XCF Global, Inc. (SAFX) Business

Business
Combination

On
March 11, 2024, Focus Impact, NewCo, Merger Sub 1, Merger Sub 2, and Legacy XCF entered into the Business Combination Agreement,
pursuant to which Focus Impact agreed to combine with Legacy XCF in a series of transactions that would result in NewCo becoming a
publicly traded company (collectively, the “Business Combination”). On June 6, 2025 (the “Closing
Date”), the parties to the Business Combination Agreement completed the Business Combination. In connection with the
closing of the Business Combination, NewCo changed its name to “XCF Global, Inc.” The terms of the Business Combination
Agreement provided that the Business Combination would be completed on the Closing Date in two steps, with (i) Focus Impact merging
with and into Merger Sub 1 (the “NewCo Merger”), with Merger Sub 1 surviving the NewCo Merger as a direct wholly
owned subsidiary of NewCo and (ii) immediately following the NewCo Merger, Merger Sub 2 merging with and into XCF (the
“Company Merger”), with XCF surviving the Company Merger as a direct wholly owned subsidiary of NewCo. Pursuant
to the terms of the Business Combination Agreement: in connection with the completion of the NewCo Merger (i) each share of Focus
Impact Class A common stock, par value $0.0001 per share outstanding immediately prior to the effectiveness of the NewCo Merger was
converted into the right to receive one share of XCF Class A common stock, par value $0.0001 per share (“XCF Common
Stock”) (rounded down to the nearest whole share), (ii) each share of Focus Impact Class B common stock, par value $0.0001
per share outstanding immediately prior to the effectiveness of the NewCo Merger was converted into the right to receive one share
of XCF Common Stock and (iii) each warrant of Focus Impact outstanding immediately prior to the effectiveness of the NewCo Merger
was converted into the right to receive one XCF Warrant, with XCF assuming Focus Impact’s rights and obligations under the
existing warrant agreement; and in connection with the completion of the Company Merger, each share of common stock of XCF
outstanding immediately prior to the effectiveness of the Company Merger was converted into the right to receive shares of XCF
Common Stock (rounded down to the nearest whole share) determined in accordance with the Business Combination Agreement based on a
pre-money equity value of XCF of $1,750,000,000, subject to adjustments for net debt and transaction expenses, and a price of $10.00
per share of XCF Common Stock.

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At
the closing of the Business Combination, NewCo issued an aggregate of 142,120,364 shares of XCF Common Stock to equity holders of XCF
in exchange for their equity interests in XCF. Subsequent to the Closing, XCF Global, Inc. issued an additional 10,268 shares to account
for final closing balances bringing to the total issued aggregate shares in connection with the closing of the Business Combination to
be 142,130,632 shares of XCF Common Stock. In addition, pursuant to certain non-redemption agreements between Focus Impact and certain
Focus Impact stockholders (the “Non-Redeeming Stockholders”), the Non-Redeeming Stockholders received 622,109 shares
of XCF Common Stock at the closing of the Business Combination. An aggregate of 1,200,000 shares of XCF Common Stock were also issued
at the closing of the Business Combination to Polar Multi-Strategy Master Fund, pursuant to the terms of a subscription agreement, dated
as of November 3, 2025 between Focus Impact and Polar Multi-Strategy Master Fund.

As
of the closing of the Business Combination and after giving effect to the NewCo Merger and Company Merger, XCF had approximately 149.3
million shares of XCF Common Stock outstanding. On a fully diluted basis, calculated using the treasury stock method and assuming the
net exercise of all warrants that are in-the-money based on the closing price of Focus Impact on June 6, 2025, the fully diluted share
count was approximately 157.8 million shares. The fully diluted share count does not include any out-of-the-money warrants. This share
count is provided solely for the purpose of estimating market capitalization and may differ from accounting treatment under GAAP or from
other financial metrics used in our public filings.

Proposed
Transaction with Southern, DEVS and EEME

On
January 26, 2026, XCF, entered into a binding term sheet (the “Term Sheet”) with Southern Energy Renewables, Inc.,
a Louisiana corporation (“Southern”), DevvStream Corp., an Alberta corporation (“DEVS”), and EEME
Energy SPV I LLC (“EEME”), which sets forth the principal terms and conditions of a proposed business combination
and related financing transactions (collectively, 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 SAF blending and related corporate purposes (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 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 during the week of March 31, 2026, but 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 (the “Special Meeting”). At the Special Meeting, the Shareholders approved
the potential issuance of 19.99% or more of XCF’s issued and outstanding Common Stock as of January 26, 2026 to a single investor,
thus removing the Share Cap.

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The
Term Sheet provides that the Board of Directors of XCF (the “Board”) post-closing will be comprised of four members
designated by XCF (including XCF’s Chief Executive Officer, Chris Cooper, as chair), two members designated by Southern, and one
member designated by DEVS.

The
Term Sheet includes customary provisions regarding definitive agreements, including that the business combination agreement and related
agreements will contain customary representations, warranties, covenants, indemnities, limitations on indemnity, termination provisions,
and other terms typical for transactions of this nature.

The
Term Sheet further provides for certain interim covenants and restrictions, including, but not limited to, that (so long as EEME continues
funding under the schedule) XCF will not issue securities under its equity line of credit without EEME’s approval, neither XCF
nor DEVS will effect any reverse split without EEME’s prior written consent, and neither XCF, Southern, nor DEVS (or their affiliates)
will sell shares to brokers for naked short coverage.

The
Term Sheet is governed by Delaware law, contains customary confidentiality provisions, and will remain in effect until the earliest of:
180 days after its date, execution of definitive agreements, mutual written termination, termination by XCF for failure by EEME to timely
fund per the schedule, termination by any party based on unsatisfactory due diligence, or termination by any party to fulfill fiduciary
duties in respect of a superior offer.

There
can be no assurance that any of the foregoing conditions will be satisfied or waived, that the definitive agreements necessary to
consummate the Proposed Transaction will be entered into, or that the Proposed Transaction will be consummated on the terms
described herein or at all. The closing the Proposed Transaction, including the satisfaction of the closing conditions, are subject
to numerous factors, many of which are outside the control of XCF, including market conditions, regulatory approvals, the actions of
third parties, the ability of the parties to negotiate and execute definitive agreements, and the achievement of specified
operational and financial milestones, including certain conditions that depend on the business performance and operating results of
XCF. Although the Term Sheet provides that certain provisions are binding on the parties, it does not obligate the parties to
consummate the Proposed Transaction, and the Term Sheet reflects preliminary, non-final terms that remain subject to further
negotiation, modification, and approval by the applicable boards of directors and special committees and may be terminated in
accordance with its terms, including in circumstances involving an alleged breach. Any such termination, or a failure by the parties
to agree on definitive documentation, could result in disputes or litigation relating to the interpretation, enforceability, or
performance of the binding provisions of the Term Sheet, which could be costly, time-consuming, divert management attention, and
adversely affect the financial condition or liquidity of one or more of the parties, including their ability to pursue or defend
such claims. Accordingly, investors should not place undue reliance on the consummation of the Proposed Transaction or on the
achievement of any related milestones or financial thresholds. Moreover, even if the Proposed Transaction is consummated, the
parties may never achieve the purpose of the Proposed Transaction and the market value the parties are aiming to achieve may never
materialize. See “Risk Factors”.

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Competitive
Strengths and Advantages: XCF’s Full Suite of Capabilities

In
addition to New Rise Reno, XCF has several projects in the pipeline and intends to capitalize on an early mover advantage and strong
regulatory and market tailwinds for sustainable fuels to become a leading producer of SAF in the United States. XCF believes it has
the opportunity to leverage repeatable site design, proven technologies, flexible and versatile feedstock requirements, and a
variety of financing sources to build a strong foundation for realizing its planned growth model.

Early
Mover Advantage

XCF
is currently one of the few publicly traded renewable fuels companies primarily focused on SAF 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. The Company
holds a strategic early-mover advantage with commercial production of SAF currently expected to begin as early as the second quarter
of 2026, and a production facility design that can be replicated.

The
current competitive landscape for SAF production facilities in North America is illustrated in the graphic below, which shows SAF production
facilities that are currently operational (producing SAF), that are currently under construction, and that are proposed or under development
(pre-construction).

Source:
Argus SAF Capacity Map, June 2025

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Reliable,
Proven Technologies

XCF
uses a two-stage production process, using pretreated feedstock with the established hydrotreated and isomerization of esters and fatty
acids (HEFA) pathway. The HEFA pathway is a process for refining vegetable oils, waste oils, or fats into SAF through hydroprocessing
and isomerization, which removes sulfur, oxygen, nitrogen and metals from the feedstock.

Pretreatment
is a key stage of the production process in that it allows facilities to react to changes in feedstock market conditions and de-risk
the supply chain even in times of high volatility. Additionally, pretreated feedstocks support a longer catalyst life which results in
less frequent shutdowns for catalyst changeout. A pretreatment stage is already in place at New Rise Reno. XCF intends to employ a pretreatment
stage at each facility or, depending on realized expansion plans, develop a regional pretreatment hub for its feedstock.

There
are multiple technology pathways to produce SAF approved by ASTM International (“ASTM”), a global organization that develops
and provides standards for various industries and applications. ASTM is an international standards organization that produces standards
for SAF, among other things. XCF uses the HEFA pathway, due to the lower capital costs, reliability, and the availability of feedstocks
which are close in energy density to fossil fuels. HEFA, approved in June 2011, is a proven technology currently in use at multiple advanced
biofuel refineries worldwide to produce SAF and renewable diesel. While SAF has multiple ASTM-approved pathways, HEFA-based SAF is the
only product that is commercially available today.

XCF
processes a variety of waste- and residue-based feedstocks into renewable fuels. These feedstocks, which are not suitable for direct
human consumption, include waste oils, agricultural residues, animal fats, and co-products from industrial agriculture. These feedstocks
are hydroprocessed under the HEFA pathway to break apart the long chain of fatty acids and subsequently hydro-isomerized and hydrocracked.
In this process, feedstock undergoes a hydrodeoxygenation process in which the removal of the oxygen atom from the reactant occurs in
the presence of hydrogen. Then, the hydrocarbons are cracked and isomerized, a refining process that alters the fundamental arrangement
of atoms in the molecule without adding or removing anything from the original material, to jet fuel chain length. The HEFA process is
similar to that used for hydrotreated renewable diesel production, only with a more intense cracking of the longer chain carbon molecules.
Airlines currently use SAF that is blended with fossil jet fuel. SAF that has not been blended with another fuel is referred to as “neat
SAF” which represents the end product produced by our production facilities. Currently, there are no specific mandates as to the
ratio of blended SAF that must be used by the aviation industry. XCF’s ability to sell blended SAF results in less neat SAF being
sold on a per gallon basis leading to the ability to earn additional revenues on a per gallon basis. XCF has had discussions with potential
offtake partners to provide Jet-A/SAF blends of 90/10 and 80/20. In 2011, ASTM put forth ASTM D7566 SAF (HEFA) that regulates blended
SAF ratios at a maximum ratio of 50/50.

Hydrogenation
is a key part of the SAF production process whereby a chemical reaction is created between molecular hydrogen and another element or
compound. The proprietary hydrogenation technology we use is licensed by New Rise Reno from Axens North America, a wholly-owned subsidiary
of IFPEN and one of the industry leaders in process and catalyst development with more than 3,000 industrial units under license. New
Rise Reno and Axens entered into a perpetual license agreement on Axens technology enables versatile hydrotreatment, boosts yields, and
facilitates longer catalyst life. In addition to the technology license, a guarantee agreement has also been executed. Axens’ technology
is in place at New Rise Reno and XCF intends to obtain similar licenses from Axens to utilize Axens’ technology at future sites.

On
December 9, 2020 New Rise Reno and Axens North America Inc. entered into a license agreement whereby New Rise Reno received the non-exclusive
right to utilize Axens’ liquid full hydrotreating technology and related process thereto, in exchange for a one-time license fee
of $1,050,000, consisting of: i) a project closing fee of $200,000, ii) a fee of $200,000 on project acceptance, which is not to exceed
four years after the effective date of the agreement, iii) $350,000 after one-year of operation following the acceptance date, iv) $200,000
after two years of operation following the acceptance date, and v) 100,000 after three years of operation following the acceptance date.
Under terms of the agreement, project acceptance is defined as the date that Axens has completed its performance tests, which includes
inspection of the Axens unit to check conformity with the process design and reactor inspection. In addition, acceptance will be confirmed
with an acceptance certificate issued between New Rise and Axens. To date, a total of $200,000 has been paid as part of the license agreement
and acceptance criteria has not yet been met. The license agreement does not require royalties paid to Axens North America, Inc. The
related license to use the Axens technology and process is effective so long as New Rise Reno continues to utilize the Axens process
and the related hydrotreating equipment. The license agreement is non-transferrable except that it may be assigned to an affiliate or
successor of the assigning party or upon written consent of the parties. Axens has the right to terminate the license agreement in the
event of New Rise’s uncured breaches of the agreement, including failures to make payment, use of Axens’ intellectual property
outside of the scope of the license and breaches of confidentiality obligations.

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Production
Process

Versatile
Feedstock Base

Like
New Rise Reno, XCF intends that future production facilities will also have feedstock pretreatment equipment. This attribute affords
XCF the flexibility to utilize and/or shift to a variety of different low carbon intensity feedstocks due to the pretreatment technology
and Axens hydrotreater technology in use at New Rise Reno and intended to be deployed at future sites.

The
P66 Agreement includes the supply of feedstock and allows the Company to procure feedstock at spot-plus pricing. Currently, this agreement
covers 100% of feedstock requirements for New Rise Reno and is the only supply agreement for feedstocks that XCF currently has in place.
As we do not presently have other feedstock supply agreements in place, 100% of the current feedstock needs would be supplied by Phillips
66.

Commonly
used feedstock sources for production of renewable fuels from triglycerides, an ester derived from glycerol and three fatty acids which
are the main constituents of body fat in humans and other vertebrates, as well as vegetable fat, have been distillers corn oil (“DCO”),
refined, bleached and deodorized soybean oil (“RBD SBO”), canola oil, and waste oils such as used cooking oil, yellow
grease, and animal tallow (from meat processing). XCF processes a variety of waste- and residue-based feedstocks into renewable fuels.
These feedstocks, which are not suitable for direct human consumption, include waste oils, agricultural residues, animal fats, and co-products
from industrial agriculture. XCF has used DCO, a byproduct of U.S. ethanol production, to produce SAF and uses crude degummed soybean
oil, a co-product of the U.S. oilseed supply chain, to produce renewable diesel. The Renewable Fuel Standard (RFS) program and Low Carbon
Fuel Standard are major drivers for the demand for production of renewable fuels in the U.S. market which in turn leads to demand for
feedstock resources. A summary of these feedstocks according to a July 2023 publication by Burns McDonnell titled, “Renewable Diesel
Feedstocks: Considering Plant-and Animal-Based Options,” follows:

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As
part of its long-term strategy, XCF intends to build an integrated business model that includes feedstock supply and delivery to its
plants; XCF has identified strategic partnerships to facilitate this objective. Through vertical integration, XCF believes that it can
position itself to secure a reliable source of sustainable non-food feedstock volumes at competitive pricing. By working with strategic
partnerships, XCF expects to have the ability to purchase non-food feedstock crops, farm-direct and partner with underutilized crush
facilities and/or expand collection networks for used cooking oil and other waste and by-product oils. These initiatives are intended
to both reduce the overall feedstock cost to XCF’s production facilities and ensure reliable supply as competition for feedstocks
increases in the coming years.

Financing

Government
sponsored loans, grants, and other programs are part of a regulatory environment that supports the development of SAF facilities and
continued adoption of SAF by the aviation industry. Management has identified various government-sponsored programs which may provide
lower-cost financing and tax credits for some XCF facilities. Management is also actively engaged in discussions with multiple potential
investors regarding capital needed for the conversion of existing production facilities to SAF production and construction and conversions
of additional productions facilities. We intend to identify and apply for multiple financing options for these facilities, which includes
grants, loans and other financing arrangements as opportunities materialize in the near future.

Greater
Nevada Credit Union Loan

New
Rise Reno operates our existing production facility in Reno, Nevada. New Rise Reno has four notes payable outstanding, in aggregate principal
amount of $112,580,000, to Greater Nevada Credit Union (“GNCU”), as the successor to Jefferson Financial Federal Credit
Union (the “GNCU Loan”). The GNCU Loan was underwritten by certain guarantees issued by the United States Department
of Agriculture (the “USDA”) under the Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance
Program, which guaranteed 100% of the principal amount of the notes evidencing the GNCU Loan (the “USDA Guaranty”).
Pursuant to the terms and conditions of the USDA Guaranty, the GNCU Loan is secured by a priority first lien on all assets of the project,
except for inventory and accounts receivable, which may be used by New Rise Reno for routine business purposes so long as New Rise Reno
is not in default of the GNCU Loan. The USDA must approve, inter alia, the accounts agreement, any issuance of additional debt by New
Rise Reno, the transfer or sale of New Rise Reno assets or collateral, lien priorities, the substitution, release or foreclosure on the
collateral, and GNCU’s exercise of any rights it has relating to the GNCU Loan, including those rights provided in the notes evidencing
the GNCU Loan and the other transaction documents relating to the GNCU Loan. In addition, New Rise Renewables is a guarantor of the GNCU
Loan.

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On
March 28, 2025, counsel for GNCU and Greater Nevada Commercial Lending, LLC (the servicer for the GNCU Loan) provided notice to New Rise
Reno asserting that an event of default has occurred with respect to the GNCU Loan as a result of New Rise Reno’s failure to make
required minimum monthly payments. The letter also demands that New Rise Reno and New Rise take immediate steps to bring the GNCU Loan
current and to cure any and all other non-payment-related defaults that may exist, as well as a demand that New Rise Reno and New Rise
provide evidence sufficient for GNCU to determine that it remains secure and that the prospect of repayment of the GNCU Loan has not
been impaired by any material adverse change in New Rise Reno’s financial condition, or in the financial condition of New Rise,
as a guarantor of the GNCU Loan. GNCU has demanded that the GNCU Loan be brought current, including payment of all late charges, no later
than close of business on May 27, 2025. As of December 31, 2025, New Rise Reno has not made payment of the amounts demanded. As of December
31, 2025, the amount required to bring the GNCU Loan current is approximately $29,000,000 inclusive of principal and interest, excluding approximately
$2,700,000 of penalties/late charges.

GNCU’s
rights and remedies in connection with an event of default include acceleration of the unpaid principal amount of the GNCU Loan, and/or
possession, control, sale, and foreclosure on any collateral, including all rights and interests in and to the real property on which
the SAF production facility is located (including any after-acquired fixtures, equipment and improvements to the production facility)
under the terms of the Ground Lease by and between Twain GL XXVIII, LLC (“Twain”), as the landlord, and New Rise,
as the tenant, dated March 29, 2022 (the “Ground Lease”), which is discussed below under “Twain Ground Lease.”
GNCU would be obligated to obtain USDA approval in the event that GNCU seeks to exercise any rights it has under the GNCU Loan, including
GNCU’s rights prescribed in the notes evidencing the GNCU Loan and related loan documents (including any attempt to foreclose or
sell any collateral). The notes also permit GNCU to refrain from taking any action on any of the notes, collateral or any guarantee with
the approval of USDA.

On
August 6, 2025, GNCU counsel sent a letter to New Rise Reno notifying New Rise Reno of (1) additional events of default under the existing
loan documents relating to the GNCU Loan, (2) failure to timely cure the ongoing payment default on the GNCU Loan by the deadline set
forth in the demand to cure addressed to New Rise Reno dated March 3, 2025, and (3) the acceleration of the full unpaid balances of the
GNCU Loan pursuant to GNCU’s rights under the loan documents relating to the GNCU Loan. The acceleration notice indicated that
the amount owing as of August 5, 2025, excluding applicable fees, costs, and penalties, is $130,671,882. Subsequent to the notification,
counsel for the Company and counsel for GNCU engaged in discussions regarding the notification, and on August 27, 2025, the Company,
on behalf of New Rise Reno and GNCU entered into a Pre-Negotiation Letter outlining the terms under which the parties would engage in
discussions for the purpose of entering into letter agreements, meetings, conferences, and written communications with respect to the
outstanding default notice and balance due to GNCU. The Pre-Negotiation letter does not obligate any party to take any action with respect
to the GNCU Loan and GNCU expressly reserved its rights under the loan documents relating to the GNCU Loan.

On
August 27, 2025, the Company and New Rise Reno received a notice from GNCU withdrawing the August 6, 2025 notice of acceleration (the
“Notice of Withdrawal”). Besides withdrawing the notice of acceleration, the Notice of Withdrawal specifies that GNCU
does not withdraw, modify, or waive the notice of additional events of default and failure to timely cure ongoing payment default set
forth in the August 6, 2025 notice of acceleration, which conditions remain in effect. GNCU also does not withdraw or modify the March
6, 2025 demand to cure.

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If
GNCU pursues one or more of its available remedies under the GNCU Loan, the notes and related loan documents and is successful in exercising
its possessory or foreclosure remedies, or is successful in obtaining a judgment requiring New Rise Reno, New Rise or XCF to pay penalties
and damages in addition to amounts New Rise Reno may owe under the GNCU Loan, such events would materially disrupt our operations and
impair our ability to generate revenue, and, in the case of GNCU taking possession of the facility and/or our assets, could result in
a temporary or permanent cessation of our operations at the New Rise Reno production facility. Any of these results would have a material
adverse effect on our business and financial condition and would materially impair our ability to execute our business plan. In addition,
the existence of defaults under the GNCU Loan and the Ground Lease could make it more difficult to us to obtain financing on acceptable
terms, or at all, which would materially impair our ability to execute our business plan.

XCF
is in active discussions with GNCU to resolve the matters addressed in GNCU’s notice to New Rise Reno, including the
possibility of a potential forbearance or modified loan payment schedule while XCF seeks and secures financing and ramps-up SAF
production so as to generate sufficient cash flows from operations to be able to make payments under the GNCU Loan, including any
past due loan payments and penalties. XCF is making minimal monthly payments to GNCU as a gesture to provide XCF temporary relief
until the New Rise Reno facility is upgraded in the second quarter of 2026. However, XCF is actively evaluating financing
alternatives with other financial institutions and investors that would allow the re-financing of the GNCU Loan and the Ground
Lease payments (as discussed below). However, there can be no assurance that we will be able to reach agreement with GNCU or Twain
to resolve these matters on acceptable terms, or at all, or obtain sufficient financing to allow us to re-finance the GNCU Loan and
Ground Lease payments and also execute our business plan.

Twain
Ground Lease

New
Rise Reno leases the land on which the New Rise Reno production facility is located pursuant to a ground lease evidenced by the Ground
Lease effective as of March 29, 2022, between Twain, as the landlord and New Rise Reno, as the tenant. Pursuant to the Ground Lease,
New Rise Reno is obligated to pay Twain base and supplemental rent quarterly in amounts set forth therein. The land was acquired by Twain
from New Rise Reno pursuant to the terms of a Purchase and Sale Agreement dated as of March 29, 2022, by and between Twain, as the buyer
and New Rise Reno, as the seller.

On
April 18, 2025, and April 30, 2025, counsel to Twain provided notice to New Rise Reno asserting that New Rise Reno is in default of
the terms of the Ground Lease for its failure to make certain payments that are due and owing thereunder. In the notices, Twain
sought immediate payment from New Rise Reno to cure the claimed default. These notices were in addition to prior correspondence
directed to New Rise Reno from counsel on behalf of Twain dated December 7, 2023, and June 21, 2024, also asserting to certain
defaults under the Ground Lease relating to failures to make required payments. The April 18, 2025, notice demanded payment by April
28, 2025, and the April 30, 2025, notice demanded immediate payment. As of the date of this filing, New Rise Reno has made minimal
monthly payments to Twain as a gesture to provide XCF temporary relief until the New Rise Reno facility is upgraded in the second
quarter of 2026. As of December 31, 2025, the amount required to satisfy the amounts owing under the Ground Lease totaled
approximately $29,000,000, comprised of (i) $18,400,000 of lease payments and (ii) $10,600,000 of late fees and penalties.

Twain’s
remedies in the case of an event to default under the Ground Lease include the right to terminate the lease, the right to bring an action
to recover the amount of all unpaid rent earned as of the date of termination or in the amount of all unpaid rent for the balance of
the term of the lease, and to seek any other amount necessary to compensate Twain for New Rise Reno’s failure to perform its obligations
under the Ground Lease. Twain’s available remedies also include the right to take possession of, operate, and/or relet the premises.
As discussed above regarding the GNCU Loan, Twain’s secured interests are subordinate to those of GNCU. If Twain were to exercise
its possessory or foreclosure remedies under the Ground Lease, it would need to seek approval from and coordinate with GNCU, which in
turn would need to consult with USDA. Alternatively, Twain could file a legal action against New Rise Reno, seeking all unpaid rent and
damages.

If
Twain pursues one or more of its available remedies under the Ground Lease and is successful in exercising its possessory or foreclosure
remedies, or is successful in obtaining a judgment requiring New Rise Reno or XCF to pay penalties and damages in addition to amounts
New Rise Reno may owe under the Ground Lease, such events would materially disrupt our operations and impair our ability to generate
revenue, and, in the case of Twain taking possession of the facility and/or our assets, could result in a temporary or permanent cessation
of our operations at the production facility. Any of these results would have a material adverse effect on our business and financial
condition and would materially impair our ability to execute our business plan. In addition, the existence of defaults under the GNCU
Loan and the Ground Lease could make it more difficult for us to obtain financing on acceptable terms, or at all, which would materially
impair our ability to execute our business plan. In addition, the existence of defaults under the Ground Lease and the GNCU Loan could
make it more difficult for us to obtain financing on acceptable terms, or at all, which would materially impair our ability to execute
our business plan.

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Twain
Forbearance Agreement

On
June 11, 2025, XCF, New Rise Reno and Twain entered into a Forbearance Agreement (the “Twain Forbearance Agreement”),
pursuant to which Twain has agreed to forbear from exercising its rights and remedies under the Ground Lease and related documents and/or
applicable law with respect to any alleged defaults or alleged events of default until September 3, 2025, subject to certain conditions
and exceptions provided in the Twain Forbearance Agreement. In consideration of Twain’s forbearance, XCF issued 4,000,000 shares
of XCF Common Stock to Twain. The shares were registered for sale in the Form S-1A filed with the SEC on November 26, 2025. The net proceeds
of any sale of these shares are to be credited on a dollar-for-dollar basis against any remaining principal, interest, and penalties
owed by New Rise Reno to Twain.

As
discussed above with respect to the GNCU Loan, XCF is actively evaluating financing alternatives with other financial institutions and
investors that would allow the re-financing of the GNCU Loan and the Ground Lease payments. However, there can be no assurance that we
will be able to reach agreement with GNCU or Twain to resolve these matters on acceptable terms, or at all, or obtain sufficient financing
to allow us to re-finance the GNCU Loan and Ground Lease payments and also execute our business plan.

Southeast
Related Indebtedness

As
part of the acquisition of the Fort Myers and Wilson facilities, Legacy XCF assumed an unsecured debt of $2,200,000. As of the date of
this filing, the Company is in default under certain of these unsecured loan agreements due to the non-payment of scheduled principal
and/or interest amounts and although the holder hasn’t yet exercised its rights, it could call the note or take other action at
any time. The affected loans have an aggregate principal balance of approximately $1,700,000 and interest payable of approximately $609,000
and carry maturities ranging from 2021 to 2024. No payments have been made as of the date of this filing on these obligations.

The
Company is actively engaged in discussions with the affected lenders regarding potential amendments, forbearance arrangements, or restructuring
of the outstanding obligations, but there can be no assurance that such discussions will result in a favorable outcome or a waiver of
the existing defaults. As of the date of this filing, the lenders have not taken any formal enforcement actions.

These
defaults could result in a range of adverse consequences, including but not limited to:

The
Company’s ability to continue funding operations, meet upcoming working capital requirements, and pursue its strategic initiatives
is dependent on resolving the loan defaults, securing additional financing, and/or generating sufficient cash flows from operations.
The Company is exploring all available options to preserve liquidity, including equity financing, asset sales, or strategic partnerships.

18

XCF
Operations and Management

XCF
uses a combination of internal management and third-party service providers to manage the business and plant operations and may make
changes to its operations management model from time to time depending on business conditions. Management is primarily responsible for
feedstock acquisitions, off-take agreements, growth and acquisition strategy, execution of current business plans, financing of existing
and future projects, day-to-day plant operations and maintenance, and management of third-party service providers. Third-party service
providers are expected to be utilized for EPC services; however, the company may elect to engage third-party service providers to manage the day-to-day
plant operations and maintenance of future sites.

Encore

Encore
was one of the EPC companies that was subcontracted to build New Rise Reno. Encore managed the conversion of New Rise Reno to SAF production.
Encore is 100% controlled by Randy Soule, who is currently our second largest shareholder.

Encore
was responsible for:

XCF does not have any future plans to use Encore at
the New Rise Reno facility or any other projects.

Orion
Plant Services, Inc.

In
February 2024, we signed an operations and maintenance agreement with Orion Plant Services, Inc. (“Orion”). Orion’s
responsibilities included:

In
Q4 2024, New Rise Reno terminated its agreement with Orion and directly hired the employees rather than utilize the service provider.
New Rise Reno currently manages day-to-day operations and maintenance at the New Rise Reno facility.

19

Market
Environment

Transportation
and Greenhouse Gas Emissions

The
transportation sector has been identified as a leading contributor of greenhouse gas emissions in the United States for the last three
decades. The “Inventory of U.S. Greenhouse Gas Emissions and Sinks (Inventory)” is an annual report published by the EPA
which tracks U.S. greenhouse gas emissions and sinks by source, economic sector, and greenhouse gas going back to 1990. Additionally,
the EPA uses the Greenhouse Gas Reporting Program (GHGRP) which requires reporting of greenhouse gas data and other relevant information
from large GHG emission sources, fuel and industrial gas suppliers, and CO2 injection sites in the United States; reported data is made
available in October of each year.

The
gasses covered by the latest Inventory report (2022) include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, sulfur hexafluoride, and nitrogen trifluoride. The national greenhouse gas inventory is submitted to the United
Nations in accordance with the Framework Convention on Climate Change. According to this report, the primary sources of greenhouse
gas emissions by economic sector in the U.S. are:

Transportation
(28.5%) - The transportation sector generates the largest share of greenhouse gas emissions. Greenhouse gas emissions from transportation
primarily come from burning fossil fuel for cars, trucks, ships, trains, and planes. Over 94% of the fuel used for transportation is
petroleum based, which includes primarily gasoline and diesel.

Electricity
production (25.0%) - Electric power generates the second largest share of greenhouse gas emissions and includes emissions from electricity
production used by other end use sectors. In 2022, 59% of electricity was produced from burning fossil fuels, mostly coal and natural
gas.

Industry
(23.0%) - Greenhouse gas emissions from industry primarily come from burning fossil fuels for energy, as well as greenhouse gas emissions
from certain chemical reactions necessary to produce goods from raw materials. If emissions from electricity use are allocated to the
industrial end-use sector, industrial activities account for a much larger share (~30%) of the U.S.’s greenhouse gas emissions.

Market
Opportunity and Demand for Renewable Fuels

The
market for renewable fuels is nascent but growing, though energy use in the industry is still dominated by liquid transportation fuels
derived from fossil, carbon-based raw materials. Through a combination of loan and grant programs and tax incentives, state and federal
government organizations have taken the lead in stimulating the demand for and adoption of SAF providing significant tailwinds for both
SAF supply and demand, driving a need for new plants and increased production. The transportation industry has responded by seeking sustainable
fuel alternatives and making commitments for incorporating SAF into their fuel programs with key milestones in 2030 and 2050.

According
to the U.S. Energy Information Administration (“EIA”), in 2023, petroleum products accounted for approximately 89%
of total U.S. transportation sector energy use. Biofuels contributed approximately 6%, most of which were blended with petroleum fuels
(gasoline, diesel fuel, and jet fuel). Gasoline, accounting for 52% of transportation energy use, is the dominant transportation fuel
in the United States, followed by distillate fuels (mostly diesel fuel) at 22% and jet fuel at 12%.

As
various industry bodies and governmental agencies have announced aspirational decarbonization targets by 2050, XCF believes that market
and political sentiment will continue to shift in favor of sustainability, significantly altering the mix of fuel consumption in favor
of renewable fuels. Decarbonization refers to the removal or reduction of carbon dioxide (CO2) output into the atmosphere.

20

The
renewable fuels that XCF will produce at its facilities are designed to meet the EPA’s Renewable Fuel Standard (RFS), which requires
a minimum volume of transportation fuels sold in the U.S. to contain renewable fuel to help reduce greenhouse gas emissions. The final
volume requirements under the EPA’s RFS are set forth below. On July 1, 2022, the EPA issued final Renewable Fuel Volume Requirements
for calendar years 2020, 2021, and 2022. On June 21, 2023, the EPA announced a final rule to establish RFS volumes for 2023, 2024, and
2025. The EPA Administrator has the discretion to determine the volume amounts for all fuel categories starting in 2023. These volume
mandates drive demand for renewable fuels. Decarbonization refers to the removal or reduction of carbon dioxide (CO2) output into the
atmosphere.

The
market for renewable fuels is also driven by the adoption of low-carbon fuel standards in certain states and Canadian provinces. Low-carbon
fuel standards programs establish levels of carbon intensity for transportation fuels and requires fuel providers to demonstrate that
the volume and type of fuel they supply for use in that state or province meets the carbon intensity level or standard that is established
for that year. Businesses such as XCF that create cleaner fuels will generate credits that can be sold to fuel users who must offset
deficits.

The
SAF Opportunity

According
to the IEA, in 2023, aviation accounted for 2.5% of global energy-related CO2 emissions, having grown faster in recent decades than rail,
road or shipping. While aviation has gradually become less energy intensive on a passenger per mile basis as aircraft have become more
efficient, efficiency gains can only go so far toward reaching climate goals. SAF allows for the decarbonization of the fuel without
requiring changes to the aircraft technology or other aviation related infrastructure. According to the IATA, SAF could contribute around
65% of the reduction in emissions needed by aviation to reach net zero CO2 emissions by 2050.

Commercial
aviation has developed largely due to the relatively high energy per unit mass of traditional fossil-based jet fuel, which can power
planes for the necessary durations and distances without adding unmanageable weight. To date, no other traditional energy source has
proved a viable substitute.

However,
recent engineering of SAF has produced a sustainable alternative chemically similar to traditional jet fuel which achieves the energy
density required to power large aircraft. This makes SAF a drop-in fuel, in that it seamlessly integrates with existing aviation infrastructure
without the need for modification and is easily blended with or used in place of traditional Jet-A. While there is no mandated or established
industry standard for the blend rate, the maximum Jet-A and SAF blend ratio is up to 50/50 (fossil jet fuel: neat SAF). We have the ability
to deliver neat SAF but we expect offtake partners to require a ratio of blended SAF. Notably, regulatory intervention or the establishment
of a common blend standard could impact the Company’s financial outlook. In 2011, ASTM put forth ASTM D7566 SAF (HEFA) that regulates
blended SAF ratios at a maximum ratio of 50/50. As SAF is produced from sustainable feedstocks, using SAF could drive significant reductions
in carbon emissions.

Due
to SAF’s promise as a viable substitute for fossil-based jet fuels, in 2021 the U.S. Department of Energy (DOE), the U.S. Department
of Transportation (DOT), the U.S. Department of Agriculture (USDA), and other federal government agencies announced the Sustainable Aviation
Fuel Grand Challenge, as part of a comprehensive strategy for scaling up new technologies to produce SAF on a commercial scale. The Challenge
aims to expand domestic consumption of SAF to 3 billion gallons per year by 2030 and 35 billion gallons per year by 2050 - projected
100% of aviation fuel demand - while achieving at least a 50% reduction in lifecycle greenhouse gas emissions. Recent EPA data shows
that approximately 5 million gallons of SAF were consumed in 2021 and over 14 million gallons in 2022. According to the Sustainable Aviation
Fuel Market Outlook (June 2024 update) by SkyRNG, SAF capacity announcements to date in the US are expected to produce 2.2 billion gallons
SAF by 2030 leaving a potential shortfall of around 800 million gallons of SAF for achieving the 2030 milestone.

21

As
this has propelled sustainability into key focus for the airline industry, multiple airlines around the world have announced near- and
medium-term goals for adopting SAF for use in meeting their sustainability targets as it relates to reducing greenhouse gas emissions.
In September 2025, the one world Alliance and member airlines, in partnership with Breakthrough Energy Ventures (BEV) announced the launch
of a new investment fund that seeks to accelerate the global development of long-term aviation fuel solutions that are cost effective,
scalable and have lower emissions than conventional fuels as part of its commitment to achieve net-zero carbon emissions by 2050. According
to IATA, in 2024, SAF accounted for 0.3% of global jet fuel production though many airlines have a target of 10% by 2030; the SAF Grand
Challenge’s goal of net zero by 2050 relies on SAF accounting for 65% of fuel. In the European Union (“EU”),
rules will require fuel suppliers to ensure that 2% of fuel made available at EU airports is SAF in 2025, rising to 6% in 2030, 20% in
2035, and gradually to 70% in 2050.

The
mission of The Sustainable Aviation Buyers Alliance (“SABA”) is to accelerate the path to net-zero aviation by driving
investment in high-integrity SAF, catalyzing new SAF production, technological innovation, and supporting member engagement in policy-making
efforts. Spearheaded by RMI and Environmental Defense Fund (EDF) and supported by its founding companies, the SABA aims to accelerate
the path to net zero aviation by driving investment in and adoption of SAF, which could substantially reduce emissions from air travel.

In
late 2022, ICAO member states adopted a long-term global aspirational goal (“LTAG”) to achieve net zero carbon emissions
from international aviation by 2050. The agreement aims to reduce emissions within the sector itself (i.e. directly from aviation activity,
as opposed to via offsetting emissions through purchase of credits). Although it remains non-binding and lacks intermediate goals, member
state governments are expected to produce action plans within their own national timeframe and capabilities.

According
to IATA, airlines will need 500 million tons (~165 billion gallons) of SAF annually by 2050, encompassing both biomass and power-to-liquid
sources, to achieve net zero carbon emissions. IATA reported that 2024 SAF production reached 1 million tons (~330 million gallons) of
SAF, requiring an approximately 27% annual growth rate to meet the 2050 target. Given the potential for even more countries to announce
targets or for blending to occur even in countries without targets in place, this estimated growth requirement could be conservative.

Blended
SAF, which is a blend of traditional Jet-A fuel and SAF, is used by airlines around the world as an alternative fuel option to traditional
100% Jet-A fuel for the purpose of reducing greenhouse gas emissions as described above. Airlines have taken meaningful steps to incorporate
SAF into their fuel purchasing programs. According to the ICAO, as of March 2026 there are over 180 airports around the world distributing
SAF and over 54 billion liters of SAF under offtake agreements.

22

XCF’s
Products

XCF
intends to sell renewable fuels such as SAF, renewable diesel, and renewable naphtha.

23

Under
the P66 Agreement, Phillips 66 shall purchase 100% of the neat SAF, renewable diesel, and renewable naphtha produced at New Rise Reno.
The P66 Agreement permits New Rise Reno to continue to engage in sales and business development activities. To the extent that we develop
new sales with FBOs or airlines directly, we may be required to deliver blended SAF which is ready for in-flight use. Although the blended
SAF ratio can be 10% to 50% compared to conventional jet fuel, XCF would benefit from a higher revenue per gallon on a neat SAF basis
due to differences in the amount of SAF used in the end product. Phillips 66, under the terms of the P66 Agreement, will provide the
blending and logistics services for these third-party customers.

Competitive
Environment

Our
current competitors primarily consist of:

The
current competitive environment in North America includes approximately 30 competitor production facilities, of which six are operational
sites, six are under construction, and 18 sites have been proposed or are under development and slated to come online by the end of 2030
or after. As sites take several years from development to first production, it is expected that this competitive set is representative
of how the market will evolve until approximately 2030. XCF has a project pipeline that includes a new site, New Rise Reno 2, which is
expected to come online in 2028, giving it an early mover advantage over the majority of the competition and the opportunity to bring
more supply to market as demand increases in the coming years.

A
brief overview of the businesses we currently believe to be our material competitors follows. These producers compete in the drop-in
renewable fuels market and may produce products in addition to SAF such as renewable diesel. Competitors’ businesses do not represent
a direct comparison to XCF whose business model currently focuses on SAF production utilizing the HEFA pathway. Some producers may be
developing new technologies and are not yet producing renewable fuels at commercial scale or may also have traditional refinery as a
core business. A brief overview of the SAF or renewable diesel production of the competitors includes:

Gevo,
Inc. (“GEVO”): Gevo produces SAF, renewable diesel, animal feed, and other low-carbon, bio-based raw materials.
According to the company’s website, the expected annual production output of Gevo’s ATJ60 facility in Lake Preston, South
Dakota is 60 million gallons per year of liquid hydrocarbons in the form of jet fuel and renewable gasoline. Total anticipated annual
neat SAF production output of XCF, assuming the timely completion of New Rise Reno 2, is expected to be 80 million gallons per year by
the end of 2028, of which New Rise Reno is expected to produce 38 million gallons per year.

LanzaJet,
Inc. (“LanzaJet”): LanzaJet, a subsidiary of LanzaTech, Inc. (LNZA), intends to produce low-carbon sustainable
aviation fuel and renewable diesel through its alcohol-to-jet (ATJ) technology. According to the company’s website, their Freedom
Pines ATJ facility completed construction in January 2024. The facility has nameplate capacity of 10 million gallons per year and is
expected to come online in 2025. Total anticipated annual neat SAF production output of XCF, assuming the timely completion of New Rise
Reno 2, is expected to be 80 million gallons per year by the end of 2028, of which New Rise Reno is expected to produce 38 million gallons
per year.

Montana
Renewables, LLC (“Montana Renewables”): Montana Renewables, a subsidiary of Calumet, Inc. (CLMT), is a producer
of SAF, renewable diesel, and renewable naphtha. According to the company’s website, annual production capacity for SAF is around
30 million gallons per year. In January 2025, the company was awarded a $1.44Bn DOE loan to fund expansion of its facility to an expected
300 million gallons per year; the facility is expected to run at approximately 50% capacity in 2026. Total anticipated annual neat SAF
production output of XCF, assuming the timely completion of New Rise Reno 2, is expected to be 80 million gallons per year by the end
of 2028, of which New Rise Reno is expected to produce 38 million gallons per year.

24

Neste
Ovi (“NESTE”): Neste claims to be the world’s leading producer of renewable diesel and SAF and a forerunner
in providing renewable feedstock solutions. In addition to renewable diesel and SAF, Neste produces a variety of other products. According
to the company’s website, output of global SAF production is expected to reach 1.5 million tons in 2025. Total anticipated annual
neat SAF production output of XCF, assuming the timely completion of New Rise Reno 2, is expected to be 80 million gallons per year by
the end of 2028, of which New Rise Reno is expected to produce 38 million gallons per year.

There
are several key factors which drive competition, namely price, production capacity, and location. As all neat SAF must meet ASTM D7566
standards, quality is less of a competitive advantage. In the future, however, as new pathways become commercially viable, fuels which
have lower CI scores may become available which could serve as a competitive advantage.

SAF
companies compete with other renewable fuels companies for feedstock. As the demand for SAF and other renewable fuels grows in the coming
years, access to a reliable supply of feedstock at a suitable price will likely become a key driver of success.

U.S.
Federal Income Tax Credits

In
addition to grants and loans, the United States federal government incentivizes the production of low-carbon transportation fuel and
sustainable aviation fuel through production tax credits (that can be used against income tax liabilities) pursuant to sections 40A,
40B, 6426, and 45Z (collectively, the “Tax Credits”) of the Code. Tax credits available under Code sections 40A and
40B expired at the end of 2024, and tax credits under Code section 45Z are available from 2025 through 2029 as extended under the One
Big Beautiful Bill Act.

The
Tax Credits are a key part of an energy policy environment that supports the development and production of sustainable aviation and transportation
fuel facilities. The Tax Credits can be monetized in various ways, including certain refundable provisions through the end of 2024, and
from 2025 through 2029, through tax equity financings or the sale of Tax Credits to certain purchasers. With respect to those facilities
eligible for Tax Credits in the years in which such credits are available (and, as relevant, for years in which the Tax Credits are extended
through Congressional action), the Company intends to monetize all available Tax Credits in an efficient manner to support the development,
construction, and ongoing operation of low-carbon transportation and sustainable aviation fuel facilities. In certain instances, depending
on the manner in which the Company monetizes Tax Credits, the Company may retain certain tax attributes associated with its facilities,
including depreciation, that can provide cashflow and timing benefits with respect to the Company’s federal income tax liabilities.

Clean
Fuel Production Tax Credit (45Z Credit) / Blenders and Renewable Diesel Tax Credit (40B /40A)

The
Tax Credits provide up to a $1 per gallon production tax credit for low-carbon transportation fuels and $1.75 per gallon tax credit for
SAF, indexed annually for inflation, currently scheduled to expire at the end of 2029.

25

The
45Z Credit is available from January 1, 2025 until December 31, 2029, as extended under the One Big Beautiful Bill Act. The value of
each credit increases inversely relative to the reduction in the fuel’s carbon intensity, measured in kilograms of CO2e per mmBTU.
Specifically, the value of the 45Z Credit begins with a baseline assumption that fuels have a maximum carbon intensity of 50 kilograms
of CO2e per mmBTU, and as that intensity approaches zero, the value of the credit increases, up to a certain cap, indexed for inflation.
For transportation fuels, the maximum 45Z Credit value is $1/gallon, assuming certain labor, wage and apprenticeship requirements are
satisfied (which the Company intends to comply with). This $1/gallon value is in part determined using the Greenhouse Gases, Regulated
Emissions, and Energy Use in Transportation (“GREET”) model. The GREET model is a tool that assesses a range of lifecycle
energy, emissions, and environmental impact challenges and that can be used to guide decision-making, research and development, and regulations
related to transportation and the energy sector. In its SAF application, the GREET model is used for determining carbon intensity, for
which the Treasury Department is obligated to publish tabular data taxpayers can rely upon for substantiating their CI scores. For SAF,
the maximum 45Z Credit value is $1.75/gallon until the end of 2025 and $1.00/gallon until the end of 2029, assuming certain labor, wage
and apprenticeship requirements are satisfied (which the Company intends to comply with), using the Carbon Offsetting and Reduction Scheme
for International Aviation, which has been adopted by the International Civil Aviation Organization (“CORSIA”) model
(or a similar model under the federal government’s Clean Air Act). For both transportation fuels and SAF, failure of the company
to comply with prevailing wage and apprenticeship requirements results in an 80% reduction in the 45Z Credit value.

The
GREET model is subject to change on a periodic basis, and while the 45Z Credit statutory language requires the publication of carbon
intensity tables for transportation fuels, there is uncertainty as to the version of GREET those tables will refer to, or how the tables
will vary over time, including during the credit period. Accordingly, there is a risk the 45Z Credit values will fluctuate during the
credit period, and that the Company may not be able to permanently rely on a version of carbon intensity tables in a GREET model. This
may result in uncertainty as to financing a project and measuring the magnitude of tax credits that the Company can monetize. In addition,
the market for SAF is currently developing, and models under CORSIA or other federally allowable rules are in a state of flux. Moreover,
the Section 45Z statute does not provide for SAF tables, suggesting taxpayers will be required to develop their own computations. Finally,
while the Section 45Z statute requires tables to be published for transportation fuels, there is no such requirement for SAF. Accordingly,
there is uncertainty as to transportation fuel credit values for purposes of Code section 45Z. Similarly, for other Fuels Credits, there
is no requirement to publish tables with credit values, resulting in potential uncertainty as to whether the IRS will respect a taxpayer’s
determination of the Fuels Credit value for any given tax year.

The
fuels tax credits under Code sections 40A and 40B (together, “40 Credits”), respectively, provided for $1.00 per gallon
for certain biodiesel fuels and $1.25 per gallon production tax credit for SAF. The 40 Credits expired on December 31, 2024. The Fuels
Credit under Code section 40B requires that the SAF produced, discounting that portion which is kerosene, have a GHG reduction percentage
of at least 50%. In contrast, the Fuels Credit under Code section 40A does not consider lifecycle GHG and accounting for the carbon intensity
score of fuel to determine the maximum credit achievable per gallon of fuel produced. Additionally, there is no requirement to publish
tables with credit values, resulting in potential uncertainty as to whether the IRS will respect a taxpayer’s determination of
the 40 Credits value for any given tax year. The 40 Credits expired at the end of 2024 and were replaced with the 45Z Credit.

In
addition to federal income tax incentives, the Company intends to manage its operations to qualify for additional federal and state regulatory
incentives as described below.

Renewable
Fuel Standard (RFS)

The
Renewable Fuel Standard (“RFS”) program was developed under the Energy Policy Act of 2005 as an amendment to the Clean
Air Act of 1970 (“CAA”). The Energy Independence and Security Act of 2007 (“EISA”) expanded the
RFS program to reduce greenhouse gas (“GHG”) emissions by expanding the use of renewable fuels. The RFS is a national
policy governed by the United States Environmental Protection Agency (“EPA”) in consultations with the USDA and the
Department of Energy (“DOE”). The program demands a specific volume of renewable fuel to substitute traditional petroleum-based
fuel for transportation.

To
satisfy the requirements of the RFS program, refiners or importers of petroleum fuels must either blend in sufficient volumes of renewable
fuels or obtain Renewable Identification Numbers (“RINs”) to meet the EPA’s Renewable Volume Obligation (“RVO”).
Each refiner’s or importer’s RVO is calculated by the EPA annually based on the CAA volume projections of gasoline and diesel
production for the year. The RVO is the volume a refiner or importer is obligated to sell based on the company’s total fuel sale.

26

To
generate RINs, a fuel producer needs to maintain significant data on the feedstock used to create the fuel. RINs are generated once a
producer generates a gallon of renewable fuel. In relation to SAF, once a renewable fuel source is blended with a non-renewable medium
at a blender, the RIN credit can be separated and sold to others or claimed by the blender if it has an RVO. Qualifying renewable fuels
are required to achieve reduction in GHG commissions compared to a petroleum-baseline metric from 2005 mandated by the EISA, although
facilities producing fuel before 2007 are not required to meet the GHG emissions reductions specified to generate RINs (the class of
RINs these facilities qualify for, however, is typically less valuable than the RINs we anticipate our fuels will generate). XCF currently
anticipates that its fuels will qualify to generate RINs specific to biomass-based diesel, and/or cellulosic biodiesels (both would also
qualify for the broader category of “renewable fuels”).

The
price of RIN credits is not fixed, but variable, depending on supply and demand dynamics. Demand for RINs is dependent upon the RVO requirements
set forth by the EPA, while supply is based on output of renewable fuel producers, which respond to costs of production. RINs are frequently
traded, with prices reflecting these dynamics.

With
the rise in global demand for non-food feedstocks, XCF expects to see an increase in the cost of SAF per gallon, which, XCF believes,
will directly raise the prices of RINs for sale.

On
the other hand, EPA’s latest RFS rules-announced in June of 2023-set annual volume requirements for 2023-2025 below biofuel production
trends, which would apply downward pressure on the prices of RINs. The limits set by the EPA in future years could also affect the financial
model with respect to price of RINs.

Low
Carbon Fuel Standard (LCFS)

Like
the RFS program, the LCFS tax credit focuses on decreasing the carbon intensity of California’s transportation fuel and providing
an increase in lower-carbon fuel alternatives to improve the quality of air. The LCFS program was initiated in 2009 by the California
Air Resource Board (“CARB”) and implemented in 2011. The program was amended and readopted in 2016 to address procedural
changes to its adoption process. CARB approved additional amendments in 2018 which strengthen the carbon-intensity (“CI”)
benchmarks through 2030, aligning with California’s 2030 GHG reduction target. The current LCFS regulation imposes a standard 20%
CI decline starting 2030. In December 2023, CARB proposed revisions to the LCFS regulation that will impose more stringent CI benchmarks
and tighten rules around eligibility of certain projects to generate LCFS credits. The LCFS allows for a lifecycle assessment of fuels
by measuring the GHG emissions associated with the production, transportation and use of the fuel. CI scores measure both the direct
and indirect effects of crop-based biofuels. Each CI represents grams of carbon dioxide equivalents per megajoule (gCO2e/MJ). The CI
score of each low-carbon fuel is compared to the declining CI benchmark for each year. Low-carbon fuels below the designated benchmark
generate a credit while fuels above generate a deficit. XCF, being a provider of transportation fuel, must demonstrate that the mix of
fuels delivered to California is compliant with the LCFS standards on an annual basis. XCF can utilize a variety of feedstocks including
but not limited to corn, soybean, and used cooking oils which generates a lower CI score in comparison to traditional petroleum-based
fuels. The CI benchmark score fluctuates annually, and fuel providers must meet the benchmark accordingly. For compliance purposes, a
deficit generator indicates the number of credits acquired is greater than or equal to the number of deficits accumulated. According
to the LCFS data dashboard, $2 billion worth of credit transactions were accounted for in 2018. To expand low-carbon initiatives, the
LCFS program is planning to create a Pacific-Coast collaborative with Washington, Oregon, and British Colombia. The trickle-down effect
of the LCFS credit is sparking interest for similar programs in other regions of the world such as Brazil and Canada.

On
June 27, 2025, the California Office of Administrative Law (OAL) approved the amended LCFS regulation, submitted by the California Air
Resources Board (CARB) to the OAL on May 16, 2025. Following OAL’s approval, CARB announced that the amendments would enter into
force in July 1, 2025. The amendments increase both the pre- and post-2030 stringency of the CI benchmarks. Specifically, they increase
the CI reduction targets from 20% to 30% by 20230, and aim for a 90% reduction by 2045, based on a 2010 baseline. The amendments establish,
among other things, a phased sustainability certification process for biomass and impose a cap on the issuance of credits for biomass-based
diesel produced from soybean, canola, or sunflower oil, limiting it to 20% of the total credits per producer.

27

To
monetize this credit, LCFS is tracked quarterly via CI scores. Once credits are calculated, the credits undergo a verification process
post credit generation. Thus, fuel producers and blenders must maintain transaction logs to maintain compliance with LCFS standards for
fuel pathway-based crediting. In August 2025, a 40 CI renewable diesel (RD) received approximately $0.31/gallon in California LCFS credit
value. For the month of December 2025, the average credit was $55 per metric tonne with 384 transfers and a total volume of 6,870,000
(credits – MTs) where MT is a metric tonne. The range for December was $46 to $96 per metric tonne. There are 264.172 gallons of
diesel in 1 MT. This converts to $.21 as the average price per gallon with a range for the month of $.17 to $.36.

Intellectual
Property

XCF
does not currently own any intellectual property material to its operations and instead plans to license existing technologies for the
operations of its plants. Currently, New Rise licenses Axens’ proprietary hydrogenation technology in renewable fuels production
at New Rise Reno. XCF intends to obtain similar licenses from Axens to utilize this technology at future sites.

Regulatory
Matters - Environmental and Compliance

As
a refiner of biofuels, XCF will be subject to federal, state and local environmental laws, regulations and permit conditions, including
those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and
disposal of hazardous materials, and the health and safety of our employees. Environmental laws and regulations may, among other things:

These
laws, regulations and permits impose legal obligations that are applicable to the operations of our facilities and may sometimes require
us to incur significant human resources and capital costs to remain compliant with existing regulations or conform to new ones. Environmental
laws and regulations change over time, and any such changes, more vigorous enforcement policies, or the discovery of currently unknown
conditions may require substantial expenditures to rectify and conform. Regulations and the compliance of such regulations may also require
us to make operational changes to limit actual or potential impacts to the environment; such changes could have a material impact on
our ability to produce fuels to previously realized specifications or volumes. A violation of these laws, regulations, permits or license
conditions could result in substantial fines, criminal sanctions, permit revocations and/or facility shutdowns.

New
laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require
us to make significant additional expenditures. Continued government and public emphasis on environmental issues can result in increased
future investments in environmental controls at our facilities which cannot be estimated now. Present and future environmental laws and
regulations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions could all
require us to make substantial expenditures which could materially impact the company.

Site
Development

In
connection with the conversion of New Rise Reno to a SAF facility, and the anticipated build-outs of New Rise Reno 2 and potential buildout of, Fort Myers
and Wilson, as well as any new site development projects, XCF is required to obtain various permits from government bodies to
commence new construction or the conversion of existing sites. We cannot be assured such permits will be received. Regulators could
make demands that increase our construction costs which might force us to obtain additional financing. Permit conditions could also
restrict or limit the extent of our intended site development initiatives. We cannot guarantee that we will be able to obtain or
comply with the terms of all necessary permits required for constructing a new SAF facility or complete the retrofit of a biodiesel
plant. Failure to obtain and comply with all applicable permits and licenses could disrupt site development initiatives by
postponing, delaying, and/or halting our construction and could subject us to future claims.

New
Rise Reno has received occupancy and operating permits for its buildings and facilities.

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Operations

As
XCF is a producer and operator of renewable fuels production facilities, various permits from government bodies are required for SAF
production and operation of the SAF production facilities, and we cannot be assured such permits will be received. As a condition to
granting the permits necessary for operating our facilities, regulators could make demands that increase our operations costs, which
might force us to obtain additional financing or render our SAF product non-competitive. Permit conditions could also restrict or limit
the extent of our operations. We cannot guarantee that we will be able to obtain or comply with the terms of all necessary permits to
operate a SAF plant and engage in SAF production. Failure to obtain and comply with all applicable permits and licenses could halt production.
XCF will be required to be compliant with regulations relating to: Air Emissions, Water Discharge, Contamination, and Spills or Releases
of Hazardous Materials.

Air
Emissions

Our
air emissions are subject to the Clean Air Act (“CAA”), the CAA Amendments of 1990 and similar state and local laws
and associated regulations. Under the CAA, the EPA has promulgated National Emissions Standards for Hazardous Air Pollutants (“NESHAP”),
which could apply to our facilities if the emissions of hazardous air pollutants exceed certain thresholds. If a facility we operate
is authorized to emit hazardous air pollutants above the threshold level, then we might still be required to come into compliance with
another NESHAP at some future time. New or expanded facilities might be required to comply with both standards upon startup if they exceed
the hazardous air pollutant threshold.

In
addition to the costs for achieving and maintaining compliance with these laws, more stringent standards may also limit our operating
flexibility. Direct impacts may occur through the CAA’s permitting requirements and/or emission control and monitoring requirements
relating to specific air pollutants, as well as the requirement to maintain a risk management program to help prevent accidental releases
of certain regulated substances. Some or all of the regulations promulgated pursuant to the CAA, or any future promulgations of regulations,
may require the installation of controls or changes to the facilities to maintain compliance. The cost to implement new controls, equipment,
or changes to operations could be substantial.

New
Rise Reno has a Class II Operating Air Quality Permit issued by Bureau of Air Pollution Control under the Nevada Department of Conservation
and Natural Resources as it relates to the production of renewable diesel. New Rise Reno 2, Fort Myers and Wilson will also be subject
to the CAA and will need to comply with any CAA requirements with respect thereto.

Water
Discharge

The
facilities that XCF will operate will be subject to requirements under the Federal Water Pollution Control Act of 1972, as amended, also
known as the federal Clean Water Act (“CWA”), and analogous state laws impose restrictions and stringent controls
on the discharge of pollutants into the water affect our business. Such discharges are prohibited, except in accordance with the terms
of a permit issued by the EPA or the appropriate state agencies. Any unpermitted release of pollutants could result in penalties, as
well as significant remedial obligations. Notably, laws and their implementing regulations are subject to change and there can be no
assurance that such future costs will not be material.

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New
Rise Reno currently has a general permit for stormwater discharges associated with industrial activity issued by the State of Nevada,
Division of Environmental Protection. As additional facilities are brought online, we will be required to comply with the CWA. New Rise
Reno 2, Fort Myers and Wilson will also be subject to the CWA and will need to obtain associated permits for water discharges as part
of the build-outs and ongoing operations of the related plants.

Contamination

XCF
may also be subject to potential liability for the investigation and cleanup of environmental contamination at each of the properties
that we own or operate and at off-site locations where we arrange for the disposal of hazardous wastes. If significant contamination
is identified at our properties in the future, costs to investigate and remediate this contamination and costs to investigate or remediate
associated damage could be significant. If any of these sites are subject to investigation and/or remediation requirements, we may be
strictly and jointly and severally responsible under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
Emergency Planning and Community Right-to-Know Act (“EPCRA”), or other environmental laws for all or part of the costs
of such investigation and/or remediation, and for damage to natural resources. XCF may also be subject to related claims by private parties
alleging property damage or personal injury due to exposure to hazardous or other materials at or from such properties. While costs to
address contamination or related third-party claims could be significant, based upon currently available information, we are not aware
of any such material contamination or third-party claims at New Rise, Fort Myers, or Wilson. Based on our current assessment of the environmental
and regulatory risks, we have not accrued any amounts for environmental matters as of December 31, 2025 at the aforementioned sites.
The ultimate costs of any liabilities that may be identified or the discovery of additional contaminants could materially adversely impact
our results of operation or financial condition. As additional production facilities are brought online, we will be required to comply
with related contamination rules.

Spills
or Releases of Hazardous Materials

Our
operations involve the storage, handling, transport and disposal of bulk materials, some of which contain oil, contaminants and other
regulated substances. The production and transportation of our products may result in spills or releases of hazardous substances, which
could result in claims from governmental authorities or third parties relating to actual or alleged personal injury, property damage,
or damage to natural resources. The response to such events is governed by the EPCRA which requires facilities to report the storage,
use, and release of hazardous chemicals to federal, state, and local governments and Section 103 of the CERCLA which mandates immediate
reporting of releases of hazardous substances exceeding reportable quantities to the National Response Center (“NRC”).

New
Rise Reno has a Site Pollution Incident Legal Liability insurance policy which provides coverage against some liabilities that result
from spills. Additionally, New Rise Reno’s general and umbrella liability policy coverage includes, but is not limited to, physical
damage to assets, employer’s liability, comprehensive general liability, automobile liability and workers’ compensation.
XCF, itself, does not carry environmental insurance. XCF believes that its insurance is adequate for the industry, but losses could occur
for uninsurable or uninsured risks or in amounts exceeding existing insurance coverage. The occurrence of events which result in significant
personal injury or damage to XCF’s property, natural resources or third parties that is not covered by insurance could have a material
adverse impact on the results of our operation and financial condition. We are not aware of any such material spills or releases of hazardous
substances that have resulted in government or third-party claims at New Rise, Fort Myers, or Wilson.