What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-14 compared with 2025-08-13 · 51 added, 46 removed, 149 unchanged (39% of the section changed)

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The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report.

The amounts contained herein are presented in thousands, except share and per share amounts.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

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• 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;

• significant developments in macroeconomic and political conditions beyond the Company’s control, including disruptions in the supply chain, increased costs due to inflation, the imposition of tariffs or trade disputes;

government shutdowns;

• the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors;

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Verde is currently focused on opportunities to convert associated natural gas into gasoline, which is expected to provide a market for such natural gas with the added potential benefits of flare mitigation and production of gasoline with a lower carbon intensity than conventional gasoline.

As of June 30, 2025, the Company is still in the process of developing its first commercial production facility and has not derived revenue from its principal business activities.

As of September 30, 2025, 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 there is only one reportable segment.

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The production of gasoline from associated natural gas from Diamondback’s operations in 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 economically disadvantaged.

In February 2024, Verde and Cottonmouth entered into a joint development agreement ("JDA"), which provides a pathway forward 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 “Permian Basin Project”).

In February 2024, Verde and Cottonmouth entered into a joint development agreement (“JDA”), which provides a pathway forward for the proposed development, construction, and operation of a natural gas-to-gasoline plant in the Permian Basin

utilizing Verde’s STG+® technology and associated natural gas from Diamondback’s operations (the “Permian Basin Project”).

The JDA frames the contracts contemplated to be entered into between the parties and outlines the conditions precedent for the parties to enter into definitive documents and achieve final investment decision (“FID”) to proceed with the Permian Basin Project.

The JDA conditions precedent include finalizing applicable project contracts, obtaining necessary permits, obtaining project financing on terms satisfactory to each party, and receiving FID by each party.

In June 2024, we entered into a contract with Chemex Global, LLC ("Chemex") for a front-end engineering and design ("FEED") study related to the Permian Basin Project.

Completing the FEED study is a key requirement to achieving FID.

In June 2024, we entered into a contract with Chemex Global, LLC (“Chemex”), a Shaw Group company (“Shaw Group”), for a front-end engineering and design (“FEED”) study related to the Permian Basin Project.

In connection with entering into the JDA and the commencement of the FEED study, 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 include costs associated with the FEED costs) are reimbursed by Cottonmouth.

In January 2025, we identified a new site for the Permian Basin Project with improved access to key utilities.

To date, we have continued to advance development activities related to the Permian Basin Project, including the FEED study.

Upon satisfaction of the JDA conditions precedent and achieving FID for the Permian Basin Project, it is anticipated that engineering, procurement, and construction work will then commence.

It is expected that commercial operations will be achieved within 18-24 months from commencement of engineering, procurement and construction work.

Under the terms of the JDA, 65% of the approved development costs that we incur (which includes costs associated with the FEED study) are reimbursed by Cottonmouth.

As of June 30, 2025, our construction in progress assets are comprised of capitalized FEED costs related to the Permian Basin Project of $6,414,100, net of amounts reimbursable by Cottonmouth of $4,168,400.

To date, we have continued to advance development activities related to the Permian Basin Project, including the FEED study, which is a key requirement to achieving FID.

Upon satisfaction of the JDA conditions precedent and achieving FID for the Permian Basin Project, it is anticipated that engineering, procurement, and construction work would then commence.

As of September 30, 2025, our construction in progress assets are comprised of capitalized development costs (which include costs associated with the FEED study) related to the Permian Basin Project of $9,293, net of amounts reimbursable by Cottonmouth of $5,977.

We expect that the Permian Basin Project 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.

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Results of Operations

Comparison of the three months ended June 30, 2025 and June 30, 2024

Comparison of the three months ended September 30, 2025 and 2024

Three Months Ended

September 30,

(in thousands) 2025 2024

General and administrative expenses $ 2,752 $ 2,694

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Loss before income taxes (2,230) (2,494)

Income tax (benefit) expense (28,200) (13,866)

Income tax expense (benefit) 104 —

Net loss $ (2,334) $ (2,494)

General and Administrative

General and administrative expenses increased $105,546, or 4%, for the three months ended June 30, 2025 as compared to the same period in 2024.

The increase was primarily due to additional headcount resulting in higher compensation expense, largely offset by a reduction in outside services and insurance expense.

Of our general and administrative expenses for the three months ended June 30, 2025 and 2024, $7,290 and $85,047, respectively, were business development costs.

The decrease was primarily due to development costs associated with the Permian Basin Project incurred in the comparative period prior to our entry into the JDA.

General and administrative expenses increased by $58, or 2%, for the three months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to additional stock options granted during 2025 and additional employee headcount, which was largely offset by lower outside services and insurance expenses.

Of our general and administrative expenses for the three months ended September 30, 2025 and 2024, $134 and $1, respectively, were business development costs.

The increase was primarily due to increased activities related to the identification and evaluation of potential opportunities to deploy our technology.

Research and Development

Research and development expenses decreased $27,778, or 16%, for the three months ended June 30, 2025 as compared to the same period in 2024.

The decrease was primarily due to classification of a portion of the engineers' and consultants' time associated with the Permian Basin Project to construction in progress in 2025, offset by higher software costs.

Other income increased $349,155, or 110%, for the three months ended June 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher interest and dividend income earned on our cash and cash equivalents, which increased due to the net proceeds received from the closing of the PIPE Investment in January 2025.

Comparison of the six months ended June 30, 2025 and June 30, 2024

Six Months Ended

Research and development expenses increased by $37, or 40%, for the three months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher engineering software costs.

Other income increased by $359, or 123%, for the three months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher interest and dividend income earned on our cash and cash equivalents resulting from the net proceeds received from the closing of the PIPE Investment in January 2025.

Comparison of the nine months ended September 30, 2025 and 2024

Nine Months Ended

September 30,

(in thousands) 2025 2024

General and administrative expenses $ 8,844 $ 8,472

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General and Administrative

General and administrative expenses increased $313,692, or 5%, for the six months ended June 30, 2025 as compared to the same period in 2024.

The increase was primarily due to additional headcount resulting in higher compensation expense, which was largely offset by a reduction in outside services and insurance expense.

Of our general and administrative expenses for the six months ended June 30, 2025 and 2024, $73,118 and $307,454, respectively, were business development costs.

The decrease was primarily due to development costs associated with the Permian Basin Project incurred in the comparative period prior to our entry into the JDA.

General and administrative expenses increased by $372, or 4%, for the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to additional employee headcount and additional stock options granted during 2025, which was partially offset by lower outside services and insurance expenses.

Of our general and administrative expenses for the nine months ended September 30, 2025 and 2024, $207 and $308, respectively, were business development costs.

The decrease was primarily due to development costs associated with the Permian Basin Project incurred in the comparative period prior to our entry into the JDA, partially offset by increased activities related to the identification and evaluation of potential opportunities to deploy our technology.

Research and Development

Research and development expenses increased $69,693, or 27%, for the six months ended June 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher software costs, offset by classification of a portion of the engineers' and consultants' time associated with the Permian Basin Project to construction in progress in 2025.

Other income increased $533,270, or 81%, for the six months ended June 30, 2025 as compared to the same period in 2024.

Research and development expenses increased by $107, or 30%, for the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher engineering software costs, which was partially offset by classification of a portion of the engineers’ and consultants’ time associated with the Permian Basin Project to construction in progress in 2025.

Other income increased by $892, or 94%, for the nine months ended September 30, 2025 as compared to the same period in 2024.

Liquidity and Capital Resources

As of June 30, 2025, we are still in the process of developing our first commercial production plant and have not derived revenue from our principal business activities.

As of September 30, 2025, we are still in the process of developing our first commercial production plant and have not derived revenue from our principal business activities.

We do not expect to generate any meaningful revenue unless and until we are able to commercialize our first production plant.

Since inception, we have incurred operating losses and generated negative operating cash flows primarily attributable to our ongoing general and administrative expenses and development activities.

Since inception, we have incurred operating losses and generated negative operating cash flows that were primarily attributable to our ongoing general and administrative expenses and development activities.

We measure liquidity in terms of our ability to fund the cash requirements of our development activities and our near-term business operations, including our contractual obligations and other commitments.

Our current liquidity needs primarily involve general and administrative expenses and activities related to the ongoing development of our first commercial production plant.

As of June 30, 2025, we had cash and cash equivalents of $62.1 million.

As of September 30, 2025, we had cash and cash equivalents of $59,440.

We expect that our cash and cash equivalents will be sufficient to fund our cash requirements, including ongoing general and administrative expenses and planned development activities, for the next 12 months from the reporting date.

However, notwithstanding the PIPE Investment, we further expect that additional capital will be required in order to complete our

first commercial production plant.

notwithstanding the PIPE Investment, we further expect that additional capital will be required in order to complete our first commercial production plant.

The exact timing of these additional cash requirements will depend on the pacing of our development activities, which is uncertain and subject to a variety of factors, many of which are outside of our control.

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The current high interest rate environment adds additional risk and expense to the issuance of debt securities or loan arrangements to fund capital investment.

Summary Statement of Cash Flows for the Six Months Ended June 30, 2025 and June 30, 2024

Summary Statement of Cash Flows for the Nine Months Ended September 30, 2025 and 2024

The following table sets forth the primary sources and uses of cash and cash equivalents for the periods presented below:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2025 2024

Net cash used in operating activities $ (7,563) $ (6,655)

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Cash Flows Used in Operating Activities

Net cash used in operating activities increased approximately $0.9 million during the six months ended June 30, 2025 as compared to the same period in 2024.

The increase was primarily due to cash paid for D&O insurance and excise tax, partially offset by higher interest and dividend income earned on our cash and cash equivalents, which increased due to the net proceeds received from the closing of the PIPE Investment in January 2025.

Net cash used in operating activities increased by $908 during the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily due to higher working capital requirements largely resulting from cash paid for excise tax, which was partially offset by higher interest and dividend income earned on our cash and cash equivalents resulting from the net proceeds received from the closing of the PIPE Investment in January 2025.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the six months ended June 30, 2025 was largely consistent as compared to the same period in 2024.

The activities were primarily related to development costs incurred in connection with the JDA, partially offset by cash reimbursements for such capital expenditures received from Cottonmouth.

Net cash used in investing activities increased by $1,036 during the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase was primarily attributable to higher development costs related to the Permian Basin Project, net of amounts reimbursable by Cottonmouth in accordance with the JDA.

See Note 4 in the accompanying unaudited condensed consolidated financial statements for further information.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was $49.4 million for the six months ended June 30, 2025 as compared to $0 for the same period in 2024.

The increase was due to the net proceeds from the closing of the PIPE Investment in January 2025.

Net cash provided by financing activities increased by $49,446 for the nine months ended September 30, 2025 as compared to the same period in 2024.

The increase was due to the net proceeds received from the closing of the PIPE Investment in January 2025.

Commitments and Contractual Obligations

The Company had a restricted cash balance of $100,000 as of both June 30, 2025 and December 31, 2024.

The Company had a restricted cash balance of $100 as of both September 30, 2025 and December 31, 2024.

The restricted cash balance is maintained in support of a letter of credit.

Off-Balance Sheet Arrangements

As of June 30, 2025, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

As of September 30, 2025, 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

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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