Financial Performance and Concerns - Innventure's principal revenues are expected to be earned in the future through its Operating Companies, including AeroFlexx, Accelsius, and Refinity, which are crucial for cash flow [115]. - There is substantial doubt regarding Innventure's ability to continue as a going concern, dependent on obtaining additional financing or generating cash flow from operations [114]. - Innventure and its Operating Companies are currently early commercial stage companies that may never achieve or sustain profitability [118]. - Innventure's inability to generate sufficient cash flow from its Operating Companies could lead to alternative financing plans or restructuring of debt [115]. - The company expects to require additional financing to fund operations or growth, which could dilute existing stockholders' ownership interests [186]. - The company relies on various financing sources, including banks and related parties, to support its operations and growth [289]. Stock Price and Market Risks - The market price of Innventure's Common Stock is likely to be highly volatile, which could lead to potential losses for investors [111]. - Future sales of shares of Common Stock may depress its stock price, affecting existing shareholders [111]. - The actual gross proceeds from the sale of shares to Yorkville may be substantially less than the $75.0 million total commitment due to fluctuating market prices [130]. - The number of shares that Innventure may sell under the SEPA and Convertible Debentures is uncertain and will depend on market prices during the sales period [129]. - Future sales of Common Stock may depress its stock price, particularly after the expiration of lock-up agreements for certain insiders [156]. - The market price of Innventure's Common Stock is likely to be highly volatile, influenced by various factors including financial performance fluctuations and competitor developments [152]. Regulatory and Compliance Challenges - AFX's products used in food grade applications are subject to FDA regulations, requiring substantial time and financial resources for compliance [146]. - The process of obtaining FDA regulatory approval may take up to one year and could adversely affect AFX's business and financial condition [147]. - AFX anticipates increased compliance costs and potential delays due to evolving regulatory requirements, which may adversely affect its business and financial condition [148]. - AFX expects to face regulatory challenges in most countries it seeks to expand into, potentially leading to reduced market demand if products do not meet local requirements [149]. - Compliance with evolving data privacy laws, such as the GDPR and CCPA, may increase regulatory risks and operational costs for Innventure [202]. Internal Controls and Financial Reporting - The Company has identified material weaknesses in its internal controls over financial reporting, which could result in material misstatements in its financial statements [112]. - If Innventure fails to remediate these weaknesses, it may not detect errors timely, potentially harming its operating results and investor confidence [176]. - Innventure's compliance with financial reporting standards may require changes to its accounting policies, potentially affecting its financial position and reputation [172]. - Innventure's ability to comply with new accounting standards may be delayed, as it can utilize an extended transition period for emerging growth companies [165]. Intellectual Property and Legal Risks - The company relies on intellectual property (IP) acquired or licensed from third parties, and may face challenges in protecting these rights [187]. - There is no certainty that Innventure's IP rights will provide substantial protection or commercial benefit, especially in non-U.S. jurisdictions [188]. - Innventure and its companies face significant risks related to IP rights disputes, which could lead to substantial legal costs and potential damages [191]. - The exclusive forum clause in the Warrant Agreement may limit investors' rights to bring legal actions against Innventure, potentially affecting their ability to obtain favorable judicial outcomes [159]. - The exclusive forum provisions in Innventure's Bylaws may limit stockholders' ability to choose their preferred judicial forum for disputes [173]. Operational and Market Environment - AFX is early in the development of its commercial production capacity and has not yet fully diversified suppliers for critical raw materials, specifically its film [142]. - AFX's reliance on a single supplier for raw materials poses risks, as any failure to deliver could materially impact its operations [144]. - The global supply chain for certain raw materials has experienced significant strain, which could adversely affect AFX's ability to deliver products on time [145]. - The company is exposed to economic volatility, including high interest rates and inflation, which may adversely affect its financial condition and operational results [193]. - Changes in foreign trade policies and tariffs could increase product costs and disrupt supply chains, impacting competitiveness in the global market [196]. - Climate change and related regulations could increase operational costs and disrupt supply chains, affecting Innventure's business [205]. - Changes in international tax laws, particularly the OECD's new "Two Pillar" approach, may result in higher effective tax rates for Innventure [209]. Strategic Growth and Future Opportunities - Innventure's growth strategy includes new business strategies and technology acquisitions, which may disrupt ongoing operations and require significant capital expenditures [135]. - Innventure may not be successful in finding future opportunities to license or acquire breakthrough technology solutions, impacting its ability to generate future revenues [117]. - The company may issue additional shares or debt securities in the future, which could dilute existing stockholders and adversely affect the market price of its Common Stock [169]. - Innventure is classified as an emerging growth company, allowing it to take advantage of reduced reporting requirements until it meets certain revenue or market value thresholds [164]. Cybersecurity and Technological Risks - Cybersecurity threats pose risks to Innventure's information technology systems, potentially leading to data loss and operational disruptions [199]. - The introduction of AI technologies presents both opportunities and risks, including potential compliance issues and reputational harm [203].
Innventure, Inc.(INV) - 2024 Q4 - Annual Report