vgasw-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-40743

Verde Clean Fuels, Inc.

(Exact name of registrant as specified in its charter)


Delaware						85-1863331
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


711 Louisiana St, Suite 2160 Houston, Texas						77002
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (908) 281-6000

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

VGAS

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share

VGASW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 14, 2025, there were 22,049,621 shares of Class A common stock and 22,500,000 shares of Class C common stock of the registrant outstanding.

TABLE OF CONTENTS


		Page
PART I FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4.	CONTROLS AND PROCEDURES	30

PART II OTHER INFORMATION		31

ITEM 1.	LEGAL PROCEEDINGS	31
ITEM 1A.	RISK FACTORS	31
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	31
ITEM 4.	MINE SAFETY DISCLOSURES	31
ITEM 5.	OTHER INFORMATION	31
ITEM 6.	EXHIBITS	31

SIGNATURES		33

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	As of
(in thousands, except share and per share amounts)	September 30, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	59,440	$	19,044
Restricted cash	100		100
Accounts receivable – other	1,315		226
Prepaid expenses and other current assets	595		804
Total current assets	61,450		20,174

Non-current assets:
Property, plant and equipment, net	3,382		1,096
Intellectual property and patented technology	1,925		1,925
Operating lease right-of-use assets, net	263		216
Deposits	161		161
Total non-current assets	5,731		3,398
Total assets	$	67,181	$	23,572

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,186	$	734
Accrued liabilities	643		1,907
Operating lease liabilities	252		154
Other current liabilities	26		16
Total current liabilities	3,107		2,811

Non-current liabilities:

Operating lease liabilities	29		78
Total non-current liabilities	29		78
Total liabilities	3,136		2,889
Commitments and contingencies (see Note 7)

Stockholders’ equity
Class A common stock, par value $0.0001 per share, 22,049,621 and 9,549,621 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively	2		1
Class C common stock, par value $0.0001 per share, 22,500,000 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively	2		2
Additional paid in capital	63,429		37,503
Accumulated deficit	(30,919)		(27,257)
Noncontrolling interest	31,531		10,434
Total stockholders’ equity	64,045		20,683
Total liabilities and stockholders’ equity	$	67,181	$	23,572

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2025		2024		2025		2024
General and administrative expenses	$	2,752	$	2,694	$	8,844	$	8,472

Research and development expenses	128		91		457		350
Total operating loss	2,880		2,785		9,301		8,822

Other (income)	(650)		(291)		(1,846)		(954)

Loss before income taxes	(2,230)		(2,494)		(7,455)		(7,868)
Income tax expense (benefit)	104		-		129		(14)
Net loss	$	(2,334)	$	(2,494)	$	(7,584)	$	(7,854)
Net loss attributable to noncontrolling interest	$	(1,179)	$	(1,716)	$	(3,922)	$	(5,400)
Net loss attributable to Verde Clean Fuels, Inc.	$	(1,155)	$	(778)	$	(3,662)	$	(2,454)

Earnings per share
Weighted average Class A common stock outstanding, basic and diluted	18,836,078		6,336,078		17,508,239		6,269,230
Loss per share of Class A common stock	$	(0.06)	$	(0.12)	$	(0.21)	$	(0.39)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended September 30, 2025


(in thousands, except share and per share amounts)	Class A Common			Class C Common			Additional Paid In Capital		Accumulated Deficit		Non controlling Interest		Total Stockholders’ Equity
	Shares	Values		Shares	Values
Balance – June 30, 2025	22,049,621	$	2	22,500,000	$	2	$	62,797	$	(29,764)	$	32,710	$	65,747

Share-based compensation	-	-		-	-		632		-		-		632


Net loss	-	-		-	-		-		(1,155)		(1,179)		(2,334)
Balance – September 30, 2025	22,049,621	$	2	22,500,000	$	2	$	63,429	$	(30,919)	$	31,531	$	64,045

Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended September 30, 2024


(in thousands, except share and per share amounts)	Class A Common			Class C Common			Additional Paid In Capital		Accumulated Deficit		Non controlling Interest		Total Stockholders’ Equity
	Shares	Values		Shares	Values
Balance – June 30, 2024	9,549,621	$	1	22,500,000	$	2	$	36,051	$	(25,599)	$	13,931	$	24,386

Share-based compensation	-	-		-	-		401		-		-		401

Net loss	-	-		-	-		-		(778)		(1,716)		(2,494)
Balance – September 30, 2024	9,549,621	$	1	22,500,000	$	2	$	36,452	$	(26,377)	$	12,215	$	22,293

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2025


(in thousands, except share and per share amounts)	Class A Common			Class C Common			Additional Paid In Capital		Accumulated Deficit		Non controlling Interest		Total Stockholders’ Equity
	Shares	Values		Shares	Values
Balance – December 31, 2024	9,549,621	$	1	22,500,000	$	2	$	37,503	$	(27,257)	$	10,434	$	20,683
Issuance of Class A common stock to Cottonmouth	12,500,000	1		-	-		49,345		-		-		49,346
Share-based compensation	-	-		-	-		1,543		-		-		1,543
Rebalancing of ownership percentage for issuance of Class A shares	-	-		-	-		(25,019)		-		25,019		-
Equity offering cost adjustment	-	-		-	-		56		-		-		56
Net loss	-	-		-	-		-		(3,662)		(3,922)		(7,584)
Balance – September 30, 2025	22,049,621	$	2	22,500,000	$	2	$	63,429	$	(30,919)	$	31,531	$	64,045

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2024


(in thousands, except share and per share amounts)	Class A Common			Class C Common			Additional Paid In Capital		Accumulated Deficit		Non controlling Interest
	Shares	Values		Shares	Values								Total Stockholders’ Equity
Balance – December 31, 2023	9,387,836	$	1	22,500,000	$	2	$	35,015	$	(23,923)	$	17,730	$	28,825
Related party promissory note settlement	40,961	-		-	-		410		-		-		410
Conversion of restricted stock units	120,824	-		-	-		-		-		-		-
Share-based compensation	-	-		-	-		912		-		-		912
Rebalancing of ownership percentage for issuance of Class A shares	-	-		-	-		115		-		(115)		-
Net loss	-	-		-	-		-		(2,454)		(5,400)		(7,854)
Balance – September 30, 2024	9,549,621	$	1	22,500,000	$	2	$	36,452	$	(26,377)	$	12,215	$	22,293

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(in thousands)	2025		2024
Cash flows from operating activities:
Net loss	$	(7,584)	$	(7,854)
Adjustments to reconcile net loss to net cash used in operating activities

Depreciation	12		10
Share-based compensation expense	1,543		912

Amortization of right-of-use assets	261		227
Changes in operating assets and liabilities
Prepaid expenses	165		(387)
Accounts payable	(460)		707
Accrued liabilities	(1,260)		(56)
Operating lease liabilities	(260)		(214)
Other changes in operating assets and liabilities	20		-
Net cash used in operating activities	(7,563)		(6,655)

Cash flows from investing activities:
Additions to property, plant and equipment	(4,458)		(1,445)
Reimbursements of development costs in accordance with the JDA	2,971		994
Net cash used in investing activities	(1,487)		(451)

Cash flows from financing activities:
Issuance of Class A common stock to Cottonmouth	50,000		-
Payment of equity issuance costs	(554)		-








Net cash provided by financing activities	49,446		-

Net change in cash, cash equivalents and restricted cash	40,396		(7,106)
Cash, cash equivalents and restricted cash, beginning of year	19,144		28,879

Cash, cash equivalents and restricted cash, end of period	$	59,540	$	21,773

Supplemental cash flows:


Capital expenditures in accounts payable and accrued liabilities (at period end)	$	1,908	$	469
Accounts receivable for reimbursement of capital expenditures (at period end)	$	1,311	$	224

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VERDE CLEAN FUELS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

Overview

Verde Clean Fuels, Inc. (the “Company”, “Verde” and “Verde Clean Fuels”) is a clean fuels company focused on the deployment of its innovative and proprietary liquid fuels processing technology through development of commercial production plants. Verde’s synthesis gas (“syngas”)-to-gasoline plus (STG+®) process converts syngas, derived from diverse feedstocks, into fully finished liquid fuels that require no additional refining. 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.

The Company is a Delaware corporation headquartered in Houston, Texas. The Company also has a demonstration plant and office in Hillsborough, New Jersey. The Company’s shares of Class A common stock, par value $0.0001 per share (the “Class A common stock”), and warrants that were issued in the public offering are listed on Nasdaq under the symbols “VGAS” and “VGASW,” respectively. The Company’s primary stockholders are Bluescape Clean Fuels Holdings, LLC (“Holdings”) and Cottonmouth Ventures, LLC (“Cottonmouth”). Holdings is an affiliate of Bluescape Energy Partners, an alternative investment firm. Cottonmouth is a wholly-owned subsidiary of Diamondback Energy, Inc. (“Diamondback”). See Notes 3 and 6 for further information.

Business Combination

On February 15, 2023 (the “Closing Date”), the Company consummated (the “Closing”) a business combination (the “Business Combination”) pursuant to that certain Business Combination Agreement, dated as of August 12, 2022 (the “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”), 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.

Following the completion of the Business Combination, the combined company is organized under an umbrella partnership C corporation structure, and the direct assets of the Company consist of equity interests in OpCo, whose direct assets consist of equity interests in Intermediate. Immediately following the Business Combination, Verde Clean Fuels is the sole manager of and controls OpCo.

Prior to the Business Combination, and up to the Closing Date, Verde Clean Fuels, previously CENAQ Energy Corp., was a special purpose acquisition company (“SPAC”) incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

Basis of Presentation

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed on March 28, 2025 and are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows. The results of operations for an interim period may not give a true indication of results for a full year.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Risks and Uncertainties

The Company is currently in the development stage and has not yet commenced principal operations or generated revenue. The development of the Company’s projects are subject to a number of risks and uncertainties including, but not limited to,

the receipt of the necessary permits and regulatory approvals, commodity price risk impacting the decision to go forward with the projects, and the availability and ability to obtain the necessary financing for the construction and development of projects.

The Company’s ability to develop and operate commercial production plants, as well as expand production at future commercial production plants, is subject to many risks beyond its control, including regulatory developments, construction risks, and global and regional macroeconomic developments.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. The most significant estimates pertain to the calculations of the fair values of equity instruments, impairment of intangible and long-lived assets and income taxes. Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ significantly from those estimates.

Principles of Consolidation

The Company consolidates all entities that it controls by ownership interest or other contractual rights giving the Company control over the most significant activities of an investee. The Company’s unaudited condensed consolidated financial statements include its subsidiaries as follows:

•OpCo;

•Intermediate;

•Bluescape Clean Fuels Employee Holdings, LLC;

•Bluescape Clean Fuels EmployeeCo., LLC;

•Bluescape Clean Fuels, LLC; and

•Maricopa Renewable Fuels I, LLC.

All intercompany balances and transactions have been eliminated in consolidation.

Statements of Operations

The Company’s general and administrative expenses primarily 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 outside service costs, such as legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs.

Research and development expenses consist primarily of activities related to the Company’s technology that are not capitalized, including labor (engineers and consultants), engineering software costs, and demonstration plant operations and maintenance costs.

Other income is primarily related to interest and dividend income earned from the Company’s cash balances and money market investments, which are included within cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets.

Cash, Cash Equivalents and Restricted Cash

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents were comprised of funds held in a short-term money market fund having investments in high-quality short-term securities that are issued or guaranteed by the U.S. government or by U.S. government agencies and instrumentalities.

The Company also has a restricted cash balance that is included in the determination of cash and restricted cash in the unaudited Condensed Consolidated Statements of Cash Flows. See Note 7 for further information.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in financial institutions, which, at times, may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit of $250. Additionally, the Company’s investments held in a short-term money market fund are not guaranteed by the FDIC. As of September 30, 2025 and December 31, 2024, the Company had not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such accounts.

Accounts Receivable – Other

Accounts receivable – other primarily consists of amounts to be reimbursed to the Company from Cottonmouth in connection with the terms of the joint development agreement (“JDA”) between the Company and Cottonmouth. See Notes 3 and 4 for further information. In accordance with Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, the Company’s accounts receivable are required to be presented at the net amount expected to be collected through an allowance for credit losses that are expected to occur over the life of the remaining life of the asset, rather than incurred losses. The Company considers the amounts due from Cottonmouth to be fully collectible and, accordingly, there was no allowance for credit losses recorded by the Company as of September 30, 2025 and December 31, 2024.

Other Current Assets

As of December 31, 2024, other current assets included $470 of deferred equity issuance costs in connection with the Company’s issuance of shares of its Class A common stock to Cottonmouth in January 2025. There were no deferred equity issuance costs as of September 30, 2025, as deferred equity issuance costs were recorded within additional paid-in capital for the nine months ended September 30, 2025 as a reduction to the proceeds received from the issuance of the Class A common stock to Cottonmouth. See Note 3 for further information.

Prepaid expenses are also included within other current assets.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), approximates the carrying amounts represented in the Condensed Consolidated Balance Sheets, primarily due to their short-term nature. The fair values of cash, restricted cash, cash equivalents, receivables, prepaid expenses, accounts payable and accrued expenses are estimated to approximate their respective carrying values as of September 30, 2025 and December 31, 2024 due to the short-term maturities of such instruments.

In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that the buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:


Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Net Loss Per Share of Common Stock

Subsequent to the Business Combination, the Company’s capital structure is comprised of shares of Class A common stock and shares of Class C common stock, par value $0.0001 per share (the “Class C common stock”). Public stockholders, the Sponsor, and the investors in the private offering of shares of Class A common stock hold shares of Class A common stock and Warrants (as defined below), and Holdings owns shares of Class C common stock and Class C units of OpCo (the “Class C OpCo Units”). Holders of Class C OpCo Units, other than Verde Clean Fuels, have the right, subject to certain limitations, to exchange all or a portion of its Class C OpCo Units and a corresponding number of shares of Class C common stock for, at OpCo’s election, (i) shares of Class A common stock on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) an equivalent amount of cash. Each share of Class C common stock represents the right to cast one vote per share at the Verde Clean Fuels level and carries no economic rights, including rights to dividends or distributions upon liquidation. Thus, shares of Class C common stock are not participating securities per ASC 260, “Earnings Per Share”. As the shares of Class A common stock represent the only participating securities, the application of the two-class method is not required.

Basic net loss per share is computed by dividing net loss attributable to Class A common stockholders by the weighted average number of shares of Class A common stock outstanding for the same period. Diluted loss per share of Class A common stock is computed by dividing net loss attributable to Class A common stockholders by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

Antidilutive instruments, including outstanding warrants, stock options, certain restricted stock units (“RSUs”) and Sponsor earn out shares, were excluded from diluted earnings per share for the three and nine months ended September 30, 2025 and 2024 because the inclusion of such instruments would be anti-dilutive. As a result, diluted net loss per share of common stock is the same as basic net loss per share of common stock for all periods presented.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and the applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The Company’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, they are recorded at their initial fair value on the date of issuance and are subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as a non-cash gain or loss in the unaudited Condensed Consolidated Statements of Operations. See Note 9 for further information.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. The Company has elected to use the outside basis approach to measure the deferred tax assets or liabilities based on its investment in its subsidiaries without regard to the underlying assets or liabilities. In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2025 and December 31, 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. The estimated useful lives of assets are as follows:


Computers, office equipment and hardware						3 – 5 years
Furniture and fixtures						7 years
Machinery and equipment						7 years
Leasehold improvements						Shorter of the lease term (including estimated renewals) or the estimated useful lives of the improvement

Project development and construction costs are capitalized as construction in progress assets to the extent that they are directly identifiable and once the project is determined to be probable. Depreciation expense is not recorded for construction in progress assets until construction is completed and the assets are placed into service. Cost reimbursements from project participants related to construction in progress assets are recorded as an offset to the construction in progress assets. Upon entry into the JDA with Cottonmouth, the Company determined that the Permian Basin Project (as defined in Note 3) was probable and began capitalizing associated directly identifiable costs as construction in progress assets, net of costs reimbursable to the Company by Cottonmouth in accordance with the JDA. See Notes 3 and 4 for further information.

Maintenance and repairs are charged to expense as incurred, and improvements that increase the useful life of the asset are capitalized.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recorded in the unaudited Condensed Consolidated Statements of Operations in the period realized.

Indefinite-Lived Intangible Assets

The Company’s intangible assets consist of its intellectual property and patented technology associated with its patented STG+® process technology. These assets are considered to be indefinite-lived intangible assets and, as such, are not subject to amortization.

Impairments

Long-Lived Assets

The Company evaluates the carrying value of long-lived assets when indicators of impairment exist. The carrying value of a long-lived asset is considered impaired when the estimated separately identifiable, undiscounted cash flows from such asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the estimated cash flows discounted at a rate commensurate with the risk involved. During the three and nine months ended September 30, 2025 and 2024, the Company did not record any impairment charges.

Intangible Assets

A qualitative assessment of indefinite-lived intangible assets is performed in order to determine whether further impairment testing is necessary. In performing this analysis, macroeconomic conditions, industry and market conditions are considered in addition to current and forecasted financial performance, entity-specific events and changes in the composition or carrying amount of net assets.

During the three and nine months ended September 30, 2025 and 2024, the Company did not record any impairment charges.

Leases

The Company accounts for leases under ASC 842, “Leases” (“ASC 842”). The core principle of this standard is that a lessee should recognize the assets and liabilities that arise from leases by recognizing a liability to make lease payments (the lease liability) and a right-of-use asset (“ROU asset”) representing the lessee’s right to use, or control the use of, the underlying asset for the lease term. In accordance with the guidance of ASC 842, leases are classified as finance or operating leases, and both types of leases are recognized on the Condensed Consolidated Balance Sheets.

Certain lease arrangements may contain renewal options. Renewal options are included in the expected lease term only if they are reasonably certain of being exercised by the Company.

The Company elected the practical expedient to not separate non-lease components from lease components for real estate lease arrangements. The Company combines the lease and non-lease component into a single accounting unit and accounts for the unit under ASC 842 where lease and non-lease components are included in the classification of the lease and the calculation of the ROU asset and lease liability. In addition, the Company has elected the practical expedient to not apply lease recognition requirements to leases with a term of one year or less. Under this expedient, lease costs are not capitalized; rather, are expensed on a straight-line basis over the lease term. The Company’s leases do not contain residual value guarantees or material restrictions or covenants.

The Company determines if an arrangement is, or contains, a lease at contract inception based on whether that contract conveys the right to control the use of an identified asset in exchange for consideration for a period of time. Leases are classified as either finance or operating. This classification dictates whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. For all lease arrangements with a term of greater than 12 months, the Company presents at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a ROU asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

The Company uses either the rate implicit in the lease, if readily determinable, or the Company’s incremental borrowing rate for a period comparable to the lease term in order to calculate the net present value of the lease liability. The incremental borrowing rate represents the rate that would approximate the rate to borrow funds on a collateralized basis over a similar term and in a similar economic environment.

Other Current Liabilities

Other current liabilities primarily consist of deferred income and deposits associated with a sublease arrangement.

Emerging Growth Company Accounting Election

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Additionally, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. The Company expects to be an emerging growth company through 2026. Prior to the Business Combination, CENAQ elected to irrevocably opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company will adopt the new or revised standard when those standards are effective for public registrants.

Equity-Based Compensation

The Company applies ASC 718, “Compensation — Stock Compensation” (“ASC 718”), in accounting for its unit and share-based compensation arrangements.

Unit-Based Compensation

Service-based units compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is recognized over the period during which an employee is required to provide service in exchange for the award, or the requisite service period, which is usually the vesting period. Performance-based unit compensation cost is measured at the grant date based on the fair value of the equity instruments awarded and is expensed over the requisite service period, based on the probability of achieving the performance goal, with changes in expectations recognized as an adjustment to earnings in the period of the change. If the performance goal is not met, no unit-based compensation expense is recognized and any previously recognized unit-based compensation expense is reversed. Forfeitures of service-based and performance-based units are recognized upon the time of occurrence.

Equity-Based Awards

In March 2023, the Company authorized and approved the Verde Clean Fuels, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan”), which authorizes certain shares that may be granted under the 2023 Plan in connection with equity-based compensation awards. Under the terms of the 2023 Plan, the Company may, from time to time, grant stock options and/or RSUs to certain employees, officers, and non-employee directors. In addition to stock options and RSUs, the 2023 Plan authorizes for the future potential grant of stock appreciation rights, restricted stock, performance awards, stock awards, dividend equivalents, other stock-based awards, cash awards, and substitute awards to certain employees (including executive officers), consultants and non-employee directors, and is intended to align the interests of the Company’s service providers with those of the stockholders.

Stock options represent the contingent right of award holders to purchase shares of the Company’s Class A common stock at a stated price for a limited time. Stock options granted to employees and officers will generally vest at a rate of 25% on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued service through the vesting dates. Stock options granted to non-employee directors will generally vest 100% on the first anniversary of the date of grant, subject to continued service through the vesting date. Forfeitures are recognized as they occur.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes model and the fair value of RSUs on the date of grant based on the value of the stock price on that date. The cost of awarded equity instruments is recognized based on each instrument’s grant-date fair value over the period during which the grantee is required to provide service in exchange for the award. Equity-based compensation is recorded as a general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

The determination of fair value of stock options requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions. The key assumptions for the Black-Scholes model include the expected term, risk-free interest rate, volatility, and dividend yield. The Company estimates the key assumptions for the Black-Scholes model as follows:

•expected term is based on peer benchmarking and expectations;

•risk-free interest rate is based on U.S. Treasury yield curve rates with maturities similar to the expected term; and

•volatility is based on the volatility of various publicly traded peer companies.

The Company does not anticipate paying cash dividends and therefore uses an expected dividend yield of zero. The Company also assesses whether or not a discount for lack of marketability is applied based on certain liquidity factors.

RSUs represent an unsecured right to receive one share of the Company’s Class A common stock equal to the per share value of the Class A common stock on the settlement date. RSUs have a zero-exercise price and vest over time in whole after the first anniversary of the date of grant subject to continuous service through the vesting date.

See Note 8 for further information.

Noncontrolling Interest

Following the Business Combination, holders of Class A common stock own a direct controlling interest in the results of the Company, while Holdings own an economic interest in the Company, which is presented as noncontrolling interest (“NCI”). NCI is classified as permanent equity within the Condensed Consolidated Balance Sheets. Income or loss is attributed to NCI based on their contractual distribution rights and the relative percentages of equity interests held during the period. The Company’s equity attributable to NCI and the Class A common stockholders are rebalanced to reflect changes in ownership, as applicable.

Recent Accounting Standards

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires public entities, on an annual basis, to provide: a tabular rate reconciliation (using both percentages and reporting currency amounts) of (1) the reported income tax expense (or benefit) from continuing operations, to (2) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile using specific categories, and separate disclosure for any reconciling items within certain categories that are equal to or greater than a specified quantitative threshold. For each annual period presented, ASU 2023-09 also requires all reporting entities to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign. It also requires additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). ASU 2023-09 is effective for public entities for fiscal years beginning after December 15, 2024. ASU 2023-09 is to be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2023-09 will have on the unaudited condensed consolidated financial statements.

In March 2024, the SEC issued Release No. 33-11275, “The Enhancement and Standardization of Climate-Related Disclosures for Investors”, which will mandate detailed disclosure of certain climate-related information, including, among other items, material climate-related risks and related governance, strategy and risk management processes, certain financial statement disclosures, and Scopes 1 and 2 greenhouse gas emissions, if material, for certain public companies. In April 2024, the SEC issued an administrative stay of the implementation of Release No. 33-11275, pending judicial review. Prior to the stay, the required disclosures were subject to a phased compliance timeline, with initial disclosures for non-accelerated filers and smaller reporting companies commencing with the fiscal year beginning January 1, 2027. In addition, in February 2025, the SEC ended its legal defense of Release No. 33-11275 and it is unclear when Release No. 33-11275 will become effective, if ever. Furthermore, in June 2025, the SEC issued a notice that it was withdrawing several proposed rulemakings, including the SEC’s 2022 proposal titled “Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social, and Governance Investment Practices.” The Company is currently monitoring the status of Release No. 33-11275 and is evaluating the impact that the release would have on the unaudited condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the income statement. The amendments are effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its disclosures.

The Company considers the applicability and impact of all ASUs issued by the FASB. There are no other accounting pronouncements which have been issued but are not yet effective that would have a material impact on the unaudited condensed consolidated financial statements when adopted.

NOTE 3 – RELATIONSHIP WITH COTTONMOUTH AND PERMIAN BASIN PROJECT

Overview

Cottonmouth is the Company’s second largest shareholder. and is a wholly-owned subsidiary of Diamondback, 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. As of September 30, 2025, the Company and Cottonmouth are advancing development activities related to the Permian Basin Project, including the FEED study (each as defined below). See Notes 1, 4 and 6 for further information.

Initial Investment

In connection with the Closing of the Business Combination, the Company issued and sold to Cottonmouth 2,000,000 shares of its Class A common stock in a private placement for an aggregate purchase price of $20,000 and entered into an equity participation right agreement, dated as of February 13, 2023 (“Existing Equity Participation Right Agreement”), by and among the Company and Cottonmouth, pursuant to which Verde granted Cottonmouth the right to participate and jointly develop natural gas-to-gasoline plants in the Permian Basin utilizing Verde’s STG+® technology and associated natural gas from Diamondback’s operations.

Permian Basin Project

In February 2024, Verde and Cottonmouth entered into a 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, the Company 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, the Company began to incur development costs with respect to the project. Under the terms of the JDA, 65% of the approved development costs incurred by the Company (which include costs associated with the FEED study) are reimbursed by Cottonmouth. See Notes 4 and 6 for further information.

Second Investment

In December 2024, the Company entered into a Class A common stock purchase agreement (the “Purchase Agreement”) with Cottonmouth pursuant to which the Company agreed to issue and sell to Cottonmouth in a private placement an aggregate of 12,500,000 shares of its Class A common stock, par value $0.0001, at a price of $4.00 per share for an aggregate purchase price of $50,000 (the “PIPE Investment”). Closing of the PIPE Investment occurred on January 29, 2025.

In connection with the closing of the PIPE Investment, on January 29, 2025, (i) Cottonmouth and the Company amended the Existing Equity Participation Right Agreement to remove certain preemptive rights with respect to the Company’s equity securities granted to Cottonmouth under the Existing Equity Participation Right Agreement and (ii) the Company entered into a second amended and restated registration rights agreement with Cottonmouth and the other parties thereto,

which amended and restated that certain amended and restated registration rights agreement, dated February 15, 2023, by and among the Company and certain stockholders named therein (the “Existing Registration Rights Agreement”), to add Cottonmouth as a party to the Existing Registration Rights Agreement.

Additionally, in connection with the consummation of the transactions contemplated by the Purchase Agreement, the Company amended and restated its fourth amended and restated certificate of incorporation (the “Restated Charter”). In accordance with the Restated Charter, effective January 29, 2025, the Company (i) increased the number of authorized shares of Class C common stock from 25,000,000 to 26,000,000 and (ii) increased the size of its Board of Directors from seven to eight and to provide Cottonmouth with certain director designation and board observer rights. The Restated Charter was approved and recommended by the Board prior to stockholder action by written consent.

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

The Company's major classes of property, plant and equipment are as follows:


(in thousands)	As of
	September 30, 2025		December 31, 2024
Construction in progress, net	$	3,316	$	1,029
Computers, office equipment and hardware	42		34
Furniture and fixtures	47		47
Machinery and equipment	44		44
Property, plant and equipment	3,449		1,154
Less: accumulated depreciation	67		58
Property, plant and equipment, net	$	3,382	$	1,096

As of September 30, 2025, the Company’s construction in progress assets were comprised of $9,293 of capitalized development costs (which include costs associated with the FEED study) related to the Permian Basin Project, net of $5,977 of costs reimbursable by Cottonmouth in accordance with the JDA. See Notes 3 and 6 for further information.

NOTE 5 - ACCRUED LIABILITIES

The Company’s accrued liabilities are as follows:


(in thousands)	As of
	September 30, 2025		December 31, 2024
Accrued compensation	$	468	$	331
Accrued construction in progress	4		-
Accrued legal fees	47		468
Accrued professional fees	-		68
Accrued excise tax liability	-		978
Accrued income taxes	91		-
Other accrued expenses	33		62
Total accrued liabilities	$	643	$	1,907

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of

the repurchase. The amount of repurchases applicable to the excise tax can be reduced by the fair market value of any issuances at the time of issuance that occurred during the year, as well as certain exceptions provided by the U.S. Department of the Treasury.

As of December 31, 2024, the Company had recorded an accrual for an excise tax liability of $978. During the nine months ended September 30, 2025, the accrued excise tax liability was paid in full.

NOTE 6 – RELATED PARTY TRANSACTIONS

Holdings

The Company has a related party relationship with Holdings whereby Holdings holds a majority ownership in the Company via voting shares and has control of its Board of Directors. Further, Holdings possesses 3,500,000 earn out shares. The Holdings equity compensation instruments consist of 1,000 authorized and issuable Series A Incentive Units (the “Series A Incentive Units”) and 1,000 authorized and issuable Founder Incentive Units (the “Founder Incentive Units”). Certain of the Company’s management hold Series A Incentive Units and Founder Incentive Units that entitle them to participate in the earnings of and distributions by Holdings after a specified return to the Series A Preferred Unit holders. See Notes 1, 8 and 10 for further information.

Cottonmouth

The Company has a related party relationship with Cottonmouth due to its ownership interest in the Company’s Class A common stock. See Notes 1 and 3 for further information.

Chemex

In June 2024, the Company entered into a contract with Chemex, a Shaw Group company, for a FEED study related to the Permian Basin Project. Also in June 2024, the parent organization of Holdings, through a separate subsidiary, made an unrelated preferred equity investment in the Shaw Group and, in connection with the investment, Jonathan Siegler, a Company director, was appointed as a director of the Shaw Group. The Company’s construction in progress assets are comprised of capitalized development costs related to the Permian Basin Project, net of amounts reimbursable by Cottonmouth in accordance with the JDA. As of September 30, 2025, the Company’s construction in progress assets were primarily related to costs associated with the FEED study. See Notes 3 and 4 for further information.

Five Star Clean Fuels

A subsidiary of the Company is a party to a letter agreement with Five Star Clean Fuels LLC, formerly known as Arb Clean Fuels Management LLC (“FSCF”). The letter agreement purports to grant FSCF certain non-exclusive rights to utilize the STG+® technology and reflects an intent to enter into mutually acceptable to be negotiated agreements related to a potential site in Odessa, Texas. As of September 30, 2025, there have been no material developments with respect to this arrangement, nor has the Company received any consideration from FSCF or incurred any material expense in connection therewith. Martijn Dekker, a Company director, is an officer and director of FSCF and his affiliate has an ownership interest in FSCF.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space and other office equipment under operating lease arrangements with initial terms greater than 12 months. The office lease in Hillsborough, New Jersey was extended until 2026. In August 2023, the Company entered into a 40-month office lease in Houston, Texas which commenced in November 2023. Office space is leased to provide adequate workspace for all employees.

The Company’s operating leases are as follows:


(in thousands)	Statements of Operations	Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Classification	2025		2024		2025		2024
Operating lease cost	General and administrative expense	$	94	$	86	$	283	$	250
Variable lease cost	General and administrative expense	48		48		141		122
Total operating lease cost		$	142	$	134	$	424	$	372

Supplemental information related to the Company’s operating lease arrangements are as follows:


(in thousands)	Nine Months Ended September 30,
Operating lease – supplemental information	2025			2024
ROU assets obtained in exchange for operating lease	$	309		$	353
Remaining lease term – operating leases	0.8 years			1.4 years
Discount rate – operating leases	7.50		%	7.50		%

Commitments

As of September 30, 2025 and December 31, 2024, the Company had restricted cash of $100. The Company's restricted cash is maintained in support of a letter of credit.

Contingencies

As of September 30, 2025 and December 31, 2024, the Company was not party to any litigation and has not recorded any contingent liabilities.

NOTE 8 – STOCKHOLDERS’ EQUITY

Earn Out Consideration

Earn out shares potentially issuable as part of the Business Combination are recorded within stockholders’ equity as the instruments are deemed to be indexed to the Company’s common stock and meet the equity classification criteria under ASC 815. Earn out shares contain market conditions for vesting and were awarded to eligible stockholders, as described further below, and not to current employees.

As consideration for the contribution of the equity interests in Intermediate, Holdings received earn out consideration (“Holdings earn out”) of 3,500,000 shares of Class C common stock and a corresponding number of Class C OpCo Units subject to vesting with the achievement of separate market conditions. One half of the Holdings earn out shares will meet the market condition when the volume-weighted average share price (“VWAP”) of the Class A common stock is greater than or equal to $15.00 for any 20 trading days within any period of 30 consecutive trading days within five years of the Closing Date. The second half will vest when the VWAP of the Class A common stock is greater than or equal to $18.00 over the same measurement period.

Additionally, the Sponsor received earn out consideration (“Sponsor earn out” and, together with Holdings earn out, the “Earn Out Equity”) of 3,234,375 shares of Class A common stock subject to forfeiture which will no longer be subject to forfeiture with the achievement of separate market conditions (the “Sponsor Shares”). One half of the Sponsor earn out will no longer be subject to forfeiture if the VWAP of Class A common stock is greater than or equal to $15.00 for any 20 trading days within any period of 30 consecutive trading days within five years of the Closing Date. The second half will no longer be subject to forfeiture when the VWAP of the Class A common stock is greater than or equal to $18.00 over the same measurement period.

Notwithstanding the foregoing, the shares of Earn Out Equity will vest in the event of a sale of the Company at a price that is equal to or greater than the applicable trigger price payable to the buyer of the Company. The Earn Out Equity was issued in connection with the Business Combination on February 15, 2023. Holdings earn out shares are neither issued nor outstanding as of September 30, 2025 as the performance requirements for vesting were not achieved. All Sponsor Shares granted in connection with the Business Combination were issued and outstanding as of September 30, 2025 and December 31, 2024.

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

Share-based Compensation

The Company records compensation expense related to share-based compensation arrangements within general and administrative expenses. The total compensation expense incurred related to the Company’s equity-based compensation plans was $632 and $1,543 for the three and nine months ended September 30, 2025, respectively, and was $401 and $912 for the three and nine months ended September 30, 2024, respectively.

No related income tax benefits were recognized during the three and nine months ended September 30, 2025 and 2024.

Stock Options

On June 2, 2025, the Company awarded additional stock options to certain employees and officers and to non-employee directors, consistent with the terms of the 2023 Plan. The stock options granted in 2025 have an exercise price of $4.76 per share and will expire 7 years from the date of grant. Stock options granted to employees and executive officers will vest at a rate of 25% on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued service through the vesting dates. Stock options granted to non-employee directors will vest one year from the date of grant, subject to continued service through the vesting date.

The fair value of stock options granted during 2025 was $1.43 per option for options granted to both employees and officers and to non-employee directors. The fair value of stock options granted in 2025 was determined using the following assumptions as of the grant date:



Risk-free interest rate	4.5	%
Expected term	3.5 years
Volatility	40	%
Dividend yield	zero
Discount for lack of marketability	zero

During the nine months ended September 30, 2025, the Company had changes in stock options as follows:


	Number of options	Weighted average exercise price per share		Weighted average remaining contractual life (years)
Outstanding as of December 31, 2024	3,387,638	$	7.82	5.7
Granted	2,726,306	$	4.76	7.0
Exercised	-	-		-
Forfeited / expired	(192,288)	$	5.99	-
Outstanding as of September 30, 2025	5,921,656	$	6.47	5.9
Unvested as of September 30, 2025	4,483,397	$	5.93	6.1
Exercisable as of September 30, 2025	820,253	$	5.99	5.7

As of September 30, 2025, there were 4,927,397 options granted to employees and officers outstanding, of which 3,929,700 were unvested, and 994,259 options granted to non-employee directors outstanding, of which 553,697 were unvested. See Note 2 for further information.

RSUs

In April 2023, the Company granted 141,656 RSUs to non-employee directors. In April 2024, all of the previously granted RSUs vested. In May 2024, the Company settled 120,824 of the vested RSUs through issuance of 120,824 shares of Class A common stock. As of September 30, 2025, the Company has not yet settled 20,832 of the vested RSUs, as the awardee elected to defer receipt. The Company includes the vested and deferred RSUs within weighted-average shares outstanding for the computation of basic and diluted loss per share. See Notes 2 and 10 for further information.

Incentive Units

Prior to Closing, certain subsidiaries of the Company, including Intermediate, were wholly owned subsidiaries of Holdings. Holdings, which was outside of the Business Combination perimeter, had entered into several compensation-related arrangements with certain of Intermediate’s management and employees. Compensation costs associated with those arrangements were allocated by Holdings to Intermediate as the employees were rendering services to Intermediate. However, the ultimate contractual obligation related to these awards, including any future settlement, rested and continues to rest with Holdings.

The Holdings equity compensation instruments consist of 1,000 Series A Incentive Units and 1,000 Founder Incentive Units. The Series A Incentive Unit holders are entitled to participate in the earnings of and distributions by Holdings after a specified return threshold to the Series A Preferred Unit holders has been achieved. The Founder Incentive Unit holders are entitled to receive a certain aggregate distribution amount by Holdings after a specified aggregate distribution amount has been received by the Series A Preferred Unit holders. The Series A Incentive Units were deemed to be service-based awards and the Founder Incentive Units were deemed to be performance-based awards.

On August 7, 2020, Holdings issued 800 Series A Incentive Units and 1,000 Founder Incentive Units to certain of Intermediate’s management and employees in compensation for their services. In August 2022, certain amendments were made to the Series A Incentive Units and Founder Incentive Units whereby such units would become fully vested upon completion of the Business Combination.

In connection with the Closing of the Business Combination, all of the outstanding and unvested Series A Incentive Units and Founder Incentive Units became fully vested. For the year ended December 31, 2023, the Company accelerated the remaining share-based payment expense for the Series A Incentive Units and recorded such expense in general and administrative expenses. For the years ended December 31, 2024 and 2023, the Company did not record additional share-based compensation expense for the Founder Incentive Units as certain conditions had not been met. The Company continues to evaluate the conditions related to the Founder Incentive Units. As of September 30, 2025, such conditions continue to not have been met.

See Note 6 for further information.

NOTE 9 – WARRANTS

There were 15,383,263 warrants outstanding as of September 30, 2025 (the “Warrants”). Each Warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below. However, no Warrants will be exercisable for cash unless there is an effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants is not effective within a specified period following the consummation of the Business Combination, Warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their Warrants on a cashless basis. In the event of such cashless exercise, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the fair market value. The

“fair market value” for this purpose will mean the average reported last sale price of the shares of Class A common stock for the five trading days ending on the trading day prior to the date of exercise. The Warrants will expire on February 15, 2028, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company may call the Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant:

•at any time after the Warrants become exercisable;

•upon not less than 30 days’ prior written notice of redemption to each Warrant holder;

•if, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30-trading day period commencing at any time after the Warrants become exercisable and ending on the third business day prior to the notice of redemption to Warrant holders; and

•if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such Warrants.

If and when the Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

No Warrants were exercised during the three and nine months ended September 30, 2025 and 2024.

NOTE 10 – LOSS PER SHARE

Loss per share

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2025		2024		2025		2024
Net loss attributable to Verde Clean Fuels, Inc.	$	(1,155)	$	(778)	$	(3,662)	$	(2,454)
Basic weighted-average shares outstanding	18,836,078		6,336,078		17,508,239		6,269,230
Dilutive effect of share-based awards	-		-		-		-
Diluted weighted-average shares outstanding	18,836,078		6,336,078		17,508,239		6,269,230
Basic loss per share	$	(0.06)	$	(0.12)	$	(0.21)	$	(0.39)
Diluted loss per share	$	(0.06)	$	(0.12)	$	(0.21)	$	(0.39)

The Company’s Warrants, Sponsor earn out shares and stock options could have the most significant impact on diluted shares should the instruments represent dilutive instruments. However, securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company’s Class A common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

As of September 30, 2025, the Company has not yet settled 20,832 of the vested RSUs, as the awardee elected to defer receipt. The Company includes the vested and deferred RSUs within weighted-average shares outstanding for the computation of basic and diluted loss per share. See Notes 8 and 10 for further information.

The following amounts were not included in the calculation of net loss per diluted share for the periods presented because their effects were anti-dilutive:


	As of September 30,
	2025	2024
Warrants	15,383,263	15,383,263
Sponsor earn out shares (1)	3,234,375	3,234,375

Stock options	5,921,656	3,076,653

Total anti-dilutive instruments	24,539,294	21,694,291

(1)Excludes 3,500,000 Class C earn out shares convertible into shares of Class A common stock. Shares of Class C common stock are not participating securities; thus, the application of the two-class method is not required. See Note 6 for further information.

Noncontrolling Interests

As of December 31, 2024, the ownership interests of the Class A common stockholders and the NCI were 29.80% and 70.20%, respectively. As of September 30, 2025, the ownership interests of the Class A common stockholders and the NCI were 49.49% and 50.51%, respectively. The change in ownership interests was due to the issuance of Class A common stock to Cottonmouth during the nine months ended September 30, 2025. See Note 3 for further information.

NOTE 11 – INCOME TAX

As of September 30, 2025, the Company holds 49.49% 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. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of the net taxable income (loss) and any related tax credits of OpCo.

The Company’s effective tax rate was (4.7)% and (1.7)% for the three and nine months ended September 30, 2025, respectively, and was 0.0% and 0.2% for the three and nine months ended September 30, 2024, respectively. The effective income tax rates for each period differed significantly from the statutory rate primarily due to the losses allocated to NCI and the recognition of a valuation allowance as a result of the Company’s tax structure.

The Company has assessed the realizability of its net deferred tax assets and that analysis has considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As of September 30, 2025, the Company has maintained a full valuation allowance against its deferred tax assets, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of the allowance.

The Company’s income tax filings will be subject to audit by various taxing jurisdictions. The Company will monitor the status of U.S. Federal, state and local income tax returns that may be subject to audit in future periods. No U.S. Federal, state and local income tax returns are currently under examination by the respective taxing authorities.

On July 4, 2025, the “One Big, Beautiful Bill Act” (“OBBBA”) was signed into federal law. The OBBBA included multiple provisions applicable to U.S. income tax for businesses, including bonus depreciation for qualified tangible property, immediate expensing of research expenditures, and updates to the calculation of disallowed interest. For the three and nine months ended September 30, 2025, the Company recognized the provisions of the OBBBA, which did not have a material impact on the unaudited condensed consolidated financial statements. The Company is continuing to evaluate the potential benefits of the provisions of the OBBBA to its projects, including the Permian Basin Project.

Tax Receivable Agreement

On the Closing Date, in connection with the consummation of the Business Combination and as contemplated by the Business Combination Agreement, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with Holdings (together with its permitted transferees, the “TRA Holders,” and each a “TRA Holder”) and the Agent (as defined in the Tax Receivable Agreement). Pursuant to the Tax Receivable Agreement, the Company is required to pay each TRA Holder 85% of the amount of net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using certain simplifying assumptions) or is deemed to realize in certain circumstances in periods after the Closing Date as a result of, as applicable to each such TRA Holder, (i) certain

increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s Class C OpCo Units pursuant to the exercise of the OpCo Exchange Right, a Mandatory Exchange or the Call Right (each as defined in the Amended and Restated LLC Agreement of OpCo) and (ii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these net cash savings. The Tax Receivable Agreement contains a payment cap of $50,000, which applies only to certain payments required to be made in connection with the occurrence of a change of control. The payment cap would not be reduced or offset by any amounts previously paid under the Tax Receivable Agreement or any amounts that are required to be paid (but have not yet been paid) for the year in which the change of control occurs or any prior years.

As of September 30, 2025 and December 31, 2024, the Company did not record a tax receivable balance.

NOTE 12 - SEGMENT INFORMATION

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by its Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its CEO. The Company has determined that it operates in one operating segment, as the CODM reviews financial information presented on a combined basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company’s segment reporting is consistent with its internal reporting to its CODM.

The following table presents information about the Company’s significant expenses. A significant segment expense is an expense that is significant to the segment considering qualitative and quantitative factors, regularly provided or easily computed from information regularly provided to the CODM and is included in the reported measure of segment profit or loss. The Company’s significant expenses are aggregated and presented as general and administrative and research and development financial statement line items on the unaudited Condensed Consolidated Statements of Operations. Other segment items represent the difference between reported significant segment expenses and consolidated operating loss. Significant segment expenses and other segment items are reviewed by the CODM on a disaggregated basis as follows:


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Outside services	$	822	$	1,090	$	3,111	$	4,033
Employee compensation-related	738		636		2,481		1,841
Insurance	258		338		807		1,056
Share-based compensation	632		401		1,543		912
Rent, property and office	305		231		998		662
Other segment items (1)	125		89		361		318
Total operating loss	$	2,880	$	2,785	$	9,301	$	8,822

(1) Other segment items primarily include depreciation and amortization, meals, travel and conference expense and franchise taxes.

NOTE 13 – SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date, up to the date which the consolidated financial statements were issued. There were no subsequent events or transactions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “our,” “us,” “Verde,” “Verde Clean Fuels” or the “Company” refer to Verde Clean Fuels, Inc. 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 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.

Special note regarding forward-looking statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of present or historical fact, included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s expectations and any future financial performance, as well as the Company’s strategy, future operations, financial position, prospects, plans and objectives of management are forward-looking statements. The words “could,” “should,” “would,” “will,” “aim,” “may,” “focus,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “advance,” “project,” “plan,” “potential,” “goal,” “strategy,” “proposed,” “positions,” the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of the Company, that could cause actual results or outcomes to differ materially from those 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 (each as defined below), and the potential liquidity and trading of such securities;

•the failure to realize the anticipated benefits of the de-SPAC business transaction that the Company consummated in February 2023 (the “Business Combination”), 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 any current or future projects;

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

•delays in acquisition, financing, construction and development of new or anticipated projects;

•the length of development cycles for new or anticipated projects, including the design and construction processes for the Company’s projects;

•the Company’s ability to identify suitable locations for new or anticipated projects;

•the Company’s dependence on suppliers;

•changes in local, state, and federal laws, regulations or policies that may affect our business or our industry (such as the effects of tax law changes, and changes in environmental, health, and safety regulations and regulations addressing climate change, and trade policy);

•decline in public and governmental acceptance and support of renewable energy development and projects;

•demand for renewable energy not being sustained;

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

•the ability to secure necessary governmental and regulatory approvals;

•the availability of, and our 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;

•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 other economic measures or trade disputes, and any U.S. government shutdowns;

•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

•other economic, competitive, governmental, legislative, regulatory, geopolitical, and technological factors that may negatively impact our businesses or operations.

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, 2024. 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

We are a clean fuels company focused on the deployment of our innovative and proprietary liquid fuels processing technology through development of commercial production plants. Verde’s synthesis gas (“syngas”)-to-gasoline plus (STG+®) process converts syngas, derived from diverse feedstocks, into fully finished liquid fuels that require no additional refining. 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 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.

Development

We acquired our STG+® technology from Primus Green Energy in 2020, which was originally founded in 2007 and invested over $110 million in developing and demonstrating such technology, including the construction and operation of

the demonstration plant. The demonstration plant began operations in 2013, completed over 10,500 hours of operation and is currently maintained in an idle state.

Recent Developments

PIPE Investment

On December 18, 2024, the Company entered into common stock purchase agreement (the “Purchase Agreement”) with Cottonmouth Ventures, LLC (“Cottonmouth”), a subsidiary of Diamondback Energy, LLC (“Diamondback”), pursuant to which the Company agreed to issue and sell an aggregate of 12,500,000 shares of its Class A common stock, par value $0.0001 (“Class A common stock”) to Cottonmouth at a price of $4.00 per share for an aggregate purchase price of $50 million (the “PIPE Investment”) in a private placement. The Company consummated the transactions contemplated by the Purchase Agreement on January 29, 2025.

In connection with the closing of the PIPE Investment, on January 29, 2025, (i) Cottonmouth and the Company amended that certain equity participation right agreement, dated February 13, 2023 (the “Existing Equity Participation Right Agreement”), to remove certain preemptive rights with respect to the Company’s equity securities granted to Cottonmouth under the Existing Equity Participation Right Agreement and (ii) the Company entered into that certain Second Amended and Restated Registration Rights Agreement with Cottonmouth and the other parties thereto, which amended and restated that certain Amended and Restated Registration Rights Agreement, dated February 15, 2023, by and among the Company and certain stockholders named therein (the “Existing Registration Rights Agreement”), to add Cottonmouth as a party to the Existing Registration Rights Agreement.

Restated Charter

On December 18, 2024, the holder of a majority of the issued and outstanding shares of Class A common stock and Class C common stock, par value $0.0001 (“Class C common stock”) adopted resolutions by written consent, in lieu of a meeting of stockholders to, among other things, amend and restate, immediately prior to and contingent upon the consummation of the closing of the PIPE Investment, our fourth amended and restated certificate of incorporation (the “Restated Charter”) to (A) increase the amount of authorized shares of Class C common stock from 25,000,000 to 26,000,000 and (B) increase the size of our Board of Directors (the “Board”) from seven to eight and to provide Cottonmouth with certain director designation and board observer rights. The Restated Charter was approved and recommended by the Board prior to the stockholder action by written consent. Immediately prior to closing of the PIPE Investment, on January 29, 2025, the Company filed the Restated Charter with the Delaware Secretary of State.

Key Factors and Trends Influencing 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 our Annual Report on Form 10-K for the year ended December 31, 2024. We believe the factors described below are key to our success.

Commencing and Expanding Commercial Operations

A critical step in our business strategy will be the successful construction and operation of the first commercial production plant using our patented STG+® technology.

Concurrent with the Business Combination, Diamondback, through its wholly-owned subsidiary, Cottonmouth, made a $20 million equity investment in Verde and entered into the Existing Equity Participation Right Agreement pursuant to which Verde must grant Cottonmouth the right to participate and jointly develop natural gas-to-gasoline plants in the Permian Basin utilizing Verde’s STG+® technology and associated natural gas from Diamondback’s operations. 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 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 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”), 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, 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. In addition to the Permian Basin Project, we also continue to identify and evaluate other potential opportunities to deploy our technology while remaining disciplined with our resources.

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.

Revenue

We have not generated any revenue to date. We expect to generate a significant portion of our future revenue from activities related to the proposed Permian Basin Project, which is expected to produce reformulated blendstock for oxygenate blending grade gasoline. These revenues are currently expected to be comprised of distributions from our share of ownership of the Permian Basin Project as well as fees from our role as operator of such project.

Expenses

General and Administrative Expenses

General and administrative expenses primarily 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 business development costs, outside service costs, such as 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 U.S. Securities and Exchange Commission (the “SEC”) and Nasdaq.

Research and Development Expenses

Other Income

Other income primarily consists of interest and dividend income earned on our cash and cash equivalents balances.

Income Tax Effects

We hold 49.49% 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 September 30, 2025 and 2024


	Three Months Ended September 30,
(in thousands)	2025		2024
General and administrative expenses	$	2,752	$	2,694
Research and development expenses	128		91
Total operating loss	2,880		2,785

Other (income)	(650)		(291)

Loss before income taxes	(2,230)		(2,494)
Income tax expense (benefit)	104		—
Net loss	$	(2,334)	$	(2,494)

General and Administrative

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 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

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
Research and development expenses	457		350
Total operating loss	9,301		8,822

Other (income)	(1,846)		(954)

Loss before income taxes	(7,455)		(7,868)
Income tax expense (benefit)	129		(14)
Net loss	$	(7,584)	$	(7,854)

General and Administrative

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 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

Other income increased by $892, or 94%, for the nine 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.

Liquidity and Capital Resources

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 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 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. 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.

Accordingly, we will likely be required to raise additional funds through the issuance of equity, equity-related or debt securities, through obtaining credit from government or financial institutions or by engaging in joint ventures or other alternative forms of financing. We cannot be certain that additional funds will be available on favorable terms when required, or at all. If we cannot raise additional funds when needed, our financial condition, results of operations, business and prospects could be materially and adversely affected. Our ability to raise funds through equity offerings may be limited by the significant number of shares that may be publicly sold as well as by the amount of publicly traded Class A common stock as well as outstanding publicly traded warrants (“Warrants”), stock options, restricted stock units (“RSUs”) or earn out equity. As the exercise price of our Warrants is $11.50 per share of Class A common stock, we do not expect that Warrants will be exercised in the foreseeable future. In addition, to the extent we raise funds through the sale of additional equity securities, our stockholders would experience additional dilution. If we raise funds through the issuance of debt securities or through loan arrangements, the terms of such debt securities or loan arrangements could require significant interest payments, contain covenants that restrict our business, or contain other unfavorable terms. 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 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:


	Nine Months Ended September 30,
(in thousands)	2025		2024
Net cash used in operating activities	$	(7,563)	$	(6,655)
Net cash used in investing activities	(1,487)		(451)
Net cash provided by financing activities	49,446		-
Net change in cash, cash equivalents and restricted cash	$	40,396	$	(7,106)

Cash Flows Used in Operating Activities

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 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

SEC Form 10-Q filed by Verde Clean Fuels Inc.