USA Rare Earth, Inc.

Current report

The following discussion and analysis is intended to help the reader understand our results of operations and financial condition. It should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Part I, Item 1, “Financial Statements (Unaudited),” in this Quarterly Report on Form 10-Q (the “Notes”). The following discussion may contain forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are reasonable when made, we cannot assure you that we will achieve the plans or expectations referenced in our forward-looking statements. Our actual results and the timing of events may differ materially from those expressed or implied as a result of various factors, including those set forth in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Current report

We are building a leading global rare earth value chain, from mine to magnet and beyond. We intend to secure, reshore, and grow the materials intelligence and production technologies required to stand up a resilient rare earth industry. This advanced industrial operating system should strengthen supply-chain security for the national defense, manufacturing and technology of the United States (“U.S.”) and its allies. Our plan is to build an integrated platform to encompass the entire rare earth value chain: extraction and separation of rare earth oxides; conversion of oxides into metals, alloys and strip-cast; and production of sintered neodymium-iron-boron (“NdFeB”) permanent magnets, which we also refer to as neo magnets. This capability should address the supply-chain vulnerabilities created by China’s current dominance of rare earth processing, and metal and magnet manufacturing.

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Factors Affecting Comparability of Results

Current report

During 2025, we completed two transactions that materially affect the comparability of the results discussed below. On March 13, 2025, we consummated our business combination with USA Rare Earth, LLC and became a publicly traded company on Nasdaq under the symbol “USAR.” On November 18, 2025, we acquired Less Common Metals Ltd. (“Less Common Metals”), a rare earth metal and alloy manufacturer based in Cheshire, United Kingdom.

Current report

As a result, the three months ended March 31, 2026 reflect a full quarter of Less Common Metals’ operations, while the prior-year period reflects none. All of our revenue for the three months ended March 31, 2026 is attributable to Less Common Metals. Accordingly, revenue, gross profit, and operating expenses for the three months ended March 31, 2026 are not comparable with the corresponding line items for the three months ended March 31, 2025.

Current report

For a complete description of both transactions, refer to Note 2,“Merger Transaction and Acquisition,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2025 (the “2025 Annual Report”) filed with the SEC on March 30, 2026.

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Recent Developments, Key Trends, Opportunities and Uncertainties

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We are an early-stage company with a limited operating history and intend to grow our global value chain though organic growth including capital and operational expenditures, as well as through strategic initiatives. These investments may exceed our revenues over the next several years. Our revenues for the three months ended March 31, 2026 were derived solely from our Less Common Metals operations following the acquisition of Less Common Metals in 2025, and we have not yet generated revenues from our neo magnet manufacturing or mineral production. We incurred a net loss of $68.1 million for the three months ended March 31, 2026. Our historical results are not indicative of our future results, and our ability to generate sufficient revenue to achieve profitability will depend largely on the successful development and scaling of our integrated mine-to-magnet platform and our global value chain.

Current report

$1.50 Billion Private Investment In Public Equity (“PIPE”)

Current report

On January 27, 2026, we completed a private placement, structured as a PIPE with institutional investors, of 69.8 million shares of our common stock for gross proceeds of $1.50 billion (“$1.50B PIPE”). The $1.50B PIPE financing provides the capital to invest in our value chain to accelerate our production capacity, expand our geographic footprint, and secure the equipment and feedstock necessary to achieve our strategic goals.

Current report

Expected U.S. Government Transaction

Current report

On January 26, 2026, we announced two non-binding letters of intent with U.S. government agencies representing a total of approximately $1.58 billion in potential funding and strategic support. The first non-binding letter of intent with the U.S. Department of Commerce (the “DOC Letter of Intent”) covers $277.0 million in direct funding awards under the CHIPS Act, and $1.30 billion in senior secured debt with each advance having a 15-year term and bearing a fixed or floating interest rate. The second non-binding letter of intent with the U.S. Department of Energy's National Energy Technology Laboratory (the “DOE Letter of Intent”), establishes a collaboration to advance heavy rare earth element (“HREE”) separation technologies at our Colorado Facility and Round Top Deposit, leveraging digital twin technology. Together, these two letters of intent and their contemplated transactions are referred to as the “Expected U.S. Government Transaction.”See Note 12, “Government Grants” of the Notes for more information about the terms of the Letters of Intent.

Current report

We believe that, if consummated on the terms described therein, the Expected U.S. Government Transaction would represent a transformative source of capital that supports our strategic goals to further accelerate the growth of our integrated rare earth value chain and strengthens our positioning as a domestic supplier of rare earth elements (“REEs”) and NdFeB permanent magnets for both commercial and national security applications.

Current report

The transactions remain subject to the negotiation and execution of definitive agreements, the satisfaction of numerous conditions, and final government approvals, and there can be no assurance that they will be consummated on the anticipated terms or at all.

Current report

Proposed Acquisition of Texas Mineral Resources Corp.

Current report

On March 4, 2026, we entered into a definitive Agreement and Plan of Merger with Texas Mineral Resources Corp. (“TMRC”), pursuant to which we expect to acquire 100% of the outstanding shares of TMRC in an all‑stock transaction. The acquisition will eliminate TMRC’s minority ownership interests in RTMD and establish us as the sole operator and 100% economic beneficiary of the “Round Top Project,” which consists of our operations and rights related to Round Top Mountain and the Round Top Mountain HREE metals deposit (the “Round Top Deposit”). The transaction is intended to secure full ownership control of the Round Top Project, and streamline operations, governance and decision-making.

Current report

The transaction is valued at approximately $72.3 million based on the closing price of the Company’s common stock on March 4, 2026. The aggregate merger consideration consists of approximately 3.8 million shares of our common stock, with cash paid in lieu of fractional shares. The ultimate value of the consideration will depend on our stock price at closing. See Note 4, “Variable Interest Entity,” of the Notes for additional information regarding the TMRC acquisition.

Current report

The completion of the merger is subject to customary closing conditions, including the affirmative vote of TMRC stockholders and the effectiveness of a registration statement on Form S-4, and there can be no assurance that the merger will be completed or that the anticipated operational, strategic, or financial benefits will be realized.

Current report

Earnout Share Conversion

Current report

In connection with the business combination between the Company and USA Rare Earth, LLC, the Company agreed to issue common stock of the Company (the “earnout shares”) to certain shareholders of USA Rare Earth, LLC in two tranches upon the occurrence of certain triggering events. On April 15, 2026, our stock price met the requirement for the first tranche of earnout shares by trading at or above $15.00 per share for at least 20 out of 30 consecutive trading days. As a result, we issued 5.0 million shares of common stock to certain former shareholders of USA Rare Earth, LLC. The second tranche of 5.0 million earnout shares will become payable when our common stock price exceeds $20.00 per share for at least 20 out of 30 trading days.

Current report

Proposed Investment in Carester SAS

Current report

On April 9, 2026, we entered into a binding letter of intent (the “Carester LOI”) to acquire a 12.5% equity interest in Carester SAS (“Carester”), the parent company of Caremag SAS (“Caremag”), for cash and equity consideration amounting to approximately $46.4 million. The initial proposed consideration consists of €28.3 million in cash, or approximately $32.9 million, and equity consideration of €11.7 million, or approximately $13.5 million, payable in shares of our common stock, in each case subject to customary adjustments, including the potential substitution of cash in lieu of our common stock.

Current report

This transaction is part of broader initiative, in partnership with Carester, the Government of France and InfraVia, to build an integrated value chain platform for rare earth processing, metal and alloy production and magnet making in Lacq, France. The platform will unite the technological expertise, process innovation, and production capacity of our manufacturing operations and those of Carester to accelerate development and strengthen our capabilities across the rare earth value chain. In parallel, USA Rare Earth, through Less Common Metals – Europe, is developing a 3,750 metric tons per year (“MTPA”) metal and alloy production facility at the same location. The partnership will create one of Europe’s most complete rare earth industrial ecosystems.

Current report

In addition, we have access to direct credits under the Government of France’s French C3IV program, which can potentially reimburse up to 45%, or a total of €130 million, of eligible equipment and real estate costs. We are engaged in ongoing discussions with French governmental entities and Bpifrance regarding potential additional financing support for Less Common Metals – Europe’s metallization and alloy facility through available export credit and guarantee programs. There can be no assurance that any such additional support will be obtained or on what terms it may be available.

Current report

The proposed transaction is further subject to, among other things, the negotiation and execution of definitive agreements, receipt of applicable regulatory approvals, and the satisfaction of customary closing conditions and there can be no assurance that the transaction will be completed.

Current report

Proposed Acquisition of SVRE Holdings Ltd.

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On April 19, 2026, we entered into a definitive agreement to acquire 100% of SVRE Holdings Ltd., the parent company of Serra Verde Group (“Serra Verde”), for a proposed consideration of approximately $2.83 billion, consisting of $300.0 million in cash and 126.8 million shares of our common stock, subject to customary adjustments. Serra Verde operates the Pela Ema rare earths project in Brazil and is currently in commercial production. The Pela Ema mine is unique as the only mine outside Asia currently capable of supplying all four magnetic REEs at scale, neodymium, praseodymium, dysprosium and terbium, together with other vital REEs, such as yttrium. This transformative acquisition creates what we believe will be the only fully integrated mine-to-magnet platform outside China, with active capabilities across mining, processing, separation, metallization and magnet making across three continents.

Current report

Serra Verde's strategic importance is further evidenced by its 15-year offtake agreement with a special purpose vehicle capitalized by the U.S. Government, which features contractual price floors covering 100% of Serra Verde's Phase 1 production of neodymium, praseodymium, dysprosium and terbium.

Current report

We believe this acquisition strengthens our U.S. and allied government relationships and provides multiple embedded growth opportunities, including a potential Phase 2 doubling of Pela Ema’s production capacity. The transaction also adds significant leadership depth through the expected appointment of Sir Mick Davis and Thrasyvoulos Moraitis to our Board upon closing, with Mr. Moraitis also serving as President of the combined company.

Current report

The transaction is subject to customary closing conditions, including receipt of shareholder approval and applicable regulatory approvals, and there can be no assurance that it will be completed.

Current report

Texas Semiconductor Innovation Fund

Current report

On May 11, 2026, we entered into a Grant Agreement with the Office of the Governor of the State of Texas (the “OOG”) pursuant to the Texas Semiconductor Innovation Fund (“TSIF”), Grant No. TSIF 26-016P. Under the Grant Agreement, the OOG has agreed to reimburse us for certain allowable costs directly allocable to the Round Top Project, up to a maximum amount of $14.2 million.

Current report

The grant proceeds are intended to support the development of Round Top Mountain as a domestic source of heavy rare earth elements and select technology metals, including dysprosium, hafnium, terbium, and other elements essential for high-performance permanent magnets used in the aerospace, defense, semiconductors, data centers, physical AI, energy, mobility, healthcare, and numerous industrial sectors.

Current report

Grant funds are disbursed on a cost reimbursement basis only, and payment is dependent upon our strict compliance with the terms and conditions of the Grant Agreement, including applicable reporting, audit, and performance requirements. The Grant Agreement terminates upon the completion of the grant project, on December 31, 2028, or upon the depletion of grant funds, whichever occurs first.

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First Quarter 2026 Business Highlights

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Commissioned Phase 1A at our Stillwater Facility

Current report

We commissioned the Phase 1a magnet manufacturing line at our Stillwater, Oklahoma manufacturing facility (“Stillwater Facility”). Commissioning of Phase 1a should enable us to begin fulfilling customer orders for sintered neodymium-iron-boron permanent magnets in the second quarter of 2026. Phase 1a is expected to ramp to a run rate capacity of 600 MTPA by the end of the fourth quarter of 2026. Phase 1a and Phase 1b magnet manufacturing lines at our Stillwater Facility are expected to bring the total capacity to 1,200 MTPA by the first quarter of 2027.

Current report

Commenced Expansion of Metal & Alloy Capacity to Meet Growing Demand

Current report

We expect to expand metal making and alloy capacity at our Less Common Metals facility to 3,000 MTPA by the end of 2026 due to increasing demand for higher internal magnet manufacturing capabilities and a widening third-party customer base. We have seen a significant interest in our pipeline for samarium-cobalt, neodymium-iron-boron and specialty alloys, fueled by third-party magnet manufacturers largely serving the aerospace, semiconductor, mobility, and consumer electronics sectors. Additionally, we are seeing heightened demand for specialized light rare earth elements (“LREE”), HREEs and other critical mineral metals, highlighting the broad product capabilities of our Less Common Metals facility.

Current report

Selection of Fluor Corporation and WSP Global Inc. to Advance our Accelerated Mining Plan

Previous report

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.

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Our Business Model

Previous report

We acquired the land at Stillwater, Oklahoma, and other assets that together comprises our Stillwater Facility. Our Stillwater Facility will be used to research, develop and produce neo magnets of which we are currently in the process of completing our magnet production capabilities which is necessary for the initial production of neo magnets.

Previous report

We control certain mining rights to Round Top Mountain, which is located near Sierra Blanca, Texas, that contains the Round Top Mountain deposit, the mining, and the extraction of rare earth minerals which comprises our Round Top Project. We have not yet begun to extract any minerals from the Round Top Mountain deposit. The development of the Round Top Project involves a high degree of financial risk and uncertainty.

Previous report

We have not yet commenced production in connection with either our Round Top Project or our Stillwater Facility and, consequently, we do not currently have any operating income or cash flows. Accordingly, we do not currently generate, nor have we realized to date, any revenues.

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Recent Developments

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Private Investment in Public Entity Financing (“PIPE”)

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On September 24, 2025, we entered into a securities purchase agreement with a purchaser for the private placement of 8.33 million shares of our common stock for gross proceeds of $125.0 million (“$125M PIPE”). The $125M PIPE offering closed on September 29, 2025.

Previous report

The Company intends to use the net proceeds from the $125M PIPE for working capital and general corporate purposes. See Note 10, “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 (the “Notes”) for further discussion on the specifics of the $125M PIPE.

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Less Common Metals Ltd. Acquisition

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On September 26, 2025, we entered into a Share Purchase Agreement (the “SPA”) with Indian Ocean Rare Metals Pte. Ltd. (“IORM”), a Singapore private limited company, the ultimate parent of Less Common Metals Ltd. (“LCM”), a United Kingdom (U.K.)-based manufacturer of specialized rare earth metals and both cast and strip cast alloys. LCM produces both light and heavy rare earth permanent magnet metals and alloys at scale in its facility in Cheshire, U.K. The Company believes the acquisition will provide:

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•access to key commercial, industry and government relationships;

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•access to critical rare earth metal and metal alloy production and high-quality rare-earth strip cast alloy, which is essential to magnet production;

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•access to unique assets and competitive advantages which allows the Company to control its rare earth metal inputs, as well as ensure that investments are made to support the growth of its magnet business, as well as enabling the Company to deliver a lower risk and lower cost solution that is unique to the industry;

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•important capability to process recycled rare earth oxides which will reuse end of life magnets, and allow for a more sustainable manufacturing process; and

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•access to alternative low-cost sources of feedstock.

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As part of the SPA, we shall pay to the IORM shareholders the aggregate consideration of $100.0 million in cash and 6.74 million shares of the Company’s common stock. Prior to the closing of the acquisition, we will need to obtain a receipt of approval from (or a notification or final notification that no further action will be taken by) U.K. Secretary of State pursuant to the National Security and Investment Act 2021 (“NSIA”). The Company expects the acquisition to close during the Company’s fourth quarter of 2025.

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Warrant Activities

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The following table presents the number of warrants exercised and related cash received during the nine months ended September 30, 2025.

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Subsequent to the balance sheet date, certain investors exercised warrants, including the complete exercise of the outstanding Common Stock warrants, of which we received approximately $163.3 million.

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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.

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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.

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Other income and expense.

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•Interest and dividend income. The increase in interest and dividend income was primarily due to higher balances in our money market funds.

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•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.

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

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Selling, general and administrative. The increase in SG&A expenses of $19.9 million was primarily due to an increase in legal services and consulting costs of $9.8 million, primarily due to merger and acquisition-related costs, stock-based compensation of $3.7 million, which includes modification of stock-based compensation of $1.6 million related to the termination of our former CEO, litigation settlement of $1.8 million, marketing costs of $1.3 million, recruiting fees of $1.2 million related to hiring of key personnel, employee-related costs of $1.1 million related to increase headcount, and other costs of $1.0 million.

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Other income and expense.

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•Interest and dividend income. The increase in interest and dividend income was primarily due to higher balances in our money market funds.

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•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.

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Sources and Uses of Liquidity

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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.

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We have generated no revenues since inception, continue to incur losses from operations, and have an accumulated deficit. Although there is sufficient cash to cover our operating needs for the next 12 months, in order to achieve our current plan to manufacture and sell commercial products, we are dependent upon our ability to raise additional capital and to control operating expenses.

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We consider cash equivalents to be highly liquid investments purchased with original maturities of three months or less. As of September 30, 2025, we had $257.6 million in cash and cash equivalents. During the nine months ended September 30, 2025, we received cash of $200.0 million from private investment in public equity investor financing and certain investors exercised 8.87 million warrants, of which we received cash of $47.5 million. During this same period, we recognized interest and dividend income of approximately $2.3 million related to higher cash balances. Furthermore, subsequent to the balance sheet date, we have received from certain investors approximately $163.3 million from exercise of warrants.

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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.

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Based on our need to raise additional capital, as well as milestones required for our current strategic plan to generate sustainable commercial revenues, there is substantial doubt regarding our ability to continue as a going concern for the twelve months following the issuance of these Condensed Consolidated Financial Statements.

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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.

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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.

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Risks and Uncertainties Associated with Future Results of Operations

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We operate in two industries that are both subject to intense competition, development risk, and changes in U.S. governmental policies related to green energy, defense spending and dependence on foreign suppliers. Our operations are subject to significant risks and uncertainties including financial and operational risks, as well as the potential risk of business failure.