USA Rare Earth, Inc.

Previous wording

USA Rare Earth, Inc. (“USAR”), is a company with a mission to establish a vertically integrated, domestic rare earth magnet supply chain that supports the future state of energy, mobility, and national security in the United States (“U.S.”). We are developing our Stillwater Facility, located in Stillwater, Oklahoma, and via our Round Top Project, intend to establish domestic rare earth and critical minerals supply, extraction, and processing capabilities to both supply our magnet manufacturing plant at Stillwater and market surplus materials to third parties. Rare earth magnets are critical to various business sectors and industries, including the defense, automotive, aviation, artificial intelligence (also referred to as “AI”) robotics, industrial, medical and consumer electronics industries, among others. Our vertically integrated approach – from sourcing rare earth elements (“REE”), in addition to other critical minerals such as gallium, to producing finished sintered Neodymium Iron Boron (“NdFeB“ or “neo”) magnets – assists in strengthening the U.S.’s control over critical supply chains such as the supply of rare earth minerals and magnets and thus reduce domestic reliance on foreign, particularly Chinese, imports. We believe our focus on developing domestic rare earth production aligns with national priorities, offering the future potential of a sustainable and secure domestic supply of materials critical to key industries. We have been in the exploration and research stages since our formation and have not yet realized any revenues from our planned operations.

Current wording

USA Rare Earth, Inc. (“USAR”), is a company with a mission to establish a vertically integrated, domestic rare earth magnet supply chain that supports the future state of energy, mobility, and national security in the United States (“U.S.”). We are developing our Stillwater Facility, located in Stillwater, Oklahoma, and via our Round Top Project, intend to establish domestic rare earth and critical minerals supply, extraction, and processing capabilities to both supply our magnet manufacturing plant at Stillwater and we believe, as we scale up our operations, support to the entire value chain. Rare earth magnets are critical to various business sectors and industries, including the defense, automotive, aviation, artificial intelligence with robotics (also referred to as “Physical AI”), industrial, medical and consumer electronics industries, among others. Our vertically integrated approach – from sourcing rare earth elements (“REE”), in addition to other critical minerals such as gallium, to producing finished sintered Neodymium Iron Boron (“NdFeB“ or “neo”) magnets – assists in strengthening the U.S.’ control over critical supply chains such as the supply of rare earth minerals and magnets and thus reduce domestic reliance on foreign, particularly Chinese, imports. We believe our focus on developing domestic rare earth production aligns with national priorities, offering the future potential of a sustainable and secure domestic supply of materials critical to key industries. We have been in the exploration and research stages since our formation and have not yet realized any revenues from our planned operations.

Previous wording

On April 29, 2025, we entered into an amended and restated securities purchase agreement with a purchaser for the private placement of (i) 8.55 million shares of our common stock, (ii) a pre-funded warrant to purchase an aggregate of 2.2 million shares of our common stock at an exercise price of $0.0001 per share, and (iii) a warrant to purchase an aggregate of 10.7 million shares of our common stock at an exercise price of $7.00 per share, for aggregate gross proceeds of $75.0 million (“$75M PIPE”). The Company intends to use the net proceeds for working capital and general corporate purposes. The $75M PIPE offering closed on May 2, 2025. See Note 4, “Fair Value Measurements – Private Investment in Public Entity Financing” for valuation of each component under the $75M PIPE and Note 11, “Mezzanine and Stockholders' Equity – Private Investment in Public Entity Financing” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements (unaudited),” of this Quarterly Report on Form 10-Q for further discussion on the specifics of the $75M PIPE.

Current wording

Private Investment in Public Entity Financing (“PIPE”)

Previous wording

Selling, general and administrative. The increase in SG&A expenses of $9.3 million was primarily due to an increase in merger-related transaction bonuses and other consulting costs of $2.9 million, legal services of $2.5 million related to the pre-merger and post-merger activities, litigation settlement of $1.8 million, equity based compensation costs of $0.9 million, marketing costs of $0.8 million, and an increase in employee, recruiting costs and travel expenses of $0.4 million.

Current wording

Selling, general and administrative. The increase in SG&A expenses of $10.6 million was primarily due to an increase in legal services and consulting costs of $4.3 million, stock-based compensation of $2.7 million, which includes modification of stock-based compensation of $1.6 million related to the termination of our former Chief Executive Officer (“CEO”), employee-related expenses of $1.9 million related to an increase in headcount, recruiting fees of $0.8 million, and other costs of $0.9 million.

Previous wording

Research and development. The increase in R&D expenses of $0.5 million was primarily due to an increase in consulting fees related to feasibility studies and employee costs, partially offset by lower insurance and other costs.

Current wording

Research and development. The increase in R&D expenses of $3.3 million was primarily due to an increase in employee-related expenses of $1.8 million related to an increase in headcount, and other costs of $1.5 million.

Previous wording

•Change in fair market value of financial instruments. The change in fair market value of financial instruments was primarily due to the day one loss of the Common Stock component under the $75M PIPE, and the increase in fair value of our Series A warrant liability.

Current wording

•Change in fair market value of financial instruments. The change in fair market value of financial instruments was primarily due to the increase in fair value of the Common Stock warrant, Series A warrant and Earnout liabilities, resulting in a net loss on the fair market value of financial instruments.

Previous wording

Comparison of thesix months ended June 30, 2025 and 2024

Current wording

Comparison of the nine months ended September 30, 2025 and 2024

Previous wording

•Change in fair market value of financial instruments. The change in fair market value of financial instruments was primarily due to the day one loss of the Common Stock component under the $75M PIPE, and the increase in fair value of our Earnout and Series A warrant liabilities, and the fair value of the Common Stock and Prefunded warrant liabilities, resulting in a net loss on the fair market value of financial instruments.

Current wording

•Change in fair market value of financial instruments. The change in fair market value of financial instruments was primarily due to the day one loss of the Common Stock warrant, and the increase in fair value of the Common Stock warrant, Series A warrant and Earnout liabilities, resulting in a net loss on the fair market value of financial instruments.

Previous wording

Our Condensed Consolidated Financial Statements have been prepared contemplating the continuation of the Company as a going concern and the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon our ability to continue as a going concern. While our management believes in the viability of its strategy to generate future revenues, control costs and the ability to raise additional funds, our strategy may not be successful. Our Condensed Consolidated Financial Statements do not include any adjustments that might be necessary were we unable to continue as a going concern. If the going concern basis was not appropriate for the Condensed Consolidated Financial Statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications used.

Current wording

The Condensed Consolidated Financial Statements have been prepared contemplating the continuation of the Company as a going concern and the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon our ability to continue as a going concern. While our management believes in the viability of its strategy to generate future revenues, control costs and the ability to raise additional funds, our strategy may not be successful. The Condensed Consolidated Financial Statements do not include any adjustments that might be necessary were we unable to continue as a going concern. If the going concern basis was not appropriate for the Condensed Consolidated Financial Statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications used.

Previous wording

For the six months ended June 30, 2025, we had a net loss of $91.0 million, which included a non-cash fair value loss on financial instruments of $74.4 million. For the six months ended June 30, 2025, net cash used in operating activities was $18.2 million.

Current wording

For the nine months ended September 30, 2025, we had a net loss of $248.0 million, which included a non-cash fair value loss on financial instruments of $216.8 million. For the nine months ended September 30, 2025, net cash used in operating activities was $21.1 million.

Previous wording

We consider cash equivalents to be highly liquid investments purchased with original maturities of three months or less. As of June 30, 2025, we had $121.8 million in cash and cash equivalents. In addition, during the three and six months ended June 30, 2025, investors exercised 0.13 million Common Stock Warrants and 2.92 million Series A Investor Warrants, of which the Company received cash of $1.5 million and $20.4 million, respectively, and for the six months ended June 30, 2025, we recognized interest and dividend income of approximately $1.0 million. Although we had sufficient cash on our balance sheet and sufficient flow of cash from the $75M PIPE financing, exercise of warrants, and interest income on our cash balances to handle our operations over the next 12 months, we will still need to raise additional capital to implement our current strategic plan and to purchase raw material inventory to achieve our revenue projections and positive cash flows.

Current wording

Although we have sufficient cash on our balance sheet and sufficient cash flow from the PIPE financings, exercise of warrants, and interest income on our cash balances to handle our operations over the next 12 months, we believe we will still need to raise additional capital to implement our current strategic plan, including current and future acquisitions, installation of manufacturing equipment, purchasing of raw material inventory in advance of production due to long lead times, and to achieve our revenue projections and positive cash flows. In addition, we expect to increase operational costs as we build our infrastructure to handle the forecasted increase production and sales.

Previous wording

Operating Activities. The $10.0 million increase in net cash used in operating activities, as compared to the comparable period of the prior year, was primarily due to an increase of $5.7 million net loss adjusted for non-cash items, such as the non-cash loss of $74.6 million related to the day one loss under the valuation of the $75M PIPE, the change in fair value of outstanding financial instruments, and a non-cash litigation settlement of approximately $1.7 million, and an increase in cash used for accounts payable and prepaid insurance.

Current wording

Operating Activities. The $11.6 million increase in net cash used in operating activities, as compared to the comparable period of the prior year, was primarily due to an increase of $14.9 million net loss adjusted for non-cash items, such as the non-cash loss of $217.2 million related to the day one loss under the valuation of the $75.0 million PIPE financing arrangement (the “$75M PIPE”) and the change in fair value of outstanding financial instruments, stock-based compensation of $4.3 million and a non-cash litigation settlement of approximately $1.7 million, and an increase in cash used for vendor payments and prepayment of insurance, partially offset by an increase in accrued liabilities related to financing, acquisition and payroll costs.

Previous wording

Investing Activities. The $5.2 million increase in cash used in investing activities, as compared to the comparable period of the prior year, was primarily due to additional investments made for property, plant and equipment as we execute our strategic business plan and continue to build the manufacturing process at our Stillwater Facility.

Current wording

Investing Activities. The $10.9 million increase in cash used in investing activities, as compared to the comparable period of the prior year, was primarily due to additional investments made for plant improvements and equipment purchases as we execute our strategic business plan and continue to build the manufacturing process at our Stillwater Facility.

Previous wording

Financing Activities. The $130.1 million increase in cash provided by financing activities, as compared to the comparable period of the prior year, is primarily due to the $75M PIPE financing activities, contributions from the Merger, and exercises of warrants. See Note 3, “Merger Transaction” of the notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, for further discussion of amounts received from financing activities and Merger transactions.

Current wording

Financing Activities. The $253.6 million increase in cash provided by financing activities, as compared to the comparable period of the prior year, is primarily due to the $75M PIPE and $125M PIPE financing activities, contributions from the Merger as defined in Note 3, “Merger Transaction and Acquisition – Business Combination Agreement” of the Notes.

Previous wording

See Note 1, “Organization” and Note 2, “Summary of Significant Accounting Policies” of the Notes to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for a discussion of our going concern assessment and a description of our critical and other significant accounting policies, respectively.

Current wording

See Note 1, “Organization” and Note 2, “Summary of Significant Accounting Policies” of the Notes for a discussion of our going concern assessment and a description of our critical and other significant accounting policies, respectively.

Previous wording

See Note 2, “Summary of Significant Accounting Policies” of the Notes to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Current wording

See Note 2, “Summary of Significant Accounting Policies” of the Notes.