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INFLECTION POINT(IPAX) - 2023 Q4 - Annual Report
2024-03-25 21:09
Part I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Intuitive Machines is a space infrastructure company with a first-mover advantage in the lunar economy, supported by NASA contracts and a successful Moon landing - Intuitive Machines is a space infrastructure and services company with a first-mover advantage, evidenced by three NASA Commercial Lunar Payload Services (CLPS) awards and the successful IM-1 mission, which saw its Nova-C lander become the **first U.S. vehicle to soft-land on the Moon since 1972**[19](index=19&type=chunk) - The company operates across four business units: **Lunar Access Services** (lunar landers), **Orbital Services** (satellite servicing), **Lunar Data Services** (lunar communications network), and **Space Products and Infrastructure** (propulsion, navigation systems)[30](index=30&type=chunk) - The company's growth strategy focuses on leveraging its first-mover advantage in lunar transport, expanding into adjacent lunar markets like power and habitats, and pursuing opportunities in the orbital services market[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) Key Business Metrics (as of December 31, 2023) | Metric | Value | | :--- | :--- | | **Contracted Backlog** | $268.6 million | | **FY 2023 Revenue** | $79.5 million | | **Lunar Access Services Contracted Value** | $336.6 million (NASA, commercial, rideshares) | | **OMES III Contract Value (Up to)** | $720.0 million | [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant operational, financial, and structural risks, including a limited history, high customer concentration, and a 'controlled company' structure - Business and operational risks include a **limited operating history**, dependence on key personnel, intense competition, potential for launch failures or accidents, and reliance on a limited number of suppliers[85](index=85&type=chunk)[87](index=87&type=chunk)[93](index=93&type=chunk)[103](index=103&type=chunk) - The company has significant customer concentration, with approximately **74% of its revenues** for the year ended December 31, 2023, coming from one major customer[92](index=92&type=chunk) - The business is **heavily dependent on U.S. government contracts**, which are subject to partial funding, immediate termination, and heavy regulation[96](index=96&type=chunk)[134](index=134&type=chunk) - Structural and financial risks include the company's holding company structure (Up-C), which makes it dependent on distributions from its operating subsidiary to pay taxes and expenses, including substantial obligations under a **Tax Receivable Agreement**[154](index=154&type=chunk)[159](index=159&type=chunk) - The company is a **"controlled company"** as its founders control a majority of the voting power, allowing them to rely on exemptions from certain corporate governance requirements[173](index=173&type=chunk)[185](index=185&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[194](index=194&type=chunk) [Item 1C. Cybersecurity](index=36&type=section&id=Item%201C.%20Cybersecurity) The company maintains a multi-layered cybersecurity strategy overseen by the Board and is compliant with key government contractor standards - The company employs a multi-layered approach to cybersecurity, using next-generation firewalls, malware blocking software, and vulnerability reporting tools, and engages third-party consultants for risk assessments[198](index=198&type=chunk) - The **Board of Directors maintains oversight of cybersecurity**, while the IT organization manages the overall security strategy and response[200](index=200&type=chunk)[201](index=201&type=chunk) - As a government contractor, the company complies with standards including ISO/IEC 27001, NIST SP 800 series, and is progressing towards **Cybersecurity Maturity Model Certification (CMMC) 2.0**[202](index=202&type=chunk) - The company has not experienced any cybersecurity incidents that have had a **material impact** on its business, operations, or financial condition[199](index=199&type=chunk) [Item 2. Properties](index=38&type=section&id=Item%202.%20Properties) The company's primary facility is its new Houston headquarters, with a significant employee presence at NASA's Goddard Space Flight Center - The main facility is the **Lunar Production and Operations Center (LPOC)** in Houston, Texas, completed in late 2023, which covers over 100,000 square feet[203](index=203&type=chunk) - The company also has a significant presence in Greenbelt, Maryland, with **over 100 employees** working at the Goddard Space Flight Center to support the OMES III contract for NASA[204](index=204&type=chunk) [Item 3. Legal Proceedings](index=38&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings arising in the ordinary course of business - The company is involved in various legal proceedings in the ordinary course of business, with further details provided in **Note 14** of the consolidated financial statements[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[206](index=206&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq with a concentrated number of holders, and there is no current plan to issue dividends - Class A Common Stock and Public Warrants trade on Nasdaq under the symbols **"LUNR"** and **"LUNRW"**[208](index=208&type=chunk) - As of March 15, 2024, there were **46 holders of record** of Class A Common Stock[209](index=209&type=chunk) - The company has **never paid dividends** and has no current plans to pay them in the foreseeable future[210](index=210&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue decreased in 2023, but net income turned positive due to non-operating gains, while the operating loss widened and the company secured new funding - The decrease in 2023 revenue was primarily driven by a **$27.9 million reduction** in revenue from the IM-1 mission, partially offset by a **$19.5 million increase** from engineering services[272](index=272&type=chunk) - The significant increase in net income was primarily due to non-operating gains, including a **$66.3 million favorable change** in the fair value of earn-out liabilities[278](index=278&type=chunk) - Backlog increased by $66.7 million to **$268.6 million** as of December 31, 2023, mainly due to new awards including the OMES III project[283](index=283&type=chunk)[284](index=284&type=chunk) - The company secured significant liquidity through the Business Combination ($34.1 million gross), a private placement ($20.0 million gross), and subsequent **warrant exercises and equity transactions in Q1 2024 ($60.6 million gross)**[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) Results of Operations (Year Ended December 31) | (in thousands) | 2023 | 2022 | $ Change | | :--- | :--- | :--- | :--- | | **Revenue** | $79,521 | $85,946 | $(6,425) | | **Cost of revenue** | $100,472 | $75,513 | $24,959 | | **Operating loss** | $(56,237) | $(5,507) | $(50,730) | | **Total other income (expense), net** | $71,299 | $(921) | $72,220 | | **Net income (loss)** | $15,022 | $(6,405) | $21,427 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this disclosure is not required - The company is a smaller reporting company and is not required to provide this information[329](index=329&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, which received an unqualified opinion from its independent auditor - The independent registered public accounting firm, Grant Thornton LLP, issued an **unqualified opinion** on the consolidated financial statements for the years ended December 31, 2023 and 2022[335](index=335&type=chunk) - The Business Combination in February 2023 was accounted for as a **reverse recapitalization**, with Intuitive Machines, LLC as the accounting acquirer[357](index=357&type=chunk) - Subsequent to year-end, in Q1 2024, the company raised approximately **$60.6 million in gross proceeds** from a series of warrant exercises and other equity transactions[374](index=374&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | **Total Assets** | $85,908 | $67,004 | | **Total Liabilities** | $139,327 | $124,623 | | **Total Mezzanine Equity** | $209,863 | $0 | | **Total Shareholders' Deficit** | $(263,282) | $(57,619) | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=101&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[561](index=561&type=chunk) [Item 9A. Controls and Procedures](index=101&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective, with previously identified material weaknesses now remediated - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2023[564](index=564&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and concluded it was **effective** as of December 31, 2023[565](index=565&type=chunk)[566](index=566&type=chunk) - **Material weaknesses** previously reported in the 2022 Form 10-K related to revenue recognition, significant transactions, and segregation of duties were **successfully remediated** as of December 31, 2023[567](index=567&type=chunk)[568](index=568&type=chunk) [Item 9B. Other Information](index=103&type=section&id=Item%209B.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 trading plans in the fourth quarter - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the fourth quarter of 2023[572](index=572&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=104&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's leadership and board structure are detailed, highlighting its status as a 'controlled company' exempt from certain governance rules - The executive team is led by co-founder **Stephen Altemus (CEO & President)**, with co-founder **Dr. Kamal Ghaffarian serving as Chairman of the Board**[574](index=574&type=chunk)[575](index=575&type=chunk)[585](index=585&type=chunk) - The Board is classified into three staggered three-year terms and has **four independent directors**[598](index=598&type=chunk)[606](index=606&type=chunk)[608](index=608&type=chunk) - The company qualifies as a **"controlled company"** under Nasdaq rules because its founders hold over 50% of the combined voting power, exempting it from certain governance requirements[604](index=604&type=chunk) - The Board has four standing committees: **Audit, Compensation, Nominating and Corporate Governance, and Conflicts**[606](index=606&type=chunk) [Item 11. Executive Compensation](index=111&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2023 included base salaries and stock awards, with no cash bonuses paid for performance - **No discretionary cash bonuses** were paid to named executive officers for 2023; instead, the Board approved one-time special performance-based restricted stock unit (RSU) awards in February 2024[627](index=627&type=chunk)[630](index=630&type=chunk) - In May 2023, the company granted time-based RSUs to former CFO Erik Sallee (550,000 shares) and General Counsel Anna Jones (50,000 shares), which vest over four years[633](index=633&type=chunk) - The non-employee director compensation program includes an annual cash retainer of **$55,000** and an annual RSU award with a value of **$155,000**[654](index=654&type=chunk)[655](index=655&type=chunk)[659](index=659&type=chunk) 2023 Named Executive Officer Compensation | Name | Position | Total Compensation ($) | | :--- | :--- | :--- | | **Stephen Altemus** | President and CEO | 714,483 | | **Timothy Crain** | CTO | 441,190 | | **Erik Sallee** | Former CFO | 4,609,212 | | **Anna Jones** | General Counsel | 608,262 | [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=115&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Voting power is highly concentrated among the company's founders, who beneficially own over 83% of the total voting power - The company's capital structure includes Class A (1 vote/share) and Class C (3 votes/share) Common Stock, which **concentrates voting power with the founders**[661](index=661&type=chunk) - The company maintains two equity compensation plans: the 2021 Unit Option Plan and the **2023 Long Term Omnibus Incentive Plan**, which has 10,879,865 securities remaining available for future issuance[668](index=668&type=chunk)[670](index=670&type=chunk)[671](index=671&type=chunk) Security Ownership of Major Holders (as of March 15, 2024) | Beneficial Owner | % of Total Voting Power | | :--- | :--- | | **Dr. Kamal Ghaffarian (Chairman)** | 52.8% | | **Stephen Altemus (CEO)** | 18.9% | | **Dr. Timothy Crain (CGO)** | 12.0% | | **Armistice Capital, LLC** | 8.9% | | **All directors and executive officers as a group** | 83.4% | [Item 13. Certain Relationships and Related Transactions and Director Independence](index=118&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) The company engages in several related party transactions, primarily with entities affiliated with its Chairman, governed by a formal policy - In January 2024, Ghaffarian Enterprises, LLC, an entity affiliated with Chairman Dr. Kamal Ghaffarian, contributed **$10.0 million** to the company to repay a credit line in exchange for shares and warrants[673](index=673&type=chunk)[674](index=674&type=chunk)[675](index=675&type=chunk) - The company engages in ordinary course business with other entities affiliated with Dr. Ghaffarian, including **Axiom Space, X-energy, IBX/PTX, and ASES**[678](index=678&type=chunk)[679](index=679&type=chunk)[680](index=680&type=chunk)[682](index=682&type=chunk) - Key governance documents include the A&R Operating Agreement and the **Tax Receivable Agreement**, which requires the company to pay 85% of certain tax savings to original LLC members[685](index=685&type=chunk)[688](index=688&type=chunk) - The Board has a written **Related Person Transaction Policy** requiring review and approval of such transactions by the Audit Committee[703](index=703&type=chunk) [Item 14. Principal Accountant Fees and Services](index=124&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Total fees paid to the independent auditor, Grant Thornton LLP, increased significantly in 2023 to $3.1 million - The Audit Committee pre-approved all audit and non-audit services provided by Grant Thornton LLP, consistent with its charter and policies[711](index=711&type=chunk) Accountant Fees (in thousands) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | **Audit fees** | $1,080 | $445 | | **Audit-related fees** | $828 | $1,225 | | **Tax fees** | $909 | $43 | | **All other fees** | $321 | $0 | | **Total fees** | **$3,138** | **$1,713** | Part IV [Item 15. Exhibits and Financial Statement Schedules](index=125&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including key agreements and certifications - This section provides an index of all exhibits filed with the annual report, including governance documents, material contracts, and required certifications[715](index=715&type=chunk)[717](index=717&type=chunk) [Item 16. Form 10-K Summary](index=127&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company elected not to provide a summary for this item - None[718](index=718&type=chunk)
INFLECTION POINT(IPAX) - 2023 Q3 - Quarterly Report
2023-11-13 21:06
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2023-05-15 12:43
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2023-03-31 00:25
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40823 Intuitive Machines, Inc. (Exact name of Registrant as specified in its Charter) | Delaware | 36-5056189 | | --- | --- | | (Sta ...