Verde Clean Fuels, Inc.
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
VGAS$1.00+1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001213900-24-027258
ITEM 7. Management’s Discussion And Analysis Of Financial Condition And Results Of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001628280-25-015480
ITEM 7. Management’s Discussion And Analysis Of Financial Condition And Results Of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 87 previous paragraphs and 92 current paragraphs.
42 unchanged; 20 reworded; 30 added; 23 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
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 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 identifying and evaluating 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.
Current report
As of December 31, 2024, the Company is still in the process of developing its first commercial production facility and has not derived revenue from its principal business activities. The Company is managed as an integrated business and there is only one reportable segment.
Current report
Development
Current report
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 10,500 hours of operation and is currently maintained in an idle state.
Current report
Recent Developments
Current report
PIPE Investment
Current report
On December 18, 2024, the Company entered into the Purchase Agreement with Cottonmouth, a subsidiary of Diamondback, pursuant to which the Company agreed to issue and sell the PIPE Shares to Cottonmouth in a private placement. The Company consummated the transactions contemplated by the Purchase Agreement on January 29, 2025.
Current report
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.
Current report
Restated Charter
Current report
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, 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 A&R 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 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.
Current report
Immediately prior to closing of the PIPE Investment, on January 29, 2025, the Company filed the Restated Charter with the Delaware Secretary of State.
Current report
Commencing and Expanding Commercial Operations
Current report
Concurrent with the Business Combination, Diamondback through its wholly-owned subsidiary, Cottonmouth, made a $20 million equity investment in Verde and entered into an equity participation right agreement pursuant to which Verde must grant Cottonmouth the right to participate and jointly develop facilities in the Permian Basin utilizing Verde’s STG+® technology for the production of gasoline derived from economically disadvantaged natural gas feedstocks. Diamondback is an independent oil and natural gas company headquartered in Midland, Texas, focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The production of gasoline from natural gas sourced from the Permian Basin is designed to allow Diamondback to mitigate the flaring of natural gas while also producing a high-margin product from natural gas streams that are subject to being price disadvantaged compared to other natural gas basins.
Current report
In February 2024, Verde and Cottonmouth entered into the JDA, which provides a pathway forward for the parties to reach final definitive documents and FID. The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close such as FID. The expectation for the project is to produce approximately 3,000 barrels per day of fully-refined gasoline utilizing Verde’s patented STG+® process. We expect that the proposed facility, which is to be located in the Permian Basin, 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.
Current report
In June 2024, the Company entered into a contract with Chemex for a FEED study related to the Permian Basin Project. In connection with entering into the JDA and the commencement of FEED, we began to incur development costs with respect to the project. Under the terms of the JDA, 65% of the approved development costs that we incur (which includes the FEED costs) are reimbursed by Cottonmouth. The construction in progress balance as of December 31, 2024 is comprised of capitalized FEED costs of $2,937,528 and is net of $1,908,628 of cost reimbursements from Cottonmouth. Upon FEED completion and reaching FID, it is anticipated that engineering, procurement and construction work will then commence. It is expected that commercial operations will be achieved with 18-24 months from commencement of engineering, procurement and construction work.
Current report
Income Tax Effects
Current report
We hold 29.8% 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.
Current report
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.
Current report
General and administrative expenses decreased approximately $0.3 million, or 3%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease was primarily due to $2.1 million of unit-based compensation expense recorded in the year ended December 31, 2023 associated with the accelerated vesting of all the outstanding Series A Incentive Units and Founder Incentive Units (each as defined in Note 9 in the accompanying Consolidated Financial Statements) as a result of the Business Combination, as well as decreases in miscellaneous general and administrative expenses of $0.4 million. These decreases were partially offset by higher employee compensation-related expense of $0.9 million attributable to an increase in headcount, higher outside services expense of $0.7 million and higher share-based compensation expense of $0.6 million associated with restricted stock units and stock options granted in 2023 and stock options granted in 2024.
Current report
R&D expenses for the year ended December 31, 2024 increased approximately $0.1 million, or 37%, as compared to the prior year. The increase was primarily due to higher employee compensation-related expense attributable to an increase in headcount, partially offset by lower outside services expense.
Current report
Other Income
Current report
Other income increased approximately $0.7 million for the year ended December 31, 2024 as compared to the prior year. The increase was primarily attributable to higher interest and dividend income earned as a result of our money market investment.
Current report
The provision for income taxes decreased approximately $0.1 million for the year ended December 31, 2024 as compared to the prior year. The decrease was primarily due to changes in estimations related to CENAQ’S fiscal year 2022 tax obligations. See Note 12 to the accompanying Consolidated Financial Statements for further information.
Current report
As of December 31, 2024, we are in process of developing our first commercial production plant and have not derived revenue from our principal business activities. We do not expect to generate any meaningful revenue unless and until we are able to commercialize our first production plant. Since inception, we have incurred operating losses and generated negative operating cash flows primarily attributable to our ongoing general and administrative expenses and development activities.
Current report
We expect that our cash and cash equivalents, including the net proceeds from the PIPE Investment received after December 31, 2024, will be sufficient to fund our cash requirements, including ongoing general and administrative expenses and planned development activities through the 2025 fiscal year. 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.
Current report
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 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.
Current report
Net cash used in operating activities decreased $0.2 million during the year ended December 31, 2024 as compared to the prior year. The decrease was primarily due to higher operating cash flows from interest and dividend income, partially offset by higher operating expenses, including employee compensation-related and outside services.
Current report
Net cash used in investing activities increased $0.8 million during the year ended December 31, 2024 as compared to the prior year. The increase was primarily attributable to development costs incurred in connection with the JDA upon commencement of FEED study in June 2024, partially offset by cash reimbursements for certain capital expenditures received from Cottonmouth. See Notes 4, 7 and 13 in the accompanying Consolidated Financial Statements for further information.
Current report
The Company had a restricted cash balance of $100,000 as of both December 31, 2024 and December 31, 2023. The restricted cash balance is maintained in support of a letter of credit.
Removed paragraphs (23)
Previous report
Overview
Previous report
We are a clean energy technology company specializing in the conversion of synthesis gas, or syngas, derived from diverse feedstocks, such as biomass or natural gas and other feedstocks, into liquid hydrocarbons that can be used as gasoline through an innovative and proprietary liquid fuels technology, the STG+® process. Through our STG+® process, we convert syngas into RBOB gasoline. We are focused on the development of technology and commercial facilities aimed at turning waste and other bio-feedstocks into a usable stream of syngas which is then transformed into a single finished fuel, such as gasoline, without any additional refining steps. The availability of biogenic MSW and the economic and environmental drivers that divert these materials from landfills will enable us to utilize these waste streams to produce renewable gasoline from modular production facilities with expected capacity to produce between approximately seven million to 30 million gallons of renewable gasoline per year.
Previous report
We are redefining liquid fuels technology through our proprietary and innovative STG+® process to deliver scalable and cost-effective renewable gasoline. We acquired our STG+® technology from Primus, who developed the patented STG+® technology to convert syngas into gasoline or methanol. Since acquiring the technology, we have adapted the application of our STG+® technology to focus on the renewable energy industry. This adaptation requires a third-party gasification system to produce acceptable synthesis gas from renewable feedstocks. Our proprietary STG+® system converts the syngas into gasoline.
Previous report
Protection and Continuous Development of Our Patented Technology
Previous report
Our ability to compete successfully will depend on our ability to protect, commercialize, and further develop our proprietary process technology and commercial facilities in a timely manner, and in a manner technologically superior to and/or are less expensive than competing processes.
Previous report
General and administrative expenses increased approximately $7.0 million, or 155%, from $4.5 million for the year ended December 31, 2022 to $11.5 million for the year ended December 31, 2023. The increase was primarily due to higher professional fees of $3.0 million primarily due to the Business Combination, higher share-based compensation expense of $1.5 million due to the acceleration of vesting of equity awards as a result of the consummation of the Business Combination, higher insurance expense of $1.4 million, and higher employee compensation and benefit costs of $0.4 million. Rent and depreciation expense and other general and administrative expenses also increased by $0.4 million and $0.3 million, respectively.
Previous report
R&D expense for the year ended December 31, 2023 was consistent with the prior year.
Previous report
The provision for income taxes of $166 thousand for the year ended December 31, 2023 was attributable to changes in estimates related to CENAQ’S 2022 tax obligation. There was no income tax provision recorded for the year ended December 31, 2022, as Intermediate was a limited liability company treated as a partnership for tax purposes, with each of its members accounting for its share of tax attributes and liabilities. See Note 9 to the Consolidated Financial Statements.
Previous report
In connection with entering into the JDA with Cottonmouth Ventures, a subsidiary of Diamondback, we will begin to incur development costs with respect to the project, prior to reaching a FID and entering into final definitive agreements, irrespective of whether these events occur. We are currently evaluating the impact that the JDA will have on our consolidated financial statements and liquidity. See Note 12 to the Consolidated Financial Statements.
Previous report
As our transaction with CENAQ only resulted in $37.3 million of net proceeds, we expect that we will only be able to construct one of our first four originally planned production facilities with these proceeds. The $37.3 million of net proceeds raised at closing of the transaction with CENAQ will contribute to the equity capital portion of our capital expenditure requirements through 2025. We also expect to earn interest income on the net proceeds raised at closing during the ongoing development and construction of our facilities through 2025, and that such interest income will be utilized towards capital expenditures or for general and administrative expenses. We also expect 70% of our total project capital requirements will be met with project financing, industrial revenue bonds, or pollution control bonds, or some combination of debt financing. While we have been in discussions with banks and other credit counterparties regarding project financing, industrial revenue bonds, or pollution control bonds, and these discussions have led to indications of debt financing equivalent to 70% of our capital expenditure requirements, there can be no assurance that we will be successful in obtaining such financing. The inability to obtain debt financing will adversely impact our ability to implement our business plan.
Previous report
In connection with the Closing, Sponsor was due $409,612 under existing promissory notes with CENAQ. On February 15, 2023, in lieu of repayment of the existing promissory notes with Sponsor, the Company entered into the New Promissory Note with the Sponsor totaling $409,612. The New Promissory Note canceled and superseded the existing promissory notes. The New Promissory note was non-interest bearing and the entire principal balance of the New Promissory Note was payable on or before February 15, 2024 in cash or shares at our election. On February 15, 2024, we settled the New Promissory Note through the issuance of 40,961 shares of Class A Common Stock at a conversion price of $10.00 per share and recorded an increase to additional paid-in capital of $409,608.
Previous report
Net cash used in operating activities increased $5.8 million to $9.1 million during the year ended December 31, 2023, as compared with net cash used in operating activities of $3.3 million during the year ended December 31, 2022. The increase primarily was due to a higher net loss of $13.2 million and higher payments for prepaid expenses of $0.3 million and income taxes of $0.3 million. These increases were partially offset by a lower non-cash impact for the change in the liability for contingent consideration of $6.3 million and stock-based compensation expense of $1.5 million, and other operating cash flows of $0.2 million.
Previous report
Net cash used in investing activities for the year ended December 31, 2023 was consistent with the prior year.
Previous report
Net cash provided by financing activities increased approximately $33.8 million to $37.5 million for the year ended December 31, 2023, as compared with net cash provided of $3.7 million in the year ended December 31, 2022. The increase was primarily due to the closing of the Business Combination on February 15, 2023, which raised $37.3 million in cash proceeds, partially offset by cash used for the payment of notes payable, the principal portion of finance lease liabilities, and deferred financing costs.
Previous report
Contingent Consideration
Previous report
Prior to the Business Combination, our parent entity (Holdings), on Intermediate’s behalf, had an arrangement payable to our Chief Executive Officer and a consultant whereby a contingent payment could become payable in the event that certain return on investment hurdles are met within five years of the closing date of the Primus asset purchase. We recognized the liability for such contingent payment on our balance sheet and remeasured the estimated payments under this arrangement and recorded our best estimate of amounts payable under such arrangement.
Previous report
Our contingent consideration liability was measured at fair value and based on significant inputs not observable in the market. As such, our contingent consideration liability was classified as a Level 3 fair value measurement within the fair value hierarchy. The valuation of contingent consideration used assumptions we believe would be made by a market participant. We assessed these estimates on an ongoing basis as additional data impacting the assumptions was obtained. Changes in the fair value of contingent consideration related to updated assumptions and estimates were recognized within the consolidated statements of operations.
Previous report
In evaluating the fair value information, considerable judgment was required to interpret the market data used to develop the estimates.
Previous report
The fair value of the contingent consideration as of the asset acquisition date was estimated using a concluded Enterprise Value of Intermediate’s business based on a weighting of derived value from the combination of two Income approaches to business valuation (Discounted Cash Flows and Relief from Royalty). Such business value underpinned a Monte Carlo Simulation valuation model to determine the ultimate contingent consideration liability balance.
Previous report
In measuring the estimated amount payable under this arrangement as of December 31, 2022, we took into consideration a discounted cash flow valuation of the business based on internal projections as well as the business valuation implied by the proposed business combination transaction with CENAQ, which implied a value to existing equity holders of $225,000,000, and also considered the expected timing of the transaction closing which was assumed to occur in the first quarter of 2023. Such implied value and timing underpinned a Monte Carlo Simulation valuation model utilized in the determination of the contingent consideration liability balance (as similarly used in the prior periods). We also updated the probability of payment due to the increased likelihood of forfeiture of the contingent consideration payment as a result of an amendment to the terms and conditions of this contingent payment during the quarter ended September 30, 2022, as discussed further below. Accordingly, we recorded a reduction in contingent consideration totaling $7,551,000 during the year ended December 31, 2022, resulting in a contingent consideration liability balance of $1,299,000 as of December 31, 2022.
Previous report
The contingent consideration liability determination using Monte Carlo Simulation was based on a number of assumptions including expected term, expected volatility, expected dividends, the risk-free interest rate, a discount rate (WACC), and probability of success, a specified contractual return hurdle (based on internal rate of return), and a contractual proportion of excess gain allocable to the contingent payment above the contractual return hurdle. See Note 10 to the Consolidated Financial Statements for further information.
Previous report
On August 5, 2022, Holdings entered into an agreement with our management and CEO whereby, upon closing of the business combination with CENAQ, the contingent consideration would be forfeited. Following the closing on February 15, 2023, the contingent consideration was forfeited, and this arrangement was terminated and no payments were made. Thus, we reversed the entire $1,299,000 during the three months ended March 31, 2023. There were no contingent consideration arrangements as of December 31, 2023.
Reworded paragraphs (20)
Previous wording
A critical step in our success will be the successful construction and operation of the first commercial production facility using our patented STG+® technology. We believe our commercialization activities are being completed at a pace that can support first commercial production of gasoline as early as 2026.
Current wording
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.
Previous wording
We are an early-stage company and our historical results may not be indicative of our future results. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or future results of operations.
Current wording
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.
Previous wording
We have not generated any revenue to date. We expect to generate a significant portion of our future revenue from the sale of renewable RBOB grade gasoline or gasoline derived from natural gas.
Current wording
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 will produce RBOB 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.
Previous wording
G&A expenses consist of compensation costs including salaries, benefits and stock-based compensation expense for personnel in executive, finance, accounting, and other administrative functions. General and administrative expenses also include legal fees, professional fees paid for accounting, auditing and consulting services, and insurance costs. Following the Business Combination, we incurred higher general and administrative expenses for public registrant costs for compliance with the regulations of the SEC and the Nasdaq Capital Market.
Current wording
General and administrative expenses consist of compensation costs including salaries, benefits and share-based compensation expense, for personnel in executive, finance, accounting and other administrative functions. General and administrative expenses also include 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 SEC and Nasdaq.
Previous wording
Our R&D expenses consist primarily of internal and external expenses incurred in connection with our R&D activities. These expenses include labor directly performed on our projects and fees paid to third parties working on and testing specific aspects of our STG+ design and gasoline product output. R&D costs have been expensed as incurred. We expect R&D expenses to grow as we continue to develop the STG+ technology and develop market and strategic relationships with other businesses.
Current wording
Our research and development (“R&D”) expenses consist primarily of internal and external expenses incurred in connection with our R&D activities. These expenses include labor directly performed on our projects and fees paid to third parties working on and testing specific aspects of our STG+® design and gasoline product output. R&D costs are expensed as incurred. We expect R&D expenses to grow as we continue to develop the STG+® technology and develop market and strategic relationships with other businesses.
Previous wording
Prior to the Business Combination, the Company had an arrangement payable to the Company’s CEO and a consultant whereby a contingent payment would become payable if certain return on investment hurdles are met within five years of an asset purchase arrangement. The contingent consideration was forfeited when the Company closed on the Business Combination.
Current wording
Prior to the Business Combination, we had an arrangement payable to our Chief Executive Officer and a consultant whereby a contingent payment would become payable if certain return on investment hurdles were met within five years of an asset purchase arrangement. The contingent consideration was forfeited in connection with the Closing.
Previous wording
Other income of $447 thousand for the year ended December 31, 2023 was primarily attributable to interest earned on our cash and cash equivalents.
Current wording
Other income primarily consists of interest and dividend income earned on our cash and cash equivalents balances.
Previous wording
The $1.3 million reduction to operating expenses associated with contingent consideration for the year ended December 31, 2023 reflects the reversal of the remaining accrual made by Holdings for certain contingent payments due to the contractual forfeiture of the payments following the close of the Business Combination on February 15, 2023. The reduction to operating expenses associated with contingent consideration of $7.6 million for the year ended December 31, 2022 was primarily due to a reduction in the probability of payment following an amendment to the terms and conditions of this arrangement during the third quarter of 2022, and due to the increased likelihood of closing the Business Combination with the SPAC, at which time the contingent payment would be forfeited. See Note 2 to the Consolidated Financial Statements.
Current wording
The $1.3 million decrease in contingent consideration for the year ended December 31, 2024 as compared to the prior year reflects the reversal during the year ended December 31, 2023 of the remaining accrual made by Holdings for certain contingent payments due to a contractual forfeiture of the payments following the close of the Business Combination on February 15, 2023. See Note 3 in the accompanying Consolidated Financial Statements for further information.
Previous wording
Interest expense was $237 thousand for the year ended December 31, 2023, which was primarily attributable to our land lease in Maricopa, Arizona, which was classified as a finance lease until the third quarter of 2023. See Note 5 to the Consolidated Financial Statements.
Current wording
Interest expense decreased approximately $0.2 million for the year ended December 31, 2024 as compared to the prior year. The decrease was primarily due to our former land lease in Maricopa, Arizona, which was classified as a finance lease until the third quarter of 2023, at which time the lease was modified and reclassified to an operating lease. The lease was exited on December 31, 2023.
Previous wording
We measure liquidity in terms of our ability to fund the cash requirements of our R&D activities and our near-term business operations, including our contractual obligations and other commitments. Our current liquidity needs primarily involve general and administrative and R&D activities for the ongoing commercialization of our first production facility and associated plant design.
Current wording
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.
Previous wording
To date, we have not generated any revenue, and as of December 31, 2023, we had cash and cash equivalents of $28.8 million. We do not expect to generate any meaningful revenue unless and until we are able to commercialize our first production facility. Since inception, we have incurred significant operating losses, have an accumulated deficit of $23.9 million as of December 31, 2023 and negative operating cash flow in both the years ended December 31, 2023 and December 31, 2022. Management expects that operating losses and negative cash flows may increase because of additional costs and expenses related to the development of technology and the development of market and strategic relationships with other companies. Our continued solvency is dependent upon our ability to obtain additional working capital to complete our product development and to successfully achieve commerciality of our projects.
Current wording
As of December 31, 2024, we had cash and cash equivalents of $19.0 million.
Previous wording
Following the Business Combination and the closing of the PIPE Financing, we received approximately $37.3 million in cash, net of approximately $10.0 million of transaction expenses and the repayment of approximately $3.75 million of capital contributions made by Holdings since December 2021. We expect to use such proceeds to fund our ongoing operations and R&D activities. The gross amount, before expenses, was composed of approximately $19.0 million released from CENAQ’s trust account, after payment of approximately $158.8 million to public stockholders who exercised Redemption Rights (representing a redemption rate of approximately 89.3%), and $32.0 million of proceeds raised from the PIPE Financing. We also received $91 thousand from the CENAQ operating account. We believe that based on our current level of operating expenses and currently available cash on hand, we will have sufficient funds available to cover R&D activities and operating cash needs for at least the next 12 months. However, as we have not yet developed a commercial production facility and have no meaningful revenue to date, we may require additional funds in future years. Our ability to raise funds through equity offerings may be limited by the significant number of shares that may be publicly sold. As the exercise price of our Public Warrants is $11.50 per share of Class A Common Stock, we do not expect that Public Warrants will be exercised in the foreseeable future. Our ability to fund R&D activities and our operating cash needs for several years does not depend on the proceeds we may receive as the result of exercises of outstanding Warrants.
Current wording
Net cash provided by financing activities was zero for the year ended December 31, 2024 as compared to $37.5 million for the prior year. Net cash provided by financing activities for the year ended December 31, 2023 consisted of the net proceeds received from the closing of the Business Combination and PIPE Financing. Following the Business Combination and the closing of the PIPE Financing, we received approximately $37.3 million in cash, net of approximately $10.0 million of transaction expenses and the repayment of approximately $3.8 million of capital contributions made by Holdings since December 2021. The gross amount, before expenses, was composed of approximately $19.0 million release from CENAQ’s trust account, after payment of approximately $158.8 million to public stockholders who exercised Redemption Rights (representing a redemption rate of approximately 89.3%), and $32.0 million of proceeds from the PIPE Financing. We also received $0.1 million from the CENAQ operating account.
Previous wording
In October 2022, we entered into a 25-year land lease in Maricopa, Arizona with the intent of building a biofuel processing facility. The commencement date of the lease occurred in February 2023 contemporaneous with us obtaining control of the identified asset. The lease was modified during the third quarter of 2023, resulting in a reclassification of the lease from finance to operating. We exited the lease as of December 31, 2023. See Note 5 to the Consolidated Financial Statements.
Current wording
In October 2022, we entered into a 25-year land lease in Maricopa, Arizona with the intent of building a biofuel processing facility. The commencement date of the lease occurred in February 2023 contemporaneous with us obtaining control of the identified asset. The lease was modified during the third quarter of 2023, resulting in a reclassification of the lease from finance to operating. We exited the lease as of December 31, 2023. See Note 8 to the accompanying Consolidated Financial Statements for further information.
Previous wording
Our consolidated financial statements have been prepared in conformity with GAAP as determined by the FASB. The preparation of consolidated financial statements in conformity with 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 condensed 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.
Current wording
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 condensed 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.
Previous wording
We have considered a mix of information in monitoring the risks associated with impairment through the use of various valuation analyses which were used to measure the estimated fair value of our stock-based incentive awards. In addition, the Company considered market transactions (such as the Business Combination). As discussed above, 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 our acquisition and we have continued to develop such technology and expand its application to other feedstocks.
Current wording
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.
Previous wording
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 under the quantitative analysis, intellectual property and patents are tested for impairment using a discounted cash flow approach and tested for impairment using the relief-from-royalty method. 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.
Current wording
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.
Previous wording
In connection with our valuation of our stock-based incentive units granted to management, we determined our estimated enterprise value utilizing a mix of market approach, discounted cash flow and relief from royalty methods in the determination and such estimated enterprise value exceeded the carrying amount of this intangible asset by a substantial amount.
Current wording
The Company also considered market transactions (such as the PIPE Investment and Business Combination) in qualitatively assessing impairment. We further determined our estimated enterprise value utilizing a mix of market approach, discounted cash flow and relief from royalty methods (obtained from various analyses including the determination of the grant date fair value of our securities in connection with the share-based compensation awarded in 2024 and 2023), and the estimated enterprise value exceeded the carrying amount of this intangible asset by a substantial amount.
Previous wording
During the years ended December 31, 2023 and December 31, 2022, we placed the most weight to the Business Combination in concluding that no impairment testing was required. We also leveraged the valuation analyses prepared in the measurement of our contingent consideration as discussed in detail above. Such transaction served to support management’s conclusion that fair value of our indefinite-lived intangible asset is greater than its carrying amount by a substantial amount, and no impairment charges were recognized in any of the periods presented. Additionally, during the year ended December 31, 2023, there were no events or changes in circumstances noted that would indicate that the carrying amount of the indefinite-lived intangible asset may not be recoverable.
Current wording
During the years ended December 31, 2024 and 2023, we placed the most weight on the PIPE Investment and Business Combination, respectively, in concluding that no impairment testing was required. Such transactions served to support management’s conclusion that fair value of our indefinite-lived intangible asset is greater than its carrying amount by a substantial amount, and no impairment charges were recognized in any of the periods presented. Additionally, during the year ended December 31, 2024, there were no events or changes in circumstances noted that would indicate that the carrying amount of the indefinite-lived intangible asset may not be recoverable.
Previous wording
See Note 3 – Significant Accounting Policies in the accompanying consolidated financial statements for information regarding accounting pronouncements.
Current wording
See Note 2 in the accompanying Consolidated Financial Statements for information regarding accounting pronouncements.
Previous wording
We qualify as an “emerging growth company” and under the JOBS 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.
Current wording
We qualify as an “emerging growth company” and under the JOBS Actare 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.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Successful Implementation of the first commercial facility
Previous report — wording carried elsewhere
Comparison for the years ended December 31, 2023 and 2022