Verde Clean Fuels, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS References in this report (the “Quarterly Report”) to “we,” “our,” “us,” “Verde,” “Verde Clean Fuels” or the “Company” refer to Verde Clean Fuels, Inc. (formerly known as CENAQ Energy Corp.). References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special note regarding forward-looking statements This Quarterly Report includes “forward-looking statements” for the purposes of federal securities laws that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “continue,” “believe,” “anticipate,” “intend,” “plan,” “potential,” “possible,” “may,” “might,” “predict,” “project,” “should,” “would,” “will,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: ● the financial and business performance of the Company; ● the ability to maintain the listing of the Class A common stock and the Verde Clean Fuels warrants on Nasdaq, and the potential liquidity and trading of such securities; ● the failure to realize the anticipated benefits of the Business Combination (as defined below) that the Company consummated in February 2023, which may be affected by, among other things, competition; ● the Company’s ability to develop and operate anticipated and new projects; ● the Company’s ability to obtain financing for future projects; ● the reduction or elimination of government economic incentives to the renewable energy market; ● delays in acquisition, financing, construction and development of new projects; ● the length of development cycles for new projects, including the design and construction processes for the Company’s projects; ● the Company’s ability to identify suitable locations for new projects; ● the Company’s dependence on suppliers; ● existing laws and regulations and changes to laws, regulations and policies that affect the Company’s operations; ● decline in public acceptance and support of renewable energy development and projects; ● demand for renewable energy not being sustained; ● impacts of climate change, changing weather patterns and conditions, and natural disasters; ● the ability to secure necessary governmental and regulatory approvals; ● the ability to qualify for federal or state level low-carbon fuel credits or other carbon credits; 22 ● any decline in the value of federal or state level low-carbon fuel credits or other carbon credits and the development of the carbon credit markets; ● risks relating to the Company’s status as a development stage company with a history of net losses and no revenue; ● risks relating to the uncertainty of success, any commercial viability, or delays of the Company’s research and development efforts including any study in which the Company participates that is funded by the Department of Energy or any other governmental agency; ● disruptions in the supply chain, fluctuation in price of product inputs, and market conditions and global and economic factors beyond the Company’s control; ● the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors; ● the ability of the Company to execute its business model, including market acceptance of gasoline derived from renewable feedstocks; ● litigation and the ability to adequately protect intellectual property rights; ● competition from companies with greater resources and financial strength in the industries in which the Company operates; and ● the effect of legal, tax and regulatory changes. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors contained in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview Formation On July 29, 2020, Green Energy Partners, Inc. (“GEP”), formed by the Chief Executive Officer of Intermediate, and an additional individual (the “Founders”), entered into an asset purchase agreement with Primus Green Energy, Inc. (“Primus”) to purchase the assets of Primus. The assets under the asset purchase agreement included a demonstration facility, a laboratory, office space, and intellectual property including the patented STG+® process technology. GEP then assigned its rights under the asset purchase agreement to a newly formed subsidiary of Intermediate. Immediately following the closing of the asset purchase agreement, the Founders sold 100% of their membership interests to BEP Clean Fuels Holdings, LLC, a Delaware limited liability company (“BEP”) in exchange for agreeing to make the payments under the asset purchase agreement as well as other capital contributions and a contingent payment. BEP ultimately contributed the membership interests to Intermediate. Intermediate holds the acquired assets through Bluescape Clean Fuels, LLC. Since acquiring the assets from Primus, we have developed the use and application of the technology acquired to focus on the renewable energy industry. The Transactions On February 15, 2023 (the “Closing Date” or “Closing”), the Company finalized a business combination (the “Business Combination”) pursuant to that certain business combination agreement, dated as of August 12, 2022 (“Business Combination Agreement”) by and among CENAQ Energy Corp. (“CENAQ”), Verde Clean Fuels OpCo, LLC, a Delaware limited liability company and a wholly owned subsidiary of CENAQ (“OpCo”), 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 to the unaudited consolidated financial statements. 23 Pursuant to the Business Combination Agreement, (i) (A) CENAQ contributed to OpCo (1) all of its assets, excluding its interests in OpCo and the aggregate amount of cash required to satisfy any exercise by CENAQ stockholders of their redemption rights (the “Redemption Rights”), and (2) 22,500,000 shares of Class C common stock (the “Holdings Class C Shares”) and (B) in exchange therefor, OpCo issued to CENAQ a number of class A common units of Opco (the “Class A OpCo Units”) equal to the number of total shares of Class A common stock issued and outstanding immediately after the Closing taking into account the PIPE financing (“PIPE Financing”) and the exercise of Redemption Rights (such transactions, the “SPAC Contribution”) and (ii) immediately following the SPAC Contribution, (A) Holdings contributed to OpCo 100% of the issued and outstanding limited liability company interests of Intermediate and (B) in exchange therefor, OpCo transferred to Holdings (1) 22,500,000 Class C common units of OpCo (the “Class C OpCo Units”) and the Holdings Class C Shares. The Business Combination was accounted for as a common control reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. GAAP. The Business Combination was not 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 Company’s Board of Directors through its majority voting rights. Under the guidance in ASC 805, for transactions between entities under common control, the assets, liabilities, and noncontrolling interests of CENAQ and Intermediate are recognized at their carrying amounts on the date of the Business Combination. Under this method of accounting, CENAQ will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Intermediate issuing stock for the net assets of CENAQ, accompanied by a recapitalization. Subsequent to the Business Combination, the Company’s capital structure is comprised of shares of Class A common stock, par value $0.0001 per share (the “Class A common stock”) and shares of Class C common stock, par value $0.0001 per share (the “Class C common stock”). Public shareholders, the Sponsor, and the investors in the private offering of securities of Verde Clean Fuels in connection with the PIPE Financing hold shares of Class A common stock and warrants to purchase shares of Class A common stock, and Holdings owns the Holdings Class C Shares and an equal number of Class C OpCo Units. We are a development-stage clean energy technology company specializing in the conversion of synthesis gas, or syngas, derived from diverse feedstocks, such as biomass or natural gas (including renewable natural gas) and other feedstocks, into liquid hydrocarbons, primarily gasoline, through an innovative and proprietary liquid fuels technology, the STG+® process. Through Verde Clean Fuels’ STG+® process, Verde Clean Fuels converts syngas into reformulated blend-stock for oxygenate blending (“RBOB”) gasoline. Verde Clean Fuels is focused on the development of technology and commercial facilities aimed at turning waste and other feedstocks into a usable stream of syngas which is then transformed into a single finished fuel, such as gasoline, without any additional refining steps. The availability of biogenic feedstocks and the economic and environmental drivers that divert these materials from landfills will enable us to utilize these waste streams to produce renewable gasoline from modular production facilities. We are redefining liquid fuels technology through our proprietary and innovative STG+® process to deliver scalable and cost-effective gasoline from renewable feedstocks or flared natural gas. We acquired our STG+® technology from Primus, a company established in 2007 that developed the patented STG+® technology to convert syngas into gasoline or methanol. Since acquiring the technology, we have adapted the application of our STG+® technology to focus on the renewable energy industry. This adaptation requires a third-party gasification system to produce acceptable synthesis gas from renewable feedstocks. Our proprietary STG+® system converts the syngas into gasoline. 24 Over $110 million has been invested in our technology, including our demonstration facility in New Jersey, which has completed over 10,500 hours of operation producing gasoline or methanol. Our demonstration facility represents the scalable nature of our operational modular commercial design which has fully integrated reactors and recycle lines and is designed with key variables, like gas velocity and catalyst bed length, at a 1-to-1 scale with our commercial design. We have also participated in carbon lifecycle studies to validate the scoring of carbon intensity, which we define as the quantity of greenhouse gas emissions associated with producing, distributing, and consuming a fuel, per unit of fuel energy (“CI”) and reduced lifecycle emissions (the greenhouse gas emissions associated with the production, distribution, and consumption of a fuel) of our renewable gasoline as well as fuel, blending and engine testing to validate the specification and performance of our gasoline product. Our carbon intensity score is based on an analysis styled after the Department of Energy’s Greenhouse gases Regulated Emissions, and Energy use in Technologies (“GREET”) life cycle analysis. We believe our renewable gasoline, when paired with carbon capture and sequestration, exhibits a significant lifecycle carbon emissions reduction compared to traditional petroleum-based gasoline. As a result, we believe our gasoline produced from renewable feedstock, such as biomass, will qualify under the federal renewable fuel standard (“RFS”) program for the D3 renewable identification number (“RIN”), which could have significant value. Similarly, gasoline produced from our process may also qualify for various state carbon programs, including California’s low carbon fuel standard (“LCFS”). Unlike many other gas-to-liquids technologies, not only can our STG+® process produce renewable gasoline from syngas, but we expect it will be able to be applied at other production facilities to produce other end products including methanol. In addition to our initial focus on the production of renewable gasoline, we believe that there is opportunity to continue to develop additional process technology to produce middle distillates including lower-carbon diesel and aviation fuel. As with other government programs, the use requirements of the RFS program and other similar state-level programs are subject to change, which could materially harm our business strategy as well as any ability to operate profitably. As of March 31, 2024, the Company is still in the process of developing its first commercial production facility and has not derived revenue from its principal business activities. The Company is managed as an integrated business and consequently, there is only one reportable segment. “Clean” or “lower-carbon” as used in relation to the Company’s products refers the lower CI, lower lifecycle emissions, and lower quantity of greenhouse gas emissions resulting directly from fuel combustion, relative to conventional gasoline derived from petroleum. “Renewable” as used in relation to the Company’s products refers to energy or fuel derived from biomass feedstock. Key Factors Affecting Our Prospects and Future Results We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including competition from other carbon-based and other non-carbon-based fuel producers, changes to existing federal and state level low-carbon fuel credit systems, and other factors discussed under the section titled “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1A of this Form 10-Q. We believe the factors described below are key to our success. Commencing and Expanding Commercial Operations In April 2022, we commenced a pre-front-end engineering and design (“FEED”) study for our first commercial production facility in Maricopa, Arizona. While we have not abandoned a potential project in Maricopa, AZ, we have refocused on projects that we believe have quicker paths to commercial operations. We believe our commercialization activities are being completed at a pace that can support first commercial production of renewable gasoline as early as 2026. Concurrent with the Business Combination, Diamondback Energy, Inc (“Diamondback”) through its wholly-owned subsidiary, Cottonmouth Ventures LLC (“Cottonmouth”), made a $20 million equity investment in Verde and entered into an equity participation right agreement pursuant to which Verde must grant Cottonmouth the right to participate and jointly develop facilities in the Permian Basin utilizing Verde’s STG+® technology for the production of gasoline derived from economically disadvantaged natural gas feedstocks. Diamondback is an independent oil and natural gas company headquartered in Midland, Texas, focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The production of gasoline from natural gas sourced from the Permian Basin is designed to allow Diamondback to mitigate the flaring of natural gas while also producing a high-margin product from natural gas streams that are subject to being price disadvantaged compared to other natural gas basins. 25 On February 6, 2024, Verde and Cottonmouth entered into a joint development agreement (“JDA”) for the proposed development, construction, and operation of a facility to produce commodity-grade gasoline using natural gas feedstock supplied from Diamondback’s operations in the Permian Basin. The JDA provides a pathway forward for the parties to reach final definitive documents and final investment decision (“FID”). The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close such as FID. We expect that the proposed facility, which is to be located in Martin County, Texas in the heart of the Permian Basin, could serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins in the U.S., as well as addressing flared or stranded natural gas opportunities internationally. We plan to grow our business by building and operating a portfolio of commercial production facilities. We currently have production facilities planned with additional potential production facility development opportunities in early-stage due diligence. We have identified opportunities to produce gasoline from natural gas in other pipeline-constrained production areas as well as opportunities to produce renewable gasoline from biomass in locations with access to suitable feedstock, carbon sequestration, and markets. We believe the number of identified and planned potential production facilities bode well for our potential growth. On August 1, 2023, we announced a non-binding 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 would construct a new renewable gasoline production facility at CRC’s existing Net Zero Industrial Park in Kern County, California, to capture carbon dioxide and produce renewable gasoline from biomass and other agricultural waste feedstock to help support the further decarbonization of California’s economy and its transportation sector. It is anticipated that the project could produce up to 7 million gallons per year of renewable gasoline for use as transportation fuel. Project FID is targeted for mid-2025, with operations expected to begin in the second half of 2027. Successful Implementation of the first commercial facility A critical step in our business strategy will be the successful construction and operation of the first commercial production facility using our patented STG+® technology. We believe that the first commercial production facility could be operational as early as 2026. Protection and continuous development of our patented technology Our ability to compete successfully will depend on our ability to protect, commercialize, and further develop our proprietary process technology and commercial facilities in a timely manner, and in a manner technologically superior to and/or are less expensive than competing processes. Key Components of Results of Operations We are an early-stage company with no revenues, and our historical results may not be indicative of our future results. Accordingly, the drivers of any future financial results, as well as any components thereof, may not be comparable to our historical or future results of operations. 26 Revenue We have not generated any revenue to date. We expect to generate a significant portion of our future revenue from the sale of renewable RBOB grade gasoline or gasoline derived from natural gas primarily in markets with federal and state level low-carbon fuel credit systems. Expenses General and Administrative Expense General and administrative expenses consist of compensation costs including salaries, benefits and stock-compensation expense, for personnel in executive, finance, accounting, and other administrative functions. General and administrative expenses also include legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs. Following the Business Combination, we incurred and expect to continue to incur higher general and administrative expenses for public company costs such as compliance with the regulations of the SEC and the Nasdaq Capital Market. Research and Development Expense Our research and development (“R&D”) expenses consist primarily of internal and external expenses incurred in connection with our R&D activities. These expenses include labor directly performed on our projects and fees paid to third parties working on and testing specific aspects of our STG+® design and gasoline product output. R&D costs are expensed as incurred. We expect R&D expenses to grow as we continue to develop the STG+® technology and develop market and strategic relationships with other businesses. Contingent consideration Prior to the Business Combination, we had an arrangement payable to our CEO and a consultant whereby a contingent payment would become payable if certain return on investment hurdles were met within five years of an asset purchase arrangement. The contingent consideration was forfeited when we closed on the Business Combination. Income Tax Effects We hold 29.53% of the economic interest in OpCo, which is treated as a partnership for U.S. federal income tax purposes. As a partnership, OpCo generally is not subject to U.S. federal income tax under current U.S. tax laws. We are subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to our distributive share of the net taxable income (loss) and any related tax credits of OpCo. Intermediate was historically and remains a disregarded subsidiary of a partnership for U.S. Federal income tax purposes. As a direct result of the Business Combination, OpCo became the sole member of Intermediate. As such, OpCo’s distributive share of any net taxable income or loss and any related tax credits of Intermediate are then distributed to us. Results of Operations Comparison of the three months ended March 31, 2024 and March 31, 2023 Three Months Ended March 31, 2024 2023 General and administrative expenses $ 2,789,376 $ 4,265,640 Contingent consideration - (1,299,000 ) Research and development expenses 85,835 82,662 Total operating expenses 2,875,211 3,049,302 Other (income) (346,128 ) - Interest expense - 67,825 Loss before income taxes 2,529,083 3,117,127 Provision for income taxes - - Net loss $ 2,529,083 $ 3,117,127 27 General and Administrative General and administrative expense decreased approximately $1.5 million, or 35%, from $4.3 million for the three months ended March 31, 2023 to $2.8 million for the three months ended March 31, 2024, primarily due to a decrease in share-based payment expense of $1.9 million. The Company incurred greater share-based payment expense for the three months ended March 31, 2023 due to the accelerated vesting of all the outstanding series A incentive units and Founder incentive units as a result of the Business Combination. The decrease in general and administrative expenses was partially offset by increases in professional fees of $0.3 million, salaries and benefits of $0.2 million, and insurance costs of $0.2 million. Contingent Consideration The $1.3 million change in contingent consideration for the three months ended March 31, 2024 reflects the reversal during the three months ended March 31, 2023 of the remaining accrual made by Holdings for certain contingent payments due to the contractual forfeiture of the payments following the close of the Business Combination on February 15, 2023. The Company reversed the contingent consideration for the three months ended March 31, 2023. See Note 2 to the unaudited consolidated financial statements. Research and Development R&D expense for the three months ended March 31, 2024 was consistent with the three months ended March 31, 2023. Other Income Other income of $0.3 million for the three months ended March 31, 2024 was primarily attributable to interest earned from our money market investment of approximately $23.9 million as of March 31, 2024. Interest Expense The decrease in interest expense during the three months ended March 31, 2024 was attributable to our land lease in Maricopa, Arizona, which was classified as a finance lease until the third quarter of 2023. The finance lease was exited on December 31, 2023. See Note 5 to the unaudited consolidated financial statements. Provision for Income Taxes The provision for income taxes was $0 for the three months ended March 31, 2024 and 2023, due to a full valuation allowance recorded as of March 31, 2023, and maintained as of March 31, 2024. Liquidity and Capital Resources Liquidity We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve general and administrative and R&D activities for the ongoing commercialization of our first production facility and associated plant design. 28 To date, we have not generated any revenue, and as of March 31, 2024, we had cash and cash equivalents of $25.9 million. We do not expect to generate any meaningful revenue unless and until we are able to commercialize our first production facility. Since inception, we have incurred significant operating losses, have an accumulated deficit of $24.7 million as of March 31, 2024 and generated negative operating cash flows during the three months ended March 31, 2024 and March 31, 2023. Management expects that operating losses and negative cash flows may increase in future periods because of additional costs and expenses related to the development of technology and the development of market and strategic relationships with other companies. Our continued solvency is dependent upon our ability to obtain additional working capital to complete our product development and to successfully achieve commerciality of our projects. In connection with entering into the JDA with Cottonmouth, a subsidiary of Diamondback, we will begin to incur development costs with respect to the project, prior to reaching a FID and entering into final definitive agreements, irrespective of whether these events occur. We are currently evaluating the impact that the JDA will have on our consolidated financial statements and liquidity. Verde plans to invest approximately $3 million for FEED costs in 2024 in support of the Permian Basin natural gas-to-gasoline facility, which is expected to take approximately eight months to complete. Following the Business Combination and the closing of the PIPE Financing, we received approximately $37.3 million in cash, net of approximately $10.0 million of transaction expenses and the repayment of approximately $3.75 million of capital contributions made by Bluescape Clean Fuels Holdings, LLC since December 2021. We expect to use such proceeds to fund our ongoing operations and R&D activities. The gross amount, before expenses, was composed of approximately $19.0 million release from CENAQ’s Trust Account, after payment of approximately $158.8 million to public stockholders who exercised redemption rights (representing a redemption rate of approximately 89.3%), and $32.0 million of proceeds from the PIPE Financing. We also received $91 thousand from the CENAQ operating account. We believe that based on our current level of operating expenses and currently available cash on hand, we will have sufficient funds available to cover R&D activities and operating cash needs for at least the next 12 months. However, as we have not yet developed a commercial production facility and have no revenue to date, we will likely require additional funds in future years. Our ability to raise funds through equity offerings may be limited by the significant number of shares that may be publicly sold. As the exercise price of our Public Warrants is $11.50 per share of Class A common stock, we do not expect that Public Warrants will be exercised in the foreseeable future. Our ability to fund R&D activities and our operating cash needs for several years does not depend on the proceeds we may receive as the result of exercises of outstanding Warrants. As our transaction with CENAQ only resulted in $37.3 million of net proceeds, we expect that we will only be able to construct one of our first four originally planned production facilities with the proceeds. The $37.3 million of net proceeds raised at closing of the transaction with CENAQ will contribute to the equity capital portion of our capital expenditure requirements through 2025. We also expect to earn interest income on the net proceeds raised at closing during the ongoing development and construction of our facilities through 2025, and that such interest income will be utilized towards capital expenditures or for general and administrative expenses. We also expect 70% of our total project capital requirements will be met with project financing, industrial revenue bonds, or pollution control bonds, or some combination of debt financing. While we have been in discussions with banks and other credit counterparties regarding project financing, industrial revenue bonds, or pollution control bonds, and these discussions have led to indications of debt financing equivalent to 70% of our capital expenditure requirements, there can be no assurance that we will be successful in obtaining such financing. The inability to obtain debt financing will adversely impact our ability to implement our business plan. 29 In connection with the Closing, Sponsor was due $409,612 under existing promissory notes with CENAQ. On February 15, 2023, in lieu of repayment of the existing promissory notes with Sponsor, we entered into a new, non-interest bearing promissory note with the Sponsor totaling $409,612. The new promissory note canceled and superseded the existing promissory notes. On February 15, 2024, we settled the promissory note through the issuance of 40,961 shares of Class A common stock at a conversion price of $10.00 per share and recorded an increase to additional paid-in capital of $409,608. Summary Statement of Cash Flows for the Three Months Ended March 31, 2024 and March 31, 2023 The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below: For the Three Months Ended March 31, 2024 2023 Net cash used in operating activities $ (2,829,250 ) $ (2,846,040 ) Net cash used in investing activities (8,323 ) - Net cash provided by financing activities - 37,198,926 Net (decrease) increase in cash, cash equivalents restricted cash $ (2,837,573 ) $ 34,352,886 Cash Flows Used in Operating Activities Net cash used in operating activities decreased $17 thousand during the three months ended March 31, 2024 versus the same period in 2023. The change in operating cash flows was a result of a decrease in cash paid for D&O insurance during the three months ended March 31, 2024, offset by a decrease in accrued expenses during the three months ended March 31, 2024 due to timing of cash payments to vendors. Cash Flows Used in Investing Activities Net cash used in investing activities during the three months ended March 31, 2024 was consistent with the three months ended March 31, 2023. Cash Flows Provided by Financing Activities Net cash provided by financing activities was zero for the three months ended March 31, 2024 compared to $37.2 million for the three months ended March 31, 2023. The decrease was due to the net proceeds from the close of the Business Combination on February 15, 2023 compared to no financing activities occurring during the three months ended March 31, 2024. Commitments and Contractual Obligations On October 17, 2022, we 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 occurred in February 2023 contemporaneous with the Company obtaining control of the identified asset. We exited the lease as of December 31, 2023. See Note 5 to the unaudited consolidated financial statements. Off-Balance Sheet Arrangements As of March 31, 2024, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 30 Critical Accounting Policies and Estimates Our unaudited consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of expenses and allocated charges during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results. We describe our significant accounting policies in Note 3 - Significant Accounting Policies, of the notes to the consolidated financial statements included in our 2023 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2023 Form 10-K. Recent Accounting Pronouncements See Note 2 in the accompanying unaudited consolidated financial statements for information regarding recent accounting pronouncements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.