USA Rare Earth, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 .” Overview 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. Factors Affecting Comparability of Results 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. 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. 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 . USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 24 Table of Contents Recent Developments, Key Trends, Opportunities and Uncertainties 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. $1.50 Billion Private Investment In Public Equity (“PIPE”) 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. Expected U.S. Government Transaction 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. 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. 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. Proposed Acquisition of Texas Mineral Resources Corp. 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. 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. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 25 Table of Contents 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. Earnout Share Conversion 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. Proposed Investment in Carester SAS 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. 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. 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. 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. Proposed Acquisition of SVRE Holdings Ltd. 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. 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. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 26 Table of Contents 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. 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. Texas Semiconductor Innovation Fund 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. 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. 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. First Quarter 2026 Business Highlights Commissioned Phase 1A at our Stillwater Facility 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. Commenced Expansion of Metal & Alloy Capacity to Meet Growing Demand 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. Selection of Fluor Corporation and WSP Global Inc. to Advance our Accelerated Mining Plan Fluor Corporation (“Fluor”) and WSP Global Inc. (“WSP”) were selected as engineering, procurement, and construction management (“EPCM”) partners for the build-out and commercialization of the Round Top Deposit. The combination of Fluor and WSP brings significant expertise across deposit geology, mine design and planning, and processing design, engineering, and construction. Fluor and WSP will also lead the authoring of the Round Top Preliminary Feasibility Study (“PFS”) that is expected to be published by the end of the third quarter of 2026, and the Definitive Feasibility Study (“DFS”) that is expected to be published in the first quarter of 2027. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 27 Table of Contents Plan to Build a 3,750 MTPA Plant in Lacq, France As mentioned above, we plan to produce metal and alloy in Lacq, France, co-located with Carester’s Caremag oxide and recycling facility. Together, we believe this platform is intended to establish a comprehensive supply chain for rare earth processing, and metal and alloy production in Europe, and enhance our globally integrated rare earth value chain, from mine to magnet. Mutual Sales and Distribution Agreement with Arnold Magnetic Technologies Corp. We signed a mutual sales and distribution agreement with Arnold Magnetic Technologies Corp., a subsidiary of Compass Diversified (“Arnold”). Under this non-exclusive partnership, we will offer Arnold’s finished permanent magnets produced from samarium-cobalt and neodymium-iron-boron, and Arnold will offer to us processed and refined neodymium-iron-boron feedstock and finished magnets. We believe this agreement strengthens the domestic supply chain for mission-critical applications by expanding availability of U.S.-manufactured rare earth magnets. Commercial Yttrium Metal Production In April 2026, we announced the first commercial pour of 2N–2N5 (99%–99.5% purity) yttrium metal through our Less Common Metals facility in Cheshire, United Kingdom. This milestone places us among a limited number of producers of commercial-grade yttrium metal operating outside of China. Yttrium is a key material in thermal barrier coatings used on turbine blades and other high-temperature aerospace components, where it enhances oxidation resistance and improves adhesion, helping extend component life under intense thermal and mechanical stress. Yttrium is also used in electronics, energy systems, lasers, superconductors, and advanced ceramics, where its chemical stability and high-temperature performance are essential. Results of Operations A discussion regarding our financial condition and results of operations for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, is presented below. Our operating revenues and gross margins have been derived solely from our ownership of Less Common Metals since November 18, 2025, and we had no operating revenues or gross margin prior to November 18, 2025. We currently rely on equity and other external financing to fund our business plans, including our magnet manufacturing facility located in Stillwater, Oklahoma (the “Stillwater Facility”); mineral exploration, evaluation, and development activities at the Round Top Project (collectively, “R&D” costs); selling, general and administrative (“SG&A”) expenses; interest expense; and other operating costs. Accordingly, we expect to incur operating losses until we achieve profitable commercial operations at our Stillwater Facility, the Round Top Project, and/or our Less Common Metals – Europe manufacturing facility located in Lacq, France. Revenue, Gross Profit and Gross Margin The following table sets forth our revenue, cost of sales, gross profit and gross margin for the period indicated. Three Months Ended March 31, 2026 (In thousands, except for percentage) Revenue $ 5,698 Cost of revenue 5,592 Gross profit $ 106 Gross margin 1.9 % USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 28 Table of Contents Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025 Revenue was $5.7 million for the three months ended March 31, 2026, all of which was generated by Less Common Metals. Cost of revenue for the period was $5.6 million, resulting in gross profit of $0.1 million and a gross margin of 1.9%. The gross margin reflects the under‑absorption of fixed indirect manufacturing costs, including labor and facility‑related expenses, due to lower production volumes during the period. Concentration of Revenue Revenue Attributable to Primary Geographical Markets Region Three Months Ended March 31, 2026 (In thousands) United States $ 960 Europe 4,519 Asia 219 Total revenue $ 5,698 Operating Expenses The following table sets forth our results of operations and the amount of change between the periods indicated. The period-to-period comparison of financial results is not necessarily indicative of future results. Three Months Ended March 31, Change 2026 2025 (In thousands, except for percentages) Operating expenses Selling, general and administrative $ 21,175 $ 7,029 $ 14,146 201.3% Research and development 14,249 1,689 12,560 NM Amortization of intangible assets 1,357 — 1,357 NM Total operating expenses $ 36,781 $ 8,718 $ 28,063 321.9% Other (expense) income, net Interest and dividend income $ 11,970 $ 187 $ 11,783 NM Grant income 206 — 206 NM (Loss) gain on fair market value of financial instruments, net (43,553) 60,300 (103,853) (172.2)% Interest expense and other loss, net (593) (87) (506) NM Total other (expense) income, net $ (31,970) $ 60,400 $ (92,370) (152.9)% NM Not meaningful. Selling, general and administrative. SG&A expenses increased by $14.1 million, primarily due to higher legal and consulting costs of $4.7 million related to merger and acquisition activities, increased stock‑based compensation of $4.2 million, and higher employee‑related costs of $3.1 million associated with increased headcount as we expanded our organizational infrastructure. The increase was further driven by other costs of $2.1 million. Research and development. R&D expenses increased by $12.6 million, primarily due to higher development costs of $5.4 million and increased employee‑related costs of $3.7 million, reflecting higher headcount and stock‑based compensation. The increase was further driven by legal costs of $1.8 million, facility and insurance costs of $0.6 million, and other costs of $1.1 million. Amortization of intangible assets increased by $1.4 million due to intangible assets acquired in connection with the acquisition of Less Common Metals. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 29 Table of Contents Other (expense) income, net. • Interest and dividend income increased by $11.8 million, primarily due to higher average balances in our investments in money market and government funds. • Grant income increased by $0.2 million, reflecting grant revenue generated by Less Common Metals, which was acquired on November 18, 2025. Grant income for the current period includes only post‑acquisition activity, whereas the prior period did not include any grant income from this business. • (Loss) gain on fair market value of financial instruments, net change was a loss of $103.9 million, primarily driven by higher share prices, which increased the fair value losses related to the earnout shares and Series A Warrants issued in connection with the business combination with USA Rare Earth, LLC by $89.8 million and $13.2 million, respectively, partially offset by warrant exercises. See Note 2, “Fair Value Measurements,” of the Notes for additional information. • Interest expense and other loss, net primarily reflects unrealized loss on money market funds, unrealized foreign exchange losses, and interest expense on the Barclays Bank PLC trade cycle loan facility previously entered into by Less Common Metals, which was repaid in full, including accrued interest, and cancelled during the first quarter of 2026. Three Months Ended March 31, 2026 2025 Change (In thousands, except percentages and basis points) (Loss) income before income taxes $ (68,645) $ 51,682 $ (120,327) 232.8% Benefit from income taxes (577) — (577) NM Effective tax rate 0.8 % — % 80 bps NM Not meaningful. Benefit from income taxes . The change of $577 thousand was primarily attributable to the forecasted taxable activities of our Less Common Metals subsidiary following the acquisition on November 18, 2025. Effective tax rate. Our effective tax rate of 0.8% for the three months ended March 31, 2026 was affected by changes in valuation allowances, recurring permanent differences and discrete items that may occur in any given year, but are not necessarily consistent from year to year. Liquidity and Capital Resources Overview We are an early‑stage company with a limited operating history. Our 2026 revenues were derived solely from our Less Common Metals operations following the acquisition of Less Common Metals Ltd. on November 18, 2025, and we have not yet generated revenues from neo magnet manufacturing or mineral production at the Stillwater Facility. As we expand our production capacity, we expect to incur significant operating expenses without generating sufficient revenues to cover these expenditures. We believe that our existing cash and cash equivalents will be sufficient to fund our planned near‑term operating and capital expenditure requirements for at least the next twelve months. However, our long‑term capital requirements, particularly those associated with the full development of the Round Top Project, the build‑out of the Stillwater Facility, and the build-out of the Less Common Metals – Europe manufacturing facility are expected to exceed our current resources, and we will require additional capital to fund these long‑term initiatives. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 30 Table of Contents In addition, we expect to incur significant future cash outflows related to strategic investments, acquisitions, and the continued development of our operating and manufacturing assets. These cash requirements may include consideration payable in connection with potential acquisitions or investments, transaction‑related costs, and capital expenditures associated with the development of the Round Top Project, the development of the Stillwater Facility, and the development of the Less Common Metals – Europe facility. The timing and amount of such expenditures will depend on the progression of these transactions and projects and the satisfaction of applicable conditions. We also intend to pursue potential sources of financing to support these initiatives, including equity financings and debt financings. As discussed elsewhere in this Quarterly Report on Form 10-Q, as part of the Expected U.S. Government Transaction, we have entered into a non‑binding letter of intent with the U.S. Department of Commerce relating to potential equity funding under the CHIPS Act and related debt financing and a non-binding letter of intent with the U.S. Department of Energy; however, any such funding remains subject to the negotiation and execution of definitive agreements, final government approvals and the satisfaction of numerous conditions and milestones. In addition, to meet certain milestones to obtain funding awards and debt financing to reimburse us for our capital expenditures under the Expected U.S. Government Transaction, and to execute on our current business plan, including the acquisition of Serra Verde and the expansion of facilities for our operations, we will be required to raise a significant amount of capital during 2026 and 2027 and establish a $250.0 million revolving credit facility by December 31, 2026. There can be no assurance that any government funding or other funding will be obtained, or as to the timing or amount of any proceeds. Our ability to raise additional capital on acceptable terms, whether through equity or government funding, is subject to market conditions, our operational progress, and our ability to satisfy applicable milestones and conditions, and there can be no assurance that such additional capital will be available on acceptable terms or at all. In addition, if the Expected U.S. Government Transaction is consummated, we would be precluded from issuing additional debt to raise capital, other than the government senior secured loan contemplated thereunder. Sources and Uses of Cash Our primary sources of liquidity have consisted of equity financing. For the three months ended March 31, 2026, we had a net loss of $68.1 million, which included a non-cash fair value loss on financial instruments of $43.6 million. Net cash used in operating activities during the period was $18.5 million. As of March 31, 2026, we had $1.75 billion in cash and cash equivalents. Outside of revenue generated from our Less Common Metals subsidiary, our operations in the United States have not yet generated revenues from neo magnet manufacturing or critical mineral production, and we expect to continue to use cash in our consolidated operating activities for the foreseeable future as we invest in commercializing our integrated mine-to-magnet platform. Our primary near-term uses of cash include: • Stillwater Facility development – completing the installation and qualification of sintered NdFeB permanent magnet production lines, procuring feedstock, and ramping toward initial commercial production; • Less Common Metals expansion – expanding the current manufacturing site in Cheshire, United Kingdom and expanding the Less Common Metals – Europe manufacturing site in Lacq, France. • Round Top Project advancement – funding the ongoing Preliminary Feasibility Study, constructing and operating the demonstration facility, and advancing toward a Definitive Feasibility Study and, ultimately, mine construction; a portion of these costs are expected to be funded through the TSIF Grant Agreement described below; and • General corporate and administrative expenses – supporting our growing operations, including personnel, legal, regulatory, and compliance costs. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 31 Table of Contents Over the longer term, we expect that developing the Round Top Project into a producing mine and expanding the Stillwater Facility to its full planned capacity will require substantial additional capital expenditures beyond our current cash on hand. We have not yet determined the full scope or timing of such expenditures, as they depend on the outcomes of ongoing feasibility studies at Round Top Mountain and the negotiation and execution of agreements with the U.S. Department of Commerce as part of the Expected U.S. Government Transaction. Accordingly, we expect total capital requirements to be significant, and our ability to fund these initiatives will depend on continued access to additional financing, primarily through equity or government funding sources. $1.50 Billion Private Investment In Public Equity. On January 28, 2026, we completed the $1.50 billion PIPE financing. The financing significantly strengthened our liquidity position and provides additional capital to support our operations, strategic initiatives, and general corporate purposes. Expected U.S. Government Transaction . If consummated, the Expected U.S. Government Transaction would represent a significant new source of long-term capital. However, the addition of $1.30 billion in long-term senior secured debt would introduce substantial debt service obligations and leverage into our capital structure. Additionally, consummation of the transaction would require us to issue approximately 16.1 million shares of common stock and warrants representing approximately 17.5 million additional shares at an exercise price of $17.17 per share, each resulting in dilution to existing stockholders. Funding to reimburse us for our capital expenditures would be disbursed in tranches tied to specified milestones, and there can be no assurance that any funding will be received. Investment in Carester SAS. The proposed Carester investment has an aggregate estimated value of €40.0 million, or approximately $46.4 million. Upon consummation of the transaction, the proposed investment would require a cash payment of €28.3 million, representing a near‑term cash outflow with an estimated U.S. dollar value of approximately $32.9 million based on an assumed exchange rate, which may fluctuate prior to closing. The remaining consideration consists of equity consideration of €11.7 million, with an estimated U.S. dollar value of approximately $13.5 million, to be settled through the issuance of shares of our common stock, subject to customary adjustments, including the potential substitution of cash in lieu of our common stock. Acquisition of SVRE Holdings Ltd. The Serra Verde acquisition, when completed, would require payment of $300.0 million in cash consideration, representing a significant near-term cash obligation. The remaining approximately $2.53 billion in consideration would be settled through the issuance of 126.8 million shares of our common stock, resulting in substantial dilution to existing stockholders. Texas Semiconductor Innovation Fund . The TSIF Grant Agreement provides for reimbursement of certain allowable costs directly allocable to the Round Top Project up to a maximum amount of $14.2 million. Grant funds are disbursed on a cost reimbursement basis only and are subject to our strict compliance with the terms and conditions of the Grant Agreement. Facility and Equipment Leases. We lease facilities and equipment under fixed noncancelable operating leases that expire on various dates through fiscal year 2030. See Note 5, “Commitments and Contingencies – Leases,” of the Notes for additional information related to our fixed noncancelable operating leases. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 32 Table of Contents Cash Flows Three Months Ended March 31, 2026 2025 Change (In thousands) Net cash used in operating activities $ (18,456) $ (10,329) $ (8,127) Net cash used in investing activities (38,641) (3,050) (35,591) Net cash provided by financing activities 1,447,146 19,969 1,427,177 Operating Activities. Net cash used in operating activities increased by $8.1 million compared to the comparable prior‑year period. The changes in non-cash adjustments were primarily driven by: • a $103.9 million non-cash loss related to the increase in the fair value of our earnout and warrant liabilities; • a $3.7 million increase in stock‑based compensation; and • a $2.0 million increase in depreciation and amortization, due primarily to acquisition-related property and intangible assets. The change in operating assets and liabilities were primarily driven by: • an increase in accounts receivable and inventory, due primarily to the addition of Less Common Metals’ receivables and inventory balances following the acquisition of Less Common Metals on November 18, 2025; • an increase in accounts payable, due primarily to capital expenditures associated with the build-out of the Stillwater Facility and the timing of vendor payments; and • an increase in accrued expenses, due primarily to higher acquisition‑related legal and consulting costs and asset retirement obligation costs associated with the Less Common Metals leased property in Cheshire, United Kingdom. Investing Activities. Net cash used in investing activities increased by $35.6 million compared to the comparable prior-year period, due primarily to capital expenditures to build out our manufacturing process at our Stillwater Facility. Financing Activities. Net cash provided by financing activities increased by $1.43 billion compared to the comparable prior-year period, primarily due to proceeds from the $1.50 billion private investment in public equity financing, net of transaction costs, completed in January 2026, partially offset by the repayment of the Barclays Bank PLC trade cycle loan facility. Off-Balance Sheet Arrangements Other than as described in this Quarterly Report, we do not have any other off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. See Note 5, “Commitments and Contingencies”, of the Notes. Purchase Obligations and Other Commitments In the normal course of business, we enter into purchase orders with vendors for manufacturing and research and development equipment and with suppliers for inventory used in the manufacture of our products. Capital equipment purchase orders are generally non-cancelable due to long lead times and generally relate to forecasted equipment needs for our Phase 1a and 2a manufacturing line expansions and facility construction, and research and development activities at RTMD. Inventory purchase orders are generally fulfilled within one year of the order date. USA Rare Earth, Inc. | Q1'2026 Quarterly Report (Form 10-Q) | 33 Table of Contents Critical Accounting Estimates Our Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and require management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and results of operations. Actual results could differ materially from these estimates. Significant estimates include goodwill and other intangible assets arising from business combinations, asset and liability valuations, including earnout and warrant liabilities, deferred taxes and related valuation allowances, and other fair value measurements. See Note 1, “Organization – Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in our 2025 Annual Report for a description of our critical and other significant accounting policies. Recent Accounting Pronouncements For a discussion of certain recent accounting pronouncements, see Note 1, “Organization – Significant Accounting Policies – Recently Issued Accounting Pronouncements Not Yet Adopted,” of the Notes. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required under Regulation S-K for “smaller reporting companies”.