Verde Clean Fuels (VGAS) risk factors, FY2024 10-K

Risks Related to Our Business, Operations and Industry

1. 01Our commercial success depends on our ability to develop and operate plants for the commercial production of gasoline
2. 02Our limited history, lack of revenue and limited liquidity makes it difficult to evaluate our business and prospects and may increase the risks associated with your investment
3. 03We are a development stage company with a history of net losses, we are currently not profitable and we may not achieve or maintain profitability and if we incur substantial losses, we may have to curtail our operations, which may prevent us from successfully operating and expanding our business
4. 04Significant capital investment is required to develop and conduct our operations and we intend to raise additional funds and these funds may not be available with acceptable terms or may not be available when needed
5. 05In order to construct new commercial production plants, we typically face a long and variable design, fabrication, and construction development cycle that requires significant resource commitments and may create fluctuations in whether and when any revenue is recognized, and may have an adverse effect on our business
6. 06tracts may be purchased by us. If we are unable to identify such suitable tracts of real property, or if we are unable to purchase or lease such tracts at commercially reasonable rates and under terms favorable to us, our business may be adversely affected
7. 07We have entered into relatively new markets, including renewable natural gas, renewable gasoline and biofuel, and these new markets are highly volatile and have significant risk associated with current market conditions
8. 08Fluctuations in the price of product inputs, including natural gas or renewable feedstocks, may affect our cost structure
9. 09Inflation may adversely affect us by increasing costs of our business
10. 10We may face substantial competition from companies with greater resources and financial strength, which could adversely affect our performance and growth
11. 11Our proposed growth projects may not be completed or, if completed, may not perform as expected and our project development activities may consume a significant portion of our management’s focus, and if not successful, reduce any anticipated profitability
12. 12We may not be able to develop, maintain and grow strategic relationships, identify new strategic relationship opportunities, or form strategic relationships, in the future
13. 13We may acquire or invest in additional companies, which may divert our management’s attention, result in additional dilution to our stockholders, and consume resources that are necessary to sustain our business
14. 14Fluctuations in the price and availability of energy to power our facilities may harm our performance
15. 15We may be subject to liabilities and losses that may not be covered by insurance
16. 16We may be unable to successfully perform under future supply and distribution agreements to provide our gasoline, which could harm our commercial prospects
17. 17Our facilities and processes may fail to produce gasoline at the volumes, rates and costs we expect
18. 18Even if we are successful in completing the first commercial production plant and consistently producing renewable gasoline on a commercial scale, we may not be successful in commencing and expanding commercial operations to support the growth of our business
19. 19Our actual costs may be greater than expected in developing our commercial production plants or growth projects, causing us to realize significantly lower profits, if any, or greater losses
20. 20Business interruptions, including those related to the widespread outbreak of an illness, pandemic (such as COVID-19), adverse weather conditions, manmade problems such as terrorism and other catastrophic events, may have an adverse impact on our business and results of operations
21. 21Disruption in the supply chain, including increases in costs, shortage of materials or other disruption of supply, or in the workforce could materially adversely affect our business
22. 22Our business and prospects depend significantly on our ability to build our brand and we may not succeed in continuing to establish, maintain, and strengthen our brand, and our brand and reputation could be harmed by negative publicity regarding our company or products
23. 23we may not timely or successfully register our trademarks. If we do not adequately protect our rights in our trademarks from infringement and unauthorized use, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business
24. 24We may be unable to qualify for existing federal and state level low-carbon fuel credits and other carbon credits and the carbon credit markets may not develop as quickly or efficiently as we anticipate or at all
25. 25Transition risks related to climate change could have a material and adverse effects on us
26. 26Liabilities and costs associated with hazardous materials, contamination and other environmental conditions may require us to conduct investigations or remediation or expose us to other liabilities, both of which may adversely impact our operations and financial condition
27. 27Increased focus on sustainability and ESG matters could impact our operations and expose us to additional risks
28. 28Third parties on whom we may rely for transportation services are subject to complex federal, state and other laws that could adversely affect our operations
29. 29We may not be able to obtain, or comply with terms and conditions for, government grants, loans, and other incentives for which we may apply for in the future, which may limit our opportunities to expand our business
30. 30subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls
31. 31We face risks associated with increased geopolitical uncertainty, including as a result of evolving domestic and foreign tariff policies
32. 32Concerns regarding the environmental impact of renewable gasoline production could affect public policy which could impair our ability to operate at a profit and substantially harm our revenues and operating margins
33. 33From time to time, we may be involved in litigation, regulatory actions or government investigations and inquiries, which could have an adverse impact on our financial results and consolidated financial position
34. 34Changes in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect our business, investments and results of operations
35. 35Changes in tax laws or the imposition of new or increased taxes may adversely affect our financial condition, results of operations and cash flows
36. 36The new 1% U.S. federal excise tax on repurchases of corporate stock included in the IR Act could cause a reduction in the value of our Class A Common Stock

Risks Related to Management and Our Employees

1. 37If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our development and harm our research, make it more difficult to pursue partnerships or develop our own products or otherwise have a material adverse effect on our business
2. 38Our management team has limited experience in operating a public company
3. 39The loss of our senior management or technical personnel could adversely affect our ability to successfully operate our business
4. 40Agreements containing confidentiality provisions and restrictive covenants with employees, contractors, consultants and other third-parties may not adequately prevent disclosures of trade secrets and other proprietary information
5. 41We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information or alleged trade secrets of third parties or competitors or are in breach of noncompetition or non-solicitation agreements with our competitors or their former employers

Risks Related to Ownership of Our Securities and Our Capital Structure

1. 42Future sales and issuances of shares of our Class A Common Stock could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall
2. 43Future sales of a substantial number of shares of our Class A Common Stock, or the perception in the market that the holders of a large number of shares of Class A Common Stock intend to sell shares, could reduce the market price of our Class A Common Stock
3. 44We may issue additional shares of Class A Common Stock under an employee incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks
4. 45Holdings owns the majority of our voting stock and has the right to appoint a majority of our board members, and our interests may conflict with those of other stockholders
5. 46Cottonmouth owns a significant percentage of our Class A Common Stock following the consummation of the PIPE Investment and will be able to exert significant control over matters subject to stockholder approval
6. 47other stockholders. The significant concentration of stock ownership may adversely affect the per-share trading price of our Class A Common Stock due to investors’ perception that conflicts of interest may exist or arise
7. 48There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq
8. 49Because there are no current plans to pay cash dividends on shares of Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your shares of Class A Common Stock for a price greater than that which you paid for it
9. 50The trading price of our securities is limited and volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control
10. 51If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Class A Common Stock adversely, the price and trading volume of our Class A Common Stock could decline
11. 52We are a holding company, and our only material asset is our equity interest in OpCo, and we will accordingly be dependent upon distributions from OpCo to pay taxes, make payments under the Tax Receivable Agreement and cover our corporate and other overhead expenses
12. 53In the event that payment obligations under the Tax Receivable Agreement are accelerated in connection with certain mergers, other forms of business combinations or other changes of control, the consideration payable to holders of our Class A Common Stock could be substantially reduced
13. 54In certain circumstances, OpCo will be required to make tax distributions to the OpCo unitholders, including us, and the tax distributions that OpCo will be required to make may be substantial. The OpCo tax distribution requirement may complicate our ability to maintain our intended capital structure
14. 55The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies
15. 56We are a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our Class A Common Stock less attractive to investors
16. 57We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for exemptions from certain corporate governance requirements, and as a result, you do not have the same protections afforded to stockholders of companies that are not exempt from such corporate governance requirements
17. 58restated, modified, supplemented or waived from time to time), (v) any action asserting a claim against us or any director, officer, employee or agent of ours that is governed by the internal affairs doctrine or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL
18. 59We will be required to make payments under the Tax Receivable Agreement for certain tax benefits that it may claim, and the amounts of such payments could be significant
19. 60In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreement
20. 61We will not be reimbursed for any payments made under the Tax Receivable Agreement in the event that any tax benefits are subsequently disallowed

Risks Related to Financial and Accounting Matters

1. 62accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results, and we may face litigation as a result
2. 63There are inherent limitations in all control systems, and misstatements due to error or fraud that could seriously harm our business may occur and not be detected
3. 64If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our operating results could be adversely affected
4. 65We may in the future use hedging arrangements to mitigate certain risks, but the use of such derivative instruments could have a material adverse effect on our results of operations

Risks Related to Information Technology, Intellectual Property and Cybersecurity

1. 66Failure to protect our intellectual property, inability to enforce our intellectual property rights or loss of our intellectual property rights through costly litigation or administrative proceedings, could adversely affect our ability to compete and our business
2. 67If we fail to comply with our obligations under license or technology agreements with third parties or are unable to license rights to use technologies on reasonable terms, we may be required to pay damages and could potentially lose license rights that are critical to our business
3. 68Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements
4. 69Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our technology
5. 70We may be subject to intellectual property rights claims by third parties, which could be costly to defend, could require us to pay significant damages and, if we are unsuccessful in defending such claims, could limit our ability to use certain technologies and compete
6. 71Our ability to successfully maintain and upgrade our information technology systems, and to respond effectively to failures, disruptions, compromises or breaches of our information technology systems, may adversely affect our competitiveness and profitability
7. 72adverse effect on our business, financial condition and results of operations. Cyber-attacks are of ever-increasing levels of sophistication, and despite our security measures, our IT and infrastructure may be vulnerable to such attacks or may be breached, including due to employee error or malfeasance
8. 73Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss