Intuitive Machines, Inc.LUNR
Intuitive Machines, Inc. Fair Value Disclosure
NOTE 11 - 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, 2024 and 2023 at fair value on a recurring basis (in thousands).
| December 31, 2024 | |||||||||||||||||||||||||||||
| Frequency of Measurement | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Earn-out liabilities | Recurring | $ | 134,156 | $ | — | $ | — | $ | 134,156 | ||||||||||||||||||||
| Warrant liabilities - Series A | Recurring | 68,778 | — | — | 68,778 | ||||||||||||||||||||||||
| Warrant liabilities - Series B | Recurring | — | — | — | — | ||||||||||||||||||||||||
| Warrant liabilities | 68,778 | — | — | 68,778 | |||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | 202,934 | $ | — | $ | — | $ | 202,934 | |||||||||||||||||||||
| 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 | |||||||||||||||||||||
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 | — | ||||||||||||||||||||||||
| Additions | — | 20,827 | 11,262 | 32,089 | — | ||||||||||||||||||||||||
| Change in fair value | 120,124 | 59,810 | 17,841 | 77,651 | — | ||||||||||||||||||||||||
| Converted to equity | — | (20,471) | (31,785) | (52,256) | — | ||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | 134,156 | $ | 68,778 | $ | — | $ | 68,778 | $ | — | |||||||||||||||||||
Earn-out Liabilities
The fair value of the earn-out liabilities 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. As of December 31, 2024, the significant assumptions utilized in estimating the fair value of the earn-out liabilities include: (i) Intuitive Machines stock price of $18.16; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.19%; and (iv) expected volatility of 85%. As of , 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%.
As a result of the Business Combination, certain Intuitive Machines, LLC members received 10,000,000 earn out units of Intuitive Machines, LLC (“Earn Out Units”) subject to certain triggering events. Upon the vesting of any Earn Out Units, each of the certain 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. Under the earn out agreement, Earn Out Units of 2,500,000 vested for the year ended December 31, 2023. For the year ended December 31, 2024, there were no vestings of Earn Out Units. See Note 17 for information related to subsequent earn out events.
Warrant Liabilities
Initial Warrants
Pursuant to the Warrant Exercise Agreement on January 10, 2024 (as further described in Note 9 and discussed below), the terms of the Initial Warrants were modified, and the Initial Series B Warrant was exercised in full and converted to equity. The pre-modification fair value of the Initial Warrant liabilities was estimated using a Black-Scholes-Merton model. The significant assumptions utilized in estimating the pre-modification fair value of the Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $2.83; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 3.99%; and (iv) expected volatility of 104%. The significant assumptions utilized in estimating the pre-modification fair value of the
Series B Warrant liabilities include: (i) a per share price of the Class A Common Stock of $2.83; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.75%; and (iv) expected volatility of 85%.
During February 2024, the investor also fully exercised and converted to equity the Initial Series A Warrant. Refer to Note 9 for more information on the warrant exercises.
New Warrants
Pursuant to the Warrant Exercise Agreement on January 10, 2024 as described further in Note 9, the fair values of the New Series A Warrant and the New Series B Warrant liabilities were estimated at $10.8 million and $5.7 million, respectively, utilizing the Black-Scholes-Merton model. The significant assumptions utilized in estimating the fair value of the New Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $2.83; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.00%; and (iv) expected volatility of 105%. The significant assumptions utilized in estimating the fair value of the New Series B Warrant liabilities include: (i) a per share price of the Class A Common Stock of $2.83; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.55%; and (iv) expected volatility of 83%.
During February 2024, the investor fully exercised and converted to equity the New Warrants. Refer to Note 9 for more information on the warrant exercises.
Conversion Warrants
Pursuant to the Letter Agreement and the issuance of warrants on January 29, 2024 as described further in Notes 6 and 9, the fair values of the Conversion Series A Warrant and the Conversion Series B Warrant liabilities were estimated at $10.0 million and $5.1 million, respectively, utilizing the Black-Scholes-Merton model. The significant assumptions utilized in estimating the fair value of the Conversion Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $3.05; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 3.97%; and (iv) expected volatility of 102%. The significant assumptions utilized in estimating the fair value of the Conversion Series B Warrant liabilities include: (i) a per share price of the Class A Common Stock of $3.05; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.53%; and (iv) expected volatility of 76%.
The fair value of the Conversion Series A Warrant liabilities as of December 31, 2024 was estimated using a Black-Scholes-Merton model. The significant assumptions utilized in estimating the fair value of the Conversion Series A Warrant liabilities include: (i) a per share price of the Class A Common Stock of $18.16; (ii) a dividend yield of 0.0%; (iii) a risk-free rate of 4.33%; and (iv) expected volatility of 93%.
During June 2024 and November 2024, the investor fully exercised and converted to equity the Conversion Series B Warrants. Refer to Note 9 for more information on the warrant exercises.
SAFE Agreements
Prior to the Business Combination described in Note 1, 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 (as further discussed in Note 1), the SAFE Agreements liability was eliminated and converted into shares of our Class A Common Stock. The fair value of the SAFE Agreements was estimated at $20.7 million using the 2,066,667 shares of Class A Common Stock issued to the SAFE investors at the Closing Date at the issuance price of $10.00 per share.About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.