Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth in the sections of this Annual Report titled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." As a result of these risks, you should not place undue reliance on these forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Overview

Integrated Rail & Resources Inc. is an energy infrastructure and processing company focused on upgrading and redeploying legacy oil sands and refining assets to support third-party feedstock processing and refined-product delivery. The Company is a Delaware corporation that, in 2025, merged with Tar Sands Holdings II, LLC ("TSII"). Its core assets are located at Asphalt Ridge in northeastern Utah - one of the largest and most accessible oil sands deposits in the United States - where the Company owns 760 acres of fee-simple land, a permitted open-pit mine, and an existing large-scale extraction, refining and terminating facility in Vernal, Utah (the "Facility").

With the planned equity and debt capital raises following the Business Combination, together with commitments under the Shell Commitment Agreement, the Company intends to upgrade and bring its existing Facility online to process and refine third-party crude feedstock into products meeting customer specifications. The Facility has been substantially constructed and refurbished over time, with more than $60 million historically invested in extraction, separation, and infrastructure upgrades, and prior commissioning activities have demonstrated that commercial-scale oil extraction is feasible. Rather than pursuing near-term oil sands development, the Company's current strategy is to leverage its permitted mine site, processing infrastructure, and transportation assets - including an on-site transload and terminal facility - to support contracted feedstock processing and refining for Shell Trading US Company ("STUSCO") and other potential customers. This approach positions the Company at the intersection of energy infrastructure, refining services, and logistics, with a capital-efficient path to commercialization through the reactivation and modernization of existing assets.

We have conducted phospholipidosis and toxicology studies on our processing capabilities and have completed a Phase 1 Front-End Loading ("FEL") engineering review by Becht Engineering BT, Inc. in January 2025, with FEL-2 completed in January 2026 and FEL-3 expected by April 2026. The expected In-Service Date for the Facility is during the second half of 2027. We expect to continue to make investments in engineering, permitting, and construction to bring our Facility online.

We have incurred significant net losses to date. Our ability to generate revenue sufficient to achieve profitability will depend on our ability to successfully upgrade and commission our Facility and commence processing operations under the Shell Commitment Agreement. As of December 31, 2025, we had cash and cash equivalents of $372,165 and accumulated deficit of $40,622,120. During the year ended December 31, 2025, we had operating losses of $5,774,457 and used $1,928,466 of cash in operations. These losses have resulted primarily from costs incurred in connection with professional fees, salaries and wages, accretion and depreciation expenses, and certain costs associated with the Business Combination. We expect to continue to incur significant expenses and operating losses for the foreseeable future until the second half of 2027, the expected In-Service Date for the Facility.

Business Combination

On December 12, 2025, we consummated a business combination pursuant to an agreement and plan of merger, dated as of August 30, 2024 (the "Initial Merger Agreement," as subsequently amended), by and among Integrated Rail and Resources Acquisition Corp., TSII and certain other parties. Upon the closing of the Business Combination, TSII became our wholly owned subsidiary, and the Company changed its name from Integrated Rail and Resources Acquisition Corp. to Integrated Rail & Resources Inc.

The Business Combination was accounted for as an asset acquisition. Prior to the Business Combination, the Company was a blank check company incorporated for the purpose of effecting a Business Combination. As a result, the Company's historical financial results prior to the Business Combination reflect the operations of the SPAC, and the financial results after the Business Combination reflect the combined operations.

Trust Account

Upon close of our business combination, we paid shareholders that redeemed their Class A common stock at the July 15, 2025 and the September 15, 2025 special meetings, paid amount due to the trust account trustee and transferred the remaining funds from the trust account to our operating bank account. The trust account was subsequently terminated.

Equity Shares

Upon the close of our business combination, all outstanding shares of the Company's Class A common stock converted to shares of Company common stock on a one-for-one basis.

Components of Our Results of Operations

Revenues

The Company has not reported any revenue for the years ended December 31, 2025 and 2024 and does not anticipate reporting any significant revenues until the Facility comes into service. The expected In-Service Date for the Facility is during the second half of 2027.

Accretion and depreciation expenses

The Company has an Asset Retirement Obligation ("ARO") recorded that is associated with its oil and natural gas property; the fair value of the ARO was recorded as a liability and is accreted over time until the date the ARO is to be paid. Associated with this property is the asset retirement cost, which is the estimated cost of retiring the asset, whereas the asset retirement obligation is the estimated reclamation cost once the asset is deemed to be no longer productive. The asset retirement cost was fully impaired at the time the oil-producing assets were impaired.

Salaries and wages expenses

Salaries and wages expenses include all payroll-related expenses, including benefits and payroll taxes. Salaries and wages expenses were higher for the year ended December 31, 2025, as compared to December 31, 2024 as we did not pay salaries in the year ended December 31, 2024.

Property tax

The Company accrues property tax for the estimated tax obligations that are paid on an annual basis. The property tax estimates are trued up to actual property tax obligations on an annual basis as payments are made and actual obligations are settled.

Professional fees

The Company paid additional accounting, legal, and consulting fees during the year ended December 31, 2025 in conjunction with the Business Combination Agreement with the SPAC. There were fewer expenses incurred during the prior period.

Other expenses

Other expenses include miscellaneous operating expenses related to maintaining the property for items such as utilities and insurance. The increase was primarily attributable to an increase in our Delaware franchise taxes driven by the closing of our Business Combination.

Income tax

The Company was a corporation under provisions of the Internal Revenue Code and had elected to be treated as a corporation for income tax purposes. Due to a net loss, there was no income taxes accrued for the year ended December 31, 2025.

Results of Operations

Prior to the close of the business combination, we were a SPAC and had neither engaged in any operations nor generated any operating revenues. Our only activities from inception through December 12, 2025 were organizational activities and those necessary to prepare for the Initial Public Offering and an initial Business Combination. We generated non-operating income in the form of interest income on marketable securities held in the Trust Account after the Initial Public Offering. After the close of the business combination, we have not generated any operating revenue.

For the year ended December 31, 2025, we had a net loss of $20,882,176, which consisted of a change in fair value of warrant liabilities of $14,558,000, interest expense of $350,342, excise tax interest and penalties of $535,632 operating costs of $5,774,457 and provision for income taxes of $64,133, partially offset by interest and income earned on cash and investments in the Trust Account of $68,722, recovery of offering costs attributable to partial waiver of deferred underwriting fee, and a change in the fair value of the conversion event liability of $63,513.

For the year ended December 31, 2024, we had a net loss of $4,822,902, which consisted of a change in fair value of warrant liabilities of $2,090,000, interest expense of $422,128, change in fair value of conversion event liability of $17,821, operating costs of $3,054,750, a provision for income taxes of $462,092 and excise tax interest and penalties of $214,457, partially offset by interest and income earned on cash and investments in the Trust Account of $1,438,346.

Liquidity and Capital Resources

As of December 31, 2025, we had cash and cash equivalents of $372,165 and accumulated deficit of $40,622,120. During the year ended December 31, 2025, we had operating losses of $5,774,457 and used $1,928,466 of cash in operations. We are dependent upon equity and debt financing to support our operations until such time as our Facility becomes operational and generates revenue.

We expect to incur significant expenses and operating losses for the foreseeable future as we continue our efforts to upgrade and commission our facility and bring it online. We estimate that we will incur approximately $15 million in costs and related fees largely consisting of legal and investment banking merger advisory and financing services, approximately $80 million to refurbish the Facility, approximately $28 to $29 million for capital obligations related to the Business Combination, and $18 to $20 million in general business expenses. We believe we will be able to consistently generate revenue during the second half of 2027, at which point we will no longer need additional financing.

Our only source of liquidity at December 31, 2025 is our cash on hand. We plan on issuing debt and equity financing to fund operations and the costs of upgrading and bringing the existing Facility online to process and refine third-party crude feedstock into products meeting customer specifications. We cannot offer any assurances that such capital raises will be available in sufficient amounts or at an acceptable cost.

On March 9, 2026, the Company took steps to satisfy $1,455,589 of outstanding payables to B H, Inc. The Company made a cash payment of $750,000 and issued 7,056 share of the Company's Series A Convertible Preferred Stock, having the designation, preferences, rights, privileges, powers and terms and conditions as specified in the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware on January 23, 2026, in full satisfaction and discharge of the $1,455,589 owed to B H, Inc.

Future Liquidity Needs

We intend to overcome the circumstances that impact our ability to remain a going concern through a combination of expanding our revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing; however, we may not have commitments from third parties for a sufficient amount of additional capital. We cannot be certain that any such financing will be available on acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to continue our operations. Our ability to obtain additional funding will determine our ability to continue as a going concern.

In connection with the PIPE SPA with Creto IRRX PIPE Investment, LLC, entered into on January 23, 2026, Creto invested $2,550,000 on January 23, 2026, an additional $2,750,000 on February 6, 2026, and a further $450,000 on March 23, 2026 in exchange for the Company's Series A Convertible Preferred Stock. We may receive additional financing not to exceed $8.0 million in aggregate through the sale of Series A Convertible Preferred Stock. We have based our anticipated operating capital requirements on assumptions that may prove to be incorrect, and we may use all our available capital resources sooner than we expect.

We anticipate that we will continue to incur net losses into the foreseeable future as we invest in upgrading our Facility, complete permitting, and prepare for commencement of commercial operations. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. See Note 1 of the notes to our consolidated financial statements included elsewhere in this Annual Report for additional information.

Material Cash Requirements

As of December 31, 2025, we have promissory notes and other obligations outstanding, including a Note Payable due to the Sponsor of $5,273,225, Notes Payable due to related parties of $2,043,710, working capital expenses due to Endeavor of $47,319, a working capital loan due to the Sponsor of $17,935, fees for investment banking advisory services of $1,750,000, investment banking fees of $1,750,000 to satisfy the fee agreement from our Initial Public Offering, and three convertible promissory notes totaling $1,900,000.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Cash Flows

The following table summarizes our cash flows for each of the periods presented (in thousands):

		Year Ended December 31,
		2025				2024				Change
Net cash used in operating activities		$	(1,928,466	)		$	(2,544,827	)		$	616,361
Net cash provided by investing activities			4,123,683				70,932,201				(66,808,518	)
Net cash used in financing activities			(1,051,906	)			(68,347,625	)			67,295,719
Net change in cash and cash equivalents		$	1,143,311			$	39,748			$	1,103,562

Cash Flows from Operating Activities

For the year ended December 31, 2025, cash used in operating activities was $1,928,466. Net loss of $20,882,176 was affected by change in fair value of Warrant Liabilities of $14,558,000, interest and income on cash and Trust Account investments of $68,722, interest expense of $350,508, change in fair value of conversion event liability of $63,513 and recovery of offering costs attributable to partial waiver of deferred underwriting fee of $268,153. Changes in operating assets and liabilities provided $4,433,713 of cash from operating activities.

For the year ended December 31, 2024, cash used in operating activities was $2,544,827. Net loss of $4,822,902 was affected by change in fair value of Warrant Liabilities of $2,090,000, interest and income on Trust Account investments of $1,438,341, interest expense of $422,128 and change in fair value of conversion event liability of $17,821. Changes in operating assets and liabilities provided $1,186,467 of cash from operating activities.

Cash Flows from Investing Activities

For the year ended December 31, 2025, cash provided by investing activities was $4,123,683 and affected by cash withdrawn from Trust Account for payment to redeeming stockholders for $3,032,225, transfer of funds from Trust Account for payment of franchise and income taxes of $72,283, payment for asset acquisition of $817,285, cash deposited in Trust Account of $210,006 and cash withdrawn from the Trust Account upon closing of trust account of $280,694.

For the year ended December 31, 2024, cash provided by investing activities was $70,932,201 and affected by cash withdrawn from Trust Account for payment to redeeming stockholders for $70,178,335, transfer of funds from Trust Account for payment of franchise and income taxes of $1,443,866 and cash deposited in Trust Account of $690,000.

Cash Flows from Financing Activities

For the year ended December 31, 2025, cash used in financing activities was $1,051,906 affected by a payment to redeeming stockholders for $3,032,225, proceeds from convertible promissory note of $400,000, repayment of a notes payable from Sponsor of $120,000, repayment of a note payable - related party of $92,000, and proceeds from a notes payable to a related party of $1,745,000.

For the year ended December 31, 2024, cash used in financing activities was $68,347,625 affected by a payment to redeeming stockholders for $70,178,335, proceeds from convertible promissory note of $1,500,000, proceeds from a note payable from Sponsor of $540,000, and a repayment of note payable - related party of $209,290.

Critical Accounting Estimates

Our accounting policies are more fully described in Note 2 of the consolidated financial statements to this Annual Report. As disclosed therein, the preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates.

Impairment of Other Long-lived Assets

The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and estimated fair value.

Asset Retirement Obligations

ARO consists of future land reclamation expenses on open mine properties. The fair value of the ARO was recorded as a liability in the period in which the mine was acquired with a corresponding increase in the carrying amount of asset retirement costs of the assets. The liability is accreted for the change in its present value each period based on the expected dates that the mine will be required to be reclaimed. The future estimated reclamation cost was determined to be $796,000, discounted over an estimated life of 10 years using a credit-adjusted risk-free rate of 7.46%.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). ASC 740, "Income Taxes", requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. The Company is currently evaluating the impact of the new law. However, none of the tax provisions are expected to have a significant impact on the Company's financial statements.

Derivative Liabilities

In determining the fair value of the Warrants and conversion event, assumptions related to market activity, expected share-price volatility, expected time to consummating a business combination, risk-free interest rate, discount rate, probability of closing on a business combination, and a market adjustment for an implied probability of closing on a business combination are utilized. The fair value of the warrant liabilities and conversion event liability is subject to change in future periods based on the underlying assumptions and changes in market data.

Recent Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which will require the company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company adopted ASU 2023-09 on January 1, 2025 on a prospective basis.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material adverse effect on the Company's consolidated financial statements.

Emerging Growth Company

An "emerging growth company" as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in GAAP or their interpretation, the adoption of new guidance or the application of existing guidance to changes in the Company's business could significantly affect our business, financial condition and results of operations.

In addition, we are in the process of evaluating the benefits of relying on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we may take advantage of certain exemptions from various reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include, but are not limited to:

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an exemption from compliance with the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act");

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an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation;

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reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and

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exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.

The Company qualifies and will remain as an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of the initial public offering, (b) in which the Company has a total annual gross revenue of at least $1.235 billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of the common equity of the Company that is held by non-affiliates equals or exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which the Company has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to "emerging growth company" have the meaning associated with it in the JOBS Act.

Smaller Reporting Company

We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that (i) the market value of our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or (ii) our annual revenues are less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.