Inflection Point Acquisition Corp. II(IPXXU) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This section highlights the report's forward-looking nature, outlining significant risks and uncertainties related to future operations and development plans - The report contains forward-looking statements regarding future operations, financial condition, business strategy, and magnet production facility rollout, which involve substantial risks and uncertainties[13] - Key risks include the company's lack of commercial operations history, potential negative operating cash flows, development risks for the magnet production facility, and dependence on the availability of rare earth element feedstock[16] - Other significant risks encompass the ability to raise future financing, compliance with laws and regulations, changes in the global supply and demand for rare earth minerals, political environment shifts, and the ability to obtain and maintain governmental permits and approvals[15][16][18] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for USA Rare Earth, Inc., including balance sheets, statements of operations, mezzanine equity, stockholders' equity, and cash flows, along with comprehensive notes detailing the company's organization, significant accounting policies, merger transactions, fair value measurements, and other financial disclosures Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (In thousands) | ASSETS (In thousands) | June 30, 2025 | December 31, 2024* | | :---------------------- | :------------ | :----------------- | | Cash and cash equivalents | $121,791 | $16,761 | | Total current assets | $123,545 | $22,273 | | Property, plant and equipment, net | $33,031 | $26,529 | | Total assets | $179,701 | $69,069 | | LIABILITIES (In thousands) | June 30, 2025 | December 31, 2024* | | Total current liabilities | $8,176 | $6,925 | | Earnout liabilities | $100,007 | — | | Warrant liabilities | $169,020 | — | | Total liabilities | $286,393 | $15,125 | | Total mezzanine equity | $25,242 | $19,923 | | Total stockholders' (deficit) equity | $(131,934) | $34,021 | | Total liabilities, mezzanine and stockholders' (deficit) equity | $179,701 | $69,069 | - Cash and cash equivalents significantly increased from $16.76 million at December 31, 2024, to $121.79 million at June 30, 2025[21] - Total assets more than doubled, rising from $69.07 million to $179.70 million, primarily driven by the increase in cash and property, plant, and equipment[21] - The company recognized substantial new liabilities, including $100.01 million in earnout liabilities and $169.02 million in warrant liabilities, contributing to a significant increase in total liabilities from $15.13 million to $286.39 million[21] - Stockholders' equity shifted from a positive $34.02 million to a deficit of $(131.93) million, reflecting the impact of increased liabilities and accumulated deficit[21] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over specific reporting periods Operating Expenses and Other Income (Loss) (In thousands) | Operating Expenses (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024* | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024* | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative | $6,227 | $1,286 | $13,256 | $3,933 | | Research and development | $2,577 | $1,725 | $4,266 | $3,776 | | Total operating expenses | $8,804 | $3,011 | $17,522 | $7,709 | | Loss from operations | $(8,804) | $(3,011) | $(17,522) | $(7,709) | | Other income (loss), net | $(133,909) | $192 | $(73,509) | $218 | | Net loss | $(142,713) | $(2,819) | $(91,031) | $(7,491) | | Net loss attributable to common stockholders | $(142,506) | $(2,597) | $(90,674) | $(7,069) | | Basic and diluted net loss per share | $(1.54) | $(0.04) | $(0.99) | $(0.12) | - Net loss attributable to common stockholders dramatically increased to $(142.51) million for the three months ended June 30, 2025, compared to $(2.60) million in the prior year, and to $(90.67) million for the six months, up from $(7.07) million[24] - The significant increase in net loss was primarily driven by a $(134.66) million loss on the fair market value of financial instruments for the three months and $(74.36) million for the six months ended June 30, 2025, compared to gains in the prior year periods[24] - Operating expenses rose substantially, with Selling, General and Administrative (SG&A) expenses increasing by 380% to $6.23 million for the three months and 240% to $13.26 million for the six months ended June 30, 2025[24] Condensed Consolidated Statements of Mezzanine Equity This section outlines changes in mezzanine equity, including preferred stock balances, dividends, and conversions 12% Series A Convertible Preferred Stock and Total Mezzanine Equity (In thousands) | 12% Series A Convertible Preferred Stock (In thousands) | Three Months Ended June 30, 2025 (Amount) | Six Months Ended June 30, 2025 (Amount) | | :---------------------------------------------------- | :---------------------------------------- | :-------------------------------------- | | Beginning balance | $32,397 | $21,173 | | Deemed dividend and accretion to redemption value | $11,569 | $11,676 | | Conversions | $(18,724) | $(18,724) | | Ending balance | $25,242 | $25,242 | | Total Mezzanine Equity (In thousands) | Three Months Ended June 30, 2025 (Amount) | Six Months Ended June 30, 2025 (Amount) | | Beginning balance | $32,397 | $19,923 | | Ending balance | $25,242 | $25,242 | - The ending balance of 12% Series A Convertible Preferred Stock was $25.24 million for both the three and six months ended June 30, 2025[26] - Mezzanine equity saw an accretion to redemption value of $11.57 million for the three months and $11.68 million for the six months ended June 30, 2025[26] - Conversions of preferred stock resulted in a reduction of $(18.72) million for both the three and six months ended June 30, 2025[26] Condensed Consolidated Statements of Stockholders' Equity This section details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Stockholders' (Deficit) Equity (In thousands) | Stockholders' (Deficit) Equity (In thousands) | Three Months Ended June 30, 2025 (Amount) | Six Months Ended June 30, 2025 (Amount) | | :-------------------------------------------- | :---------------------------------------- | :-------------------------------------- | | Common Stock (Shares) | 96,189 | 96,189 | | Common Stock (Amount) | $10 | $10 | | Additional Paid-In Capital | $46,270 | $46,270 | | Accumulated Deficit | $(180,500) | $(180,500) | | Non-Controlling Interest | $2,286 | $2,286 | | Total Stockholders' (Deficit) Equity | $(131,934) | $(131,934) | - The accumulated deficit significantly increased to $(180.50) million for both the three and six months ended June 30, 2025, from $(72.87) million at the beginning of the six-month period[29] - Additional Paid-In Capital decreased from $104.24 million at the beginning of the six-month period to $46.27 million, impacted by earnout liability recognition and warrant conversions[29] - Total stockholders' (deficit) equity shifted from a positive $34.02 million at the beginning of the six-month period to a deficit of $(131.93) million by June 30, 2025[29] Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Cash Flows (In thousands) | Cash Flows (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024* | | :------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(91,031) | $(7,491) | | Net cash used in operating activities | $(18,238) | $(8,277) | | Net cash used in investing activities | $(6,297) | $(1,055) | | Net cash provided by (used in) financing activities | $129,565 | $(572) | | Net change in cash and cash equivalents | $105,030 | $(9,904) | | Cash and cash equivalents, end of period | $121,791 | $3,295 | - Net cash used in operating activities increased to $(18.24) million for the six months ended June 30, 2025, from $(8.28) million in the prior year, primarily due to a higher net loss adjusted for non-cash items[34][253] - Net cash used in investing activities rose to $(6.30) million, up from $(1.06) million, reflecting increased capital expenditures for property, plant, and equipment, particularly for the Stillwater Facility[34][254] - Net cash provided by financing activities significantly increased to $129.57 million, compared to $(0.57) million in the prior year, driven by the $75M PIPE financing, merger contributions, and warrant exercises[34][255] - Cash and cash equivalents at the end of the period surged to $121.79 million, a substantial increase from $3.30 million in the prior year[34] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Organization This note describes the company's business objectives, recent merger, and ongoing going concern considerations - USA Rare Earth, Inc. (USAR) aims to establish a domestic rare earth magnet supply chain, developing a manufacturing plant in Stillwater, Oklahoma, and the Round Top Project for mineral extraction and processing[36] - The company completed a reverse recapitalization merger on March 13, 2025, with Inflection Point Acquisition Corp. II (IPXX), where USARE LLC is treated as the accounting predecessor[43][44] - Despite $121.8 million in cash as of June 30, 2025, the company has generated no revenues since inception, continues to incur losses ($91.0 million net loss for six months), and requires additional capital to implement its strategic plan, raising substantial doubt about its ability to continue as a going concern[46][47] Note 2. Summary of Significant Accounting Policies This note outlines the accounting principles, standards, and estimation methods used in preparing the financial statements - The interim unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and SEC rules, with certain information condensed or omitted[50] - The company is an emerging growth company, electing to use the extended transition period for complying with new or revised financial accounting standards[54] - Significant accounting policies involve estimates for equity-based compensation, asset and liability valuations, and fair value estimates, which inherently involve uncertainties and judgment[58] Note 3. Merger Transaction This note details the reverse recapitalization merger, related funding events, and recognition of earnout liabilities - The merger was accounted for as a reverse recapitalization, with USARE LLC as the successor, converting its preferred and common units into USAR Series A Convertible Preferred Stock and Common Stock[66] - Funding events prior to closing included $25.5 million from SPAs for Class A Convertible Preferred Units and warrants, and $15.3 million for Class A-2 Convertible Preferred Units and warrants[68] - In connection with the merger, USAR incurred an earnout liability of up to 10.1 million additional shares of Common Stock, classified as a derivative liability due to exercise contingencies outside the company's control[77][79] - Forward Purchase Agreements (FPAs) for approximately 1.89 million shares were terminated by June 30, 2025, with sellers remitting $20.8 million in cash to the company[87] Note 4. Fair Value Measurements This note provides fair value measurements for financial instruments, including earnout and warrant liabilities Liabilities Fair Value (In thousands) | Liabilities (In thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------------- | :------------------------- | :----------------------------- | | Derivative liability | $— | $1,164 | | Earnout liability | $100,007 | $— | | Warrant liability | $53,715 | $— | | Common Stock warrant | $91,600 | $— | | Prefunded warrant | $23,705 | $— | | Total liabilities | $269,027 | $1,164 | - The company recognized significant new Level 3 liabilities as of June 30, 2025, including $100.01 million for earnout liability, $53.72 million for Series A Investor Warrants, $91.60 million for Common Stock warrants, and $23.71 million for Prefunded warrants[89] - The earnout liability was valued using a Monte Carlo simulation with inputs including a share price of $10.96, expected volatility of 72.0%, and a risk-free rate of 3.82% as of June 30, 2025[96][98] - The Series A Investor Warrants liability increased by $35.76 million for the three months ended June 30, 2025, primarily due to changes in estimated fair value, with the exercise price reset from $12.00 to $7.00 on May 2, 2025[100][102][105] - The $75M PIPE financing resulted in the establishment of Common Stock warrant liability ($84.81 million) and Prefunded warrant liability ($22.31 million) at May 2, 2025, both measured at fair value on a recurring basis[111][115] Note 5. Property, Plant and Equipment, Net This note details the composition and changes in the company's property, plant, and equipment, including construction in progress Property, Plant and Equipment, Net (In thousands) | Property, Plant and Equipment, Net (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Land | $707 | $707 | | Building improvements | $2,553 | $— | | Lab equipment | $3,011 | $500 | | Construction in progress | $26,239 | $25,775 | | Property, plant and equipment, gross | $33,272 | $27,731 | | Less: Accumulated depreciation | $(1,407) | $(1,202) | | Property, plant and equipment, net | $31,865 | $26,529 | | Finance lease-right-of-use assets, net | $1,166 | $— | | Total property, plant and equipment, net | $33,031 | $26,529 | - Total property, plant and equipment, net, increased to $33.03 million as of June 30, 2025, from $26.53 million at December 31, 2024[115] - Significant increases were observed in building improvements ($2.55 million from zero) and lab equipment ($3.01 million from $0.50 million), indicating ongoing development of the Stillwater Facility[115] - Construction in progress remained a substantial component, increasing slightly to $26.24 million from $25.78 million[115] - Depreciation expense for the six months ended June 30, 2025, was $135 thousand, and amortization expense for finance lease right-of-use assets was $67 thousand[116] Note 6. Variable Interest Entity This note explains the consolidation of Round Top Mountain Development as a variable interest entity - The company consolidates Round Top Mountain Development (RTMD) as a variable interest entity (VIE), holding approximately 80.57% ownership as of June 30, 2025, up from 80% due to TMRC's failure to fund capital contributions[118][120] RTMD Assets and Liabilities (In thousands) | RTMD Assets and Liabilities (In thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Consolidated assets | $18,160 | $17,683 | | Consolidated liabilities | $665 | $205 | - Mineral interests, with a net carrying value of $17.1 million, are held through RTMD, and no impairment losses have been recognized as of June 30, 2025[125][126] Note 7. Accrued Liabilities This note details the breakdown and changes in the company's accrued liabilities, including litigation settlements Accrued Liabilities (In thousands) | Accrued Liabilities (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Payroll and related employee taxes | $1,349 | $1,908 | | Litigation settlement | $1,824 | $— | | Construction in progress | $1,302 | $323 | | Other | $659 | $840 | | Total accrued liabilities | $5,134 | $3,071 | - Total accrued liabilities increased to $5.13 million as of June 30, 2025, from $3.07 million at December 31, 2024[128] - A new litigation settlement liability of $1.82 million was recorded during the quarter ended June 30, 2025[128] - Accrued liabilities for construction in progress significantly increased to $1.30 million from $0.32 million[128] Note 8. Commitments and Contingencies This note discloses environmental regulations, litigation settlements, and transaction-related bonuses - The company's planned exploration and development activities are subject to extensive and costly environmental regulations, with the ultimate amount of future site-restoration costs unknown[131] - A litigation settlement was reached on July 1, 2025, for the Ramco Complaint and Kleiner Notice, resulting in the company agreeing to issue 159 thousand shares of Common Stock and pay $150 thousand to certain plaintiffs, with an estimated fair value charge of $1.8 million recorded in Q2 2025[133][134][136] - Transaction bonuses triggered by the merger included $1.9 million in cash bonuses and $0.8 million in equity-based compensation for Class A units converted to common stock[138][139] Note 9. Leases This note provides information on the company's finance and operating lease assets and liabilities Lease Balances (In thousands) | Lease Balances (In thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Finance leases, net | $1,166 | $— | | Operating leases, net | $389 | $30 | | Total lease assets | $1,555 | $30 | | Finance lease liabilities | $1,012 | $— | | Operating lease liabilities | $399 | $23 | | Total lease liabilities | $1,411 | $23 | - The company recognized new finance lease right-of-use assets of $1.23 million and operating lease right-of-use assets of $0.43 million during the six months ended June 30, 2025[151] - Weighted-average remaining lease terms are 3.44 years for finance leases and 2.75 years for operating leases as of June 30, 2025[153] Note 10. Note Payable This note details the settlement of a senior convertible promissory note and related financial impacts - The $1.0 million Senior Convertible Promissory Note with Hatch LTD was settled on February 26, 2025, by issuing approximately 0.68 million USARE LLC Class A common units, which converted into 0.14 million shares of Common Stock upon merger closing[159][161] - A gain of $0.7 million on the derivative liability was recognized during the three months ended March 31, 2025, due to the modification of the Note's terms, and a loss on extinguishment of $11 thousand was recognized[159][160] Note 11. Mezzanine and Stockholders' Equity This note describes the authorized and outstanding shares, preferred stock terms, and various warrants Class of Stock (In thousands, except par value) | Class of Stock (In thousands, except par value) | Authorized | Par Value | Outstanding | | :---------------------------------------------- | :--------- | :-------- | :---------- | | Common Stock | 750,000 | $0.0001 | 96,189 | | Preferred Stock | 50,000 | $0.0001 | 3,714 | - Common Stock holders have one vote per share, dividend rights subject to Board discretion, and liquidation rights ratably after preferred stockholders[166][167] - Certain former USARE LLC members and the Sponsor are subject to lock-up arrangements restricting the sale of Common Stock for six months to one year post-merger[168][169] - 12% Series A Convertible Preferred Stock accrues dividends at 12% per annum (paid in kind) or 10% (cash), has a liquidation preference, and is convertible into Common Stock, with the conversion price reduced to $7.00 on May 2, 2025[171][173][174][175] Warrants Outstanding (In thousands, except for exercise price) | Warrants Outstanding (In thousands, except for exercise price) | Balance Sheet Classification | Exercise Price | Potential Common Stock Shares Issuable Upon Exercise | | :------------------------------------------------------------- | :--------------------------- | :------------- | :--------------------------------------------------- | | Investor Public Warrants | Equity | $11.50 | 12,369 | | Investor Private Warrants | Equity | $11.50 | 6,000 | | Series A Warrants | Liability | $7.00 | 6,130 | | Common Stock warrants | Liability | $7.00 | 10,714 | | Prefunded warrants | Liability | $0.0001 | 2,164 | | Total Warrants | | | 37,377 | - The $75M PIPE financing on May 2, 2025, involved issuing 8.55 million Common Stock shares, 10.71 million Common Stock warrants ($7.00 exercise price), and 2.16 million Prefunded warrants ($0.0001 exercise price) for $75.0 million cash, resulting in a $36.9 million loss on the value of issued Common Stock shares[182][183] Note 12. Equity-Based Compensation This note outlines the company's equity incentive plan, vesting of incentive units, and compensation expenses - The company has reserved 13.0 million shares for the 2024 Omnibus Incentive Plan but has not granted any awards as of June 30, 2025[198] - All outstanding and unvested incentive units under the Legacy Incentive Plan vested upon the closing of the merger, resulting in the recognition of $0.2 million in unrecognized equity-based compensation expense[200] Compensation Expense (In thousands) | Compensation Expense (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Incentive units | $— | $(38) | $441 | $259 | | Class A units | $— | $(277) | $841 | $(225) | | Total | $— | $(315) | $1,282 | $34 | - Upon merger closing, all outstanding incentive units converted into approximately 4.55 million shares of Common Stock[206] Note 13. Government Grants This note details deferred grant income from various government programs for the Stillwater Facility - The company recorded $7.0 million in deferred grant income related to the Tax Increment Financing (TIF) Agreement for the Stillwater Facility, which will be recognized over the useful life of the underlying assets once requirements are met[210][211] - A $1.2 million award from the Governor's Fund for the Stillwater Facility renovation was received and recorded as deferred grant income in 2022[212][213] - The company was accepted into the Oklahoma Quality Jobs Program, potentially providing quarterly cash rebates of up to 5.0% of wages for new direct jobs, with a maximum payout of $2.8 million over 10 years, with claims expected by end of 2025[216] Note 14. Income Taxes This note explains the company's effective tax rate and the valuation allowance against deferred tax assets - The company's effective tax rate is zero percent due to a valuation allowance that entirely offsets its net deferred tax assets[218] - The valuation allowance is maintained because it is more likely than not that none or substantially none of the deferred tax assets will be realized, based on the company's history of net losses and latest forecasts[218] Note 15. Net Loss per Share This note presents the calculation of basic and diluted net loss per share and anti-dilutive securities Net Loss per Share (In thousands, except per share amounts) | Net Loss per Share (In thousands, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(142,506) | $(2,597) | $(90,674) | $(7,069) | | Weighted average shares outstanding - basic and diluted | 92,769 | 59,425 | 91,598 | 59,319 | | Basic and diluted net loss per share | $(1.54) | $(0.04) | $(0.99) | $(0.12) | - Basic and diluted net loss per share increased significantly to $(1.54) for the three months and $(0.99) for the six months ended June 30, 2025, compared to $(0.04) and $(0.12) in the prior year periods, respectively[222] - Approximately 51.91 million shares from Preferred Stock, Series A warrants, Earnout shares, Investor warrants, and Common Stock warrants were excluded from diluted EPS calculations for the six months ended June 30, 2025, as their effect would be anti-dilutive[223] Note 16. Segment Reporting This note identifies the company's single reportable operating segment and the chief operating decision maker - The company operates in a single reportable operating segment: the vertically integrated, domestic rare earth element magnet production supply chain[224] - The chief operating decision maker, since December 17, 2024, is the chief executive officer, who reviews financial information on an aggregate basis[224] Note 17. Subsequent Events This note discloses significant events occurring after the balance sheet date, including a joint development agreement - On August 5, 2025, the company signed a joint development agreement (JDA) with ePropelled, Inc. to develop a strategic supply and purchase relationship for sintered neo magnets for use in ePropelled's motors for uncrewed air, land, and sea vehicles[225] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of USA Rare Earth's business, recent financial developments, and a detailed analysis of its financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year. It highlights the company's lack of revenue, dependence on external financing, and significant operating losses, while also discussing liquidity, capital resources, and associated risks Overview This section provides a high-level introduction to the company's business, strategic focus, and current operational status - USA Rare Earth, Inc. (USAR) is focused on establishing a vertically integrated, domestic rare earth magnet supply chain in the U.S., developing a Stillwater Facility for magnet manufacturing and the Round Top Project for mineral extraction[226] - Rare earth magnets are critical for various industries including defense, automotive, aviation, AI robotics, medical, and consumer electronics[226] - The company has been in exploration and research stages since its formation and has not yet realized any revenues from its planned operations[226] Our Business Model This section describes the company's dual-facility strategy for magnet production and mineral extraction, highlighting current operational status - The Stillwater Facility in Oklahoma is being developed for research, development, and production of neo magnets, with magnet production capabilities currently being completed[227] - The company controls mining rights at Round Top Mountain in Texas for rare earth minerals, but extraction has not yet begun, and its development involves a high degree of financial risk and uncertainty[228] - As production has not commenced at either facility, the company currently has no operating income, cash flows, or revenues[229] Recent Developments This section outlines key financial events, including PIPE financing, FPA terminations, and warrant exercises - On May 2, 2025, the company closed a $75.0 million Private Investment in Public Equity (PIPE) financing, issuing 8.55 million common stock shares, a pre-funded warrant for 2.2 million shares, and a warrant for 10.7 million shares[231] - Forward Purchase Agreements (FPAs) with three investors, covering approximately 1.89 million shares, were terminated during Q2 2025, resulting in $20.8 million cash remitted to the company[232][233] - During Q2 2025, investors exercised 0.13 million Investor warrants and 2.92 million Series A warrants, generating $1.5 million and $20.4 million in cash payments, respectively[234] Results of Operations This section analyzes the company's operating expenses, other income, and net loss, explaining key drivers of financial performance - The company has no operating revenues and is dependent on external financings, expecting to incur operating losses until its Stillwater Facility generates net profits or the Round Top Project achieves profitable commercial production[236] Operating Expenses and Other Income (Loss) Comparison (In thousands) | Category (In thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | SG&A | $6,227 | $1,286 | $4,941 | 380.0% | $13,256 | $3,933 | $9,323 | 240.0% | | R&D | $2,577 | $1,725 | $852 | 50.0% | $4,266 | $3,776 | $490 | 10.0% | | Total Operating Expenses| $8,804 | $3,011 | $5,793 | 190.0% | $17,522 | $7,709 | $9,813 | 130.0% | | Interest and Dividend | $765 | $45 | $720 | NM | $952 | $154 | $798 | NM | | (Loss) gain on fair market value of financial instruments | $(134,662) | $229 | $(134,891) | NM | $(74,362) | $230 | $(74,592) | NM | | Total Other Income (Loss), net | $(133,909) | $192 | $(134,101) | NM | $(73,509) | $218 | $(73,727) | NM | - For the three months ended June 30, 2025, SG&A expenses increased by $4.9 million (380%) due to litigation settlement ($1.8 million), consulting ($1.2 million), and legal services ($0.6 million). R&D expenses increased by $0.9 million (50%) due to feasibility studies[239][240] - For the six months ended June 30, 2025, SG&A expenses increased by $9.3 million (240%) due to merger-related transaction bonuses, legal services, litigation settlement, and equity-based compensation. R&D expenses increased by $0.5 million (10%) due to consulting fees and employee costs[244][245] - A significant loss on the fair market value of financial instruments of $(134.66) million for the three months and $(74.36) million for the six months ended June 30, 2025, was primarily due to the day one loss of the Common Stock component under the $75M PIPE and increases in earnout and warrant liabilities[243][252] Liquidity and Capital Resources This section discusses the company's ability to meet short-term obligations, its cash position, and ongoing capital needs - The company's financial statements are prepared on a going concern basis, but management acknowledges substantial doubt about its ability to continue as a going concern due to no revenues, ongoing losses, and an accumulated deficit[247][248] - For the six months ended June 30, 2025, the company reported a net loss of $91.0 million (including a $74.4 million non-cash fair value loss on financial instruments) and used $18.2 million in operating activities[249] - As of June 30, 2025, cash and cash equivalents totaled $121.8 million, supplemented by $21.9 million from warrant exercises and $75M PIPE financing, but additional capital is still needed for its strategic plan and raw material inventory[250] Cash Flows This section provides a detailed analysis of cash flows from operating, investing, and financing activities and their changes Cash Flow Summary (In thousands) | Cash Flows (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | | :------------------------ | :----------------------------- | :----------------------------- | :--------- | | Net cash used in operating activities | $(18,238) | $(8,277) | $(9,961) | | Net cash used in investing activities | $(6,297) | $(1,055) | $(5,242) | | Net cash provided by (used in) financing activities | $129,565 | $(572) | $130,137 | - Net cash used in operating activities increased by $10.0 million, primarily due to a higher net loss adjusted for non-cash items like the $74.6 million non-cash loss from the $75M PIPE valuation and a $1.7 million non-cash litigation settlement[253] - Net cash used in investing activities increased by $5.2 million, reflecting additional investments in property, plant, and equipment for the Stillwater Facility[254] - Net cash provided by financing activities surged by $130.1 million, mainly driven by the $75M PIPE financing, contributions from the merger, and warrant exercises[255] Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements impacting financial condition or results - The company does not have any material off-balance sheet arrangements that are reasonably likely to have a material current or future effect on its financial condition or results of operations[256] Risks and Uncertainties Associated with Future Results of Operations This section highlights industry-specific risks, development challenges, and market uncertainties affecting future operations - The company operates in two industries (magnet technology and mineral exploration) subject to intense competition, development risk, and changes in U.S. governmental policies[256] - The magnet technology industry in the U.S. is nascent, requiring substantial capital commitment for the Stillwater facility, with risks of unanticipated costs, delays, and potential substitute products[257] - The Round Top Mountain deposit's commercial viability is unproven, and its development involves high risk, with success dependent on factors like mineral attributes, infrastructure, government regulation, and market prices[258] Critical Accounting Policies and Estimates This section identifies key accounting policies and estimates that require significant management judgment and impact financial reporting - The most critical accounting policies and estimates for understanding the company's financial condition and results of operations include Fair Value, Long-Lived Assets, Equity-based Compensation, and the Going Concern assessment[259] - These estimates are based on historical experience and assumptions, but actual results could differ significantly, impacting future financial statements[259] Recently Adopted Accounting Standards This section refers to disclosures on recently adopted accounting standards within the financial statements notes - Information on recently adopted accounting standards is incorporated by reference from Note 2, 'Summary of Significant Accounting Policies,' in Part I, Item 1 of this Form 10-Q[261] Emerging Growth Company Status This section explains the company's status as an emerging growth company and its election regarding accounting standard compliance - The company is an emerging growth company and has elected to take advantage of the extended transition period for complying with new or revised accounting standards, which may affect comparability with other public companies[262] - The company expects to retain its emerging growth company status until the earliest of its annual revenues exceeding $1.235 billion, the fifth anniversary of its public company registration, issuing over $1.0 billion in non-convertible debt, or qualifying as a large accelerated filer[264] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for the company as it qualifies as a 'smaller reporting company' under Regulation S-K - The company is not required to provide quantitative and qualitative disclosures about market risk under Regulation S-K because it is a 'smaller reporting company'[263] ITEM 4. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - The company's disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective at the reasonable assurance level as of June 30, 2025[265][266] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[267] - The effectiveness of any control system is subject to limitations, providing only reasonable, not absolute, assurance that objectives will be attained[268] PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other significant corporate information ITEM 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 8, 'Commitments and Contingencies–Litigation,' in Part I, Item 1 of this Quarterly Report on Form 10-Q - Details on legal proceedings are provided in Note 8, 'Commitments and Contingencies–Litigation,' within the financial statements section[271] ITEM 1A. Risk Factors The company refers to its 2024 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, for a comprehensive description of risk factors, noting no material changes as of the current report's filing date - Risk factors are described in the company's 2024 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025[272] - As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the previously disclosed risk factors[273] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and no use of proceeds to report[274] ITEM 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities to report[275] ITEM 4. Mine Safety Disclosures The company reported no mine safety disclosures during the period - There were no mine safety disclosures to report[276] ITEM 5. Other Information This section details the adoption of a Severance and Change of Control Protection Plan for executive officers and senior management, outlining severance benefits based on termination circumstances. It also covers recent Founder and Annual Equity Grants of restricted stock units (RSUs) to executive officers and confirms no Rule 10b5-1 trading arrangements were adopted or terminated during the quarter - On August 11, 2025, the Board approved a Severance and Change of Control Protection Plan for executive officers and certain senior management, providing severance benefits upon termination without cause or resignation for good reason[277] - Severance benefits include 12 months of base salary and COBRA coverage for the CEO (6 months for others) and acceleration of the next tranche of outstanding equity awards[277] - In a change of control scenario, the CEO is entitled to 1.5 times the sum of annual base salary and target bonus, 18 months of COBRA, and full equity acceleration (1 time for others, 12 months COBRA)[279] - Founder and Annual Equity Grants of time-based vesting restricted stock units (RSUs) were approved on August 11, 2025, for executive officers, including 90,992 RSUs vesting over two years and 181,984 RSUs vesting over three years for the CEO[281] - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter ended June 30, 2025[282] ITEM 6. Exhibits This section provides a comprehensive index of exhibits filed with the Quarterly Report on Form 10-Q, including certificates of incorporation, warrant forms, securities purchase agreements, and certifications - The exhibit index lists various documents filed, such as the Certificate of Incorporation, Certificate of Designation for Preferred Stock, Warrant forms, Securities Purchase Agreement, and Registration Rights Agreement[285] - New exhibits filed herewith include the Severance and Change of Control Protection Plan, Form of RSU Agreement for Officers and Employees, and certifications from the Principal Executive and Financial Officers[285] Signatures The report is duly signed on behalf of USA Rare Earth, Inc. by its Chief Executive Officer, Joshua Ballard, and Chief Financial Officer, William Robert Steele Jr., on August 11, 2025 - The report is signed by Joshua Ballard, Chief Executive Officer (Principal Executive Officer), and William Robert Steele Jr., Chief Financial Officer (Principal Financial and Accounting Officer), on August 11, 2025[289]