Verde Clean Fuels Inc.

03/27/2026 | Press release | Distributed by Public on 03/27/2026 14:49

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion And Analysis Of Financial Condition And Results Of Operations.
The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read together with the audited consolidated financial statements and related notes that are included elsewhere in this Report, as well as with "Item 1. Business - Formation, Business Combination and Related Transactions." In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. See the sections entitled "Cautionary Note Regarding Forward-Looking Statements" and Item 1A. "Risk Factors" elsewhere in this Report. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A. "Risk Factors."
Overview
We own an innovative and proprietary gas-to-liquids processing technology capable of converting low-value or stranded feedstocks into higher-value clean transportation fuels. Our synthesis gas ("syngas")-to-gasoline plus (STG+®) process is designed to convert syngas, derived from a variety of feedstocks, including natural gas and biomass, into fully finished liquid fuels that require no additional refining. The STG+® technology is engineered for industrial-scale deployment and intended to be delivered in standardized modular units. The technology has been validated through a fully integrated demonstration plant that has completed over 10,000 hours of operation.
As of December 31, 2025, we are still in the process of deploying our STG+®technology and have not derived revenue from our principal business activities.
Development
We acquired our STG+®technology from Primus 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 10,000 hours of operation and is currently maintained in an idle state.
Recent Developments
On February 6, 2026, we announced the suspension of development of the Permian Basin Project (as defined below) primarily as a result of changing market conditions driven by increasing demand for natural gas in the Permian Basin.
On February 18, 2026, we announced a revised strategy to deploy our innovative and proprietary liquid fuels processing technology through capital-lite opportunities. The shift in strategy is intended to identify the most effective pathways to commercialize the STG+® technology with a disciplined approach to capital allocation. Related to our revised strategy, we have implemented and intend to continue implementing aggressive cost savings initiatives targeting a 50% reduction in costs in 2026 as compared to 2025. In connection with this initiative, our Board of Directors has created a Restructuring Committee and appointed director Jonathan Siegler as the sole member of that committee. The Restructuring Committee's mandate includes overseeing all aspects of our revised strategy and evaluation of strategic alternatives while ensuring we remain fully NASDAQ-compliant. In connection with our cost savings initiatives, we are streamlining our Board of Directors. Related thereto, current directors Martijn Dekker and Dail St. Claire will not be standing for re-election at the end of their term.
On March 20, 2026, we announced the appointment of George Burdette as CEO and engagement of Roth Capital Partners as financial advisor to assist the Company in evaluating strategic alternatives. These announcements are part of the Company's continued advancement of its previously announced restructuring and cost reduction initiatives. Mr. Burdette succeeds Ernie Miller who is stepping down from his role as CEO to pursue another opportunity. Mr. Miller will remain with the Company as a senior advisor. Mr. Burdette, who has served as the Company's CFO since October 2024, will also continue in that role.
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 an 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 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.
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" or "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 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." 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 deployment of our 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.
In February 2024, Verde and Cottonmouth entered into a joint development agreement ("JDA") related to 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 includes the FEED costs) are reimbursed by Cottonmouth.
The FEED study was completed in December 2025; however, the Permian Basin Project was suspended in February 2026. We believe the FEED study will continue to be useful as we explore other opportunities to deploy the STG+® technology.
Also in February 2026, we announced a revised strategy to deploy our innovative and proprietary liquid fuels processing technology through capital-lite opportunities. The shift in strategy is intended to identify the most effective pathways to commercialize the STG+® technology with a disciplined approach to capital allocation. Such opportunities include licensing technology and providing engineering, technical, and operational services.
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 that future revenue generation opportunities would result from capital-lite opportunities to deploy our STG+® technology. Such opportunities include licensing technology and providing engineering, technical, and operational services.
Expenses
General and Administrative Expense
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.
Research and Development Expense
Research and development expenses primarily consist 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
Other income primarily consists of interest and dividend income earned on our cash and cash equivalents.
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 Operations for the Years Ended December 31, 2025 and 2024
For The Year Ended
December 31,
(in thousands) 2025 2024
General and administrative expenses 11,927 $ 11,206
Research and development expenses 591 451
Impairment of property, plant and equipment 3,936 -
Total operating loss 16,454 11,657
Other (income) (2,425) (1,193)
Loss before income taxes (14,029) (10,464)
Income tax expense 106 51
Net loss $ (14,135) $ (10,515)
General and Administrative Expenses
General and administrative expenses increased approximately $721, or 6%, for the year ended December 31, 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 partially offset by lower outside services and insurance expenses.
Of our general and administrative expenses for the years ended December 31, 2025 and 2024, $242 and $316, 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 Expenses
Research and development expenses increased by $140, or 31%, for the year ended December 31, 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.
Impairment of Property, Plant and Equipment
On February 6, 2026, the Company announced the suspension of development of the Permian Basin Project primarily as a result of changing market conditions driven by increasing demand for natural gas in the Permian Basin. For the year ended December 31, 2025, the Company recorded an impairment of property, plant and equipment of $3,936, which represented the full value of the Company's construction in progress assets. Prior to the impairment, the Company's construction in progress assets were comprised of capitalized development costs (which include costs associated with the FEED study) related to the Permian Basin Project, net of costs reimbursable by Cottonmouth in accordance with the JDA.
Other Income
Other income increased by $1,232, or 103%, for the year ended December 31, 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.
Income Tax Expense
Income tax expense increased approximately $55, or 106%, for the year ended December 31, 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 Cash Flows for the Years Ended December 31, 2025 and 2024
For The Year Ended
December 31,
(in thousands) 2025 2024
Net cash used in operating activities $ (8,889) $ (8,880)
Net cash used in investing activities (2,386) (855)
Net cash provided by financing activities 49,446 -
Net change in cash, cash equivalents and restricted cash
$ 38,171 $ (9,735)
Cash Flows Used in Operating Activities
Net cash used in operating activities increased by $9 during the year ended December 31, 2025 as compared to the same period in 2024. The increase was primarily due to higher general and administrative and research and development expenses and higher working capital requirements largely resulting from cash paid for excise tax, which was largely 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 $1,531 during the year ended December 31, 2025 as compared to the same period in 2024. The increase was primarily due to higher development costs related to the Permian Basin Project, net of amounts reimbursable by Cottonmouth in accordance with the JDA. See Notes 3, 5, and 14 in the accompanying consolidated financial statements for further information.
Cash Flows From Financing Activities
Net cash provided by financing activities increased by $49,446 for the year ended December 31, 2025 as compared to the same period in 2024. The increase was due to the net proceeds received from the closing of the PIPE Investment in January 2025.
Liquidity and Capital Resources
We have not generated any revenue to date. We expect that future revenue generation opportunities would result from capital-lite opportunities to deploy our STG+® technology. Such opportunities include licensing technology and providing engineering, technical, and operational services.
As of December 31, 2025, we are still in the process of deploying our STG+® technology and have not derived revenue from our principal business activities. We do not expect to generate revenue unless and until we are able to deploy our STG+® technology. Since inception, we have incurred operating losses and generated negative operating cash flows that were primarily due to our general and administrative expenses and development activities.
We measure liquidity in terms of our ability to fund the cash requirements of our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs are primarily comprised of general and administrative expenses. As of December 31, 2025, we had cash and cash equivalents of $57,215. We expect that our cash and cash equivalents will be sufficient to fund our cash requirements, including ongoing general and administrative expenses, for the next 12 months from the reporting date.
Commitments and Contractual Obligations
As of December 31, 2025 and 2024, we had a restricted cash balance of $100. The restricted cash balance is maintained in support of a letter of credit.
Off-Balance Sheet Arrangements
As of December 31, 2025 and during the year then ended, we did not engage in any off-balance sheet arrangements, as defined in the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC").
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in conformity with U.S. GAAP as determined by the Financial Accounting Standards Board. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses and allocated charges during the reporting period. The following is a summary of certain critical accounting policies and
estimates that are impacted by judgments and uncertainties and under which different amounts might be reported using different assumptions or estimation methodologies.
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 statements 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 December 31, 2025 and 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.
Impairment of Long-Lived Assets
We evaluate 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.
Impairment of Intangible Assets
Substantially all of the value of the acquired assets from Primus was attributable to the intellectual property and patented technology. Such technology has remained our core asset since its acquisition and we have continued to develop such technology and expand its application to other feedstocks.
A qualitative assessment of indefinite-lived intangible assets is performed in order to determine whether further impairment testing is necessary. In performing this analysis, we consider macroeconomic conditions, industry and market considerations, current and forecasted financial performance, entity-specific events and changes in the composition or carrying amount of net assets. Following our analysis of qualitative impairment indicators, intellectual property is tested for impairment using certain valuation methods, such as the discounted cash flow or relief-from-royalty methods. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference.
Unit-Based Compensation
We apply the fair value method under ASC 718, "Compensation - Stock Compensation" ("ASC 718"), in accounting for unit-based compensation to employees. 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. The fair value of the equity award granted is estimated on the date of the grant. Performance-based units are 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. No service-based or performance-based incentive units were granted during the years ended December 31, 2025 and 2024.
Share-Based Compensation
We apply ASC 718 in accounting for share-based compensation to employees. We estimate the fair value of stock options on the date of grant using the Black-Scholes model. The fair value of RSUs granted is determined based on the value of our stock price on the date of the award subject to a discount for lack of marketability. Share-based compensation expense is recorded over the period during which the grantee is required to provide service in exchange for the award. Forfeitures are recognized as they occur.
The determination of fair value requires significant judgment and the use of estimates, particularly with regard to Black-Scholes assumptions such as stock price volatility and expected option term. We estimate the expected term of options granted based on peer benchmarking and expectations. We use the treasury yield curve rates for the risk-free interest rate in the option valuation model with maturities similar to the expected term of the options. Volatility is determined by reference to the actual volatility of several publicly traded peer companies that are similar to us in our industry sector. We do not anticipate paying cash dividends and therefore use an expected dividend yield of zero in the option valuation model. We assess whether a discount for lack of marketability is applied based on certain liquidity factors. All equity-based payment awards subject to graded vesting based only on a service condition are amortized on a straight-line basis over the requisite service periods.
There is substantial judgment in selecting the assumptions which we use to determine the fair value of such equity awards, and other companies could use similar market inputs and arrive at different conclusions.
Recent Accounting Pronouncements
See Note 2 in the accompanying Consolidated Financial Statements for information regarding accounting pronouncements.
JOBS Act
We qualify as an "emerging growth company" and under theJOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. CENAQ previously elected to irrevocably opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with another emerging growth company that has not opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used. Additionally, we are not required to, among other things, provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
Verde Clean Fuels Inc. published this content on March 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 27, 2026 at 20:49 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]