Intuitive Machines, Inc. (LUNR)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As a result of the closing of the Business Combination on February 13, 2023, which was accounted for as a reverse recapitalization in accordance with U.S. GAAP, the financial statements of Intuitive Machines, LLC, a Delaware limited liability company and our wholly-owned subsidiary, are now the financial statements of the Company. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I. Item 1A. “Risk Factors” included in this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “IM,” “Intuitive Machines,” “we,” “us,”, or “our” refer to Intuitive Machines, Inc. and its consolidated subsidiaries.

Overview

We are a space technology, infrastructure, and services company founded in 2013 that is contributing to the establishment of cislunar infrastructure and helping to develop cislunar and deep space commerce. Cislunar encompasses objects in orbit in the Earth-Moon system and on the Lunar surface, while deep space exploration is space beyond the Moon, including Mars. We believe we have a leading position in the development of technology platforms operating in three core pillars —delivery services, data transmission services, and infrastructure as a service— as described below under Our Business Strategy. We are focused on establishing the lunar infrastructure associated with each of the three pillars, which provides the basis for commerce to inform and sustain human presence off Earth. Our vision is that our infrastructure services enable our customers to focus on their unique contributions to create a thriving, diverse cislunar economy and expand the commercial space exploration marketplace to the Lunar surface and beyond.

The United States (“U.S.”) government has indicated that returning to the moon is of strategic importance to the U.S. and we believe it will continue to have bipartisan support as we enter the next generation space race with the People’s Republic of China (“China”). We believe that space is the next economic frontier, with the moon being the next stepping stone, and the increased demand from governments, intelligence agencies, commercial industries, and private individuals has created multiple opportunities for long-term growth. We intend to participate in expanding the cislunar economy through a steady cadence of missions, with the intent of offering reduced cost of access and operations while providing reliable missions on a defined schedule. We are one of a select few companies servicing NASA and a worldwide set of commercial payload customers. We believe we have a strong position, as evidenced by four Commercial Lunar Payload Services (“CLPS”) awards to date as of December 31, 2024. On February 22, 2024, our Nova-C lander became the first U.S. vehicle to softly land on the lunar surface since 1972, utilizing our Nova-C Guidance, Navigation and Control (“GN&C”) and Propulsion systems, both of which were designed and are produced in-house. Our IM-1 Nova-C lander carried approximately 100 kilograms of science experiment and technology demonstration payloads, including the first CLPS payload, to a landing site closer to the lunar south pole than any previous mission. We operated on the lunar surface beyond the CLPS required mission duration and downloaded over 500 MB of payload customer data on our commercial Lunar Data Network. In March 2025, our IM-2 mission landed at the southernmost location of the moon, 5 degrees from the south pole. While in transit, our space to ground communications brought down over 8GB of data from space over our network; delivered 3 rideshare customers to trans lunar injection orbit and assisted them with ground tracking and communication; and demonstrated precision autonomous orbit operations circling the moon for 39 orbits over a 72 hour period. While on the surface, we demonstrated the ability to manage power in thermal conditions on the south pole surface and in a crater. With the challenge of not being able to recharge the IM-2 lander solar panels post landing, the mission was still able to complete several mission and payload milestones, including downloading 500 MB of payload customer data from the lunar surface. See Our Business Strategy for a description of our additional lunar missions, lunar relay communications, lunar vicinity navigation, and autonomous surface rover operations.

The U.S. Space Force (“Space Force”) has recently begun to turn its attention to the cislunar space, as noted in the Mitchell Institute paper “Securing Cislunar Space and the First Island Off the Coast of Earth.” As the leading CLPS provider and the first company to have successfully landed and operated on the Moon, we believe we are at the forefront of NASA's push for a sustainable return to the lunar surface, while simultaneously driving critical early conversations with the U.S. Department of Defense (“U.S. DoD”) and Space Force to secure the Moon and cislunar space to ensure peaceful and strategic operations in this emerging domain.

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Our Business Model

We primarily generate revenue through our contracts with customers of our orbital and lunar access services and by collecting and transmitting cislunar data for science, technology and infrastructure. We are a provider and supplier of space products and services that we believe will enable sustained robotic and human exploration to the Moon, Mars, and beyond.

We employ a “land-and-expand” go-to-market strategy with the goal to deliver increasing value and repetitive revenue with each customer over time by expanding the scope of the services we offer. We work closely with our customers and partners to enable their early success. We expect that deeper adoption of our products and services from our customers will come in many forms, including increased reliance on our technology as a core part of a mission, increased usage of our landers for lunar transportation and exploration, and greater dependence on our advanced software analytics capabilities for satisfying each customers’ needs.

We operate under three core pillars which we believe are required to develop cislunar and deep space commerce: delivery services, data transmission services, and infrastructure as a service. Under Accounting Standards Codification (“ASC”) 280 “Segment Reporting,” we concluded that our core pillars operate as one reportable segment. See our Segment Reporting disclosure under Notes 2 and 16 in our consolidated financial statements for further discussion on our reportable segment. Provided below are summarized descriptions of our three core pillars.

•Delivery Services provides for the transportation and delivery of payloads, such as, satellites, scientific instruments and cargo to various destinations in space, in addition to rideshare delivery and lunar surface access.

•Data Transmission Services offerings include the collection, processing, and interpretation of space-based data, utilizing applications, such as, command, control, communications, reconnaissance and prospecting.

•Infrastructure as a Service delivers space assets performing tasks and making decisions without human intervention that are designed to perform essential functions, such as, navigation, maintenance, scientific data collection, and system health monitoring.

We integrate these fundamental pillars to not only enable access to the Moon but also to lay the foundation for a thriving cislunar and deep space economy. We believe our delivery, data transmission, and infrastructure capabilities uniquely position us to drive innovation, create long-tail revenue streams, and ultimately support humanity’s push to establish profitable industries in space. We expect to achieve leading time to market across these core pillars driven by our short design to manufacture process, enabled through vertical integration and rapid iterative testing. We leverage technologies developed for our three core service pillars to expand into adjacent markets where these capabilities provide a competitive advantage.

Delivery Services

We utilize our proprietary lunar lander vehicles to service CLPS contracts by flying NASA scientific equipment and commercial payloads to the lunar surface and supporting mission operations. With four CLPS contracts awarded to date, we are pioneering lunar access. We are also scaling our lander capabilities to support larger payloads, including heavy cargo-class infrastructure delivery for projects like the Lunar Terrain Vehicle (“LTV”), ensuring a reliable path for sustained human and robotic exploration of the Moon.

In August 2024, NASA awarded Intuitive Machines a $116.9 million contract to deliver six science and technology payloads, including one European Space Agency-led drill suite to the Moon’s South Pole. This award leverages the Company’s lunar delivery, data transmission, and autonomous operation capabilities to explore the region targeted for sustained human operations. As part of NASA’s CLPS initiative, this marks the Company’s fourth contract award, IM-4, to deliver science and technology payloads and return valuable data while autonomously operating on the surface of the Moon. In February 2024, our IM-1 lander became the first U.S. vehicle to softly land on the lunar surface since 1972. In March 2025, our IM-2 mission landed at the southernmost location of the Moon, 5 degrees from the south pole. While on the surface, we demonstrated the ability to manage power in thermal conditions on the south pole surface and in a crater. With the challenge of not being able to recharge the IM-2 lander solar panels post landing, the mission was still able to complete several mission and payload milestones.

Revenue streams from delivery services are expected to include transportation and delivery of payloads (satellites, scientific instruments, and cargo) to various destinations in space, including rapid in-space mobility solutions enabled by our proprietary engine technology.

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Data Transmission Services

We believe that our Data Transmission Services offering is made up of a validated and complete lunar communications solution. Our Lunar Data Network (“LDN”) consists of our Nova Control Center (“NCC”), our existing global collection of dishes called the Lunar Telemetry, Tracking and Communications Network (“LTN”), and a constellation of Lunar Data Network Satellites to be deployed as part of our NSN 2.2 contract award.

In September 2024, NASA awarded Intuitive Machines the sole NSN contract for communication and navigation services for missions in the near space region, which extends from Earth’s surface to beyond the Moon (NSN 2.2). The NSN contract is a firm-fixed-price, multiple award, Indefinite-Delivery/Indefinite-Quantity (“IDIQ”) task order contract, with a base period of five years with an additional five-year option, with a maximum potential value of $4.82 billion. The initial NSN contract award includes incrementally funded task orders totaling $150.0 million over the next 3 years. As the sole awardee of the initial tranche of NSN contracts, we are deploying a constellation of lunar relay satellites to provide continuous cislunar communication and navigation services. This capability supports NASA’s Artemis missions while introducing a scalable, pay-by-the-minute data service model, enabling enhanced video, telemetry, and autonomous navigation. Our strategy leverages the additional performance capacity of our lunar landers to deploy satellites at marginal costs, creating a robust and cost-effective lunar communication infrastructure that forms the data backbone of our cislunar operations. We believe providing these lunar data and navigation services to NASA, NSS, and commercial/international customers will be an increasingly important priority.

In December 2024, NASA awarded Intuitive Machines NSN contracts for DTE services for the lunar vicinity (NSN 1.2) and beyond the lunar vicinity (NSN 1.3). These contracts allow use of terrestrial ground stations to support science missions in lunar orbit, on the lunar surface, or beyond the Moon. Our network is secured by layered levels of protection including advanced architecture, enterprise-level endpoint and antivirus protection, and Splunk advanced Security Information & Event Management (“SIEM”) control. Our Network Control Center (“NCC”) is located at our headquarters in Houston, Texas and was built from the ground up. NCC enables collaboration, innovation and seamless operations, in this 24-hour facility that was designed to provide tracking, telemetry and communications support for cislunar space and the surface of the Moon.

Our network is secured by layered levels of protection including advanced architecture, enterprise-level endpoint and antivirus protection, and Splunk advanced Security Information & Event Management (“SIEM”) control. Our Network Control Center (“NCC”) is located at our headquarters in Houston, Texas and was built from the ground up by our highly experienced team. NCC enables collaboration, innovation and seamless operations, in this 24-hour facility that was designed to provide tracking, telemetry and communications support for cislunar space and the surface of the Moon.

Once established and deployed, the data transmission services are expected to include and support NASA, U.S. national security, international, and commercial data needs. We will collect, transmit, and monetize data buys from data collected in-transit to the moon, in a variety of cislunar orbits, and on the surface of the moon for our future missions.

Infrastructure as a Service

Our Infrastructure as a Service pillar delivers essential systems and platforms to enable sustainable lunar exploration and commercial activity. By focusing on mobility, energy, and operational capabilities, we are creating the foundational infrastructure needed to support NASA’s Artemis campaign and commercial endeavors on the Moon. Key areas of focus include the LTV, its commercialization potential, and the Fission Surface Power (“FSP”) initiative, all designed to build a thriving and sustainable lunar economy.

During 2024, NASA awarded Intuitive Machines a $30.8 million LTV contract to support the agency’s Artemis Campaign as a prime contractor, leading the development of the Moon RACER. Designed to operate in extreme lunar conditions, including the Moon's South Pole, the LTV features advanced autonomous driving, power management, and communications systems.

Adjacent and Opportunistic Market Opportunities

Due to Intuitive Machines’ unique technology platforms and engineering expertise, we are also pursuing and executing on business opportunities outside the three core pillars for customers aligned with our talent and product offerings. This includes work on the JETSON Low Power project for the Air Force Research Laboratory (AFRL), the development of scalable reentry technologies, and federal engineering services contracts at various NASA centers.

In the $9.5 million JETSON Low Power project, we are helping AFRL develop the architecture and technology for deploying and maintaining a network of navigation beacons in cislunar space that require little-to-no support once

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delivered to their orbits. This includes a new radioisotope power generator that gives IM invaluable experience with nuclear power systems that can be applied to future lunar surface infrastructure, such as NASA’s FSP program.

We have also made significant progress to date in federal services contracts. Our federal service contracts provide us access to one of our key customers, NASA, allows us to develop technologies important for the cislunar economy, and provides a skilled labor force which can support our three core pillars. In 2023, we were awarded as the prime contractor by NASA on the OMES III contract, with a focus on spacecraft mechanisms and robotics. In addition in 2024, we were also selected as an awardee under the One Acquisition Solution for Integrated Services Plus Multi-Agency Contract (“OASIS+”).

Recent Developments

In December 2024, the Company completed an underwritten public offering of 10,952,381 shares of its Class A Common Stock at a price to the public of $10.50 per share (the “Public Offering”), which included the full exercise of the underwriters’ option to purchase an additional 1,275,714 shares of Class A Common Stock from the Company. The Company also entered into an agreement with an accredited investor, pursuant to which the Company sold to the investor $10.0 million of shares of its Class A Common Stock in a concurrent private placement at a purchase price per share equal to the public offering price per share in the Offering of $10.50 (the “Private Offering” together with the Public Offering, the “2024 Offering”). The net proceeds to the Company from the Offering and concurrent private placement, after deducting transaction costs of $6.5 million, were approximately $116.9 million.

In December 2024, the Company secured two additional contracts from NASA’s Near Space Network (“NSN”) for Direct-to-Earth (“DTE”) services. DTE communication and navigation services are critical for enabling missions to exit Earth’s orbit, reach lunar destinations, and explore deep space. The new contract awards are NSN 1.2 for DTE Geostationary to Cislunar DTE Services, offering enhanced data transmission capabilities and autonomous operations and NSN 1.3 for xCislunar DTE Services, addressing mission needs for highly elliptical orbits and deep space operations. Both contracts are firm-fixed-price, indefinite-delivery/indefinite-quantity task orders designed to bolster NASA’s Lunar Exploration Ground Segment. These awards add capacity to alleviate demand on the Deep Space Network and support unique mission requirements.

Subsequent Events

Warrant Redemption

On February 4, 2025, the Company announced the redemption of all of its outstanding warrants (the Public Warrants and Private Warrants as defined in Note 9, collectively the “Warrants”) to purchase shares of the Company’s Class A Common Stock that were issued under the warrant agreement, dated September 21, 2021 (the “Warrant Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent, and that remained unexercised at 5:00 p.m., New York City time, on March 6, 2025 (the “Redemption Date”) for the redemption price of $0.01 per Warrant. During the period from January 1, 2025 to March 6, 2025, 15,358,229 of the Warrants were exercised resulting in gross proceeds of $176.6 million. On the Redemption Date, a total of 6,571,724 Warrants remained unexercised as of 5:00 p.m. New York City time, and the Company redeemed those Warrants for an aggregate redemption price of $66 thousand. As such, the Warrants ceased trading on the Nasdaq and were delisted, with the suspension of trading effective before the market opened on March 6, 2025. In connection with the Warrant Redemption, Michael Blitzer, a director and warrant holder, agreed to exercise 1,800,000 of the Warrants, and the Company agreed to repurchase 941,080 shares of the Company’s Class A Common Stock for an aggregate purchase price of $20.7 million.

Earn Out Units

On February 4, 2025, the Company issued an aggregate of 7,500,000 shares of Intuitive Machines’ Class C Common Stock in connection with meeting the conditions of the following milestones, Triggering Events II-A and III (as defined in Note 2), resulting in the vesting of Earn Out Units of 5,000,000 and 2,500,000, respectively. Refer to Note 2 for additional information on the Earn Out Units.

Loan Agreement

On March 4, 2025, we entered into a loan and security agreement (the “Loan Agreement”) with Stifel Bank. The Loan Agreement provides for a secured revolving credit facility in an aggregate principal amount of up to $40.0 million (the “Revolving Facility”). The proceeds of the loans (and any letters of credit issued thereunder) may be used for the funding of growth initiatives, including working capital needs and general corporate purposes as the Company continues to focus on minimizing its cost of capital while maximizing available funding alternatives. Amounts outstanding under the Revolving Facility will bear interest at a rate per annum equal to the greater of (a) Term SOFR (secured overnight financing rate) plus 2.75% and (b) 6.00%. The Loan Agreement matures on April 30, 2027 (the “Maturity Date”). Subject

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to certain conditions in the Loan Agreement, amounts borrowed thereunder may be repaid and reborrowed at any time prior to the Maturity Date. As of the date of this filing, the revolving credit facility remains unborrowed.

Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on several factors that present significant opportunities for our business, but also pose risks and challenges, including those discussed below and in the section titled Part I., Item 1A. “Risk Factors” in this Annual Report.

Inflation and Macroeconomic Pressures

The global economy continues to experience volatile disruptions including to the commodity and labor markets. These disruptions have contributed to an inflationary environment which has affected, and may continue to adversely affect, the price and availability of certain products and services necessary for our operations, which in turn, has adversely impacted, and may continue to adversely impact our business, financial condition and results of operations.

We continue to monitor economic conditions and the impact of macroeconomic pressures, including repercussions from the recent banking crisis, rising interest rates, sustained inflation and recession fears, supply chain disruptions, monetary and fiscal policy measures (including future actions or inactions of the United States government related to the “debt-ceiling”), heightened geopolitical tensions (such as the war in Ukraine and Israel), changes to the U.S. federal budget, and the political and regulatory environment on our business, customers, suppliers and other third parties.

While rising costs and other inflationary pressures have not had a material impact on our business to date, we are monitoring the situation and assessing its impact on our business, including to our partners and customers.

Our ability to expand our product and services offerings

We are in the preliminary stages of developing our full space infrastructure offerings. These services are expected to grant customers access to cislunar space and the lunar surface at lower price points than previous lunar missions. We are also working to provide data transmission services at lunar distance to include far-side connectivity, along with ancillary services that are likely to include orbital servicing and payload development and manufacture.

Our growth opportunity is dependent on our ability to win lunar missions and expand our portfolio of services. Our ability to sell additional products and services to existing customers is a key part of our success, as follow-on purchases indicate customer satisfaction and decrease the likelihood of competitive substitution. To sell additional products and services to new and existing customers, we will need to continue to invest significant resources in our products and services as well as demonstrate reliability through a successful lunar landing. If we fail to make the right investment decisions, are unable to raise capital, if customers do not adopt our products and services, or if our competitors are able to develop technology or products and services that are superior to ours, our business, prospects, financial condition and operating results could be adversely affected.

We expect to make significant investments in our lunar and data programs in the short term. Although we believe that our financial resources will be sufficient to meet our capital needs in the short term, our timeline and budgeted costs for these offerings are subject to substantial uncertainty, including due to compliance requirements of U.S. federal export control laws and applicable foreign and local regulations, the impact of political and economic conditions, and the need to identify opportunities and negotiate long-term agreements with customers for these services, among other factors. Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay any additional indebtedness that we may incur.

Our ability to expand spaceflight mission operations

Our success will partially depend on our ability to expand our lunar mission operations in 2025 and beyond. We completed the first mission in February 2024 and completed our second mission in March 2025. We are working to establish a regular cadence of missions. We believe that this will provide our customers with proven and reliable cislunar access, with which to plan their future manifest. With binding agreements for additional launches as of December 31, 2024, we have $328.3 million in backlog, and we are in active discussions with numerous potential customers, including government agencies and private companies, to potentially add to our contracted revenue backlog.

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Prior to commencing missions, we must complete internal integration activities as well as launch vehicle integration with our launch provider, SpaceX. Any delays to our targeted mission launch date or in commencing our missions, including due to congestion at the pad launch site or delays in obtaining various approvals or licenses, could adversely impact our results and growth plans. As we improve production efficiency and schedule reliability and reach our target of multiple missions per year manifested 2-3 years in advance, we expect to improve our market penetration, which we believe will lead to higher revenue from both volume and mission complexity as well as increased operating leverage.

Ability to continue to capitalize on government expenditures and private enterprise investment in the space economy

Our future growth is largely dependent on our ability to continue to capitalize on increased government spending and private investment in the space economy. U.S. federal government expenditures and private enterprise investment have fueled our growth in recent years, and it has resulted in our continued ability to secure increasingly valuable contracts for products and services in 2024. An increased focus on U.S. federal government spending could unfavorably impact the space exploration sector in the future. On January 20, 2025, President Donald J. Trump announced an executive order establishing the “Department of Government Efficiency” to maximize government efficiency and productivity. Pressures on and uncertainty surrounding the U.S. federal government’s budget and potential changes in budgetary priorities, could adversely affect the funding for individual programs and delay purchasing decisions by our customers. If our existing programs and project pursuits are not focused on the federal government’s higher priorities, our business, prospects, financial condition and operating results could be adversely affected.

Ability to improve profit margins and scale our business

The growth of our business is dependent on our ability to improve our profit margins over time while successfully scaling our business. We intend to continue investing in initiatives to improve our operating leverage and significantly increase utilization. Our ability to achieve our production-efficiency objectives could be negatively impacted by a variety of factors including, among other things, lower-than-expected facility utilization rates, manufacturing and production cost overruns, increased purchased material costs and unexpected supply-chain quality issues or interruptions. If we are unable to achieve our goals, we may not be able to increase operating margin, which would negatively impact gross margin and profitability.

Our ability to continue to innovate

We design, build, and test our landers, spacecraft and subsystems in-house and operate at the forefront of composite structures, liquid rocket engines, guidance, navigation and control software, precision landing and hazard avoidance software, and advanced manufacturing techniques. We believe the synergy of these technologies enables greater responsiveness to the commercial and government requirements for lunar exploration. To continue establishing market share and attracting customers, we plan to continue to make substantial investments in research and development for the continued enhancements of our landers, lunar data network, and other space systems. Over time, we expect our research and development expenditures to continue to grow on an absolute basis, but remain consistent or decrease as a percent of our total revenue as we expand our service offerings.

Components of Results of Operations

Revenue

We perform work under contracts that broadly consist of fixed-price, cost-reimbursable, time-and-materials or a combination of the three. Pricing for all customers is based on specific negotiations with each customer. For a description of our revenue recognition policies, see the section titled “Critical Accounting Policies and Estimates.”

Historically, most of our revenue has been derived from fixed-price, long-term contracts for the delivery of payloads to the lunar surface. In order to satisfy these contracts, we undertake the engineering for the research, design, development, manufacturing, integration and sustainment of advanced technology space systems. The integration of these technologies and systems lead to an organic and integrated capability to provide lunar access on a commercial services basis. Individual contracts are aggregated by mission (e.g., IM-2, IM-3, IM-4) for management purposes. Revenue is measured based on the amount of consideration specified in a contract with the customer.

We recognize revenue when we transfer control of a promised good or service to a customer in an amount that reflects the consideration we expect to be entitled to in exchange for the good or service. Under the overtime revenue recognition model, revenue and gross profit are recognized over the contract period as work is performed based on actual costs incurred and an estimate of costs to complete and resulting total estimated costs at completion.

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Revenue from long-term contracts can fluctuate from period to period largely based on the stage of the project and overall mission. These projects will typically have a ramp up period in the beginning stage and wind down as the mission nears the targeted launch date. A significant portion of the revenue (approximately 10% of the contract price) contains variable consideration which is constrained to nil for accounting purposes as it is dependent on a successful mission landing. This may cause fluctuations in future revenue, profits and cash flows.

Since late 2023, we have been performing a more significant amount of work on cost-reimbursable contracts such as OMES III. Under cost-reimbursable contracts, the price is generally variable based upon our actual allowable costs incurred for materials, equipment, reimbursable labor hours, overhead and G&A expenses. Profit on cost-reimbursable contracts may be in the form of a fixed fee or a mark-up applied to costs incurred, or a combination of the two. The fee may also be an incentive fee based on performance indicators, milestones or targets and can be based on customer discretion or in the form of an award fee determined based on customer evaluation of the Company's performance against contractual criteria. Cost-reimbursable contracts are generally less risky because the owner/customer retains many of the project risks, however it generally requires us to use our best efforts to accomplish the scope of the work within a specified time and budget.

Cost-reimbursable contracts with the U.S. government are generally subject to the Federal Acquisition Regulation (“FAR”) and are competitively priced based on estimated or actual costs of providing the contractual goods or services. The FAR provides guidance on types of costs that are allowable in establishing prices for goods and services provided to the U.S. government and its agencies. Pricing for non-U.S. government agencies and commercial customers is based on specific negotiations with each customer.

Cost of revenue (excluding depreciation)

Cost of revenue (excluding depreciation) consists primarily of direct material and labor costs, launch services, manufacturing overhead, freight expense, and other personnel-related expenses, which include salaries, bonuses, benefits and stock-based compensation expense. We expect our cost of revenue to increase in absolute dollars in future periods as we sell more products and services. As we grow into our current capacity and execute on cost-optimization initiatives, we expect our cost of revenue as a percentage of revenue to decrease over time.

Depreciation

Depreciation consists of the depreciation of tangible fixed assets for the relevant period based on the straight-line method over the useful life of the assets. Tangible fixed assets include property and equipment.

Impairment of property and equipment

Impairment of long-lived assets occurs whenever events or changes in circumstances indicate the carrying value of a long-lived asset may not be recoverable. Long-lived assets consists of property and equipment, net. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds it fair value. See Note 4 of the consolidated financial statements for additional information on the impairment of property and equipment.

General and administrative expense (excluding depreciation)

Selling, general and administrative expense (excluding depreciation) consist primarily of personnel-related expenses for our sales, marketing, supply chain, research and development (“R&D”), finance, legal, human resources and administrative personnel, as well as the costs of customer service, information technology, professional services, insurance, travel, allocated overhead and other marketing, communications and administrative expenses. R&D represents costs incurred for the Company’s continued enhancements of our landers, lunar data network, other space systems, and also for the development and innovation of our proprietary technology platforms. R&D costs primarily include engineering personnel salaries and benefits, subcontractor costs, materials and supplies, and other related expenses. We also expect to invest in our corporate organization and incur additional expenses associated with transitioning to, and operating as, a public company, including increased legal and accounting costs, investor relations costs, higher insurance premiums and compliance costs. As a result, we expect that selling, general and administrative expenses will increase in absolute dollars in future periods as a percentage of total revenue.

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Interest income (expense), net

Interest income (expense), net consists of interest income earned on cash and cash equivalents and short-term investment balances held by us in interest bearing demand deposit accounts. Interest expense is incurred primarily on long-term debt and credit support arrangements.

Change in fair value of earn-out liabilities

Earn Out Units are classified as liabilities transactions at initial issuance which were offset against paid-in capital as of the closing of the Business Combination. At each period end, the Earn Out Units are remeasured to their fair value with the changes during that period recognized in other income (expense) on the consolidated statement of operations. Upon issuance and release of the shares after each Triggering Event is met, the related Earn Out Units will be remeasured to fair value at that time with the changes recognized in other income (expense), and such Earn Out Units will be reclassed to stockholders’ equity (deficit) on the consolidated balance sheet. See Notes 2 and 11 of the consolidated financial statements for additional information on the earn-out liabilities.

Change in fair value of warrant liabilities

In connection with the Private Placement, Warrant Exercise Agreement, and the Bridge Loan Conversion, the Company has issued warrants which are classified as liabilities on our balance sheet. At each period end, the warrants are remeasured to their fair value with the changes during the period recognized in other income (expense) on our consolidated statement of operations. See Notes 9 and 11 of the consolidated financial statements for additional information on the warrant liabilities.

Change in fair value of SAFE Agreements

Prior to closing the Business Combination (as discussed in Note 1), Intuitive Machines, LLC issued six SAFE Agreements in late 2021 and early 2022. The funds received upon issuance of the SAFE Agreements were used to fund operations. Pursuant to the guidance under ASC 480 “Distinguishing Liabilities from Equity,” management determined that the SAFE Agreements should be initially recorded as liabilities at fair value and subsequently remeasured at fair value with changes recognized in earnings until conversion at a qualifying financing event or termination of the SAFE Agreements. Upon the consummation of the Business Combination in February 2023, the SAFE Agreements liability was eliminated and converted into shares of our Class A Common Stock. See Note 11 - Fair Value Measurements of the consolidated financial statements for additional information on the SAFE Agreements.

Loss on issuance of securities

In connection with the Private Placement, Warrant Exercise Agreement, and the Bridge Loan Conversion as discussed in Notes 9 and 11 to the consolidated financial statements, the Company issued warrants and recognized a loss on the issuance as the fair value of the securities exceeded the gross proceeds at the issuance date. The Company evaluated the terms of the warrants and determined they meet the criteria in ASC 815, “Derivatives and Hedging”, to be classified as a derivative liability, initially measured at fair value. The subsequent changes in fair value are recognized in earnings in other income (expense) on the consolidated statement of operations.

Other income (expense), net

Other (expense) income, net primarily consists of immaterial miscellaneous income sources.

Income tax expense

Intuitive Machines, Inc. is a corporation and thus is subject to United States (“U.S.”) federal, state and local income taxes. Intuitive Machines, LLC is a partnership for U.S. federal income tax purposes and therefore does not pay United States federal income tax on its taxable income. Instead, the Intuitive Machines, LLC unitholders, including Intuitive Machines, Inc., are liable for U.S. federal income tax on their respective shares of Intuitive Machines, LLC’s taxable income. Intuitive Machines, LLC is liable for income taxes in those states which tax entities classified as partnerships for U.S. federal income tax purposes.

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Net loss attributable to redeemable noncontrolling interest

Noncontrolling interests represents the portion of Intuitive Machines, LLC that the Company controls and consolidates but does not own. The noncontrolling interests was created as a result of the Business Combination and represents 68,150,754 Class A and Class B units issued by Intuitive Machines, LLC to the prior investors represents approximately 81.2% of the ownership interests in the Company at the Closing Date. The Company allocates net income or loss attributable to the noncontrolling interests based on the weighted average ownership interests during the period. The net income or loss attributable to noncontrolling interests is reflected in the consolidated statement of operations.

The financial results of Intuitive Machines, LLC were consolidated into Intuitive Machines, Inc. for the periods February 13, 2023 forward and resulted in the allocation of approximately 35.5% of Intuitive Machines, LLC’s net loss to noncontrolling interests.

Net income attributable to noncontrolling interest

Intuitive Machines and KBR entered into a joint venture agreement (the “OMES III JV Agreement”) within Space Network Solutions to execute the OMES III contract with a profits interest of 47% for Intuitive Machines and 53% for KBR, which represents the noncontrolling interest. We have determined that the OMES III JV Agreement represents a silo within Space Network Solutions and is a standalone VIE. Intuitive Machines is the primary beneficiary of this VIE which is consolidated for financial reporting purposes.

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Results of Operations

The following tables set forth our results of operations for the periods presented. The period over period comparison of financial results is not necessarily indicative of future results.

The following table sets forth information regarding our consolidated results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Revenue

Revenue for the years ended December 31, 2024 and 2023 was primarily driven by NASA and other commercial payload contracts associated with the IM-1, IM-2 and IM-3 lunar payload missions as well as the OMES III contract where we provide engineering services to the Landsat Servicing mission at the Goddard Space Flight Center in Maryland. Additionally, we earned revenue from several other general and feasibility study engineering contracts for the year ended December 31, 2024, including the JETSON Low Power, LTV and NSN contract awards.

The following provides a summary of the significant contracts and targeted mission launch dates for each lunar payload mission impacting our results of operations:

•The NASA payload contract for the IM-1 mission was awarded in June 2019 and was completed in February 2024. As a result of the successful landing on the lunar surface, previously constrained revenue of approximately $12.3 million as of December 31, 2023 was released and approximately $11.6 million was

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recognized as revenue during the first quarter of 2024, bringing the total IM-1 mission contract revenue under NASA and other commercial fixed-priced contracts to $132.4 million. As of March 31 2024, the IM-1 mission and all related contracts have been closed out.

•The initial NASA payload contract for the IM-2 mission was awarded in October 2020 with a targeted mission launch date in December 2022. Total IM-2 mission estimated contract revenue under NASA and other commercial fixed-priced contracts increased to $123.8 million as of December 31, 2024 (excluding constrained revenue of $15.8 million) as compared to $102.1 million as of December 31, 2023. The increase in total mission estimated contract revenue is mostly due to a task order modification with NASA finalized in the second quarter of 2024 to change the mission targeted landing site within the South Pole region of the moon and extend the expected mission launch and post-launch services of IM-2 to no later than August 2025. The task order modification increased estimated contract revenue by approximately $12.5 million. In addition, several new awards for commercial landed payload and commercial rideshare contracts further contributed to the increase in the estimated revenue. In early 2025, we completed the IM-2 mission and continue to work with our customers to close out all related contracts.

•The initial NASA payload contract for the IM-3 mission was awarded in November 2021 with an initial targeted mission launch date no later than June 2024 under our current contract with NASA. Total IM-3 mission estimated revenue under fixed-priced contracts is $93.0 million (excluding constrained revenue of $9.7 million) as of December 31, 2024 as compared to $80.9 million as of December 31, 2023. The increase in total mission estimated contract revenue is mostly due to a task order modification with NASA to identify its complement of payloads and extend the IM-3 mission timeline to no later than June 2026. The task order modification increased estimated contract revenue by approximately $9.0 million.

•The initial NASA payload contract for the IM-4 mission was awarded in August 2024 with an initial targeted mission launch date no later than August 2028. Total IM-4 mission estimated revenue under fixed-priced contracts is $105.2 million (excluding constrained revenue of $11.7 million) as of December 31, 2024.

Total revenue increased by $148.4 million, or 187%, for the year ended December 31, 2024 compared to the same period in 2023 and was substantially driven by a full year of revenue in 2024 from the OMES III contract execution which began in the fourth quarter of 2023 as further discussed below.

Revenue on the IM-1 mission increased approximately $5.2 million to $12.4 million for the year ended December 31, 2024 from $7.2 million for the same period in 2023. The increase in IM-1 revenue was due to the successful completion of the mission in February 2024 which resulted in the release of approximately $12.3 million of previously constrained revenue, and approximately $11.6 million was recognized as revenue during the first quarter of 2024. Revenue on the IM-2 mission decreased slightly by $3.0 million to $19.1 million for the year ended December 31, 2024 from $22.1 million for the same period in 2023 as revenue from commercial payload and commercial rideshare contracts leveled off as the mission neared the upcoming launch in February 2025. The IM-2 mission was approximately 97% complete as of December 31, 2024. Revenue from the IM-3 mission decreased approximately $11.9 million to $13.0 million for the year ended December 31, 2024 from $24.9 million for the same period in 2023 and was largely attributable to unfavorable adjustments from task order modifications extending the targeted mission launch window to no later than June 2026. The IM-3 mission was approximately 69% complete as of December 31, 2024.

Revenues from task orders under the OMES III contract, which commenced in December 2023, were approximately $145.0 million for the year ended December 31, 2024 compared to $12.5 million for the same period in 2023. Other revenue contracts from engineering and other services increased approximately $23.1 million mostly driven by $18.3 million in revenues from the LTV contract awarded in April 2024.

Cost of revenue (excluding depreciation)

Total cost of revenue increased by $121.2 million, or 117%, for the year ended December 31, 2024 compared to the same period in 2023. Cost of revenue on the IM-1 mission decreased by $12.8 million due to winding down progress as the mission was completed in February 2024. On the IM-2 mission, cost of revenue decreased slightly by approximately $1.4 million for the year ended December 31, 2024 compared to the same period in 2023 as the mission neared completion. IM-3 mission cost of revenue decreased by approximately $11.4 million to $20.2 million for the year ended December 31, 2024 compared to $31.6 million for the same period in 2023, primarily due to lower activity as the focus shifted towards the upcoming IM-2 mission launch, as previously discussed.

As of December 31, 2024, two lunar missions were in loss positions. On the IM-2 mission, we increased the accrued contract loss by approximately $9.9 million during the year ended December 31, 2024 which was primarily driven by

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unfavorable adjustments resulting from task order modifications to change the mission targeted landing site and extension of the targeted mission launch window to early 2025. On the IM-3 mission, the accrued contract loss increased by approximately $12.5 million during the year ended December 31, 2024 and was largely attributable to unfavorable adjustments resulting from task order modifications extending the targeted mission launch window to no later than 2026.

Cost of revenue from task orders under the OMES III contract were approximately $138.3 million for the year ended December 31, 2024 compared to $11.6 million for the same period in 2023. The OMES III contract started in December 2023. Other contract cost of revenue increased approximately $17.3 million for the year ended December 31, 2024 compared to the same periods in 2023 mostly driven by $15.4 million in cost of revenue from the LTV contract awarded in April 2024.

Impairment of property and equipment

During the third quarter of 2024, management determined that certain assets under development by a third party subcontractor were not in compliance according to the contract. Management concluded the carrying cost of these assets was not recoverable and recorded an impairment charge of approximately $5.0 million including capitalized interest of $0.5 million, in our consolidated statements of operations for the year ended December 31, 2024. See Note 4 to the consolidated financial statements for additional information.

During the fourth quarter of 2023 and in connection with moving operations to our new facility, the Lunar Production and Operations Center (“LPOC”), as discussed further in Note 5 to the consolidated financial statements, management identified the move as a significant adverse change in the usage of space from our prior facility. As such, management determined that certain leasehold improvements and furniture and fixtures from our prior facility will not be utilized at the LPOC and the carrying value will not be recoverable. For the year ended December 31, 2023, we recorded impairment charges of approximately $1.0 million in our consolidated statements of operations. See Note 4 to the consolidated financial statements for additional information.

General and administrative expense (excluding depreciation)

General and administrative expense (excluding depreciation) increased by $18.9 million for the year ended December 31, 2024 compared to the same period in 2023, primarily attributable to our growth to support corporate and business operations, resulting in higher headcount driving increased employee compensation and benefits expense of $9.4 million and related share-based compensation expense of $4.5 million. For the same comparative periods, we incurred increases in expenses for rent expense of $2.5 million primarily driven by the move to our new corporate headquarters in late 2023, professional services of $1.9 million, software licenses of $1.7 million, and various other administrative costs of $1.0 million. These increases were slightly offset by a decrease in bids and proposals of $2.1 million.

Other income (expense), net

Total other income (expense), net unfavorable change of $360.8 million for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to unfavorable changes in fair value of the earn-out liabilities of $186.4 million and warrant liabilities of $93.1 million, and loss on issuance of securities of $86.4 million. These unfavorable changes were partially offset by favorable changes of $2.4 million related to the SAFE Agreement liability which was eliminated and converted to Class A Common Stock upon the consummation of the Business Combination in February 2023, $1.0 million in interest income (expense), net as the Company paid off the Credit Mobilization Facility during late 2023 through mid 2024 (as further discussed in Note 6 to the consolidated financial statements), and various other income of $1.7 million.

Income tax expense

For the years ended December 31, 2024 and 2023, we recognized a combined U.S. federal and state expense for income taxes of $37 thousand and $40 thousand, respectively. The effective combined U.S. federal and state income tax rates were (0.01%) and 0.39% for the years ended December 31, 2024 and 2023, respectively. For year ended December 31, 2024, our effective tax rate differed from the statutory rate of 21% primarily due to deferred taxes for which no benefit is being recorded and losses attributable to noncontrolling interest unitholders that are taxable on their respective share of taxable income. For the year ended December 31, 2023, our effective tax rate differed from the statutory rate primarily due to Intuitive Machines, LLC's status as a partnership for U.S. federal income tax purposes.

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Key Business Metrics and Non-GAAP Financial Measures

We monitor the following key business metrics and non-GAAP financial measures that assist us in evaluating our business, measuring our performance, identifying trends and making strategic decisions.

Backlog

We define backlog as our total estimate of the revenue we expect to realize in the future as a result of performing work on awarded contracts, less the amount of revenue previously recognized. We monitor our backlog because we believe it is a forward-looking indicator of potential sales which can be helpful to investors in evaluating the performance of our business and identifying trends over time. We generally include total expected revenue in backlog when a contract is awarded by the customer under a legally binding agreement. Our backlog does not include any estimate of future potential work orders that might be awarded under government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts or other multiple-award contract vehicles, nor does it include option periods that have not been exercised by the customer. Due to government procurement rules, in certain cases revenue included in backlog is subject to budget appropriation or other contract cancellation clauses. Nearly all contracts allow customers to terminate the agreement at any time for convenience. If any of our contracts with firm orders were to be terminated, our backlog would be reduced by the expected value of the unfilled orders of such contracts. Consequently, our backlog may differ from actual revenue recognized in our financial statements.

The following table presents our backlog as of the periods indicated:

Orders comprising backlog as of a given balance sheet date are typically invoiced in subsequent periods. As of December 31, 2024, we expect to recognize approximately 60% to 65% of our backlog in 2025, approximately 15% to 20% in 2026 and the remaining thereafter. Our backlog could experience volatility between periods, including as a result of customer order volumes and the speed of our fulfillment, which in turn may be impacted by the nature of products and services ordered, the amount of inventory on hand to satisfy orders and the necessary development and manufacturing lead time required to satisfy certain orders.

Backlog increased by $59.8 million as of December 31, 2024 compared to December 31, 2023, due to $303.7 million in new awards primarily associated with the IM-4 CLPS, NSN, and LTV contracts awarded from NASA as well as task order modifications to the existing IM-2 CLPS, IM-3 CLPS and OMES III contracts. These increases were partially offset by continued performance on existing contracts of $228.0 million and decreases related to contract value adjustments of $15.9 million mostly related to various fixed price contracts.

As of December 31, 2024, our backlog of $328.3 million exceeded our remaining performance obligations of $168.7 million as reported in Note 3 to our consolidated financial statements. The difference of $159.6 million was primarily due $66.0 million of variable consideration associated with constrained revenue and $93.6 million in backlog related to the funded value of the OMES III project and various other time and materials service contracts where revenue is recognized when services are performed and contractually billable and therefore not included in remaining performance obligations.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management team uses to assess our operating performance. We calculate Adjusted EBITDA as net income (loss) excluding results from non-operating sources including interest income, interest expense, share based compensation, change in fair value instruments, gain or loss on issuance of securities, other income/expense, depreciation, impairment of property and equipment, and provision for income taxes.

We present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and because it is frequently used by analysts, investors, and other interested parties to evaluate companies in our industry.

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Adjusted EBITDA has limitations as an analytical measure, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

•Adjusted EBITDA does not reflect interest income, interest expense or other non-operating gains and losses, which may represent an increase to or reduction in cash available to us;

•Adjusted EBITDA does not consider the impact of share-based compensation expense, which is expected to continue to be part of our compensation strategy;

•Adjusted EBITDA does not consider the impact of change in fair value of SAFE Agreements, change in fair value of earn-out liabilities, change in fair value of warrant liabilities, loss on issuance of securities, or impairment of property and equipment, that we do not consider to be routine in nature for the ongoing financial performance of our business;

•Adjusted EBITDA excludes non-cash charges for depreciation of property and equipment, and although the assets being depreciated may have to be replaced in the future, Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and

•Adjusted EBITDA does not reflect provisions for income taxes, which may represent a reduction in cash available to us.

Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other U.S. GAAP results.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure presented in accordance with U.S. GAAP, to Adjusted EBITDA.

Free Cash Flow

We define free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment. We believe that free cash flow is a meaningful indicator of liquidity that provides information to management and investors about the amount of cash generated from operations that, after purchases of property and equipment, can be used for strategic initiatives, including continuous investment in our business and strengthening our balance sheet.

Free Cash Flow has limitations as a liquidity measure, and you should not consider it in isolation or as a substitute for analysis of our cash flows as reported under U.S. GAAP. Some of these limitations are:

•Free Cash Flow is not a measure calculated in accordance with U.S. GAAP and should not be considered in isolation from, or as a substitute for financial information prepared in accordance with U.S. GAAP.

•Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences among methods of calculation.

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•Free Cash Flow may be affected in the near to medium term by the timing of capital investments, fluctuations in our growth and the effect of such fluctuations on working capital and changes in our cash conversion cycle.

The following table presents a reconciliation of net cash used in operating activities, the most directly comparable financial measure presented in accordance with U.S. GAAP, to free cash flow:

Liquidity and Capital Resources

Since inception, we have funded our operations through internally generated cash on hand, proceeds from sales of our capital stock, including the execution of SAFE Agreements, our At The Market Offering Program (the “ATM Program”) with Cantor (as described below), our 2024 Offering (as described below), proceeds from warrant exercises, and proceeds from the issuance of bank debt. We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. Our expected primary uses of cash on a short and long-term basis are for working capital requirements, capital expenditures, general corporate purposes, including operations, research and development and potential mergers and acquisitions. Our primary working capital requirements are for project execution activities including purchases of materials, subcontracted services and payroll which fluctuate during the year, driven primarily by the timing and extent of activities required on new and existing projects. Our capital expenditures are primarily related to machinery and equipment, computers and software, and leasehold improvements.

As of December 31, 2024, we had cash and cash equivalents of $207.6 million and working capital of $194.3 million. For the year ended December 31, 2024, the Company received approximately $294.7 million in gross proceeds from warrant exercises, sales of stock under the ATM program and the 2024 Offering, and other equity transactions, as further described in Notes 8 and 9.

In connection with the Business Combination as discussed in Notes 1 and 8, the Company entered into the Cantor Purchase Agreement, pursuant to which the Company may direct CFPI, at the Company’s discretion, to purchase up to the lesser of (i) $50.0 million of newly issued shares of Class A Common Stock and (ii) the “exchange cap” specified therein, subject to certain customary conditions and limitations set forth in the agreement. The Cantor Purchase Agreement contractually terminated on September 1, 2024. Additionally, in April 2024, the Company and Cantor entered into a Controlled Equity Offering Sales Agreement with Cantor acting as the Company’s exclusive sales agent for the sale of newly issued shares of Class A Common Stock for aggregate proceeds up to $100.0 million, as further described in Note 8 as the ATM Program. Pursuant to the ATM program, the Company raised approximately $97.5 million, net of $2.5 million in transaction fees, during the second and third quarters of 2024.

In December 2024, the Company completed an underwritten public offering of 10,952,381 shares of its Class A Common Stock at a price to the public of $10.50 per share (the “Public Offering”), which included the full exercise of the underwriters’ option to purchase an additional 1,275,714 shares of Class A Common Stock from the Company. The Company also entered into an agreement with an accredited investor, pursuant to which the Company sold to the investor 952,381 shares of its Class A Common Stock in a concurrent private placement at a purchase price per share equal to the Public Offering price per share of $10.50 (the “Private Offering” together with the Public Offering, the “2024 Offering”). The net proceeds to the Company from the 2024 Offering, after deducting transaction costs of $6.5 million, were approximately $116.9 million.

As further described in Note 17 - Subsequent Events, the Company announced on February 4, 2025, the redemption of all of its outstanding warrants (the Public Warrants and Private Warrants as defined in Note 9, collectively the “Warrants”) and Warrants remaining unexercised as of March 6, 2025 (the “Redemption Date”) were redeemed by the Company for $0.01 per Warrant. During the first quarter of 2025, the Company received approximately $176.6 million in gross proceeds from the Warrant exercises of 15,358,229. On the Redemption Date, a total of 6,571,724 Warrants remained unexercised and the Company redeemed those Warrants for an aggregate redemption price of $66 thousand. In connection with the Warrant Redemption, a warrant holder agreed to exercise 1,800,000 of the Public Warrants, and the Company agreed to repurchase 941,080 shares of the Company’s Class A Common Stock for an aggregate purchase price of $20.7 million.

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Management believes that the cash and cash equivalents as of December 31, 2024 and the additional liquidity provided by subsequent equity transactions, will be sufficient to fund the short-term liquidity needs and the execution of the business plan through at least the twelve-month period from the date the financial statements are issued.

Loan Agreement

On March 4, 2025, we entered into a loan and security agreement (the “Loan Agreement”) with Stifel Bank. The Loan Agreement provides for a secured revolving credit facility in an aggregate principal amount of up to $40.0 million (the “Revolving Facility”). The proceeds of the loans (and any letters of credit issued thereunder) may be used for the funding of growth initiatives, including working capital needs and general corporate purposes as the Company continues to focus on minimizing its cost of capital while maximizing available funding alternatives. Amounts outstanding under the Revolving Facility will bear interest at a rate per annum equal to the greater of (a) Term SOFR (secured overnight financing rate) plus 2.75% and (b) 6.00%. The Loan Agreement matures on April 30, 2027 (the “Maturity Date”). Subject to certain conditions in the Loan Agreement, amounts borrowed thereunder may be repaid and reborrowed at any time prior to the Maturity Date. As of the date of this filing, the revolving credit facility remains unborrowed.

Live Oak Mobilization Credit Facility

In December 2019, the Company entered into a loan agreement with Live Oak Banking Company (the “Credit Mobilization Facility”) which provided a $12.0 million credit mobilization facility that was paid in full as of November 2023. In July 2022, we entered into the Second Amended and Restated Loan Agreement with Live Oak Banking Company which provided an $8.0 million credit mobilization facility with a loan maturity of July 14, 2024. The Credit Mobilization Facility bears interest (payable monthly) at a rate per annum equal to the greater of (a) the prime rate, as published in the Wall Street Journal newspaper, plus 2.0% and (b) 5.0% and requires the Company to meet certain financial and other covenants and are secured by substantially all of the assets of the Company. There was $8.0 million outstanding under the Credit Mobilization Facility as of December 31, 2023. The Company paid $5.0 million during the second quarter of 2024, and paid the remaining $3.0 million in July 2024 and the facility has been terminated. See Note 6 - Debt to our consolidated financial statements for additional information related to the credit mobilization facilities.

Bridge Loan

On January 10, 2024, the Company entered into a series of loan documents with Pershing LLC, an affiliate of Bank of New York Mellon, pursuant to which Pershing LLC agreed to an extension of credit in an amount not to exceed $10.0 million to the Company (the “Bridge Loan”). Borrowings under the Bridge Loan bear interest at the target interest rate set by the Federal Open Market Committee (“Fed Funds Rate”), subject to a 5.5% floor, plus a margin. For borrowings, the applicable rate margin is 0.9%. The $10.0 million in borrowings are available for working capital needs and other general corporate purposes must be repaid by February 22, 2024.

The Bridge Loan included guarantees (the “Credit Support Guarantees”) by Ghaffarian Enterprises, LLC (an affiliate of Dr. Kamal Ghaffarian) (“Ghaffarian Enterprises”) and documentation by which Ghaffarian Enterprises, LLC supported such Credit Support Guarantees with collateral including marketable securities (the “Credit Support”), in each case in favor of the lender for the benefit of the Company. On January 10, 2024, the Company and Ghaffarian Enterprises entered into a credit support fee and subrogation agreement, where the Company agreed to pay a support fee of $148 thousand for the Credit Support.

On January 29, 2024, the Bridge Loan was repaid in full as a result of $10.0 million in contributions from the Guarantor under the Bridge Loan Conversion transaction further described in Note 8.

Other

In March 2024, the Company filed a shelf registration statement on Form S-3 (File No. 333-278288) with the Securities and Exchange Commission, which permits the offering, issuance, and sale of up to a maximum aggregate offering price of $300.0 million of the Company’s Class A common stock and warrants. Up to a maximum of $100.0 million of the maximum aggregate offering price of $300.0 million may be issued and sold pursuant to an at-the-market financing facility under a capital controlled equity offering sales agreement between the Company and Cantor Fitzgerald & Co. As of the third quarter of 2024, the Company raised approximately $97.5 million in net proceeds (net of $2.5 million in transaction fees) pursuant to the at-the-market financing facility. In addition, subject to market and other conditions, we may opportunistically pursue underwritten public offerings of our Class A common stock under such shelf registration statement for our account or the account of our selling stockholders. Unless otherwise specified in the prospectus supplement relating to any such offering, we expect to use the net proceeds of any sales of Class A common stock for our account for general

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corporate purposes. We would not receive any proceeds from the sale of our Class A common stock by the selling stockholders. We expect to continue to evaluate opportunities for such underwritten offerings over the near and intermediate term.

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

Cash Flows for the years ended December 31, 2024 and 2023

Operating Activities

During the year ended December 31, 2024, our operating activities used $57.6 million of net cash as compared to $45.3 million of net cash used during the year ended December 31, 2023. Changes in operating assets and liabilities which consist primarily of working capital balances for our projects may vary and are impacted by the stage of completion and contractual terms of projects. The primary components of our working capital accounts are trade accounts receivable, contract assets, accounts payable, and contract liabilities.

Investing Activities

During the year ended December 31, 2024, investing activities used $10.1 million of net cash as compared to $29.9 million of net cash used during the year ended December 31, 2023. The $19.8 million favorable change primarily results from capital expenditures that occurred during 2023 for our Lunar Production and Operations Center that was completed in late 2023 slightly offset by capital expenditures associated primarily with the new NSN contract award in late 2024.

Financing Activities

During the year ended December 31, 2024, financing activities provided $272.8 million of net cash as compared to $53.9 million of net cash provided during the year ended December 31, 2023.

During 2024, our financing activities primarily included $61.3 million in proceeds from the exercise of warrants, $224.0 million in net proceeds from the issuance of securities, $10.0 million in proceeds received in borrowings under the Bridge Loan offset by the repayment of $10.0 million, $8.0 million repayment on a loan under our Credit Mobilization Facility, $2.3 million in distributions to noncontrolling interests, and $2.2 million in net activity related to our share-based awards.

During 2023, our financing activities primarily included $34.1 million in proceeds received upon consummation of the Business Combination and Series A Preferred Stock issuance slightly offset by $9.4 million in related transaction costs paid. We also received $20.0 million in proceeds upon the close of the Private Placement, $12.7 million in cash associated with the termination of a prepaid forward purchase agreement and $16.1 million in proceeds from the exercise of warrants, slightly offset by $12.0 million repayment on a loan under our Credit Mobilization Facility and member distributions of $8.0 million.

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Contractual Obligations and Commitments

The following table presents our significant contractual obligations and commitments as of December 31, 2024 (in thousands):

(1)    Refer to Note 5 for additional information on our operating and finance lease obligations.

(2)    From time-to-time, we enter into long-term commitments with vendors to purchase launch services and for the development of certain components in conjunction with our obligations under revenue contracts with our customers. This represents our significant remaining purchase obligations under non-cancelable commitments.

See Note 7 of the consolidated financial statements for information regarding our tax receivable agreement.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

We believe that the following accounting policies involve a high degree of judgement and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. Significant accounting policies employed by us, including the use of estimates, are presented in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgements that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

Revenue Recognition

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our revenue is primarily generated from the progress on long-term lunar mission contracts and engineering services for the research, design, development, and manufacturing of advancement technology aerospace system.

Revenue is measured based on the amount of consideration specified in a contract with a customer. Revenue is recognized when and as our performance obligations under the terms of the contract are satisfied which generally occurs with the transfer of services to the customer. For each long-term contract, we determine the transaction price based on the consideration expected to be received. We allocate the transaction price to each distinct performance obligation to deliver a good or service, or a collection of goods and/or services, based on the relative standalone selling prices.

For most of our business, where performance obligations are satisfied due to the continuous transfer of control to the customer, revenue is recognized over time. Where the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability, those contracts are accounted for as single performance obligations. We recognize revenue generally using the cost-to-cost method, based primarily on contract costs incurred to date compared to total estimated contract costs at completion. This method is deemed appropriate in measuring performance towards completion because it directly measures the value of the goods and services transferred to the customer. Billing timetables and payment terms on our contracts vary based on a few factors, including the contract type. Typical payment terms under fixed-price contracts provide that the customer pays either performance-based payment based on the achievement of contract milestones or progress payments based on a percentage of costs we incur.

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Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion (the process described below in more detail) is complex and subject to many variables and requires significant judgment. The consideration to which we are entitled on our long-term contracts may include both fixed and variable amounts. Variable amounts can either increase or decrease the transaction price.

We include estimated amounts of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the contract price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We reassess the amount of variable consideration each accounting period until the uncertainty associated with the variable consideration is resolved. Changes in the assessed amount of variable consideration are accounted for prospectively as a cumulative adjustment to revenue recognized in the current period.

When changes are required for the estimated total revenue on a contract, these changes are recognized on a cumulative catch-up basis in the current period. A significant change in one or more estimates could affect the profitability of one or more of our performance obligations. If estimates of total costs to be incurred exceed estimates of total consideration the Company expects to receive, a provision for the remaining loss on the contract is recorded in the period in which the loss becomes evident.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is either not an emerging growth company or an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

If the Company loses its EGC status, it will qualify as a large accelerated filer based on its unaffiliated market capitalization, according to Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As a result of the closing of the Business Combination on February 13, 2023, which was accounted for as a reverse recapitalization in accordance with GAAP, the financial statements of Intuitive Machines, LLC, a Delaware limited liability company and our wholly-owned subsidiary, are now the financial statements of the Company. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and Part I. Item 1A. “Risk Factors” included in this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless otherwise indicated or the context otherwise requires, references in this section to the “Company,” “IM,” “Intuitive Machines,” “we,” “us,”, or “our” refer to Intuitive Machines, Inc. and its consolidated subsidiaries.

Overview

We are a space infrastructure and services company founded in 2013 that is contributing to the establishment of lunar infrastructure and commerce on the Moon. We believe we have a leading position in the development of lunar space operating in four business lines described further below. We are initially focused on establishing the lunar infrastructure and basis for commerce to inform and sustain human presence off Earth. We believe our business is well positioned for continued growth and expansion:

•Right Now: Servicing the National Aeronautics and Space Administration (“NASA”) and a worldwide set of commercial payload customers, working to provide access to the lunar surface, cislunar space and data transmission for science, technology, and infrastructure.

•Tomorrow: Working to provide a thriving, diverse lunar economy, creating new opportunities and markets to enable on-orbit applications, a permanent presence on the Moon, and expand the commercial space exploration marketplace.

We are currently working to provide access to the lunar surface and collect and transmit cislunar data for science, technology, and infrastructure. We are one of a select few companies servicing NASA and a worldwide set of commercial payload customers. We believe we have a strong position with a first mover advantage, as evidenced by three Commercial Lunar Payload Services (“CLPS”) awards to date as of December 31, 2023. On February 22, 2024, Intuitive Machines’ Nova-C lander became the first U.S. vehicle to softly land on the lunar surface since 1972 and landed the vehicle further south than any vehicle in the world has ever soft-landed on the Moon. Our Nova-C lander on the IM-1 mission carried approximately 100 kilograms of payloads and executed numerous experiments and technology demonstrations at the lunar surface near the south pole. Our goal is to follow the successful IM-1 mission with IM-2, which will continue to execute experiments and technology demonstrations at the Shackleton Connecting Ridge at the lunar south pole, and IM-3, our third CLPS award, which will land at Reiner Gamma. These missions, along with additional expeditions, are in partnership with NASA, Nokia Corporation, Columbia Sportswear Company, Aegis Aerospace, Inc. and other commercial players. Intuitive Machines offers its customers the flexibility needed to pioneer a thriving, diverse lunar economy and to enable a permanent presence on the Moon.

Additionally, the U.S. Space Forces’ (the “Space Force”) requirement to ensure freedom of action in space is driving their initial focus on cislunar Space Domain Awareness sensors and xGEO Position Navigation and Timing solutions as a result of the ongoing efforts by the United States and the People’s Republic of China (“China”) to return to the lunar surface in a sustainable manner. We believe the U.S. Department of Defense funding for cislunar activities will drive the Space Force to rely on purchasing cislunar commercial services for the next five plus years, as opposed to acquiring and operating new government systems. This funding provides an opportunity for companies such as Intuitive Machines to sell Space Domain Awareness, Position Navigation and Timing, and secure communications to the Space Force, especially given that the commercial sector will be the driving force in providing cislunar products and services due to the capital that is flowing to new space entrants. This, along with other domestic and foreign allied policies, enhances our belief in the growing space economy and why we are well-positioned.

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Our Business Model

We primarily generate revenue through our contracts with customers of our lunar access services and by collecting and transmitting cislunar data for science, technology and infrastructure in our Space Products and Infrastructure services. We are a provider and supplier of space products and services that we believe will enable sustained robotic and human exploration to the Moon, Mars, and beyond.

We employ a “land-and-expand” go-to-market strategy with the goal to deliver increasing value and repetitive revenue with each customer over time by expanding the scope of the services we offer. We work closely with our customers and partners to enable their early success. We expect that deeper adoption of our products and services from our customers will come in many forms, including increased reliance on our technology as a core part of a mission, increased usage of our landers for lunar transportation and exploration, and greater dependence on our advanced software analytics capabilities for satisfying each customers’ needs.

Our core technologies underpin our capabilities in four business units: Lunar Access Services, Orbital Services, Lunar Data Services and Space Products and Infrastructure. Under Accounting Standards Codification (“ASC”) 280 “Segment Reporting,” we concluded that our business units operate as one reportable segment. See our Segment Reporting disclosure under Note 2 in our consolidated financial statements for further discussion on our reportable segment.

Lunar Access Services

Our Lunar Access Services business provides reliable and affordable means for governments, companies and individuals to explore and place objects in cislunar space or on the lunar surface. We have developed a complete lunar program that includes mission control, the Nova-C lander, a space-to-ground communications network, and a series of launch vehicle contracts with SpaceX. As of December 31, 2023, we had three missions on the flight manifest, with plans to increase the frequency and complexity of the missions over time. On February 22, 2024, our Nova-C lander on the IM-1 mission became the first U.S. vehicle to softly land on the lunar surface since 1972 and landed the vehicle further south than any vehicle in the world has ever soft-landed on the Moon.

We are currently focused on using our proprietary lunar lander vehicles to execute CLPS contracts for NASA to fly scientific equipment to the lunar surface and support experiments. We also have a robust and growing set of commercial customers pursuing R&D and technology maturation efforts aimed at capturing the growing cislunar economy. This service includes softly landing on the lunar surface while carrying significant payloads, shuttling numerous technology demonstrations to the lunar surface, deploying the first drill to test for water ice on the Moon and deploying drones to test Long Term Evolution networks.

Orbital Services

Orbital Services provides in-space orbital services for both commercial and government organizations. These services include repair, refueling, and raising the orbits of existing satellites. We seek to leverage our domain expertise and space products, such as optical navigation, rendezvous and proximity operations, robotic mechanisms for satellite delivery, debris removal and Space Domain Awareness in orbits from low Earth orbit out to cislunar space. We also serve as the prime contractor and partner on NASA center support contracts, such as the recently awarded OMES III and JETSON Low Power contracts, that expand our relationship with NASA and emphasize our capabilities in key technology focus areas.

Lunar Data Services

Our Lunar Data Services business will establish a private and secure network called the Lunar Data Network (the “LDN”) that sends and receives secure communications, navigation and imagery to and from the Moon. The LDN is designed to support line-of-sight and data relay services for spacecraft in cislunar space and systems anywhere on the lunar surface. We intend to evolve the network to provide backup services to NASA and the U.S. Space Force. The LDN is currently comprised of a mission control center, strategically positioned global ground stations, and base-band units installed at each ground station.

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With the launch of future lander missions, the LDN will be further enhanced with the deployment of our lunar data relay satellites to offer continuous lunar coverage. We believe providing these lunar data services to NASA and the Space Force will be an increasingly important priority given China’s recent declaration that it intends to build its own lunar satellite network and manned lunar habitat.

Space Products and Infrastructure

Our Space Products and Infrastructure business offers reliable and cost-effective space products to its customers with offerings that include propulsion systems, navigation systems, lunar mobility, power infrastructure and human habitation systems. We also provide highly specialized aerospace engineering services for complex space systems development to NASA and the aerospace industry across the United States.

With extensive additive manufacturing capabilities, including an in-house composites shop and robust machine shop, we believe we have the capabilities and expertise required to rapidly manufacture on-demand prototypes, development parts, flight units, and spares with a focus on producing small series and high-quality serial productions of metal components utilizing additive manufacturing. Additionally, we believe this business allows us to expand into prime positions on payload contracts with NASA and other customers.

Recent Developments

Business Combination and Related Transactions

The Company was formerly known as Inflection Point Acquisition Corp. (“IPAX”), which was a blank check company originally incorporated on January 27, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On September 24, 2021, IPAX consummated an initial public offering, after which its securities began trading on the Nasdaq. On September 16, 2022, IPAX entered into that certain Business Combination Agreement by and between IPAX and Intuitive Machines, LLC.

On February 13, 2023, Intuitive Machines, LLC consummated the previously announced Business Combination and other related transactions as further described in Note 1 - Business Description and Note 3 - Business Combination and Related Transactions to our consolidated financial statements included in Item 8 of Part II of this Annual Report. The Business Combination was accounted for akin to a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The Business Combination and other related transactions had several significant impacts on our reported financial position and results, as a consequence of the reverse recapitalization treatment.

Private Placement

On September 5, 2023, the Company consummated a securities purchase agreement (the “Purchase Agreement”) with Armistice Capital Master Fund Ltd (the “Purchaser”) pursuant to which the Company agreed to sell securities to the Purchaser in a private placement (the “Initial Private Placement”). The Purchase Agreement provided for the sale and issuance by the Company of (i) an aggregate of 4,705,883 shares of the Company’s Class A Common Stock (the “PIPE Shares” and (ii) an accompanying (a) warrant to purchase up to 4,705,883 shares of Class A Common Stock (the “Initial Series A Warrant”) at an exercise price of $4.75 per share and (b) warrant to purchase up to 4,705,883 shares of Class A Common Stock (the “Initial Series B Warrant”) at an exercise price of $4.75 per share, for aggregate gross proceeds of $20.0 million, before deducting related transaction costs of $1.4 million. The Initial Series A Warrant and the Initial Series B Warrant are immediately exercisable and will expire on March 5, 2029 and March 5, 2025, respectively.

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After giving effect to the Business Combination, the Private Placement and other related transactions, there are currently (i) 21,029,876 shares of Class A Common Stock issued and outstanding, (ii) 0 shares of Class B Common Stock issued and outstanding, (iii) 70,909,012 shares of Class C Common Stock issued and outstanding, and (iv) 26,000 shares of Series A Preferred Stock issued and outstanding. The shares of Class B Common Stock and Class C Common Stock do not have any economic value but entitle the holder thereof to one and three votes per share, respectively. The Company also has outstanding a total of 21,930,394 Public Warrants and Private Warrants to purchase one share of Class A Common Stock with an exercise price of $11.50 per share and 9,411,766 Series A Warrants and B Warrants to purchase one share of the Company’s Class A Common Stock with an exercise price of $4.75 per share. The Company also issued 541,667 Preferred Investor Warrants in conjunction with the issuance of the Series A Preferred Stock to purchase an aggregate 706,522 shares of the Company’s Class A Common Stock with an exercise price of $11.50 per share. The Class A Common Stock, and the Public Warrants and Private Warrants trade on the Nasdaq under the symbols, “LUNR” and “LUNRW”, respectively.

Subsequent Events

Warrant Transactions

On January 10, 2024, the Company entered into a Warrant Exercise Agreement with an existing investor to exercise in full an existing Series B Common Stock Purchase Warrant to purchase up to an aggregate 4,705,883 shares of Class A Common Stock. In consideration for the immediate and full exercise of the existing Series B Common Stock Purchase Warrant, the existing investor received (i) a new unregistered Series A Common Stock Purchase Warrant to purchase up to an aggregate of 4,705,883 shares of Class A Common Stock with an exercise price of $2.75 per share and a term of 5 years, 6 months and (ii) a new unregistered Series B Common Stock Purchase Warrant to purchase up to an aggregate of 4,705,883 shares of Class A Common Stock with an exercise price of $2.75 per share and a term of 18 months in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933. In connection with the Warrant Exercise Agreement, the Company also agreed to reduce the exercise price of the existing Series B Common Stock Purchase Warrant from $4.75 to $2.50 per share and reduced the exercise price of the existing Series A Common Stock Purchase Warrant from $4.75 to $2.75 per share. The gross proceeds to the Company from the exercise of the existing Series B Common Stock Purchase Warrant was approximately $11.8 million.

In a series of transactions during February 2024, the investor exercised its remaining 4,705,883 Series B and 9,411,766 Series A Common Stock Purchase Warrants providing an additional $38.8 million of gross proceeds to the Company.

Loan and Loan Conversion

On January 10, 2024, the Company entered into a series of loan documents with Pershing LLC, an affiliate of Bank of New York Mellon, pursuant to which Pershing LLC agreed to an extension of credit in an amount not to exceed $10.0 million to the Company (the “Loan Documentation”). Borrowings under this credit facility bear interest at the target interest rate set by the Federal Open Market Committee (“Fed Funds Rate”), subject to a 5.5% floor, plus a margin. For borrowings, the applicable rate margin is 0.9%. The proceeds are available for working capital needs and other general corporate purposes. The credit facility is due on February 22, 2024.

The Loan Documentation included one or more guarantees (the “Credit Support Guarantees”) by Ghaffarian Enterprises, LLC (an affiliate of Dr. Kamal Ghaffarian) (“Ghaffarian Enterprises”) and documentation by which Ghaffarian Enterprises, LLC supported such Credit Support Guarantees with collateral including marketable securities (the “Credit Support”), in each case in favor of the lender for the benefit of the Company. On January 10, 2024, the Company and Ghaffarian Enterprises entered into a credit support fee and subrogation agreement, where the Company agreed to pay a support fee of $148 thousand for the Credit Support.

On January 28, 2024, the Company and the Guarantor entered into a letter agreement (the “Letter Agreement”) pursuant to which, on January 29, 2024: (i) the Guarantor contributed $10.0 million to the Company for purposes of repaying the principal amount owed to the Lender under the Credit Line as of the repayment date specified thereunder (the “Repayment Obligation”), in exchange for which (x) the Company issued to the Guarantor 3,487,278 shares of the Company’s Class A Common Stock and Conversion Warrants described further below. Following the Contribution, the Company all amounts due to the Lender in satisfaction of the Credit Line were repaid in full.

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Pursuant to the Letter Agreement, the Company agreed to issue to the Guarantor, pursuant to Section 4(a)(2) of the Securities Act of 1933, (i) a new unregistered Series A Common Stock Purchase Warrant to purchase up to an aggregate of 4,150,780 shares of, at the Guarantor’s election, Class A Common Stock (at an exercise price per share equal to $2.57 per share), Class C Common Stock (at an exercise price per share equal to $0.0001 per share), or a combination thereof, with an expiration date of January 29, 2029, and (ii) a new unregistered Series B Common Stock Purchase Warrant to purchase up to an aggregate of 4,150,780 shares of, at the Guarantor’s election, Class A Common Stock (at an exercise price per share equal to $2.57 per share), Class C Common Stock (at an exercise price per share equal to $0.0001 per share), or a combination thereof, with an expiration date of January 29, 2025.

Series A Preferred Stock Conversion

As a result of the Warrant Exercise Agreement on January 10, 2024 in conjunction with the Warrant Transactions discussed above and in accordance with the Certificate of Designation, the Series A Preferred Stock conversion price was reduced to $3.00 per share. In a series of notifications to the Company during February 2024, the registered holder of 21,000 shares of Series A Preferred Stock elected to convert all of its Series A Preferred Stock holdings into Class A Common Stock at a conversion price of $3.00 per share. The Company issued 7,738,743 shares of Class A Common Stock as a result of the conversion.

Inflation and Macroeconomic Pressures

In combination with the economic recovery from the COVID-19 pandemic and repercussions from geopolitical events, the global economy continues to experience volatile disruptions including to the commodity and labor markets. These disruptions have contributed to an inflationary environment which has affected, and may continue to adversely affect, the price and availability of certain products and services necessary for our operations, which in turn, has adversely impacted, and may continue to adversely impact our business, financial condition and results of operations.

We continue to monitor economic conditions and the impact of macroeconomic pressures, including repercussions from the recent banking crisis, rising interest rates, sustained inflation and recession fears, supply chain disruptions, monetary and fiscal policy measures (including future actions or inactions of the United States government related to the “debt-ceiling”), heightened geopolitical tensions (such as the war in Ukraine and Israel), changes to the U.S. federal budget, and the political and regulatory environment on our business, customers, suppliers and other third parties (including the potential for U.S. government shut down).

While rising costs and other inflationary pressures have not had a material impact on our business to date, we are monitoring the situation and assessing its impact on our business, including to our partners and customers.

Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on several factors that present significant opportunities for our business, but also pose risks and challenges, including those discussed below and in the section titled Part I., Item 1A. “Risk Factors” in this Annual Report.

Our ability to commence and expand spaceflight mission operations

Our success will depend in large part on our ability to commence and expand our lunar mission operations in 2024 and beyond. We completed our first mission in February 2024 and we are on track to complete the two additional funded missions with a goal of establishing a regular cadence of multiple missions per year of increasing size and complexity by late 2025. This will provide our customers with proven and reliable cislunar access, with which to plan their future manifest. With binding agreements for 3 launches as of December 31, 2023, we have $268.6 million in backlog, and we are in active discussions with numerous potential customers, including government agencies and private companies, to potentially add to our contracted revenue.

Prior to commencing missions, we must complete internal integration activities as well as launch vehicle integration with our launch provider, SpaceX. Any delays in our launch date or in otherwise commencing our missions, including due to congestion at the pad launch site or delays in obtaining various approvals or licenses, could adversely impact our results and growth plans. As we improve production efficiency and schedule reliability and reach our target of multiple missions per year manifested 2-3 years in advance, we expect to improve our market penetration, which we believe will lead to higher revenue from both volume and mission complexity as well as increased operating leverage.

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Our ability to expand our product and services offerings

We are in the preliminary stages of developing our full space infrastructure. These services are expected to grant customers access to cislunar space and the lunar surface at lower price points than previous lunar missions. We are also working to provide data transmission services at lunar distance to include far-side connectivity, along with ancillary services that are likely to include orbital servicing and payload development and manufacture.

Our growth opportunity is dependent on our ability to win lunar missions and expand our portfolio of services. Our ability to sell additional products and services to existing customers is a key part of our success, as follow-on purchases indicate customer satisfaction and decrease the likelihood of competitive substitution. To sell additional products and services to new and existing customers, we will need to continue to invest significant resources in our products and services as well as demonstrate reliability through a successful lunar landing. If we fail to make the right investment decisions, are unable to raise capital, if customers do not adopt our products and services, or if our competitors are able to develop technology or products and services that are superior to ours, our business, prospects, financial condition and operating results could be adversely affected.

We expect to make significant investments in our lunar and data programs in the short term. Although we believe that our financial resources, including the proceeds of the Business Combination and the subsequent Private Placement, will be sufficient to meet our capital needs in the short term, our timeline and budgeted costs for these offerings are subject to substantial uncertainty, including due to compliance requirements of U.S. federal export control laws and applicable foreign and local regulations, the impact of political and economic conditions, and the need to identify opportunities and negotiate long-term agreements with customers for these services, among other factors. Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay any additional indebtedness that we may incur.

Ability to improve profit margins and scale our business

The growth of our business is dependent on our ability to improve our profit margins over time while successfully scaling our business. We intend to continue investing in initiatives to improve our operating leverage and significantly increase utilization. Our ability to achieve our production-efficiency objectives could be negatively impacted by a variety of factors including, among other things, lower-than-expected facility utilization rates, manufacturing and production cost overruns, increased purchased material costs and unexpected supply-chain quality issues or interruptions. If we are unable to achieve our goals, we may not be able to increase operating margin, which would negatively impact gross margin and profitability.

Ability to continue to capitalize on government expenditures and private enterprise investment in the space economy

Our future growth is largely dependent on our ability to continue to capitalize on increased government spending and private investment in the space economy. From 2019 to 2024, the U.S. federal government increased its space exploration and development budget for NASA by approximately 15.8%, or $3.4 billion. U.S. federal government expenditures and private enterprise investment have fueled our growth in recent years, and it has resulted in our continued ability to secure increasingly valuable contracts for products and services in 2023. An increased focus on U.S. federal government spending could unfavorably impact the space exploration sector in the future. If our existing programs and project pursuits are not focused on the federal government’s higher priorities, our business, prospects, financial condition and operating results could be adversely affected. However, we expect U.S. federal government expenditures and private investment in the space economy will continue to result in increased purchases of our products and services.

Our ability to continue to innovate

We design, build, and test our landers, spacecraft and subsystems in-house and operate at the forefront of composite structures, liquid rocket engines, guidance, navigation and control software, precision landing and hazard avoidance software, and advanced manufacturing techniques. We believe the synergy of these technologies enables greater responsiveness to the commercial and government requirements for lunar exploration. To continue establishing market share and attracting customers, we plan to continue to make substantial investments in research and development for the continued enhancements of our landers and other space systems. Over time, we expect our research and development expenditures to continue to grow on an absolute basis, but remain consistent or decrease as a percent of our total revenue as we expand our service offerings.

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Components of Results of Operations

Revenue

Most of our revenue is derived from long-term contracts for the delivery of payloads to the lunar surface. In order to satisfy these contracts, we undertake the engineering for the research, design, development, manufacturing, integration and sustainment of advanced technology space systems. The integration of these technologies and systems lead to an organic and integrated capability to provide lunar access on a commercial services basis. Individual contracts are aggregated by mission (e.g., IM-1, IM-2, IM-3) for management purposes. Revenue is measured based on the amount of consideration specified in a contract with the customer.

We recognize revenue when we transfer control of a promised good or service to a customer in an amount that reflects the consideration we expect to be entitled to in exchange for the good or service. Under the overtime revenue recognition model, revenue and gross profit are recognized over the contract period as work is performed based on actual costs incurred and an estimate of costs to complete and resulting total estimated costs at completion.

Revenue from long-term contracts can fluctuate from period to period largely based on the stage of the project and overall mission. These projects will typically have a ramp up period in the beginning stage and wind down as the mission nears launch date. A significant portion of the revenue (approximately 10% of the contract price) contains variable considerations which is constrained to nil for accounting purposes as it is dependent on a successful mission landing. This may cause fluctuations in future revenue, profits and cash flows.

We perform work under contracts that broadly consist of fixed-price, cost-reimbursable, time-and-materials or a combination of the three. Pricing for all customers is based on specific negotiations with each customer. For a description of our revenue recognition policies, see the section titled “Critical Accounting Policies and Estimates.” A small portion of our revenue is generated from engineering services which are time-and-material type contracts. Going forward, cost-reimbursable contracts may constitute a material portion of our revenue.

Cost of revenue (excluding depreciation)

Cost of revenue (excluding depreciation) consists primarily of direct material and labor costs, launch costs, manufacturing overhead, other personnel-related expenses, which include salaries, bonuses, benefits and stock-based compensation expense and freight expense. We expect our cost of revenue to increase in absolute dollars in future periods as we sell more products and services. As we grow into our current capacity and execute on cost-optimization initiatives, we expect our cost of revenue as a percentage of revenue to decrease over time.

Depreciation

Depreciation consists of the depreciation of tangible fixed assets for the relevant period based on the straight-line method over the useful life of the assets. Tangible fixed assets include property and equipment.

General and administrative expense (excluding depreciation)

Selling, general and administrative expense (excluding depreciation) consist primarily of personnel-related expenses for our sales, marketing, supply chain, finance, legal, human resources and administrative personnel, as well as the costs of customer service, information technology, professional services, insurance, travel, allocated overhead and other marketing, communications and administrative expenses. We expect to invest in our corporate organization and incur additional expenses associated with transitioning to, and operating as, a public company, including increased legal and accounting costs, investor relations costs, higher insurance premiums and compliance costs. As a result, we expect that selling, general and administrative expenses will increase in absolute dollars in future periods as a percentage of total revenue.

Interest expense, net

Interest expense, net consists of interest income earned on cash and cash equivalents and short-term investment balances held by us in interest bearing time deposit accounts. Interest expense is incurred on long-term debt.

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Change in fair value of earn-out liabilities

Earn Out Units are classified as liabilities transactions at initial issuance which were offset against paid-in capital as of the closing of the Business Combination. At each period end, the Earn Out Units are remeasured to their fair value with the changes during that period recognized in other income (expense) on the consolidated statement of operations. Upon issuance and release of the shares after each Triggering Event is met, the related Earn Out Units will be remeasured to fair value at that time with the changes recognized in other income (expense), and such Earn Out Units will be reclassed to stockholders’ equity (deficit) on the consolidated balance sheet. See Notes 2, 3 and 12 of the consolidated financial statements for additional information on the earn-out liabilities.

Change in fair value of warrant liabilities

In connection with the closing of the Private Placement, the Company issued the Initial Series A Warrant and the Initial Series B Warrant (the “Warrants”) which are classified as liabilities on our balance sheet. At each period end, the Warrants are remeasured to their fair value with the changes during the period recognized in other income (expense) on our consolidated statement of operations. See Notes 10 and 12 of the consolidated financial statements for additional information on the warrant liabilities.

Change in fair value of SAFE Agreements

Prior to closing the Business Combination, Intuitive Machines, LLC issued six SAFE Agreements in late 2021 and early 2022. The funds received upon issuance of the SAFE Agreements were used to fund operations. Pursuant to the guidance under ASC 480 “Distinguishing Liabilities from Equity,” management determined that the SAFE Agreements should be initially recorded as liabilities at fair value and subsequently remeasured at fair value with changes recognized in earnings until conversion at a qualifying financing event or termination of the SAFE Agreements. Upon the consummation of the Business Combination, the SAFE Agreements liability was eliminated and converted into shares of our Class A Common Stock. See Note 10 for additional information on the SAFE Agreements.

Loss on issuance of securities

In connection with the Private Placement as discussed in Notes 9 and 10 to the consolidated financial statements, the Company issued warrants and recognized a loss on the issuance as the fair value of the securities exceeded the gross proceeds at the issuance date. The Company evaluated the terms of the warrants and determined they meet the criteria in ASC 815, “Derivatives and Hedging”, to be classified as a derivative liability, initially measured at fair value. The subsequent changes in fair value are recognized in earnings in other income (expense) on the consolidated statement of operations.

Other (expense) income, net

Other (expense) income, net primarily consists of expense driven by fair value adjustments related to our Commitment Shares liability as discussed under Equity Facility in Note 3 to the consolidated financial statements, slightly offset by miscellaneous income sources.

Income tax (expense) benefit

Intuitive Machines, Inc. is a corporation and thus is subject to United States (“U.S.”) federal, state and local income taxes. Intuitive Machines, LLC is a partnership for U.S. federal income tax purposes and therefore does not pay United States federal income tax on its taxable income. Instead, the Intuitive Machines, LLC unitholders, including Intuitive Machines, Inc., are liable for U.S. federal income tax on their respective shares of Intuitive Machines, LLC’s taxable income. Intuitive Machines, LLC is liable for income taxes in those states which tax entities classified as partnerships for U.S. federal income tax purposes.

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Net loss attributable to redeemable noncontrolling interest

Noncontrolling interests represents the portion of Intuitive Machines, LLC that the Company controls and consolidates but does not own. The noncontrolling interests was created as a result of the Business Combination and represents 68,150,754 Class A and Class B units issued by Intuitive Machines, LLC to the prior investors represents approximately 81.2% of the ownership interests in the Company at the Closing Date. The Company allocates net income or loss attributable to the noncontrolling interests based on the weighted average ownership interests during the period. The net income or loss attributable to noncontrolling interests is reflected in the consolidated statement of operations.

The financial results of Intuitive Machines, LLC were consolidated into Intuitive Machines, Inc. for the period from February 13, 2023 to December 31, 2023 and resulted in the allocation of approximately 77.1% of Intuitive Machines, LLC’s net loss to noncontrolling interests.

Results of Operations

The following tables set forth our results of operations for the periods presented. The period-period comparison of financial results is not necessarily indicative of future results.

The following table sets forth information regarding our consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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Revenue

Revenue for the years ended December 31, 2023 and 2022 was primarily driven by NASA and other commercial payload contracts associated with the IM-1, IM-2 and IM-3 missions. The following provides a summary of the material contracts and estimated mission launch dates for each mission impacting our results of operations (estimated contract revenue and contract revenue excludes variable consideration that is constrained):

•The NASA payload contract for the IM-1 mission was awarded in June 2019 with an initial targeted mission launch date in March 2022. Total IM-1 mission estimated contract revenue under NASA and other commercial fixed-priced contracts was $120.1 million as of December 31, 2023. As of December 31, 2022, total IM-1 mission estimated contract revenues were approximately $117.3 million. During the third quarter of 2022, the targeted mission launch date was revised from December 2022 to March 2023. In April 2023, we received an additional modification from NASA to change the targeted landing site within the South Pole extending the targeted mission launch date to no later than February 2024 and increasing contract revenue by approximately $3.1 million.

•The initial NASA payload contract for the IM-2 mission was awarded in October 2020 with a targeted mission launch date in December 2022. Total IM-2 mission estimated contract revenue under NASA and other commercial fixed-priced contracts was $102.1 million as of December 31, 2023 as compared to $106.7 million as of December 31, 2022. One of our commercial rideshare customers opted to re-manifest its payload from the IM-2 mission to the IM-3 mission resulting in a decrease to estimated contract revenues of approximately $4.5 million on the IM-2 mission. The IM-2 mission launch and post-launch services run through June 2024 under our contract with NASA although we anticipate launching after that date as we work with our customer to identify a final targeted landing site that will impact the mission timeline.

•The initial NASA payload contract for the IM-3 mission was awarded in November 2021 with an initial targeted mission launch date no later than June 2024 under our current contract with NASA. Total IM-3 mission estimated revenue under fixed-priced contracts is $80.9 million as of December 31, 2023 as compared to $78.8 million as of December 31, 2022. The increase in estimated contract revenues for the IM-3 mission is primarily due to the award of a new $2.1 million commercial landed payload received in the first quarter of 2023. The IM-3 mission launch and post-launch services run through June 2024 under our contract with NASA although we anticipate launching after that date as we work with our customer to identify its complement of payloads that will impact the mission timeline.

Total revenue decreased by $6.4 million, or 7%, for the year ended December 31, 2023 compared to the same period in 2022. Revenue on the IM-1 mission decreased approximately $27.9 million to $7.2 million for the year ended December 31, 2023 from $35.2 million for the same period in 2022 primarily due to the mission nearing completion in 2023. As of December 31, 2023, the IM-1 mission was 98% complete and was successfully completed in February 2024. Revenue on the IM-2 mission for the year ended December 31, 2023 was $22.1 million as compared to $25.1 million in the same period of 2022 and was primarily driven by a change in progress towards completion of the IM-1 mission. The IM-2 mission was approximately 92% complete as of December 31, 2023. Revenue from the IM-3 mission increased approximately $5.1 million to $24.9 million for the year ended December 31, 2023 from $19.8 million for the same period in 2022 primarily due to the commercial landed payload contract awarded in the first quarter of 2023 and novation of the commercial rideshare contract in the second quarter of 2023. The IM-3 mission was approximately 64% complete as of December 31, 2023. Revenue from engineering and other services increased approximately $19.5 million including $12.5 million associated with the start up of the OMES III contract in December 2023 and $3.6 million associated with the initial phase of the fission surface power contract which was completed in the third quarter of 2023.

Operating Expenses

Cost of revenue (excluding depreciation)

Total cost of revenue increased by $25.0 million, or 33%, for the year ended December 31, 2023 compared to the same period in 2022. Cost of revenue on the IM-1 mission decreased by $5.1 million due to lower progress as the mission neared completion as well as delay fees in 2022 on launch vehicle costs that did not recur in 2023. On the IM-2 mission, cost of revenue was approximately $31.7 million for the year ended December 31, 2023 compared to $33.0 million in the same period in 2022. IM-3 mission cost of revenue increased approximately $13.7 million primarily due to higher progress as our focus shifted in the latter half of 2023 from final completion of the IM-1 mission and the later phases of the IM-2 mission to ramping up activities on the IM-3 mission. Cost of revenue for engineering and other services projects increased

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approximately $18.7 million during the year ended December 31, 2023 including $11.6 million associated with the start up of the OMES III contract in December 2023 and $3.6 million associated with the initial phase of the fission service power contract which was completed in the third quarter of 2023.

As of December 31, 2023, all three of our lunar missions were in loss positions, primarily as a result of constrained variable consideration and continued increases in the estimated costs to complete the missions. The IM-1 mission became a loss contract in 2019 primarily as a result of constrained variable consideration. During year ended December 31, 2023, the IM-1 mission accrued loss increased by $10.2 million due to the delay of the targeted mission launch date discussed above. We have included additional labor costs in our cost estimates at completion as result of extending the targeted mission launch date. Additionally, costs increased as a result of technical challenges identified through systems testing in early 2023 primarily associated with electronics and tank valves. On the IM-2 mission, we increased the accrued contract loss by approximately $14.2 million during the year ended December 31, 2023 which was primarily driven by additional labor and subcontractor costs associated with the extension of the targeted launch date as well as increased costs associated with fuel systems and avionics based on our evaluation and consideration of the technical issues encountered on the IM-1 mission. On the IM-3 mission, the accrued contract loss increased by approximately $5.8 million during the year ended December 31, 2023 primarily due to additional estimated labor and subcontractor costs associated with the extension of the targeted launch date.

General and administrative expense (excluding depreciation)

General and administrative expense (excluding depreciation) increased by $18.1 million for the year ended December 31, 2023 compared to the same period in 2022, driven primarily by our growth to support corporate and business operations, resulting in higher headcount driving increased compensation expense of $2.6 million and related share-based compensation expense of $3.6 million. For the same comparative periods, we incurred increases in expenses related for insurance of $2.3 million and professional services, software licenses and various other administrative costs of $8.0 million primarily associated with being a newly public company and the corresponding need for increased legal and accounting support and information technology infrastructure. The Company also incurred transaction costs of $1.4 million related to the Private Placement during the third quarter of 2023.

Other income (expense), net

Total other income (expense), net favorable change of $72.2 million for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to favorable changes in fair value of the earn-out liabilities of $66.3 million and warrant liabilities of $15.4 million, partially offset by an unfavorable change in the fair value of SAFE Agreements of $2.3 million, and loss on issuance of securities of $6.7 million.

Income tax (expense) benefit

For the years ended December 31, 2023 and 2022, we recognized a combined U.S. federal and state (expense) / benefit for income taxes of $(40) thousand and $23 thousand, respectively. The effective combined U.S. federal and state income tax rates were 0.27% and 0.36% for the years ended December 31, 2023 and 2022, respectively. For year ended December 31, 2023, our effective tax rate differed from the statutory rate primarily due to deferred taxes for which no benefit is being recorded and losses attributable to noncontrolling interest unitholders that are taxable on their respective share of taxable income. For the year ended December 31, 2022, our effective tax rate differed from the statutory rate primarily due to Intuitive Machines, LLC's status as a partnership for U.S. federal income tax purposes.

Key Business Metrics and Non-GAAP Financial Measures

We monitor the following key business metrics and non-GAAP financial measures that assist us in evaluating our business, measuring our performance, identifying trends and making strategic decisions.

Backlog

We define backlog as our total estimate of the revenue we expect to realize in the future as a result of performing work on awarded contracts, less the amount of revenue we have previously recognized. We monitor our backlog because we believe it is a forward-looking indicator of potential sales which can be helpful to investors in evaluating the performance of our business and identifying trends over time. We generally include total expected revenue in backlog when a contract is awarded by the customer under a legally binding agreement. Our backlog does not include any estimate of future potential

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work orders that might be awarded under government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts or other multiple-award contract vehicles, nor does it include option periods that have not been exercised by the customer. Due to government procurement rules, in certain cases revenue included in backlog are subject to budget appropriation or other contract cancellation clauses. Nearly all contracts allow customers to terminate the agreement at any time for convenience. If any of our contracts with firm orders were to be terminated, our backlog would be reduced by the expected value of the unfilled orders of such contracts. Consequently, our backlog may differ from actual revenue recognized in our financial statements.

The following table presents our backlog as of the periods indicated:

Orders comprising backlog as of a given balance sheet date are typically invoiced in subsequent periods. As of December 31, 2023, we expect to recognize approximately 80% of our backlog over the next 12 months during 2024, approximately 3% to 5% over the subsequent twelve months of 2025 and the remaining thereafter. Our backlog could experience volatility between periods, including as a result of customer order volumes and the speed of our fulfillment, which in turn may be impacted by the nature of products and services ordered, the amount of inventory on hand to satisfy orders and the necessary development and manufacturing lead time required to satisfy certain orders.

Backlog increased by $66.7 million as of December 31, 2023 compared to December 31, 2022, primarily due to new awards of $184.4 million primarily attributable to the OMES III project for $142.4 million, an international payload on a future mission for $17.6 million, the JETSON contract for $9.5 million, and various other projects. These increases are partially offset by continued performance on existing contracts of $79.5 million and decreases related to contract value adjustments of $38.2 million primarily related to certain time and materials and other contracts.

As of December 31, 2023, our backlog of $268.6 million exceeded our remaining performance obligations of $57.2 million as reported in Note 4 - Revenue to our consolidated financial statements included in this Annual Report. The difference of $211.4 million was primarily due $62.1 million of variable consideration associated with constrained revenue and $149.3 million in backlog related to the funded value of OMES III and various other time and materials service contracts where revenue is recognized when services are performed and contractually billable and therefore not included in remaining performance obligations.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management team uses to assess our operating performance. We calculate Adjusted EBITDA as net income (loss) excluding results from non-operating sources including interest income, interest expense, gain on extinguishing of debt, share based compensation, change in fair value instruments, depreciation, and provision for income taxes.

We present Adjusted EBITDA because we believe it is helpful in highlighting trends in our operating results and because it is frequently used by analysts, investors, and other interested parties to evaluate companies in our industry.

Adjusted EBITDA has limitations as an analytical measure, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•Adjusted EBITDA does not reflect interest income, interest expense or other non-operating gains and losses, which may represent an increase to or reduction in cash available to us;

•Adjusted EBITDA does not consider the impact of share-based compensation expense, which is expected to continue to be part of our compensation strategy;

•Adjusted EBITDA does not consider the impact of change in fair value of SAFE Agreements, change in fair value of earn-out liabilities, change in fair value of warrant liabilities, or loss on issuance of securities that we do not consider to be routine in nature for the ongoing financial performance of our business;

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•Adjusted EBITDA excludes non-cash charges for depreciation of property and equipment, and although the assets being depreciated may have to be replaced in the future, Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and

•Adjusted EBITDA does not reflect provisions for income taxes, which may represent a reduction in cash available to us.

Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA.

Free Cash Flow

We define free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment. We believe that free cash flow is a meaningful indicator of liquidity that provides information to management and investors about the amount of cash generated from operations that, after purchases of property and equipment, can be used for strategic initiatives, including continuous investment in our business and strengthening our balance sheet.

Free Cash Flow has limitations as a liquidity measure, and you should not consider it in isolation or as a substitute for analysis of our cash flows as reported under GAAP. Some of these limitations are:

•Free Cash Flow is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for financial information prepared in accordance with GAAP.

•Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences among methods of calculation.

•Free Cash Flow may be affected in the near to medium term by the timing of capital investments, fluctuations in our growth and the effect of such fluctuations on working capital and changes in our cash conversion cycle.

The following table presents a reconciliation of net cash used in operating activities, the most directly comparable financial measure presented in accordance with GAAP, to free cash flow:

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Liquidity and Capital Resources

Since inception, we have funded our operations through internally generated cash on hand, proceeds from sales of our capital stock, including the execution of SAFE Agreements, and our proceeds from the issuance of bank debt. We assess our liquidity in terms of our ability to generate adequate amounts of cash to meet current and future needs. Our expected primary uses of cash on a short and long-term basis are for working capital requirements, capital expenditures, debt service requirements and other general corporate services. Our primary working capital requirements are for project execution activities including purchases of materials, subcontracted services and payroll which fluctuate during the year, driven primarily by the timing and extent of activities required on new and existing projects. Our capital expenditures are primarily related to machinery and equipment, computers and software, and leases.

As of December 31, 2023, we had cash and cash equivalents of $4.5 million and a working capital deficit of $51.8 million. As further described in Note 3 - Business Combination and Related Transactions of our consolidated financial statements, on February 13, 2023, Intuitive Machines, Inc. (formerly known as Inflection Point Acquisition Corp. (“IPAX”) and our wholly owned subsidiary, Intuitive Machines, LLC consummated the Business Combination and related transactions. Upon the closing of the Business Combination and issuance of 10% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) to certain investors, the Company received approximately $34.1 million of gross proceeds to fund operations. Additionally, in connection with the Business Combination, the Company entered into a common stock purchase agreement with an investor establishing a committed equity facility pursuant to which the Company has the right, but not the obligation, to direct the counterparty to purchase up to the lesser of $50.0 million of newly issued Class A common stock and the Exchange Cap (as defined in the common stock purchase agreement), subject to certain requirements and limitations. Additionally, subsequent to the closing of the Business Combination, we received $12.7 million in cash associated with the termination of a prepaid forward purchase agreement and $16.1 million associated with the exercises of Public Warrants.

On September 5, 2023, the Company consummated a securities purchase agreement pursuant to which the Company agreed to sell securities in a private placement which included the issuance by the Company of the PIPE Shares and the accompanying Initial Series A Warrant and Initial Series B Warrant, for aggregate gross proceeds of approximately $20.0 million. See Notes 9 and 10 for additional information on the securities purchase agreement.

Additionally, as further described in Note 17 to our consolidated financial statements, the Company received approximately $60.6 million in gross proceeds from warrant exercises and other equity transactions in the first quarter of 2024.

Management believes that the cash and cash equivalents as of December 31, 2023 and the additional liquidity provided by the equity facility and other subsequent equity transactions discussed above will be sufficient to fund the short-term liquidity needs and the execution of the business plan through at least the twelve-month period from the date the financial statements are issued.

Live Oak Mobilization Credit Facility

On December 12, 2019, we entered into a loan agreement with Live Oak Banking Company (the “Credit Mobilization Facility”) which provided a $12.0 million Credit Mobilization Facility with a due date of December 12, 2022 and a $1.0 million line of credit with a due date of December 12, 2020. Both the Credit Mobilization Facility and the line of credit thereunder initially bore interest, payable monthly, at a rate per annum equal to 6.0%. The Credit Mobilization Facility and the line of credit thereunder are secured by substantially all of our assets.

On December 8, 2020, we entered into a Loan Modification Agreement with Live Oak Banking Company which amended the terms of the line of credit under the Credit Mobilization Facility, including decreasing the maximum principal from $1.0 million to $0.4 million, extending the maturity date from December 12, 2020 to December 10, 2021, and changing the interest rate from 6.0% to a variable interest rate at the prime rate, as published in the Wall Street Journal, plus 2.0%.

On April 30, 2021, we entered into a commitment with Live Oak Banking Company which provided a $12.0 million contract mobilization credit facility with a loan maturity of November 15, 2022 (the “New Credit Mobilization Facility”), which superseded the existing Credit Mobilization Facility. The New Credit Mobilization Facility bears interest (payable monthly) at a rate per annum equal to 5.25%, adjusted quarterly based on the prime rate, as published in the Wall Street Journal, plus 2.0%. On December 10, 2021, the line of credit expired. We had no balance outstanding at that time and did not renew the line of credit.

On July 14, 2022, we entered into the Second Amended and Restated Loan Agreement with Live Oak Banking Company which provided an $8.0 million mobilization credit facility with a loan maturity of July 14, 2024 and extended the maturity

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date of our existing $12.0 million mobilization credit facility to November 14, 2023. The mobilization credit facilities bear interest (payable monthly) at a rate per annum equal to the greater of (a) the prime rate, as published in the Wall Street Journal, plus 2.0% and (b) 5.0%. The $8.0 million mobilization credit facility requires early payment of principal upon the completion of certain mission milestones. If the milestones are completed, principal payments of $4.1 million and $3.9 million would be due prior to loan maturity in 2023 and 2024, respectively. The $12.0 million mobilization credit facility requires principal payments of $8.0 million on August 15, 2023 and $4.0 million on November 14, 2023. The mobilization credit facilities require the Company to meet certain financial and other covenants and are secured by substantially all of the assets of the Company.

The credit mobilization facilities require compliance with various covenants customary for agreements of this type, including those restricting our ability to incur debt, incur liens and undergo certain fundamental changes. The credit mobilization facilities also include events of default customary for agreements of this type. As of December 31, 2023, we were in compliance with all covenants under the credit mobilization facilities.

During the third quarter of 2023, we considered options to modify the terms of the Second Amended and Restated Loan Agreement with Live Oak. We received confirmation from Live Oak to defer the $8.0 million principal payment due on August 15, 2023 under the $12.0 million mobilization credit facility pending the outcome of the loan modification. On October 31, 2023, management decided to no longer pursue loan modification and promptly paid the deferred $8.0 million principal payment. On November 3, 2023, we received a letter of good standing from Live Oak stating the Company was current on all payments due and was in full compliance with the terms and conditions of the $8.0 million and $12.0 million mobilization credit facilities under the Second Amended and Restated Loan Agreement. On November 15, 2023, we paid the remaining $4.0 million on the $12.0 million mobilization credit facility.

There was $8.0 million and $20.0 million outstanding under the credit mobilization facilities as of December 31, 2023 and 2022, respectively. See Note 7 - Debt to our consolidated financial statements for additional information related to the credit mobilization facilities.

The following table summarizes our cash flows for the periods presented:

Cash Flows for the years ended December 31, 2023 and 2022

Operating Activities

During the year ended December 31, 2023, our operating activities used $45.3 million of net cash as compared to $0.8 million of net cash provided during the year ended December 31, 2022. The $46.1 million unfavorable change was primarily due to higher operating expenses in 2023 as a result of becoming a public company as well as to support our missions, including increases in headcount and professional service fees, and is also affected by changes in operating assets and liabilities which consist primarily of working capital balances for our projects. Working capital levels may vary and are impacted by the stage of completion and contractual terms of projects. The primary components of our working capital accounts are trade accounts receivable, contract assets, accounts payable, and contract liabilities.

Investing Activities

During the year ended December 31, 2023, investing activities used $29.9 million of net cash as compared to $16.4 million of net cash used during the year ended December 31, 2022. The $13.5 million increase in cash used was primarily due to capital expenditures associated with equipment to be used for future missions and our new Lunar Production and Operations Center that was completed in late 2023.

Financing Activities

During the year ended December 31, 2023, financing activities provided $53.9 million of net cash as compared to $12.1 million of net cash provided during the year ended December 31, 2022. The $41.8 million increase was primarily associated with $34.1 million in proceeds received upon consummation of the Business Combination and Series A

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Preferred Stock issuance which was partially offset by $9.4 million in related transaction costs paid. We also received $12.7 million in cash associated with the termination of a prepaid forward purchase agreement, $20.0 million in proceeds received upon the close of the Private Placement and another $16.1 million in proceeds from the exercise of Public Warrants. These increases were slightly offset by the repayment of a loan under our Credit Mobilization Facility of $12.0 million and member distributions of $8.0 million. During 2022, our financing activities primarily included proceeds from borrowings of $7.9 million and SAFE Agreements of $4.3 million.

Contractual Obligations and Commitments

Lease Commitments

We lease real estate for office space and for administrative, research, marketing and light manufacturing operations. These leases are classified as operating leases with various expiration dates through 2043. See Note 6 - Leases to our consolidated financial statements for more information regarding our lease commitments.

In September 2021, we signed a ground lease agreement for the development of our Lunar Production and Operations Center (“LPOC”) that will serve as a production and testing facility of lunar lander components and other aerospace related operations. The lessor will reimburse up to $40.0 million for certain costs incurred by us for design, construction, and development. Management concluded that it was deemed the owner, for accounting purposes only, of the facility under build-to-suit lease accounting due to its involvement in the construction activities of the facility. Accordingly, we are accounting for the construction of the facility as a financing arrangement. As of December 31, 2022, we had capitalized $10.3 million of construction in progress and a corresponding financing obligation of $9.1 million. Upon completion of the construction, the lease agreement will have an initial term of 20 years with four optional renewal periods of 5 years each.

During the fourth quarter of 2022, construction was completed for the Small Engine Verification facility (the “SEV” facility) portion of the LPOC, and we took possession of the SEV facility. Upon commencement of the SEV facility portion of the lease, management determined that it qualified for sale and leaseback accounting, with the leaseback being classified as an operating lease. No gain or loss was recognized or deferred on the sale of the SEV facility, as the fair value upon completion was determined to be equal to the carrying value. As of December 31, 2023, the Company recorded right-of-use assets of $2.9 million and corresponding lease liabilities of approximately $3.2 million. As of December 31, 2022, the Company recorded right-of-use assets and corresponding lease liabilities of approximately $3.1 million.

During the third quarter of 2023, the remaining construction for the LPOC was near completion, we took possession of the entire facility. Upon commencement of the lease, we determined that the LPOC qualified for sale and leaseback accounting, with the leaseback being classified as an operating lease. No gain or loss was recognized or deferred on the sale of the lunar operations center, as the fair value upon commencement was determined to be equal to the carrying value. As of the lease commencement date, we derecognized approximately $30.4 million of construction in progress and the corresponding financing obligation of $30.4 million associated with capitalized construction costs of the lunar operations center and related reimbursements received from the lessor. We recognized operating lease right-of-use assets of $32.3 million and operating lease liabilities of $26.7 million as of the lease commencement date, which included $5.6 million of reimbursable costs to be received from the lessor. As of December 31, 2023, we have approximately $3.8 million of contractual obligations to complete construction of the LPOC which will be funded through a combination of remaining reimbursements from the lessor and available cash on hand.

For disclosures regarding our Live Oak Credit Mobilization Facility, refer to the preceding discussions under Liquidity and Capital Resources and Note 7 - Debt.

Purchase Commitments

From time-to-time, we enter into long-term commitments with vendors to purchase launch services and for the development of certain components in conjunction with our obligations under revenue contracts with our customers. As of December 31, 2023, we had remaining purchase obligations under non-cancelable commitments with two vendors totaling $37.7 million of which $36.2 million is due within the next twelve months and the remaining $1.5 million is due in the subsequent twelve-month period.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Critical Accounting Policies and Estimates

We believe that the following accounting policies involve a high degree of judgement and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. Significant accounting policies employed by us, including the use of estimates, are presented in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgements that affect the amounts reported in those financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.

Revenue Recognition

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our revenue is primarily generated from the progress on long-term lunar mission contracts and engineering services for the research, design, development, and manufacturing of advancement technology aerospace system.

Revenue is measured based on the amount of consideration specified in a contract with a customer. Revenue is recognized when and as our performance obligations under the terms of the contract are satisfied which generally occurs with the transfer of services to the customer. For each long-term contract, we determine the transaction price based on the consideration expected to be received. We allocate the transaction price to each distinct performance obligation to deliver a good or service, or a collection of goods and/or services, based on the relative standalone selling prices.

For most of our business, where performance obligations are satisfied due to the continuous transfer of control to the customer, revenue is recognized over time. Where the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability, those contracts are accounted for as single performance obligations. We recognize revenue generally using the cost-to-cost method, based primarily on contract costs incurred to date compared to total estimated contract costs at completion. This method is deemed appropriate in measuring performance towards completion because it directly measures the value of the goods and services transferred to the customer. Billing timetables and payment terms on our contracts vary based on a few factors, including the contract type. Typical payment terms under fixed-price contracts provide that the customer pays either performance-based payment based on the achievement of contract milestones or progress payments based on a percentage of costs we incur.

Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion (the process described below in more detail) is complex and subject to many variables and requires significant judgment. The consideration to which we are entitled on our long-term contracts may include both fixed and variable amounts. Variable amounts can either increase or decrease the transaction price.

We include estimated amounts of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the contract price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We reassess the amount of variable consideration each accounting period until the uncertainty associated with the variable consideration is resolved. Changes in the assessed amount of variable consideration are accounted for prospectively as a cumulative adjustment to revenue recognized in the current period.

When changes are required for the estimated total revenue on a contract, these changes are recognized on a cumulative catch-up basis in the current period. A significant change in one or more estimates could affect the profitability of one or more of our performance obligations. If estimates of total costs to be incurred exceed estimates of total consideration the Company expects to receive, a provision for the remaining loss on the contract is recorded in the period in which the loss becomes evident.

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Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is either not an emerging growth company or an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.

You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with the audited financial statements and the notes thereto
included in Part II. Item 8. of this Annual Report.

Unless otherwise indicated, references to the
“Company,” “our,” “us” or “we” in this Item 7 refer to Inflection Point Acquisition Corp.,
or IPAX, before the consummation of the Business Combination. The term “New Intuitive Machines” refers to Intuitive Machines,
Inc. after the consummation of the Business Combination.

The financial information included in this
Item 7 is that of IPAX prior to the Business Combination because the Business Combination was consummated subsequent to the period covered
by the audited financial statements included in this Annual Report.

Overview

Until February 13, 2023, we were a blank check
company incorporated on January 27, 2021 as a Cayman Islands exempted company under the name, Inflection Point Acquisition Corp., for
the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
one or more businesses.

Initial Public Offering and Private Placements

On September 24, 2021, we completed our initial
public offering (“IPO”) of 30,000,000 units, at $10.00 per unit (the “Units”), and issued an additional 2,975,000
Units (the “Over-Allotment Units”) to the underwriters on October 29, 2021 upon their partial exercise of their over-allotment
option, generating aggregate gross proceeds to us of $329,750,000. Each Unit consisted of one of our Class A ordinary shares, $0.0001
par value (the “Class A ordinary shares” or “Public Shares”) and one-half of one redeemable warrant
(each, a “Public Warrant”), with each whole warrant entitling the holder to purchase one Class A ordinary share for $11.50 per
share, subject to adjustment.

Simultaneously with the closing of the IPO, we
sold to our Sponsor, Inflection Point Holdings LLC, a Cayman Islands limited liability company (the “Sponsor”), 6,250,000
private placement warrants (“IPO Private Placement Warrants”) at a price of $1.00 per warrant, and simultaneously with the
sale of the Over-Allotment Units, sold to our Sponsor an additional 595,000 private placement warrants (the “Over-Allotment Private
Placement Warrants” and, together with the IPO Private Placement Warrants, the “Private Placement Warrants”), generating
aggregate gross proceeds to us of $6,845,000.

An aggregate of 12 qualified institutional buyers
(“Anchor Investors”) were allocated and purchased a total of 29,540,000 Units or 98.5% of the Units sold in the IPO. One of
the Anchor Investors, Kingstown 1740 Fund, LP (“Kingstown 1740”), is an affiliate of our Sponsor, and was allocated and purchased
2,900,000 Units in the IPO.

In addition, subject to each Anchor Investor purchasing
100% of the Units allocated to it, in connection with the closing of the IPO, our Sponsor sold membership interests reflecting an allocation
of Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”) to each Anchor Investor, amounting to an aggregate
of 1,625,000 Founder Shares to all Anchor Investors collectively. We estimated the aggregate fair value of these Founder Shares attributable
to Anchor Investors to be approximately $9.68 million, or $5.96 per share. The excess of the fair value of the Founder Shares was determined
to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Offering costs allocated to the Public Shares and the Public
Warrants was all charged to shareholder’s equity upon the completion of the IPO.

Transaction costs from the IPO amounted to $26,658,313,
consisting of $4,595,000 of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value
of Founder Shares, and $841,938 of other offering costs, with $23,439 allocated to the over-allotment option, $24,538,134 allocated to
the Class A ordinary shares subject to redemption, and $2,096,740 allocated to the Class A ordinary shares not subject to redemption,
the Public Warrants and the Private Placement Warrants.

Following the consummation of the IPO, including
the sale of the Over-Allotment Units, a total of $329,750,000 from the proceeds of the Units in the IPO and the sale of the Over-Allotment
Units was deposited into a trust account (the “Trust Account”). The proceeds from the Private Placement Warrants were used
to pay a portion of the transaction expenses with the remainder deposited into the operating account.

Business Combination with Intuitive Machines
OpCo

On September 16, 2022, the Company entered
into a business combination agreement (the “Business Combination Agreement”) with Intuitive Machines OpCo.

29

On February
10, 2023, as contemplated by the Business Combination Agreement and described in the section titled “The Business Combination Proposal”
of the Company’s final prospectus and definitive proxy statement, dated January 24, 2023 (the “Proxy Statement/Prospectus”)
and filed with the SEC on January 24, 2023, the Company filed a notice of deregistration with the Cayman Islands Registrar of Companies,
together with the necessary accompanying documents, and filed a certificate of incorporation (the “Certificate of Incorporation”)
and a certificate of corporate domestication with the Secretary of State of the State of Delaware, pursuant to which the Company was domesticated
and continues as a Delaware corporation, changing its name to “Intuitive Machines, Inc.” (the “Domestication”).

Immediately
prior to the Domestication, each of the then issued and outstanding Class B ordinary shares of the Company, par value $0.0001 per share
(each, a “Class B ordinary share”), converted automatically, on a one-for-one basis, into a Class A ordinary share of the
Company. As a result of and upon the effective time of the Domestication, among other things, (1) each of the then issued and outstanding
Class A ordinary shares automatically converted, on a one-for-one basis, into a share of the Company’s Class A common stock, par
value $0.0001 per share (the “Class A Common Stock”); (2) each of the then issued and outstanding warrants representing the
right to purchase one Class A ordinary share automatically converted into a warrant to acquire one share of the Company’s Class
A Common Stock pursuant to the related warrant agreement (each warrant, an “Intuitive Machines Warrant”); and (3) each of
the then issued and outstanding Units were canceled and each holder thereof was entitled to one share of the Company’s Class A Common
Stock and one-half of one Intuitive Machines Warrant per unit.

On February 13, 2023, we consummated the transactions
contemplated by the Business Combination Agreement, whereby (i) Intuitive Machines OpCo appointed
the Company as its managing member, (ii) we issued to certain existing members of Intuitive Machines OpCo prior to the Business Combination,
a number of shares of our Class B Common Stock, par value $0.0001 per share, having one vote per share and no economic rights or our Class
C Common, par value $0.0001 per share, having three votes per share and no economic rights, in each case, equal to the number of common
units of Intuitive Machines OpCo (“Intuitive Machines OpCo Common Units”) held by such person as of and on the Closing Date
and (iii) we contributed to Intuitive Machines OpCo an amount in cash (the “Available Closing Cash”) equal to the sum of (without
duplication): (a) all amounts in our Trust Account, less (x) amounts required for the redemptions of Cayman Class A Shares by shareholders
of IPAX prior to the Business Combination and (y) our and Intuitive Machines OpCo’s transaction expenses, plus (b) the aggregate
proceeds actually received by IPAX from the Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain
investors (collectively, the “Series A Investors”), pursuant to which the Series A Investors purchased $26.0 million (the
“Series A Investment”) of 10% Series A Cumulative Convertible Preferred Stock, par value $0.0001 per share, of the Company
(“Series A Preferred Stock”) and warrants exercisable to purchase shares of our Class A Common Stock at an initial exercise
price of $15.00 (the “Preferred Investor Warrants”), plus (c) all other cash and cash equivalents of IPAX, determined in accordance
with GAAP as of 11:59 p.m. Eastern Time on February 12, 2023 plus (d) the Founder Subscription Amount (as defined in the Business Combination
Agreement) in exchange for the issuance by Intuitive Machines OpCo to us (w) a number of Intuitive Machines OpCo Common Units equal to
the number of shares of our Class A Common Stock issued and outstanding as of the Closing Date, (x) a number of warrants of Intuitive
Machines OpCo (the “Intuitive Machines OpCo Warrants”) equal to the number of Intuitive Machines Warrants issued and outstanding
as of the Closing Date, (y) a number of Series A preferred units of Intuitive Machines (the “Series A Preferred Units”) equal
to the number of shares of Series A Preferred Stock issued and outstanding as of the Closing Date and issued to the Series A Investors
and (z) a number of Intuitive Machines OpCo preferred investor warrants (the “Intuitive Machines OpCo Preferred Investor Warrants”)
equal to the number of Preferred Investor Warrants delivered to the Series A Investors on the Closing Date (together with the Domestication,
the “Transactions”).

For additional information regarding the Transactions,
see the section titled “The Business Combination Proposal” of the Company’s final
prospectus and definitive proxy statement, dated January 24, 2023 (the “Proxy Statement/Prospectus”) and filed with the SEC
on January 24, 2023 and the Company’s Current Report on Form 8-K filed on February 14, 2023.

As a result of the Business Combination, our only
direct assets consist of Intuitive Machines OpCo Common Units, and substantially all of our assets and business are held by Intuitive
Machines OpCo and its subsidiaries. See Note 1 in the notes to our audited financial statements included in Part II. Item 8 in this Annual
Report.

The Series A Investment

On September 16, 2022, concurrently with the execution
of the Business Combination Agreement, IPAX entered into a purchase agreement (the “Series A Purchase Agreement”) with Kingstown
1740 (an existing security holder of the Company and an affiliate of the Sponsor) and Ghaffarian Enterprises, LLC (an affiliate of Kamal
Ghaffarian, an Intuitive Machines founder) (collectively, the “Series A Investors”), pursuant to which, and on the terms and
subject to the conditions of which, New Intuitive Machines agreed to issue and sell to the Series A Investors (i) an aggregate of 26,000
shares of Series A Preferred Stock which would be convertible into shares of New Intuitive Machines Class A Common Stock and (ii) warrants
to purchase 541,667 shares of New Intuitive Machines Class A Common Stock at an initial exercise price of $15.00 per share, subject to
adjustment (the “Preferred Investor Warrants”). The Series A Investment was consummated following the Domestication but immediately
prior to the Closing.

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Tax Receivable Agreement

On February 13, 2023, in connection with the consummation
of the Transactions and as contemplated by the Business Combination Agreement, New Intuitive Machines entered into a Tax Receivable Agreement
(the “Tax Receivable Agreement”) with Intuitive Machines OpCo and certain members of Intuitive Machines OpCo. See Part III.
Item 13. “Certain Relationships and Related Transactions, and Director Independence – Post-Business Combination Arrangements
-Tax Receivables Agreement” for further information.

Equity Facility

On September 16, 2022, the Company entered
into a common stock purchase agreement (the “Cantor Purchase Agreement”), dated September 16, 2022, with CF Principal Investments
LLC (“CFPI”) relating to an equity facility under which shares of newly issued New Intuitive Machines Class A Common Stock
may be sold to CFPI by New Intuitive Machines. Pursuant to the terms of the Cantor Purchase Agreement, New Intuitive Machines will have
the right, but not the obligation, from time to time at its sole discretion, until the first day of the month following the 18-month period
from and after the Commencement (as defined in the Cantor Purchase Agreement), to direct CFPI to purchase up to the lesser of (i) $50 million
of newly issued New Intuitive Machines Class A Common Stock and (ii) the Exchange Cap (as defined in the Cantor Purchase Agreement),
by delivering written notice to CFPI prior to the commencement of trading on any trading day, subject to certain customary conditions
and limitations set forth in the Cantor Purchase Agreement. In connection with the execution of the Cantor Purchase Agreement, the Company
agreed to issue 100,000 shares (the “Commitment Shares”) of New Intuitive Machines’ Class A Common Stock to CFPI. The
Company entered into a registration rights agreement with CFPI, pursuant to which it agreed to register for resale, pursuant to Rule 415
under the Securities Act of 1933, as amended (the “Securities Act”), the shares of New Intuitive Machines’ Class A Common
Stock that are sold to CFPI under the equity facility and the Commitment Shares.

Subscription Agreements

On February 13, 2023, New Intuitive Machines and
Intuitive Machines OpCo entered into subscription agreements with certain legacy investors in Intuitive Machines OpCo (the “SAFE
Investors”) that held simple agreements for future equity (“SAFEs”) of Intuitive Machines OpCo, pursuant to which, among
other things, the SAFE Investors contributed the SAFEs to Intuitive Machines and, in exchange for such contribution, New Intuitive Machines
issued an aggregate of 2,066,666 shares of Class A Common Stock to the SAFE Investors (the “SAFE Exchange”). Immediately following
the consummation of the SAFE Exchange, New Intuitive Machines and Intuitive Machines OpCo exchanged all of the SAFEs received by Intuitive
Machines in the SAFE Exchange for 2,066,666 Intuitive Machines OpCo Common Units in a recapitalization of the SAFEs in order to maintain
a one-to-one ratio of the Intuitive Machines OpCo Common Units owned by Intuitive Machines and the number of outstanding shares of New
Intuitive Machines’ Class A Common Stock in accordance with the A&R Operating Agreement.

Results of Operations

As of December 31, 2022, we had not commenced
any operations. All activity for the period from January 27, 2021 (inception) through December 31, 2022 related to our formation and the
IPO and, subsequent to the closing of the IPO, identifying a target company for an initial business combination. We have neither
engaged in any operations nor generated any revenues or income during the period from inception through December 31, 2022 other than non-operating income in
the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.  Since our IPO through December
31, 2022, we incurred increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.

For the year ended December 31, 2022, we had net
loss of $190,408, which consisted primarily of interest income earned on cash and marketable securities held in Trust Account amounting
to $4,833,790, offset by formation and operating costs amounting to $5,024,198.

For the period from January 27, 2021 (inception)
to December 31, 2021, we had net loss of $315,511, which consisted primarily of formation and operating costs amounting to $491,341 and
over-allotment issuance costs amounting to $23,439 offset by interest income earned on cash and marketable securities held in Trust Account
amounting to $5,798, and change in fair value of over-allotment liability of $193,471.

Liquidity and Capital Resources

As of December 31, 2022, we had $14,932 in cash and working capital
deficit of $4,082,477.

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On September 30, 2021, our Sponsor agreed to provide
us with loans in such amounts as may be required by us to fund our working capital requirements up to an aggregate of $250,000. On
March 8, 2022, our Sponsor agreed to provide us with loans in such amounts as may be required by us to fund our working capital requirements
up to an aggregate of $500,000.

On August 4, 2022, our Sponsor agreed to loan
the Company up to $1,000,000 to be used for ongoing expenses reasonably related to the business of the Company and the consummation of
an initial business combination pursuant to a convertible promissory note (the “Working Capital Note”).

All unpaid principal under the Working Capital
Note was due and payable in full on the earlier of (i) September 24, 2023 and (ii) the effective date of an initial business combination,
involving the Company and one or more businesses (such earlier date, the “Maturity Date”), unless accelerated upon the occurrence
of an event of default as set forth in the Working Capital Note. The Sponsor had the option, at any time on or prior to the Maturity Date,
to convert up to $1,000,000 outstanding under the Working Capital Note into warrants to purchase Class A ordinary shares at a conversion
price of $1.00 per warrant, with each warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50 per share,
subject to the same adjustments applicable to the Private Placement Warrants. As of December 31, 2022, there was $625,000 outstanding
under the Working Capital Note. Subsequent to December 31, 2022, the Company drew an additional $100,000 on the Working Capital Note.
The Working Capital Note was subsequently repaid at Closing.

Until the consummation of the Business Combination,
the Company used the funds not held in the Trust Account for identifying and evaluating target businesses, performing due diligence on
prospective target businesses, traveling to and from the offices, plants or similar location of prospective target businesses or their
representatives or owners, reviewing corporate documents and material agreements of prospective target businesses and structuring, negotiating
and completing the Business Combination.

Upon the closing of the Business Combination,
we received approximately $34 million of gross proceeds to fund operations. We believe that the cash available from the consummation of
the Business Combination and related transactions will be sufficient to fund the short-term liquidity needs and the execution of the business
plan through at least the twelve month-period from the date of the Business Combination.

Prior to the closing of the Business Combination,
holders of 27,481,818 shares of Class A ordinary shares exercised their right to redeem such shares for cash at a price of approximately
$10.18 per share for aggregate payments of $279,884,314. We may need to raise additional capital to fund our operations and our business
plan. There can be no assurance that we will be successful in obtaining capital sufficient to meet our operating needs on terms or a timeframe
acceptable to us or at all. Further, in the event that market conditions preclude our ability to obtain sufficient capital, we may be
required to evaluate additional alternatives in restructuring our business and our capital structure.

Financial Statements and MD&A of Intuitive
Machines OpCo

In light of the consummation of the Business Combination,
the historical financial statements of IPAX ceased to be representative of the consolidated financial position, results of operations,
stockholders’ equity and cash flows of New Intuitive Machines. As described in the “Basis of Presentation” section of
this Annual Report, in future reporting periods, our
financial statements will be prepared on a consolidated basis with the financial statements of Intuitive Machines OpCo beginning on the
Closing Date and will represent a continuation of the financial statements of Intuitive Machines OpCo.

The consolidated financial position, results of operations,
stockholders’ equity and cash flows of Intuitive Machines OpCo as of and for the years ended December 31, 2022 and 2021 (“OpCo
Financial Statements”), and management’s discussion and analysis of the OpCo Financial Statements, including known trends
and uncertainties regarding the future consolidated financial position, results of operations, stockholders’ equity and cash flows
of Intuitive Machines OpCo will be filed as exhibits to Amendment No. 2 to the Company’s Current Report on Form 8-K to be filed
with the SEC on or about March 30, 2023.

Risks and Uncertainties

We have evaluated the impact of the COVID-19 pandemic
and Russian-Ukraine war on the industry and have concluded that while it is reasonably possible that the virus and the war could have
a negative effect on our financial position, results of its operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements included elsewhere in this Annual Report. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Financing Arrangements

As of December 31, 2022, we had no obligations,
assets or liabilities, which would be considered off-balance sheet arrangements.

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Contractual Obligations

As of December 31, 2022, we did not have any long-term
debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.

Administrative Services Agreement

Commencing on September 21, 2021, we agreed to
pay Kingstown Capital Management L.P., an affiliate of our Sponsor, $15,000 per month for office space, utilities and secretarial
and administrative support services. Upon the consummation of the Business Combination, we ceased paying such monthly fees.

Registration Rights

As of December 31, 2022, certain securityholders
of IPAX had registration rights to require us to register a sale of any of our securities held by them and our any other securities acquired
by them prior to the consummation of our initial business combination pursuant to a registration rights agreement entered into in connection
with the IPO. Pursuant to the registration rights agreement and assuming $1,500,000 of Working Capital Loans were converted into additional
warrants, we would have been obligated to register up to 21,588,750 Class A ordinary shares and 8,345,000 warrants. The holders of
these securities were entitled to make up to three demands, excluding short form demands, that we register such securities. In addition,
the holders had certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion
of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

At the Closing, the Company, the Sponsor and certain
securityholders of the Company entered into an amended and restated registration rights agreement (the “A&R Registration Rights
Agreement”), pursuant to which, among other things, the Sponsor and such securityholders were granted certain customary registration
rights, on the terms and subject to the conditions therein, with respect to securities of the Company that they hold following the Business
Combination. See Part III. Item 13. “Certain Relationships and Related Transactions, and Director Independence – A&R Registration
Rights Agreement.”

Underwriting Agreement

We granted the underwriters a 45-day option from
the effective date of the IPO to purchase up to an additional 4,500,000 Units to cover over-allotments, if any. On October 29, 2021, the
underwriters partially exercised the over-allotment option and purchased 2,975,000 Over-Allotment Units, generating aggregate gross proceeds
of $29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.

The Company provided a discount to the underwriters
at the closing of the Public Offering of 2.0% per Unit, or $4,595,000, excluding the proceeds from the purchase of an aggregate of 10,000,000
Units by certain of our Anchor Investors, $4,000,000 of which was payable upon the closing of the IPO and $595,000 was payable upon closing
of the Over-Allotment. Additionally, the underwriting agreement states that the Company will pay Citigroup Global Markets Inc. (“Citi”) a
deferred discount of $0.35 per Unit sold in the Public Offering including pursuant to the Over-Allotment, or an aggregate of $11,541,250
upon the Company’s completion of an initial business combination, which would be payable from the amounts held in the Trust Account
solely in the event that we complete an initial business combination, subject to the terms of the underwriting agreement.

On
November 27, 2022, in connection with the proposed Business Combination, Citi agreed to waive its entitlement to the deferred underwriting
commission of $11,541,250 to which it became entitled upon completion of the Company’s IPO, subject to the completion of an initial
business combination. As a result, the Company recorded
$11,541,250 to additional paid-in capital in relation to the reduction of the deferred underwriter fee in the accompanying condensed financial
statements. As of December 31, 2022 and December 31, 2021, the deferred underwriting fee payable was $0 and $11,541,250, respectively.

Professional Service Agreement

We reimbursed our Sponsor for services provided
by one of our Sponsor’s employees who served as our Chief of Staff (“COS”). The COS received $12,500 per month for services
rendered, commencing September 25, 2021, through the closing of our initial business combination. For the year ended December 31, 2022,
we recorded $191,668 of compensation for services provided. As of December 31, 2022, there was $0 due to the COS. Upon the consummation
of the Transactions, the professional services agreement was terminated.

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Critical Accounting Policies

This management’s discussion and analysis
of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with
US GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We
base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We
have identified the following as its critical accounting policies:

Offering Costs

We comply with the requirements of the ASC 340-10-S99-1. Offering
costs consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related
to the Public Offering. Offering costs are allocated to the separable financial instruments issued in the Public Offering based on
a relative fair value basis, compared to total proceeds received. Transaction costs amounted to $26,658,313, consisting of $4,595,000
of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value of founder shares, and
$841,938 of other offering costs, with $23,439 included in the statements of operations as an allocation for the over-allotment option,
$24,538,134 included in temporary equity as an allocation for the Class A ordinary shares subject to redemption, and $2,096,740 included
in additional paid-in capital as an allocation for the Class A ordinary shares not subject to redemption, the Public Warrants and the
Private Placement Warrants.

Subject to each Anchor Investor purchasing 100%
of the Units allocated to it in the IPO, and in connection with the closing of the IPO, our Sponsor sold membership interests reflecting
an allocation of an aggregate of 1,625,000 Founder Shares to the Anchor Investors collectively. We, through an independent valuations
expert, estimated the aggregate fair value of these Founder Shares attributable to Anchor Investors to be approximately $9.68 million,
or $5.96 per share. The excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff
Accounting Bulletin Topic 5A.

Class A Ordinary Shares Subject to Possible
Redemption

All of the Class A ordinary shares sold as part
of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation,
if there is a shareholder vote or tender offer in connection with an initial business combination and in connection with certain amendments
to our amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance on redeemable
equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within our control require ordinary shares
subject to redemption to be classified outside of permanent equity.

The Class A ordinary shares are subject to SEC
and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the
equity instrument will become redeemable, we have the option to either accrete changes in the redemption value over the period from the
date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption
date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the
instrument to equal the redemption value at the end of each reporting period. We recognize changes in redemption value immediately as
they occur. Immediately upon the closing of the IPO and the Over-Allotment, we recognized the remeasurement from initial book value to
redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in
capital.

Related Party Redemption Waiver Agreement

In September 2021, we entered into a redemption
waiver agreement with one of our Anchor Investors, Kingstown 1740, whereby Kingstown 1740 agreed to waive its redemption rights on 1,386,989
Class A ordinary shares it held. These Class A ordinary shares are classified as shareholders’ equity in the financial statements
included in this Annual Report.

Net Loss Per Ordinary Share

We comply with accounting and disclosure requirements
of ASC Topic 260, “Earnings Per Share.” Our statements of operations include a presentation of loss per share for ordinary
shares subject to possible redemption in a manner similar to the two-class method of loss per share. The remeasurement associated with
the redeemable Class A ordinary shares is excluded from net loss per ordinary share as the redemption value approximates fair value. Net
loss per share, basic and diluted, for Class A redeemable ordinary shares is calculated by dividing interest income earned and realized
gains or losses on the Trust Account for the year ended December 31, 2022 and for the period from January 27, 2021 (Inception) to December
31, 2021, by the weighted average number of Class A ordinary shares outstanding since original issuance. We have not considered the effect
of the Public Warrants or the Private Placement Warrants to purchase an aggregate of 23,332,500 of our Class A ordinary shares in
the calculation of diluted loss per share, since their exercise is contingent upon future events. Net loss per share, basic and diluted,
for Class A and Class B non-redeemable ordinary shares is calculated by dividing the net loss, adjusted for income or loss attributable
to Class A ordinary shares, by the weighted average number of Class A and Class B non-redeemable ordinary shares outstanding for the period.
Class A non-redeemable ordinary shares and Class B non-redeemable ordinary shares, which include the Founder Shares, do not have any redemption
features and do not participate in the income or losses of the Trust Account. At December 31, 2022 and 2021, we did not have any dilutive
securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings
of our company. As a result, diluted loss per share is the same as basic loss per share for the period presented.

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Derivative Financial Instruments

We evaluate our financial instruments to determine
if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives
and Hedging.” Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date,
with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance
sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within
12 months of the balance sheet date.

We evaluated the warrants in accordance with ASC
815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that there were no indexation
or tender offer provisions in the warrant agreement that precluded the warrants from being accounted for as components of equity, and
the warrants meet the criteria in ASC 815-40-25 to be classified in shareholders’ deficit. Fair value of the Public and Private
Placement Warrants was determined by an independent valuation expert as of September 24, 2021 (the date of the IPO) and October 29, 2021
(the date of the Over-Allotment) using a Monte Carlo Model. Proceeds from the IPO and subsequent partial exercise of the over-allotment
option allocated to the Public Warrants was an aggregate $11,995,753 ($11,025,229, net of offering costs) and is recorded in additional
paid-in capital. Proceeds from the issuance of the Private Placement Warrants were $6,845,000 ($6,831,701, net of offering costs) and
is recorded in additional paid-in capital.

Forward Purchase Agreement

In September 2021, we entered into a forward purchase
agreement (“FPA”) pursuant to which certain affiliates of our Sponsor (“Kingstown”) agreed to purchase up to 5,000,000
forward purchase Class A ordinary shares (“Forward Purchase Shares”), for $10.00 per share, or an aggregate amount of up to
$50,000,000, in a private placement that will close concurrently with the closing of our initial business combination, subject to approval
by the Kingstown investment committee. We have the right, in our sole discretion, to reduce the amount of Forward Purchase Shares that
Kingstown may purchase pursuant to the FPA. We have not considered the effect of the Forward Purchase Shares in the calculation of diluted
income per share, since their issuance is contingent upon future events.

We evaluated the FPA under ASC 480 and ASC 815-40
to determine the appropriate accounting treatment. The FPA does not meet the criteria to be classified as a liability under ASC 480. In
addition, there is no net cash settlement feature and settlement will be in gross physical delivery of Class A ordinary shares; therefore,
the FPA should be classified as equity. However, as the issuance of Forward Purchase Shares is contingent on several factors, including
the consummation of an initial business combination, approval by the Kingstown investment committee, and our discretion, we will record
the FPA when it becomes probable that the triggering events will occur. Until such time, due to the contingent nature of the FPA, we will
disclose the contingency in the notes to our financial statements.

The FPA was terminated on November 30, 2022.

Inflation

We do not believe that inflation had a material
impact on our business, revenues or operating results during the period presented.

Emerging Growth Company Status

We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS
Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports
and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.

35

Further, Section 102(b)(1) of the JOBS Act
exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply
with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected
not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of our financial statements with another public company which is either not
an emerging growth company or an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to the “Company,” “Inflection Point Acquisition
Corp.,” “our,” “us” or “we” refer to Inflection Point Acquisition Corp. The following discussion
and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited financial
statements and the notes thereto contained elsewhere in this Annual Report.

Cautionary
Note Regarding Forward-Looking Statements

This Annual Report includes forward-looking statements. These forward-looking
statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can
be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve
a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. Our forward-looking statements include,
but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies
regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,”
“plan,” “possible,” “potential,” “predict,” “project,” “should,”
“would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that
a statement is not forward-looking. Factors that might cause or contribute to such forward-looking statements include, but are not limited
to, those set forth in the Risk Factors section of this Annual Report. The following discussion and analysis of the Company’s financial
condition and results of operations should be read in conjunction with the audited financial statements and the notes thereto contained
elsewhere in this Annual Report.

Overview

We are a blank check company incorporated on January 27, 2021 as a
Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization
or similar business combination with one or more businesses (the “Initial Business Combination”).

48

Our sponsor is Inflection Point Holdings LLC, a Cayman Islands limited
liability company (the “Sponsor”). The registration statement for our initial public offering was declared effective
on September 21, 2021. On September 24, 2021, we consummated our initial public offering (the “Initial Public Offering”
or “IPO”) of 30,000,000 units, at $10.00 per unit (the “Units”). Each Unit consists of one of the
Company’s Class A ordinary shares, $0.0001 par value (the “Class A Ordinary Shares” or “Public
Shares”) and one-half of one redeemable warrant (each, a “Public Warrant”). The underwriters had a 45-day
option from the effective date to purchase up to an additional 4,500,000 Units to cover over-allotments, if any. On October 29, 2021,
the underwriters partially exercised the over-allotment option (the “Over-Allotment” and together with the IPO, the
“Public Offering”) and purchased an additional 2,975,000 Units (the “Over-Allotment Units”), generating
additional gross proceeds of $29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.

Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 6,250,000 private placement warrants (“IPO Private Placement
Warrants”) at a price of $1.00 per IPO Private Placement Warrants, for an aggregate purchase price of $6,250,000. On October
29, 2021, simultaneously with the sale of the Over-Allotment Units, the Sponsor purchased an additional 595,000 private placement warrants
(the “Over-Allotment Private Placement Warrants” and together with the IPO Private Placement Warrants, the “Private
Placement Warrants”), generating aggregate gross proceeds to the Company of $595,000.

An aggregate of 12 qualified institutional buyers
(“Anchor Investors”) expressed an interest to purchase an aggregate of approximately $322.3 million of the Units to
be sold in the IPO. None of the Anchor Investors expressed an interest in purchasing more than 9.9% of the Units sold in the IPO. The
Anchor Investors were allocated and purchased a total of 29,540,000 Units or 98.5% of the Units sold in the IPO. One of the Anchor Investors,
Kingstown 1740 Fund, LP, is an affiliate of the Sponsor, and was allocated and purchased 2,900,000 Units in the IPO.

In addition, subject to each Anchor Investor purchasing
100% of the Units allocated to it, in connection with the closing of the IPO, the Sponsor sold membership interests reflecting an allocation
of Class B ordinary shares, par value $0.0001 per share (the “Founder Shares”) to each Anchor Investor, or an aggregate
of 1,625,000 Founder Shares to all Anchor Investors. The Company estimated the aggregate fair value of these Founder Shares attributable
to Anchor Investors to be approximately $9.68 million, or $5.96 per share. The excess of the fair value of the Founder Shares was determined
to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Offering costs allocated to the Public Shares and the Public
Warrants was all charged to shareholder’s equity upon the completion of the IPO.

Transaction costs amounted to $26,658,313, consisting
of $4,595,000 of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value of founder
shares, and $841,938 of other offering costs, with $23,439 included in the statement of operations as an allocation for the over-allotment
option, $24,538,134 included in temporary equity as an allocation for the Class A ordinary shares subject to redemption, and $2,096,740
included in additional paid-in capital as an allocation for the Class A ordinary shares not subject to redemption, the Public Warrants
and the Private Placement Warrants.

Following the closing of the IPO on September 24, 2021, $300,000,000
($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the IPO Private Placement Warrants was deposited
into a trust account (the “Trust Account”). Following the closing of the Over-Allotment on October 29, 2021, an additional
$29,750,000 ($10.00 per Over-Allotment Unit) from the net proceeds from the sale of the Over-Allotment Units in the Over-Allotment and
the sale of the Over-Allotment Private Placement Units was deposited into the Trust Account. The proceeds deposited in the Trust Account
are, and will be, invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury
obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay
taxes, if any, the proceeds from the Public Offering and the sale of the Private Placement Warrants will not be released from the Trust
Account until the earliest of (i) the completion of an Initial Business Combination, (ii) the redemption of the Company’s Public
Shares if the Company is unable to complete the Initial Business Combination by September 24, 2023, subject to applicable law, or (iii)
the redemption of the Company’s Public Shares properly submitted in connection with a shareholder vote to amend the Company’s
Amended and Restated Memorandum and Articles of Association to (A) modify the substance or timing of the Company’s obligation to
allow redemption in connection with the Initial Business Combination or to redeem 100% of its Public Shares if the Company has not consummated
an Initial Business Combination by September 24, 2023 or (B) with respect to any other material provisions relating to shareholders’
rights or pre-Initial Business Combination activity. The proceeds deposited in the Trust Account could become subject to the claims of
the Company’s creditors, if any, which could have priority over the claims of the Company’s Public Shareholders.

49

The Company’s management has broad discretion with respect to
the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants although substantially
all of the net proceeds are intended to be generally applied toward consummating an Initial Business Combination (less deferred underwriting
commissions). The Company’s Initial Business Combination must be with one or more operating businesses or assets with a fair market
value equal to at least 80% of the value of the Trust Account (excluding the amount of any deferred underwriting discount held in trust
and taxes payable on the income earned on the Trust Account). However, the Company will only complete an Initial Business Combination
if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise
acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment
Company Act. There is no assurance that the Company will be able to successfully effect an Initial Business Combination.

The Company will have until September 24, 2023
to complete the Initial Business Combination (the “Combination Period”). However, if the Company is unable to complete
the Initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the
Trust Account (less tax payable and up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding
Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive
further liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject in the case
of clauses (ii) and (iii) to the Company’s obligations under Cayman Islands law to provide for claims of creditors and in all cases
subject to the other requirements of applicable law.

Liquidity and Capital Resources; Going Concern

As of December 31, 2021, we had approximately $0.36 million in cash
and working capital of $0.62 million.

On
September 30, 2021, the Sponsor agreed to provide us with loans in such amounts as may be required by us to fund our working capital
requirements up to an aggregate of $250,000. In addition, in order to finance transaction costs in connection with an Initial Business
Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, provide
Working Capital Loans to us. As of December 31, 2021, there were no amounts outstanding under any Working Capital Loans.

Based on the foregoing, it is possible that the $0.36 million in cash
held outside the Trust Account might not be sufficient to allow the Company to operate for at least 12 months from the date of this Annual
Report, assuming that an Initial Business Combination is not consummated during that time. Until consummation of its Initial Business
Combination, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective Initial
Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to merge with or acquire, and structuring, negotiating and consummating the Initial Business Combination.

The
Company can raise additional capital through Working Capital Loans from the Sponsor, certain of the Company’s officers and directors,
or through loans from third parties. If the Company is unable to raise additional capital, it may be required to take additional measures
to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business
plan, and reducing overhead expenses. The Company cannot provide assurance that new financing will be available to it on commercially
acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern
for a reasonable period of time, which is considered to be one year from the issuance date of these financial statements.

Risks
and Uncertainties

Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the
specific impact is not readily determinable as of the date of this Annual Report. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

50

Results
of Operations

As of December 31, 2021, we had not commenced
any operations. All activity for the period from January 27, 2021 (inception) through December 31, 2021 relates to our formation and the
Public Offering and, subsequent to the closing of the IPO, identifying a target company for an Initial Business Combination. We
have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after
the completion of our Initial Business Combination, at the earliest. We will generate non-operating income in the
form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering. We incur increased expenses
as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence
expenses.

For the period from January 27, 2021 (inception)
to December 31, 2021, we had net loss of $315,511, which consisted primarily of formation and operating costs amounting to $491,341 and
over-allotment issuance costs amounting to $23,439 offset by interest income earned on cash and marketable securities held in Trust Account
amounting to $5,798, and change in fair value of over-allotment liability of $193,471.

We
do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term
liabilities.

As
of December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Administrative
Services Agreement

Commencing
on September 22, 2021, we agreed to pay Kingstown Capital Management L.P., an affiliate of the Sponsor, $15,000 per month for office
space, utilities and secretarial and administrative support services. Upon the earlier of the completion of the Initial Business
Combination or our liquidation, we will cease paying such monthly fees.

Registration
Rights

The holders of the (i) Founder Shares and the Class A Ordinary
Shares issuable upon conversion of Founder Shares, (ii) Forward Purchase Shares, (iii) Private Placement Warrants and the Class A
Ordinary Shares underlying such Private Placement Warrants and (iv) warrants that may be issued upon conversion of Working Capital
Loans and the Class A Ordinary Shares underlying such warrants will have registration rights to require us to register a sale of
any of our securities held by them and any other securities of the Company acquired by them prior to the consummation of our Initial Business
Combination pursuant to a registration rights agreement entered into in connection with the IPO. Pursuant to the registration rights agreement
and assuming $1,500,000 of Working Capital Loans are converted into additional Private Placement Warrants, we will be obligated to register
up to 21,588,750 Class A Ordinary Shares and 8,345,000 Private Placement Warrants. The number of Class A Ordinary Shares includes
(i) 8,243,750 Class A Ordinary Shares to be issued upon conversion of the Founder Shares, (ii) 5,000,000 Forward Purchase Shares,
(iii) 6,845,000 Class A Ordinary Shares underlying the Private Placement Warrants and (iv) 1,500,000 Class A Ordinary Shares
underlying the warrants issuable upon conversion of working capital loans. The number of warrants includes 6,845,000 Private Placement
Warrants and 1,500,000 additional warrants issuable upon the conversion of Working Capital Loans. The holders of these securities are
entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our Initial
Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

51

Underwriting
Agreement

The Company granted the underwriters a 45-day
option from the date of IPO prospectus to purchase up to an additional 4,500,000 Units to cover over-allotments, if any. On October 29,
2021, the underwriters partially exercised the over-allotment option and purchased 2,975,000 Over-Allotment Units, generating aggregate
gross proceeds of $29,750,000, and forfeited their option to purchase the remaining 1,525,000 Units.

The underwriters were entitled to a cash underwriting
discount of 2.0% per Unit, or $4,595,000, excluding the proceeds from the purchase of an aggregate of 10,000,000 Units by certain of our
Anchor Investors, $4,000,000 of which was payable upon the closing of the IPO and $595,000 was payable upon closing of the Over-Allotment.
Additionally, Citigroup Global Markets Inc. will be entitled to a deferred underwriting discount of 3.5% of the gross proceeds
of the Public Offering, or $11,541,250 upon the completion of the Company’s Initial Business Combination. The deferred fee will
become payable from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination,
subject to the terms of the underwriting agreement.

Professional Service Agreement

The Company reimburses its Sponsor for services
provided by one of the Sponsor’s employees who serves as the Company’s Chief of Staff (“COS”). The COS
receives $12,500 per month for services rendered, commencing September 25, 2021, through the closing of our initial business combination.
For the period from January 27, 2021 (date of inception) through December 31, 2021, the Company recorded $40,000 of compensation for services
provided. As of December 31, 2021, there was no balance due to the COS.

Critical Accounting Policies

This management’s discussion and analysis
of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with
US GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing
basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We
base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We
have identified the following as its critical accounting policies:

Offering Costs

We comply with the requirements of the ASC 340-10-S99-1. Offering
costs consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related
to the Public Offering. Offering costs are allocated to the separable financial instruments to be issued in the Public Offering based
on a relative fair value basis, compared to total proceeds received. Transaction costs amounted to $26,658,313, consisting of $4,595,000
of underwriting commissions, $11,541,250 of deferred underwriting commissions, $9,680,125 of excess fair value of founder shares, and
$841,938 of other offering costs, with $23,439 included in the statement of operations as an allocation for the over-allotment option,
$24,538,134 included in temporary equity as an allocation for the Class A ordinary shares subject to redemption, and $2,096,740 included
in additional paid-in capital as an allocation for the Class A ordinary shares not subject to redemption, the Public Warrants and the
Private Placement Warrants.

Subject to each Anchor Investor purchasing 100%
of the Units allocated to it in the IPO, and in connection with the closing of the IPO, the Sponsor sold membership interests reflecting
an allocation of an aggregate of 1,625,000 Founder Shares to the Anchor Investors collectively. The Company, through an independent valuations
expert, estimated the aggregate fair value of these Founder Shares attributable to Anchor Investors to be approximately $9.68 million,
or $5.96 per share. The excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff
Accounting Bulletin Topic 5A.

Class
A Ordinary Shares Subject to Possible Redemption

All
of the Class A Ordinary Share sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption
of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection
with the Initial Business Combination and in connection with certain amendments to the Company’s Amended and Restated Memorandum
and Articles of Association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified
in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to
be classified outside of permanent equity.

The Class A Ordinary Shares are subject to SEC
and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the
equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period
from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest
redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount
of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value
immediately as they occur. Immediately upon the closing of the IPO and the Over-Allotment, the Company recognized the remeasurement from
initial book value to redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against
additional paid-in capital.

Related
Party Redemption Waiver Agreement

In September 2021, the Company entered into a
redemption waiver agreement with one of its Anchor Investors, Kingstown 1740 Fund, LP, whereby Kingstown 1740 Fund, LP agreed to waive
its redemption rights on 1,386,989 Class A Ordinary Shares it holds, and these Class A Ordinary Shares are classified as shareholders’
equity.

52

Net Loss Per Ordinary Share

We comply with accounting and disclosure requirements
of ASC Topic 260, “Earnings Per Share.” Our statement of operations include a presentation of income per share for ordinary
shares subject to possible redemption in a manner similar to the two-class method of income per share. The remeasurement associated with
the redeemable Class A ordinary shares is excluded from net loss per ordinary share as the redemption value approximates fair value. Net
income per share, basic and diluted, for Class A redeemable ordinary shares is calculated by dividing interest income earned and realized
gains or losses on the Trust Account for the period from January 27, 2021 (inception) through December 31, 2021, by the weighted average
number of Class A redeemable ordinary shares outstanding since original issuance. The Company has not considered the effect of the Public
Warrants or the Private Placement Warrants to purchase an aggregate of 23,332,500 of the Company’s Class A Ordinary Shares
in the calculation of diluted income per share, since their exercise is contingent upon future events. Net income per share, basic
and diluted, for Class A and Class B non-redeemable ordinary shares is calculated by dividing the net income, adjusted for income or loss
attributable to Class A redeemable ordinary shares, by the weighted average number of Class A and Class B non-redeemable ordinary shares
outstanding for the period. Class A and Class B non-redeemable ordinary shares includes the Founder Shares as these shares do not have
any redemption features and do not participate in the income or losses of the Trust Account. At December 31, 2021, we did not have any
dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the
earnings of our company. As a result, diluted income per share is the same as basic income per share for the period presented.

Warrants

We evaluated the Warrants in accordance with ASC
815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that there were no indexation
or tender offer provisions in the Warrant Agreement that precluded the Warrants from being accounted for as components of equity, and
the Warrants meet the criteria in ASC 815-40-25 to be classified in shareholders’ equity. Fair value of the Public and Private Placement
Warrants was determined by an independent valuation expert as of September 24, 2021 (the date of the IPO) and October 29, 2021 (the date
the over-allotment option was exercised) using a Monte Carlo Model. Proceeds from the IPO and subsequent partial exercise of the over-allotment
option allocated to the Public Warrants was an aggregate $11,995,753 ($11,025,229, net of offering costs) and is recorded in additional
paid-in capital. Proceeds from the issuance of the Private Placement Warrants were $6,845,000 ($6,831,701, net of offering costs) and
is recorded in additional paid-in capital.

Forward Purchase Agreement

In September 2021, we entered into a forward purchase
agreement (“FPA”) pursuant to which certain affiliates of the Sponsor (“Kingstown”) agreed to purchase
up to 5,000,000 forward purchase Class A ordinary shares (“Forward Purchase Shares”), for $10.00 per share, or an aggregate
amount of up to $50,000,000, in a private placement that will close concurrently with the closing of our Initial Business Combination,
subject to approval by the Kingstown investment committee. We have the right, in our sole discretion, to reduce the amount of Forward
Purchase Shares that Kingstown may purchase pursuant to the FPA. We have not considered the effect of the Forward Purchase Shares in the
calculation of diluted income per share, since their issuance is contingent upon future events.

We evaluated the FPA under ASC 480 and ASC 815-40
to determine the appropriate accounting treatment. The FPA does not meet the criteria to be classified as a liability under ASC 480. In
addition, there is no net cash settlement feature and settlement will be in gross physical delivery of Class A ordinary shares; therefore,
the FPA should be classified as equity. However, as the issuance of Forward Purchase Shares is contingent on several factors, including
the consummation of the Initial Business Combination, approval by the Kingstown board of directors, and the Company’s discretion,
we will record the FPA when it becomes probable that the triggering events will occur. Until such time, due to the contingent nature of
the FPA, we will disclose the contingency in the notes to our financial statements.

Inflation

We
do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.

Emerging
Growth Company Status

We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our
Business Startups Act of 2012, (the “JOBS Act”), and may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective
or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out
of such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.