XCF Global, Inc. (SAFX)

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION
AND RESULTS OF OPERATIONS OF NEW XCF

Unless
otherwise stated herein or unless the context otherwise requires, the terms “we,” “us,” “our,”
“the Company”, “and “New XCF” refer to XCF Global, Inc. (formerly known
as Focus Impact BH3 NewCo, Inc.), a Delaware corporation, after giving effect to the Business Combination (as defined below) and following
the Closing Date, June 6, 2025. In addition, unless otherwise stated herein or unless the context otherwise requires (i) references to
“NewCo” refer to Focus Impact BH3 NewCo, Inc. prior to the Closing Date, (ii) references to “Legacy
XCF” refer to XCF Global Capital, Inc., a Nevada corporation, prior to the Closing Date and (iii) references to “Focus
Impact” refer to Focus Impact BH3 Acquisition Company, a Delaware corporation. In addition to historical information, this
discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause XCF’s
actual results to differ materially from management’s expectations. Factors which could cause such differences are discussed
herein and set forth in the “Risk Factors” section included elsewhere in this Quarterly Report on Form 10-Q.

Company
Overview

XCF
Global, Inc. (“New XCF” or the “Company”), a Delaware corporation, formerly known as Focus Impact BH3 NewCo,
Inc. was founded on March 6, 2024, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization
or similar business combination. Subsequent to the Business Combination (as defined below), the name was changed to XCF Global Inc.

In
connection with the completion of the Business Combination, Legacy XCF became a wholly owned subsidiary of New XCF. Legacy XCF was formed
in January 2023, was founded to develop, operate and invest in renewable energy assets and production facilities and will continue those
initiatives and business activities as the primary operating subsidiary of New XCF. Throughout 2023, Legacy XCF identified acquisition
targets in Nevada, Florida, and North Carolina as the foundation for the Company’s first production of sustainable aviation fuel
(“SAF”), a synthetic kerosene derived from waste- and residue-based feedstocks such as waste oils and fats, green and municipal
waste, and non-food crops and, currently, blended with conventional Jet-A fuel. We are committed to reducing the world’s carbon
footprint by meeting the growing demand for renewable fuels and will concentrate on the production of clean-burning, sustainable biofuels,
principally SAF. Though we are focused on promoting and accelerating the decarbonization of the aviation industry through SAF, we may,
opportunistically, produce other renewable products such as renewable diesel, a renewable fuel, and bio-based glycerol, also known as
natural glycerin, which is used in healthcare, food, and cosmetics industries. We believe there is a market opportunity in the aviation
and renewable sectors as a result of a combination of regulatory support, industry-led demand and end-user commitment. The actual market
environment may evolve differently from our expectations and is subject to a variety of external forces such as government regulation
and technological development that may impact the market opportunity. XCF intends to build a nationwide portfolio of SAF and renewable
fuels production facilities that use waste-and residue-based feedstocks at competitive production costs. We also intend to implement
a fully integrated business model from feedstock supply and production to marketing and sales of SAF. XCF is currently one of the few
publicly traded renewable fuels companies primarily focused on SAF and renewable fuels in the United States, with the stated intention
to be a majority SAF producer, distinguishing itself from peers that are predominantly legacy crude oil refiners.

44

Table of Contents

We
intend to scale and operate clean fuel production facilities engineered to the highest levels of compliance, reliability, and quality.
The Company owns New Rise Reno Renewables LLC, which owns and operates a renewable fuels facility, New Rise Reno, in McCarren, Nevada.
In February 2025, New Rise Reno started its ramp-up process and began initial production of SAF and renewable naphtha (a byproduct in
SAF production). First deliveries of near SAF and renewable naphtha began in March 2025. During the initial phase of production ramp-up,
New Rise Reno production facility operated at approximately 50% of nameplate capacity. Until SAF production is at nameplate capacity,
New Rise Reno is not deemed to be an operating facility and classifies as under construction until final project acceptance under New
Rise’s license agreement with Axens North America under the original intention of the SAF conversion. Such final project acceptance
has not yet been completed. While ramp-up processes are being undertaken and until final plant acceptance, management has made the determination
to temporarily produce and sell renewable diesel, a byproduct of SAF production, which can be achieved at approximately 2,000 barrels
per day, which is approximately 20% below nameplate capacity, and without any additional modifications to the facility. In May 2025,
New Rise Reno began selling renewable diesel under its Supply and Offtake Agreement with Phillips 66 (the “P66 Agreement”).
The P66 Agreement was canceled on May 1, 2026 and the Company entered into a a Renewable Fuel Tolling Agreement with BGN, an independent
global energy and commodities group, pursuant to which it is anticipated that the Company will provide the following services to BGN
both at its New Rise Reno facility and, potentially, a second, future XCF facility:

We
also own dormant biodiesel plants located in Fort Myers, Florida and Wilson, North Carolina that we intend to further build-out and reconstruct
into SAF, renewable fuels and/or associated SAF-related infrastructure. The Company is continuing to evaluate the role of each of the
Fort Myers, Florida and Wilson, North Carolina facilities within our broader SAF and biofuels value chain.

Company
Formation and Initial Acquisitions

New
XCF, formerly known as Focus Impact BH3 NewCo, Inc., was founded on March 6, 2024, for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business combination. Subsequent to the Business Combination (as defined
below), the name was changed to XCF Global Inc.

On
October 31, 2023, Legacy XCF entered into an asset purchase agreement with Southeast Renewables, LLC (“Southeast Renewables”)
to acquire its Wilson, North Carolina biodiesel plant assets for an aggregate purchase price of $100,000,000. Legacy XCF issued Southeast
Renewables 7,700,000 shares of Legacy XCF at an agreed conversion price of $10 per share ($77,000,000) and issued a convertible promissory
note (“Southeast Renewables Convertible Note”) in principal amount of $23,000,000, with a maturity date of October 31, 2024.
The Southeast Renewables Convertible Note accrues interest at the per annum rate of 8%. The Southeast Renewables Convertible Note can
be converted into shares of Legacy XCF common stock based on the outstanding principal and interest, divided by the conversion price.
The conversion price prior to a change of control is $10, and subsequent to a change of control is equal to the volume weighted average
price of the shares of common stock for the 20 days prior to the notice of conversion.

45

Table of Contents

On
December 29, 2023, Southeast Renewables exercised its right to convert the Southeast Renewables Convertible Note principal balance of
$23,000,000 plus accrued interest of $297,425 into 2,329,743 shares of Legacy XCF common stock.

At
the closing of the Business Combination, the 7,700,000 shares and 2,329,743 shares of Legacy XCF common stock issued to Southeast Renewables
were automatically converted into shares of New XCF Class A common stock at an exchange ratio of approximately 0.68627. The 7,700,000
and 2,329,743 Legacy XCF shares converted into 5,284,301 and 1,598,839 shares of New XCF Class A common stock upon closing.

On
October 31, 2023, Legacy XCF also entered into an asset purchase agreement with Good Steward Biofuels FL, LLC (“Good Steward”),
to acquire its Fort Myers, Florida biodiesel plant assets. Legacy XCF issued Southeast Renewables, the parent company of Good Steward,
9,800,000 shares of XCF common stock as partial consideration for the purchase, and also assumed certain liabilities, including a $356,426
loan made by GL Part SPV I, LLC (“GL”) to Southeast Renewables. GL was a shareholder of Legacy XCF and owns membership interests
in Southeast Renewables. The purchase price was $100,000,000 less $200,000 in notes payable, and loans assumed by Legacy XCF using a
conversion price of $10 per share.

At
the closing of the Business Combination, the 9,800,000 shares of Legacy XCF common stock issued to Good Steward were automatically converted
into shares of New XCF common stock at an exchange ratio of approximately 0.68627. The 9,800,000 Legacy XCF shares converted into 6,725,474
shares of New XCF Class A common stock upon closing.

The
Wilson, North Carolina plant and Fort Myers, Florida plant have been non-operational for over three years and five years, respectively.

On
January 23, 2025, and February 19, 2025, Legacy XCF completed its acquisitions (the “Acquisition”) of New Rise SAF Renewables
Limited Liability Company, (“New Rise SAF”) and New Rise Renewables, LLC. (“New Rise Renewables”) (collectively
the “New Rise Entities”), which became wholly owned subsidiaries of Legacy XCF. New Rise Renewables, a Delaware limited liability
company, was formed on September 23, 2016, for the purpose of owning 100% of New Rise Renewables Reno, LLC (“New Rise Reno”).
New Rise Renewables is focused on producing renewable fuels to lower the world’s carbon footprint by meeting the growing demand
for renewable fuels and will concentrate on the production of clean-burning, sustainable biofuels, principally SAF. The New Rise Reno
facility is built on a 10-acre parcel located within McCarran, Nevada.

Recent
Developments

On
July 9, 2026, the Company’s flagship refinery, New Rise Renewables Reno (“NRRR”), became fully operational and commenced with
the production, initially, of Renewable Diesel and it is estimated that in fourth quarter of 2026 the refinery will produce SBC for use
in SAF.  Prior to the first shipment of Renewable Diesel on August 6, 2026, the refinery had produced approximately 886,400 gallons
of Renewable Diesel.  On August 6, 2026, NRRR began fulfilling customer orders of approximately 55,000 gallons per day, with fulfillment
of approximately 90,000 gallons per day at nameplate capacity, NRRR invoices its customers on the same day that product is loaded in
tanker trucks or railcars, with payment terms of net 10 days.

Renewable
Fuels Production

XCF’s
current production facility in Reno, Nevada was converted to SAF production in October 2024 and began initial production of SAF and renewable
naphtha (a byproduct in SAF production) in February 2025. First deliveries of neat SAF and renewable naphtha produced at New Rise Reno
began in March 2025 under our existing Supply and Offtake Agreement w

[Excerpt truncated for page length; source filing is linked above.]

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

The
following information should be read in conjunction with the Financial Statements, including the notes thereto, included elsewhere in
this Form 10-K. This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results
and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth herein and elsewhere in this Form 10-K.

Company
Overview

XCF,
formerly known as Focus Impact BH3 NewCo, Inc. was founded on March 6, 2024, for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination. Subsequent to the Business Combination, the name was changed
to XCF Global, Inc.

In
connection with the completion of the Business Combination, Legacy XCF became a wholly owned subsidiary of XCF. Legacy XCF was formed
in January 2023, was founded to develop, operate and invest in renewable energy assets and production facilities and will continue those
initiatives and business activities as the primary operating subsidiary of XCF. Throughout 2023, Legacy XCF identified acquisition targets
in Nevada, Florida, and North Carolina as the foundation for the Company’s first production of SAF, a synthetic kerosene derived
from waste- and residue-based feedstocks such as waste oils and fats, green and municipal waste, and non-food crops and, currently, blended
with conventional Jet-A fuel. We are committed to reducing the world’s carbon footprint by meeting the growing demand for renewable
fuels and will concentrate on the production of clean-burning, sustainable biofuels, principally SAF. Though we are focused on promoting
and accelerating the decarbonization of the aviation industry through SAF, we may, opportunistically, produce other renewable products
such as renewable diesel, a renewable fuel, and bio-based glycerol, also known as natural glycerin, which is used in healthcare, food,
and cosmetics industries. We believe there is a market opportunity in the aviation and renewable sectors as a result of a combination
of regulatory support, industry-led demand and end-user commitment. The actual market environment may evolve differently from our expectations
and is subject to a variety of external forces such as government regulation and technological development that may impact the market
opportunity. XCF intends to build a nationwide portfolio of SAF and renewable fuels production facilities that use waste-and residue-based
feedstocks at competitive production costs. We also intend to implement a fully integrated business model from feedstock supply and production
to marketing and sales of SAF. XCF is currently one of the few publicly traded renewable fuels companies primarily focused on SAF and
renewable fuels in the United States, with the stated intention to be a majority SAF producer, distinguishing itself from peers that
are predominantly legacy crude oil refiners.

We
intend to scale and operate clean fuel production facilities engineered to the highest levels of compliance, reliability, and quality.
The Company owns New Rise Reno Renewables LLC, which owns and operates a renewable fuels facility, New Rise Reno, in McCarren, Nevada.
In February 2025, New Rise Reno started its ramp-up process and began initial production of SAF and renewable naphtha (a byproduct in
SAF production). First deliveries of near SAF and renewable naphtha began in March 2025. During the initial phase of production ramp-up,
New Rise Reno production facility operated at approximately 50% of nameplate capacity. Until SAF production is at nameplate capacity,
New Rise Reno is not deemed to be an operating facility and classifies as under construction until final project acceptance under New
Rise’s license agreement with Axens North America under the original intention of the SAF conversion, such as meeting ASTM 7566
specifications for synthetic blending component standards to be blended with conventional jet fuel. Such final project acceptance has
not yet been completed.

While ramp-up processes are being undertaken and until final plant acceptance, management has made the determination
to temporarily produce and sell renewable diesel, a byproduct of SAF production, which can be achieved at approximately 2,000 barrels
per day, which is approximately 20% below nameplate capacity, and without any additional modifications to the facility. In May 2025,
New Rise Reno began selling renewable diesel under its Supply and Offtake Agreement with Phillips 66 (the “P66 Agreement”).

We
also own dormant biodiesel plants located in Fort Myers, Florida and Wilson, North Carolina that we are considering whether to further build-out and reconstruct
into SAF, renewable fuels and/or associated SAF-related infrastructure. The Company is continuing to evaluate the role of each of the
Fort Myers, Florida and Wilson, North Carolina facilities within our broader SAF and biofuels value chain.

68

Company
Formation and Initial Acquisitions

XCF,
formerly known as Focus Impact BH3 NewCo, Inc., was founded on March 6, 2024, for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business combination. Subsequent to the Business Combination, the name was
changed to XCF Global, Inc.

On
October 31, 2023, Legacy XCF entered into an asset purchase agreement with Southeast Renewables, LLC (“Southeast Renewables”)
to acquire its Wilson, North Carolina biodiesel plant assets for an aggregate purchase price of $100,000,000. Legacy XCF issued Southeast
Renewables 7,700,000 shares of Legacy XCF at an agreed conversion price of $10 per share ($77,000,000) and issued a convertible promissory
note (“Southeast Renewables Convertible Note”) in principal amount of $23,000,000, with a maturity date of October
31, 2024. The Southeast Renewables Convertible Note accrues interest at the per annum rate of 8%. The Southeast Renewables Convertible
Note can be converted into shares of Legacy XCF common stock based on the outstanding principal and interest, divided by the conversion
price. The conversion price prior to a change of control is $10, and subsequent to a change of control is equal to the volume weighted
average price of the shares of common stock for the 20 days prior to the notice of conversion.

On
December 29, 2023, Southeast Renewables exercised its right to convert the Southeast Renewables Convertible Note principal balance of
$23,000,000 plus accrued interest of $297,425 into 2,329,743 shares of Legacy XCF common stock.

At
the closing of the Business Combination, the 7,700,000 shares and 2,329,743 shares of Legacy XCF common stock issued to Southeast Renewables
were automatically converted into shares of XCF Class A common stock at an exchange ratio of approximately 0.68627. The 7,700,000 and
2,329,743 Legacy XCF shares converted into 5,284,301 and 1,598,839 shares of XCF Class A common stock upon closing.

On
October 31, 2023, Legacy XCF also entered into an asset purchase agreement with Good Steward Biofuels FL, LLC (“Good Steward”),
to acquire its Fort Myers, Florida biodiesel plant assets. Legacy XCF issued Southeast Renewables, the parent company of Good Steward,
9,800,000 shares of XCF common stock as partial consideration for the purchase, and also assumed certain liabilities, including a $356,426
loan made by GL to Southeast Renewables. GL was a shareholder of Legacy XCF and owns membership interests in Southeast Renewables. The
purchase price was $100,000,000 less $200,000 in notes payable, and loans assumed by Legacy XCF using a conversion price of $10 per share.

At
the closing of the Business Combination, the 9,800,000 shares of Legacy XCF common stock issued to Good Steward were automatically converted
into shares of XCF common stock at an exchange ratio of approximately 0.68627. The 9,800,000 Legacy XCF shares converted into 6,725,474
shares of XCF Class A common stock upon closing.

The
Wilson, North Carolina plant and Fort Myers, Florida plant have been non-operational for over three years and five years, respectively.

On
January 23, 2025, and February 19, 2025, Legacy XCF completed its acquisitions (the “Acquisition”) of New Rise SAF
Renewables Limited Liability Company, (“New Rise SAF”) and New Rise Renewables, LLC. (“New Rise Renewables”)
(collectively the “New Rise Entities”), which became wholly owned subsidiaries of Legacy XCF. New Rise Renewables,
a Delaware limited liability company, was formed on September 23, 2016, for the purpose of owning 100% of New Rise Reno. New Rise Renewables
is focused on producing renewable fuels to lower the world’s carbon footprint by meeting the growing demand for renewable fuels
and will concentrate on the production of clean-burning, sustainable biofuels, principally SAF. The New Rise Reno facility is built on
a 10-acre parcel located within McCarran, Nevada.

69

Recent
Developments

Proposed
Transaction with Southern, DEVS and EEME

On
January 26, 2026, XCF, entered into the term sheet with Southern, DEVS, and EEME, which sets forth the principal terms and conditions
of the Proposed Transaction. Pursuant to the Term Sheet, and subject to the finalization of mutually agreeable merger structure and definitive
transaction documents and ultimately the satisfaction of certain closing conditions, it is expected that Southern and DEVS will each
merge with wholly-owned subsidiaries of XCF, with Southern and DEVS surviving, and their respective stockholders receiving shares of
Common Stock of XCF, resulting in Southern and DEVS becoming wholly-owned subsidiaries of XCF.

In
connection with and to support the Proposed Transaction and subject to the terms and conditions set forth in the Term Sheet, XCF
agreed to invest $10 million to convert and build out its New Rise Reno facility for the Plant Conversion, to be funded through the
sale by XCF to EEME of $10 million of Common Stock; provided that in no event shall XCF issue to EEME, nor shall EEME (i) acquire
more than 41,639,170 shares of XCF’s common stock pursuant to this Term Sheet or (ii) acquire or to otherwise become, directly
or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) of a number of shares of Common Stock in excess of 19.99% of the issued and outstanding shares
of Common Stock as of the date hereof until such time as XCF has obtain stockholder approval for such issuance (the “Share
Cap”) which XCF obtained on March 6, 2026. Subsequent to the execution of the Term Sheet, EEME has purchased 69,000,000 million shares of Common Stock for
$6,900,000. The issuance and sale to EEME of the remaining 31,000,000 shares of Common Stock is expected to be consummated
periodically during the period ending the week of March 31, 2026, although there can be no assurances in this
regard. EEME is expected to have customary demand and piggy-back registration
rights and will not be subject to any lock-up or other transfer restrictions (other than as imposed by applicable securities laws or
underwriters.) EEME’s obligation to acquire such shares is independent of the remainder of the proposed Transaction
contemplated by the Term Sheet. The offer and sale of the shares of XCF common stock to EEME, will be made in reliance upon Section
4(a)(2) under the Securities Act, or upon such other exemption or exclusion from the registration requirements of the
Securities Act as may be available with respect to any or all of the transactions with the EEME to be made under the Term
Sheet.

On March 6, 2026, XCF held a Special Meeting of Shareholders, at which
the Shareholders approved the potential issuance of 19.99% or more of XCF’s issued and outstanding Common Stock to a

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]