{"url_path":"/sec/frmi/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/2071778/0002071778-26-000032-index.html","accession_number":"0002071778-26-000032","cik":"0002071778","ticker":"FRMI","issuer_name":"Fermi Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/2071778/0002071778-26-000032-index.html","primary_entity_key":"0002071778","primary_entity_name":"Fermi Inc."},"word_count":4345,"has_tables":true,"body_markdown":"Item 1A. Risk Factors\n\nSummary of Risk Factors\n\nAn investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:\n\n•We are a development-stage company with no operating history or historical revenue, and we face execution risk across all major components of our business.\n\n•We have not yet constructed our facilities or entered into any binding contract with any tenants, and there is no guarantee that we will be able to do so in the future. Our limited commercial operating history makes it difficult to evaluate our prospects, the risks and challenges we may encounter and our total potential addressable market. Any delays or setbacks we may experience could have a material adverse effect on our business, financial condition and results of operations, and could harm our reputation.\n\n•We will be dependent on third-party manufacturing and supply chain relationships to develop and lease our facilities. Our reliance on third parties and suppliers involves certain risks that may result in increased costs, delays, and loss of revenue.\n\n•We will require significant additional capital to construct and complete Project Matador, and we may not be able to secure such financing on time with acceptable terms, or at all, which could cause delays in our construction, lead to inadequate liquidity and increase overall costs.\n\n•We will need to hire additional skilled employees as we grow and scale up Project Matador, and there is no assurance we will be successful in recruiting, hiring, and training the personnel we need.\n\n•The termination of our Chief Executive Officer, Toby Neugebauer, and resignation of our Chief Financial Officer, Miles Everson, and the resulting leadership transition exposes us to potential delays in our execution on certain aspects of our business strategy as we search for new permanent executive leadership.\n\n•The actions of our former Chief Executive Officer, Toby Neugebauer, and related persons to initiate a proxy contest in an effort to take control of our Board of Directors, and to bring or threaten lawsuits against the Company and its directors and officers, have caused and will likely continue to cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.\n\n•If members of our board of directors or senior management team are unable to align on strategic direction, capital allocation, operational priorities, or other significant matters, such differences in perspective could result in delays in decision-making, the departure of key personnel, disruption to our operations, or an inability to execute on our business strategy.\n\n38\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\n•Substantial doubt about our ability to continue as a going concern was raised as a result of our pre-revenue status, recurring losses, and unrestricted cash that is insufficient to fund our known and reasonably knowable contractual obligations over the next twelve months, and the Company may not be successful in implementing management's plans to alleviate that doubt; even if management is successful, such plans may prove insufficient or may have other adverse effects on the Company.\n\n•Technological advances or disruptive innovations, specifically advancements in artificial intelligence or the ability of new generations of chips to produce useful output in the form of tokenized results using substantially less energy input, may outpace our development cycle, and we are exposed to technology obsolescence across all major asset classes.\n\n•We have not yet secured a tenant, and we may not achieve tenant adoption at the pace or pricing levels required for financial viability.\n\n•We depend on third-party vendors, contractors, and consultants to support our business.\n\n•We have incurred substantial additional debt in the first quarter of 2026, including the MUFG Equipment Financing (up to $500.0 million), the Keystone Facility (equipment-backed advances of up to $120.0 million in aggregate principal, with the potential to increase by an additional $100.0 million subject to lender approval), the Yorkville Promissory Note ($156.3 million), and the Beal Equipment Financing ($165.0 million). These obligations contain restrictive covenants, collateral coverage requirements, mandatory prepayment triggers, and in certain cases conditions tied to execution of tenant agreements by December 31, 2026. Our ability to service these obligations and comply with all covenants is subject to significant uncertainty.\n\n•Wars, threats of war, terrorist attacks, cyberattacks and threats may compromise the security, operability or integrity of our power generation and transmission and distribution infrastructure and could have a material adverse effect on our business, financial condition, and results of operations.\n\n•Our use of technologies and systems that use AI or large-scale language models (“LLMs”), given the dynamic state of such technologies, may cause inadvertent or unexpected impacts that may introduce new operational, legal, and regulatory risks that could adversely affect our business, financial condition, or results of operations.\n\n•Project Matador is an unprecedented, large-scale, multi-phase development effort that presents significant planning, execution, and coordination risks.\n\n•Our ability to develop and retain site control depends on maintaining our leasehold interest with the Texas Tech University System.\n\n•The scale of infrastructure planned at Project Matador will require extensive permitting, interconnection, and third-party coordination.\n\n•High demand for, constraints on the supply of, and increasing costs for industrial scale gas-fired turbines could lead to significant delays or significant increases in capital costs associated with our ability to develop the natural gas-fired power generation infrastructure we will need to achieve our power delivery goals on the schedule we are projecting.\n\n•Westinghouse reactors and SMRs can be costly and time consuming to construct and commercialize. Delays and cost overruns arising from issues with our procurement, licensing and other regulatory approvals, construction and commercialization of nuclear reactors may materially adversely affect our business.\n\n•Our construction, delivery timeline estimates, and costs for our facilities and other equipment may increase due to a number of factors, including the degree of pre-fabrication, standardization, on-site construction, long-lead procurement, contractor performance, facility pre-operational and startup testing, demand for repairs and other site-specific considerations.\n\n•Our business operations rely heavily on securing agreements with suppliers for essential materials, equipment, and components which will be used to construct Project Matador facilities.\n\n39\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\n•If we cannot obtain required permits, licenses and regulatory clearance or approvals for Project Matador or our operations, or are unable to maintain such permits, licenses or approvals, we may not be able to continue or expand our operations.\n\n•We are subject to complex, evolving, and potentially burdensome regulatory requirements.\n\n•Accidents involving third party owned and operated nuclear power facilities, including but not limited to events similar to the Three Mile Island or Fukushima Daiichi nuclear accidents, or other high profile events involving radioactive materials, could materially and adversely affect the public perception of the safety of nuclear energy, our customers and the markets in which we operate and potentially decrease demand for nuclear energy or facilities, increase regulatory requirements and costs or result in liabilities or claims that could materially and adversely affect our business.\n\n•We are subject to federal environmental review processes, including the NEPA, that may materially delay or restrict project development.\n\n•Commodity prices (particularly for natural gas) could impact the economic viability of our businesses or impair our ability to commence operations if we are not able to adequately pass through the cost of natural gas and other raw materials to our tenants.\n\n•Our near-term revenue may be heavily concentrated among a small number of anchor tenants.\n\n•Failure of any major tenant to perform under its lease could result in material financial losses.\n\n•We intend to elect to be classified as a REIT for U.S. federal income tax purposes. Our failure to qualify or maintain our qualification as a REIT for U.S. federal income tax purposes would reduce the amount of funds we have available for distribution and limit our ability to make distributions to our shareholders.\n\n•Adverse macroeconomic conditions could impair our ability to raise capital or complete development phases.\n\n•Influential political actors, shifting domestic policy priorities, and organized opposition by politically connected stakeholders could materially adversely affect our ability to develop, finance, and operate Project Matador.\n\n•As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal controls over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act. We may not complete our analysis of our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our common stock.\n\n•We have identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or if we experience additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.\n\n•The JOBS Act will allow us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC. We cannot be certain if this reduced disclosure will make our common stock less attractive to investors.\n\n•Risks related to the volatility of our common stock, and provisions in our Charter and Bylaws.\n\n•A significant portion of our total outstanding shares of common stock were restricted from immediate resale but may be sold into the market in the near future. The sale of such shares could cause the market price of our common stock to drop significantly.\n\n•We are named as a defendant in a securities class action lawsuit alleging materially false and misleading statements in connection with our IPO registration statement and subsequent public disclosures. Regardless of the merits, this litigation could divert management attention, require substantial legal costs, result in adverse judgments, and impair our ability to raise capital.\n\n40\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\nRisk Factors\n\nIn addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the period from January 10, 2025 (Inception) through December 31, 2025 (the “Annual Report”), filed with the Securities and Exchange Commission on March 30, 2026. Except as set forth below, we are not aware of any material changes to the risk factors disclosed in the Annual Report and the following risk factor updates supplement and should be read in conjunction with the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the period from January 10, 2025 (Inception) through December 31, 2025. These disclosures reflect the Company's beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.\n\nRisks Related to Our Business and Industry\n\nThe termination of our Chief Executive Officer, Toby Neugebauer, and resignation of our Chief Financial Officer, Miles Everson, requires that we implement a leadership transition that could temporarily delay our ability to execute on certain aspects of our strategy as we search for new permanent executive leadership.\n\nOn April 17, 2026, the Company removed Toby Neugebauer from his position as President and Chief Executive Officer. On April 19, 2026, our Chief Financial Officer, Miles Everson, resigned from his position as Chief Financial Officer. On April 30, 2026, the Company terminated Toby Neugebauer’s employment for Cause pursuant to his Employment Agreement as a result of conduct in violation of the terms of such agreement and of Company policies. As a result of his termination for Cause, Mr. Neugebauer was automatically removed from the Company’s board of directors. The search for, and transition to, new permanent leadership will require significant time and resources. Lenders, prospective tenants, joint venture partners, and other counterparties may require assurances regarding leadership stability as a condition of continued or new business relationships. The failure to quickly identify and install permanent leadership could delay our ability to execute on certain aspects of our strategy.\n\nSubstantial doubt about our ability to continue as a going concern was raised as a result of our pre-revenue status, recurring losses, and unrestricted cash that is insufficient to fund our known and reasonably knowable contractual obligations over the next twelve months, and the Company may not be successful in implementing management's plans to alleviate that doubt; even if management is successful, such plans may prove insufficient or may have other adverse effects on the Company.\n\nProject Matador will require substantial capital investment to achieve commercial operation. As of March 31, 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, in addition to recurring operating expenses that must be funded. As of March 31, 2026, the Company had cash on hand of $207.5 million and restricted cash of $35.8 million, a portion of which is available to fund defined capital expenditures. 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 the accompanying unaudited condensed consolidated financial statements are issued.\n\nThese factors raise substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the date of issuance of the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report. Management has implemented plans which are disclosed in Note 2, Significant Accounting Policies to the accompanying unaudited condensed consolidated financial statements. As a result of these actions, management believes that the substantial doubt about the Company's ability to continue as a going concern has been alleviated. There is no guarantee, however, that we will successfully implement the plans described in Note 2. If our planned borrowing draws under existing committed facilities, monetization of unencumbered equipment, sequencing of capital expenditures with the execution of definitive tenant agreements and corresponding project-level financing, or efforts to defer, scale, or renegotiate near-term collateral and credit support obligations are not successful, or if we are unable to identify and execute additional project-level capital arrangements or customer arrangements with strategic counterparties on acceptable terms, we may need to scale back our business plan, reduce our operating costs and headcount, or discontinue or curtail certain of our development activities.\n\n41\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\nRisks Related to Our Governance and Operating Model\n\nWe rely on a highly concentrated leadership team and may face succession or key personnel risks\n\nOur Company is currently undergoing a leadership transition following the removal of our former Chief Executive Officer, Toby Neugebauer, and the resignation of our former Chief Financial Officer, Miles Everson. Our operations and the growth of our business are still dependent on a small group of key personnel with deep institutional knowledge of our operating model, site entitlement history, and financing structure. The loss of any senior executive—including the interim Co-Presidents of our Office of the Chief Executive Officer, our interim Chief Financial Officer, our Head of Power, or our Chief Nuclear Construction Officer—or our failure to complete an orderly and timely transition to permanent CEO and CFO leadership could materially impair critical development milestones, our relationships with financing counterparties, and our ability to execute on our business strategy.\n\nA proxy contest commenced against the Company by our former Chief Executive Officer, Toby Neugebauer, and certain of his family members and related persons have caused and are expected to continue to cause us to incur substantial costs, divert the attention of the Board of Directors and management, take up management's attention and resources, cause uncertainty about the strategic direction of our business and adversely affect our business, operating results and financial condition, and future proxy contests could do so as well.\n\nA proxy contest or other activist campaign and related actions, such as the recent proxy contest by our former Chief Executive Officer, Toby Neugebauer, and certain of his family members and related persons could have a material and adverse effect on us for the following reasons:\n\n•In filings with the SEC and press releases, Mr. Neugebauer states that he seeks to install new directors on our Board that, if successful, would result in a change in the control of our Board of Directors and could result in significant changes in the Company's management and strategic direction. In addition, based on statements made by Mr. Neugebauer, if he is successful in taking control of our Board of Directors, he and the newly constituted Board and management could undertake in an immediate effort to sell the Company at a price that our current Board believes would grossly undervalue the Company.\n\n•Mr. Neugebauer has filed, and may in the future file, additional legal proceedings against the Company and/or its current and former officers and directors relating to his termination, his removal from the Board of Directors, and/or his proxy contest. Defending against such proceedings could require the Company to incur significant legal and other costs, consume substantial management and Board attention and resources, and result in potential indemnification obligations to current and former officers and directors, any of which would have an adverse effect on our business.\n\n•While the Company welcomes the opinions of all shareholders, responding to proxy contests and related actions by activist investors such as Mr. Neugebauer will be costly and time-consuming, disrupt our operations, and divert the attention of our Board of Directors and senior management and employees away from their regular duties and the pursuit of business opportunities. In addition, there may be litigation in connection with a proxy contest, which would serve as a further distraction to our Board of Directors, senior management and employees and could require the Company to incur significant additional costs.\n\n•Perceived uncertainties as to our future direction as a result of potential changes in the composition of our Board of Directors and management team that could result from the proxy contest initiated by the Neugebauer group may lead to concern among potential tenants, existing and future financing counterparties and investors, vendors, contractors, employees, and other important stakeholders regarding the stability of our business, which may be exploited by our competitors, may inhibit potential customers and financing counterparties from transacting with us, may result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners.\n\n•Proxy contests and related actions by activist investors such as the Neugebauer group could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.\n\n42\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\nOur former President and Chief Executive Officer, Toby Neugebauer, is involved in litigation that could cause negative publicity or perception about us and could divert management’s attention, particularly if he is successful in gaining control of our Board of Directors.\n\nOur former President and Chief Executive Officer, Toby Neugebauer, is involved in legal proceedings that have in the past, and may in the future, garner negative publicity. If Mr. Neugebauer is successful in his efforts to take control of our Board of Directors and management, these legal proceedings could adversely affect our Company.\n\nOn January 4, 2023, creditors of Animo Services, LLC (“Animo”), an affiliate of GloriFi (defined below), involuntarily placed Animo in Chapter 7 of Title 11 of the United States Code (“Chapter 7”). On February 7, 2025, the Chapter 7 Trustee in Animo’s bankruptcy proceedings filed a series of adversary proceedings against Mr. Neugebauer, and his related entities, alleging a series of fraudulent transfers and breaches of fiduciary duties (such proceedings, collectively with the ongoing bankruptcy proceedings, the “Animo Proceedings”).\n\nOn February 8, 2023, With Purpose, Inc. (d/b/a GloriFi) (“GloriFi”) filed for bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Texas under Chapter 7. On February 7, 2025, the Chapter 7 Trustee in GloriFi’s bankruptcy proceedings filed a series of adversary proceedings against Mr. Neugebauer, and his related entities, alleging a series of fraudulent transfers and breaches of fiduciary duties (such proceedings, collectively with the ongoing bankruptcy proceedings, the “GloriFi Bankruptcy Proceedings”).\n\nSimilarly, on March 3, 2023, a group of GloriFi investors also filed a lawsuit in the 191st Judicial District of the District Court of Dallas County, Texas, against Mr. Neugebauer, and related entities, alleging (i) fraudulent inducement, (ii) negligent misrepresentation, (iii) breach of fiduciary duty, (iv) unjust enrichment, and (v) exemplary damages (such proceedings, the “GloriFi State Court Proceedings”).\n\nOn May 16, 2024, and on May 17, 2024, Mr. Neugebauer, and related entities, also filed lawsuits in the District of Georgia and District of Delaware, respectively, against certain GloriFi investors alleging, among other things, investor violations under the Racketeer Influenced and Corrupt Organizations Act (RICO) as it relates to GloriFi (such proceedings, the “RICO Proceedings,” and together with the Animo Proceedings, the GloriFi Bankruptcy Proceedings, and the GloriFi State Court Proceedings, the “Animo/GloriFi Proceedings”). The RICO Proceedings have been temporarily stayed in connection with the GloriFi Bankruptcy Proceedings but may be resumed.\n\nIf Mr. Neugebauer is successful in gaining control of our Board of Directors through his attempted proxy contest, the Animo/GloriFi Proceedings may attract negative press coverage and other forms of negative attention to the Company.\n\nRisks Related to Our Common Stock\n\nWe are subject to pending securities litigation that could result in substantial costs, divert management attention, and adversely affect our reputation and ability to raise capital.\n\nOn January 5, 2026, the Company, certain of its directors and officers, and certain underwriters of our IPO were named as defendants in a putative securities class action filed in the U.S. District Court for the Southern District of New York. The complaint alleges that the Company made materially false and misleading statements and omissions in the registration statement and prospectus issued in connection with the IPO and in other public statements during the period from October 1, 2025 through December 11, 2025, in violation of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10b-5 thereunder. The action seeks unspecified damages on behalf of a purported class of purchasers of our common stock pursuant and/or traceable to the IPO registration statement and/or during the alleged class period.\n\nWe believe the claims are without merit and intend to vigorously defend against the action. However, securities class action litigation is inherently unpredictable and may divert significant management time and resources regardless of outcome. Even if resolved in our favor, the costs of defending this litigation could be substantial, and any adverse resolution could result in monetary damages, reputational harm, or impaired access to capital markets. We are currently unable to reasonably estimate the possible loss or range of loss, if any, associated with this matter.\n\nRisks Related to Our Business and Industry — Financing and Debt Obligations\n\nOur newly incurred equipment financing obligations contain restrictive covenants, collateral coverage requirements, and tenant execution conditions that, if not satisfied, could result in events of default, mandatory prepayments, or acceleration of our debt.\n\n43\n\n[Table of Contents](#id354ade5ec2b4fa6b9ca4faa344251c2_7)\n\nSince December 31, 2025, we have incurred substantial additional indebtedness to finance equipment for Project Matador, including: (i) a $500.0 million MUFG Equipment Financing facility (entered February 10, 2026), of which $396.6 million has been drawn as of the date hereof; (ii) a Keystone Master Loan Agreement providing for equipment-backed advances of up to $120.0 million in aggregate principal, with the potential to increase by an additional $100.0 million subject to lender approval (entered February 2026), of which $39.5 million has been drawn; (iii) a $165.0 million Beal Equipment Financing facility (entered March 2026) to fund the purchase of six Siemens Energy SGT-800 industrial gas turbines, of which $3.0 million has been drawn as of the date hereof; and (iv) a Yorkville Promissory Note with a committed principal amount of $156.3 million (entered March 30, 2026).\n\nThese facilities contain numerous restrictive covenants and conditions, including: (a) under the MUFG Equipment Financing, loan-to-value requirements whereby an event of default will occur if the LTV ratio exceeds the applicable target for more than thirty consecutive days following an updated appraisal reflecting a value more than 2% below the initial appraisal; (b) under the Keystone Facility, a minimum liquidity covenant requiring us to maintain at least $20.0 million in liquidity until the facility is repaid or a qualifying customer agreement is executed, and a mandatory prepayment requirement if the Keystone Agent has not received an approved customer agreement by December 31, 2026; (c) under the Beal Credit Agreement, an exit fee obligation and restrictions on asset dispositions; and (d) under the Yorkville Note, mandatory monthly amortization payments beginning thirty days after the first advance, with at least $10.0 million of each payment to be satisfied in shares of common stock.\n\nOur ability to comply with these covenants is subject to uncertainty, particularly given the early stage of our development, the absence of signed definitive tenant agreements as of the date of this filing, and leadership transition risk. A breach of any covenant or failure to satisfy any condition could trigger an event of default, acceleration of the applicable debt obligation, and potential cross-default under our other financing arrangements, any of which would have a material adverse effect on our business, financial condition, liquidity, and results of operations."}