Business context and reporting period
This is Inflection Point Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2022—not an operating-company quarterly report from Intuitive Machines, Inc. Inflection Point was a SPAC with no operating business or revenue, seeking a business combination. On September 16, 2022, it agreed to combine with Intuitive Machines, LLC; completion remained subject to conditions, including shareholder approval.
Financial results and liquidity
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Operating revenue | None | None |
| Formation and operating costs | $2.012 million | $2.937 million |
| Interest income | $1.491 million | $1.987 million |
| Net loss | $521,000 | $950,000 |
| Net loss per share, Class A and Class B | $0.01 | $0.02 |
At September 30, cash outside the Trust Account was $19,442; Trust Account investments were $331.7 million. Working capital was negative $1.995 million. Total liabilities were $14.0 million, including a $11.5 million deferred underwriting fee payable only upon a completed business combination. The company had $125,000 outstanding under a non-interest-bearing Sponsor working-capital note, with up to $1 million available under that note. It reported no long-term debt obligations or off-balance-sheet arrangements.
Operating cash flow was negative $465,000 for the nine months. Financing cash flow was positive $125,000 from the working-capital loan; there was no investing cash flow. The Trust Account is principally reserved for a transaction or public-share redemptions and is not ordinary operating liquidity.
Changes versus the prior comparable period
For the three months ended September 30, 2021, net loss was $45,000, compared with $521,000 in 2022. For the 2021 inception-to-September period, net loss was $65,000, versus $950,000 for the first nine months of 2022. The 2022 loss reflected substantially higher formation and operating costs, partly offset by materially higher Trust Account interest. The comparison periods differ: 2021 nine-month results cover only January 27, 2021 through September 30, 2021, while 2022 covers nine months.
The company revised previously reported 2021 comparative figures to correct an offering-cost allocation error. The revision increased reported loss by $23,439 for the three-month and inception-to-date periods through September 30, 2021.
Transaction, outlook and key risks
- Proposed combination: The agreement contemplated an Up-C structure and approximately $700 million of consideration to Intuitive Machines members, including common units, options and up to 10 million earn-out units. Earn-outs depend on specified NASA-contract and share-price milestones. Closing was not assured; the agreement could be terminated in specified circumstances, including failure to close by September 16, 2023.
- Proposed financing and dilution: A 10% cumulative convertible preferred-stock investment of $26 million, with warrants to purchase 541,667 shares at an initial $15 exercise price, was to close immediately before the business combination. A separate equity facility would permit, but not require, sales of up to $50 million of Class A stock, subject to conditions and an exchange cap; 100,000 commitment shares were also contemplated.
- Tax receivable agreement: The proposed agreement would generally direct 85% of specified realized cash tax savings to certain former Intuitive Machines members. Illustrative estimates were a $147.2 million liability if all units were exchanged and a $99.7 million payment if the agreement were terminated immediately after the transaction, under stated assumptions; these are not actual recorded liabilities.
- Going concern: Management said the $19,442 of operating cash was insufficient to fund operations for 12 months absent a business combination and concluded that substantial doubt existed about the company’s ability to continue as a going concern after September 24, 2023. Failure to complete a combination by that deadline would trigger liquidation and redemption of public shares, subject to applicable requirements. Additional Sponsor financing was possible but not assured.
- Other risks: The filing cited uncertainty about COVID-19 and the Russia-Ukraine war, and potential Investment Company Act concerns for SPACs. Moving Trust Account assets to cash to mitigate that risk could reduce interest and redemption proceeds. Sponsor indemnification for certain Trust Account claims was not funded or independently verified.
- Other disclosures: No material change to previously disclosed risk factors was reported apart from going-concern concerns. Management assessed disclosure controls as effective; no material change in internal control was reported. No legal proceedings were disclosed.
Important facts for investors to verify
- Confirm the business combination’s final terms, shareholder approval, closing status and any changes to the proposed transaction or share structure.
- Check redemption levels and resulting cash available at closing; Trust Account assets are not equivalent to unrestricted operating cash.
- Review the preferred-stock conversion and warrant terms, potential equity-facility sales, earn-out conditions and resulting dilution.
- Assess the actual funding needs and repayment or conversion of Sponsor loans, as well as the September 24, 2023 deadline and liquidation consequences.
- Review the tax receivable agreement’s final terms and assumptions; the filing’s liability and termination-payment figures are illustrative estimates.