ALOY 10-K & 10-Q changes, risk factors and insider trading

Risks Related to the Proposed Merger

In addition, the Company has and expects to continue to incur a number of non-recurring costs associated with the Merger, including taxes, legal fees, advisor fees, filing fees, mailing expenses, and financial printing expenses. There can be no assurance that the actual costs will not exceed those estimated and the actual completion of the Merger may result in additional and unforeseen expenses. Many of these costs will be payable whether or not the Merger is completed. While it is expected that benefits of the Merger achieved by the Company will offset these transaction costs over time, this net benefit may not be achieved in the short-term or at all, particularly if the Merger are delayed or does not happen at all. These combined factors could adversely affect the business, results of operations or financial condition of the Company.

The calculation of the number of Blackboxstocks shares to be issued in the Merger may be adjusted if there is a change in REalloys share capital between the date of Merger Agreement and Closing.

The completion of the Merger may trigger certain change in control, consent, assignment or other provisions in agreements to which the Company, our subsidiary Blackbox Operating, or REalloys is a party. In addition, the completion of the Merger may trigger certain technical provisions in agreements to which the Company, Blackbox Operating or REalloys is a party. If such parties are unable to assert that such provisions should not apply, or the parties are unable to comply with or negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, including potentially terminating such agreements or seeking monetary damages. Even if the Company, Blackbox Operating or REalloys is able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to the Company.

Failure to complete the Merger could adversely affect the market price of our common stock as well as our business, financial condition and results of operations.

If the Merger is not completed for any reason, the price of our common stock may decline, and our business, financial condition and results of operations may be impacted to the extent that the market price of our common stock reflects positive market assumptions that the Merger will be completed and the related expected benefits will be realized; based on significant expenses, such as legal, advisory and financial services which generally must be paid regardless of whether the Merger is completed; based on potential disruption of our business and distraction of our workforce and management team and other contemplated transactions under the Merger Agreement.

The pendency of the Merger could have an adverse effect on the stock price of our common stock as well as our business, financial condition, results of operations or business prospects.

The pendency of the Merger could disrupt our businesses in negative ways. For example, customers and other third-party business partners may seek to terminate and/or renegotiate their relationships with the Company as a result of the Merger, whether pursuant to the terms of their existing agreements or otherwise. In addition, current and prospective employees may experience uncertainty regarding their future roles with the Company upon consummation of the Merger, which might adversely affect our ability to retain, recruit and motivate key personnel. Should they occur, any of these events could adversely affect the price of our common stock, or harm our financial condition, results of operations or business prospects.

There is no assurance when or if the Merger will be completed. Any delay in completing the Merger may substantially reduce the potential benefits that Blackboxstocks expects to obtain from the Merger.

Completion of the Merger is subject to the satisfaction or waiver of a number of conditions, as set forth in the Merger Agreement, including the approval by Blackboxstocks’ stockholders, approval by Nasdaq of Blackboxstocks’ application for the initial listing of Blackboxstocks’ common stock to be issued in connection with the Merger, and other customary closing conditions. There can be no assurance that Blackboxstocks and REalloys will be able to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or may not be completed within the expected timeframe, and Blackboxstocks may materially and adversely lose some or all of the potential benefits it expects to achieve as a result of the Merger and could result in additional transaction costs or other effects associated with uncertainty about the Merger.

Blackboxstocks and REalloys can agree at any time to terminate the Merger Agreement, even though Blackboxstocks’ stockholders and/or REalloys’ securityholders have already adopted the Merger Agreement and thereby approved the Merger and the other transactions contemplated by the Merger Agreement. Blackboxstocks and REalloys can also terminate the Merger Agreement under other specified circumstances.

In addition, if the Merger Agreement is terminated and our board of directors determines to seek another business combination, it may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger. In such circumstances, our Board of Directors may elect to, among other things, divest all or a portion of Blackboxstocks’ business, or take the steps necessary to liquidate all of Blackboxstocks’ business and assets, and in either case, the consideration that Blackboxstocks receives may be less attractive than the consideration to be received by Blackboxstocks pursuant to the Merger Agreement.

The issuance of shares of Blackboxstocks common stock to REalloys stockholders in the Merger will substantially dilute the voting power of current Blackboxstocks stockholders. Having a minority share position will reduce the influence that current stockholders have on the management of Blackboxstocks.

Pursuant to the terms of the Merger Agreement, at the Effective Time, Blackboxstocks will issue (or reserve for future issuance) to REalloys stockholders as Merger Consideration: (i) approximately 46,312,574 shares of its common stock, using the assumed Exchange Ratio of 0.3694, (ii) approximately 5,000 shares of Series C Preferred Stock at a ratio of one share of REalloys Preferred Stock to one share of Series C Preferred Stock (which is subject to change depending on the number of outstanding securities of Blackboxstocks and REalloys at the effective time of the Merger), (iii) warrants to purchase up to an aggregate of approximately 4,486,423 shares of Blackboxstocks common stock based on an assumed price of $8.47 per share, the closing price of the Blackboxstocks common stock on Nasdaq on December 26, 2025, and (iv) an aggregate of approximately 355,962 shares of Blackboxstocks common stock as related to the REalloys SAFEs, based on an assumed price of $8.47 per share, the closing price of the Blackboxstocks common stock on Nasdaq on December 26, 2025, in each case after giving effect to the proposed reverse stock split contemplated by the Reverse Stock Split Proposal. As a result, upon completion of the Merger, the current Blackboxstocks stockholders and holders of certain outstanding options and warrants to purchase shares of Blackboxstocks common stock will hold approximately 4,519,055 pre-reverse stock split shares, which is currently expected to be approximately 7.9% of the fully diluted equity of the post-merger combined company (the “Combined Company”). Accordingly, the issuance of the shares of Blackboxstocks common stock to REalloys stockholders in the Merger will significantly reduce the ownership stake and relative voting power of each share of Blackboxstocks common stock held by current Blackboxstocks stockholders. Consequently, following the Merger, the ability of Blackboxstocks’ current stockholders to influence the management of Blackboxstocks will be substantially reduced.

For illustrative purposes, the conversion of REalloys’ Preferred Stock into Series C Preferred Stock, would entitle holders of the former REalloys Preferred stock to 500 votes per share of Series C Preferred Stock, to vote in all matters with holders of Blackboxstocks Common Stock. This illustrative example assumes the 5,000 issued and contingently issuable at December 26, 2025, REalloys Series X Preferred Stock were outstanding and converted to Series C Preferred Stock at a 1:1 ratio, as contemplated in the Merger, with an assumed aggregate Stated Value of $15,000,000 or $3,000 per share, and a hypothetical Nasdaq Minimum Price of Blackboxstocks of $6.00 immediately preceding the Merger. The number of votes attributable to the Series C Preferred Stock has an inverse relationship to Blackboxstocks’ minimum price immediately preceding the Merger completion. This example excludes the impacts of potential Make-Whole, dividends in arrears, and any other adjustments to Stated Value as contemplated by terms of the REalloys’ Series X Stock or the Series C Preferred Stock and does not represent an indication or estimate of the expected actual voting impact on completion of the merger.

The issuance, or expected issuance, of Blackboxstocks common stock and Series C Preferred Stock in connection with the Merger could decrease the market price of Blackboxstocks common stock.

In connection with the Merger and as part of the Merger Consideration, Blackboxstocks expects to issue shares of Blackboxstocks common stock and Series C Preferred Stock to REalloys stockholders. The anticipated issuance of Blackboxstocks common stock and Series C Preferred Stock in the Merger may result in fluctuations in the market price of Blackboxstocks common stock, including a stock price decrease. In addition, the perception in the market that the holders of a large number of shares of Blackboxstocks common stock may intend to sell shares could reduce the market price of Blackboxstocks common stock.

CVR holders may not receive any payment on the CVRs, the CVRs may otherwise expire valueless, and the U.S. federal income tax treatment of CVRs in unclear.

Pursuant to the CVR Agreement and the Merger Agreement, holders of each share of Blackboxstocks common stock immediately prior to Closing, will receive a dividend of one contractual contingent value right entitling such holders to receive net proceeds received by Blackboxstocks from any transaction in which the Blackboxstocks or Blackbox Operating grants, sells, licenses or otherwise transfers some or all of the rights to any and all of the assets, rights, and properties owned, used, or useable by Blackbox Operating in connection with or related to the business as conducted by Blackbox Operating and all of the Blackboxstocks rights therein. The right of Blackboxstocks stockholders to receive any future payment on or to derive any value from the CVRs will be contingent solely upon the achievement of the events specified in the CVR Agreement within the time period specified in the CVR Agreement. If the payment triggering events are not achieved for any reason within the time period specified in the CVR Agreement, no payments will be made under the CVRs, and the CVRs will expire valueless.

Additionally, the U.S. federal income tax treatment of the CVRs is subject to substantial uncertainty. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position that could potentially result in adverse U.S. federal income tax consequences to holders of the CVRs.

The intended benefits of the Merger may not be realized.

The Merger poses risks for Blackboxstocks’ ongoing operations, including, among others:

As a result of the foregoing, we may be unable to realize the full strategic and financial benefits currently anticipated from the Merger, and cannot assure that the Merger will be accretive to Blackboxstocks in the near term or at all. Furthermore, if we fail to realize the intended benefits of the Merger, the market price of the Combined Company’s common stock could decline to the extent that the market price reflects those benefits. Our stockholders will have experienced substantial dilution of their ownership interests in Blackboxstocks without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the Combined Company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

Because the lack of a public market for REalloys common stock makes it difficult to evaluate the fairness of the Merger, REalloys stockholders may receive consideration in the Merger that is greater than or less than the fair market value of REalloys common stock.

The outstanding common stock of REalloys is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of REalloys common stock. Since the percentage of Blackboxstocks’ common stock and Series C Preferred Stock to be issued to REalloys stockholders was determined based on negotiations between the parties, it is possible that the value of the Blackboxstocks common stock and Series C Preferred Stock to be issued in connection with the Merger will be greater than the fair market value of REalloys shares. Alternatively, it is possible that the value of the shares of Blackboxstocks common stock and Series C Preferred Stock to be issued in connection with the Merger will be less than the fair market value of REalloys shares.

Directors and officers of Blackboxstocks and REalloys may have interests in the Merger that are different from, or in addition to, those of Blackboxstocks stockholders and REalloys stockholders generally that may influence them to support or approve the Merger.

The officers and directors of Blackboxstocks and REalloys may have interests in the Merger that are different from, or are in addition to, those of Blackboxstocks stockholders and REalloys stockholders generally. Effective upon the closing of the Merger, Leonard Sternheim and Robert Winspear are expected to be employed as executive officers by the Combined Company. It is expected that six of the current directors of REalloys, and one current director of Blackboxstocks will be appointed as directors of the Combined Company after the completion of the Merger and may receive cash and equity compensation in consideration for such service. Contingent upon closing of the Merger, Gust Kepler has agreed to sell Leonard Sternheim certain shares of Blackboxstocks Series A Preferred Stock that will effectively confer voting control of the Combined Company currently held by Mr. Kepler to Mr. Sternheim for nominal consideration. Upon the Merger, the vesting of outstanding equity awards held by Blackboxstocks’ directors and officers will accelerate, and certain Blackboxstocks officers may be entitled to certain severance benefits in connection with changes in their employment. In addition, the directors and executive officers of Blackboxstocks and REalloys also have certain rights to indemnification or to directors’ and officers’ liability insurance that will survive the completion of the Merger. These interests may have influenced the directors and executive officers of Blackboxstocks and REalloys to support or recommend the proposals presented to Blackboxstocks and REalloys stockholders.

If the Merger is completed, REalloys executive officers and REalloys appointees to the Combined Company’s board of directors will have the ability to significantly influence the Combined Company’s management and business affairs, as well as matters submitted to the Combined Company’s board of directors or stockholders for approval, especially if they decide to act together with the current REalloys stockholders.

Upon completion of the Merger, the former REalloys stockholders will own approximately 92.7% of the Combined Company on a fully diluted basis, excluding the effects of adjustments based on Blackboxstocks’ net cash at closing. Contingent upon closing of the Merger, Gust Kepler has also agreed to sell Leonard Sternheim certain shares of Blackboxstocks Series A Preferred Stock that will effectively confer voting control of the Combined Company to Mr. Sternheim. If the Merger is completed, the Combined Company is expected to be led by REalloys’ executive officers. Furthermore, the Combined Company’s anticipated board of directors will consist of nine members, six of which will be appointed by REalloys and one of which will be appointed by Blackboxstocks, pursuant to the terms and conditions of the Merger Agreement and two which are expected to be appointed immediately following the Merger. As a result, such persons, if they choose to act together, will have the ability to significantly influence the Combined Company’s management and business affairs, as well as matters submitted to the Combined Company’s board of directors or stockholders for approval.

The pendency and close of the Merger could have an adverse effect on Blackboxstocks’ or REalloys’ business, financial condition, results of operations or business prospects.

The pendency and close of the Merger could disrupt Blackboxstocks’ and/or REalloys’ businesses in the following ways, among others:

Should they occur, any of these matters could adversely affect the businesses of, or harm the financial condition, results of operations or business prospects of, Blackboxstocks or REalloys.

The Exchange Ratio is not adjustable based on the market price of Blackboxstocks’ common stock, so the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

The Merger Agreement has set the Exchange Ratio formula for the REalloys common stock, and the Exchange Ratio is only adjustable upward or downward to reflect Blackboxstocks’ and REalloys’ equity capitalization as of immediately prior to the Effective Time and the excess cash Blackboxstocks has at the effective time of the Merger. Any changes in the market price of common stock before the completion of the Merger will not affect the number of shares REalloys securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Blackboxstocks common stock declines from the market price on the date of the Merger Agreement, then REalloys securityholders could receive Merger consideration with substantially lower value. Similarly, if before the completion of the Merger, the market price of Blackboxstocks common stock increases from the market price on the date of the Merger Agreement, then REalloys securityholders could receive Merger Consideration with substantially more value for their shares of REalloys common stock than the parties had negotiated for in the establishment of the Exchange Ratio.

If the Merger does not qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, or is otherwise taxable to U.S. REalloys stockholders, then such holders may be required to pay U.S. federal income taxes.

For U.S. federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Code. If the Internal Revenue Service (the “IRS”) or a court determines that the Merger should not be treated as a reorganization or a tax deferred contribution, a holder of REalloys stock or warrants would recognize taxable gain or loss upon the exchange of REalloys stock or warrants for Blackboxstocks common stock or warrants pursuant to the Merger Agreement.

Blackboxstocks is expected to incur substantial expenses related to the Merger with REalloys.

Blackboxstocks has incurred, and expects to continue to incur, substantial expenses in connection with the Merger, as well as operating as a public company. Blackboxstocks will incur significant fees and expenses relating to legal, accounting, financial advisory and other transaction fees and costs associated with the Merger. Actual transaction costs may substantially exceed Blackboxstocks’ estimates and may have an adverse effect on the Combined Company’s financial condition and operating results.

Failure to complete the Merger could negatively affect the value of Blackboxstocks common stock and the future business and financial results of both Blackboxstocks and REalloys.

If the Merger is not completed, the ongoing businesses of Blackboxstocks and REalloys could be adversely affected. Moreover, each of Blackboxstocks and REalloys will be subject to a variety of risks associated with the failure to complete the Merger, including without limitation the following:

If the Merger is not completed, the market price of Blackboxstocks common stock and the business and financial results of both Blackboxstocks (including the cessation of its operations) and REalloys could be materially affected.

The Merger is expected to result in a limitation on the Combined Company’s ability to utilize its net operating loss carryforward.

Under Section 382 of the Code, use of Blackboxstocks’ net operating loss carryforwards (“NOLs”) will be limited if Blackboxstocks experiences a cumulative change in ownership of greater than 50% in a moving three-year period. At December 31, 2025, Blackboxstocks had approximately $5.2 million of net operating loss carryforwards, which NOLs will begin to expire in 2035 and are available to offset taxable income or reduce taxes payable through 2041. Blackboxstocks will experience an ownership change as a result of the Merger and therefore its ability to utilize its NOLs and certain credit carryforwards remaining at the effective time of the Merger will be limited. The limitation will be determined by the fair market value of Blackboxstocks’ common stock outstanding prior to the ownership change, multiplied by the applicable federal rate. It is expected that the Merger will impose a limitation on Blackboxstocks’ NOLs. Limitations imposed on Blackboxstocks’ ability to utilize NOLs could cause U.S. federal and state income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes or other causes.

In general, either party can refuse to complete the Merger if there is a material adverse effect (as defined in the Merger Agreement) affecting the other party between March 10, 2025, the date of the Merger Agreement, and the closing of the Merger. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would have a material adverse effect on Blackboxstocks or REalloys, as the case may be:

Agreement and Plan of Merger

The Merger Agreement contains customary representations, warranties and covenants of the Company, Merger Sub and the REalloys, including, among others, (i) covenants requiring each of the Company and REalloys to conduct its business in the ordinary course during the period between the execution of the Merger Agreement and the Closing or earlier termination of the Merger Agreement, subject to certain exceptions, (ii) a covenant prohibiting the Company from engaging in certain kinds of transactions during such period (without the prior written consent of the REalloys), and (iii) a covenant restricting Company and REalloys from activities relating to the soliciting, initiating, encouraging, inducing or facilitating the communication, making, submission or announcement of any alternative acquisition proposals or inquiries.

The Merger Agreement also required the Company, in cooperation with the REalloys, to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 containing a proxy statement relating to a Company stockholder meeting held in connection with the Merger (the “Registration Statement”) pursuant to which shares of Company Common Stock were registered under the Securities Act of 1933, as amended (the “Securities Act”), to be issued by virtue of the Merger and the contemplated transactions thereunder. In addition, under the Merger Agreement, the parties agreed to other customary provisions including (i) obtaining requisite stockholder approval to consummate the Merger and the contemplated transactions thereunder, (ii) obtaining regulatory approvals from relevant governmental authorities, (iii) indemnifying the directors and officers of the Company for a period of six years following the Closing, (iv) completing certain disclosure obligations required by the SEC and listing requirements promulgated by the Nasdaq Capital Market (“Nasdaq”), (v) electing or appointing to the positions of officers and directors of Company and the surviving corporation certain persons designated by REalloys, (vi) executing employment agreements between the Company and Lipi Sternheim and David Argyle, (vii) Company adopting a new stock incentive plan reserving not more than 15% of the fully-diluted, outstanding interest of the Company immediately following the Merger for issuance, and (viii) allocating funds received by Company pursuant to sales, issuances, grants or other dispositions of Company Common Stock, during the period between the Merger Agreement and Closing, under that certain Registration Statement on Form S-3 (File No. 333-284626) filed with the SEC on January 31, 2025 which became effective on February 10, 2025.

Closing of the Merger is subject to various customary closing conditions. Each party’s obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder are conditioned upon (i) the effectiveness of the Registration Statement on Form S-4, (ii) expiration or termination of applicable regulatory waiting periods, (iii) no restraints from any governmental authority preventing the consummation of the contemplated transactions under the Merger Agreement, (iv) the Company and REalloys obtaining their respective requisite stockholder votes to consummate the transactions contemplated by the Merger Agreement, (v) Nasdaq’s approval of the Company’s Nasdaq listing application for the post-Merger entity, (vi) execution of Lock-Up Agreements (as further described below), (vii) execution of a Stock Purchase Agreement by and between Gust Kepler and Lipi Sternheim whereby Gust Kepler shall agree to sell certain shares of Company Series A Convertible Preferred Stock to Lipi Sternheim contingent upon and effective concurrently with Closing, and (viii) the filing of an amendment to Company’s charter with the Secretary of State of the State of Nevada, containing such amendments necessary to consummate the transactions contemplated by the Merger Agreement. Company’s and Merger Sub’s obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder are further conditioned upon customary closing conditions as well as REalloys having sufficient stockholder’s equity as necessary for the Company to meet Nasdaq listing requirements. REalloys’ obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder are further conditioned upon customary closing conditions as well as (i) the Company’s execution of an Option Agreement (as further described below), (ii) the Company’s consummation of a Company Financing and issuance of $2,300,000 of Additional Debentures to the satisfaction of the REalloys (as further described below), (iii) the Company having Net Cash (as defined in the Merger Agreement) equal to or in excess of negative $2.69 million, and (iv) the Company filing the Certificate of Designations establishing a class of Company preferred stock to be designated Series C Convertible Preferred Stock (as further described below).

Following the Closing, the Company is expected to be renamed “REalloys Inc.,” and it is expected that the shares of Company Common Stock will continue to be listed on Nasdaq.

Palladium Capital Group, LLC served as the exclusive financial advisor in connection with the above transactions.

Stockholder Support Agreements

As a condition to the parties’ execution of the Merger Agreement, Gust Kepler, a director and the President and Chief Executive Officer of the Company, who holds shares of Company Common Stock and Series A Convertible Preferred Stock, executed a Stockholder Support Agreement (the “Company Stockholder Support Agreement”), pursuant to which Mr. Kepler agreed to vote his shares of Company Common Stock and Series A Convertible Preferred Stock in favor of (i) the approval of the Merger Agreement and transactions contemplated therein, (ii) if deemed necessary by the Company, an amendment to the Company’s certificate of incorporation to effect a forward or reverse split of the outstanding Company Common Stock if necessary, (iii) the issuance of Company Common Stock in accordance with Nasdaq Listing Rule 5635, and (iv) against any competing proposals. In addition, as a condition to the parties’ execution of the Merger Agreement, holders of at least 50.1% of the outstanding shares of capital stock of the REalloys executed a Stockholder Support Agreement (the “REalloys Stockholder Support Agreements”), pursuant to which such holders agreed to vote all of their shares of capital stock of the REalloys in favor of the approval of the Merger Agreement and transactions contemplated therein.

Lock-Up Agreements

As a condition to the parties’ execution of the Merger Agreement, prior to Closing, all officers, directors and stockholders of the REalloys will execute lock-up agreements (the “Lock-Up Agreements”), which among other things (i) prohibit such parties from engaging in certain sale and other transfer transactions relating to the Company Common Stock and securities convertible, exercisable or exchangeable therefor, without the prior written consent of the Company for a period of 180 days after the Closing and (ii) for 180 days thereafter, further prohibits such parties from engaging certain transactions representing more than 10% of each party’s record or beneficial ownership of the Company in any one month.

Option Agreement

As a condition to the parties’ execution of the Merger Agreement, prior to Closing, the Company and Gust Kepler will execute an Option Agreement (the “Option Agreement”) pursuant to which the Company shall have the right to call for redemption and Gust Kepler shall have the right to cause Company to redeem all of the issued and outstanding Series A Convertible Preferred Stock of Parent held by Gust Kepler in exchange for shares of Series A Convertible Preferred Stock of Blackbox.io, Inc. (“Blackbox Operating”), a Delaware corporation and wholly owned subsidiary of Parent, which was organized to conduct historical Blackbox operations of the Company.

Contingent Value Rights Agreements

At the Closing, the Company, a representative of the Company stockholders, and a to be appointed Rights Agent, will enter into a Contingent Value Rights Agreement (the “CVR Agreement”). Pursuant to the Merger Agreement and the CVR Agreement, each share of Company Common Stock held by Parent stockholders as of a record date immediately prior to the Closing will receive a dividend of one contingent value right (“CVR”) entitling such holders to receive, in connection with certain transactions involving Blackbox Operating (a “CVR Transaction”), an amount equal to the net proceeds actually received by the Company at the closing of such transaction. A CVR Transaction is generally a transaction pursuant to which (i) the Company or Blackbox Operating grants, sells, licenses or otherwise transfers some or all of the rights to the Blackbox Operating assets, or other monetizing event of all or any part of the Blackbox Operating assets and (ii) the Company receives or Blackbox Operating determines to distribute net proceeds from such transaction as a dividend to its stockholders.

The CVR payment obligations will expire the date that is 24 months following the Closing. The CVRs will not be transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading on any exchange. There is no guarantee that any CVR Transaction or payment pursuant thereto will be earned.

Certificate of Designations for Series C Preferred Stock

Under the terms of the Merger Agreement, as a condition to Closing, the Company will file a Series C Certificate of Designations with the Secretary of State of the State of Nevada establishing a class of Company preferred stock to be designated Series C Convertible Preferred Stock, par value $0.001 per share, stated value $3,000 per share, which is expected to be issued as partial consideration in the Merger. Under the agreed form of the Series C Certificate of Designations, all shares of capital stock of the Company rank pari passu or junior to the Series C Preferred Stock, with respect to preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. The Series C Preferred Stock is convertible into shares of Company Common Stock at the election of the holder at any time at a conversion price to be equal to 100% of the lesser of (i) the closing price of the Company Common Stock on the trading day immediately prior to the closing of the Merger and (ii) the closing price of the Company Common Stock on the date the Companies obtain stockholder approval for issuance of the Series C Preferred Stock and Company Common Stock into which it convert (the “Series C Stockholder Approval”). The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications, stock combinations and the like (subject to certain exceptions). At any time after issuance of the Series C Preferred Stock, to the extent the Company raises capital in any financing with gross proceeds in excess of $3 million, the Company is required to use one-third of such gross proceeds to redeem all or any portion of the Series C Preferred Stock then outstanding. The amortization payments due upon such redemption are payable by the Company in cash at a price equal to the product of (i) 110% and (ii) the stated value of the shares of Series C Preferred Stock being redeemed plus any and all accrued and unpaid dividends on such shares of Series C Preferred Stock.

The holders of the Series C Preferred Stock will be entitled to dividends of 2.5% per annum, compounded each calendar month, which are payable in arrears monthly in cash, “in kind” in the form of additional shares of Series C Preferred Stock, or in a combination thereof, at the holder’s discretion, in accordance with the terms of the Series C Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Series C Certificate of Designations and described below), the Series C Preferred Stock accrues dividends at a rate of 15% per annum. Upon conversion or redemption, the holders of shares of Series C Preferred Stock will be also entitled to receive a dividend make-whole payment, assuming for calculation purposes that stated value of such Series C Preferred Stock remained outstanding through and including the date of conversion or redemption of all the shares of Series C Preferred Stock. The holders of Series C Preferred Stock will be entitled to vote with holders of the Company Common Stock on an as-converted basis, with the number of votes to which each holder of Series C Preferred Stock is entitled to be calculated as the stated value of such share of Series C Preferred Stock divided by the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) immediately preceding the Subscription Date (as defined in the Series C Certificate of Designations), subject to certain beneficial ownership limitations as set forth in the Series C Certificate of Designations.

Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization payments and dividend make-whole payments using shares of Company Common Stock is subject to certain limitations set forth in the Series C Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that the Company has obtained the Series C Stockholder Approval. Further, the Series C Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Company Common Stock issuable upon conversion of the Series C Preferred Stock or as part of any amortization payment or dividend make-whole payment under the Series C Certificate of Designations.

The Series C Certificate of Designations includes certain Triggering Events (as defined in the Series C Certificate of Designations), including, among other things, the suspension from trading or failure of the Company Common Stock to be trading or listed on an Eligible Market (as defined in the Series C Certificate of Designations) for a period of five consecutive trading days and the Company’s failure to pay any amounts due to the holders of Series C Preferred Stock when due. In connection with a Triggering Event, each holder of Series C Preferred Stock will be able to require the Company to redeem in cash any or all of the holder’s shares of Series C Preferred Stock at a premium set forth in the Series C Certificate of Designations.

The Company will be subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the maturity of indebtedness, preservation of existence, maintenance of properties, maintenance of insurance, transactions with affiliates, among other matters.

There is no established public trading market for the Series C Preferred Stock and the Company does not intend to list the Series C Preferred Stock on any national securities exchange or nationally recognized trading system.

As described below, Series C Preferred Stock will be issued upon consummation of the Merger as consideration for certain outstanding shares of Series X Stock (as defined below) of REalloys and, at the option of the holders of the Additional Debenture issued in connection with the Company Financing (described below), in exchange for satisfaction of certain Company obligations under the terms of the Additional Debenture.

First Amendment to Agreement and Plan of Merger

On July 1, 2025, Blackboxstocks, Merger Sub and REalloys entered into a First Amendment to Agreement and Plan of Merger in order to reflect Blackboxstocks’ intent to conduct an at-the-market offering of its common stock, pursuant to which up to 250,000 shares of Blackboxstocks common stock may be sold and issued without affecting the calculation of Company Merger Shares (as defined in the Merger Agreement) to be issued in the Merger.

Second Amendment to Agreement and Plan of Merger

On August 22, 2025, Blackboxstocks, Merger Sub and REalloys entered into a Second Amendment to Agreement and Plan of Merger in order to delete and restate in its entirety the definition of “Permitted Transfer” in the CVR Agreement.

Third Amendment to Agreement and Plan of Merger

On December 10, 2025, Blackboxstocks, Merger Sub and REalloys entered into a Third Amendment to Agreement and Plan of Merger in order to delete and restate in its entirety the form of Option Agreement.

REalloys Financing

In connection with the Merger, REalloys entered into a Securities Purchase Agreement (the “REalloys Purchase Agreement”), dated as of March 6, 2025, with Five Narrow Lane LP (the “Buyer”), pursuant to which REalloys agreed to sell to the Buyer (i) an aggregate of 5,000 shares of REalloys’ Series X Preferred Stock, par value $0.0001 per share (the “Series X Stock”), with a stated value of $1,000 per share (the “Stated Value”) and (ii) warrants (the “REalloys Warrants”) to acquire up to 5,000,000 shares of common stock of REalloys, par value $0.0001 per share (the “REalloys Common Stock”) (collectively, the “REalloys Financing”). REalloys will also issue to the Buyer an aggregate number of shares of REalloys Common Stock representing 5.0% of the fully diluted outstanding capital of REalloys (the “Commitment Shares”), which shall be adjusted as necessary immediately prior to the consummation of the Merger to the extent that the Commitment Shares represent less than 5.0% of the fully diluted outstanding capital of REalloys. The aggregate gross proceeds from the REalloys Financing were $5,000,000 (or up to $55,000,000 if the REalloys Warrants are exercised in full for cash). REalloys expects to use the net proceeds from the REalloys Financing for general corporate purposes and for transaction expenses incurred in connection with the Merger.

The REalloys Purchase Agreement contains certain representations and warranties, covenants and indemnities customary for similar transactions. The representations, warranties and covenants contained in the REalloys Purchase Agreement were made solely for the benefit of the parties to the REalloys Purchase Agreement and may be subject to limitations agreed upon by the contracting parties.

The closing of the REalloys Financing occurred on March 10, 2025. The REalloys Financing was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. The Buyer has represented to REalloys that it is an accredited investor within the meaning of Rule 501(a) of Regulation D and that it is acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The Series X Stock and REalloys Warrants were offered without any general solicitation by the Company or its representatives.

Certificate of Designations of Series X Preferred Stock

The terms of the Series X Stock are set forth in a certificate of designations (the “REalloys Certificate of Designations”) which was filed with the Secretary of State of Nevada prior to the closing of the REalloys Purchase Agreement. All shares of capital stock of REalloys rank pari passu or junior to the Series X Stock, with respect to preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of REalloys. At any time after issuance of the Series X Stock, to the extent (i) the Merger Agreement is terminated for any reason before the Merger is consummated and (ii) REalloys raises capital in any financing, REalloys is required to use 50% of the aggregate gross proceeds from such financing to redeem all or any portion of the Series X Stock then outstanding. The amortization payments due upon such redemption are payable by REalloys in cash at a price equal to the product of (i) 110% and (ii) the Stated Value of the shares of Series X Stock being redeemed plus any and all accrued and unpaid dividends on such shares of Series X Stock.

The holders of the Series X Stock are entitled to dividends of 8.0% per annum, compounded each calendar quarter, which are payable in arrears quarterly on the Maturity Date (as defined in the REalloys Certificate of Designations) in cash, “in kind” in the form of additional shares of Series X Stock, or in a combination thereof, at the holder’s discretion, in accordance with the terms of the REalloys Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the REalloys Certificate of Designations and described below), the Series X Stock accrues dividends at a rate of 15% per annum. Upon redemption or other repayment, the holders of shares of Series X Stock are also entitled to receive a dividend make-whole payment, assuming for calculation purposes that the Stated Value of such Series X Stock remained outstanding through and including the date of redemption of all the shares of Series X Stock. The holders of Series X Stock are entitled to vote with holders of the REalloys Common Stock on an as-converted basis, with each share of Series X Stock entitling the holder thereof to cast one vote per share of Series X Stock.

The REalloys Certificate of Designations includes certain Triggering Events (as defined in the REalloys Certificate of Designations), including, among other things, REalloys’ failure to pay any amounts due to the holders of Series X Stock when due. In connection with a Triggering Event, each holder of Series X Stock will be able to require REalloys to redeem in cash any or all of the holder’s shares of Series X Stock at a premium set forth in the REalloys Certificate of Designations.

REalloys will be subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, restricted payments and investments, restrictions on redemption and cash dividends, restrictions on transfer of assets, the maturity of indebtedness, change in nature of business, preservation of existence, maintenance of properties, intellectual property and insurance, transactions with affiliates, restricted issuances and restrictions on acquisitions, among other matters. There is no established public trading market for the Series X Stock and REalloys does not intend to list the Series X Stock on any national securities exchange or nationally recognized trading system.

Pursuant to the Merger Agreement, each share of Series X Stock outstanding will be converted solely into the right to receive shares of the Company’s Series C Preferred Stock at a ratio of 1 to 1.

Warrants

The REalloys Warrants are exercisable for shares of REalloys Common Stock immediately upon issuance, at an exercise price of $10.00 per share (the “Exercise Price”) and expire two years from the date of issuance. The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications, and the like. There is no established public trading market for the REalloys Warrants and REalloys does not intend to list the REalloys Warrants on any national securities exchange or nationally recognized trading system.

Pursuant to the Merger Agreement, the REalloys Warrants are to be assumed by the Company at Closing and will be exercisable for the purchase of Company Common Stock in an amount and at an adjusted Exercise Price based upon the Exchange Ratio.

Company Financing

On January 17, 2025, the Company entered into a Securities Purchase Agreement (the “Original Purchase Agreement”) with Five Narrow Lane LP (the “Purchaser”), and Five Narrow Lane LP, as collateral agent for the Purchaser (the “Agent”), pursuant to which the Purchaser agreed to purchase from the Company a senior debenture having an aggregate principal amount of $250,000 (the “Initial Debenture”) and an amended and restated senior secured convertible debenture having an aggregate principal amount of up to $2,000,000 (the “Additional Debenture”, and together with the Initial Debenture, the “Debentures”) upon certain closing conditions applicable to the Initial Debenture and Additional Debenture, respectively.

The closing of the Initial Debenture (the “Initial Closing”) took place on January 17, 2025. The closing of the Additional Debenture (the “Additional Closing”), was agreed to take place upon satisfaction of certain customary closing conditions outlined in the Original Purchase Agreement, including, but not limited to, the execution and delivery of (i) a Security Agreement (as further described below), (ii) a Subsidiary Guarantee (as further described below), (iii) a Registration Rights Agreement (as further described below), and (iv) a Merger Agreement (as further described below).

The Original Purchase Agreement contains customary representations, warranties, covenants, confidentiality and indemnification obligations customary for a transaction of the size and type contemplated by the Original Purchase Agreement. The Original Purchase Agreement also provides that, so long as the Debentures remain outstanding, each holder of the Securities shall have “most favored nation” status with respect to any debt or equity financing (including, without limitation, the issuance of convertible debt and equity securities of any nature) obtained by the Company.

Initial Debenture

The Initial Debenture bore interest at a rate of 7.00% per annum and matured on the earlier to occur of the date on which a definitive agreement relating to any “Merger Transaction” (as defined in the Original Purchase Agreement) (the “Merger Agreement”) was duly executed by the parties signatory thereto (the “Initial Debenture Trigger Date”) or March 15, 2025 (the “Initial Debenture Maturity Date”). At any time prior to the Initial Debenture Maturity Date, the Company could elect to prepay all or a portion of the outstanding amounts due under the Initial Debenture.

On the Initial Debenture Trigger Date, the Company agreed to pay in cash to the Purchaser of the Initial Debenture the outstanding principal amount of the Initial Debenture, together with all accrued and unpaid interest thereon, an exit fee in an amount equal to 15% of the outstanding principal amount of the Initial Debenture and any other amounts due thereunder; provided that, if the “Trigger Conditions” are satisfied as of the Initial Debenture Trigger Date, it was agreed that the Initial Debenture would be exchanged for an Additional Debenture. As defined in the Initial Debenture, “Trigger Conditions” meant (a) no event of default has occurred or is continuing or would result from the effectiveness of the Merger Transaction, (b) no event or condition has resulted in, or could be reasonably expected to cause, either individually or in the aggregate, a material adverse effect or to result in a material adverse effect from the effectiveness of the Merger Transaction, (c) the Company has executed and delivered such documents as the holder may reasonably request in connection with the exchange of the Initial Debenture for the Additional Debenture, and (d) the satisfaction of any additional covenants and conditions set forth in the Original Purchase Agreement.

The Initial Debenture also included customary negative and affirmative covenants, as well as events of default, the occurrence of which would cause the Initial Debenture to bear interest at a default rate of 18% per annum.

Amendment to Securities Purchase Agreement; A&R Initial Debenture

On January 27, 2025, the Company, the Purchaser and the Agent entered into an Amendment to Securities Purchase Agreement (the “Amendment”, and together with the Original Purchase Agreement, the “Purchase Agreement”) to, among other things, increase the aggregate principal and subscription amount of the Initial Debenture and Additional Debenture to up to $550,000 and $2,300,000, respectively. The Amendment amended certain provisions within the Purchase Agreement to reflect such increase in the aggregate principal and subscription amounts of the Debenture. On same date, the Company issued to the Purchaser an Amended and Restated Debenture due the Earlier of the Trigger Date and March 15, 2025, in the aggregate principal amount of $550,000 (the “A&R Initial Debenture”).

Additional Closing; Additional Debenture

On March 10, 2025, the Company consummated the Additional Closing (the “Additional Closing Date”). At the Additional Closing, the A&R Initial Debenture was exchanged for the Amended and Restated Senior Secured Convertible Debenture Due the Earlier of the Trigger Date and March 10, 2026 (the “Additional Debenture Maturity Date”), in the principal amount of $1,050,000, where “Trigger Date” means the date on which the transactions contemplated by the Merger Agreement are consummated, which debenture constitutes an Additional Debenture pursuant to the Purchase Agreement. The obligations of the Company under the Additional Debenture constitute senior indebtedness secured by a first priority security interest on substantially all of the assets of the Company.

The Additional Debenture bears interest at a rate of 7.00% per annum. At any time prior to the Additional Debenture Maturity Date, the Company can, upon Purchaser’s prior written consent, prepay all or a portion of the outstanding principal due under the Additional Debenture, plus (i) accrued and unpaid interest thereon, plus (ii) the exit fee, and plus (iii) all other sums, if any, that shall have become due and payable thereunder.

At any time after the original issuance date, the Additional Debenture is convertible into shares of common stock of the Company at the initial conversion price of $5.46, subject to customary adjustments for reverse splits and anti-dilution protections, provided that the conversion shall at no time be lower than the floor price of $5.00 per share.

On the Trigger Date, the Company shall, at the option of the Company, either (i) pay to the Purchaser in cash all or a portion of the principal amount of the Additional Debenture outstanding on the Trigger Date, together with all accrued and unpaid interest thereon, the exit fee and any other amounts due hereunder or (ii) issue to the Purchaser such number of shares of Series C Preferred Stock of the Company, for aggregate stated value equal to: (x) 3.0 multiplied by (y) all, or such portion, as applicable, of the principal amount of the Additional Debenture outstanding on the Tigger Date, after giving effect to any repayment pursuant to foregoing clause (i), together with all accrued and unpaid interest thereon, the exit fee and other amount due hereunder. In case the Company elects the option specified in the foregoing clause (i), the Company shall deliver on a date that is at least 5 Trading Days before such Trigger Date a written notice (a “Trigger Date Repayment Notice”) to the Purchaser of its irrevocable election to repay all or a portion of the outstanding principal amount of the Additional Debenture plus (i) accrued and unpaid interest thereon, plus (ii) the exit fee, and plus (iii) all other sums, if any, that shall have become due and payable (collectively, the “Trigger Date Repayment Amount”) for cash on the Trigger Date (the period from the date of such Trigger Date Repayment Notice to the Trigger Date, the “Repayment Period”). For the avoidance of doubt, the Purchaser may elect to convert all or a portion of the outstanding principal amount of the Additional Debenture, from time to time, prior to the Trigger Date and the Company must honor all conversions occurring by virtue of one or more Notices of Conversion of the Purchaser during the Repayment Period.

The Additional Debenture also includes customary negative and affirmative covenants, as well as events of default, the occurrence of which will cause the Additional Debenture to bear interest at a default rate of 18% per annum.

On April 24, 2025, the Additional Debenture was increased by $750,000 as a result of the Company filing a registration statement on Form S-4 in connection with the Merger. On June 18, 2025 the Additional Debenture was increased by $250,000 as an advance against the $500,000 tranche due upon the Registration Statement being declared effective by the SEC. The remaining $250,000 was funded upon the Registration Statement being declared effective by the SEC.

Company Background

Rare earth elements, principally neodymium, praseodymium, dysprosium, and terbium, are what give high-performance permanent magnets their strength and their ability to hold that strength at high temperature. Neodymium and praseodymium provide the raw magnetic power; dysprosium and terbium provide the coercivity, the resistance to demagnetization, that keeps a magnet working in the heat of a jet engine bay or an electric motor. Those magnets are what turn electricity into motion, and they sit inside almost anything that moves electrically: missile and aircraft actuators, radar and sonar systems, electric vehicle drivetrains, robotics, wind turbines and medical imaging equipment. Supply of these materials is concentrated in China, and the U.S. Department of Defense will be prohibited from procuring covered magnets containing rare earths sourced from adversarial nations beginning January 1, 2027. Our strategy is to give U.S. and allied customers a secure, transparent and traceable alternative located entirely in North America.

Recent Developments

Executive and Board Leadership Changes

On June 24, 2026, Robert Winspear resigned as the Company’s Chief Financial Officer, effective as of that date. In connection with his departure, the Company and Mr. Winspear entered into a General Release and Severance Agreement, pursuant to which the Company agreed to provide customary separation benefits in exchange for a general release of claims and his continued cooperation with the Company during a transition period.

On the same date, the Board of Directors (the “Board”) appointed Craig Cunningham, to serve as the Company’s Chief Financial Officer and principal financial officer, effective June 24, 2026. Mr. Cunningham has served as an Executive Director of Provenance Advisors, a Toronto, Ontario-based financial advisory firm, since August 2023, and previously provided management advisory services to the Company through Provenance Advisors from July 2025 until his appointment as Chief Financial Officer. Mr. Cunningham is a Chartered Professional Accountant (CPA, CA) and holds an Executive Master of Business Administration from the Ivey Business School at Western University, bringing more than two decades of public-company experience and leadership across the critical minerals and mining sectors. Within the critical minerals and metals industry he most recently served as Chief Financial Officer of Li-Cycle Holdings Corp., a cross-border lithium-ion battery resource recovery company, and as Chief Financial Officer of Electra Battery Materials Corporation, a North American battery metals and materials processor., from June 2022 to July 2023, roles in which he was responsible for financial reporting, capital markets execution and strategic planning for critical minerals businesses closely aligned with the Company’s own mine-to-magnet strategy. Over a span of 12 years, Mr. Cunningham held a series of increasingly senior finance and leadership roles with Kinross Gold Corporation, a global gold mining company, culminating in his service as Vice President, Regional Financial Officer, Russia, where he oversaw financial operations, procurement, logistics, and information technology for a multi-billion-dollar international mining portfolio. Mr. Cunningham provides his services to the Company on an independent contractor basis pursuant to a Chief Financial Officer Consulting Agreement, dated June 24, 2026 (the “CFO Consulting Agreement”), which is filed as Exhibit 10.2 to this Form 10-Q.

On June 26, 2026, Joseph Sawyer notified the Company of his resignation from the Board, effective as of June 29, 2026. The Company does not currently intend to appoint a replacement director to fill the resulting vacancy. In connection with his departure from the Board, Mr. Sawyer joined the Company in a management capacity as Director, Projects and Delivery, effective July 1, 2026, where he will provide project management and drive delivery of the Company’s various strategic development projects.

Completed Significant Capital Raise

During the three months ended June 30, 2026, we closed on approximately $100.0 million in gross proceeds through a private placement of common stock. Clear Street LLC acted as placement agent in the offering and was granted a 180-day right to participate in certain future financings, which remains in effect through September 5, 2026. We intend to use the net proceeds for the advancement of our processing and metallization projects, working capital and general corporate purposes.

Development and Capital Projects Update

We continued to advance our phase 1 strategic initiatives - development and expansion of rare earth processing and metallization capabilities.

Capital Project Milestones

We are advancing engineering and equipment procurement for our planned Heavy Rare Earth Metallization Facility, with commissioning currently targeted for Q1 2028 and initial operations targeted for H1 2028. The facility is expected to have targeted annual processing capacity of approximately 50 tonnes of combined Dy and Tb oxide feedstock.

With our planned Rare Earth Processing Facility upgrade funding, the SRC is expected to commence upgrade activity in Q3 2026, while staged commissioning of the plant is already underway. The upgrades are intended to increase annual production capacity to approximately 525 tonnes of NdPr metal, 30 tonnes of Dy oxide and 15 tonnes of Tb oxide. Funding of the expansion, together with the SRC supply agreement, secures supply rights to approximately 80% of the expanded facility’s total output. Jointly, the Company and SRC plan to advance processing and separation trials using recycled mixed rare earth oxide feedstock during H2 2026, with the objective of producing separated material for potential customer qualification as early as Q4 2026.

We expect to advance technical studies for our Phase 2 strategic initiatives, wholly owned, increased scale Integrated Rare Earth Separation and Metallization Facility.

Commercial Milestones

We expect to commence commercial intake of NdPr metal and Dy and Tb oxides from the SRC in Q3 2027, in line with the facility’s targeted production ramp-up and the Company’s existing supply arrangements. REalloys continues to evaluate prospective primary feedstock sources under its existing MOUs and other arrangements, with a focus on advancing selected opportunities toward definitive feedstock supply agreements.

Feedstock Sourcing and Development

We continued to evaluate prospective primary feedstock sources under our existing MOUs and other arrangements, with a focus on advancing selected opportunities toward definitive feedstock supply agreements.

Rare Earth Offtake Agreement with Critical Metals Corp.

On May 20, 2026, we executed a definitive long-term Rare Earth Product Offtake Agreement with Critical Metals Corp. ("CRML") covering 15% of monthly Phase 1 production from CRML’s Tanbreez rare earth project in southern Greenland. The agreement replaces and supersedes the previously announced non-binding letter of intent between the parties.

Deliveries begin only once the parties agree on detailed product specifications and qualification requirements. Tanbreez is not in production, and the timing of first deliveries depends on the development of the project by Critical Metals, which is outside our control. We have not purchased or received any material under this agreement, and it had no effect on our results of operations, financial position or cash flows for the three and six months ended June 30, 2026.

Feedstock Development Agreements

During the quarter we entered into several non-binding arrangements intended to develop a diversified North American feedstock network:

•U.S. Critical Materials Corp., contemplating offtake of up to 10% of production from the Sheep Creek project in Ravalli County, Montana

•Ramaco Resources, Inc., contemplating mixed rare earth carbonate feedstock from the Brook Mine in Wyoming

•Patriot Exploration & Mining, contemplating priority access to up to approximately 30% of its rare earth production None obligates either party to enter into a definitive agreement, none provides for the purchase or sale of any material, and no consideration has been paid or received. There can be no assurance that any definitive agreement will result, or that any of the volumes described will be available to us. These arrangements had no effect on our results of operations, financial position or cash flows for the three and six months ended June 30, 2026.

U.S. Army Enhanced Use Lease Opportunity, Tooele Army Depot

On June 25, 2026, we announced that we had been selected by the U.S. Army for exclusive negotiations toward a long-term Enhanced Use Lease at Tooele Army Depot in Utah. If a lease is executed, we would design, finance, build and operate heavy rare earth processing facilities at the site. The arrangement is non-binding and does not obligate either party to enter into a definitive agreement. There can be no assurance that negotiations will result in a lease, or that any lease would be on the terms we currently contemplate. As of June 30, 2026, we had not committed capital to the site, had incurred no material costs in connection with the opportunity, and had recognized no revenue or assets related to it.

Any development of the site would be subject to the execution of a definitive lease, environmental review and permitting, the availability of financing, and the completion of engineering and procurement. We continue to advance our negotiations and planning with the U.S. Army ahead of the September 8, 2026, scheduled completion of the negotiation phase of the selection process.

As a North American rare earth company spanning upstream resources at Hoidas Lake and with separation and metallization capacity under development, we believe we are well positioned to benefit from these trends, particularly as U.S. policy, procurement and customer qualification frameworks continue to favor domestic, traceable supply.

Rare Earth Pricing

A price divergence has emerged between Chinese domestic and ex-China markets for the heavy rare earths, driven by Chinese export controls and limited non-Chinese supply. As of late June 2026, ex-China dysprosium and terbium oxide traded at a substantial premium to Chinese domestic prices, and the divergence was more pronounced still for yttrium.

If sustained, this divergence supports the economics of non-Chinese production, including ours. It is also volatile, sensitive to Chinese policy, and may narrow if controls are relaxed or if non-Chinese capacity comes online faster than expected. Higher prices can improve the economics of our downstream products, but they also increase our feedstock costs. We do not currently hedge commodity price exposure.

U.S. policy continues to support the build out of a domestic critical minerals supply chain through a range of procurement, financing, stockpiling and grant programs. These include the Defense Production Act, the Department of Defense Industrial Base Analysis and Sustainment program, the Department of Energy’s Energy Dominance Financing program, the Export-Import Bank of the United States, the National Defense Stockpile and related procurement and grant programs. We are actively pursuing additional government, defense and dual-use customer relationships, and we are pursuing financing under certain of the programs described above, including with the Export-Import Bank.

Policy support is increasingly directed at the midstream and downstream stages of the value chain, where non-Chinese capacity is most limited. The G7 critical minerals declaration of June 17, 2026, sets a target of reducing reliance on any single non-G7 supplier for rare earths and permanent magnets to below 60% by 2030. Government-backed price floor and offtake mechanisms have also emerged in the United States and among allied governments and are intended to improve the bankability of non-Chinese projects by reducing revenue uncertainty. We are not currently a party to any government price floor or offtake arrangement.

Effective January 1, 2027, Section 857 of the FY2023 National Defense Authorization Act prohibits the U.S. Department of Defense from procuring covered permanent magnets containing rare earths sourced from adversarial nations. We expect this to create increased demand for the North American rare earth materials and metals we plan to refine and produced. However, winning defense and related contracts and obtaining the necessary supplier qualification ahead of the effective date remains subject to significant uncertainty.

Changes in administration priorities, appropriations, tariff and trade policy, or program scope could materially affect demand, realized prices and the availability of additional funding for our capital projects.

Midstream Separation and Metallization: The North American Gap

China currently accounts for more than 90% of global magnet rare earth separation and refining capacity, a concentration that has remained around this level for several years (source: U.S. DOE, International Energy Agency, Benchmark Mineral Intelligence). For the heavy rare earths critical to high-temperature magnets, such as dysprosium and terbium, separation capacity outside China is effectively negligible. Midstream and downstream processing, comprising separation, metallization, alloying and magnet manufacturing, rather than mining, has been identified as the principal bottleneck limiting supply chain diversification. Refining capacity outside China would need to increase several-fold beyond currently planned levels to achieve meaningful diversification.

The practical consequence is that new upstream supply, on its own, does not create supply chain security. Concentrate and mixed rare earth carbonate produced in the United States or in allied jurisdictions must still be separated into individual oxides and reduced to metal before it can be made into a magnet. Absent midstream capacity in North America, that material is routed back through the same processing base the supply chain is intended to diversify away from.

A substantial volume of allied and domestic upstream supply is now advancing toward production. Our response has been to secure access to that material through offtake agreements and development arrangements, as described under "Recent Developments," while concentrating our own capital and execution effort on the midstream stage that is missing in North America.

Our principal midstream vehicle is our relationship with the Saskatchewan Research Council ("SRC"), a Canadian provincial research and technology organization that operates one of the few heavy rare earth separation facilities outside China.

Under the REPF upgrade arrangement, we are funding an expansion of SRC’s separation capacity for NdPr metal and dysprosium and terbium oxides. In exchange, we secured rights to a substantial share of that output on a cost-plus basis, giving us a contracted North American source of separated heavy rare earth material. The dysprosium and terbium oxides are intended to feed the commercial-scale metallization facility we are developing with SRC, which would convert them into metal for alloy and magnet materials production at our Euclid facility. We currently expect initial separated oxide production from SRC in the second half of 2027, and dysprosium and terbium metal output from the metallization facility we are funding in the first half of 2028.

The SRC arrangements are expected to affect our business, liquidity, capital allocation, operating results, and development timeline. During the three months ended June 30, 2026, we paid aggregate deposits of $11.1 million to SRC, consisting of $3.7 million for our REPF Upgrade Project and $7.4 million towards our commercial Heavy RE Metallization Facility. In the three months ending June 30, 2026, we began receiving equipment and other related project services as we continued to advance our work in Saskatchewan.