Evolution Metals & Technologies Corp.
08/17/2026 | Press release | Distributed by Public on 08/17/2026 04:22
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q ("Form 10-Q") as of and for the three and six months ended June 30, 2026 and 2025. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those set forth in the section titled "Cautionary Note Regarding Forward-Looking Statements" included in this Form 10-Q, as well as in "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as the same may be amended from time to time. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.
Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "we," "us," "our," the "Company," "EMAT" and "EM&T" generally refer to Evolution Metals & Technologies Corp. and its consolidated subsidiaries.
Business Overview
EM&T (formerly known as Welsbach Technology Metals Acquisition Corp. ("WTMA")) is a fully integrated critical materials and technology company focused on building a secure, reliable, and self-sustaining U.S.-aligned supply chain for critical minerals and materials ("CMM"), including rare earth elements ("REEs"), primarily through the recycling of end-of-life materials ("urban mining"). End-of-life materials are recovered from products that have reached the end of their useful service life - such as batteries, electronic devices, motors, and magnets - which can no longer perform their intended function but still contain valuable metals and materials that can be recycled and reused in new manufacturing. EM&T owns and operates across the following midstream to downstream segments: (i) feedstock processing, (ii) oxide production, (iii) metal and alloy manufacturing, (iv) powder production, (v) the manufacture of bonded and sintered rare earth magnets, (vi) battery-grade sulfates and carbonates, (vii) precursor cathode active materials ("pCAM"), (viii) precious metals, and (ix) base metals. These outputs integrate directly into the supply chains of, and are suitable for direct delivery to, gigafactories, defense suppliers, original equipment manufacturers ("OEMs"), automotive manufacturers, and refineries. EM&T's own operations are supported by advanced recycling processes, proprietary automation, and artificial intelligence-enabled systems, allowing the Company to continue to operate at commercial scale using proven technologies and experienced operating personnel to support a sustainable future through efficient processing and the application of cutting edge robotics and artificial intelligence ("AI").
To achieve this vision, EM&T acquired Four Entities (as defined below) critical to the CMM supply chain in order to combine initial capabilities believed to serve as the foundation for the Company's growth - transforming raw materials into essential components for further manufacturing; recycling lithium batteries; producing materials that are essential feedstocks used in the production of advanced magnets, which include (a) bonded magnets that are vital components in various high-tech applications (including automotive, aerospace, and consumer electronics industries) and (b) sintered magnets that are crucial for high-performance applications (particularly in the defense and aerospace sectors where precision and durability are paramount); developing AI software and machines to drive automation, innovation, and efficiency to reduce labor costs, lower manufacturing reject rates, and automating the quality of control processes. The Operating Companies include Handa Lab Co., Ltd., a Korean company ("Handa Lab"), KCM Industry Co., Ltd., a Korean company ("KCM"), KMMI Inc., a Korean company ("KMMI"), and NS World Co., Ltd., a Korean company (collectively with Handa Lab, KCM and KMMI, the "Four Entities" or the "Korean Companies"). As a result of the acquisition of the Four Entities, the Company is expected to produce materials annually, including magnets and battery metals to meet the growing global demand driven by the electrification of transportation, the expansion of green energies, advancements in healthcare technologies, military and defense manufacturing, and consumer appliances, among others.
Recent Developments
Recent events impacting our business are as follows:
Jones Day Lawsuit
On April 23, 2026, Jones Day filed a complaint against Evolution Metals LLC ("EM"), a Delaware limited liability company and a wholly owned subsidiary of the Company, in the Superior Court of Fulton County, State of Georgia, Civil Action No. 26CV005969. The complaint alleges claims for breach of contract, account stated, open account and attorneys' fees arising from legal services allegedly provided by Jones Day to EM in connection with the Business Combination. Jones Day is seeking damages in the amount of approximately $3.9 million, plus prejudgment interest, attorneys' fees, costs and expenses of collection, and such other relief as the court deems appropriate. The Company is currently evaluating the complaint and has not yet filed a formal response. The Company intends to vigorously defend itself in this matter. At this time, the Company is unable to predict the ultimate outcome of the proceeding or reasonably estimate the amount of any potential loss, if any.
Securities Purchase Agreement, Convertible Debentures and Related Agreements
On May 7, 2026, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with YA II PN, LTD. ("Yorkville"), a fund managed by Yorkville Advisors Global, LP, pursuant to which the Company agreed to issue and sell to Yorkville convertible debentures in the aggregate principal amount of up to $100,000,000 (the "Convertible Debentures" and each a "Convertible Debenture"), which will be convertible into shares of the Company's common stock, par value $0.0001 per share (the "Common Stock," and as converted, the "Conversion Shares").
The first Convertible Debenture (the "First Debenture") in the principal amount of $20,000,000 was issued on May 7, 2026. The second Convertible Debenture in the principal amount of $5,775,000 was issued on July 14, 2026 upon effectiveness of a resale registration statement on Form S-1 on July 10, 2026. Additionally, pursuant to the Securities Purchase Agreement, up to $74,225,000 in Convertible Debentures shall be purchased in subsequent tranches from time to time upon the mutual agreement of the Company and Yorkville.
Subsequent to June 30, 2026, YA II PN, Ltd. ("Yorkville") converted portions of the Company's second convertible debenture, which was issued on July 14, 2026 in the original principal amount of $5.775 million. From July 29, 2026 through August 13, 2026, Yorkville converted an aggregate of $550,000 of principal and approximately $23,195 of accrued interest into an aggregate of 210,191 shares of the Company's common stock. The conversions were effected at conversion prices ranging from approximately $2.14 to $4.59 per share in accordance with the terms of the convertible debenture. Following these conversions, approximately $5.225 million of principal remained outstanding under the second convertible debenture.
Each Convertible Debentures will have a purchase price equal to 97% of principal amount thereunder. Each Convertible Debenture is convertible into Conversion Shares at a conversion price equal to the lower of $12.09 or 95% of the lowest daily volume-weighted average price ("VWAP") during the 5 consecutive trading days immediately preceding the conversion date. The Company shall not issue any Conversion Shares upon conversion of the Convertible Debentures held by Yorkville if the issuance of such Conversion Shares would exceed the aggregate number of Common Stock that the Company may issue in compliance with the Company's obligations under the rules or regulations of the Nasdaq Stock Market (the "Exchange Cap"). The Exchange Cap will not apply if the Company obtains the approval of its stockholders as required by the applicable rules of the Nasdaq Stock Market for issuances of Common Stock in excess of such amount. In addition, no conversion will be permitted to the extent that, after giving effect to such conversion, the holder together with the certain related parties would beneficially own in excess of 4.99% of the Common Stock outstanding immediately after giving effect to such conversion, subject to certain adjustments.
The First Debenture bears interest at an annual rate of 5.0%, unless an event of default occurs and remains uncured, upon which the Convertible Debentures will bear interest at an annual rate of 18.0%. The Convertible Debentures will mature on November 7, 2027.
The Company will not be required to make monthly cash payments pursuant to the Convertible Debentures unless an Amortization Event, as such term is defined below, has occurred and then the Company will make monthly cash payments each month until the entire outstanding amount under the Convertible Debentures have been repaid. An "Amortization Event" means (i) the VWAP of the Company's Common Stock is lower than the floor price for any five of seven consecutive trading days, (ii) the Company has issued in excess of 99% of the Common Stock available under the Exchange Cap or (iii) Yorkville is unable to use the Registration Statement, as such term is defined below, for a period of 10 consecutive trading days.
The monthly cash payments will be in an amount equal to 1/5 of the original principal amount (or the outstanding principal amount of the Convertible Debentures if lower than such amount), plus a payment premium of 5% and all accrued and unpaid interest as of the date of such payment. Such Amortization Event payments will commence 7 days following the Amortization Event. The Securities Purchase Agreement includes customary registration rights, investor protections, and provisions governing trading activity, including limitations on short selling. The Company intends to use the proceeds from the facility for general corporate purposes, including supporting the expansion of its operations and development initiatives.
On May 7, 2026, pursuant to the Securities Purchase Agreement, the Company and Yorkville entered into a Registration Rights Agreement (the "Registration Rights Agreement") pursuant to which Yorkville is entitled to certain registration rights under the Securities Act of 1933, as amended (the "Securities Act"). Pursuant to the Registration Rights Agreement, the Company was required to, on the 30th calendar day following the date of the Securities Purchase Agreement, file with the Securities and Exchange Commission a registration statement (the "Registration Statement") registering the resale by Yorkville of 5.4 million Conversion Shares. Under the Registration Rights Agreement, Yorkville was also granted piggyback registration rights under certain conditions as described in the Registration Rights Agreement.
On May 7, 2026, pursuant to the Securities Purchase Agreement, the Company and Yorkville entered into a Global Guarantee Agreement, pursuant to which, the Company and its subsidiaries agreed to guarantee all of the Company's obligations under the Convertible Debentures.
Equipment Supply Contracts
On May 13, 2026, EM entered into eight separate equipment supply contracts (collectively, the "Contracts" and each a "Contract") with ULVAC Korea, Ltd. ("ULVAC Korea") for the purchase of vacuum induction melting furnaces and continuous vacuum sintering furnaces. The equipment is intended for use in the Company's rare earth metal and rare earth permanent magnet production operations. A summary of the equipment to be supplied under the eight Contracts is set forth below:
| Contract No. | Equipment | Quantity | ||
| W20260330-001-01 | Vacuum Induction Melting Furnace (600 kg) - Magcaster-600C, with Karayaki-ro, Recovering Container Turning Device and Furnace Lining Turning Device | 2 sets | ||
| W20260330-003-01 | Vacuum Induction Melting Furnace (600 kg) - Magcaster-600C | 2 sets | ||
| W20260330-004-01 | Vacuum Induction Melting Furnace (50 kg) - FVI-50-SC | 2 sets | ||
| W20260330-005-01 | Continuous Vacuum Sintering Furnace - FSC-6150C-8 | 2 sets | ||
| W20260330-006-01 | Continuous Vacuum Sintering Furnace - FHH-6150C-6 | 2 sets | ||
| W20260330-007-01 | Vacuum Induction Melting Furnace (600 kg) - Magcaster-600C/A, with Karayaki-ro, Recovering Container Turning Device and Furnace Lining Turning Device | 1 set | ||
| W20260330-008-01 | Vacuum Induction Melting Furnace (600 kg) - Magcaster-600C/A | 1 set | ||
| W20260330-009-01 | Vacuum Induction Melting Furnace (50 kg) - FVI-50-SC/A | 1 set |
Material Terms
Delivery. Delivery is to be made on a DDP buyer final destination basis (Republic of Korea) no later than November 30, 2026. Delivery is to occur prior to completion of full installation and commissioning at the buyer's site.
Payment Structure. Each Contract provides for payment in four installments: a first installment due in May or July 2026; a second installment due in July or August 2026; a third installment due within five (5) days of shipment ex Dalian; and a final installment due within thirty (30) days of arrival at destination.
Performance Bond and Cargo Insurance. ULVAC Korea is required to procure, and to submit to EM LLC within twenty-four (24) hours after execution of each Contract, a performance guarantee insurance policy issued by Seoul Guarantee Insurance Co., Ltd. covering ULVAC Korea's delivery obligations. ULVAC Korea is also required, at its sole cost, to procure and maintain comprehensive inland, transit and marine cargo insurance covering the equipment from its facility through final delivery in the Republic of Korea.
Acceptance, Warranty and Late-Delivery Remedies. Shipment of the equipment is conditioned upon successful completion of a Factory Acceptance Test (FAT) in the presence of EM LLC and mutual agreement on the On-site Installation Inspection Test Plan (ITP). ULVAC Korea will deliver technical specifications, acceptance criteria, equipment drawings, testing reports and the ITP prior to or during the FAT. ULVAC Korea provides a one (1) year warranty on the equipment, running from completion of full commissioning and commencement of normal operation at the buyer's site. Late delivery (other than as a result of force majeure) is subject to a daily late-delivery penalty payable by ULVAC Korea, subject to a cap.
Cancellation, Force Majeure and Governing Law. EM LLC has the right to terminate any Contract for its convenience at any time prior to delivery upon written notice, subject to a tiered cancellation charge that scales with the number of weeks between ULVAC Korea's receipt of advance payment and the date of cancellation. Either party may terminate a Contract if a force majeure event continues for more than four (4) weeks. The Contracts are governed by the laws of the Republic of Korea, with disputes settled by arbitration in the Republic of Korea before the Korean Commercial Arbitration Board; the United Nations Convention on Contracts for the International Sale of Goods is expressly excluded.
Relationship. ULVAC Korea is not a related party to the Company or EM LLC. The Contracts were negotiated on arm's-length terms.
Nasdaq Delinquency Notice and Regained Compliance
On May 21, 2026, the Company received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC notifying the Company that as it had not yet filed its Quarterly Report on Form 10-Q for the period ended March 31, 2026 (the "Form 10-Q"), the Company no longer complied with Nasdaq Listing Rule 5250(c)(1). Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the SEC. The Company filed the Form 10-Q on May 22, 2026, thereby curing the deficiency described in the Notice. On May 26, 2026, the Company received notice from Nasdaq that the Company had regained compliance with Nasdaq Listing Rule 5250(c)(1) and that the matter is now closed.
Share Issuances to Advisors, Consultants and Marketing Service Providers
Subsequent to March 31, 2026, the Company entered into certain advisory, consulting, marketing and related services agreements and amendments pursuant to which the Company issued or agreed to issue an aggregate of 674,768 shares of its common stock, par value $0.0001 per share, of which 650,189 shares have been issued as of August 17, 2026, as compensation for services rendered or to be rendered to the Company. The shares include issuances or agreed issuances to certain advisors, consultants and marketing service providers, including for capital markets advisory services, shareholder base expansion and marketing services, and sourcing and origination services related to rare earth magnets and related critical materials derived from end-of-life electronic scrap components. The Company did not receive any cash proceeds from these issuances or agreed issuances. The shares have been or will be issued in exempt private transactions as compensation for services. The issuances were made, or are expected to be made, in reliance upon exemptions from the registration requirements of the Securities Act of 1933, as amended.
Agreement with Senri Trading Co., Ltd.
On May 29, 2026, the Company executed an agreement with Senri Trading Co., Ltd. ("Senri") to purchase bulk quantities of NdPr metal from SRE Vietnam ("SRE"), a wholly-owned subsidiary of Tokai Trading Co., Ltd. ("Tokai") in Japan. Obtained entirely from a non-China source, we believe that NdPr metal are essential in the Company's intended increase of magnet production to approximately 10,000 tons per annum of rare earth magnets in 2026. Tokai has been operating as a specialized trading company for rare earths and rare metals since its founding in 1981 and began investing in its wholly owned Vietnamese subsidiary, SRE, in 2008. As of January 2025, SRE began tripling its rare earth processing capacity of mid-stream materials to 3,929 metric tons per annum.
As of July 22, 2026, the Company has taken delivery of the first shipment of 4 metric tons of NdPr metals from SRE for the manufacture of high performance magnets that are compliant with new federal regulations requiring U.S. defense systems to exclude magnets that are sourced or originated from certain prohibited countries. The Company views this development as directly aligned with the Trump administration's July 20, 2026 Executive Order "Securing America's Defense Supply Chains and Ensuring Domestic Acquisition of Critical Materials", as well as with the existing January 1, 2027 DFARS 252.225-7052 sourcing deadline for rare earth permanent magnets in U.S. defense systems. The deliveries of compliant NdPr metal allows the Company produce high-performance magnets that are compliant with DFARS 252.225-7052. The initial delivery of five tons of NdPr metals is the first stage of an agreement for SRE to scale deliveries to support the Company's increased production capacity, expected to reach approximately 10,000 metric tons per annum by November 2026.
Under DFARS 252.225-7052, effective January 1, 2027, U.S. defense contractors will be prohibited from delivering to the Department of War rare earth magnets containing materials mined, refined, separated, melted, or produced in China, Russia, North Korea, or Iran. Because the People's Republic of China appropriates most of the world's NdPr metal, the majority of globally available magnet supply is expected to become non-compliant absent qualified ex-China feedstock and manufacturing. The July 20, 2026 Executive Order sharply tightens enforcement by ending routine waivers, requiring a formal mitigation plan for any exception, and eliminating the "non-availability" argument unless a contractor demonstrates active, adequately funded, and ongoing efforts to qualify a domestic or allied source. The Executive Order follows the Trump administration's January 2026 Section 232 Proclamation identifying rare earth permanent magnets as "vital to nearly all electronics and vehicles" and also follows the February 2026 launch of the $12 billion Project Vault critical minerals reserve.
Market Developments, Trends, and Uncertainties
Our business is affected by macroeconomic, geopolitical, regulatory, technological and industry-specific trends that impact demand for critical minerals and materials, the availability and cost of feedstock, customer purchasing decisions, financing availability and our ability to scale our operations. As a newly public company that completed the Business Combination on January 5, 2026, our historical results may not be indicative of future results, particularly as we integrate the Korean Companies, pursue additional financing, and seek to expand our midstream and downstream critical materials platform.
Demand for critical minerals and materials continues to be driven by the electrification of transportation, renewable energy infrastructure, defense and aerospace applications, industrial automation, consumer electronics and other advanced manufacturing applications. Many of these applications rely on materials and components such as rare earth oxides, rare earth metals and alloys, bonded magnets, sintered magnets, battery materials, precious metals and base metals. We believe these demand drivers create long-term market opportunities for companies with capabilities across recycling, processing, refining and downstream manufacturing. However, demand in these markets may fluctuate based on customer production schedules, capital spending cycles, commodity prices, electric vehicle adoption rates, defense procurement priorities, interest rates, tariffs, trade restrictions and broader macroeconomic conditions.
The global supply chain for rare earth elements, battery materials, permanent magnets and other critical materials remains highly concentrated in Asia, particularly in China. This concentration has increased customer, governmental and industry focus on developing alternative, secure and geographically diversified supply chains. Geopolitical tensions, export controls, tariffs, sanctions, industrial policy initiatives and national security considerations may increase demand for U.S.-aligned and non-China sources of critical materials and related products. At the same time, these factors may also increase operating complexity, affect the availability or cost of feedstock and equipment, create uncertainty in customer procurement decisions, and require us to invest significant capital before realizing commercial benefits.
We believe recycling and "urban mining" represent an increasingly important source of critical materials supply. End-of-life batteries, electronic devices, motors, magnets and other materials contain valuable metals and materials that can be recovered, processed and reused in new manufacturing. The ability to convert these end-of-life materials into commercially usable outputs may reduce reliance on primary mining, shorten supply chains, support sustainability objectives and provide customers with alternative sources of supply. However, the recycling market remains subject to uncertainties, including variability in feedstock availability, feedstock composition, collection economics, transportation and handling costs, regulatory requirements, customer qualification timelines and the technical complexity of producing materials that meet customer specifications.
Our operating results will also be affected by our ability to integrate and scale the Korean Companies acquired in connection with the Business Combination. These companies provide the Company with initial capabilities in magnet-related materials, bonded and sintered magnets, and automation and AI-enabled manufacturing systems. We expect the integration of these businesses to require substantial management attention, working capital and capital expenditures. Our ability to realize the anticipated benefits of the Business Combination will depend on, among other things, our ability to coordinate operations across jurisdictions, retain key personnel, maintain customer and supplier relationships, improve capacity utilization, execute expansion plans, implement consistent financial reporting and internal control processes, and secure additional financing on acceptable terms.
Because our growth strategy is capital intensive, our future performance will depend significantly on our ability to raise additional capital. We expect to require substantial funding to support working capital, public company costs, integration activities, capital expenditures, equipment purchases, facility expansion, research and development, customer qualification processes and potential future acquisitions. If we are unable to obtain financing on acceptable terms or at all, we may be required to delay, reduce or abandon certain expansion plans, which could materially and adversely affect our business, financial condition and results of operations. In addition, financing transactions may result in dilution to existing stockholders, increased leverage, restrictive covenants or other terms that could adversely affect our business.
Our results may also be affected by changes in commodity prices, foreign currency exchange rates and interest rates. Many of our products and feedstocks are linked directly or indirectly to the market prices of metals and critical materials, which may be volatile. Changes in these prices may affect revenue, gross margin, inventory valuation, customer demand and supplier economics. In addition, because a significant portion of our current operations is conducted in Korea, fluctuations between the Korean won and the U.S. dollar may affect our reported results, cash flows and financial position. Rising interest rates or constrained credit markets may also increase the cost of capital and reduce the availability of financing for us and our customers.
As a result of becoming a public company, we expect to incur additional costs, including costs related to financial reporting, legal and accounting compliance, internal control development, investor relations, insurance and governance matters. We also expect that certain non-cash and non-operating items may continue to affect our reported results, including fair value changes in financial instruments, credit loss provisions, foreign currency gains and losses, and changes in liabilities related to dissenting shareholder appraisal rights. These items may cause significant period-to-period volatility and may not directly reflect the underlying operating performance of our business.
Given these factors, our near-term results may be difficult to predict and may vary significantly from period to period. We are still in the early stages of operating as a combined public company, and our ability to achieve our business plan will depend on the successful integration of the acquired businesses, access to capital, development of customer relationships, execution of expansion initiatives, stability of supply chains and broader market acceptance of our products and technologies.
Key Factors Affecting our Performance
Our results of operations, financial condition and cash flows are affected by a number of factors, including those described below. As a result of the Business Combination completed on January 5, 2026, our historical results may not be comparable to our future results, and our operating results may vary significantly from period to period as we integrate the Korean Companies, operate as a public company, pursue financing and execute our growth strategy.
Ability to Obtain Additional Financing
Our business plan is capital intensive and depends significantly on our ability to obtain additional financing on acceptable terms. We expect to require substantial capital to fund working capital needs, public company costs, integration activities, equipment purchases, facility upgrades, customer qualification processes, research and development, expansion projects and potential future acquisitions. Our ability to raise capital may be affected by market conditions, investor demand, interest rates, our operating performance, regulatory developments and broader macroeconomic factors. If we are unable to obtain sufficient financing when needed, or if financing is available only on unfavorable terms, we may be required to delay, reduce or abandon certain business initiatives, which could materially and adversely affect our business, financial condition and results of operations.
Integration of the Korean Companies
Our future performance will depend in part on our ability to successfully integrate Handa Lab, KCM, KMMI and NS World following the Business Combination. The integration process requires management attention and may involve operational, financial, legal, tax, accounting, human resources, information technology, reporting and internal control matters. Our ability to realize the anticipated benefits of the Business Combination will depend on, among other things, our ability to retain key personnel, coordinate operations across jurisdictions, maintain customer and supplier relationships, implement consistent financial reporting and internal control processes, align strategic priorities and manage working capital requirements. Any delays or difficulties in integration could adversely affect our operating results and delay our ability to execute our growth strategy.
Capacity Utilization and Production Ramp-Up
Our revenues and margins are expected to be affected by the timing and pace at which we utilize and expand our production capacity. Certain of our acquired operations are expected to require additional capital investment, equipment purchases, facility improvements, process optimization, customer qualification and working capital before reaching targeted operating levels. Our ability to increase production volumes and improve operating efficiency will depend on the availability of equipment, skilled labor, raw materials and feedstock, as well as our ability to implement automation and quality control processes. Delays in ramping production or lower-than-expected capacity utilization may result in lower revenue, reduced gross margin and higher unit costs.
Customer Demand and Qualification
Our products are intended to serve customers in industries such as automotive, aerospace, defense, electronics, industrial manufacturing, gigafactories, OEMs and refineries. Sales into these markets may require customer qualification, testing, technical validation, sample production, commercial negotiation and, in certain cases, regulatory or customer-specific approval processes. The timing and success of customer qualification may affect when we are able to convert commercial opportunities into revenue. Demand for our products may also be affected by end-market conditions, customer production schedules, procurement policies, commodity prices, geopolitical considerations and customer efforts to diversify supply chains away from concentrated sources of critical materials.
Availability and Cost of Feedstock and Raw Materials
Our operations depend on the availability, quality and cost of feedstock and raw materials, including end-of-life materials, magnet-related materials, electronic scrap, batteries, metals and other critical materials. Feedstock availability may fluctuate based on collection economics, competition, regulatory requirements, transportation costs, commodity prices and supplier relationships. Variability in feedstock composition may also affect processing yields, production costs and product quality. If we are unable to secure sufficient feedstock or raw materials on commercially acceptable terms, our ability to operate and scale our business may be adversely affected.
Commodity Price Volatility
Many of our products and feedstocks are exposed directly or indirectly to the market prices of critical materials, rare earth elements, battery materials, precious metals and base metals. These prices may be volatile and may be affected by supply and demand dynamics, geopolitical developments, trade restrictions, tariffs, currency movements, energy prices, inventory levels and macroeconomic conditions. Changes in commodity prices may affect our revenue, cost of sales, gross margin, inventory values and customer demand. In periods of significant price volatility, our results of operations may fluctuate even if production volumes remain stable.
Foreign Currency Exposure
A significant portion of our current operating activities is conducted in Korea, while our reporting currency is the U.S. dollar. Accordingly, our results of operations, financial position and cash flows may be affected by fluctuations in exchange rates, particularly between the Korean won and the U.S. dollar. Foreign currency fluctuations may affect the translated value of our revenues, expenses, assets and liabilities, as well as the cost of imported equipment, materials and services. We may also be exposed to transaction gains and losses on monetary assets and liabilities denominated in currencies other than the applicable functional currency.
Public Company Costs and Compliance Requirements
Following the Business Combination, we became subject to the reporting, governance, internal control and compliance requirements applicable to public companies. We expect to incur additional expenses related to financial reporting, legal and accounting services, audit and review procedures, investor relations, directors' and officers' insurance, board and committee matters, internal controls and other public company infrastructure. These costs may be significant, particularly in the periods immediately following the Business Combination, and may adversely affect our near-term results of operations.
Non-Cash and Non-Operating Items
Our reported results may be affected by non-cash and non-operating items that may not directly reflect the underlying performance of our operating businesses. These items may include changes in fair value of financial instruments, credit loss provisions, foreign currency gains and losses, interest expense, and changes in liabilities related to dissenting shareholder appraisal rights. These items may cause significant period-to-period volatility in our results of operations and may make it more difficult to compare our operating performance across periods.
Regulatory, Trade and Geopolitical Developments
Our business is affected by regulatory, trade and geopolitical developments relating to critical minerals and materials, rare earth elements, battery materials, recycling, environmental regulation, national security, export controls, tariffs and industrial policy. Government policies that support domestic or allied critical materials supply chains may create opportunities for our business. However, changes in laws, regulations, trade restrictions, permitting requirements, tariffs, sanctions or export controls may also increase costs, restrict supply chains, delay customer decisions or otherwise adversely affect our operations. Because our business involves operations and supply chains across multiple jurisdictions, we may be affected by regulatory and political developments in the United States, Korea and other markets in which we source materials, operate or sell products.
Factors Affecting the Comparability of our Results
Our historical results of operations may not be comparable to our future results of operations, and our results for the six months ended June 30, 2026 may not be comparable to the six months ended June 30, 2025, primarily due to the consummation of the Business Combination, the acquisition of the Korean operating companies, the inclusion of post-combination public company costs, changes in the fair value of financial instruments, and the Company's change in tax status, as described below.
Expenses Associated with the Business Combination
On January 5, 2026, the Company consummated the Business Combination. In connection with the Business Combination, the Company incurred significant transaction-related, professional, accounting, legal, valuation, advisory, public company readiness and other corporate costs. In addition, the Company recognized significant non-cash losses from changes in the fair value of financial instruments, including the July Investment Agreement derivative and CPU Share Allocation Obligations. These fair value changes and transaction-related costs materially affected the Company's results of operations for the six months ended June 30, 2026 and may limit comparability to prior periods.
Acquisitions
As part of the consummation of the Business Combination, the Company acquired controlling interests in the Korean operating companies. As a result, the Company's results of operations for the six months ended June 30, 2026 include revenues, cost of sales, operating expenses, assets and liabilities of the Korean operating companies following the acquisition date, while the comparable prior-year period primarily reflects the historical results of EM LLC before the acquisition of such operating businesses. Accordingly, the Company's results of operations for the periods presented are not directly comparable. The Company may continue to pursue acquisitions as part of its growth strategy, which could further affect comparability of future periods.
Income Taxes
Following the Business Combination, EM&T is subject to U.S. federal and state income taxes as a corporation. EM LLC, the accounting predecessor, was treated as a pass-through entity for U.S. federal income tax purposes and was generally not subject to U.S. federal income tax at the entity level. In addition, following the acquisition of the Korean operating companies, the Company is subject to income taxes in Korea. As a result, the Company's income tax expense and effective tax rate for periods following the Business Combination may not be comparable to historical periods prior to the Business Combination.
Our future results of operations may not be comparable to the historical results of operations for the periods presented.
Business Segments
We operate our business through a single operating and reportable segment focused on rare earth magnet-related products and technologies. Following the Business Combination, our current operating activities are primarily conducted through the Korean Companies, with our near-term operating focus on rare earth magnet-related products and technologies. As our broader critical materials platform develops, including e-scrap recycling, battery recycling and related metals recovery activities, we expect to continue evaluating our segment presentation based on the manner in which management reviews operating results, allocates resources and assesses performance.
Our operating activities consist of the production and development of rare earth magnet materials and finished magnet products. These activities include rare earth metals, rare earth alloys, sintered magnets and bonded magnets. These products are used, or are expected to be used, in a range of high-performance and industrial applications, including automotive, aerospace, defense, industrial automation, consumer electronics and other advanced manufacturing end markets.
Our current operating business following the acquisition of the Korean Companies supports the Company's strategy to participate across the rare earth magnet supply chain, from magnet-related materials and alloy production to bonded and sintered magnet manufacturing. Over time, the Company intends to expand these rare earth magnet-related operations beyond Korea, including through the development of a U.S. industrial campus designed to replicate and scale the Company's Korean commercial capabilities in the United States. The planned U.S. expansion is expected to support the Company's broader strategy of establishing a secure, reliable and U.S.-aligned supply chain for rare earth magnet materials and finished magnet products.
Our operating performance is affected by, among other things, customer demand, capacity utilization, production yields, availability and pricing of rare earth materials, customer qualification timelines, foreign currency movements, labor and energy costs, access to growth capital, timing of facility expansion, and our ability to expand production capacity and improve operating efficiency.
Components of Results of Operations
Revenues
The Company derives revenue from manufacturing and selling magnet and magnet materials. The Company recognizes revenue when it satisfies performance obligations under the terms of its contracts, and control of its products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products.
Cost of sales
Cost of sales represent all direct and indirect costs associated with the manufacture of our products. Cost of goods sold consists primarily of direct costs associated with inventory and delivery of the Company's goods, including freight costs. Cost of sales also includes inventory impairment, allocated personnel-related expenses and allocated facilities and overhead costs.
Selling, general and administrative expenses
Selling, general and administrative expenses consist of corporate service functions such as finance, legal, human resources and information technology expenses, as well as rent, utilities, depreciation, amortization and insurance costs.
Interest expense (income), net
Interest expense (income), net consists primarily of interest incurred on the Company's debt obligations, including short-term debt, related-party debt, long-term debt, and assumed obligations in connection with the Business Combination, offset by interest earned on the Company's notes receivable and other non-trade receivables, including related-party receivables.
Provision for credit losses
Provision for credit losses primarily consists of expected credit losses recognized on the Company's financial assets, including notes receivable and other receivables.
Change in fair value of financial instruments
Change in fair value of financial instruments primarily consists of non-cash changes in the fair value of the Company's financial instruments that are measured at fair value each reporting period.
Other expense (income)
Other expense (income) primarily consists of miscellaneous income and expense, amortization of accumulated actuarial loss, gain or loss on disposal of tangible assets, foreign currency transaction gains or losses, and other non-operating items.
Income taxes
Income taxes consist of current and deferred income tax expense or benefit recognized in the applicable period.
Results of Operations
The following table summarizes our results of operations for the following periods (dollars in thousands):
Three Months Ended June 30, 2026
| 2026 | 2025 | $ Change | % Change | |||||||||||||
| Revenues | $ | 1,636 | $ | - | $ | 1,636 | NM | |||||||||
| Cost of sales | (1,751 | ) | - | (1,751 | ) | NM | ||||||||||
| Gross loss | (115 | ) | - | (115 | ) | NM | ||||||||||
| Selling, general and administrative | (12,072 | ) | (2,900 | ) | (9,172 | ) | 316.3 | % | ||||||||
| Operating loss | (12,187 | ) | (2,900 | ) | (9,287 | ) | 320.2 | % | ||||||||
| Interest (expense) income, net | (821 | ) | 525 | (1,346 | ) | 256.4 | % | |||||||||
| Other expense, net | (124 | ) | - | (124 | ) | NM | ||||||||||
| Provision for credit losses | - | (5,059 | ) | 5,059 | 100.0 | % | ||||||||||
| Change in fair value of financial instruments | 1,671 | (33,457 | ) | 35,128 | 105.0 | % | ||||||||||
| Loss on foreign currency | (500 | ) | - | (500 | ) | NM | ||||||||||
| Loss before income taxes | (11,961 | ) | (40,891 | ) | 28,930 | 70.7 | % | |||||||||
| Income tax benefit | 51 | - | 51 | NM | ||||||||||||
| Net loss | $ | (11,910 | ) | $ | (40,891 | ) | $ | 28,981 | 70.9 | % | ||||||
Six Months Ended June 30, 2026
| 2026 | 2025 | $ Change | % Change | |||||||||||||
| Revenues | $ | 3,515 | $ | - | $ | 3,515 | NM | |||||||||
| Cost of sales | (3,186 | ) | - | (3,186 | ) | NM | ||||||||||
| Gross profit | 329 | - | 329 | NM | ||||||||||||
| Selling, general and administrative | (28,171 | ) | (5,702 | ) | (22,469 | ) | 394.1 | % | ||||||||
| Operating loss | (27,842 | ) | (5,702 | ) | (22,140 | ) | 388.3 | % | ||||||||
| Interest (expense) income, net | (1,526 | ) | 1,019 | (2,545 | ) | 249.8 | % | |||||||||
| Other income, net | 1,171 | 250 | 921 | 368.4 | % | |||||||||||
| Provision for credit losses | - | (5,529 | ) | 5,529 | 100.0 | % | ||||||||||
| Change in fair value of financial instruments | (423,556 | ) | (48,925 | ) | (374,631 | ) | 765.7 | % | ||||||||
| Loss on foreign currency | (521 | ) | - | (521 | ) | NM | ||||||||||
| Loss before income taxes | (452,274 | ) | (58,887 | ) | (393,387 | ) | 668.0 | % | ||||||||
| Income tax benefit | 51 | - | 51 | NM | ||||||||||||
| Net loss | $ | (452,223 | ) | $ | (58,887 | ) | $ | (393,336 | ) | 668.0 | % | |||||
Revenues
Three Months Ended June 30, 2026 and 2025
Revenues were $1.6 million for the three months ended June 30, 2026, compared to $0 for the three months ended June 30, 2025, representing an increase of $1.6 million. The percentage change is not meaningful because the Company did not generate revenues during the prior-year period. The increase was primarily due to the Company's acquisition of the Korean operating companies in connection with the Business Combination, which resulted in the Company recognizing product sales generated in Korea during the three months ended June 30, 2026.
Six Months Ended June 30, 2026 and 2025
Revenues were $3.5 million for the six months ended June 30, 2026, compared to $0 for the six months ended June 30, 2025, representing an increase of $3.5 million. The percentage change is not meaningful because the Company did not generate revenues during the prior-year period. The increase was primarily due to the Company's acquisition of the Korean operating companies in connection with the Business Combination, which resulted in the Company recognizing product sales generated in Korea during the six months ended June 30, 2026.
Cost of sales
Three Months Ended June 30, 2026 and 2025
Cost of sales was $1.8 million for the three months ended June 30, 2026, compared to $0 for the three months ended June 30, 2025, representing an increase of $1.8 million. The percentage change is not meaningful because the Company did not incur cost of sales during the prior-year period. The increase was primarily attributable to the commencement of revenue-generating product sales activities through the Korean operating companies acquired in connection with the Business Combination.
Six Months Ended June 30, 2026 and 2025
Cost of sales was $3.2 million for the six months ended June 30, 2026, compared to $0 for the six months ended June 30, 2025, representing an increase of $3.2 million. The percentage change is not meaningful because the Company did not incur cost of sales during the prior-year period. The increase was primarily attributable to the commencement of revenue-generating product sales activities through the Korean operating companies acquired in connection with the Business Combination.
Selling, general and administrative expenses
Three Months Ended June 30, 2026 and 2025
Selling, general and administrative expenses were $12.1 million for the three months ended June 30, 2026, compared to $2.9 million for the three months ended June 30, 2025, representing an increase of $9.2 million, or 316.3%. The increase was primarily due to higher corporate, professional, transaction-related and public company costs incurred in connection with the Business Combination and post-combination operations, together with the inclusion of selling, general and administrative expenses of the Korean operating companies acquired in connection with the Business Combination.
Six Months Ended June 30, 2026 and 2025
Selling, general and administrative expenses were $28.2 million for the six months ended June 30, 2026, compared to $5.7 million for the six months ended June 30, 2025, representing an increase of $22.5 million, or 394.1%. The increase was primarily due to higher corporate, professional, transaction-related and public company costs incurred in connection with the Business Combination and post-combination operations, together with the inclusion of selling, general and administrative expenses of the Korean operating companies acquired in connection with the Business Combination.
Operating loss
Three Months Ended June 30, 2026 and 2025
Operating loss was $12.2 million for the three months ended June 30, 2026, compared to $2.9 million for the three months ended June 30, 2025, representing an increase in operating loss of $9.3 million, or 320.2%. The increase was primarily attributable to the increase in selling, general and administrative expenses discussed above, together with a gross loss of approximately $0.1 million recognized during the three months ended June 30, 2026.
Six Months Ended June 30, 2026 and 2025
Operating loss was $27.8 million for the six months ended June 30, 2026, compared to $5.7 million for the six months ended June 30, 2025, representing an increase in operating loss of $22.1 million, or 388.3%. The increase was primarily attributable to the increase in selling, general and administrative expenses discussed above, partially offset by gross profit of approximately $0.3 million generated by the Korean operating companies during the six months ended June 30, 2026.
Other non-operating income and losses, net
Three Months Ended June 30, 2026 and 2025
Other non-operating income, net was $0.2 million for the three months ended June 30, 2026, compared to other non-operating loss, net of $38.0 million for the three months ended June 30, 2025, representing an improvement of approximately $38.2 million, or 100.6%. The improvement was primarily attributable to a $1.7 million gain from the change in fair value of financial instruments during the three months ended June 30, 2026, compared to a $33.5 million loss from the change in fair value of financial instruments and a $5.1 million provision for credit losses during the three months ended June 30, 2025. The improvement was partially offset by $0.8 million of net interest expense and a $0.5 million foreign currency loss during the three months ended June 30, 2026.
Six Months Ended June 30, 2026 and 2025
Other non-operating loss, net was $424.4 million for the six months ended June 30, 2026, compared to $53.2 million for the six months ended June 30, 2025, representing an increase in loss of approximately $371.2 million, or 698.0%. The increase was primarily attributable to a $423.6 million loss from changes in the fair value of financial instruments during the six months ended June 30, 2026, primarily associated with the July Investment Agreement Derivative and the CPU Share Allocation Obligations, compared to a $48.9 million loss from changes in the fair value of financial instruments during the six months ended June 30, 2025. The increase was also affected by $1.5 million of net interest expense and a $0.5 million foreign currency loss during the six months ended June 30, 2026, compared to $1.0 million of net interest income and no foreign currency loss during the six months ended June 30, 2025. These unfavorable changes were partially offset by the absence of the $5.5 million provision for credit losses recognized during the six months ended June 30, 2025.
Income tax benefit
Three Months Ended June 30, 2026 and 2025
The Company recognized an income tax benefit of approximately $0.1 million for the three months ended June 30, 2026, compared to no income tax expense or benefit for the three months ended June 30, 2025, representing an increase in income tax benefit of approximately $0.1 million. The percentage change is not meaningful because no income tax expense or benefit was recognized during the prior-year period.
Six Months Ended June 30, 2026 and 2025
The Company recognized an income tax benefit of approximately $0.1 million for the six months ended June 30, 2026, compared to no income tax expense or benefit for the six months ended June 30, 2025, representing an increase in income tax benefit of approximately $0.1 million. The percentage change is not meaningful because no income tax expense or benefit was recognized during the prior-year period.
Segment Results of Operations
The Company operates as a single operating and reportable segment. Accordingly, the Company's segment revenue and gross profit (loss) are the same as the corresponding consolidated amounts presented above.
Three Months Ended June 30, 2026 and 2025
| in thousands | 2026 | 2025 | Change ($) | Change (%) | ||||||||||||
| Revenue | $ | 1,636 | $ | - | $ | 1,636 | NM | |||||||||
| Gross profit (loss) | $ | (115 | ) | $ | - | $ | (115 | ) | NM | |||||||
For the three months ended June 30, 2026, segment revenue was $1.6 million, compared to $0 for the three months ended June 30, 2025, representing an increase of $1.6 million. The percentage change is not meaningful because the Company did not generate revenue in the prior-year period. The increase was primarily attributable to the inclusion of the Korean operating companies acquired in connection with the Business Combination.
The Company reported a segment gross loss of $0.1 million for the three months ended June 30, 2026, compared to no gross profit or loss for the three months ended June 30, 2025. The gross loss resulted from cost of sales of approximately $1.8 million exceeding revenue of approximately $1.6 million during the period.
Six Months Ended June 30, 2026 and 2025
| in thousands | 2026 | 2025 | Change ($) | Change (%) | ||||||||||||
| Revenue | $ | 3,515 | $ | - | $ | 3,515 | NM | |||||||||
| Gross profit (loss) | $ | 329 | $ | - | $ | 329 | NM | |||||||||
For the six months ended June 30, 2026, segment revenue was $3.5 million, compared to $0 for the six months ended June 30, 2025, representing an increase of $3.5 million. The percentage change is not meaningful because the Company did not generate revenue in the prior-year period. The increase was primarily attributable to the inclusion of the Korean operating companies acquired in connection with the Business Combination.
The Company reported segment gross profit of $0.3 million for the six months ended June 30, 2026, compared to no gross profit or loss for the six months ended June 30, 2025. Gross profit for the 2026 period reflected revenue of approximately $3.5 million, partially offset by cost of sales of approximately $3.2 million.
Liquidity and Going Concern
Overview
Following the completion of the Business Combination on January 5, 2026, the Company is focused on integrating and scaling the operations of its acquired Korean operating companies and executing its broader growth strategy. The Company's current and future capital requirements are expected to include funding for working capital, feedstock and raw material purchases, capital expenditures, equipment purchases, integration activities, facility expansion, public company costs and other operating and strategic initiatives. The Company expects that additional financing will be required to support these activities and its planned growth. While there can be no assurances, the Company intends to seek additional capital through equity, debt, strategic financing or other financing arrangements. The Company may not be able to raise additional capital on terms acceptable to it or at all. If the Company is unable to obtain sufficient financing when needed, it may be required to delay, reduce or abandon certain operating or expansion initiatives, which could materially and adversely affect its business, results of operations and financial condition.
Historically, the Company's primary sources of liquidity have included proceeds from the issuance of convertible preferred units and, more recently, debt financing, including the issuance of convertible debentures. The Company reported a net loss of $452.2 million for the six months ended June 30, 2026. As of June 30, 2026, the Company had an aggregate cash balance of $5.3 million and a net working capital deficit of $78.8 million. These are indicators of substantial doubt as to the Company's ability to continue as a going concern for at least one year from issuance of the unaudited condensed consolidated financial statements. The Company's ability to continue as a going concern is dependent upon its ability to manage operating expenditures, fund its working capital and other obligations, obtain additional financing when needed and improve the operating performance of its businesses.
As a result of the above, in connection with the Company's assessment of going concern considerations in accordance with ASC 205-40, "Presentation of Financial Statements-Going Concern," management has determined that the Company's liquidity condition raises substantial doubt about the Company's ability to continue as a going concern through twelve months from the date the unaudited condensed consolidated financial statements were available to be issued. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Sources of Liquidity
In assessing liquidity, we monitor and analyze cash on-hand and operating expenditure commitments. Our business is capital intensive and requires substantial expenditure for, among other things, the purchase and maintenance of equipment used in our operations, and to remain in compliance with environmental laws. Our short-term and long-term liquidity needs arise primarily from working capital requirements, capital expenditures, including expansion projects and principal and interest payments related to our outstanding indebtedness. Our liquidity as of June 30, 2026, and December 31, 2025, is as follows (dollars in thousands):
|
June 30, 2026 |
December 31, 2025 | |||||||
| Cash and cash equivalents | $ | 5,254 | $ | 11,685 | ||||
| Restricted cash included in cash and cash equivalents | $ | 33 | - | |||||
| Working capital deficit, excluding cash, cash equivalents and restricted cash | $ | (84,022 | ) | $ | (675,818 | ) | ||
| Accumulated deficit | $ | (1,131,031 | ) | $ | (678,807 | ) | ||
Restricted cash was $33 thousand as of June 30, 2026 and December 31, 2025. The Company's total working capital deficit, including cash and cash equivalents, was $78.8 million as of June 30, 2026.
The Business Combination did not include significant external financing at closing, and management is actively pursuing additional sources of capital, including equity and strategic financing arrangements, to support the Company's operations and growth initiatives.
The Business Combination provided the Company with access to the public capital markets and established EM&T as a Nasdaq-listed public company. However, the transaction did not result in significant cash proceeds at closing. Accordingly, our liquidity following the Business Combination continues to depend on our ability to manage operating expenditures, fund working capital needs, service existing indebtedness, and raise additional capital through equity, debt, strategic financing or other arrangements. There can be no assurance that such financing will be available on acceptable terms, or at all.
On May 7, 2026, the Company entered into a Securities Purchase Agreement with YA II PN, Ltd., a fund managed by Yorkville Advisors Global, LP, pursuant to which the Company agreed to issue and sell convertible debentures in an aggregate principal amount of up to $100.0 million. The Company issued the first convertible debenture in the principal amount of $20.0 million on May 7, 2026. A second convertible debenture in the principal amount of $5,775,000 was issued upon effectiveness of a resale registration statement on Form S-1 on July 10, 2026, and up to an additional $74.2 million in convertible debentures may be purchased in subsequent tranches from time to time upon the mutual agreement of the Company and Yorkville.
On May 13, 2026, the Company entered into binding purchase orders with ULVAC Korea, Ltd., a subsidiary of ULVAC, Inc., for the purchase of thirteen high-performance rare earth sintered magnet manufacturing machines.
On May 29, 2026, the Company entered into an agreement with Senri Trading Co., Ltd. ("Senri") to purchase bulk quantities of NdPr metal supplied by SRE Vietnam ("SRE"), a wholly owned subsidiary of Tokai Trading Co., Ltd. The agreement is intended to provide the Company with a non-China source of NdPr metal to support the planned expansion of its rare earth magnet production. Subsequent to June 30, 2026, the Company received an initial shipment of 4 metric tons of NdPr metal from SRE on July 22, 2026. As deliveries under the agreement scale in connection with the Company's planned production expansion, purchases of NdPr metal are expected to require additional working capital and therefore represent an additional consideration in the Company's ongoing liquidity and capital requirements.
In May and June 2026, NS World extended four existing IBK loan facilities totaling KRW 1.044 billion. Three facilities totaling KRW 644 million were extended on May 22, 2026 and one facility totaling KRW 400 million was extended on June 5, 2026, with maturities extended through May and June 2027, respectively.
Cash flows
The following table summarizes our cash flows from operating, investing and financing activities for the following periods (dollars in thousands):
|
Six Months Ended June 30, 2026 |
Six Months Ended June 30, 2025 |
Change ($) |
Change (%) |
|||||||||||||
| Net cash used in operating activities | $ | (14,818 | ) | $ | (4,462 | ) | $ | (10,356 | ) | 232.1 | % | |||||
| Net cash used in investing activities | (7,365 | ) | (561 | ) | (6,804 | ) | 1,212.8 | % | ||||||||
| Net cash provided by financing activities | 16,443 | 4,022 | 12,421 | 308.8 | % | |||||||||||
| Net decrease in cash and cash equivalents and restricted cash (1) | $ | (6,432 | ) | $ | (1,001 | ) | $ | (5,431 | ) | 542.6 | % | |||||
| (1) | June 30, 2026 figures includes immaterial effect of exchange rate changes on cash and cash equivalents, and restricted cash |
Net cash flows used in operating activities
For the six months ended June 30, 2026, net cash used in operating activities was $14.8 million, as compared to $4.5 million for the six months ended June 30, 2025, representing an increase in cash used in operating activities of $10.3 million. The increase was primarily attributable to higher operating expenditures following the Business Combination and the inclusion of the Korean operating companies, together with changes in operating assets and liabilities. The Company's $452.2 million net loss for the six months ended June 30, 2026 included substantial non-cash fair value adjustments, including $190.5 million and $234.7 million of losses related to changes in the fair value of the CPU Share Allocation Obligations and July Investment Agreement Derivative, respectively, partially offset by a $1.7 million gain from the change in fair value of the convertible debentures. Accordingly, these fair value changes did not result in corresponding operating cash outflows during the period.
Net cash flows used in investing activities
For the six months ended June 30, 2026, net cash used in investing activities was $7.4 million, as compared to net cash used in investing activities of $0.6 million for the six months ended June 30, 2025, representing an increase in cash used in investing activities of approximately $6.8 million. The increase in cash used in investing activities was primarily attributable to $7.7 million of purchases of property, plant and equipment, $0.7 million of issuances of notes receivable, and $0.4 million of payments related to the acquisition of a business during the six months ended June 30, 2026, partially offset by $1.4 million of net cash acquired in connection with the Business Combination. During the six months ended June 30, 2025, investing cash flows primarily consisted of $0.8 million of issuances of notes receivable, partially offset by $0.2 million of proceeds from notes receivable.
Net cash flows provided by financing activities
For the six months ended June 30, 2026, net cash provided by financing activities was $16.4 million, as compared to $4.0 million for the six months ended June 30, 2025, representing an increase of $12.4 million. Financing cash inflows during the six months ended June 30, 2026 primarily included $19.4 million of proceeds from issuance of the convertible debentures and $1.7 million of proceeds from short-term debt. These inflows were partially offset by $1.4 million of repayments of short-term debt, $0.6 million of repayments of the current portion of long-term debt, $1.4 million of constructive disbursements to a related party, $0.9 million of payments for appraisal rights, $0.4 million of repayments of short-term debt to the Sponsor, and other financing-related payments. During the six months ended June 30, 2025, financing activities included $7.1 million of proceeds from the issuance of convertible preferred units.
Dissenting Shareholder Appraisal Rights
In connection with the share exchange transactions contemplated by the share exchange agreements dated February 10, 2025, as amended (collectively, the "Agreements"), by and among the Company, EMT Sub Co. Ltd ("EMT Sub"), and the other operating companies party thereto, shareholders who formally dissented at the general meeting of shareholders held to approve the share exchange (the "Share Exchange EGM") were granted statutory appraisal rights under the Korean Commercial Code (the "Appraisal Rights").
Pursuant to the Agreements, dissenting shareholders may obtain the Appraisal Rights by delivering to the Company, within 20 days from the date of the Share Exchange EGM, a written notice identifying the class and number of shares for which appraisal rights are elected (the "Appraisal Shares"). Upon receipt of valid notice, the Company is contingently required to repurchase the Appraisal Shares within two (2) months, provided the Share Exchange remains in effect and the dissenting shareholder does not withdraw its notice (by mutual agreement with the Company), after which any unpaid amount will begin to accrue interest at a statutorily dictated 6% interest rate per annum. The repurchase price for Appraisal Shares is determined by mutual agreement between the Company and the applicable dissenting shareholder through the Agreements.
Management accounts for these appraisal rights as a liability under ASC 480 measured at fair value, with changes recognized in earnings, until the obligation becomes unconditional at merger close. In January 2026, the Company completed the Business Combinations. This event legally obligates the Company to repurchase the Appraisal Shares in accordance with the terms above. The payment amount was approximately $48.2 million as of the closing of the share exchange transaction and continues to accrue statutory interest until the actual payment date. Because the appraisal rights obligation is denominated in Korean Won, the U.S. dollar carrying amount of the liability is affected by changes in the USD/KRW exchange rate. As a result of changes in the exchange rate between the closing date and June 30, 2026, the U.S. dollar-equivalent carrying amount of the liability decreased from the initial obligation amount. As of June 30, 2026, a liability of $45.1 million was recorded in non-trade accounts payable on the condensed consolidated balance sheets.
Contractual Obligations
The following table presents a summary of our contractual obligations, including payments due by period, as of June 30, 2026 (in thousands):
| 2026(3) | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||
| Operating lease(1) | $ | 2 | $ | 10 | $ | 1 | $ | - | $ | - | $ | 13 | ||||||||||||
| Finance lease(1) | $ | 49 | $ | 58 | $ | 25 | $ | 14 | $ | 5 | $ | 149 | ||||||||||||
| Debt obligations(2) | $ | 237 | $ | 1,309 | $ | 754 | $ | 550 | $ | 707 | $ | 3,557 | ||||||||||||
| ULVAC equipment purchase obligations(4) | $ | 15,851 | $ | - | $ | - | $ | - | $ | - | $ | 15,851 | ||||||||||||
| Dissenting shareholder appraisal rights(5) | $ | 45,135 | $ | - | $ | - | $ | - | $ | - | $ | 45,135 | ||||||||||||
| Convertible debenture obligations(6) | $ | - | $ | 20,000 | $ | - | $ | - | $ | - | $ | 20,000 | ||||||||||||
| Convertible promissory notes(7) | $ | 2,296 | $ | - | $ | - | $ | - | $ | - | $ | 2,296 | ||||||||||||
| Total | $ | 63,570 | $ | 21,377 | $ | 780 | $ | 564 | $ | 711 | $ | 87,002 |
| (1) | Future lease payment obligations for operating and finance lease liabilities. |
| (2) | Long-term debt principal repayment obligations for individual cash loans, our bank loans, and loans provided by Korea Small and Medium-sized Enterprises and Startups Agency and Industrial bank of Korea. |
| (3) | Represents the period July 1, 2026 through December 31, 2026. |
| (4) | Represents approximately $15.9 million of contractual commitments under equipment supply contracts with ULVAC Korea, Ltd. as of June 30, 2026. |
| (5) | Represents approximately $45.1 million of obligations related to dissenting shareholder appraisal rights as of June 30, 2026. The obligation continues to accrue statutory interest until paid. |
| (6) | Represents the $20.0 million principal amount outstanding under the Company's convertible debenture issued to YA II PN, Ltd. ("Yorkville") as of June 30, 2026. The debenture matures on November 7, 2027, subject to conversion, earlier repayment or extension in accordance with its terms. |
| (7) | Represents approximately $2.3 million outstanding under convertible promissory notes assumed in connection with the Business Combination. The notes became due upon consummation of the Business Combination and remained outstanding as of June 30, 2026. |
As of June 30, 2026, our contractual obligations and commitments increased materially from December 31, 2025, primarily due to approximately $15.9 million of equipment purchase commitments with ULVAC Korea, Ltd., approximately $45.1 million of obligations related to dissenting shareholder appraisal rights, and $20.0 million of principal outstanding under the Company's convertible debenture issued to Yorkville.
Issuance of Note Receivables and Note Receivables - Related Party
During 2025 and 2026, the Company entered into unsecured promissory notes with the Sponsor in the amounts of $1.1 million and $0 million, respectively (the "WTMA Sponsor Notes"). The WTMA Sponsor Notes are non-interest bearing and mature on the earlier of the (a) Closing or (b) liquidation of WTMA.
In connection with the Business Combination, the Company effectively settled a preexisting relationship with WTMA through its prior note receivable. As of December 31, 2025, $1.2 million was included in non-trade accounts receivable related to loans made to WTMA. As of the Closing Date, the loan receivable amount was $2.7 million. In connection with the settlement of the preexisting relationship, the Company recognized a gain of $1.2 million included in other income (expense), net, due to the difference between the Company's carrying value of the notes and the settlement amount recorded by WTMA.
During 2026, the Company advanced approximately $0.5 million to David Wilcox, the Company's sole managing and voting member prior to the Business Combination and majority shareholder following the Business Combination, pursuant to an unsecured, non-interest-bearing promissory note arrangement (the "2026 Related Party Advances"). The advances were used to fund EMT Asia Co., Ltd., a related-party entity wholly owned by Mr. Wilcox, including certain transaction-related costs, professional fees, operational support activities, business development expenditures, organizational expenses, and other expenditures incurred in furtherance of the Company's business activities and strategic objectives.
As described in Note 17 - Related Party Transactions to the Company's unaudited condensed consolidated financial statements for the six months ended June 30, 2026, management determined that the 2026 Related Party Advances should be accounted for as equity transactions and presented as a reduction to additional paid-in capital, rather than as a note receivable or non-trade accounts receivable - related party. In addition, certain expenses incurred by EMT Asia on behalf of the Company were recognized as expenses of the Company in the appropriate periods. Accordingly, as of June 30, 2026, no balance related to the 2026 Related Party Advances was included in non-trade accounts receivable - related parties on the Company's condensed consolidated balance sheets.
Off Balance Sheet Arrangements
The Company has evaluated its relationship with EMT Asia Co., Ltd. ("EMT Asia"), an entity owned and controlled by the Company's majority shareholder, and determined that EMT Asia is a variable interest entity ("VIE"). The Company is not the primary beneficiary of EMT Asia because it does not have the power to direct the activities of EMT Asia that most significantly impact its economic performance. Accordingly, EMT Asia is not consolidated in the Company's unaudited condensed consolidated financial statements.
During the three and six months ended June 30, 2026, EMT Asia incurred certain operating and acquisition-related expenditures on behalf of the Company that were funded through the Shareholder Loan Advances. Such expenditures were recognized as selling, general and administrative expenses of the Company, with corresponding adjustments to additional paid-in capital. The Company's maximum exposure to loss from its involvement with EMT Asia is approximately $2.8 million, representing cumulative distributions made to EMT Asia, and the carrying amount of the Company's interest in EMT Asia is de minimis. As of June 30, 2026, the Company's general relationship and direct economic exposure with EMT Asia remained unchanged.
Other than the foregoing, the Company did not have any material off-balance sheet arrangements as of June 30, 2026.
Critical Accounting Estimates
The above discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and judgments that affect the amounts reported. Our significant accounting policies are described in Note 2 - Summary of Significant Accounting Policies of the accompanying Notes to Unaudited Condensed Consolidated Financial Statements of the Company in Part I, Item 1 of this Form 10-Q. Critical accounting policies are those that we consider to be the most important in portraying our financial condition and results of operations and also require the greatest amount of judgments by management. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. During the six months ended June 30, 2026, the only significant changes to our critical accounting estimates are as follows:
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP. The accompanying unaudited condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of the Company's management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with GAAP. References to GAAP issued by the FASB in the accompanying notes to the unaudited condensed consolidated financial statements are to the FASB Accounting Standards Codification ("ASC"). The unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The accompanying unaudited condensed consolidated financial statements are presented in US dollars and include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Business Combination
The accounting for business combinations is considered a critical accounting estimate because it requires management to make significant judgments in determining the fair values of assets acquired and liabilities assumed, including identifiable intangible assets and goodwill, in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. These estimates involve the use of complex valuation techniques and assumptions that are inherently uncertain, and changes in these assumptions could have a material impact on the Company's unaudited condensed consolidated financial statements. The purchase price allocation required management to estimate the fair values of acquired tangible and intangible assets and assumed liabilities as of the acquisition date. Significant assumptions used in these valuations included projected future cash flows, discount rates, and growth rates. Management believes these assumptions were reasonable based on information available at the time; however, actual results may differ from these estimates. Changes in key assumptions could affect the recorded amounts of acquired assets and liabilities and future results of operations through amortization expense or impairment charges. Goodwill arising from business combinations is not amortized but is tested for impairment at least annually or upon the occurrence of triggering events, and adverse changes in market conditions, integration results, or operating performance could increase the likelihood of a future goodwill impairment that could be material to the Company's financial position and results of operations.
Convertible Preferred Unit
EM Convertible Preferred Units consist of preferred units issued with either (i) an option to convert into New EM Common Stock at the option of the holders or (ii) automatic conversion into New EM Common Stock ninety days after closing of the Business Combination. The EM Convertible Preferred Units are accounted for as permanent equity in the scope of ASC 815, "Derivatives and Hedging" ("ASC 815") and recorded at fair value which is representative of the proceeds received.
Fair Value of Financial Instruments and Derivative Liabilities
Certain agreements the Company entered into either require the Company to issue or provide the Company the option to issue a variable number of shares of New EM Common Stock to certain investors and vendors. The Company applies ASC 480, "Distinguishing Liabilities and Equity" ("ASC 480"), ASC 815, and ASC 718, "Compensation - Stock Compensation" ("ASC 718") in its evaluation of the terms of each agreement. In addition, for certain eligible financial instruments, the Company may elect the fair value option under ASC 825, "Financial Instruments" ("ASC 825").
Financial instruments that were identified in each agreement and
| ● | meet the criteria to be accounted for as a liability in accordance with ASC 480 were reported at fair value at issuance and re-measured to fair value each reporting period with changes in the estimated fair value of the liability recognized as a non-cash gain or loss on the accompanying consolidated statements of operations; |
| ● | do not meet the criteria to be accounted for as a liability in accordance with ASC 480 and do not meet the criteria to be accounted for as equity in accordance with ASC 815 are accounted for as a liability and were reported at fair value at issuance and re-measured to fair value each reporting period with changes in the estimated fair value of the liability recognized as a non-cash gain or loss on the accompanying consolidated statements of operations; |
| ● | meet the criteria of a liability-classified share-based payment transaction in accordance with ASC 718 were measured based on the fair value of the transaction on the date of grant and remeasured to fair value each reporting period until settlement; |
| ● |
for which the Company elects the fair value option under ASC 825 are measured at fair value at each reporting date. For financial liabilities accounted for under the fair value option, the portion of the change in fair value attributable to changes in the Company's own credit risk is recognized in other comprehensive income, while the remaining change in fair value is recognized in the consolidated statements of operations. The fair value option is elected on an instrument-by-instrument basis and, once elected, is irrevocable. |
Agreements where multiple financial instruments are identified that would individually warrant separate accounting as a derivative instrument are bundled together as a single, compound embedded derivative that is bifurcated and accounted for separately from the host contract in accordance with ASC 815.
The Company elected the fair value option under ASC 825 for the Convertible Debentures issued to YA II PN, Ltd. ("Yorkville"). Accordingly, the Convertible Debentures are remeasured to fair value at each reporting date. As of June 30, 2026, the fair value of the Convertible Debentures was $17.4 million. During the six months ended June 30, 2026, the decrease in fair value included approximately $1.7 million attributable to changes in the Company's stock price and other valuation inputs, which was recognized in the consolidated statements of operations, and approximately $0.3 million attributable to changes in the Company's instrument-specific credit risk, which was recognized in other comprehensive income.
Revenue Recognition
The Company only has revenue from customers. The Company recognizes revenue when it satisfies performance obligations under the terms of its contracts, and the control of its products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products.
This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer, and (b) is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or product to a customer, meaning the customer has the ability to direct the use and obtain the benefit of the product.
Evolution Metals & Technologies Corp. published this content on August 17, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 17, 2026 at 10:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]