RARE ELEMENT RESOURCES LTD

The following Consolidated Financial Statements and Reports of Independent Registered Public Accountants are filed as part of this Item 8 and are included in this Annual Report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of Rare Element Resources Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Rare Element Resources Ltd. (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Cost Share Agreement – Refer to Note 4 to the Financial Statements

As discussed in Note 4 to the financial statements, the Company is a member of a consortium of companies, led by General Atomics, a related party, who are developing a Demonstration Plant (the “project”) that will process high-grade rare-earth material. In connection with the arrangement, the Company entered into a Cost Share Agreement with General Atomics, in which the Company agreed to assume and pay for 50% of those costs incurred by, and on behalf of, General Atomics, as leader of the consortium, for the project.

We consider management’s assessment and accounting of the Cost Share Agreement as a significant audit matter because of the significant judgements required by management to determine the activity completed in accordance with the agreements. This required a high degree of auditor judgement and an increased extent of effort to address these matters.

Addressing the matter involved gaining an understanding of the process to account for the Cost Share Agreement. We obtained and interpreted the Cost Share Agreement and subcontracts to ensure the amounts were consistently applied. We evaluated management’s analysis and compared that to applicable accounting guidance. Finally, we obtained the

Company’s fund flows and examined the costs used in their calculation to ensure they were in accordance with the agreements.

​​​​​

Haynie & CompanySalt Lake City, UtahMarch 12, 2026​We have served as the Company’s auditor since 2022.

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. Dollars, except shares outstanding)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of U.S. Dollars, except per share and common share amounts)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. Dollars)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Expressed in thousands of U.S. Dollars, except number of shares)

1. NATURE OF OPERATIONS

Rare Element Resources Ltd. (“we,” “us,” “Rare Element” or the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, on June 3, 1999.

Rare Element holds a 100%interest in the Bear Lodge rare earth elements project (the “Bear Lodge REE Project”) located near the town of Sundance in northeast Wyoming. The Bear Lodge REE Project consists of several large, disseminated rare earth elements (“REE”) deposits having a favorable distribution of neodymium-praseodymium (NdPr), as well as a number of other critical REEs. Additionally, the Company has developed and enhanced, along with General Atomics and its affiliates, innovative and proprietary REE processing and separation capabilities, currently being tested at the Demonstration Plant, for the processing of the Bear Lodge REE Project feed material and possibly feed materials from other sources.

If and when developed, the Bear Lodge REE Project will likely consist of a mine and a separation plant to produce a commercial NdPr product. As market conditions dictate, the Company will decide whether it is prudent to develop and put into production the mine and separation plant independent of each other or whether linking the two production processes into a single project is the more prudent path.

The Company also holds a 100% interest in the Sundance Gold Project that is adjacent to the Bear Lodge REE Project and contains a historical inferred mineral resource primarily composed of three gold targets within the area of the Bear Lodge property (the “Bear Lodge Property”). The Sundance Gold Project has been on hold since 2011 and will likely remain so for the foreseeable future, although with the recent rise in the price of gold, the Company may explore options to advance or monetize this asset.

The Company is currently focused on the advancement of a rare earth processing and separation demonstration-scale plant (the “Demonstration Plant”) projectand the permitting and licensing of the Bear Lodge REE Project. The Demonstration Plant will process already stockpiled high-grade sample materials from the Bear Lodge REE Project.

In January 2021, a consortium of companies, of which the Company is a part, received notice from the Department of Energy (“DoE”) that the consortium had been selected for negotiation of a potential financial award for the engineering, construction and operation of a rare earth separation and processing demonstration plant, which is now the Demonstration Plant project. The consortium of companies is led by General Atomics, an affiliate of Synchron, the Company’s majority shareholder, and includes certain of General Atomics’ affiliates, as well as the Company and LNV, an Ardurra Group, Inc. company, as engineering and construction subcontractor. The Company, as a subrecipient of the award, along with the other consortium members, commenced work on the planning and design of the Demonstration Plant project in November 2021, with the Company’s contractual arrangement with General Atomics finalized in December 2021.

To address the Company’s funding needs, including the funding required for the Demonstration Plant, the Company completed rights offerings in December 2021 (the “2021 Rights Offering”) and March 2024 (the “2024 Rights Offering”) for gross proceeds of approximately$25,400 and$35,800, respectively. Additionally, the Company completed a rights offering in March 2026 for gross proceeds of approximately $30,900 (the “2026 Rights Offering”). The Company plans to use the net proceeds from the 2026 Rights Offering in conjunction with those funds already on hand (i) to support (A) the continuation of the operation of the Demonstration Plant; (B) the advancement of projects for the as-constructed Demonstration Plant beyond the current neodymium/praseodymium (NdPr) separation objectives, including applying the technology to the separation of heavy rare earth elements and possibly to third-party feed sources; (C) the completion of federal and state permitting and licensing for the Bear Lodge REE Project; and (ii) for other general corporate purposes.

Since inception, the General Atomics-led consortium has seen increases in the Demonstration Plant’s project costs, including its final equipment costs, due to inflation, among other factors. As a result of these cost pressures, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant construction and operations budget in 2024 of approximately $53,600, which was approximately 22% higher than the original budget of approximately

$43,800. In response, the DoE pledged an additional $2,400 in September 2024 (increasing its total commitment to approximately $24,200) to help fund a portion of the budget increase. The remaining amount will be funded by the Company, including any costs in excess of the revised $53,600 budget, now estimated to total approximately $77,500, inclusive of projected operating cost through December 31, 2026.

In December 2022, the Demonstration Plant achieved its final engineering design milestone, marking the DoE’s first go/no-go decision point. A second go/no-go gating milestone was achieved in December 2023 with the issuance by the DoE of a Project Continuation Notice, allowing for the construction of the Demonstration Plant.

In September 2024, the DoE issued its final Project Continuation Notice following its approval of the revised project budget of$53,600 and confirmation of readiness for the operations phase of the Demonstration Plant. This notice, along with the U.S. Nuclear Regulatory Commission’s (the “NRC”) operations approval under its previously issued license (received by the Company in October 2024), allowed for the commencement of Demonstration Plant operations.

Early in 2025, the Company identified several design and equipment issues during the Demonstration Plant’s equipment testing phase, which followed the completion of construction activities. After identifying these issues, we initiated an as-built design review in April 2025, which continued through December 31, 2025. As a result of this as-built design review, Demonstration Plant operations did not formally commence until early 2026.

The Company has incurred losses since its inception, and further losses are anticipated in the development of its business. As of December 31, 2025, the Company had cash and cash equivalents of $19,315. During the year ended December 31, 2025, the Company consumed cash of $7,121 in its operating activities, primarily associated with the Demonstration Plant project activities and for the payment of the Company’s general and administrative expenses and other ongoing costs of sustaining its properties.

The Company currently estimates that with (i) the net proceeds of approximately $30,500 from the 2026 Rights Offering and (ii) the funds on hand prior to the closing of the 2026 Rights Offering, it will have sufficient funds to complete theoperations stage of the Demonstration Plant, as currently planned, and the licensing and permitting for the Bear Lodge REE Project. Longer-term, in the event the Company cannot secure additional financial resources, or complete a strategic transaction, the Company may need to curtail or suspend the development and commercialization of its Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

2. BASIS OF PRESENTATION

Principles of Consolidation

These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and are inclusive of the accounts of Rare Element Resources Ltd. and its directly held wholly owned subsidiary, Rare Element Resources, Inc. All numbers in the consolidated financial statements are presented in U.S. dollars (in thousands), unless otherwise denoted.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results

could differ from those estimates. The amounts that involve estimates include our lease obligations, reclamation obligations and stock-based compensation.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less. At December 31, 2025 and 2024, cash and cash equivalents consisted of $19,315 and $26,732, respectively, of funds held in bank and investment accounts with financial institutions in the United States.

The Company continually monitors its cash positions with, and the credit quality of, the financial institutions with which it invests. The Company maintains balances in various U.S. financial institutions in excess of U.S. federally insured limits.

Restricted Cash

The Company periodically maintains cash deposits that are held and earmarked for a specific purpose. At December 31, 2025 and 2024, the Company had $202 and $195, respectively, in restricted cash for amounts held by a third party as security for a surety bond for our Demonstration Plant.

Mineral Properties and Exploration and Evaluation Costs

Mineral property acquisition costs, including indirectly related acquisition costs, are capitalized when incurred. Acquisition costs include cash considerations, and the fair market value of the Company’s common shares issued as consideration. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are capitalized as mineral property acquisition costs at such time as the payments are made. Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable mineral reserves, as defined by the Securities and Exchange Commission (“SEC”) Item 1300 of Regulation S-K or National Instrument 43-101 – Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (“NI 43-101”), development costs related to such reserves and incurred after such determination will be considered for capitalization. The establishment of proven and probable reserves is based on results of feasibility studies. Upon commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure. Capitalized amounts relating to a property that is abandoned or otherwise considered uneconomic for the foreseeable future will be written off.

The Company currently has no proven and probable reserves, and it should not be assumed that any part or all of our mineral resources will ever be converted into mineral reserves, as defined by the SEC or NI 43-101. See “Item 1A. Risk Factors” of this Annual Report.

Research & Development (“R&D”) Expenditures

Materials, equipment, and facilities acquired or constructed for R&D activities associated with the Demonstration Plant project are expensed as incurred. These materials, equipment and facilities are not expected to have an alternative future use beyond the end of the current Demonstration Plant project.

Impairment Assessment of Long-Lived Assets

Carrying values of long-lived assets, other than mineral properties, are evaluated for impairment when information becomes available that indicates the carrying value may not be recoverable. If it is determined that the fair value is less than the carrying value an impairment charge equal to the difference between the fair value and the carrying value will be recorded in our Consolidated Statements of Operations.

Reclamation Obligations

The Company’s mining and exploration activities are subject to various laws and regulations, including legal and contractual obligations to reclaim, remediate, or otherwise restore properties at the time the property is removed from service. Reclamation obligations are recognized when incurred and recorded as liabilities at fair value. The reclamation obligation is based on when spending for an existing disturbance is expected to occur. The Company reclaims the disturbance from its exploration programs on an ongoing basis; therefore, the portion of its reclamation obligation corresponding to its exploration programs expected to be settled in the near term is classified as a current liability. The remaining reclamation associated with environmental monitoring programs is classified as a long-term liability; however, because we have not declared proven or probable mineral reserves as defined under Item 1300 of Regulation S-K, the timing of these reclamation activities is uncertain as the reclamation areas will only be utilized once the Bear Lodge REE Project is operating. For exploration stage properties that do not qualify for asset capitalization, the costs associated with the reclamation obligation are charged to operations. For development and production stage properties, the costs are added to the capitalized costs of the property and amortized using the units-of-production method. We review, on a quarterly basis, unless otherwise deemed necessary, the reclamation obligation associated with our Bear Lodge Property.

The Company’s reclamation obligation is secured by surety bonds held for the benefit of the state of Wyoming in amounts determined by the applicable federal or state regulatory agencies. The Company’s reclamation obligation was $185 as of December 31, 2025 and December 31, 2024.

Depreciation

Depreciation is computed using the straight-line method. The Company depreciates computer equipment, furniture andfixtures and geological equipment over a period ofthree toten years, vehicles andother mobile equipment over a period offive years, and buildings over a period often years.

Stock-based Compensation

The fair value of stock-based compensation awards is measured at the date of grant and amortized over the requisite service period, which is generally the vesting period, with a corresponding increase in additional paid-in capital. The Company uses the Black-Scholes option valuation model to calculate the fair value of awards granted.

In the case of a share-based compensation award that is either cancelled or forfeited prior to vesting, the amortized expense associated with the unvested awards is reversed. The Company has elected to account for forfeitures as they occur.

Leases

The Company accounts for leases in accordance with ASC 842 –*Leases.*This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of the remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement in determining the present value of lease payments.

In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments, and options to extend, terminate or purchase. Renewal, termination, or purchase options affecting the lease term are used for determining lease asset value only if the option is reasonably certain to be exercised.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that the entire or some portion of the deferred tax asset will not be recognized.

Loss per Share

Loss per share is computed using the weighted average number of shares outstanding during the period. To calculate diluted loss per share, the Company uses the treasury stock method and the if-converted method. Diluted loss per share in our case is not presented, as the effect on the basic loss per share would be anti-dilutive. At December 31, 2025 and 2024, we had 3,705,000 and 4,405,000 of potentially dilutive securities, respectively, related to outstanding stock options.

Fair Value

GAAP defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of December 31, 2025 and 2024 are presented in the following table:

Money market funds are valued at cost, which approximates fair value. These amounts are included on the balance sheet in cash and cash equivalents at December 31, 2025 and 2024.

Recently Issued Accounting Pronouncements

Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amended guidance enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance requires disclosure of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal, state, and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amended guidance is effective for annual periods beginning January 1, 2025. The guidance can be applied either prospectively or retrospectively.

The adoption of this ASU only impacted our disclosures, with no impacts to our results of operations, cash flows, or financial condition.

Disaggregation of Income Statement Expenses

Issued by FASB in November 2024, ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), requires a public business entity to disclose disaggregated information about certain income statement expense line items and information about selling expenses. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted.

While early adoption is permitted, we do not plan to adopt this standard early. When adopted, this ASU may result in additional disclosures being included in our consolidated financial statements, but we are still in the process of evaluating the provisions of this ASU.

4. RELATED PARTY

Cost Share Agreement with General Atomics

In January 2021, a consortium of companies, of which the Company is a part, received notice from the DoE that the consortium had been selected for negotiation of a potential financial award for the engineering, construction, and operation of the Demonstration Plant. This consortium of companies is led by General Atomics, an affiliate of Synchron (the Company’s majority shareholder), and includes certain of General Atomics’ affiliates, as well as the Company and LNV, an Ardurra Group, Inc. company, as engineering and construction subcontractor. A formal proposal was submitted by the consortium in response to a published Funding Opportunity Announcement in mid-2020 for the construction and operation of the Demonstration Plant utilizing proprietary technology to produce commercial-grade products. Under this original proposal, the DoE’s share of the Demonstration Plant project funding was estimated at$21,900 and represented approximatelyone-half of the total originally estimated costs for the project. The DoE agreement was executed by the DoE’s grants/agreement officer on September 27, 2021, with an effective date of October 1, 2021. The DoE award was finalized through a cooperative agreement dated October 1, 2021 (the “Cooperative Agreement”) that was awarded by the DoE for the Demonstration Plant. The Cooperative Agreement provided that up to approximately$43,800 in allowable

costs for the Demonstration Plant were to be funded on a cost-share basis,50% by the DoE and 50% by a non-federal entity.

On November 30, 2021, the Company and General Atomics entered into a Cost Share Funding Assumption Agreement (the “Cost Share Agreement”) pursuant to which the Company agreed to assume and pay for the 50% of the non-federal funds incurred by, and on behalf of, General Atomics for the design, construction, and operation of the Demonstration Plant under the Cooperative Agreement. The Demonstration Plant will process already stockpiled high-grade sample materials from the Bear Lodge REE Project.

On March 17, 2022, the Company executed a subcontract purchase order in the amount of$5,318 with General Atomics under which the Company agreed to provide certain services and materials to the Demonstration Plant project, including, but not limited to, providing the plant’s sample materials, engaging in site location leases and other logistics, providing operational support, and providing decommissioning, bonding and other Demonstration Plant support activities (the “Subcontract Purchase Order”). In connection with the Subcontract Purchase Order, the Company submitted monthly invoices to General Atomics for the subcontracted services performed, which were reimbursed by General Atomics withone-half of the funds coming from funds advanced by the Company under the Cost Share Agreement and, up to the original Demonstration Plant budget, one-half of the funds from the DoE.

Due to inflationary cost pressures on labor, equipment, and consumables, as well as cost increases associated with certain optimized plant engineering and design parameters, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant project budget of approximately$53,600, which was approximately 22% higher than the original budget of approximately$43,800. In response, the DoE pledged an additional cost-share funding commitment of$2,400 to fund a portion of the budget increase, with the balance coming from the Company, including any amounts in excess of the$53,600 revised budget total. The Company currently estimates the total cost of the Demonstration Plant from inception to be approximately$77,500, inclusive of operating cost estimates through December 31, 2026.

On May 16, 2024, the Company and General Atomics entered into an extension agreement to the Cost Share Agreement (the “Extension Agreement”) under which the Company agreed to make additional cash advances, of up to$2,500, to General Atomics while the parties progressed an amended project funding agreement covering the Company’s share of the additional non-federal project funding needed for the project’s completion. Pursuant to the terms of the Cost Share Agreement and Extension Agreement, the Company had advanced payments to General Atomics, as leader of the consortium, totaling$24,200 through October 31, 2024, the maximum amount of advances authorized under these agreements. In November 2024, General Atomics subsequently returned approximately$3,811 of the amounts previously funded by the Company under the Cost Share Agreement, which were used by the Company, in part, to make payments to certain other contractors for work under the Cost Share Agreement. The payments to these other contractors, all made in November 2024 and on General Atomics’ behalf, totaled to$4,746.

In September 2025, at the Company’s request, General Atomics and the Company formally requested a novation of the financial assistance agreement between General Atomics and the DoE, under which General Atomics’ interests under the agreement would be transferred to the Company. The novation process, which is underway and is expected to be completed during the first half of 2026, will not change the intellectual property rights held by Synchron and its affiliates in the Company’s intellectual property. Once the novation process is complete, the Company will be named the recipient of the award under the agreement and certain conditions are expected to be confirmed, including the potential for additional DoE funding for further advancements of the Demonstration Plant.

The DoE has allowed the novation process to progress even though the financial assistance agreement’s term expired on September 30, 2025. If a novation is not completed, the DoE award to General Atomics could be terminated, and final disposition of the assets and decommissioning activities would be negotiated with the DoE. Although the Company expects the novation process to be completed in the first half of 2026, there is no assurance of the process progressing in a timely manner or being completed at all.

Since inception, the Company has (i) advanced$20,389 in funds to General Atomics under the Cost Share Agreement, (ii) paid an additional$4,746 on General Atomics’ behalf to certain contractors for work performed under the Cost Share Agreement and (iii) paid directly another$11,963 in Demonstration Plant project costs. Inclusive of all amounts incurred since project inception, a total of$57,554 has been expended on the Demonstration Plant through December 31, 2025.

The following table summarizes transactions under the Cost Share Agreement for the years ended December 31, 2025 and 2024:

(1) As of December 31, 2025, the Company has a receivable from General Atomics due to the Company invoicing amounts during the third quarter of 2025 for certain Demonstration Plant expenses incurred in prior periods under the Cost Share Agreement. These expenses were initially excluded from the Company’s billings under the Cost Share Agreement because the Company believed at the time that including them would cause the original $43,800 award to be exceeded and therefore not recoverable. The subsequent increase in the Cost Share Agreement award to $53,600 prompted the Company to re-evaluate its prior position and invoice the project for certain of these previously excluded expenses. As a result, the Company’s share of Demonstration Plant project costs for the year ended December 31, 2025 was negative.

The following table summarizes the related party receivable activity with General Atomics for reimbursable costs incurred by the Company under the Cost Share Agreement for the years ended December 31, 2025 and 2024:

5. WYOMING ENERGY AUTHORITY GRANT

In June 2023, the Company, and the WEA entered into a Funding Agreement (the “WEA Funding Agreement”) pursuant to which the WEA agreed to fund, subject to certain conditions, a $4,400 grant to the Company, the proceeds of which are to be used for the Demonstration Plant. Pursuant to the WEA Funding Agreement, the grant is to be paid upon the WEA’s receipt of invoices from the Company detailing its actual expenses relating to the Demonstration Plant (half of which funds will be allocated totwo milestone periods during the development process), less a 10% retainer, the payment of which is conditioned upon the WEA’s receipt, following the commencement of the Demonstration Plant’s operations, of an invoice and the Company’s final executive summary report in a form to be approved by the WEA. Pursuant to the WEA Funding Agreement, the funding for the Demonstration Plant will be provided to the WEA from the Energy Resources Council (the “ERC”) and is further conditioned upon the availability of government funds that are appropriated or allocated for the payment of the grant and which may be limited for any reason, including congressional, legislative, gubernatorial, or administration action.

The WEA Funding Agreement will terminate when the funding has been fully disbursed, but no later than June 30, 2026, unless terminated sooner by either party in accordance with the terms of the WEA Funding Agreement. The WEA Funding Agreement may be terminated (i) by either party if the WEA does not receive the requested funding from the ERC or if the grant funds are not allocated or available for the continued performance of the WEA Funding Agreement, or (ii) by the WEA immediately for cause if the Company fails to perform in accordance with the terms of the WEA Funding Agreement.

By December 31, 2023, the Company had met the conditions allowing for the invoicing of$2,000 of the$4,400 WEA grant total, which was received on January 31, 2024. By September 30, 2024, the Company had met the conditions allowing for the invoicing of an additional$2,000, which was received in November 2024. The remaining$400 of the$4,400 grant total, which is conditioned on the commencement of operations and submission of a report to WEA, will be invoiced to the WEA once that final milestone has been achieved, which is currently expected to occur in mid-2026.

The following table summarizes transactions under the WEA Funding Agreement for the years ended December 31, 2025 and 2024:

Because there is no specific guidance under U.S. GAAP that addresses the recognition and measurement of government assistance received by non-government entities, the Company has elected to account for the WEA grant by analogy to the guidance provided under U.S. GAAP for government assistance to non-business entities. Under this guidance, any recognition of the grant is deferred and only gets recorded in the grantee’s financial statements if and when the applicable gating condition(s) have been substantially met. Accordingly, the Company has not yet recognized as grant income the final $400 remaining under the WEA Funding Agreement as this amount is conditioned upon the commencement of the Demonstration Plant’s operations and receipt of the Company’s final executive summary report, neither of which had been met at December 31, 2025.

6. LEASES

Effective September 21, 2021, the Company entered into a lease agreement (the “Property Lease”) for real property, including land and buildings in Upton, Wyoming for the Demonstration Plant. The Property Lease, which had an initial 12-month term, allows for annual renewals, which at the Company’s option can be renewed for as long as the facility is needed. In June 2025, the Property Lease was renewed, extending the termination date to September 30, 2026. The Property Lease, which is classified as an operating lease, generally provides for base rent, and requires the Company to pay all insurance, personal property taxes on any structure or improvements made by the Company and other maintenance costs. The Property Lease provides for an annual cost of living adjustment but contains no residual value guarantees or restrictive covenants. Pursuant to the Property Lease, the Company is obligated to remove certain Company completed property improvements, though those items requiring removal, if any, will be confirmed with the lessor prior to the termination of the Property Lease.

On May 14, 2024, the Company entered into a second lease agreement for modular office units for use at its Demonstration Plant site in Upton, Wyoming (the “Office Lease”). The Office Lease, which was for an initial 12-month term and provided for monthly extension options thereafter, was classified as an operating lease, and generally provided for base rent, and required the Company to pay all insurance, property taxes and other applicable costs, including the transportation charges to return the units to their original point of origin in an amount not to exceed$7. As of December 31, 2025, the Office Lease was terminated with the Company’s purchase of these modular office units for$131.

For purposes of the following table, payments under the Property Lease are assumed to run through September 30, 2027. If the completion of the Demonstration Plant operations dictates further extensions beyond this date, the Company may seek to extend the term of the Property Lease.

Total future minimum lease payments under the Property Lease as of December 31, 2025 were as follows:

For the years ended December 31, 2025 and 2024, $168 and $134, respectively, were included in operating cash flows for amounts paid for operating leases.

For the years ended December 31, 2025 and 2024, the Company incurred interest expense on lease liabilities of $23 and $32, respectively, and right of use asset amortization expense of $162 and $142, respectively.

As of December 31, 2025 and 2024, the weighted average lease terms for the Company’s operating leases were 1.75 years and 1.58 years (including renewal options), respectively, and the weighted average discount rate was estimated at 12% for both years.

7. MINERAL PROPERTIES

Bear Lodge Property, Wyoming, USA

The Company, through its wholly owned subsidiary, Rare Element Resources, Inc., holds a 100% interest in 499 unpatented mining claims located on land administered by the USFS and approximately 640 acres (257 hectares) of fee property, together which contain (1) the Bear Lodge REE Project that contains REE mineralization; and (2) the Sundance Gold Project that contains gold mineralization. The property is situated in the Bear Lodge Mountains of Crook County, in northeast Wyoming.

8. EQUIPMENT, BUILDINGS AND LAND

Equipment and Buildings

At December 31, 2025 and 2024, equipment and buildings consisted of the following:

Depreciation expense for the years ended December 31, 2025 and 2024 was $33 and $13, respectively. The Company evaluates the recoverability of the carrying value of equipment and buildings when events and circumstances indicate that

such assets might be impaired. No impairment charges were recorded during the years ended December 31, 2025 and 2024.

Land

On October 25, 2021, the Company and Whitelaw Creek LLC, a Wyoming limited liability company (“Whitelaw Creek”), entered into an amendment (the “Amendment”) to the asset purchase agreement dated October 20, 2016 between the Company and Whitelaw Creek (the “APA”). The Amendment modified certain provisions of the APA related to the terms and conditions of the Company’s option to repurchase (the “Repurchase Option”) approximately 640 acres (257 hectares) of non-core real property located in Crook County, Wyoming (the “Section 16 Property”), that was under consideration for a stockpile facility for the Bear Lodge REE Project. Pursuant to and subject to the terms of the Amendment, among other things, the term of the Repurchase Option (which was to expire on October 26, 2021) was extended for up tothree additional years, subject to annual option extension payments from the Company to Whitelaw Creek of $25 in cash per year (each, a “Repurchase Option Extension Payment”); and the exercise price of the Repurchase Option was increased from $1,000 to a price to be determined by a mutually agreed upon real estate appraiser (the “Repurchase Price”), provided that (i) the Repurchase Price not be less than $1,200 or greater than $1,850 and (ii) any Repurchase Option Extension Payments paid by the Company to Whitelaw Creek be credited toward the Company’s payment of the Repurchase Price if the Repurchase Option were later exercised.

Pursuant to the terms of the APA, the Company exercised its option to repurchase the Section 16 Property, and on October 21, 2024, entered into a purchase agreement with Whitelaw Creek to repurchase the property (the “Land Repurchase”). The Land Repurchase closed on October 25, 2024 (the “Closing Date”). As consideration for the Land Repurchase, on the Closing Date, the Company (i) issued 5,000,000 of its common shares to Whitelaw Creek having a Closing Date fair value of$1,950 and (ii) paid Whitelaw Creek$1,507 in cash. After settlement of the repurchase option liability and other costs incurred to close the transaction, the Company recorded a loss on the land repurchase of $67 for the year ended December 31, 2024.

For accounting purposes, the Company had treated the APA as a financing arrangement under which the then-$600 market value of the land had been reflected in the Company’s financial statements as an asset (“Investment in Land”) with a related liability (“Repurchase Option”) recorded for the Company’s obligation under the Repurchase Option. Accretion expense was being recorded monthly to increase the repurchase option liability to the maximum exercise price of $1,850, less any annual option payments of $25 made during the option period.

For the year ended December 31, 2024, the Company recorded accretion expense of $236 related to the Repurchase Option. With the Company’s repurchase of this property on October 25, 2024, the balances in both the Investment in Land account and the Repurchase Option account were written off and the land was recorded at its fair market value of $2,240.

9. RETIREMENT PLAN

Beginning on January 1, 2024, the Company began sponsoring a qualified tax-deferred savings plan in accordance with the provisions of Section 401(k) of the U.S. Internal Revenue Code, which was available to permanent, full-time employees. Employees may contribute up to 90% of their compensation, but not to exceed the maximum allowable contribution amount under IRS rules. When an employee meets eligibility requirements, the Company matches 100% of employee contributions of up to 6% of eligible earnings. Matching contributions are made in cash. The Company’s expense related to employee matching contributions was $112 and $55 during the years ended December 31, 2025 and 2024, respectively.

10. SHAREHOLDERS’ EQUITY

Stock-based Compensation

As of December 31, 2025 and 2024, the Company had issued and outstanding stock options of 2,685,000 and 3,385,000, respectively, that were issued under its 10% Rolling Stock Option Plan, as amended and restated (the “2011 Plan”), and 1,020,000 and 1,020,000, respectively, that were issued under its 2022 Equity Incentive Plan (the “2022 Plan”).

The 2011 Plan was replaced in 2022 by the 2022 Plan, and as such, no additional stock options can be granted under the 2011 Plan. Under the 2011 Plan, our Board of Directors could from time-to-time grant stock options to eligible directors, officers, employees, and consultants. The maximum term of any stock option grant under the 2011 Plan was 10 years.

Under the 2022 Plan, as approved by our shareholders at the annual meeting of shareholders on August 23, 2022, the Board is authorized to grant stock options, stock appreciation rights, restricted stock units, performance stock units and other cash and share-based awards to eligible directors, officers, employees, or consultants up to a maximumof 17,236,689 common shares. The maximum term of any grant under the 2022 Plan is 10 years.

The Company estimates the fair value of its stock option grants using the Black-Scholes option valuation model and the closing price of our common shares on the business day prior to the grant date. The Company did not grant any stock options during the years ended December 31, 2025 and 2024.

The following table summarizes our stock option activity for the years ended December 31, 2025 and 2024:

The following table summarizes the intrinsic value and weighted average remaining life for stock options as of December 31, 2025:

Stock-based compensation is included in corporate administration expenses within the Company’s consolidated statements of operations. For the years ended December 31, 2025 and 2024, the Company recognized compensation expense of $4 and a compensation benefit (or negative expense) of $38, respectively. The benefit or negative expense for the year ended December 31, 2024 was due to the forfeiture of certain stock options that resulted in the reversal of previously recognized stock-based compensation expense.

As of December 31, 2025, all outstanding stock options were fully vested and exercisable.

The intrinsic value of stock options exercised during the years ended December 31, 2025 and 2024 was $20 and $10, respectively.

2024 Rights Offering

On March 11, 2024, the Company completed the 2024 Rights Offering for gross proceeds of approximately$35,800 in which each holder of the Company’s common shares as of the record date of December 15, 2023 was eligible to participate. Terms of the 2024 Rights Offering included the issuance of one and four-tenth (or 1.4) subscription rights for each common share owned by each holder on the record date with each subscription right entitling the holder to purchaseone common share of the Company at a subscription price of$0.12 per share (the “Basic Subscription Privilege”). For any holder exercising its Basic Subscription Privilege in full, the holder could also exercise an oversubscription privilege to purchase additional common shares that were unsubscribed for at the expiration of the 2024 Rights Offering, subject to availability and pro rata allocation of shares among persons exercising the oversubscription privilege. The 2024 Rights Offering, which generated$35,286 in net proceeds after deducting approximately$514 in transactions costs, resulted in the issuance of 298,106,831 common shares of the Company.

The net proceeds from the 2024 Rights Offering have been and are being used to support the operations of the Demonstration Plant related to gathering the information necessary for a commercialization decision as well as to support the Company’s other general corporate purposes.

See Note 15 for a discussion of the 2026 Rights Offering.

11. INCOME TAX

The Company recognizes future tax assets and liabilities for each tax jurisdiction based on the difference between the financial reporting and tax bases of assets and liabilities using the enacted tax rates expected to be in effect when the taxes are paid or recovered. A valuation allowance is provided against net future tax assets for which the Company does not consider the realization of such assets to meet the required “more likely than not” standard.

The Company’s future tax assets and liabilities at December 31, 2025 and 2024 include the following components:

The composition of the Company’s valuation allowance by tax jurisdiction is summarized as follows:

The valuation allowance increased by $1,136 from the year ended December 31, 2024 to the year ended December 31, 2025. Since it is more likely than not that the deferred tax assets will not be realized, the Company has recorded a full valuation allowance against the deferred tax assets.

At December 31, 2025, the Company had total U.S. federal net operating loss (“NOL”) carryforwards of approximately $110,614, comprised of approximately $59,886 having expiration dates ranging from 2026 to 2037 and $50,728 not having expiration dates, and U.S. state NOL carryforwards of approximately $95,167 with expiration dates ranging from 2031 to 2045.

As a result of the Tax Cuts and Jobs Act, U.S. federal NOL carryforwards generated in years ending after 2017 have an indefinite carryforward period (no expiration date) rather than the 20-year carryforward period that applied to those NOL carryforwards generated in 2017 and earlier years.

Section 382 of the Internal Revenue Code could apply and limit our ability to utilize a portion of our U.S. federal NOL carryforwards. However, since no Section 382 study has been completed, the actual usage of U.S. federal NOL carryforwards has not been determined.

At December 31, 2025, the Company also had Canadian non-capital loss carryforwards of approximately C$15,351, which expire from 2026 to 2045, and Canadian capital loss carryforwards of C$59 having no expiration dates.

For financial reporting purposes, loss from continuing operations before income taxes consists of the following components:

A reconciliation of expected income tax on net income at statutory rates is as follows:

On July 4, 2025, the One Big Beautiful Bill Act (“OBBB”), which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the period ending December 31, 2025.

The Company does not have any unrecognized income tax benefits. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and operating expense, respectively.

Rare Element files income tax returns in the Canadian federal and provincial jurisdictions, while its wholly owned subsidiary, Rare Element Resources, Inc., files U.S. federal and state tax returns. The years still open for audit are generally the current year plus the previous three. However, because the Company has NOL carryforwards, certain items attributable to closed tax years are still subject to adjustment by applicable taxing authorities through an adjustment to tax losses carried forward to open years.

12. COMMITMENTS AND CONTINGENCIES

Potential Environmental Contingency

The Company’s exploration and development activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally have become more restrictive. The Company conducts its operations to protect public health and the environment and believes that its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The ultimate amount of reclamation and other future site restoration costs associated with the Company’s existing mining interests is uncertain and may exceed current estimates. As of December 31, 2025 and 2024, these costs were estimated at $185 for each respective period.

Contract Commitment – Related Party

Pursuant to the Cost Share Agreement between the Company and General Atomics, as extended and as expected to be amended in the first half of 2026, if required, and as discussed in Note 4, the Company has agreed to assume and pay for certain allowable costs under the DoE-approved Demonstration Plant budget incurred by General Atomics and the other consortium members for the design, construction, operation, and decommissioning of the Demonstration Plant.

13. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

The Company did not have any significant non-cash transactions during the year ended December 31, 2025. During October 2024, the Company issued 5,000,000 common shares, having a fair value of $1,950, as partial payment for the repurchase of the Section 16 property. See Note 8 to the Consolidated Financial Statements for a more complete discussion of the Land Repurchase.

14. SEGMENT INFORMATION

The Company operates in asingle reportable operating segment; that segment being minerals exploration and development. The Company’s sole minerals exploration property is its Bear Lodge Property, located near the town of Sundance in the state of Wyoming. The segment, which includes the Demonstration Plant project, doesnot presently generate any revenues and is not in commercial operation. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for evaluating financial performance. All of the Company’s long-lived assets are associated with its Bear Lodge Property and are located in the United States.

15. SUBSEQUENT EVENTS

2026 Rights Offering

The Company completed a rights offering in early March 2026, generating gross proceeds of approximately $30,900. Holders of the Company’s common shares as of the January 30, 2026 record date were eligible to participate in the offering.