You can strike two adjacent foes with a single swing.
Benefit: As a standard action, you can make a single attack at your full base attack bonus against a foe within reach. If you hit, you deal damage normally and can make an additional attack (using your full base attack bonus) against a foe that is adjacent to the first and also within reach. You can only make one additional attack per round with this feat. When you use this feat, you take a –2 penalty to your Armor Class until your next turn.
Can I take a 5-foot step in the middle of my attempt to use the Cleave feat, to bring another foe within reach?
No. Cleave is a special action and the conditions for that action are checked at the moment you begin your action. At that moment, all of the available targets are checked to make sure they adjacent to each other and within reach. You cannot take a 5-foot step in the middle of the action and check conditions again. If you do not have two targets within reach, adjacent to each other at the start of the attack, you could not even attempt to make an attack using Cleave.
Pathfinder RPG Core Rulebook. Copyright 2009, Paizo Publishing, LLC; Author: Jason Bulmahn, based on material by Jonathan Tweet, Monte Cook, and Skip Williams.