What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-14 · 338 added, 305 removed, 156 unchanged (80% of the section changed)

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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.

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.

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

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:

financial and business performance of the Company;

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;

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,

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

Company’s ability to obtain financing for future projects;

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

in acquisition, financing, construction and development of new projects;

length of development cycles for new projects, including the design and construction processes

for the Company’s projects;

Company’s ability to identify suitable locations for new projects;

Company’s dependence on suppliers;

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

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

for renewable energy not being sustained;

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

ability to secure necessary governmental and regulatory approvals;

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

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;

relating to the Company’s status as a development stage company with a history of net

losses and no revenue;

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;

Company’s success in retaining or recruiting, or changes required in, its officers,

key employees or directors;

ability of the Company to execute its business model, including market acceptance of gasoline

derived from renewable feedstocks;

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;

effect of legal, tax and regulatory changes.

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.

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

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;

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;

the effect of legal, tax and regulatory changes.

For information identifying important factors that could cause actual

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

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

The Company’s securities filings

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

Except as expressly required by applicable securities

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

future events or otherwise.

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

formed by the Chief Executive Officer of Intermediate, and an additional individual (the “Founders”), entered into an asset

formed by the Chief Executive Officer of Bluescape Clean Fuels Intermediate Holdings, LLC, a Delaware limited

liability company (“Intermediate”), and an additional individual (the “Founders”), entered into an asset

purchase agreement with Primus Green Energy, Inc.

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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”).

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.

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”), 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 in the accompanying unaudited consolidated financial statements.

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

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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.

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.

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

the United States of America (“U.S.

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

determination reflects Holdings holding a majority of the voting power of Verde Clean Fuels, Intermediate’s pre-Business Combination

operations being the majority post-Business Combination operations of Verde Clean Fuels, and Intermediate’s management team retaining

similar roles at Verde Clean Fuels.

Further, Holdings continues to have control of the Company’s Board of Directors through its

majority voting rights.

Under the guidance in Accounting Standards Codification (“ASC”)

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

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

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

for accounting purposes, the Business Combination was treated as the equivalent of Intermediate issuing stock for the net assets of CENAQ,

accompanied by a recapitalization.

Subsequent to the Business Combination, the Company’s capital

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

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

Public 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 renewable energy 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 disadvantaged, stranded or flared natural gas

and the economic and environmental drivers that demand a beneficial use of this resource could create opportunities for Verde to deploy

our STG+® process in multiple producing basins.

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.

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

Our proprietary STG+® system converts the syngas into gasoline.

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

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

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.

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.

“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.

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.

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

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

emissions (the greenhouse gas emissions associated with the production, distribution, and consumption of a fuel) of our renewable gasoline

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

Our carbon intensity

score is based on an analysis styled after the Department of Energy’s Greenhouse gases Regulated Emissions, and Energy use in Technologies

life-cycle analysis.

We believe our renewable gasoline, when paired with carbon capture and sequestration, exhibits a significant lifecycle

carbon emissions reduction compared to traditional petroleum-based gasoline.

As a result, we believe our gasoline produced from renewable

feedstock, such as biomass, will qualify under the federal renewable fuel standard (“RFS”) program for the D3 renewable identification

number, which could have significant value.

Similarly, gasoline produced from our process may also qualify for various state carbon programs,

including California’s low carbon fuel standard.

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.

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 June 30, 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

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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.

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.

we have not abandoned a potential project in Maricopa, AZ, we have refocused on projects that we believe have quicker paths to commercial

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.

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.

On February 6, 2024, Verde and Cottonmouth entered into a joint development

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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

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.

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

as the contractor to spearhead the pre-front-end engineering and design (“FEED”) phase of the JDA.

With the selection of Chemex,

FEED work commenced and is expected to be completed in early 2025.

In connection with entering into the JDA and the commencement of FEED,

we began to incur development costs with respect to the project.

Under the terms of the JDA, 65% of the approved development costs

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

Upon FEED completion and reaching FID, it is anticipated

that engineering, procurement and construction work will then commence, with the goal to complete construction in 2027 .

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

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

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

(“CRC”), and Brookfield Renewable.

The CDMA was subsequently amended in December 2023 to extend the term to the earlier

of entry into a binding transaction or December 31, 2024.

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.

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

development opportunities in early-stage due diligence.

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

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

suitable feedstock, carbon sequestration, and markets.

We believe the number of identified and planned potential production facilities

bode well for our potential growth.

Successful Implementation of the first commercial facility

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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.

General and administrative expenses consist of compensation costs

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

administrative functions.

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

auditing and consulting services, and insurance costs.

Following the Business Combination, we incurred and expect to continue to

incur higher general and administrative expenses for public company costs such as compliance with the regulations of the SEC and the

Nasdaq Capital Market.

Research and Development Expense

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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.

Prior to the Business Combination, we had

an arrangement payable to our Chief Executive Officer (“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.

Other income primarily consists of interest and dividend income earned

on the Company’s cash and cash equivalents balances.

Income Tax Effects

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Results of Operations

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

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

Three Months Ended

General and administrative expenses

Research and development expenses

Total operating loss

Other (income)

Interest expense

Loss before income taxes

Income tax (benefit)

General and Administrative

General and administrative expense increased approximately $0.5

million, or 22%, for the three months ended June 30, 2024 compared to the same period in 2023.

The increase was primarily attributable to higher salaries and benefits

of $0.3 million as a result of an increase in headcount and higher professional fees of $0.2 million, including legal and marketing

Research and Development

R&D expense for the three months ended June 30, 2024

increased approximately $0.1 million, or 102% compared to the same period in 2023.

The increase was primarily due to higher salaries and benefits expense as a result

of an increase in headcount.

The increase in other income of $0.2 million for the three months

ended June 30, 2024 compared to the same period in 2023 was primarily attributable to interest and dividend income earned from our

money market investment, which was approximately $21.3 million as of June 30, 2024.

Interest Expense

The $0.1 million decrease in interest expense during the three

months ended June 30, 2024 compared to the same period in 2023 was attributable to our former land lease in Maricopa, Arizona, which

was classified as a finance lease until the third quarter of 2023, at which time the lease was modified and reclassified to an

operating lease.

The lease was exited on December 31, 2023.

See Note 5 in the accompanying unaudited consolidated financial

statements for further information.

The income tax benefit for the three months ended June 30, 2024 consisted

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

There was no provision for income taxes for the three months

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

Comparison of the six months ended June 30, 2024 and June 30, 2023

Six Months Ended

General and administrative expenses

Contingent consideration

Research and development expenses

Total operating expenses

Total operating loss

Other (income)

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Loss before income taxes

Provision for income taxes

Income tax (benefit)

General and Administrative

General and administrative expense decreased approximately $0.9 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.

or 14%, for the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily due

to $2.1 million of shared-based compensation expense recorded in the six months ended June 30, 2023 associated with the accelerated vesting

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

was partially offset by higher share-based compensation expense of $0.3 million associated with

restricted stock units granted in April 2023 and stock options granted in April 2023 and May 2024, higher salaries and benefits

expense of $0.5 million attributable to an increase in headcount and higher professional fees of $0.5 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

The Company reversed the contingent consideration for the three months ended March 31, 2023.

See Note 2 to the unaudited consolidated

financial statements.

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

ended June 30, 2024 compared to the same period in 2023 reflects the reversal during the six months ended June 30, 2023 of the remaining

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

Combination on February 15, 2023.

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

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 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.

R&D expense for the six months ended June 30, 2024 increased approximately

$0.1 million, or 54% compared to the same period in 2023.

The increase was primarily due to higher salaries and benefits expense as a

result of an increase in headcount.

The increase in other income of $0.6 million for the six months

ended June 30, 2024 compared to the same period in 2023 was primarily attributable to interest and dividend income earned from our

money market investment.

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.

The $0.2 million decrease in interest expense during the six

months ended June 30, 2024 compared to the same period in 2023 was attributable to our former land lease in Maricopa, Arizona, which

was classified as a finance lease until the third quarter of 2023, at which time the lease was modified and reclassified to an

operating lease.

The lease was exited on December 31, 2023.

The income tax benefit for the six months ended June 30, 2024 consisted of a refund received in connection with a previously paid income tax penalty.

was no provision for income taxes for the six months ended June 30, 2024 and 2023 due to a full valuation allowance that was

recorded as of June 30, 2023, and maintained as of June 30, 2024.

Liquidity and Capital Resources

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.

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

liquidity needs primarily involve general and administrative and R&D activities for the ongoing commercialization of our first production

facility and associated plant design.

To date, we have not generated any revenue, and as of March 31, 2024,

To date, we have not generated any revenue, and as of June 30, 2024,

we had cash and cash equivalents of $23.2 million.

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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

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

of $25.6 million as of June 30, 2024 and generated negative operating cash flows during the six months ended June 30, 2024 and June 30,

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.

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.

of Diamondback, we have begun to incur development costs with respect to the project, prior to reaching FID and entering into final definitive

agreements, irrespective of whether these events occur.

The Company plans to invest approximately $3 million, net of the reimbursement

from Cottonmouth, for FEED costs in support of the Permian Basin natural gas-to-gasoline facility, which is expected to take approximately

eight months to complete.

Following the Business Combination and the closing of the PIPE Financing,

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We also received

$91 thousand from the CENAQ operating account.

$0.1 million from the CENAQ operating account.

We believe that based on our current level of operating expenses and currently available

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years does not depend on the proceeds we may receive as the result of exercises of outstanding Warrants.

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

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.

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.

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

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

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.

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.

See Note 4 in the accompanying

unaudited consolidated financial statements for further information.

Summary Statement of Cash Flows for the Six Months Ended June 30,

2024 and June 30, 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

Six Months Ended

Net cash used in operating activities

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Net cash provided by financing activities

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

Net (decrease) increase in cash, cash equivalents and

restricted cash

$ (5,569,276 )

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.

Net cash used in operating activities increased $0.2 million during

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

The increase was primarily due

to higher operating expenses, including salaries and benefits and professional fees, during the six months ended June 30, 2024, partially

offset by an increase in dividend income and a decrease in cash paid for D&O insurance during the six months ended June 30, 2024.

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.

Net cash used in investing activities increased $0.6 million during

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

The increase was primarily attributable to development costs incurred

for the JDA upon commencement of the FEED in June 2024.

There were no cash reimbursements received from Cottonmouth during the six months

ended June 30, 2024.

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

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.

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

ended June 30, 2024 compared to $37.5 million for the six months ended June 30, 2023.

Net cash provided by financing activities for

the six months ended June 30, 2023 consisted of the net proceeds received from the close of the Business Combination on February 15, 2023.

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.

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

as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

Our unaudited consolidated financial statements

are based on the selection and application of significant accounting policies.

The preparation of unaudited consolidated financial statements

in conformity with 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

Our unaudited consolidated financial statements are based on the selection

and application of significant accounting policies.

The preparation of unaudited consolidated financial statements in conformity with

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

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

Actual results could differ from those estimates.

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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.

our significant accounting policies in Note 3 – Significant Accounting

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

We discuss our critical accounting

policies and estimates in Management’s Discussion and Analysis of Financial Conditions and Results of Operations in our 2023 Form 10-K.

Recent Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis