Significant Accounting Policies |
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies | Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as established by the Financial Accounting Standards Board (“FASB”) in the Accounting Standards Codification (“ASC”), including modifications issued under Accounting Standards Updates (“ASUs”). The reporting currency of the Company is the U.S. Dollar. Dollar amounts in the financial statements are presented in thousands, except as otherwise stated. Share, per share, unit, and per unit data are presented as whole numbers. The unaudited condensed consolidated financial statements include the accounts of Fermi Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In management’s opinion, the unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to fairly state the Company’s financial position and results of operations. Results for the period presented are not necessarily indicative of the results that may be expected for any subsequent period. The significant accounting policies presented in these unaudited condensed consolidated financial statements are consistent with those described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and should be read in conjunction with the audited consolidated financial statements and notes thereto included therein. Liquidity, Going Concern, and Capital Resources Under ASC Topic 205-40, Presentation of Financial Statements—Going Concern, we are required to evaluate whether conditions or events raise substantial doubt about our ability to meet future financial obligations as they become due within one year after the unaudited condensed consolidated financial statements are issued. Project Matador will require substantial capital investment to achieve commercial operation. As of June 30, 2026, the Company had not generated any revenues, had incurred recurring losses from operations and negative cash flows from operating activities since inception, and had substantial near-term capital expenditure obligations under existing equipment purchase, construction, lease, and other project-related commitments. As of June 30, 2026, the Company had cash on hand of $62,536 and restricted cash of $29,195, a portion of which is available to fund defined capital expenditures. In addition, in July 2026, subsequent to quarter-end, the Company issued $431,250 aggregate principal amount of 5.00% convertible senior notes due 2031 for net proceeds of approximately $416,810, of which approximately $34,500 was used to pay the cost of related capped call transactions (the “Capped Call Transactions”), with the remainder available for general corporate purposes, as further described in Note 9, Subsequent Events. When measured against forecasted disbursements under the Company’s current operating plan, these resources are not sufficient to satisfy the Company’s financial obligations as they become due within one year after the date these unaudited condensed consolidated financial statements are issued. Considered in the aggregate and before consideration of management’s plans, these conditions raise substantial doubt about the Company’s ability to continue as a going concern within that period. In order to alleviate the substantial doubt, the Company has approved and undertaken several measures. In addition to its existing cash on hand and restricted cash, the Company has undrawn committed borrowing capacity under the Company’s existing equipment financing facilities, the terms of which are further described in Note 5, Debt, net. The Company also holds significant equity in its power generation, substation and transformer, data center, and other ancillary equipment, and, in the event the Company elects to monetize all or any portion of these assets in markets where demand currently exceeds available supply, such monetization would further mitigate the Company’s near-term liquidity needs. In addition, the Company is actively working with its suppliers, contractors, and other counterparties to sequence the timing of future capital expenditures with the execution of definitive tenant agreements and the corresponding project-level financing arrangements expected to be secured in connection therewith, in order to align cash outflows with available liquidity through the assessment period. Certain of the Company’s near-term cash commitments, including obligations to post collateral and credit support in connection with certain commercial arrangements, would arise only if the Company elects to proceed under those arrangements and are intended to secure capacity for anticipated future tenant demand rather than to support current operations. In addition, because the Company’s equipment financing obligations are secured by the financed equipment, whose value exceeds the related obligations, the Company could satisfy those obligations through the pledged equipment itself, limiting the demand on its other liquidity sources. Management expects to defer, scale, or renegotiate the timing and amount of these obligations with the applicable counterparties as development progresses and tenant requirements are finalized. There is no guarantee that these counterparties will agree to renegotiate the terms of their commercial arrangements with the Company, and it is possible that management’s efforts to renegotiate terms or defer obligations under existing commercial arrangements, such as deferring or renegotiating obligations to post collateral and credit support in connection with certain commercial arrangements, could result in a termination of those arrangements by the counterparties. If we are unable to raise capital in the amounts, timing, or terms we expect, we may be forced to delay capital expenditures, amend or terminate our purchase commitments, or surrender assets pledged as collateral under our financing agreements in order to preserve liquidity, which could materially extend our development timeline and delay one or more phases of Project Matador, preventing us from achieving planned operational and financial milestones within the anticipated timeframe. The Company is also pursuing additional project-level capital arrangements and customer arrangements with strategic counterparties that, although subject to counterparty action and other conditions outside the Company’s control and therefore not relied upon by management in concluding that substantial doubt has been alleviated, would, if executed, provide further liquidity to the Company. Based on the magnitude and timing of the Company’s cash on hand and restricted cash, the net proceeds from the convertible senior notes issued in July 2026 (as described in Note 9, Subsequent Events), undrawn capacity under the Company’s existing committed equipment financing facilities, and the Company’s ability to sequence capital expenditures to align with the execution of definitive tenant agreements and associated project financing, management has concluded that (i) it is probable that the Company’s plans will be effectively implemented within twelve months following the issuance of these unaudited condensed consolidated financial statements and (ii) it is probable that those plans, when implemented, will mitigate the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within that period. Accordingly, management has concluded that its plans alleviate the substantial doubt, and these unaudited condensed consolidated financial statements have been prepared on a going concern basis. There can be no guarantee that the Company’s plans will be successfully implemented or, if implemented, that they will mitigate the conditions and events that gave rise to substantial doubt within that period. Related Party Transactions The Company identifies related parties in accordance with ASC 850, Related Party Disclosures, which includes affiliates, equity method investees, principal owners, members of management, their immediate families, and any other party that can significantly influence the management or operating policies of the Company. Transactions with related parties are disclosed when material to the financial statements, even if conducted on terms equivalent to those prevailing in arm’s-length transactions. During the six months ended June 30, 2026, the Company incurred rental and related costs of $759, all of which were incurred during the first quarter of 2026, under a non-exclusive aircraft dry lease agreement with TMNN Manager, LLC (“TMNN”), an entity affiliated with Toby Neugebauer, the Company’s former Chief Executive Officer. Under the agreement, effective January 8, 2026, the Company leased a Gulfstream GVI aircraft from TMNN on an hourly and monthly rental basis for use in operations. Because either party may terminate the agreement for convenience, the Company has elected the short-term lease exemption under ASC 842. Following the termination of Mr. Neugebauer’s employment during the second quarter of 2026, the Company terminated the aircraft lease agreement. Effective July 22, 2026, subsequent to the end of the quarter, the Board of Directors (the “Board”) appointed George Wentz, the founder, a director, and Chief Executive Officer of MAD Energy Limited Partnership (“MAD Energy”), as General Counsel of the Company. MAD Energy is the counterparty to the net profits interest assumed in connection with the Firebird Acquisition and has agreed to indemnify the Company and its affiliates against certain claims asserted in the Firebird litigation, each as described in Note 8, Commitments and Contingencies. Mr. Wentz is also a member of the Davillier Law Group (“Davillier”), a law firm that has provided, and continues to provide, legal services to the Company. For the six months ended June 30, 2026, the Company incurred approximately $534 of fees for legal services from Davillier. Accordingly, from the effective date of Mr. Wentz’s appointment, MAD Energy, Davillier, and their respective affiliates are related parties of the Company, and transactions with, or amounts arising under existing arrangements payable to, MAD Energy or Davillier from that date will be disclosed as related party transactions in future periods. See Note 9, Subsequent Events. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheet. Actual results could differ from those estimates. We believe the estimates and assumptions underlying our unaudited condensed consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2026. Cash and Cash Equivalents We consider short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in our checking and savings accounts. Cash is maintained with financial institutions located in the United States that management believes to be creditworthy. While we monitor the credit quality of our banking relationships, our cash balances may, at times, exceed the federally insured limits. Restricted Cash Restricted cash represents amounts deposited in a bank account that are required to remain restricted in accordance with the terms of the related financing or standby letter of credit agreements. As of June 30, 2026, the Company had restricted cash of $29,195, with $23,862 related to borrowings under the Turbine Warehouse Equipment Financing (as defined in Note 5, Debt, net) and $5,333 for our cash-collateralized standby letter of credit agreement. Restricted cash is presented separately in the unaudited condensed consolidated balance sheets. The unaudited condensed consolidated statements of cash flows reconcile the beginning-of-period and end-of-period total amounts of cash, cash equivalents and restricted cash. Income Taxes The unaudited condensed consolidated financial statements have been prepared using the tax classification of the Company as a corporation for U.S. federal income tax purposes for the periods presented. Fermi previously stated that it intended to elect to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its short taxable year ended December 31, 2025; however, Fermi has determined to defer its REIT election. Accordingly, Fermi does not have a REIT election in place for U.S. federal income tax purposes at this time. Fermi’s current expectation is that it will be taxable as a C corporation for U.S. federal income tax purposes at least through its taxable year ending December 31, 2026. It is possible that Fermi may seek to qualify and elect to be taxable as a REIT for U.S. federal income tax purposes in the future, but the timing of any such election has not been determined, and it is possible that Fermi will never make a REIT election. If Fermi does decide to elect to be taxable as a REIT in the future, any such election would be made upon the filing of its Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts, for the applicable taxable year. For any period during which Fermi is taxed as a C corporation, Fermi is subject to U.S. federal income tax on its net taxable income and is not entitled to a deduction for dividends paid. If Fermi qualifies for and elects to be taxed as a REIT, it generally will not be subject to U.S. federal income tax at the REIT level on taxable income that is currently distributed to stockholders. In the event Fermi does qualify for and elects to be taxed as a REIT, Fermi would expect to distribute substantially all of its REIT taxable income and therefore would not expect to incur U.S. federal income tax at the REIT level. If Fermi qualifies for and elects to be taxed as a REIT, Fermi may nonetheless be subject to U.S. federal income tax and excise taxes in certain circumstances, including on undistributed taxable income or if it fails to satisfy REIT requirements. In addition, our taxable REIT subsidiaries are subject to U.S. federal, state, and local income taxes as regular C corporations, as described below. If the Company elects and qualifies to be taxed as a REIT, the Company’s tax attributes generated during its non-REIT periods generally would not be expected to provide a future tax benefit at the REIT level, other than potentially reducing any built-in gains tax on assets held at the time of conversion that are disposed of within the statutory recognition period or tax on undistributed taxable income. Deferred tax balances attributable to periods expected to be governed by the REIT provisions would be remeasured when the Company becomes committed to any such election. Any such remeasurement is not expected to have a material effect on the unaudited condensed consolidated statements of operations, as the Company’s net deferred tax assets are fully offset by a valuation allowance. As of June 30, 2026 and December 31, 2025, the Company’s deferred tax assets exceeded its deferred tax liabilities. Based on the Company’s cumulative losses since inception, the absence of revenue-generating operations, and the potential effect of any future REIT election, the Company concluded that it is not more likely than not that its net deferred tax assets will be realized and recorded valuation allowances of $85,729 and $79,048 as of June 30, 2026 and December 31, 2025, respectively. Accordingly, no net deferred tax assets or deferred tax liabilities are recognized in the accompanying unaudited condensed consolidated balance sheets, and no current or deferred income tax provision (benefit) was recognized for the periods presented. Taxable REIT Subsidiary A taxable REIT subsidiary (“TRS”) is an entity that is taxable as a corporation in which a REIT directly or indirectly owns stock and that elects with the REIT to be treated as a TRS. If we elect to qualify as a REIT, the use of TRSs would enable us to engage in certain businesses and jurisdictions while complying with REIT qualification requirements that would apply following any REIT election. We may, from time to time, change the election of a previously designated qualified REIT subsidiary to a TRS. Effective March 30, 2026, we elected to convert Fermi Turbine Holdco, LLC, together with its direct wholly owned subsidiary Fermi Turbine Warehouse LLC and its indirect wholly owned subsidiary Firebird Equipment Holdco, LLC, into a corporate subsidiary that will be a TRS if we elect to qualify as a REIT. As of June 30, 2026, Fermi Turbine Warehouse LLC and its subsidiaries held non-qualifying REIT assets. The corporate election became effective on March 30, 2026, but these entities did not generate taxable income or loss during the period from the effective date of the election through June 30, 2026. Accordingly, no current or deferred provision (benefit) for U.S. federal, state, or local income taxes has been recognized at these subsidiaries in the accompanying unaudited condensed consolidated financial statements for the periods presented. Segments All of the Company’s activities relate to developing its first campus, Project Matador, in Carson County, Texas, integrating approximately 11 gigawatts of private-grid power generation with large-scale AI data center infrastructure. Operating and strategic decision-making responsibility for the Company is exercised by a group of the Company’s senior officers, who function collectively as the chief operating decision maker (“CODM”). Prior to April 2026, the CODM group consisted of the Company’s then Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Head of Power. As of June 30, 2026, the CODM group consisted of the Co-Presidents of the Company’s Interim Office of the CEO and its Interim Chief Financial Officer. See Note 9, Subsequent Events, for additional information regarding changes in the Company’s executive officers after June 30, 2026, including the Interim Chief Financial Officer’s appointment as the Company’s permanent Chief Financial Officer and the appointment of Lee McIntire as Chief Executive Officer effective August 11, 2026. Although the composition of the CODM group has changed since December 31, 2025, there has been no change in the information regularly reviewed by the CODM, the manner in which operating performance is evaluated, the basis used to allocate resources, or the Company’s determination that it has a single operating and reportable segment. The CODM evaluates performance and allocates resources based on the Company’s overall operations and financial results. Based on the structure of our operations and the manner in which the CODM monitors and manages the business, we have concluded that the Company operates as a single operating segment and, accordingly, a single reportable segment for accounting and financial reporting purposes. The Company’s single reportable segment is expected to generate substantially all of its revenue from leasing private-grid powered AI data center infrastructure facilities to hyperscaler tenants. The CODM manages the Company as a single business and uses GAAP net income (loss), as presented in the unaudited condensed consolidated statement of operations, as the primary financial measure for assessing performance and allocating resources. The CODM regularly reviews the consolidated statement of operations, including the various line items therein, as presented in the Company’s unaudited condensed consolidated financial statements. No significant revenue or expense categories are regularly evaluated by the CODM other than those already reflected in the consolidated statement of operations. Additionally, the CODM assesses segment assets as presented within the Company’s consolidated balance sheet, as there is no distinction between segment assets and total assets. Substantially all assets are located within the United States, with certain equipment located at vendor facilities abroad, pending transport of such equipment to the Company’s Project Matador campus in Texas. Because the Company operates as a single segment, the accounting policies applied are consistent with the Company’s other significant accounting policies described within Note 2, Significant Accounting Policies. Supplemental Cash Flow Information The following table shows supplemental cash flow information:
Other Income (Expense), Net For the six months ended June 30, 2026, other income (expense), net of $24,798 primarily consisted of a $24,753 loss on the extinguishment of the Company’s term loan with Macquarie Equipment Capital, Inc. (the “Macquarie Term Loan”), which was recognized during the three months ended March 31, 2026. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of this standard. The standard requires the disclosure of additional information about specific expense categories in the notes to the unaudited condensed consolidated financial statements. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The standard allows for adoption on a prospective or retrospective basis. We are currently assessing the impact of adopting ASU 2024-03 on our unaudited condensed consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”), to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt—Debt with Conversion and Other Options. The amendments in this ASU are effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company adopted this guidance effective January 1, 2026. The adoption of ASU 2024-04 did not have a material impact on our unaudited condensed consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (“Subtopic 350-40”): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which amends certain aspects of the accounting for and disclosure of software costs under Subtopic 350-40. The amendments improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods, including methods that entities may use to develop software in the future. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. We early adopted ASU 2025-06 effective January 1, 2026, on a prospective basis and the impact of the adoption was not material to our unaudited condensed consolidated financial statements. In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. ASU 2025-07 refines the scope of derivative accounting under Topic 815 and clarifies the treatment of share-based noncash consideration under ASC 606. The guidance will be effective for annual periods beginning after December 15, 2026, including interim periods within those annual periods. Early adoption is permitted. We early adopted ASU 2025-07 effective January 1, 2026, on a prospective basis and the impact of the adoption was not material to our unaudited condensed consolidated financial statements.
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