Intuitive Machines, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Reports of Independent Registered Public Accounting Firm (PCAOB ID # 248 ) 52 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2023 and 2022 53 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 54 Consolidated Statements of Mezzanine Equity for the years ended December 31, 2023 and 2022 55 Consolidated Statements of Shareholders’ Deficit for the years ended December 31, 2023 and 2022 56 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 57 Notes to Consolidated Financial Statements 59 51 Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Intuitive Machines, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Intuitive Machines, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, mezzanine equity, shareholders’ deficit and cash flows for each of the two years in the period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2021. Houston, Texas March 25, 2024 52 Table of Contents INTUITIVE MACHINES, INC. Consolidated Balance Sheets (in thousands, except share data and par value) December 31, 2023 December 31, 2022 ASSETS Current assets Cash and cash equivalents $ 4,498 $ 25,764 Restricted cash 62 62 Trade accounts receivable, net of allowance for expected credit losses of $ 0 and $ 836 , respectively 16,881 1,302 Contract assets 6,489 6,979 Prepaid and other current assets 3,681 6,885 Total current assets 31,611 40,992 Property and equipment, net 18,349 21,176 Operating lease right-of-use assets 35,853 4,829 Finance lease right-of-use assets 95 — Deferred income taxes — 7 Total assets $ 85,908 $ 67,004 LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued expenses $ 16,771 $ 6,081 Accounts payable - affiliated companies 3,493 442 Current maturities of long-term debt 8,000 16,098 Contract liabilities, current 45,511 56,656 Operating lease liabilities, current 4,833 725 Finance lease liabilities, current 25 — Other current liabilities 4,747 15,178 Total current liabilities 83,380 95,180 Long-term debt, net of current maturities — 3,863 Contract liabilities, non-current — 2,188 Operating lease liabilities, non-current 30,550 5,078 Finance lease liabilities, non-current 67 — Simple Agreements for Future Equity ("SAFE Agreements") — 18,314 Earn-out liabilities 14,032 — Warrant liabilities 11,294 — Other long-term liabilities 4 — Total liabilities 139,327 124,623 Commitments and contingencies (Note 14) MEZZANINE EQUITY Series A preferred stock subject to possible redemption, $ 0.0001 par value, 25,000,000 shares authorized, 26,000 shares issued and outstanding at December 31, 2023 28,201 — Redeemable noncontrolling interests 181,662 — SHAREHOLDERS’ DEFICIT Common units — 1 Class A common stock, $ 0.0001 par value, 500,000,000 shares authorized, 22,279,876 shares issued and 21,029,876 outstanding at December 31, 2023 2 — Class B common stock, $ 0.0001 par value, 100,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2023 — — Class C common stock, $ 0.0001 par value, 100,000,000 shares authorized, 70,909,012 shares issued and outstanding at December 31, 2023 7 — Treasury stock, at cost, 1,250,000 shares at December 31, 2023 ( 12,825 ) — Paid-in capital — 14,967 Accumulated deficit ( 250,466 ) ( 72,587 ) Total shareholders’ deficit ( 263,282 ) ( 57,619 ) Total liabilities, mezzanine equity and shareholders’ deficit $ 85,908 $ 67,004 The accompanying notes are an integral part of these consolidated financial statements 53 Table of Contents INTUITIVE MACHINES, INC. Consolidated Statements of Operations (in thousands, except share and per share amounts) Year Ended December 31, 2023 2022 Revenue $ 79,521 $ 85,946 Operating expenses: Cost of revenue (excluding depreciation) 100,472 75,513 Depreciation 1,376 1,072 Impairment of property and equipment 964 — General and administrative expense (excluding depreciation) 32,946 14,868 Total operating expenses 135,758 91,453 Operating loss ( 56,237 ) ( 5,507 ) Other income (expense), net: Interest expense, net ( 823 ) ( 836 ) Change in fair value of earn-out liabilities 66,252 — Change in fair value of warrant liabilities 15,435 — Change in fair value of SAFE Agreements ( 2,353 ) ( 91 ) Loss on issuance of securities ( 6,729 ) — Other (expense) income, net ( 483 ) 6 Total other income (expense), net 71,299 ( 921 ) Income (loss) before income taxes 15,062 ( 6,428 ) Income tax (expense) benefit ( 40 ) 23 Net income (loss) 15,022 ( 6,405 ) Net loss attributable to Intuitive Machines, LLC prior to the Business Combination ( 5,751 ) ( 6,405 ) Net income for the period February 13, 2023 through December 31, 2023 20,773 — Net loss attributable to redeemable noncontrolling interest ( 42,031 ) — Net income attributable to the Company 62,804 — Less: Cumulative preferred dividends ( 2,343 ) — Net income attributable to Class A common shareholders $ 60,461 $ — Net income per share (1) Net income per share of Class A common stock - basic $ 3.43 Net income per share of Class A common stock - diluted 2.46 Weighted-average common shares outstanding Weighted average shares outstanding - basic 17,648,050 Weighted average shares outstanding - diluted 25,564,313 (1) As a result of the Business Combination (as defined herein), the capital structure has changed and income per share information is only presented after the Closing Date (as defined herein) of the Business Combination, for the period from February 13, 2023 through December 31, 2023. See Note 3 - Business Combination and Related Transactions and Note 13 - Net Income per Share for additional information. The accompanying notes are an integral part of these consolidated financial statements 54 Table of Contents INTUITIVE MACHINES, INC. Consolidated Statements of Mezzanine Equity (In thousands except per share data) Year Ended December 31, 2023 Series A Preferred Stock Redeemable Noncontrolling Interest Shares Amount Balance, December 31, 2022 — $ — $ — Issuance of series A preferred stock 26,000 25,827 — Cumulative preferred dividends — 2,343 — Accretion of preferred stock discount — 31 — Establishment of redeemable noncontrolling interests — — ( 85,865 ) Subsequent remeasurement of redeemable noncontrolling interests — — 309,558 Net loss attributable to redeemable noncontrolling interests — — ( 42,031 ) Balance, December 31, 2023 26,000 $ 28,201 $ 181,662 The accompanying notes are an integral part of these consolidated financial statements 55 Table of Contents INTUITIVE MACHINES, INC. Consolidated Statements of Shareholders’ Deficit (In thousands except per share data) Members Units Common Stock Class A Common Stock Class B Common Stock Class C Treasury Stock Paid-in Capital Accumulated Deficit Total Shareholders’ Equity Units Shares Amount Shares Amount Shares Amount Balance, December 31, 2021 122,500,000 $ 1 — — — — — — — $ 14,337 $ ( 66,182 ) $ ( 51,844 ) Issuance of units 5,500 — — — — — — — — 6 — 6 Share-based compensation expense 0 — — — — — — — — 624 — 624 Net loss 0 — — — — — — — — — ( 6,405 ) ( 6,405 ) Balance, December 31, 2022 122,505,500 $ 1 — $ — — $ — — $ — $ — $ 14,967 $ ( 72,587 ) $ ( 57,619 ) Issuance of units 21,500 — — — — — — — — 22 — 22 Share-based compensation expense — — — — — — — — — 101 — 101 Net loss — — — — — — — — — — ( 5,751 ) ( 5,751 ) Effects of Business Combination Recapitalization ( 122,527,000 ) ( 1 ) 13,736,932 2 10,566 — 68,140,188 6 — 47,438 — 47,445 Conversion of SAFE Agreements — — 2,066,666 — — — — — — 20,667 — 20,667 Issuance of warrants to preferred shareholders — — — — — — — — — 173 — 173 Transaction costs — — — — — — — — — ( 24,445 ) — ( 24,445 ) Establishment of the earn-out liabilities — — — — — — — — — ( 99,659 ) — ( 99,659 ) Establishment of redeemable noncontrolling interest — — — — — — — — — 85,865 — 85,865 Activities subsequent to the Business Combination Share-based compensation expense — — — — — — — — — 4,172 — 4,172 Member distributions — — 64,328 — — — 268,824 — — 3,168 ( 11,120 ) ( 7,952 ) Cumulative preferred dividends — — — — — — — — — ( 2,343 ) — ( 2,343 ) Accretion of preferred stock discount ( 31 ) — ( 31 ) Repurchase of common stock — — — — — — — — ( 12,825 ) — — ( 12,825 ) Class A common stock issued for warrants exercised — — 1,402,106 — — — — — — 16,124 — 16,124 Class A common stock issued related to Private Placement (Note 9) — — 4,705,883 — — — — — — — — — Class A common stock issued for stock options exercised — — 197,610 — — — — — — ( 369 ) — ( 369 ) Class A common stock issued for Class B canceled — — 10,566 — ( 10,566 ) — — — — — — — Partner capital — — — — — — — — — 686 — 686 Recapitalization adjustment (Note 3) — — — — — — — — — ( 1,000 ) — ( 1,000 ) Issuance of Class A Common Stock related to CEF (Notes 3) — — 95,785 — — — — — — 834 — 834 Issuance of Class C common stock related to earn-out awards (Note 3) — 0 — — — — — 2,500,000 1 — 19,375 — 19,376 Other — — — — — — — — — — 1 1 Subsequent remeasurement of redeemable noncontrolling interests — — — — — — — — — ( 85,745 ) ( 223,813 ) ( 309,558 ) Net income attributable to the Company — — — — — — — — — — 62,804 62,804 Balance, December 31, 2023 — $ — 22,279,876 $ 2 — $ — 70,909,012 $ 7 $ ( 12,825 ) $ — $ ( 250,466 ) $ ( 263,282 ) The accompanying notes are an integral part of these consolidated financial statements 56 Table of Contents INTUITIVE MACHINES, INC. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net income (loss) $ 15,022 $ ( 6,405 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 1,376 1,072 Bad debt (recoveries) expense ( 836 ) 836 Impairment of property and equipment 964 — Loss on disposal of property and equipment — 6 Share-based compensation expense 4,273 624 Change in fair value of SAFE Agreements 2,353 91 Change in fair value of earn-out liabilities ( 66,252 ) — Change in fair value of warrant liabilities ( 15,435 ) — Loss on issuance of securities 6,729 — Deferred income taxes 7 ( 7 ) Other 43 13 Changes in operating assets and liabilities: Trade accounts receivable, net ( 14,743 ) 1,252 Contract assets 490 ( 5,135 ) Prepaid expenses ( 1,435 ) ( 5,699 ) Other assets, net 1,165 ( 2,999 ) Accounts payable and accrued expenses 14,091 3,423 Accounts payable – affiliated companies 3,050 225 Contract liabilities – current and long-term ( 13,333 ) ( 1,316 ) Other liabilities 17,192 14,803 Net cash (used in) provided by operating activities ( 45,279 ) 784 Cash flows from investing activities: Purchase of property and equipment ( 29,911 ) ( 16,405 ) Net cash used in investing activities ( 29,911 ) ( 16,405 ) Cash flows from financing activities: Proceeds from Business Combination 8,055 — Proceeds from issuance of Series A Preferred Stock 26,000 — Transaction costs ( 9,371 ) — Proceeds from borrowings — 7,948 Repayment of loans ( 12,000 ) ( 108 ) Proceeds from issuance of securities 20,000 6 Member distributions ( 7,952 ) — Net costs of stock option exercises ( 348 ) — Forward purchase agreement termination 12,730 — Warrants exercised 16,124 — Investment from non-controlling interests 686 — SAFE Agreements — 4,250 Net cash provided by financing activities 53,924 12,096 Net decrease in cash, cash equivalents and restricted cash ( 21,266 ) ( 3,525 ) Cash, cash equivalents and restricted cash at beginning of the period 25,826 29,351 Cash, cash equivalents and restricted cash at end of the period 4,560 25,826 Less: restricted cash 62 62 Cash and cash equivalents at end of the period $ 4,498 $ 25,764 57 Table of Contents Year Ended December 31, 2023 2022 Supplemental disclosure of cash flow information Cash paid for interest, net $ 1,919 $ 1,013 Cash paid for taxes $ 35 $ — Accrued capital expenditures $ — $ ( 38 ) Noncash financing activities: Transaction costs $ 15,074 $ — SAFE Agreements $ 20,667 $ — Class A Common Stock related to CEF (Note 3) $ 834 $ — Issuance of Class C Common Stock related to earn-out awards (Note 3) $ 19,376 Preferred dividends $ ( 2,343 ) $ — The accompanying notes are an integral part of these consolidated financial statements 58 Table of Contents INTUITIVE MACHINES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BUSINESS DESCRIPTION Intuitive Machines, Inc. (formerly known as Inflection Point Acquisition Corp. or “IPAX”), collectively with its subsidiaries (the “Company,” “IM,” “Intuitive Machines,” “we,” “us” or “our”) designs, manufactures and operates space products and services. Intuitive Machines’ near-term focus is to create and operate space systems and space infrastructure on and in the vicinity of the Moon that enable scientific and human exploration and utilization of lunar resources to support sustainable human presence on the Moon and exploration to Mars and beyond. Intuitive Machines offers its customers the flexibility needed to pioneer a thriving and diverse lunar economy designed to enable a permanent presence in lunar orbit and on the lunar surface. IM is currently headquartered in Houston, Texas. Intuitive Machines, Inc. 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 Stock Market LLC (“Nasdaq”). IPAX Business Combination On September 16, 2022, IPAX entered into a certain Business Combination Agreement (the “Business Combination Agreement”) by and between IPAX and Intuitive Machines, LLC, a Delaware limited liability company (formerly, a Texas limited liability company). On February 10, 2023, as contemplated by the Business Combination Agreement and described in the section titled “The Business Combination Proposal” of the final prospectus and definitive proxy statement of IPAX, dated January 24, 2023 and filed with the SEC on January 24, 2023, IPAX filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and certificate of corporate domestication with the Secretary of State of the State of Delaware, pursuant to which IPAX was domesticated and continues as a Delaware corporation, changing its name to “Intuitive Machines, Inc.” On February 13, 2023 (the “Closing Date”), Intuitive Machines, Inc. and Intuitive Machines, LLC consummated the previously announced business combination (the “Business Combination”) and related transactions (the “Transactions”) contemplated by the Business Combination Agreement. As a result of the Transactions, all of the issued and outstanding common units of Intuitive Machines, LLC were converted into common stock of Intuitive Machines, Inc. using an exchange ratio of 0.5562 shares of Intuitive Machines, Inc. common stock per each unit of Intuitive Machines, LLC Common Unit. In addition, Intuitive Machines, LLC’s share-based compensation plan and related share-based compensation awards were exchanged or converted, as applicable, into common stock of Intuitive Machines, Inc. In connection with the Transactions, the Company was reorganized into an umbrella partnership C corporation (or “Up-C”) structure, in which substantially all of the assets and business of the Company are held by Intuitive Machines, LLC and continue to operate through Intuitive Machines, LLC and its subsidiaries. Intuitive Machines, Inc. is a holding company whose only material asset is its equity ownership interests of Intuitive Machines, LLC. While Intuitive Machines, LLC became a subsidiary of Intuitive Machines, Inc. and Intuitive Machines, Inc. was appointed as its managing member, Intuitive Machines, LLC was deemed to be the acquirer in the Business Combination for accounting purposes. Accordingly, the Business Combination was accounted for as a reverse recapitalization, in which case the consolidated financial statements of the Company represent a continuation of Intuitive Machines, LLC and the issuance of common stock in exchange for the net assets of Intuitive Machines, Inc. was recorded at historical cost with no recognition of goodwill or other intangible assets. Operations prior to the Business Combination are those of Intuitive Machines, LLC. In addition, the number of shares subject to, and the exercise price of, the Company’s outstanding options were adjusted to reflect the Business Combination. The treatment of the Business Combination as a reverse recapitalization was based upon the pre-merger members of Intuitive Machines, LLC holding the majority of the voting interests of Intuitive Machines, Inc., Intuitive Machines, LLC’s existing management team serving as the initial management team of Intuitive Machines, Inc., Intuitive Machines, LLC’s appointment of the majority of the initial board of directors of Intuitive Machines, Inc., and the significance of Intuitive Machines, LLC’s operations prior to the Business Combination which represent the entirety of Company’s operations. In connection with the Business Combination, approximately $ 34.1 million of cash held in trust, net of redemptions by IPAX’s public shareholders, became available for use by the Company as well as proceeds received from the contemporaneous sale of preferred stock in connection with the closing of a PIPE investment. In addition, the Company entered into a common stock purchase agreement, dated September 16, 2022 (the “Cantor Purchase Agreement”) relating to an equity facility under which shares of newly issued Intuitive Machines Class A common stock, par value $ 0.0001 per 59 Table of Contents share (the “Class A Common Stock”) may be sold to CF Principal Investments LLC (“CFPI”), at the Company’s discretion, up to the lesser of (i.) $ 50.0 million and (ii) the “exchange cap” specified therein, subject to certain customary conditions and limitations set for in the Cantor Purchase Agreement. Beginning on February 14, 2023, the Company’s Class A Common Stock and warrants to purchase the Class A Common Stock at an exercise price of $ 11.50 per share (th e “Public Warrants”) began trading on Nasdaq under the symbols “LUNR” and “LUNRW,” respectively. See Note 3 - Business Combination and Related Transactions for additional information. ` ` NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements and related notes as of and for the years ended December 31, 2023 and 2022 have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the SEC. Our consolidated financial statements include the accounts of Intuitive Machines, the accounts of Intuitive Aviation Inc. (“IA” or “Intuitive Aviation”), a wholly owned subsidiary, Space Network Solutions, LLC (“SNS” or “Space Network Solu tions”) a majority-owned subsidiary, and IX, LLC, a variable interest entity (“VIE”) for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The December 31, 2022 balances reported herein are derived from the consolidated financial statements of Intuitive Machines, LLC. Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications did not result in an changes to previously reported net income. The Company reclassed a certain line item in the consolidated statements of cash flows. Emerging Growth Company The Company is an emerging growth company (“EGC”), as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts EGCs 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. The Company did not 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 EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. The effective dates shown in this Note 2 below reflect the election to use the extended transition period. Use of Estimates The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. The Company bases its estimates and assumptions on historical experience, other factors, including the current economic environment, and various other judgments that it believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future reporting periods. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. All of the Company’s assets are maintained in the United States. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance. 60 Table of Contents Concentration of Credit Risks Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. By their nature, all such financial instruments involve risks, including the credit risk of nonperformance by counterparties. The majority of the Company’s cash and cash equivalents are held at major financial institutions. Certain account balances exceed the Federal Deposit Insurance Corporation insurance limits of $250,000 per account. The Company generally does not require collateral to support the obligations of the counterparties and cash levels held at banks are more than federally insured limits. The Company limits its exposure to credit loss by maintaining its cash and cash equivalents with highly rated financial institutions. The Company has not experienced material losses on its deposits of cash and cash equivalents. The Company monitors the creditworthiness of its customers to whom it grants credit terms in the normal course of its business. The Company evaluates the collectability of its accounts receivable based on known collection risks and historical experience. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to the Company (e.g., bankruptcy filings, substantial downgrading of credit ratings), the Company records a specific allowance for expected credit losses against amounts to reduce the net recognized receivable to the amount it reasonably believes will be collected and revenue recognition is deferred until the amount is collected and the contract is completed. For all other customers, the Company records allowances for credit losses based on the specific analysis of the customer’s ability to pay on an as needed basis. Major customers are defined as those individually comprising more than 10% of the Company’s total revenue. There was one major customer that accounted for 74 % and 83 %, respectively, of the Company’s total revenue for the years ended December 31, 2023 and 2022, and accounted for 80 % of the accounts receivable balance as of December 31, 2023. The largest customer had no accounts receivable as of December 31, 2022, while two other customers accounted for 35 % and 14 %. Major suppliers are defined as those individually comprising more than 10% of the annual goods or services purchased. For the years ended December 31, 2023 and 2022, the Company had one major supplier representing 18 % and 63 %, respectively, of goods and services purchased. As of December 31, 2023 and 2022, the one major supplier represented 2 % and 21 %, respectively, of the accounts payable balance. Liquidity and Capital Resources The consolidated financial statements as of December 31, 2023 and for the years ended December 31, 2023 and 2022, and related notes were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. As of December 31, 2023, the Company had cash and cash equivalents of $ 4.5 million and a working capital deficit of $ 51.8 million. The Company has historically funded its operations through internally generated cash on hand, proceeds from sales of its capital stock including the execution of SAFE Agreements, and proceeds from the issuance of bank debt. As further described in Note 1 - Business Description, on February 13, 2023, the Company received approximately $ 34.1 million of gross proceeds to fund operations as a result of the Business Combination with IPAX. Additionally, in connection with the Business Combination, 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. Subsequent to the closing of the Business Combination, the Company received $ 12.7 million in cash associated with the termination of a forward purchase agreement and $ 16.1 million in cash proceeds associated with warrant exercises. 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 an aggregate of 4,705,883 shares of the Company’s Class A Common Stock for aggregate gross proceeds of approximately $ 20.0 million. See Note 9 - Mezzanine Equity and Equity for additional information on this securities purchase agreement. Additionally, as further described in Note 17, 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 61 Table of Contents liquidity needs and the execution of the business plan through at least the twelve-month period from the date the financial statements are issued. Cash and Cash Equivalents The Company considers cash, time deposits and other highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Restricted Cash Restricted cash consists of cash not readily available for general purpose cash needs. Restricted cash relates to cash held at commercial banks to support credit accounts. Restricted cash serving as collateral will be released upon full repayment of the credit account. Transaction Costs Business Combination Transaction costs consists of direct legal, consulting, audit and other fees related to the consummation of the Business Combination and related transactions as described further in Note 3. These costs were initially capitalized as incurred and recorded as prepaid expenses in our consolidated balance sheets and totaled $ 5.3 million as of December 31, 2022. Upon the completion of the Business Combination, transaction costs directly related to the issuance of shares were netted against the proceeds from the merger and recorded as an offset in additional paid-in capital upon consummation of the transactions. Total transaction costs charged to additional paid in capital were approximately $ 24.4 million during the year ended December 31, 2023. Approximately, $ 9.4 million in transaction costs were paid by Intuitive Machines, LLC during the year ended December 31, 2023. The remaining difference was paid by Intuitive Machines, LLC in 2022 or by IPAX prior to the closing of the Business Combination. Securities Purchase Agreement Transaction costs related to the consummation of the securities purchase agreement described further in Note 9, includes direct legal, broker, accounting and other fees. Transaction costs totaled approximately $ 1.4 million during the year ended December 31, 2023 charged to general and administrative expenses in our statement of operations. Accounts Receivable and Allowance for Credit Losses Accounts receivable is recorded at the invoiced amount and unbilled receivable, less an allowance for any potential expected uncollectible amounts and do not bear interest. The Company estimates allowance for credit losses based on the credit worthiness of each customer, historical collections experience and other information, including the aging of the receivables. The Company writes off accounts receivable against the allowance for credit losses when a balance is unlikely to be collected. Prepayments and Other Current Assets Prepaid and other current assets primarily consist of prepaid service fees, security deposits and other general prepayments. 62 Table of Contents Property and Equipment, Net Property and equipment, net are stated at cost, less accumulated depreciation. Property and equipment which are not in service are classified as construction-in-process. Depreciation is computed using the straight-line method over the following estimated useful lives of assets: Asset Useful Life Leasehold improvements 1 – 7 years Vehicles and trailers 3 – 5 years Computers and software 3 years Furniture and fixtures 5 years Machinery and equipment 3 – 7 years Expenditures for maintenance and repairs that do not extend the useful lives of property and equipment are recognized as expenses when incurred. Upon retirement or sale of assets, the cost and related accumulated depreciation and amortization is written off. No material gains or losses related to the sale of assets have been recognized in the accompanying consolidated statements of operations. Long-Lived Assets Long-lived assets consist of property and equipment, net, and are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the long-lived asset may not be recoverable. Recoverability is measured by comparing the carrying value of a long-lived asset to the future undiscounted cash flows that the long-lived asset is expected to generate from use and eventual disposition. An impairment loss will be recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. For the year ended December 31, 2023, we recorded impairment charges of approximately $ 1.0 million within our consolidated statements of operations associated with leasehold improvements and furniture and fixtures in connection with our previous corporate headquarters . No impairment charges were recorded for the year ended December 31, 2022. See Note 5 for further discussion of our impairment loss on property and equipment. Earn-Out Liabilities Unvested earn out units of Intuitive Machines, LLC (“Earn Out Units”) are classified as liability 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 (as defined in Note 3) 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 shareholders’ equity (deficit) on the consolidated balance sheet. As of the Closing Date, the Earn Out Units had a fair value of $ 99.7 million. As a result of the OMES III Contract award by the National Aeronautics and Space Administration (“NASA”) in May 2023, Triggering Event I (as defined below) under the earn out agreement vested resulting in the issuance of 2,500,000 shares of Intuitive Machines Class C common stock, par value $ 0.0001 per share (the “Class C Common Stock”) with a fair value of approximately $ 19.4 million to the applicable Intuitive Machines, LLC Members resulting in a reduction to earn-out liabilities and an increase to shareholders’ deficit. As of December 31, 2023, the remaining Earn Out Units had a fair value of $ 14.0 million, with the changes in the fair value between the Closing Date and December 31, 2023 of $ 66.3 million recognized as change in fair value of the earn-out liability under other income (expense) within the consolidated statements of operations. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms pursuant to the guidance of ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Liability classified warrants are valued using a Black-Scholes-Merton model at issuance and for each reporting period when applicable. 63 Table of Contents Lease Liabilities and Right-of-Use Assets We determine whether a contract is or contains a lease when we have the right to control the use of the identified asset in exchange for consideration. Lease liabilities and right-of-use assets (“ROU assets”) are recognized at the commencement date based on the present value of lease payments over the lease term. We use our incremental borrowing rate in the calculation of present value unless the implicit rate can be readily determined, however, none of our lease liabilities were determined using implicit rates. Certain leases include provisions for the renewal or termination. We only consider fixed payments and those options that are reasonably certain to be exercised in the determination of the lease term and the initial measurement of lease liabilities and ROU assets. Expense for operating lease payments is recognized as lease expense on a straight-line basis over the lease term. We do not separate lease and non-lease components of a contract. Operating and finance ROU assets, and operating and finance lease liabilities are presented within our consolidated balance sheet. See Note 6 - Leases for further disclosures and information on leases. Fair Value Measurements The Company’s financial instruments consist of cash and cash equivalents, restricted cash, trade receivables, trade payables, amounts receivable or payable to related parties and long-term debt. The carrying amount of cash and cash equivalents, trade receivables, trade payables and receivables and payables from affiliates approximates fair value because of the short-term nature of the instruments. The fair value of debt approximates its carrying value because the cost of borrowing fluctuates based upon market conditions. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We estimate fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which is categorized in one of the following levels: • Level 1: Quoted prices for identical instruments in active markets. • Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and • Level 3: Significant inputs to the valuation model are unobservable. Redeemable Noncontrolling Interests Noncontrolling interests represent the portion of Intuitive Machines, LLC that Intuitive Machines, Inc. controls and consolidates but does not own. The noncontrolling interests was created as a result of the Business Combination and represents 68,150,754 common units issued by Intuitive Machines, LLC to the prior investors. As of the Close of the Business Combination, Intuitive Machines, Inc. held an 18.8 % interest in Intuitive Machines, LLC, with the remaining 81.2 % interest held by Intuitive Machines, LLC’s prior investors. As of December 31, 2023 , Intuitive Machines, Inc. held a n 22.9 % interest in Intuitive Machines, LLC with the remaining 77.1 % intere st held by the prior investors. The prior investors’ interests in Intuitive Machines, LLC represents a redeemable noncontrolling interest. At its discretion, the members have the right to exchange their common units in Intuitive Machines, LLC (along with the cancellation of the paired shares of Intuitive Machines Class B Common Stock or Class C Common Stock in Intuitive Machines) for either shares of Class A Common Stock on a one -to-one basis or cash proceeds of equal value at the time of redemption. Any redemption of Intuitive Machines, LLC Common Units in cash must be funded through a private or public offering of Class A Common Stock and is subject to the Board’s approval. As of December 31, 2023 , the prior investors of Intuitive Machines, LLC hold the majority of the voting rights on the Board. As the redeemable noncontrolling interests are redeemable upon the occurrence of an event that is not solely within the Company’s control, we classify our redeemable noncontrolling interests as temporary equity. The redeemable noncontrolling interests were initially measured at the Intuitive Machines, LLC prior investors’ share in the net assets of the Company upon consummation of the Business Combination. Subsequent remeasurements of the Company’s redeemable noncontrolling interests are recorded as a deemed dividend each reporting period, which reduces retained 64 Table of Contents earnings, if any, or additional paid-in capital of Intuitive Machines. Remeasurements of the Company’s redeemable noncontrolling interests are based on the fair value of our Class A Common Stock. General and Administrative Expense General, selling, and administrative expenses consist of human capital related expenses for employees involved in general corporate functions, including executive management and administration, accounting, finance, tax, legal, information technology, marketing, and human resources; rent relating to the Company’s office space; professional fees and other general corporate costs. Human capital expenses primarily include salaries and benefits. Revenue Recognition Most of our revenue is from long-term contracts associated with the engineering services for the research, design, development, manufacturing, integration and sustainment of advanced technology aerospace systems. 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. Contract Combination To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment and the decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in each period. Contracts are considered to have a single performance obligation if the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts primarily because we provide a significant service of integrating a complex set of tasks and components into a single project or capability. Contract Types The Company performs 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 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. For a small portion of our business, where we have the right to consideration from the customer in an amount that corresponds directly with the value received by the customer based on our performance to date, revenue is recognized when services are performed and contractually billable. Under the typical payment terms of our services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., weekly, biweekly, or monthly) or upon achievement of contractual milestones. Contract Costs Contract costs include all direct materials, labor and subcontractor costs and an allocation of indirect costs related to contract performance. Customer-furnished materials are included in both contract revenue and cost of revenue when management concludes that the company is acting as a principal rather than as an agent. Revenue for uninstalled materials is recognized when the cost is incurred and control is transferred to the customer, which revenue is recognized using the cost-to-cost method. Certain costs associated with significant long-term service arrangements are capitalized and amortized across the life of the contract. Capitalized contract costs primarily relate to prepaid pre-launch integration and engineering services and launch services subcontracted with a third-party. Pre-launch integration and engineering services and launch services are capitalized and amortized over the term of the contract on a systematic basis that is consistent with the transfer 65 Table of Contents of the goods and services to our end customer. Project mobilization costs are generally charged to the project as incurred when they are an integrated part of the performance obligation being transferred to the client. Costs to obtain a contract are expensed as incurred unless they are expected to be recovered from the customer. Variable Consideration It is common for our contracts to contain variable consideration in the form of award fees, incentive fees, performance bonuses, liquidated damages or penalties that may increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or targets and can be based on customer discretion. We estimate the amount of variable consideration based on a weighted probability or the most likely amount to which we expect to be entitled. Variable consideration is included in the transaction price when it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, anticipated performance, and any other information (historical, current or forecasted) that is reasonably available to us. Contract Estimates and Modifications 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 is complex and subject to many variables and requires significant judgment. As a significant change in estimated total revenue and cost could affect the profitability of our contracts, we routinely review and update our contract-related estimates through a disciplined project review process in which management reviews the progress and execution of our performance obligations and the estimate at completion. As part of this process, management reviews information including, but not limited to, outstanding contract matters, progress towards completion, program schedule and the associated changes in estimates of revenue and costs. Management must make assumptions and estimates regarding the availability and productivity of labor, the complexity of the work to be performed, the availability and cost of materials, the performance of subcontractors and the availability and timing of funding from the customer, along with other risks inherent in performing services under all contracts where we recognize revenue over time using the cost-to-cost method. We typically recognize changes in contract estimates on a cumulative catch-up basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified. Contracts are often modified to account for changes in contract specifications and requirements. Most of our contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. We account for contract modifications prospectively when the modification results in the promise to deliver additional goods or services that are distinct and the increase in price of the contract is for the same amount as the stand-alone selling price of the additional goods or services included in the modification. Unbilled Receivables and Deferred Revenue Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time using the cost-to-cost method. Unbilled receivables (contract assets) include unbilled amounts typically resulting from revenue under long-term contracts when the cost-to-cost method of revenue recognition is utilized, and revenue recognized exceeds the amount billed to the customer. Deferred revenue (contract liabilities) consists of advance payments and billings in excess of revenue recognized. Our unbilled receivables and deferred revenue are reported in a net position on a contract-by-contract basis at the end of each reporting period. The payment terms of our contracts from time to time require the customer to make advance payments as well as interim payments as work progresses. The advance payment generally is not considered to contain a significant financing component as we expect to recognize those amounts in revenue within a year of receipt as work progresses on the related performance obligation. 66 Table of Contents Income Taxes Intuitive Machines 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. 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. We use the asset and liability method of accounting for income taxes for the Company. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss (“NOL”) and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the results of operations in the period that includes the enactment date. The realizability of deferred tax assets is evaluated quarterly based on a “more likely than not” standard and, to the extent this threshold is not met, a valuation allowance is recorded. The Company follows the guidance of ASC Topic 740, Income Taxes. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. The open tax years for the tax returns generally include 2019 through 2021 for state and federal reporting purposes. Tax Receivable Agreement In conjunction with the consummation of the Transactions, Intuitive Machines, Inc. entered into a Tax Receivable Agreement (the “TRA”) with Intuitive Machines, LLC and certain Intuitive Machines, LLC members (the “TRA Holders”). Pursuant to the TRA, Intuitive Machines, Inc. is required to pay the TRA Holders 85 % of the amount of cash tax savings, if any, in U.S. federal, state, and local income tax that are based on, or measured with respect to, net income or profits, and any interest related thereto that Intuitive Machines, Inc. realizes, or is deemed to realize, as a result of certain tax attributes, including (A) existing tax basis of certain assets of Intuitive Machines, LLC and its subsidiaries, (B) tax basis adjustments resulting from taxable exchanges of Intuitive Machines, LLC Common Units acquired by Intuitive Machines, Inc., (C) certain tax benefits realized by Intuitive Machines, Inc. as a result of the Business Combination, and (D) tax deduction in respect of portions of certain payments made under the TRA. All such payments to the TRA Holders are the obligations of Intuitive Machines, Inc., and not that of Intuitive Machines, LLC. As of December 31, 2023, there have been no exchanges of Intuitive Machines, LLC units for Class A Common Stock of Intuitive Machines, Inc. and, accordingly, no TRA liabilities currently exist. See Note 3 - Business Combination and Related Transactions for further description of the TRA. Earnings (Loss) Per Share (“EPS”) The Company reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of Class A Common Stock outstanding and excludes the dilutive effect of warrants, stock options, and other types of convertible securities. Diluted earnings per share is calculated based on the weighted average number of shares of Class A Common Stock outstanding and the dilutive effect of stock options, warrants and other types of convertible securities are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where a net loss has been reported. Prior to the Business Combination, the membership structure of Intuitive Machines, LLC included membership units. In conjunction with the closing of the Business Combination, the Company effectuated a recapitalization whereby all membership units were converted to common units of Intuitive Machines, LLC, and Intuitive Machines, Inc. implemented a revised class structure including Class A Common Stock having one vote per share and economic rights, Class B Common Stock having one vote per share and no economic rights, and Class C Common Stock having three votes per share and no economic rights. The Company has determined that the calculation of loss per unit for periods prior to the Business Combination would not be meaningful to the users of these consolidated financial statements. As a result, loss per share information has not been presented for periods prior to the Business Combination on February 13, 2023. 67 Table of Contents Share-Based Compensation We recognize all share-based awards to employees and directors as share-based compensation expense based upon their fair values on the date of grant. We estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense during the requisite service periods. We have estimated the fair value for each option award as of the date of grant using the Black-Scholes-Merton option pricing model. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of our share price. We recognize the share-based compensation expense over the requisite service period using the straight-line method for service condition only awards, which is generally a vesting term of five years . Forfeitures are accounted for in the period in which they occur and reverses any previously recognized compensation cost associated with forfeited awards. 68 Table of Contents Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For public business entities, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continue to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. The Company is assessing the potential impact of adopting the ASU on its financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. It requires a public entity to disclose the title and position of the Chief Operating Decision Maker. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company is assessing the potential impact of adopting the ASU on its financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. The Company adopted this ASU as of January 1, 2023. The adoption did not have a material impact on the Company’s consolidated financial statements. Other Current Liabilities As of December 31, 2023 and December 31, 2022, other current liabilities consisted of the following (in thousands): December 31, 2023 December 31, 2022 Financing obligation, current (see Note 6 - Leases) $ — $ 9,117 Payroll accruals 2,553 2,117 Income tax payable 20 — Professional fees accruals 832 3,677 Commercial insurance financing 493 — Commitment shares liability (see Note 3 - Business Combination and Related Transactions) 755 — Other accrued liabilities 94 267 Other current liabilities $ 4,747 $ 15,178 NOTE 3 - BUSINESS COMBINATION AND RELATED TRANSACTIONS On February 13, 2023 as contemplated by the Business Combination Agreement, Intuitive Machines, Inc. and Intuitive Machines, LLC consummated the Business Combination, whereby: (i) Intuitive Machines, LLC appointed Intuitive Machines, Inc. a s its managing member; (ii) Intuitive Machines, Inc. issued to certain existing members of Intuitive Machines, LLC, 10,566 shares of Intuitive Machines Class B Common Stock having one vote per share and no economic right s, or 68,140,188 shares of Class C Common Stock having three votes per share and no economic rights, in each case, in exchange for payment from such Intuitive Machines, LLC members of a per-share price equal to the par value per share of such stock, and equal to the number of Intuitive Machines, LLC Common Units held by such person as of and on the 69 Table of Contents Closing Date; (iii) Intuitive Machines, Inc. contributed to Intuitive Machines, LLC an amount in cash of $ 8.1 million, net of transaction costs, in exchange for certain units in Intuitive Machines, LLC; and (iv) the Transactions were consummated as further described below. Intuitive Machines, LLC Conversion and Recapitalization In connection with the Business Combination, Intuitive Machines, LLC changed its jurisdiction of organization from Texas to Delaware. Immediately prior to the closing of the Business Combination, Intuitive Machines, LLC effectuated the recapitalization whereby all outstanding equity securities of Intuitive Machines, LLC were converted into Common Units of Intuitive Machines, LLC (“Intuitive Machines, LLC Common Units”), options to purchase Intuitive Machines, LLC common units (“Intuitive Machines, LLC options”) and unvested Earn Out Units of Intuitive Machines, LLC. Consideration and Structure As a result of the Up-C structure, the Business Combination consideration received by Intuitive Machines, LLC members consisted of securities of both Intuitive Machines, LLC having economic rights but not voting rights and Intuitive Machines, Inc. having voting rights but not economic rights equal to a value of approximately $ 700.0 million. In particular, the Business Combination consideration received by the Intuitive Machines, LLC members comprised of an aggregate of (a) (i) 68,155,203 Intuitive Machines, LLC Common Units, (ii) 1,874,719 Intuitive Machines, LLC Options and (iii) 10,000,000 Earn Out Units and (b) (i) 15,015 shares of Class B Common Stock (excluding 1,873,307 shares of Class B Common Stock reserved for issuance upon exercise of Intuitive Machines, LLC Options) and (ii) 68,140,188 shares of Class C Common Stock (excluding 10,000,000 shares of Class C Common Stock reserved for issuance upon vesting of the Earn Out Units). The 10,000,000 Earn Out Units received by the applicable Intuitive Machines, LLC Members are subject to vesting and will be earned, released and delivered upon satisfaction of the following milestones (each, a “Triggering Event”): (i) 2,500,000 Earn Out Units will vest if, during the Earn Out Period (as defined below), Intuitive Machines is awarded the OMES III Contract by NASA (“Triggering Event I”), (ii) 5,000,000 Earn Out Units will vest if, within the Earn Out Period, Triggering Event I occurs and the volume weighted average closing sale price of the Class A Common Stock equals or exceeds $ 15.00 per share (“Triggering Event II-A”), (iii) 7,500,000 Earn Out Units will vest if, within the Earn Out Period, Triggering Event I has not occurred and the volume weighted average closing sale price of the Class A Common Stock equals or exceeds $ 15.00 per share (“Triggering Event II-B”), and (iv) 2,500,000 Earn Out Units will vest if, within the Earn Out Period, Triggering Event III occurs the volume weighted average closing sale price of the Class A Common Stock equals or exceeds $ 17.50 per share (“Triggering Event III”), provided, that Triggering Event II-A and Triggering Event II-B may not both be achieved. “Earn Out Period” means (i) with respect to Triggering Event I, the time period beginning on September 16, 2022 and ending at 11:59 pm ET on December 31, 2023, and (ii) with respect to Triggering Event II-A, Triggering Event II-B and Triggering Event III, the time period beginning on the date that is 150 days following the Closing Date and ending on the date that is the five ( 5 ) year anniversary of the Closing Date. If a Change of Control (as defined in the Business Combination Agreement) occurs during the Earn Out Period that results in the holders of the Class A Common Stock receiving a per share price greater than or equal to $ 15.00 or $ 17.50 , respectively, then immediately prior to the consummation of such Change of Control, to the extent not previously triggered, then Triggering Event II-A or Triggering Event II-B will be deemed to have occurred, as applicable, and the applicable Earn Out Units shall vest. Upon the vesting of any Earn Out Units, each of the applicable Intuitive Machines, LLC Members will be issued (i) by Intuitive Machines, LLC an equal number of Intuitive Machines, LLC Common Units and (ii) by Intuitive Machines, an equal number of shares of Class C Common Stock, in exchange for surrender of the applicable Earn Out Units and the payment to Intuitive Machines, Inc. of a per-share price equal to the par value per share of the Class C Common Stock. See Note 2 for further discussion of Triggering Event I which vested upon the OMES III award by NASA in May 2023. After the expiration of the applicable lock-up period on August 14, 2023, holders of certain Intuitive Machines, LLC Common Units will be permitted to exchange such Intuitive Machines, LLC Common Units (along with the cancellation of the paired share of Class B Common Stock or share of Class C Common Stock) for shares of Class A Common Stock on a one -for-one basis pursuant to the second amended and restated limited liability company agreement of Intuitive Machines, LLC (the “Second A&R Operating Agreement”) (subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications) or, at the election of Intuitive Machines, Inc. (determined by a majority of the directors of Intuitive Machines, Inc. who are disinterested with respect to such determination), cash from a substantially concurrent public offering or private sale in an amount equal to the net amount, on a per share basis, of cash received as a result of such public offering or private sale. 70 Table of Contents The Series A Investment On September 16, 2022, concurrently with the execution of the Business Combination Agreement, Intuitive Machines, Inc. entered into the Series A Purchase Agreement with Kingstown 1740 Fund, LP (an existing security holder of Intuitive Machines, Inc. and an affiliate of IPAX’s sponsor, Inflection Point Holdings LLC (the “Sponsor”) and Ghaffarian Enterprises, LLC (an affiliate of Kamal Ghaffarian, an Intuitive Machines, LLC founder) (collectively, the “Series A Investors”), pursuant to which, and on the terms and subject to the conditions of which, Intuitive Machines, Inc. agreed to issue and sell to the Series A Investors (i) an aggregate of 26,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”) which will be convertible into shares of Class A Common Stock in accordance with the terms of the Certificate of Designation of Preferences, Rights and Limitations of 10% Series A Cumulative Convertible Preferred Stock (the “Certificate of Designation”) and (ii) warrants to purchase 541,667 shares of Class A Common Stock at an initial exercise price of $ 15.00 per share, subject to adjustment (the “Preferred Investor Warrants”). In conjunction with the closing of the Business Combination, the Company received proceeds of $ 26.0 million and issued 26,000 shares of Series A Preferred Stock and 541,667 Preferred Investor Warrants. The Series A Preferred Stock and Preferred Investor Warrants each represent freestanding financial instruments. The Series A Preferred Stock is not a mandatorily redeemable financial instrument and is redeemable at the option of the Series A Investors. The Series A Preferred Stock was recorded as Series A preferred stock subject to possible redemption and classified as temporary equity pursuant to ASC 480-10-S99. The Preferred Investor Warrants were classified as equity. The $ 26.0 million in proceeds received were allocated to the Series A Preferred Stock and Preferred Investor Warrants based on the relative fair value of the instruments at closing. Tax Receivable Agreement Intuitive Machines, Inc. entered into the TRA with Intuitive Machines, LLC and the TRA Holders at closing of the Business Combination. Pursuant to the TRA, Intuitive Machines, Inc. will generally be required to pay the TRA Holders 85 % of the amount of the cash tax savings, if any, in U.S. federal, state, and local taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that Intuitive Machines, Inc. (and applicable consolidated, unitary, or combined subsidiaries thereof, if any realizes, or is deemed to realize, as a result of certain tax attributes (the “Tax Attributes”), including: • existing tax basis in certain assets of Intuitive Machines, LLC and certain of its direct or indirect subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service; • tax basis adjustments resulting from taxable exchanges of Intuitive Machines, LLC Common Units (including any such adjustments resulting from certain payments made by Intuitive Machines, Inc. under the TRA) acquired by Intuitive Machines, Inc. from a TRA Holder pursuant to the terms of the Second A&R Operating Agreement; • certain tax benefits realized by Intuitive Machines, Inc. as a result of certain U.S. federal income tax allocations of taxable income or gain away from Intuitive Machines, Inc. and to other members of Intuitive Machines, LLC and deductions or losses to Intuitive Machines, Inc. and away from other members of Intuitive Machines, LLC, in each case as a result of the Business Combination; and • tax deductions in respect of portions of certain payments made under the TRA. Under the terms of the TRA, Intuitive Machines, Inc. will make payments to the TRA Holders in respect of 85 % of the cash tax savings resulting from the net tax benefit of certain Tax Attributes. However, until a TRA Holder exchanges at least 5 % of its Intuitive Machines, LLC Common Units, Intuitive Machines, Inc. will hold such payments applicable to existing basis until the TRA Holder satisfies such threshold exchange. As of December 31, 2023, no TRA Holder had exchanged at least 5 % of its Intuitive Machines, LLC Common Units. Fut ure exchanges will result in incremental tax attributes and potential cash tax savings for Intuitive Machines, Inc. Depending on Intuitive Machines’ assessment on realizability of such Tax Attributes, the arising TRA liability will be recorded through income. Equity Facility On September 16, 2022, the Company entered into the Cantor Purchase Agreement with CFPI relating to an equity facility under which shares of newly issued Class A Common Stock may be sold to CFPI by Intuitive Machines, Inc. Pursuant to the terms of the Cantor Purchase Agreement, Intuitive Machines, Inc. 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) $ 50.0 million of newly issued shares of Class A Common Stock and (ii) the Exchange Cap, 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 71 Table of Contents in the Cantor Purchase Agreement. In connection with the execution of the Cantor Purchase Agreement, the Company agreed to issue 100,000 shares of 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, the shares of Class A Common Stock that are sold to CFPI under the equity facility and the Commitment Shares. During the second quarter of 2023, we recorded a recapitalization adjustment to increase other current liabilities and decrease to paid-in capital for $ 1.0 million to recognize the Commitment Share liability within our consolidated balance sheets which was not previously recognized in the balance sheet of IPAX prior to the closing of the Business Combination. In June 2023, the Company issued 95,785 Commitment Shares to CFPI. Under the terms of the Cantor Purchase Agreement, to the extent after the resale of the Commitment Shares by CFPI is less than $ 1.0 million, the Company will pay CFPI the difference between $ 1.0 million and the net proceeds of the resale of the Commitment Shares received by CFPI in cash. As of December 31, 2023, none of the Commitment Shares have been sold by CFPI and the Company has recorded a liability of approximately $ 755 thousand, reflected in other current liabilities in our consolidated balance sheets as of December 31, 2023, representing the difference between $ 1.0 million and the fair value of the Commitment Shares. As of December 31, 2023, no shares of Class A Common Stock have been sold to CFPI under the Cantor Purchase Agreement. Forward Purchase Agreements Prior to the closing of Business Combination, the Company entered into forward purchase agreements with two separate counterparties pursuant to which each counterparty agreed to purchase 1,250,000 shares of Class A Common Stock from shareholders who had previously tendered such shares for redemption but agreed to reverse their redemption and sell such shares to the counterparties at the redemption price of approximately $ 10.19 per share. The Company prepaid approximately $ 25.5 million to the counterparties at the closing of the Business Combination to secure its purchase obligation to repurchase the 2,500,000 shares of Class A Common Stock at the redemption price per share on the option expiration date that was one month after closing of the Business Combination. The forward purchase agreements were accounted for as a prepaid asset and marked to fair value through earnings each period until the agreements were terminated or expired. The Company paid transaction fees to the counterparties totaling $ 750 thousand which was recorded as general and administrative expense during the first quarter of 2023. On February 23, 2023, one of the counterparties exercised their right to optional early termination of the forward purchase agreement for 1,250,000 shares of Class A Common Stock and returned approximately $ 12.7 million in cash to the Company resulting in an immaterial net loss on termination during the first quarter of 2023. On March 8, 2023, the remaining forward purchase agreement expired resulting in the Company’s repurchase of 1,250,000 shares of Class A Common Stock resulting in a net gain on settlement of the agreement of approximately $ 93 thousand recorded in other income (expense) during the first quarter of 2023. The repurchased shares of Class A Common Stock were recorded as treasury stock upon expiration of the forward purchase agreement in the amount of $ 12.8 million based on a stock price of $ 10.26 per share on the date of repurchase. NOTE 4 - REVENUE Disaggregated Revenue We disaggregate our revenue from contracts with customers by contract type. The following table provides information about disaggregated revenue for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Revenue by Contract Type Fixed price $ 58,712 74 % $ 80,801 94 % Cost reimbursable 13,920 18 % — — % Time and materials 6,889 9 % 5,145 6 % Total $ 79,521 100 % $ 85,946 100 % Contract Assets and Liabilities Contract assets primarily relate to deferred contract costs for subcontracted launch services, as well as work completed not yet billed for performance obligations that are satisfied over time. Deferred contract costs and unbilled receivables are 72 Table of Contents recorded contract assets on our consolidated balance sheets. Contract assets related to deferred contract costs are amortized straight-line across the life of the long-term service arrangement. Contract assets related to work completed for performance obligations that are satisfied over time are transferred to receivables when the right to consideration becomes unconditional. Contract liabilities relate to billings or consideration received in advance of performance (obligation to transfer goods or services to a customer) under the contract as well as provisions for loss contracts. Contract liabilities are recognized as revenue when the performance obligation has been performed. Current deferred revenue and provisions for loss contracts are recorded in current contract liabilities on our consolidated balance sheets. Long-term deferred revenue and provisions for loss contracts are recorded in long-term contract liabilities on our consolidated balance sheets. The following table presents contract assets as of December 31, 2023 and December 31, 2022 (in thousands): December 31, 2023 December 31, 2022 Contract Assets Unbilled receivables $ 6,146 $ 346 Deferred contract costs 343 6,633 Total $ 6,489 $ 6,979 Amortization expense associated with deferred contract costs for subcontracted launch services was recorded in cost of revenue and was $ 31.2 million and $ 43.3 million, respectively, for the years ended December 31, 2023 and 2022. The following table presents contract liabilities as of December 31, 2023 and December 31, 2022 (in thousands): December 31, 2023 December 31, 2022 Contract liabilities – current Deferred revenue $ 22,926 $ 39,831 Contract loss provision 9,567 10,120 Accrued launch costs 13,018 6,705 Total contract liabilities – current 45,511 56,656 Contract liabilities – long-term Contract loss provision — 2,188 Total contract liabilities – long-term — 2,188 Total contract liabilities $ 45,511 $ 58,844 Revenue recognized from amounts included in contract liabilities at the beginning of the period was $ 38.2 million and $ 31.4 million during the year ended December 31, 2023 and 2022, respectively. Loss Contracts Contract losses are a result of constraining variable consideration and estimated contract costs exceeding current contract price. The Company experiences favorable or unfavorable changes to contract losses from time to time due to changes in estimated contract costs and modifications that result in changes to contract price. We recorded unfavorable and (favorable) changes in net losses related to contracts with customers of $ 30.3 million and $( 9.3 ) million, respectively, for the years ended December 31, 2023 and 2022. As of December 31, 2023, the status of these loss contracts was as follows: • The first contract, for lunar payload services, became a loss contract in 2019 due to the constraint of variable consideration. Variable consideration has been constrained to $ 0 from a total potential amount of $ 12.3 million. For the years ended December 31, 2023, and 2022, changes in contract price and estimated contract costs resulted in unfavorable and (favorable) changes of $ 10.2 million and $( 11.1 ) million, respectively. As of December 31, 2023, and 2022, this contract was approximately 99 % complete and 96 % complete, respectively. The contract was successfully completed in February 2024. As of December 31, 2023 and 2022, the contract loss provision recorded in contract liabilities, current in our consolidated balance sheets was $ 10 thousand and $ 0.4 million, respectively. • The second contract, for lunar payload services, became a loss contract in 2021 due to the constraint of variable consideration and estimated contract costs exceeding current contract price. Variable consideration has been 73 Table of Contents constrained to $ 0 from a total potential amount of $ 7.8 million. For the years ended December 31, 2023 and 2022, changes in estimated contract costs resulted in an additional $ 5.8 million and a reduction of $( 4.7 ) million in contract loss, respectively. As of December 31, 2023, and 2022, this contract was approximately 64 % complete and 33 % complete, respectively. The period of performance for this contract currently runs through June 2024 although we anticipate that the launch and post-launch services will occur after that date. As of December 31, 2023 and 2022, the contract loss provision recorded in contract liabilities, current was $ 7.4 million and $ 7.7 million, respectively, and zero and $ 2.2 million, respectively, in contract liabilities, non-current in our consolidated balance sheets. • The third contract, for lunar payload services, became a loss contract in 2022 due to the constraint of variable consideration and estimated contract costs exceeding current contract price. Variable consideration has been constrained to $ 0 from a total potential amount of $ 11.4 million. For the years ended December 31, 2023 and 2022, changes in estimated contract costs resulted in an additional $ 14.2 million and $ 6.0 million in contract loss, respectively. As of December 31, 2023 this contract was approximately 89 % complete. The period of performance for this contract currently runs through June 2024 although we anticipate that the launch and post-launch services will occur after that date. As of December 31, 2023 and 2022, the contract loss provision recorded in contract liabilities, current in our consolidated balance sheets was $ 2.1 million and $ 1.9 million, respectively. • The remaining loss contracts are individually and collectively immaterial. Remaining Performance Obligations Remaining performance obligations represent the remaining transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 57.2 million. The Company expects to recognize revenue on approximately 90 - 95 % of the remaining performance obligations over the next 12 months, and the remaining in 2025 and thereafter. Remaining performance obligations do not include variable consideration that was determined to be constrained as of December 31, 2023. For time and materials contracts, we have adopted the practical expedient that allows us to recognize revenue based on our right to invoice; therefore, we do not report unfulfilled performance obligations for time and materials agreements. NOTE 5 - PROPERTY AND EQUIPMENT, NET As of December 31, 2023 and 2022, property and equipment, net consisted of the following (in thousands): December 31, 2023 December 31, 2022 Leasehold improvements $ — $ 1,544 Vehicles and trailers 129 129 Computers and software 2,864 1,673 Furniture and fixtures 1,666 794 Machinery and equipment 2,772 2,211 Construction in progress 13,795 17,747 Property and equipment, gross 21,226 24,098 Less: accumulated depreciation and amortization ( 2,877 ) ( 2,922 ) Property and equipment, net $ 18,349 $ 21,176 Total depreciation expense related to property and equipment for the years ended December 31, 2023 and 2022 was $ 1.4 million and $ 1.1 million, respectively. As of December 31, 2023 and 2022, the Company pledged property and equipment with net book value of approximately $ 18.3 million and $ 20.3 million, respectively, as security for its Credit Mobilization Facility (as defined below) with Live Oak Banking Company. 74 Table of Contents As of December 31, 2023, construction in progress includes construction costs of $ 13.5 million associated with the fabrication of a commercial communications satellite. The Company capitalized interest in connection with construction in progress of $ 967 thousand and $ 247 thousand for the years ended December 31, 2023 and 2022, respectively. 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 6, 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. NOTE 6 - LEASES The Company leases real estate for office space and for administrative, research, marketing and light manufacturing operations of the lessee’s aerospace related research and development business under operating leases. There are four finance leases. The Company has eight real estate leases with lease terms ranging from 6 months to 250 months and four equipment leases with lease terms ranging from 36 months to 60 months, some of which contain options to extend and some of which contain options to terminate the lease without cause at the option of lessee. The Company’s real estate leasing agreements include terms requiring the Company to reimburse the lessor for its share of real estate taxes, insurance, operating costs and utilities which the Company accounts for as variable lease costs when incurred since the Company has elected to not separate lease and non-lease components, and hence are not included in the measurement of lease liability. For the years ended December 31, 2023 and 2022, there were no significant variable lease costs. There are no restrictions or covenants imposed by any of the leases, and none of the Company’s leases contain material residual value guarantees. In September 2021, we signed a ground lease agreement for the development of our 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 and 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, of which $ 0.7 million is expected to be reimbursed by the lessor recorded as other current liabilities and $ 3.1 million to be funded from available cash recorded as current operating lease liabilities. 75 Table of Contents The components of total lease expense are as follows (in thousands): Year Ended December 31, 2023 2022 Operating lease cost $ 1,536 $ 714 Finance lease cost 3 — Short-term lease cost 333 117 Total lease cost $ 1,872 $ 831 The components of supplemental cash flow information related to operating leases are as follows (in thousands): Year Ended December 31, 2023 2022 Operating Leases Finance Leases Operating Leases Finance Leases Cash paid for amounts included in the measurement of lease liabilities: Cash flows from operating activities $ 1,034 $ 3 $ 832 $ — Cash flows from investing activities $ 1,344 $ 5 $ — $ — Cash flows from financing activities $ — $ 2 $ — $ — Right-of-use assets obtained in exchange for new operating lease liabilities $ 32,393 $ 93 $ 3,480 $ — Weighted average remaining lease term - operating leases (months) 226 35 155 0 Weighted average discount rate - operating leases 6.1 % 7.8 % 5.7 % — % The operating and finance lease ROU assets, current operating lease liabilities, current finance lease liabilities, non-current operating lease liabilities, and non-current finance lease liabilities are disclosed in our consolidated balance sheets. The table below includes the estimated future undiscounted cash flows for operating and finance leases as of December 31, 2023 (in thousands): Year Ending December 31, Operating Leases Finance Leases 2024 $ 1,822 $ 33 2025 1,836 33 2026 1,831 28 2027 1,364 5 2028 1,451 4 Thereafter 56,783 — Total undiscounted lease payments $ 65,087 $ 103 Less: imputed interest 32,177 11 Present value of lease liabilities $ 32,910 $ 92 Plus: construction costs to be funded by the Company 3,150 — Less: reimbursable construction costs from the lessor ( 677 ) — Total lease liabilities $ 35,383 $ 92 NOTE 7 - DEBT The following table summarizes our outstanding debt (in thousands): December 31, 2023 December 31, 2022 Credit Mobilization Facility $ 8,000 $ 20,000 Less: deferred financing costs — ( 39 ) Less: current maturities ( 8,000 ) ( 16,098 ) Long-term debt, net of current maturities $ — $ 3,863 76 Table of Contents As of December 31, 2023 and 2022, the weighted-average interest rate on short-term borrowings outstanding was 10.20 % and 6.55 %, respectively. Live Oak Credit Mobilization 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 line of credit bear interest (payable monthly) at a rate per annum equal to 6 %. The Credit Mobilization Facility and line of credit are secured by substantially all of the assets of the Company. On December 8, 2020 the Company entered into a Loan Modification Agreement with Live Oak Banking Company (“Live Oak”) which amended the terms of the line of credit, including decreasing the maximum principal from $ 1.0 million to $ 400 thousand, 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 newspaper, 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, which superseded the existing contract mobilization credit facility. On December 10, 2021, the line of credit expired. The Company 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 which provided an $ 8.0 million mobilization credit facility with a loan maturity of July 14, 2024 and extended the maturity date of our existing $ 12.0 million mobilization credit facility to November 14, 2023. The $ 8.0 million mobilization credit facility requires early payment of principal upon the completion of certain mission milestones of $ 4.1 million and $ 3.9 million in 2023 and 2024, respectively. The $ 12.0 million mobilization credit facility required principal payments of $ 8.0 million on August 15, 2023 and $ 4.0 million on 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 newspaper, plus 2.0 % and (b) 5.0 %. 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. 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. 77 Table of Contents NOTE 8 - INCOME TAXES The Company’s consolidated income tax provision consisted of the following components (in thousands): Year Ended December 31, 2023 2022 Current: Federal $ — $ — State 33 ( 16 ) Deferred: Federal — — State and local 7 ( 7 ) Total income tax provision (benefit) $ 40 $ ( 23 ) The reconciliation of the income tax provision computed at the Company’s effective tax rate is as follows (in thousands except for rates): Year Ended December 31, 2023 2022 Income/(loss) before income taxes $ 15,062 $ ( 6,428 ) Statutory income tax rate 21.0 % 21.0 % Expected income tax expense/(benefit) 3,163 ( 1,349 ) Noncontrolling interest 10,052 — Nontaxable entity — 1,348 Fair value activity on earn-out liability ( 13,913 ) — Other permanent differences ( 1,796 ) — Research and development benefit ( 611 ) — State income tax expense ( 703 ) ( 23 ) Change in valuation allowance 3,949 1 Other ( 101 ) — Total income tax provision (benefit) $ 40 $ ( 23 ) Effective tax rate 0.27 % 0.36 % The Company’s effective tax rates for the years ended December 31, 2023 and 2022 were 0.27 % and 0.36 %, respectively. For year ended December 31, 2023, 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, 2022, our effective tax rate differed from the 78 Table of Contents statutory rate of 21% primarily due to Intuitive Machines, LLC's status as a partnership for United States federal income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): Year Ended December 31, 2023 2022 Deferred tax assets: Net operating losses $ 391 $ 165 Restricted stock options 184 — Property and equipment — 11 Inventory — 148 Deferred revenue 9 12 Investment in Intuitive Machines, LLC 67,599 — Other deferred tax assets 1,103 — Total deferred tax assets 69,286 336 Valuation allowance ( 69,265 ) ( 324 ) Net deferred tax assets 21 12 Deferred tax liabilities: Section 481(a) adjustment ( 21 ) ( 5 ) Total deferred tax liabilities ( 21 ) ( 5 ) Net deferred tax asset (liability) $ — $ 7 As a result of the Business Combination, the Company was appointed as the sole managing member of Intuitive Machines, LLC. Prior to the close of the Business Combination, the Company's financial reporting predecessor, Intuitive Machines, LLC, was treated as a pass-through entity for tax purposes and no provision, except for certain state taxes, was made in the consolidated financial statements for income taxes. Any income tax items for the periods prior to the close of the Business Combination are related to Intuitive Machines, LLC. The Company 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 U.S. federal income tax on its taxable income. Instead, the Intuitive Machines, LLC unitholders, including the Company, 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. The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be settled or recovered. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. Valuation Allowance The Company has established a valuation allowance related to its domestic and state net deferred tax assets. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this 79 Table of Contents assessment. The Company continues to closely monitor and weigh all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance. Net Operating Loss As of December 31, 2023, the company had approximately $ 1.8 million of federal net operating loss carryforwards (“NOL carryforwards”), which do not have an expiration date. The Company’s deferred tax assets, including these NOL carryforwards have been reduced by a valuation allowance due to a determination made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. Uncertain Tax Positions For the periods ending December 31, 2023, and 2022, the Company has no reserves for uncertain tax positions. The Company filed Form 3115, Application for Change in Accounting Method, with the Internal Revenue Service (“IRS”) to request permission to change from its impermissible method of accounting for launch costs to a permissible method. The requested change is nonautomatic and as such requires advance consent from the IRS. On October 18, 2023, the Company received affirmative written consent from the IRS and subsequently reversed the uncertain tax position. The Company files income tax returns in the U.S., including federal and various state filings. The number of years that are open under the statute of limitations and subject to audit varies depending on the tax jurisdiction. We remain subject to U.S. federal tax examinations for years after 2019. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them. Research and development expenses must be amortized over five years for research performed in the U.S. and fifteen years for research performed outside the U.S. Although Congress is considering legislation that would defer the amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified. In 2023, the company has estimated $ 26.0 million of research and expenditures subject to capitalization and subsequent amortization for federal tax purposes. NOTE 9 - MEZZANINE EQUITY AND EQUITY Business Combination The consolidated statements of shareholders’ deficit, mezzanine equity and noncontrolling interests reflect the reverse recapitalization and Business Combination as described in Note 1 - Business Description and Note 3 - Business Combination and Related Transactions. As Intuitive Machines, LLC was deemed to be the accounting acquirer in the Business Combination, all periods prior to the consummation of the Business Combination reflect the balances and activity of Intuitive Machines, LLC. The consolidated balances as of December 31, 2022 from the financial statements of Intuitive Machines, LLC as of that date and membership unit activity in the consolidated statements of change in shareholders’ deficit, as well as mezzanine and noncontrolling interests, prior to the consummation of the Business Combination have not been retroactively adjusted. Upon consummation of the Transactions, the Company’s capital stock consisted of (i) 8,243,750 shares of Class A Common Stock held by the Sponsor, (ii) 5,493,182 shares of Class A Common Stock issued to public shareholder, net of redemptions, (iii) 2,066,667 shares of Class A Common Stock issued as a result of the conversion of SAFE Agreements previously held by investors in Intuitive Machines, LLC, (iv) 10,566 shares of Class B Common Stock issued to Intuitive Machines, LLC Class B Unit holders, (v) 68,140,188 shares of Class C Common Stock issued to the Founders of Intuitive Machines, LLC, and (vi) 26,000 shares of Series A Preferred Stock issued to PIPE investors. In addition, 10,000,000 Earn Out Units were issued to the Intuitive Machines, LLC Founders representing contingently issuable shares of Class A Common Stock as further described in Note 3. 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 “Private Placement”). The Purchase Agreement provided for the sale and issuance by 80 Table of Contents 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. See Note 10 for additional information on these warrants. On August 30, 2023, in connection with the entry into the Purchase Agreement, the Company and certain directors, officers and 5 % stockholders of the Company entered into lock-up agreements. Pursuant to the applicable lock-up agreement, Michael Blitzer, a member of the board of directors of the Company, agreed not to transfer shares of Class A Common Stock or any securities convertible, exchangeable or exercisable into shares of Class A Common Stock held of record as of August 30, 2023 or acquired of record thereafter from August 30, 2023 until (i) with respect to 50 % of such securities, 30 days after the date that the registration statement relating to the securities that were issued and sold in the Private Placement (the “Resale Registration Statement”) has been declared effective by the SEC and (ii) with respect to the remaining 50 % of such securities, until 60 days after the effective date of the Resale Registration Statement, subject, in each case, to limited exceptions. The lock-up parties other than Mr. Blitzer agreed not to transfer shares of Class A Common Stock or any securities convertible, exchangeable or exercisable into shares of Class A Common Stock beneficially owned as of August 30, 2023 or with respect to which beneficial ownership is acquired thereafter from August 30, 2023 until 60 days after the effective date of the Resale Registration Statement, subject, in each case, to limited exceptions. The Resale Registration Statement was declared effective on September 29, 2023. The table below reflects share information about the Company’s capital stock as of December 31, 2023. Par Value Authorized Issued Treasury Stock Outstanding Class A Common Stock $ 0.0001 500,000,000 22,279,876 ( 1,250,000 ) 21,029,876 Class B Common Stock $ 0.0001 100,000,000 — — — Class C Common Stock $ 0.0001 100,000,000 70,909,012 — 70,909,012 Series A Preferred Stock $ 0.0001 25,000,000 26,000 — 26,000 Total shares 725,000,000 93,214,888 ( 1,250,000 ) 91,964,888 Class A Common Stock Each holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held of record in person or by proxy on all matters submitted to a vote of the holders of Class A Common Stock, whether voting separately as a class or otherwise. Class A Common Stock has rights to the economics of the Company and to receive dividend distributions, subject to applicable laws and the rights and preferences of holders of Series A Preferred Stock or any other series of stock having preference over or participation rights with Class A Common Stock. In the event of liquidation, dissolution or winding up of the affairs of Company, Class A Common Stock has rights to assets and funds of the Company available for distribution after making provisions for preferential and other amounts to the holders of Series A Preferred Stock or any other series of stock having preference over or participation rights with Class A Common Stock. Class B Common Stock Each holder of Class B Common Stock is entitled to one vote for each share of Class B Common Stock held of record in person or by proxy on all matters submitted to a vote of the holders of Class B Common Stock, whether voting separately as a class or otherwise. Class B Common Stock does not have rights to the economics of the Company nor to receive dividend distributions, except in limited circumstances. In the event of liquidation, dissolution or winding up of the affairs of the Company, Class B Common Stock holders are entitled to receive par value per share only. Class B Common Stock ownership is limited only to Intuitive Machines, LLC members in an amount not to exceed at any time the aggregate number of Intuitive Machines, LLC Common Units held of record by such member. Class C Common Stock Each holder of Class C Common Stock is entitled to three votes for each share of Class C Common Stock held of record in person or by proxy on all matters submitted to a vote of the holders of Class C Common Stock, whether voting separately as a class or otherwise. Class C Common Stock does not have rights to the economics of the Company nor to receive dividend distributions, except in limited circumstances. In the event of liquidation, dissolution or winding up of the affairs of the Company, Class C Common Stock holders are entitled to receive par value per share only. Class C Common Stock 81 Table of Contents ownership is limited only to Intuitive Machines, LLC Founders in an amount not to exceed at any time the aggregate number of Intuitive Machines, LLC Founder Common Units held of record by such founder. The Intuitive Machines, LLC Founders are Dr. Kamal Ghaffarian, Stephen J. Altemus and Dr. Timothy Crain and their permitted transferees. Class B and C Common Stock Conversions to Class A Common Stock After the expiration of the applicable lock-up period on August 14, 2023, holders of certain Intuitive Machines, LLC Common Units will be permitted to exchange their Intuitive Machines, LLC Common Units (along with the cancellation of the paired share of Class B Common Stock or share of Class C Common Stock) for shares of Class A Common Stock on a one -for-one basis (subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications) or at the Company’s election (determined by a majority of our directors who are disinterested with respect to such determination), cash from a substantially concurrent public offering or private sale in an amount equal to the net amount, on a per share basis, of cash received as a result of such public offering or private sale. During the third quarter of 2023, all of the previously issued shares of Class B Common Stock (and paired Intuitive Machines, LLC Common Units) were exchanged for shares of Class A Common Stock on a one -for-one basis. The Intuitive Machines, LLC Common Units and shares of Class B Common Stock were subsequently cancelled. Series A Preferred Stock (Mezzanine Equity) The Series A Preferred Stock votes together with the Company’s Common Stock on an as-converted basis, except as required by law and under certain protective provisions. Each holder of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Class A Common Stock into which the shares of Series A Preferred Stock are convertible. The Series A Preferred Stock pays dividends , semi-annually at the rate of 10 % of the original price per share, plus the amount of previously accrued, but unpaid dividends, compounded semi-annually, and participates with our Common Stock on all other dividends. Accrued dividends may be paid (i) in cash , (ii) subject to satisfaction of certain equity conditions, in shares of Class A Common Stock or (iii) accumulated, compounded and added to the liquidation preference described below. Upon any liquidation or deemed liquidation event, the holders of Series A Preferred Stock will be entitled to receive out of the available proceeds, before any distribution is made to holders of Common Stock or any other junior securities, an amount per share equal to the greater of (i) 100% of the Accrued Value (as defined in the Certificate of Designation) or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Class A Common Stock immediately prior to the liquidation event. Each share of Series A Preferred Stock will be convertible at the holder's option into shares of Class A Common Stock at an initial conversion ratio determined by dividing the Accrued Value (as defined in the Certificate of Designation) of such shares of Series A Preferred Stock by the conversion price of $ 12.00 per share subject to adjustment in accordance with the terms of the Certificate of Designation. As result of the Private Placement discussed above and in accordance with the terms of the Certificate of Designation, the Series A Preferred Stock conversion price was reduced to $ 5.10 per share. The Series A Preferred Stock shall be redeemable at the option of the holder commencing any time after the 5 th year anniversary of the Closing Date at a price equal to the 100 % of the sum of (i) original purchase price plus (ii) all accrued/declared but unpaid dividends. The Series A Preferred Stock shall be redeemable at the Company’s option commencing any time (A) after the 3rd year anniversary of the Closing Date at a price equal to the 115 % of the Accrued Value, (B) after the 4th anniversary of the Closing Date at a price equal to the 110 % of the Accrued Value and (C) after the 5th anniversary of the Closing Date at a price equal to the 100 % of the Accrued Value. Redeemable Noncontrolling Interests As of December 31, 2023, the prior investors of Intuitive Machines, LLC owns 77.1 % of the common units of Intuitive Machines, LLC. The prior investors of Intuitive Machines, LLC have the right to exchange their common units in Intuitive Machines, LLC (along with the cancellation of the paired shares of Class B Common Stock or Class C Common Stock in Intuitive Machines, Inc.) for shares of Class A Common Stock on a one -to-one basis or cash proceeds for an equivalent amount. The option to redeem Intuitive Machines, LLC’s common units for cash proceeds must be approved by the Board, which as of December 31, 2023, is controlled by the prior investors. The ability to put common units is solely within the control of the holder of the redeemable noncontrolling interests. If the prior investors elect the redemption to be settled in 82 Table of Contents cash, the cash used to settle the redemption must be funded through a private or public offering of Class A Common Stock and subject to the Company’s Board approval. The financial results of Intuitive Machines, LLC and its subsidiaries are consolidated with Intuitive Machines, Inc. with the redeemable noncontrolling interests' share of our net loss separately allocated. NOTE 10 - WARRANTS AND SAFE AGREEMENTS Public and Private Warrants In conjunction with the closing of the Business Combination, on February 13, 2023, the Company assumed a total of 23,332,500 warrants to purchase one share of the Company’s Class A Common Stock with an exercise price of $ 11.50 per share, subject to adjustment. Of the warrants, 16,487,500 Public Warrants were originally issued in the IPAX initial public offering (the “IPO”) and 6,845,000 private warrants (the “Private Warrants”) were originally issued in a private placement in connection with the IPO. The Company evaluated the terms of the warrants and determined they meet the criteria in ASC 815, “Derivatives and Hedging”, to be classified in shareholders’ equity upon issuance. The warrants became exercisable 30 days after the closing of the Business Combination, and will expire five years after the closing of the Business Combination. The Private Warrants are identical to the Public Warrants except that the Private Warrants may not, subject to certain limited exceptions, be transferred assigned or sold by the holders until 30 days after the closing of the Business Combination. The Public Warrants and Private Warrants do not entitle the holder to any voting rights, dividends or other rights as a shareholder of the Company prior to exercise. Once the warrants become exercisable, the Company may redeem the outstanding warrants, in whole or in part, at a price of $ 0.01 per warrant upon a minimum of 30 days prior written notice of redemption and if, and only if, the closing price of the Company’s Class A Common Stock equals or exceeds $ 18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise pursuant to any anti-dilution adjustments) for any 20 days within a 30 -trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. The number of Class A Common Stock issuable on exercise of each warrant will be increased in proportion to certain increases in outstanding Class A Common Stock including any share capitalization payable, sub-division of shares or other similar events. During the year ended December 31, 2023, Public Warrants of 1,402,106 were exercised resulting in the issuance of an equal number of shares of Class A Common Stock. The Company has received cash proceeds of approximately $ 16.1 million as of December 31, 2023. Series A Preferred Warrants In conjunction with the issuance of Series A Preferred Stock at closing of the Business Combination, the Company issued 541,667 Preferred Investor Warrants to purchase one share of the Company’s Class A Common Stock with an exercise price of $ 15.00 , subject to adjustment. The Company evaluated the terms of the Preferred Investor Warrants and determined they meet the criteria to be classified in shareholders’ upon issuance. The Preferred Investor Warrants were immediately exercisable upon issuance and expire five years from the closing of the Business Combination. The Preferred Investor Warrants include customary cash and cashless exercise provisions and may be exercised on a cashless basis if, at any time after the six month anniversary of the Closing Date, there is not an effective registration statement with respect to the Class A Common Stock. The Preferred Investor Warrants have the same terms and conditions as the Public Warrants. The Preferred Investor Warrants do not entitle the holder to any voting rights, dividends or other rights as a shareholder of the Company prior to exercise. As result of the Private Placement discussed in Note 9 and in accordance with the terms of the Certificate of Designation, the Series A Preferred Warrants exercise price was reduced to $ 11.50 per share and the aggregate number of shares of 83 Table of Contents Class A Common Stock issuable upon exercise of the Series A Preferred Warrants was proportionally increased to 706,522 . As of December 31, 2023, there have been no exercises of the Preferred Investor Warrants. The Initial Series A Warrant and the Initial Series B Warrant (collectively, the “Initial Warrants”) In connection with the issuance of Class A Common stock at the closing of the Private Placement as discussed in Note 9, the Company issued (i) the Initial Series A Warrant, which is exercisable for up to 4,705,883 shares of the Company’s Class A Common Stock at an exercise price of $ 4.75 per share and (ii) the Initial Series B Warrant, which is exercisable for up to 4,705,883 shares of Class A Common Stock at an exercise price of $ 4.75 per share, in each case, subject to adjustment. The Initial Series A Warrant and Initial Series B Warrant are immediately exercisable and will expire on March 5, 2029 and March 5, 2025, respectively. The Company evaluated the terms of the Initial 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 with changes in fair value recognized in earnings in other income (expense) on the consolidated statement of operations. The Initial Series A Warrant and Initial Series B Warrant had an initial fair value of $ 17.4 million and $ 9.3 million, respectively. The gross aggregate proceeds of $ 20.0 million from the Private Placement were allocated to the Initial Series A Warrant and Initial Series B Warrant resulting in a loss on the transaction of approximately $ 6.7 million recognized as loss on issuance of securities in our consolidated statement of operations. As of December 31, 2023, the fair value of the Initial Series A Warrant and Initial Series B Warrant decreased to approximately $ 8.6 million and $ 2.7 million, respectively, resulting in a gain of approximately $ 15.4 million recognized as change in fair value of warrant liabilities in our consolidated statement of operations. Each of the Initial Warrants includes the right of the holder to exercise such warrant on a cashless basis at any time on or after March 5, 2024 if and to the extent that the shares of Class A Common Stock underlying such warrant are not registered. The Warrants do not entitle the holder to any voting rights, dividends or other rights as a shareholder of the Company prior to exercise. As of December 31, 2023, there have been no exercises of the Warrants. SAFE Agreements Prior to closing of 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 initially be 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. As of December 31, 2022, the SAFE Agreements had a fair value of $ 18.3 million recorded as a long term liability in the consolidated balance sheets. As a result of closing of the Business Combination, the SAFE Agreements were converted into 2,066,667 shares of Class A Common Stock. At the Closing Date, the fair value of the SAFE Agreements was estimated at $ 20.7 million resulting in a change in fair value of SAFE Agreements of approximately $ 2.4 million recorded in the consolidated statements of operations for the year ended December 31, 2023. 84 Table of Contents NOTE 11 - SHARE-BASED COMPENSATION AND RETIREMENT BENEFITS Share-Based Compensation 2021 Unit Option Plan On May 25, 2021, the Intuitive Machines, LLC’s board of directors adopted, and its members approved the 2021 Unit Option Plan (the “2021 Plan”). The 2021 Plan allowed Intuitive Machines, LLC to grant incentive unit options (“Incentive Unit Options”) to purchase Class B unit interests. Pursuant to the 2021 Plan, up to 6,125,000 shares of Class B units were reserved for issuance, upon exercise of the aforementioned Incentive Unit Options made to employees, directors and consultants. As a result of the Business Combination discussed in Note 3 - Business Combination and Related Transactions and per the terms of the Second Amended and Restated Intuitive Machines, LLC Operating Agreement, the unexpired and unexercised outstanding Incentive Unit Options at the closing of the Business Combination, whether vested or unvested, were proportionately adjusted using a conversion ratio of 0.5562 (rounded down to the nearest whole number of options). The exercise price of each option was adjusted accordingly. Each Incentive Unit Option continues to be subject to the terms and conditions of the 2021 Plan and will be exercisable for Class B common units of Intuitive Machines, LLC (the “Class B Common Units”). When an option is exercised, the participant will receive Class A Common Stock. As a result of the conversions, there was no incremental compensation cost and the terms of the outstanding options, including fair value, vesting conditions and classification, were unchanged. As of December 31, 2023, Intuitive Machines, LLC was authorized to issue a total of 1,325,354 Class B Common Units upon exercise of the Incentive Unit Options under the 2021 Plan. The following table provides a summary of the option activity under the 2021 Plan for the year ended December 31, 2023: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of December 31, 2022 1,865,094 $ 2.93 8.90 $ — Granted — — — Exercised ( 430,552 ) 1.80 495,135 Forfeited / Cancelled ( 109,188 ) 4.73 — Balance as of December 31, 2023 1,325,354 $ 3.15 7.61 $ 1,223,510 Exercisable as of December 31, 2023 526,353 $ 2.60 7.41 $ 534,947 Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s units determined by our Board for each of the respective periods. The following table provides a summary of weighted-average grant-date fair value of unit options under the 2021 Plan: Weighted- Average Grant Date Fair Value Non-vested as of December 31, 2022 $ 1.01 Granted — Vested 0.98 Forfeited 2.56 Non-vested as of December 31, 2023 $ 1.80 The weighted average grant-date fair value per share of options granted to employees was zero and $ 3.07 during 2023 and 2022, respectively. Following the consummation of the Business Combination, no new awards were granted under the 2021 Plan. Share-based compensation expense related to options was $ 787 thousand and $ 624 thousand for the years ended December 31, 2023 and 2022, respectively, and was classified in the consolidated statement of operations under general and administrative expense. As of December 31, 2023, the Company had $ 699 thousand in estimated unrecognized 85 Table of Contents share-based compensation costs related to outstanding unit options that is expected to be recognized over a weighted average period of 3.40 years. The following weighted average assumptions were used to calculate the fair value of each unit option award under the 2021 Plan using the Black-Scholes option pricing model: December 31, 2022 Expected unit price volatility 65 – 70 % Risk-free interest rate 2.9 – 3.6 % Expected annual dividend yield 0.0 % Expected term (years) 6.50 Intuitive Machines, Inc. 2023 Long Term Omnibus Incentive Plan (the “2023 Plan”) The 2023 Plan, which became effective in conjunction with closing of the Business Combination, provides for the award to certain directors, officers, employees, consultants and advisors of the Company of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards as well as cash-based awards and dividend equivalents, as determined, and subject to the terms and conditions established, by the Company’s Compensation Committee. Under the 2023 Plan, a maximu m of 12,706,811 sh ares of Class A Common Stock are authorized to be issued. As of December 31, 2023, the Company has issued restricted stock units (“RSUs”) as outlined in the following disclosure. No other awards have been granted under the 2023 Plan. Restricted Stock Units In 2023, the Company granted RSUs with time-based vesting requirements under the 2023 Plan. These RSUs typically vest over one to four years . The fair value of RSUs is based on the Company’s closing stock price on the date of grant. The following table provides a summary of the Company’s RSU activity: Number of Units Weighted Average Grant Date Fair Value Outstanding as of December 31, 2022 — $ — Granted 1,851,124 7.02 Vested — — Forfeited ( 24,178 ) 7.56 Balance as of December 31, 2023 1,826,946 $ 7.01 Share-based compensation expense related to RSUs was $ 3.5 million for year ended December 31, 2023, and disclosed in the consolidated statement of operations under general and administrative expense. As of December 31, 2023, the Company had $ 9.4 million in estimated unrecognized share-based compensation costs related to unvested RSUs that is expected to be recognized over a weighted average period of 2.98 years. Defined Contribution Retirement Plan We have an elective defined contribution plan for our employees that provides retirement benefits in return for services rendered. This plan provides an individual account for each participant and has terms that specify how contributions to the participant’s account are to be determined. Contributions to this plan are based on pretax income discretionary amounts determined on an annual basis. Our expense for the defined contribution plan totaled approximately $ 945 thousand and $ 521 thousand for the years ended December 31, 2023 and 2022, respectively. 86 Table of Contents NOTE 12 - FAIR VALUE MEASUREMENTS The following tables summarize the fair value of assets and liabilities that are recorded in the Company’s consolidated balance sheets as of December 31, 2023 and 2022 at fair value on a recurring basis. December 31, 2023 Frequency of Measurement Total Level 1 Level 2 Level 3 Liabilities Earn-out liabilities Recurring $ 14,032 $ — $ — $ 14,032 Warrant liabilities - Series A Recurring 8,612 — — 8,612 Warrant liabilities - Series B Recurring 2,682 — — 2,682 Warrant liabilities 11,294 — — 11,294 Total liabilities measured at fair value $ 25,326 $ — $ — $ 25,326 December 31, 2022 Frequency of Measurement Total Level 1 Level 2 Level 3 Liabilities SAFE Agreement liabilities Recurring $ 18,314 $ — $ — $ 18,314 Total liabilities measured at fair value $ 18,314 $ — $ — $ 18,314 The following table provides a roll-forward of the Company’s Level 3 liabilities (in thousands): Earn-out liabilities Warrant liabilities - Series A Warrant liabilities - Series B Total Warrant liabilities SAFE Agreement liabilities Balance, December 31, 2022 $ — $ — $ — $ — $ 18,314 Additions 99,659 17,459 9,270 26,729 — Change in fair value ( 66,252 ) ( 8,847 ) ( 6,588 ) ( 15,435 ) 2,353 Converted to equity ( 19,375 ) — — — ( 20,667 ) Balance, December 31, 2023 $ 14,032 8,612 2,682 11,294 $ — Earn-out Liabilities The fair value of the earn-out liabilities as of December 31, 2023 was estimated using a Monte Carlo simulation approach that modeled the triggering events including the simulated stock price of the Company over the maturity dates. The significant assumptions utilized in estimating the fair value of the earn-out liabilities include: (i) Intuitive Machines stock price of $ 2.56 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 3.84 %; and (iv) expected volatility of 105 %. In conjunction with the closing of the Business Combination on February 13, 2023, the fair value of the earn-out liabilities was estimated at $ 99.7 million. The significant assumptions utilized in estimating the fair value of the earn-out liabilities include: (i) Intuitive Machines stock price of $ 10.42 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 3.93 %; and (iv) expected volatility of 100 %. The probability of the Company being awarded the OMES III contract was assumed at 60 %. Warrant Liabilities The fair value of the Series A Warrant and the Series B Warrant liabilities as of December 31, 2023 was estimated using a Black-Scholes-Merton model. The significant assumptions utilized in estimating the fair value of the Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $ 2.56 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 3.84 %; and (iv) expected volatility of 105 %. The significant assumptions utilized in estimating the fair value of the Series B Warrant liabilities include: (i) a per share price of the Class A Common Stock of $ 2.56 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 4.69 %; and (iv) expected volatility of 92 %. 87 Table of Contents In connection with the closing of the Private Placement on September 5, 2023 as described further in Note 9, the fair values of the Series A Warrant and the Series B Warrant liabilities were estimated at $ 17.4 million and $ 9.3 million, respectively. The significant assumptions utilized in estimating the fair value of the Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $ 4.96 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 4.37 %; and (iv) expected volatility of 90 %. The significant assumptions utilized in estimating the fair value of the Series B Warrant liabilities include: (i) a per share price of the Class A Common Stock of $ 4.96 ; (ii) a dividend yield of 0.0 %; (iii) a risk-free rate of 5.18 %; and (iv) expected volatility of 76 %. SAFE Agreements Prior to the Business Combination described in Notes 1 and 3, the fair value of the SAFE Agreements under the equity financing scenario were estimated using a Monte Carlo simulation approach. The fair value of the SAFE Agreements under the liquidity event and dissolution event scenarios were estimated based on the present value of the purchase amount. The unobservable inputs used in the fair value measurement of the Company’s SAFE Agreements are the probabilities of future scenarios, volatility, discount rate and risk-free rate. As of December 31, 2022, the probability of an equity financing was 0 %, the probability of a liquidity event was 95 % and the probability of a dissolution event was 5 %. The value under the liquidity event and dissolution event scenarios is based on the present value of the purchase amount. The present value factors are estimated based on a 16.4 % discount rate based on venture capital rates of return for December 31, 2022. The periods in which the scenarios are expected to occur for the liquidity event and dissolution events are 0.25 year and 1 year, respectively as of December 31, 2022. In conjunction with the closing of the Business Combination on February 13, 2023, the fair value of the SAFE Agreements was estimated at $ 20.7 million. The fair value was estimated using the 2,066,667 shares of Class A Common Stock issued to the SAFE investors at the Closing Date using the issuance price of $ 10.00 per share. NOTE 13 - NET INCOME PER SHARE Basic net income p er share of Class A common stock is computed by dividing net income attributable to Class A common shareholders from February 13, 2023, or the Closing Date, to December 31, 2023 by the weighted-average number of shares of Class A common stock outstanding for the same periods. Diluted net income per share of Class A common stock includes additional weighted average common shares that would have been outstanding if potential common shares with a dilutive effect had been issued using the if-converted method for the Series A Preferred Stock and the treasury method for our RSUs, options, and warrants. During loss periods, diluted net loss per share for all periods presented is the same as basic net loss per share as the inclusion of the potentially issuable shares would be anti-dilutive. Prior to the Business Combination, the membership structure of Intuitive Machines, LLC included membership units. In conjunction with the closing of the Business Combination, the Company effectuated a recapitalization whereby all membership units were converted to common units of Intuitive Machines, LLC and Intuitive Machines, Inc. implemented a revised class structure including Class A common stock having one vote per share and economic rights, Class B common stock having one vote per share and no economic rights, and Class C Common Stock having three votes per share and no economic rights. Shares of the Company’s Class B Common Stock and Class C Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. The Company has determined that the calculation of loss per unit for periods prior to the Business Combination would not be meaningful to the users of these consolidated financial statements. Therefore, net loss per share information has not been presented for periods prior to the Business Combination on February 13, 2023. The basic and diluted net income per share for the year ended December 31, 2023 represent only the period of February 13, 2023 to December 31, 2023. 88 Table of Contents The following table presents the computation of the basic and diluted income per share of Class A Common Stock for the period of February 13, 2023 (the Closing Date) to December 31, 2023 (in thousands, except share data): Year Ended December 31, 2023 Numerator Net income for the period from February 13, 2023 through December 31, 2023 $ 20,773 Less: Net loss attributable to redeemable noncontrolling interests for the period from February 13, 2023 through December 31, 2023 ( 42,031 ) Net income for the period from February 13, 2023 through December 31, 2023 attributable to the Company 62,804 Less: Cumulative preferred dividends ( 2,343 ) Net income for the period from February 13, 2023 through December 31, 2023 attributable to Class A common shareholders $ 60,461 Denominator Basic weighted-average shares of Class A common stock outstanding 17,648,050 RSUs and Options 1,112,364 Series A Preferred Stock 3,719,506 Warrants 3,084,393 Diluted weighted-average shares of Class A common stock outstanding 25,564,313 Net income per share of Class A common stock - basic $ 3.43 Net income per share of Class A common stock - diluted $ 2.46 The following table presents potentially dilutive securities, as of the end of the period, excluded from the computation of diluted net earnings per share of Class A Common Stock. Year Ended December 31, 2023 RSUs (1) 1,832,918 Options (1) 261,432 Warrants (1) 32,048,682 Earn Out Units (2) 7,500,000 (1) Represents number of instruments outstanding at the end of the period that were evaluated under the treasury stock method for potentially dilutive effects and were determined to be anti-dilutive. (2) Represents number of Earn Out Units outstanding at the end of the period that were excluded due to unsatisfied contingent issuance conditions. See Note 3 for terms and conditions of the contingencies related to the Earn Out Units. NOTE 14 - COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company applies accounting for contingencies to determine when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, the Company discloses contingencies deemed to be reasonably possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. While the resolution of these legal proceedings and claims cannot be predicted with certainty, management believes the outcome of such matters will not have a material adverse effect on our consolidated financial statements. NOTE 15 - RELATED PARTY TRANSACTIONS Intuitive Machines, Intuitive Aviation, IX LLC and Space Network Solutions, LLC have entered into recurring transaction agreements with certain related parties, including sales agreements and loan agreements. 89 Table of Contents Axiom Space, Inc. The Company recognized revenue from Axiom Space, Inc. (“Axiom”) related to engineering services of $ 153 thousand and $ 1.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2022, there was $ 0.8 million of affiliate accounts receivable which was fully reserved. During the third quarter of 2023, the affiliate accounts receivable balance was collected and the reserve was reversed. As of December 31, 2023, there were no affiliate accounts receivable related to Axiom. Kamal Ghaffarian, the Chairman of the Board and one of the co-founders of Intuitive Machines, LLC is a co-founder and current member of management at Axiom. Revenue related to Axiom are incurred in the normal course of business and amounts are settled under normal business terms. IBX, LLC and PTX, LLC The Company incurred expenses with IBX, LLC and PTX, LLC (“IBX/PTX”) related to bid & proposal, capture management and various consulting services of $ 0.1 million and $ 2.1 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, there was approximately $ 0.4 million of affiliate accounts payable related to IBX/PTX expenses. Kamal Ghaffarian is a member of Management at Intuitive Machines and a member of Management at IBX/PTX. Expenses related to IBX/PTX are incurred in the normal course of business and amounts are settled under normal business terms. KBR, Inc. On November 12, 2020, KBR, Inc. (“KBR”) made an initial capital contribution in Space Network Solutions resulting in a 10 % ownership of Space Network Solutions, which was previously a wholly owned subsidiary of Intuitive Machines, LLC. The Company recognized affiliate revenue from KBR related to engineering services of $ 3.1 million and $ 1.9 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, there were $ 0.5 million and $ 0.3 million, respectively, of affiliate accounts receivable related to KBR revenue. Revenue related to KBR are incurred in the normal course of business and amounts are settled under normal business terms. ASES The Company recognized revenue from ASES related to engineering services of $ 1.1 million for the year ended December 31, 2023. As of December 31, 2023, there was $ 0.1 million of affiliate accounts receivable related to ASES revenue. ASES is a joint venture between Aerodyne Industries, LLC and KBR. Kamal Ghaffarian, the Chairman of the Board and one of the co-founders of Intuitive Machines, LLC is a current member of management at Aerodyne Industries with an ownership interest in Aerodyne Industries. Revenue related to ASES are incurred in the normal course of business and amounts are settled under normal business terms. X-energy, LLC As of December 31, 2023 and 2022, there were zero and $ 0.1 million, respectively, of affiliate accounts payable related to X-energy, LLC (“X-energy”) expenses. Expenses related to X-energy are incurred in the normal course of business and amounts are settled under normal business terms. Penumbra, LLC In November 2019, certain members of our management team formed Penumbra, LLC (“Penumbra”) as an Isle of Man entity. The sole purpose of forming Penumbra was to permit us to obtain required licenses for its Lunar Data Network line of business to operate in the ordinary course. The Company incurred expenses with Penumbra related to license fees for the year ended December 31, 2022 of $ 134 thousand, and incurred no expenses for the year ended December 31, 2023. As of December 31, 2023, no member of our management team has received any financial benefit from its ownership interest in Penumbra, LLC, other than expense reimbursements incurred in the ordinary course. As of December 31, 2023, this entity is dissolved. 90 Table of Contents NOTE 16 - VARIABLE INTEREST ENTITIES The Company determines whether joint ventures in which it has invested meet the criteria of a variable interest entity or “VIE” at the start of each new venture and when a reconsideration event has occurred. A VIE is a legal entity that satisfies any of the following characteristics: (a) the legal entity does not have sufficient equity investment at risk; (b) the equity investors at risk as a group, lack the characteristics of a controlling financial interest; or (c) the legal entity is structured with disproportionate voting rights. The Company consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Space Network Solutions, LLC The Company participates in the Space Network Solutions joint venture with KBR, a leading provider of specialized engineering, and professional, scientific and technical services primarily to the U.S. federal government. Under the terms of the Amended Space Network Solutions limited liability company agreement, we hold a 90 % interest in the Space Network Solutions and KBR hold a 10 % interest. Space Network Solutions is a VIE and Intuitive Machines is the primary beneficiary. Space Network Solutions was formed to provide cyber security as well as communication & tracking services using its expertise in developing secure ground system architecture for lunar space missions. In the second quarter of 2023, NASA awarded Space Network Solutions a cost-plus-fixed-fee indefinite-delivery, indefinite quantity contract to support work related to the Joint Polar Satellite System, NASA’s Exploration and In-space Services. Intuitive Machines and KBR entered into a separate 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. 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 silo based on the governance structure of the OMES III JV Agreement. IX, LLC Joint Venture The Company participates in the IX, LLC joint venture (“IX LLC JV”) with X-energy, a nuclear reactor and fuel design engineering company, developing high-temperature gas cooled nuclear reactors and fuel to power them. We hold a 51 % interest in the IX LLC JV and X-energy holds a 49 % interest. Kamal Ghaffarian is also the co-founder and current member of management of X-energy. Intuitive Machines and X-energy are common controlled entities. We have determined that IX, LLC JV is a variable interest entity and Intuitive Machines is the primary beneficiary because it is most closely associated with the activities of the joint venture. Therefore, we consolidate this VIE for financial reporting purposes. The IX LLC JV was formed to pursue nuclear space pro JV received an award from Battelle Energy Alliance to design a fission surface power system that can operate on the surface of the Moon to support sustained lunar presence and exploration of Mars. 91 Table of Contents Provided below is the summarized financial information for our consolidated VIEs (in thousands). Balance Sheet SNS IX, LLC December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Cash and cash equivalents $ 1,187 $ — $ — $ 556 Trade accounts receivable, net 12,501 — — 750 Contract assets — — — — Total current assets 13,688 — — 1,306 Total assets $ 13,688 $ — $ — $ 1,306 Accounts payable and accrued expenses $ 9,093 $ — $ — $ 194 Accounts payable - affiliated companies 2,949 — — 323 Contract liabilities, current — — — 790 Total current liabilities 12,042 — — 1,307 Total liabilities $ 12,042 $ — $ — $ 1,307 Statements of Operations SNS IX, LLC Year Ended December 31, Year Ended December 31, 2023 2022 2023 2022 Revenue $ 12,502 $ — $ 4,290 $ 710 Operating expenses: Cost of revenue (excluding depreciation) 11,997 — 4,290 710 General and administrative expense (excluding depreciation) 259 — — — Total operating expenses 12,256 — 4,290 710 Operating income 246 — — — Net income $ 246 $ — $ — $ — NOTE 17 - SUBSEQUENT EVENTS Warrant Transactions On January 10, 2024, the Company entered into a Warrant Exercise Agreement with an existing investor to exercise in full the Initial Series B 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 Initial Series B 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 (the “Second Series A Warrant”) 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 (the “Second Series B Warrant”) 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 Initial Series B Warrant from $ 4.75 to $ 2.50 per 92 Table of Contents share and reduced the exercise price of the Initial Series A Warrant from $ 4.75 to $ 2.75 per share. The gross proceeds to the Company from the exercise of the Initial Series B Warrant was approximately $ 11.8 million. In a series of transactions during February 2024, the investor exercised in full its remaining Second Series B Warrant, Initial Series A Warrant, and Second Series A Warrant 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. 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. Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosures None.