Verde Clean Fuels(VGAS) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial information of Verde Clean Fuels, Inc. for the reported periods ITEM 1. FINANCIAL STATEMENTS This section presents Verde Clean Fuels, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with comprehensive notes detailing accounting policies, related party transactions, commitments, contingencies, and other financial disclosures for the periods ended June 30, 2025, and December 31, 2024 CONDENSED CONSOLIDATED BALANCE SHEETS This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :---------------- | :------------------ | | Cash and cash equivalents | $62,054,765 | $19,044,067 | | Total current assets | $63,973,280 | $20,174,410 | | Total assets | $68,726,638 | $23,572,306 | | Total current liabilities | $2,933,046 | $2,810,585 | | Total liabilities | $2,978,788 | $2,888,830 | | Total stockholders' equity | $65,747,850 | $20,683,476 | - Cash and cash equivalents significantly increased by approximately $43 million from December 31, 2024, to June 30, 2025, primarily due to the PIPE Investment[12] - Total assets more than doubled, from $23.6 million to $68.7 million, driven by the increase in cash and cash equivalents[12] CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Unaudited): | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $3,094,320 | $2,988,774 | $6,091,842 | $5,778,150 | | Research and development expenses | $145,242 | $173,020 | $328,548 | $258,855 | | Total operating loss | $3,239,562 | $3,161,794 | $6,420,390 | $6,037,005 | | Other (income) | $(665,363) | $(316,208) | $(1,195,606) | $(662,336) | | Net loss | $(2,545,999) | $(2,831,720) | $(5,249,584) | $(5,360,803) | | Net loss attributable to Verde Clean Fuels, Inc. | $(1,260,130) | $(903,707) | $(2,506,841) | $(1,676,078) | | Loss per share of Class A common stock | $(0.07) | $(0.14) | $(0.15) | $(0.27) | - Net loss attributable to Verde Clean Fuels, Inc. increased by 39.4% for the three months ended June 30, 2025, compared to the same period in 2024, from $(903,707) to $(1,260,130)[14] - Loss per share of Class A common stock improved from $(0.14) to $(0.07) for the three months ended June 30, 2025, despite a higher net loss, due to a significant increase in weighted average shares outstanding[14] CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and noncontrolling interest Key Changes in Stockholders' Equity (Six Months Ended June 30, 2025 vs. December 31, 2024): | Metric | December 31, 2024 | June 30, 2025 | Change | | :-------------------------------- | :---------------- | :---------------- | :----- | | Class A Common Stock Shares | 9,549,621 | 22,049,621 | +12,500,000 | | Additional Paid In Capital | $37,502,903 | $62,797,055 | +$25,294,152 | | Noncontrolling Interest | $10,434,454 | $32,710,267 | +$22,275,813 | | Total Stockholders' Equity | $20,683,476 | $65,747,850 | +$45,064,374 | - The issuance of 12,500,000 Class A common stock shares to Cottonmouth for $50,000,000 significantly increased additional paid-in capital and total stockholders' equity during the six months ended June 30, 2025[19] - Noncontrolling interest increased substantially, reflecting a rebalancing of ownership percentage due to the issuance of Class A shares[19] CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS This section presents the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Unaudited): | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,883,483) | $(5,016,976) | | Net cash used in investing activities | $(551,927) | $(552,300) | | Net cash provided by financing activities | $49,446,108 | $- | | Net change in cash, cash equivalents and restricted cash | $43,010,698 | $(5,569,276) | | Cash, cash equivalents and restricted cash, end of period | $62,154,765 | $23,309,901 | - Net cash provided by financing activities was $49.4 million for the six months ended June 30, 2025, primarily from the issuance of Class A common stock to Cottonmouth, compared to $0 in the prior year period[23] - The company experienced a significant positive net change in cash, cash equivalents, and restricted cash of $43 million for the six months ended June 30, 2025, a substantial improvement from a net decrease of $5.6 million in the same period of 2024[23] NOTE 1 – THE COMPANY This note provides an overview of Verde Clean Fuels, Inc., its business focus, stock listings, and significant corporate events - Verde Clean Fuels, Inc. is a clean fuels company focused on deploying its proprietary syngas-to-gasoline plus (STG+®) process to convert diverse feedstocks into finished liquid fuels, with a current focus on converting associated natural gas into lower carbon intensity gasoline[24] - The company's Class A common stock and warrants are listed on Nasdaq under symbols 'VGAS' and 'VGASW', respectively, with primary stockholders being Bluescape Clean Fuels Holdings, LLC and Cottonmouth Ventures, LLC[25] - The company consummated a business combination on February 15, 2023, with CENAQ Energy Corp., which was subsequently renamed Verde Clean Fuels, Inc., adopting an umbrella partnership C corporation structure[26][27] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the critical accounting policies and estimates used in preparing the financial statements, highlighting the company's development stage and associated risks - The company is in the development stage, has not yet commenced principal operations or generated revenue, and faces risks including permits, regulatory approvals, commodity price fluctuations, and financing availability[30][31] - Significant estimates in financial statements include fair values of equity instruments, impairment of intangible and long-lived assets, and income taxes, which may change as more current information becomes available[32][33] - The company accounts for warrants as either equity-classified or liability-classified based on specific terms and applicable authoritative guidance, with equity-classified warrants recorded in additional paid-in capital and liability-classified warrants remeasured at fair value each period[49][50] NOTE 3 – RELATIONSHIP WITH COTTONMOUTH AND PERMIAN BASIN PROJECT This note describes the strategic partnership with Cottonmouth Ventures, LLC, and their joint development of the Permian Basin Project - Cottonmouth Ventures, LLC, a subsidiary of Diamondback Energy, Inc., is Verde's second largest shareholder and is jointly developing the Permian Basin Project to convert associated natural gas into gasoline using Verde's STG+® technology[82][84] - In January 2025, Cottonmouth made a second investment of $50 million by purchasing 12,500,000 shares of Class A common stock at $4.00 per share, increasing its ownership and leading to changes in the company's charter and board composition[86][89] - Under the Joint Development Agreement (JDA), Cottonmouth reimburses Verde for 65% of approved development costs, including Front-End Engineering and Design (FEED) study costs for the Permian Basin Project[85] NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT This note details the company's property, plant, and equipment, including capitalized construction in progress and FEED costs for the Permian Basin Project Property, Plant, and Equipment, Net: | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :---------------- | :------------------ | | Construction in progress | $2,245,700 | $1,028,900 | | Property, plant and equipment, net | $2,315,784 | $1,096,270 | - Construction in progress assets more than doubled from $1,028,900 at December 31, 2024, to $2,245,700 at June 30, 2025, reflecting ongoing capitalized FEED costs for the Permian Basin Project[90] - As of June 30, 2025, capitalized FEED costs for the Permian Basin Project totaled $6,414,100, with $4,168,400 reimbursed by Cottonmouth[90] NOTE 5 - ACCRUED LIABILITIES This note provides a breakdown of the company's accrued liabilities, including compensation, legal fees, and excise tax Accrued Liabilities: | Accrued Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :---------------- | :------------------ | | Accrued compensation | $467,856 | $331,398 | | Accrued legal fees | $253,800 | $467,645 | | Accrued excise tax liability | $- | $978,412 | | Total accrued liabilities | $751,223 | $1,907,165 | - Total accrued liabilities decreased significantly from $1,907,165 at December 31, 2024, to $751,223 at June 30, 2025, primarily due to the payment of the accrued excise tax liability[91][93] - The accrued excise tax liability of $978,412 as of December 31, 2024, was paid in full during the six months ended June 30, 2025[92][93] NOTE 6 – RELATED PARTY TRANSACTIONS This note discloses transactions and relationships with related parties, including Holdings, Cottonmouth, and Chemex Global, LLC - Holdings maintains a majority ownership and control of the Board of Directors, with certain management holding Series A and Founder Incentive Units entitling them to participate in Holdings' earnings and distributions[94] - Cottonmouth is a related party due to its ownership interest in the Company's Class A common stock and its involvement in the Permian Basin Project[95] - The Company entered into a contract with Chemex Global, LLC for the Permian Basin Project's FEED study, with Chemex being a related party due to an unrelated preferred equity investment by Holdings' parent in Shaw Group (Chemex's parent) and a shared director[96] NOTE 7 – COMMITMENTS AND CONTINGENCIES This note outlines the company's contractual commitments, including operating leases, and any contingent liabilities Operating Lease Costs: | Lease Cost Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $94,313 | $84,104 | $188,626 | $163,909 | | Variable lease cost | $45,558 | $34,599 | $93,732 | $73,460 | | Total operating lease cost | $139,871 | $118,703 | $282,358 | $237,369 | - Total operating lease costs increased by 17.8% for the three months ended June 30, 2025, and by 18.9% for the six months ended June 30, 2025, compared to the respective prior year periods[100] - The company maintains a restricted cash balance of $100,000 as of June 30, 2025, and December 31, 2024, to support a letter of credit[101] NOTE 8 – STOCKHOLDERS' EQUITY This note details the components of stockholders' equity, including earn-out shares, stock options, and share-based compensation - Earn out shares for Holdings (3,500,000 Class C common stock) and Sponsor (3,234,375 Class A common stock) are subject to vesting based on Class A common stock VWAP reaching $15.00 and $18.00 within five years of the Business Combination[104][105] Share-based Compensation Expense: | Period | 2025 | 2024 | | :-------------------------------- | :--------- | :--------- | | Three Months Ended June 30 | $494,959 | $262,627 | | Six Months Ended June 30 | $911,509 | $511,328 | - The company awarded 2,726,306 additional stock options in 2025 with an exercise price of $4.76 per share, increasing total outstanding options to 5,950,499 as of June 30, 2025[110][111] NOTE 9 – WARRANTS This note describes the outstanding warrants, their exercise terms, and conditions for redemption - As of June 30, 2025, there were 15,383,263 warrants outstanding, each entitling the holder to purchase one share of Class A common stock at $11.50 per share, expiring on February 15, 2028[121][122] - Warrants are exercisable for cash only if an effective registration statement and current prospectus are available; otherwise, they may be exercised on a cashless basis under certain conditions[121] - The company may redeem warrants at $0.01 per warrant if the Class A common stock's reported last sale price equals or exceeds $18.00 for 20 trading days within a 30-trading day period, and a current registration statement is in effect[123] NOTE 10 – LOSS PER SHARE This note presents the calculation of basic and diluted loss per share for Class A common stock, explaining the impact of various equity instruments Loss Per Share of Class A Common Stock: | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to Verde Clean Fuels, Inc. | $(1,260,130) | $(903,707) | $(2,506,841) | $(1,676,078) | | Basic weighted-average shares outstanding | 18,836,078 | 6,297,162 | 16,833,316 | 6,235,439 | | Basic loss per share | $(0.07) | $(0.14) | $(0.15) | $(0.27) | | Diluted loss per share | $(0.07) | $(0.14) | $(0.15) | $(0.27) | - Basic and diluted loss per share for Class A common stock improved from $(0.14) to $(0.07) for the three months ended June 30, 2025, and from $(0.27) to $(0.15) for the six months ended June 30, 2025, primarily due to a significant increase in weighted-average shares outstanding[126] - Warrants, Sponsor earn out shares, and stock options were excluded from diluted EPS calculations as their inclusion would be anti-dilutive due to the net loss or exercise price exceeding the average stock price[126] NOTE 11 – INCOME TAX This note details the company's income tax position, including effective tax rates and the valuation allowance against deferred tax assets Effective Tax Rates: | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | 1.1% | 0.5% | | Six Months Ended June 30 | (0.5)% | 0.3% | - The company's effective tax rate for the six months ended June 30, 2025, was (0.5)%, compared to 0.3% in the prior year, differing significantly from the statutory rate due to losses allocated to noncontrolling interest and a full valuation allowance against deferred tax assets[132][133] - The company maintains a full valuation allowance against its deferred tax assets as of June 30, 2025, due to uncertainty regarding their realization[133] NOTE 12 - SEGMENT INFORMATION This note clarifies that the company operates as a single segment and provides a breakdown of significant expenses - The company operates in one operating segment, as its CEO (Chief Operating Decision Maker) reviews financial information on a combined basis for decision-making[139] Significant Segment Expenses: | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Outside services | $1,041,772 | $1,468,002 | $2,289,389 | $2,942,826 | | Employee compensation-related | $984,279 | $704,948 | $1,742,494 | $1,205,216 | | Share-based compensation | $494,959 | $262,627 | $911,509 | $511,327 | | Total operating loss | $3,239,562 | $3,161,794 | $6,420,390 | $6,037,005 | - Employee compensation-related expenses increased significantly by 39.6% for the three months and 44.6% for the six months ended June 30, 2025, compared to the prior year periods, while outside services decreased[140] NOTE 13 – SUBSEQUENT EVENTS This note discloses significant events occurring after the reporting period, including new legislative acts - On July 4, 2025, the 'One Big, Beautiful Bill Act' (OBBBA) was signed into federal law, introducing provisions for bonus depreciation, immediate expensing of research expenditures, and updates to disallowed interest calculations, which the company is currently evaluating for potential impact[141] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Verde Clean Fuels, Inc.'s financial condition and results of operations for the periods ended June 30, 2025, and June 30, 2024. It covers the company's business overview, recent developments, key factors influencing future results, components of operations, detailed financial comparisons, liquidity, and capital resources Overview This section provides a high-level summary of Verde Clean Fuels' business model and current operational status - Verde Clean Fuels is a clean fuels company focused on deploying its proprietary STG+® technology to convert syngas from diverse feedstocks into finished liquid fuels, specifically targeting associated natural gas to produce lower carbon intensity gasoline[145] - As of June 30, 2025, the company is still developing its first commercial production facility and has not yet generated revenue from its principal business activities, operating as a single reportable segment[146] Development This section outlines the historical development and investment in the company's core STG+® technology - The company acquired its STG+® technology from Primus Green Energy in 2020, which had invested over $110 million in its development, including a demonstration plant that operated for over 10,500 hours[147][148] Recent Developments This section highlights significant corporate and financial events that have occurred recently - In January 2025, Verde Clean Fuels completed a $50 million PIPE Investment with Cottonmouth Ventures, LLC, issuing 12,500,000 shares of Class A common stock at $4.00 per share[149] - Following the PIPE Investment, the company amended its charter to increase authorized Class C common stock and expand its Board of Directors from seven to eight, granting Cottonmouth certain director designation and board observer rights[151] Key Factors and Trends Influencing our Prospects and Future Results This section discusses the primary drivers and challenges that are expected to shape the company's future financial performance and operational success - A critical factor for future success is the successful construction and operation of the first commercial production plant utilizing the patented STG+® technology[153] - The Permian Basin Project, a joint development with Cottonmouth, aims to convert associated natural gas from Diamondback's operations into gasoline, mitigating flaring and producing a high-margin product[154][155] - The company is advancing development activities for the Permian Basin Project, including a FEED study, and expects commercial operations within 18-24 months after achieving Final Investment Decision (FID)[157][158] Key Components of Results of Operations This section breaks down the main categories of revenues and expenses that constitute the company's financial results - The company is an early-stage entity with no current revenues, expecting future revenue primarily from distributions and operator fees from the proposed Permian Basin Project[161][162] - General and administrative expenses include compensation, business development, legal, accounting, and insurance costs, with an expectation of higher public company compliance costs post-Business Combination[163] - Research and development expenses cover non-capitalized technology activities, including labor, engineering software, and demonstration plant operations and maintenance[164] Results of Operations This section provides a detailed comparison and analysis of the company's financial performance for the reported periods Operating Expenses and Other Income (Three Months Ended June 30): | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | General and administrative expenses | $3,094,320 | $2,988,774 | $105,546 | 3.5% | | Research and development expenses | $145,242 | $173,020 | $(27,778) | -16.1% | | Other (income) | $(665,363) | $(316,208) | $(349,155) | 110.4% | | Net loss | $(2,545,999) | $(2,831,720) | $285,721 | -10.1% | Operating Expenses and Other Income (Six Months Ended June 30): | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | | General and administrative expenses | $6,091,842 | $5,778,150 | $313,692 | 5.4% | | Research and development expenses | $328,548 | $258,855 | $69,693 | 26.9% | | Other (income) | $(1,195,606) | $(662,336) | $(533,270) | 80.5% | | Net loss | $(5,249,584) | $(5,360,803) | $111,219 | -2.1% | - Other income significantly increased by 110% for the three months and 81% for the six months ended June 30, 2025, primarily due to higher interest and dividend income from increased cash and cash equivalents following the PIPE Investment[172][177] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and its sources of funding - As of June 30, 2025, the company had $62.1 million in cash and cash equivalents, expected to fund operations and development for the next 12 months[180] - Additional capital will be required to complete the first commercial production plant, likely through equity, debt, or joint ventures, with uncertainty regarding availability and favorable terms[181][182] Summary Statement of Cash Flows (Six Months Ended June 30): | Cash Flow Activity | 2025 | 2024 | | :--------------------------------------- | :---------------- | :---------------- | | Net cash used in operating activities | $(5,883,483) | $(5,016,976) | | Net cash used in investing activities | $(551,927) | $(552,300) | | Net cash provided by financing activities | $49,446,108 | $- | | Net change in cash, cash equivalents and restricted cash | $43,010,698 | $(5,569,276) | Commitments and Contractual Obligations This section details the company's binding agreements and financial obligations that require future payments - The company maintained a restricted cash balance of $100,000 as of June 30, 2025, and December 31, 2024, to support a letter of credit[187] Off-Balance Sheet Arrangements This section discloses any financial arrangements that are not recorded on the company's balance sheet but could impact its financial condition - As of June 30, 2025, Verde Clean Fuels has not engaged in any off-balance sheet arrangements[188] Critical Accounting Policies and Estimates This section outlines the accounting policies and judgments that are most important to the portrayal of the company's financial condition and results - The preparation of financial statements requires management to make significant estimates and assumptions, particularly regarding fair values of equity instruments, impairment of assets, and income taxes, which could differ from actual results[189] Recent Accounting Pronouncements This section discusses new accounting standards and their potential impact on the company's financial reporting - The company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[77][80][191] - The SEC's climate-related disclosure mandate (Release No. 33-11275) is currently under an administrative stay, and its future effectiveness is uncertain, with the company monitoring its status[78] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Verde Clean Fuels, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Verde Clean Fuels, Inc. is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[192] ITEM 4. CONTROLS AND PROCEDURES Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting were identified during the period - The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[193] - No material changes in internal control over financial reporting occurred during the period covered by the report[194] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS Verde Clean Fuels, Inc. is not currently a party to any material pending legal proceedings and has not recognized any provisions for legal proceedings as of June 30, 2025 - The company is not a party to any material pending legal proceedings as of June 30, 2025[196] - No provisions for legal proceedings were recognized as of June 30, 2025[196] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the period ended December 31, 2024, have occurred[197] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This item is not applicable to the company for the reporting period ITEM 3. DEFAULTS UPON SENIOR SECURITIES There have been no defaults upon senior securities during the reporting period ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company for the reporting period ITEM 5. OTHER INFORMATION There is no other information to report under this item ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Exhibits include the Fifth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and certifications from the Principal Executive Officer and Principal Financial Officer[203] - The report also includes Inline XBRL Instance Document and related taxonomy extension documents[203] SIGNATURES The report is duly signed on behalf of Verde Clean Fuels, Inc. by its Chief Executive Officer, Ernest Miller, and Chief Financial Officer, George Burdette, on August 13, 2025 - The report was signed by Ernest Miller, Chief Executive Officer, and George Burdette, Chief Financial Officer, on August 13, 2025[207]