 )

( 5,667,377 )

Balance – June 30, 2023

$ ( 22,502,750 )

Statement of Member’s Equity for the Three Months Ended June

Balance - March 31, 2022

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

Member’s Equity

Accumulated Deficit

Total Member’s Equity

Balance - December 31, 2021

$ ( 15,817,107 )

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Unit-based compensation expense

Balance June 30, 2022

$ ( 15,139,398 )

$ ( 4,055,518 )

Balance March 31, 2022

Statement of Member’s Equity for the Six Months Ended June

Balance – December 31, 2021

$ ( 14,391,830 )

$ ( 6,786,461 )

Capital contribution

Unit-based compensation expense

Balance June 30, 2022

$ ( 15,139,398 )

$ ( 4,055,518 )

The accompanying notes to the unaudited consolidated financial

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

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( 1,299,000 )

( 1,893,000 )

Unit-based compensation expense

Finance lease amortization

Amortization of right-of-use assets

Changes in operating assets and liabilities

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Accrued liabilities

Operating lease liabilities

Net cash used in operating activities

( 4,801,692 )

Investing activities

( 1,631,160 )

Cash flows from investing activities

Purchases of property, equipment and improvements

Net cash used in investing activities

Financing activities

Cash flows from financing activities

PIPE proceeds

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Deferred financing costs

Capital Contribution

Warrant exercises

Capital contributions

Net cash provided by financing activities

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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.

Accrued deferred transaction costs

The accompanying notes to the unaudited consolidated

financial statements are an integral part of these statements.

VERDE CLEAN FUELS, INC.

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NOTE 1 – ORGANIZATION

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.

(the “Company”

or “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 Fuels’ STG+® process, Verde Clean Fuels converts syngas

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

Verde Clean Fuels is focused on the development

of technology and commercial facilities aimed at turning waste and other 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 facilities.

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

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

(“Intermediate”), and CENAQ Sponsor LLC (“Sponsor”).

Immediately upon the completion of the Business Combination,

CENAQ was renamed to Verde Clean Fuels, Inc.

The Business Combination is discussed further 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.

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

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

Immediately following the Business Combination, Verde

Clean Fuels is the sole manager of and controls OpCo.

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.

to the Business Combination, and up to the transaction close on February 15, 2023, Verde Clean Fuels, previously CENAQ Energy Corp., was

a special purpose acquisition company (“SPAC”) incorporated for the purpose of effecting a merger, share exchange, asset acquisition,

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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give a true indication of results for a full year.

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 statements.

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.

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 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.

with US 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

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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

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 .

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

Renewable Fuels I, LLC.

All intercompany balances and transactions have been eliminated in consolidation.

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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.

of $ 100,000 as of June 30, 2023 for a letter of credit which is included in the determination of cash and restricted cash in the

Consolidated Statements of Cash Flows.

There were no other cash equivalents as of June 30, 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

Financial instruments that potentially subject

the Company to concentrations of credit risk consist of cash accounts 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.

As of June 30, 2023, the Company has not experienced losses on these accounts and

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

Fair Value of Financial Instruments

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

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

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

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

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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.

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.

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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.

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

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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 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

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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.

June 30, 2023, and December 31, 2022, due to the short maturities of such instruments.

Net Loss Per Common Stock

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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.

are not participating securities per ASC 260, “Earnings Per Share” (“ASC 260”).

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.

warrants, stock options, restricted stock units (“RSUs”) and earn out shares were excluded from diluted earnings per share

for the three and six-months ended June 30, 2023, because certain of those instruments are contingently exercisable where the contingencies

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

As a result, diluted net loss per common stock is

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

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

in 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.

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

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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.

Officer (“CEO”).

The Company has determined that it operates in one operating segment, as the CODM reviews financial information

presented on a combined basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

The Company 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.

of accounting for income taxes under ASC 740, “Income Taxes (“ASC 740”).

Deferred tax assets and liabilities are

recognized for the estimated future tax consequences attributable to differences between the financial 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.

effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment

The Company has elected to use the outside basis approach to measure the deferred tax assets or liabilities based on its investment

in its subsidiaries without regard to the underlying assets or liabilities.

In assessing the realizability of deferred tax

assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which

those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future

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

ASC 740 prescribes a recognition threshold

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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.

no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 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.

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

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

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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.

Under the guidance in ASC 805, “Business

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

interests of CENAQ and Intermediate are recognized at their carrying amounts on the date of the business combination.

Under this method

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

Accordingly, for accounting purposes,

the business combination 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

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

Maintenance and repairs are charged to expense as

incurred, and improvements are capitalized.

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

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

Maintenance and repairs are charged to expense

as incurred, and improvements are capitalized.

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

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

Accrued Liabilities

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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.

The Company accounts for leases under ASU 842,

“Leases” (“ASC 842)”.

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

that arise from leases, by recognizing in the consolidated balance sheet a liability to make lease payments (the lease liability) and

a right-of-use asset (“ROU asset”) representing its right to use the underlying asset for the lease term.

In accordance with

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

balance sheet.

Certain lease arrangements

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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.

The Company uses either the rate implicit in the

lease, if readily determinable, or the Company’s incremental borrowing rate for a period comparable to the lease term in order to

calculate the net present value of the lease liability.

The incremental borrowing rate represents the rate that would approximate the

rate to borrow funds on a collateralized basis over a similar term and in a similar economic environment.

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 .

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 June 30, 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

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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,

During the three and six months ended June 30,

2023 and 2022, the Company did not record any impairment charges.

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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.

During the three and six months ended June 30, 2023

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

Emerging Growth Company Accounting Election

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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 expects to be an emerging growth company 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.

Equity-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.

Unit-Based Compensation

Service-based units compensation cost is measured

at the grant date based on the fair value of the equity instruments awarded and is recognized over the period during which an employee

is required to provide service in exchange for the award, or the requisite service period, which is usually the vesting period.

Performance-based

unit compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is expensed over the

requisite service period, based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment

to earnings in the period of the change.

If the performance goal is not met, no unit-based compensation expense is recognized and any

previously recognized unit-based compensation expense is reversed.

Forfeitures of service-based and performance-based units are recognized

upon the time of occurrence.

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.

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

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

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

the closing of the Business Combination.

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

to be met as of March 31, 2023.

to be met as of June 30, 2023.

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

2023 Equity-Based Awards

In March 2023, the Company authorized and approved

the Verde Clean Fuels, Inc.

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

On April 25, 2023, the Company granted stock options

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

The Company estimates

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

by the value of the stock price on the date of the award subject to a discount for lack of marketability (see Note 7).

Equity-based compensation is measured using a

fair value-based method for all equity-based awards.

The cost of awarded equity instruments is recognized based on each instrument’s

grant-date fair value over the period during which the grantee is required to provide service in exchange for the award.

The determination

of fair value requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions such as stock

price volatility and expected option term.

Equity-based compensation is recorded as a general and administrative expense in the Consolidated

Statements of Operations.

We estimate the expected term of options granted

based on peer benchmarking and expectations.

We use the treasury yield curve rates for the risk-free interest rate in the option valuation

model with maturities similar to the expected term of the options.

Volatility is determined by reference to the actual volatility of several

publicly traded peer companies that are similar to us in our industry sector.

We do not anticipate paying cash dividends and therefore

use an expected dividend yield of zero in the option valuation model.

Forfeitures are recognized as they occur.

We assess whether a discount

for lack of marketability is applied based on certain liquidity factors.

All equity-based payment awards subject to graded vesting based

only on a service condition are amortized on a straight-line basis over the requisite service periods.

There is substantial judgment in selecting the

assumptions which we use to determine the fair value of such equity awards and other companies could use similar market inputs and experience

and arrive at different conclusions.

Contingent Consideration

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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.

management and CEO whereby, if the Business Combination reaches closing, the Contingent Consideration will be forfeited.

For the three and six months ended June 30, 2022,

the Company remeasured the liability of this arrangement, and reassessed the probability of the completion of the Business Combination

and reversed $ 1,893,000 of the accrued expense through earnings.

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.

Thus, the remaining $ 1,299,000

of accrued contingent consideration was reversed through earnings for the six months ended June 30, 2023.

NOTE 3 – BUSINESS COMBINATION

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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

Pursuant to ASC 805, the Business Combination

was accounted for as a common control reverse recapitalization where Intermediate is deemed the accounting acquirer and the Company is

treated as the accounting acquiree, with no goodwill or other intangible assets recorded, in accordance with US 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 Clean Fuels.

Further, Holdings continues

to have control of the Board of Directors through its majority voting rights.

Under ASC 805, the assets, liabilities, and noncontrolling

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

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.

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 stock;

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 agreements;

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.

CENAQ Public Stockholders

New PIPE Investors (excluding Holdings)

Sponsor and Anchor Investors

Sponsor Earn Out shares

Total Shares of Common Stock at Closing

Earn Out Equity shares

Total diluted shares at Closing (including shares above)

Total proceeds raised from the business combination

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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.

ASC 850, “Related Party Disclosures”

(“ASC 850”) provides guidance for the identification of related parties and disclosure of related party transactions.

15, 2023, the Company entered into a new promissory note with the Sponsor totaling $ 409,279 (the “New Promissory Note”).

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.

The Company has a related party relationship with

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

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

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.

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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

The Company leases office space and other office

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

The office lease was extended until 2024.

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

In October 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 was in February 2023 as control of the identified asset did not transfer to the Company on the effective date of the lease.

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

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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 asset retirement obligation is zero as of June 30, 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

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

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

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

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.

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 element.

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 ROU asset and lease liability.

In addition, the Company has elected the practical expedient to not apply lease recognition requirements

to leases with a term of one year or less.

Under this expedient, lease costs are not capitalized;

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.

rather, are expensed on a straight-line

basis over the lease term.

The Company’s leases do not contain residual value guarantees, 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 the net present value of the lease liability.

The incremental borrowing rate represents the rate that would approximate the

rate to borrow funds on a collateralized basis over a similar term and in a similar economic environment.

Lease costs for the Company’s operating and finance

leases are presented below.

Statements of Operations Classification

Finance lease cost

Amortization of right-of-use assets

Amortization of finance lease right-of-use asset

General and administrative expense

Interest on lease liabilities

Interest on finance lease liability

General and administrative expense

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Total lease cost

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

Statements of Operations Classification

Amortization of finance lease right-of-use asset

General and administrative expense

Interest on finance lease liability

General and administrative expense

Total finance lease cost

General and administrative expense

Operating lease cost

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Total lease cost

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

As of March 31, 2023

Statements of Operations Classification

Operating lease cost

General and administrative expense

Variable lease cost

General and administrative expense

Total lease cost

Statements of Operations Classification

Operating lease cost

General and administrative expense

Variable lease cost

General and administrative expense

Total lease cost

Maturities of the Company’s operating and

finance leases as of June 30, 2023 are presented below.

As of June 30, 2023

Maturity of lease liabilities

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Present value of lease liabilities

Three months ended

Supplemental information related to the Company’s

operating and finance lease arrangements was as follows:

Operating lease - supplemental information

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The Company is not party to any litigation.

NOTE 6 – PROPERTY, EQUIPMENT

AND IMPROVEMENTS

Major classes of property, equipment, and improvements are

NOTE 6 – PROPERTY, EQUIPMENT AND IMPROVEMENTS

Major classes of property, equipment, and improvements

are as follows:

Computers, office equipment and hardware

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Property, equipment and improvements, net

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

March 31, 2023 and 2022, respectively.

Depreciation expense was $ 580 and $ 1,160 for the three and six months

ended June 30, 2023, respectively, and was $ 2,640 and $ 5,354 for the three and six months ended June 30, 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.

Earnout Shares potentially issuable as part of

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

common stock and meet 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

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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

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

Holdings earn out shares are neither issued nor outstanding as of June 30, 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.

All Sponsor Shares granted in connection with the Business Combination are issued and outstanding as of June 30, 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:

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

Expected volatility

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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.

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.

the Class A common stock trading price the market conditions were not met and no Earnout Shares vested as of June 30, 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

Compensation expense related to share-based compensation

arrangements is included within general and administrative expenses.

The total compensation expense incurred related to the Company’s

equity-based compensation plans was $ 200,264 and $ 2,347,056 for the three and six months ended June 30, 2023.

As a taxable event has not

occurred, the income tax benefits for these awards were zero for the three and six months ended June 30, 2023.

Share-based compensation costs incurred in the

three and six months ended June 30, 2022 were $ 376,013 and $ 978,511 , respectively.

Incentive Units

Prior to closing of the business combination,

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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.

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

As the award recipients resided on subsidiaries of Intermediate

and provided service to the Company, the Company recognized $ 376,013 and $ 978,511 of compensation expense related to the awards during

the three and six months ended June 30, 2022, respectively.

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.

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

No compensation expense was recorded related to these awards

during the three months ended June 30, 2022 as performance conditions had not, and were unlikely to be met.

On August 5, 2022, certain amendments to the existing

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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.

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

period ended June 30, 2023.

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

met as of March 31, 2023.

met as of June 30, 2023.

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

2023 Equity Awards

In March 2023, the Company authorized and approved

the Verde Clean Fuels, Inc.

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

On April 25, 2023, consistent with the terms of

the 2023 Plan, the Company granted stock options to certain employees and officers and RSUs to non-employee directors.

In addition to

stock options and RSUs, the 2023 Plan authorizes for the future potential grant of stock appreciation rights, restricted stock, performance

awards, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards to certain employees (including

executive officers), consultants and non-employee directors, and is intended to align the interests of the Company’s service providers

with those of the stockholders.

Stock Options

Stock options represent the contingent right of

award holders to purchase shares of the Company’s common stock at a stated price for a limited time.

The stock options granted in

2023 have an exercise price of $ 11.00 per share and will expire 7 years from the date of grant.

Stock options granted vest at a rate of

25 % on each of the first, second, third and fourth anniversaries of the date of grant subject to continued service through the vesting

The Company estimates the fair value of stock

options on the date of grant using the Black-Scholes model and the following underlying assumptions.

Expected volatility was based on

historical volatility for public company peers 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.

The fair value of stock options granted in 2023

were determined using the following assumptions as of the grant date:

Risk-free interest rate

Expected term

Dividend yield

Discount for lack of marketability

The table below presents activity related to stock

options awarded in 2023:

Number of options

Weighted average exercise price per share

Weighted average remaining contractual life (years)

Outstanding as of December 31, 2022

Forfeited / expired

Outstanding as of June 30, 2023

Vested as of June 30, 2023

Unvested as of June 30, 2023

Exercisable as of June 30, 2023

Stock-based compensation expense related to stock

options was $ 88,841 for the three and six months ended June 30, 2023, respectively.

As of June 30, 2023, unrecognized compensation expense

related to unvested stock options was $ 1,876,425 .

The remaining compensation cost is expected to be recognized over a weighted-average

period of 3.82 years.

There were no vested stock options outstanding as of June 30, 2023.

Restricted Stock Units

RSUs represent an unsecured right to receive one

share of the Company’s common stock equal to the value of the common stock on the settlement date.

RSUs have a zero-exercise price

and vest over time in whole after the first anniversary of the date of grant subject to continuous service through the vesting date.

The fair value of RSUs granted in 2023 were determined

by the value of the stock price on the date of the award subject to a discount for lack of marketability of 13 % for a per unit value of

The discount due to lack of marketability was applied because of the limited trading activity of the Company’s public equity.

RSU activity for the six months ended June 30,

2023 is as follows:

Time-based restricted stock units

Unvested, December 31, 2022

Granted in six months ended June 30, 2023

Unvested June 30, 2023

For RSUs, the compensation expense was $ 111,423

for the three and six months ended June 30, 2023.

As of June 30, 2023, unrecognized compensation expense related to unvested RSUs was

The remaining compensation cost is expected to be recognized over a weighted-average period of 0.82 years.

To date, the Company has not granted RSUs which

vest based on the achievement of certain market or performance metrics.

Recast of Intermediate Equity

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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,

There are 15,383,263 warrants currently outstanding,

including 12,908,263 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

there is an effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the warrants

and a current prospectus relating to such shares of Class A common stock.

Notwithstanding the foregoing, if a registration statement covering

the shares of Class A common stock issuable upon exercise of the 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

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.

The Company may call the warrants for redemption,

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

at any time after the warrants become exercisable;

● upon not less than 30 days’ prior written notice of

redemption to each warrant holder;

● if, and only if, the reported last sale price of the shares

of Class A common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations),

for any 20 trading days within a 30-trading day period commencing at any time after the warrants become exercisable and ending on the

third business day prior to the notice of redemption to warrant holders;

● 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.

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

4 unchanged sentences

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

Warrants were exercised on various dates during

the three months ended June 30, 2023 whereby the total number of warrants exercised was 29,216 resulting in 29,216 Class A common shares

The Company received cash of $ 335,984 related to the warrant exercise as of June 30, 2023.

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.

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

The Company is subject to U.S.

Federal income taxes, in addition to state and local income taxes, with respect to its distributive

share of 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

and six months ended June 30, 2023.

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

losses allocated to non-controlling interests and the recognition of a valuation allowance as a result of the Company’s new tax

structure following the Business Combination.

The Company has assessed the realizability of

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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.

allowance against its deferred tax assets as of June 30, 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.

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.

former Trust assets were invested in income generating U.S.

Treasury bills.

As a result of the investment income, $ 292,673 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 )%

Income tax provision

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

jurisdiction and is subject to examination by the taxing authorities.

Federal income taxes payable survived the Business Combination and remained on the Company’s balance sheet as of June 30, 2023.

Tax receivable agreement

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.

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 Agreement).

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

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.

As of June 30, 2023, the Company did not have

any assets or liabilities 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 liability for contingent

consideration as of December 31, 2022 using level 3 inputs and valued the contingent consideration at $ 1,299,000 .

There was no contingent

consideration as of June 30, 2023 as this liability was reversed and recognized in earnings during the six-month period ended June 30,

2023 as a result of the close of the Business Combination.

NOTE 11 – LOSS PER SHARE

4 unchanged sentences

Further, prior

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

to the consummation of the Business Combination, the Intermediate 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

1 unchanged sentence

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.

information has not been presented for the three and six months ended June 30, 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 Class A shares of common stock outstanding for the same period.

Diluted earnings per share of Class A common stock were computed

by dividing net loss attributable to Class A common shareholders by the weighted-average number of Class A shares of 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)

have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same.

following table sets forth the computation of net loss used to compute basic net loss per share of Class A common stock for the three

and six months ended June 30, 2023.

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

$ ( 749,147 )

4 unchanged sentences

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:

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

$ ( 1,323,607 )

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

earnout shares could have the most significant impact on diluted shares should the instruments represent dilutive instruments.

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

2 unchanged sentences

Convertible debt

Stock options

Time based RSUs

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

1 unchanged sentence

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.

On August 1, 2023, the Company announced a Carbon

Dioxide Management Agreement (“CDMA”) with Carbon TerraVault JV HoldCo, LLC (“CTV JV”), a carbon management partnership

focused on carbon capture and sequestration development formed between Carbon TerraVault, a subsidiary of California Resources Corporation

(“CRC”), and Brookfield Renewable.

Under the terms of the non-binding agreement, the

Company expects to construct a new renewable gasoline production facility at CRC’s existing Net Zero Industrial Park in Kern County,

The plant is expected to capture carbon dioxide and produce renewable gasoline from biomass and other agricultural waste feedstock

to help support the further decarbonization of California’s economy and its transportation sector.

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