10-Q: XCF Global Faces Liquidity Crisis Amid Production Delays

XCF Global, Inc. reported a net income of $102.8 million for the six months ended June 30, 2025, primarily driven by non-cash warrant revaluation gains, but faces substantial doubt about its ability to continue as a going concern due to significant operating losses, debt defaults, and production delays at its key Reno facility.

Summary

• XCF Global, Inc. (formerly Focus Impact BH3 NewCo, Inc.) completed its business combination on June 6, 2025, becoming a publicly traded company on NASDAQ (SAFX).
• The company reported net income of $102,800,908 for the six months ended June 30, 2025, a significant improvement from a net loss of $7,782,851 in the prior year period, largely due to a $206.2 million gain from the change in fair value of warrants.
• Revenue for the six months ended June 30, 2025, was $6,576,232, primarily from renewable diesel and environmental credits, compared to no revenue in the same period of 2024.
• The New Rise Reno facility, converted to Sustainable Aviation Fuel (SAF) production in October 2024, began initial production of SAF and renewable naphtha in February 2025, with first deliveries in March 2025.
• During the April-June 2025 period, New Rise Reno produced approximately 1.9 million gallons of neat SAF, renewable diesel, and renewable naphtha, operating at about 50% of nameplate capacity for SAF.
• Management has temporarily shifted to producing and selling renewable diesel at approximately 2,000 barrels per day (20% below nameplate capacity) due to ongoing SAF ramp-up issues and catalyst processing reviews.
• The company expects to resume SAF production as early as the first quarter of 2026, but cannot assure when full capacity will be reached.
• XCF Global has a working capital deficit of $229,294,212 as of June 30, 2025, with current assets of $17,967,672 and current liabilities of $247,261,884.
• The company is in default on its Greater Nevada Credit Union (GNCU) loan, with $25,302,788 in principal and interest, plus $2,350,030 in penalties/late charges, required to bring it current as of September 30, 2025.
• GNCU issued an acceleration notice for $130,671,882.10 on August 6, 2025, which was later withdrawn on August 27, 2025, though the underlying defaults remain.
• New Rise Reno is also in default on its Ground Lease with Twain GL XXVIII, LLC, owing $15,671,955 in lease payments and $8,047,791 in late fees/penalties as of September 30, 2025.
• A forbearance agreement with Twain was entered into on June 11, 2025, until September 3, 2025, in exchange for 4,000,000 shares of XCF Common Stock.
• The company has identified material weaknesses in internal control over financial reporting, including lack of journal entry review, formal risk assessment, effective financial reporting processes, IT general controls, and segregation of duties.
• Total indebtedness as of June 30, 2025, was approximately $254,872,279, including notes payable and a financial liability related to a failed sale and leaseback transaction.

Sentiment

Score: 2

Explanation: The company faces severe liquidity challenges, multiple debt defaults, and significant production delays at its primary facility. While a net income was reported, it was driven by non-cash gains, masking substantial operational losses. The 'going concern' warning and the need for substantial additional financing indicate a highly precarious financial position, despite long-term growth plans in a promising industry.

Positives

• Reported a net income of $102,800,908 for the six months ended June 30, 2025, a significant turnaround from a net loss in the prior year.
• Generated $6,576,232 in revenue for the six months ended June 30, 2025, compared to no revenue in the same period of 2024, indicating initial commercial activity.
• Successfully completed the business combination and became a publicly traded company on NASDAQ (SAFX) on June 6, 2025.
• The New Rise Reno facility began initial production of SAF and renewable naphtha in February 2025, with first deliveries in March 2025.
• Entered into an Equity Line of Credit (ELOC) agreement with Helena Global Investment Opportunities I Ltd for up to $50,000,000.
• Secured a Convertible Note Purchase Agreement with EEME Energy SPV I LLC for up to $7,500,000 in convertible promissory notes, with $6,000,000 already elected for conversion.

Negatives

• Operating losses continue, with a loss from operations of $40,283,826 for the six months ended June 30, 2025.
• The company has a significant working capital deficit of $229,294,212 as of June 30, 2025.
• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and insufficient funding.
• The GNCU Loan is in default, requiring approximately $25,302,788 in principal and interest, plus $2,350,030 in penalties/late charges, to become current as of September 30, 2025.
• The Twain Ground Lease is in default, with $15,671,955 in lease payments and $8,047,791 in late fees/penalties owing as of September 30, 2025.
• The company is in default on approximately $1,700,000 in principal and $500,000 in interest on several unsecured promissory notes related to the Fort Myers and Wilson facilities.
• The Polar Subscription Agreement is in default, leading to the issuance of 480,000 shares of Class A common stock to Polar.
• The New Rise Reno SAF production facility is experiencing production issues, operating at approximately 50% capacity for SAF during ramp-up and temporarily producing renewable diesel.
• SAF production is not expected to resume until Q1 2026, and there is no assurance of reaching full capacity.
• Incurred $13,200,000 in severance expenses during the six months ended June 30, 2025.
• Incurred $11,853,942 in professional fees for the six months ended June 30, 2025, primarily for transaction costs and consulting.
• Recognized a $40,531,000 loss on the issuance of debt to a related party (GL) during the six months ended June 30, 2025.
• Identified multiple material weaknesses in internal control over financial reporting that have not yet been remediated.

Risks

• Inability to obtain sufficient additional funding to execute the business plan and meet financial obligations, raising substantial doubt about continuing as a going concern.
• Production issues at the New Rise Reno facility, including delays in resuming SAF production (expected Q1 2026) and uncertainty about reaching full capacity, will adversely affect revenues and profitability.
• Delays or cost overruns in constructing additional renewable fuels production facilities (New Rise Reno 2, Fort Myers, Wilson) could impair revenue generation and financial condition.
• Failure to resolve disputes with the landlord (Twain) regarding the ground lease could lead to termination of the lease, possession of the facility, and cessation of operations.
• Failure to resolve disputes with the primary lender (GNCU) regarding outstanding loans could lead to acceleration of debt, foreclosure on assets, and cessation of operations.
• Reliance on Randy Soule, the largest shareholder, for operational support and legacy knowledge, with potential disruption if his support is withdrawn or if he pursues competing interests.
• Volatility in feedstock costs and SAF selling prices, with little correlation between them, could reduce margins and negatively impact revenues.
• Dependence on a single counterparty (Phillips 66) for all feedstock requirements and renewable diesel/SAF off-take, posing risks if the counterparty fails to meet obligations or if additional agreements are not secured.
• Risks associated with domestic feedstock sourcing strategy, including cost/availability fluctuations, contract concentration, logistical vulnerabilities, and counterparty performance.
• Reliance on licensed technology from Axens North America Inc. for SAF production, with risks of license termination or challenges to intellectual property rights.
• Uncertainty regarding the continued adoption and use of SAF by airlines, and potential incompatibility or ineffectiveness of SAF with existing aircraft, could reduce demand.
• Significant capital outlays and operating expenditures required for facilities, with risks of projects not meeting expected costs or market conditions deteriorating.
• Operational and safety risks at facilities, including equipment defects, chemical releases, fires, and personal injury, could lead to substantial liabilities and operational disruptions.
• Citizen opposition and negative publicity regarding operations and planned expansions could damage reputation and delay projects.
• Insurance policies may not cover all losses, costs, or liabilities, exposing the company to significant financial expense.
• Exposure to litigation risk, including potential class action and shareholder derivative lawsuits, which could incur substantial costs and divert management resources.
• Competition from other renewable fuels producers, including those with their own feedstock supply, could diminish market share.
• Rapidly advancing technologies in the fuel and chemical industries could diminish demand for the company's SAF product if competitors develop more effective or cost-efficient technologies.
• Inability to successfully integrate new and acquired facilities could adversely affect financial results.
• Uncertainty and illiquidity in the capital markets may impair the ability to obtain equity or debt financing.
• Substantial indebtedness and future need for additional debt could adversely affect financial flexibility and competitive position.
• Inability to retain key personnel or attract additional qualified personnel could hinder growth.
• Failure to manage rapid growth and expand operations successfully could damage reputation and harm business.
• Risks associated with international growth strategy, including regulatory uncertainties, dependence on partner performance, and intellectual property protection challenges.
• Negative impact from inflation on commodity markets, feedstock costs, labor, and interest rates.
• Declines in anticipated profitability could result in impairment of long-lived assets.
• Volatility in the price of the company's securities due to various market and industry factors.
• Future resales of Class A common stock by existing stockholders could cause the market price to drop significantly.
• Substantial control by directors, executive officers, and principal stockholders (77% ownership, largest stockholder 47%) could limit other stockholders' influence.
• Issuance of additional shares of Class A common stock would dilute existing stockholders.
• Delaware law and company's charter/bylaws contain anti-takeover provisions that could delay or discourage takeover attempts.
• Exclusive forum provisions in the certificate of incorporation could limit stockholders' ability to obtain a favorable judicial forum.

Future Outlook

The company intends to build a nationwide portfolio of SAF and renewable fuels production facilities, implementing a fully integrated business model from feedstock supply to sales. SAF production at the Reno facility is expected to resume as early as Q1 2026, with plans to scale and operate clean fuel production facilities. Additional facilities in Reno (New Rise Reno 2), Fort Myers, Florida, and Wilson, North Carolina are planned for construction or reconstruction for SAF/renewable fuels production, with anticipated construction costs of $300 million for New Rise Reno 2 (28 months to complete, SAF production around 2028) and $350 million per site for Fort Myers and Wilson (36 months to complete). The company is actively seeking new sources of financing to meet obligations and fund its long-term business plan, including refinancing existing loans and lease payments. Management is also working to remediate identified material weaknesses in internal controls.

Management Comments

• "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."
• "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."
• "New 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."
• "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."
• "We currently expect to resume SAF production as early as the first quarter of 2026, although we cannot assure you when SAF production will resume, and when it does resume, when or whether the Reno production facility will be able to produce SAF at full capacity."
• "Our ultimate success is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely basis."
• "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."

Industry Context

The company operates in the rapidly growing, but capital-intensive, renewable fuels sector, specifically targeting Sustainable Aviation Fuel (SAF) production. This industry is driven by increasing regulatory support, industry-led demand from airlines for decarbonization, and end-user commitment to reduce carbon footprints. XCF Global aims to differentiate itself as a primary SAF producer compared to legacy crude oil refiners. However, the market is characterized by evolving regulations, technological advancements, and significant competition for feedstocks. The reliance on government incentives (RINs, LCFS, BTC) highlights the regulatory sensitivity of the sector. The current U.S. reliance on voluntary SAF adoption measures may place it at a disadvantage compared to mandates in the European Union, potentially impacting domestic supply and adoption rates.

Comparison to Industry Standards

• The company aims to be a majority SAF producer, distinguishing itself from peers that are predominantly legacy crude oil refiners, suggesting a focused strategy within the renewable fuels industry.
• The Reno production facility operated at approximately 50% of nameplate capacity during the initial SAF ramp-up, which is not uncommon for commissioning and early-stage operations in production facilities, but the prolonged delay in reaching full SAF capacity and temporary shift to renewable diesel indicates challenges in line with the inherent risks of new production technologies.
• The company's significant capital requirements and recurring losses, leading to a 'going concern' doubt, are common for early-stage, capital-intensive renewable energy projects, but the multiple defaults on loans and leases indicate a more severe liquidity challenge than typical industry ramp-up issues.

Management Changes

Corporate Governance

Legal Proceedings

• Polaris Processing, LLC filed an arbitration demand against New Rise Reno for $950,000 related to unpaid invoices and alleged non-solicitation violations. The amount is due to a cybersecurity incident affecting outside legal counsel, and New Rise Reno remains obligated to Polaris. The company has recorded a liability and a corresponding receivable for expected insurance recovery.

Related Party Transactions

• Related party receivables of $728,218 are due from Randy Soule, the majority shareholder, related to regulatory filing fees and immaterial advances to officers.
• Encore DEC, LLC, 100% owned by Randy Soule, provides EPC services to the company. Costs incurred for services were $1,533,000 (three months) and $2,648,400 (six months) ended June 30, 2025, capitalized to construction in progress. The outstanding payable balance to Encore was $40,278,654 as of June 30, 2025, with no interest or due date, considered payable on demand.
• Loans payable to GL Part I SPV, LLC (GL) totaled $2,350,000 as of June 30, 2025, with no interest or due date, considered payable on demand.
• An additional loan payable with GL of $1,404,000 was assumed in February 2025, with a fair value of $1,397,000 as of June 30, 2025.
• A promissory note with GL for $2,500,000 (April 17, 2025) resulted in a $40,531,000 loss on issuance of debt, with a fair value of $2,717,000 as of June 30, 2025.
• A convertible note payable to RESC (related party) for $100,000,000 was assumed in February 2025 and converted into 10,000,000 shares of New XCF Class A common stock upon Business Combination closing.
• The ELOC Agreement with Helena Global Investment Opportunities I Ltd involved a commitment fee of 740,000 Legacy XCF shares (500,000 New XCF shares) issued to Helena.
• The Helena Note for $2,000,000 involved Randall Soule transferring 2,840,000 Legacy XCF shares to Helena, with the company agreeing to issue Soule replacement shares. The Helena Note was paid off on June 18, 2025.
• Focus Impact Partners entered into a strategic consulting agreement for an annual fee of $1,500,000, payable monthly.

Stakeholder Impact

• Shareholders face significant dilution risk from potential future equity raises and the issuance of shares to settle debt defaults and commitment fees.
• Existing shareholders' ownership interest is highly concentrated, with executive officers, directors, and principal stockholders owning approximately 77% of outstanding shares, potentially limiting influence of other stockholders.
• Employees may be impacted by the company's financial instability and the need to attract and retain skilled personnel, although new equity incentive and stock purchase plans are in place.
• Customers, particularly Phillips 66, are impacted by production delays and the temporary shift from SAF to renewable diesel, potentially affecting supply consistency and product mix.
• Suppliers and creditors face heightened risk due to multiple debt and lease defaults, which could lead to strained relationships, stricter terms, or legal actions.
• Regulatory bodies are monitoring the company's compliance with financial reporting standards, especially concerning identified material weaknesses in internal controls.

Next Steps

• Actively seeking new sources of financing to meet obligations and fund the long-term business plan.
• Engaging in discussions with GNCU to resolve loan defaults, including potential forbearance or modified payment schedules.
• Evaluating financing alternatives to refinance the GNCU Loan and Ground Lease payments.
• Working to remediate identified material weaknesses in internal control over financial reporting, including implementing Oracle NetSuite, establishing a formalized governance program, and hiring additional accounting personnel.
• Resuming SAF production at the New Rise Reno facility as early as Q1 2026.
• Continuing to evaluate the role of Fort Myers, Florida, and Wilson, North Carolina facilities within the broader SAF and biofuels value chain for future build-out and reconstruction.
• Beginning construction of New Rise Reno 2 in 2026, with SAF production anticipated around 2028.
• Continuing discussions with affected lenders regarding potential amendments, forbearance arrangements, or restructuring of outstanding unsecured loan obligations.

Key Dates

Recommendation

XCF Global, Inc. presents an extremely high-risk investment profile. While the company operates in the promising Sustainable Aviation Fuel (SAF) sector and reported a net income, this was primarily due to non-cash accounting adjustments for warrants, masking severe underlying operational and financial distress. The company explicitly states 'substantial doubt about our ability to continue as a going concern,' which is a critical red flag. It faces multiple defaults on significant loans and leases, including a $130 million GNCU loan and a $23 million Twain Ground Lease, which could lead to asset seizure or cessation of operations. Production at its key Reno facility is delayed, with SAF not expected to resume until Q1 2026, and there's no assurance of reaching full capacity. The company has a massive working capital deficit of over $229 million and will require substantial additional financing, which may not be available on favorable terms or at all, and would likely result in significant shareholder dilution. Identified material weaknesses in internal controls further compound the risk. Given the severe liquidity crisis, operational setbacks, and high probability of further dilution or business disruption, a seasoned investor would likely recommend a strong sell.

Keywords

Sustainable Aviation Fuel, SAF, Renewable Diesel, Biofuels, Renewable Energy, SEC Filing, 10-Q, XCF Global, New Rise Reno, Going Concern, Debt Default, Liquidity Crisis, Production Delays, Phillips 66, GNCU Loan, Twain Ground Lease, Capital Raise, Internal Controls, Environmental Credits, NASDAQ:SAFX