Intuitive Machines, Inc. (LUNR) FY 2021 MD&A

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

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

Cautionary
Note Regarding Forward-Looking Statements

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

Overview

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources; Going Concern

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

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

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

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

Risks
and Uncertainties

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

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Results
of Operations

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

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

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

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

Administrative
Services Agreement

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

Registration
Rights

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

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Underwriting
Agreement

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

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

Professional Service Agreement

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

Critical Accounting Policies

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

Offering Costs

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

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

Class
A Ordinary Shares Subject to Possible Redemption

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

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

Related
Party Redemption Waiver Agreement

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

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Net Loss Per Ordinary Share

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

Warrants

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

Forward Purchase Agreement

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

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

Inflation

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

Emerging
Growth Company Status

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

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