8-K: Innventure, Inc. Secures $13M in Convertible Notes for Subsidiary Accelsius, Amends Executive SARs, and Approves Key Shareholder Proposals

Innventure, Inc. announced the successful issuance of $13 million in convertible notes by its subsidiary Accelsius Holdings LLC, amendments to executive appreciation rights, and the approval of all proposals at its 2025 Annual Meeting of Stockholders.

Summary

• Accelsius Holdings LLC, a controlled subsidiary of Innventure, Inc., issued $13,000,000 in convertible unsecured promissory notes between June 27, 2025, and July 1, 2025.
• This includes $12,000,000 in Term Convertible Notes to investors, some of whom are related parties, convertible into Series A Units at $12.175 per unit from January 2, 2026, and maturing on December 31, 2026.
• An additional $1,000,000 Bridge Convertible Note was issued to Accelsius CEO Joshua Claman, with an option for an additional $2,000,000, bearing 15% annual interest and maturing on December 31, 2025.
• Proceeds from the Term Convertible Notes will repay up to $12,000,000 of the Innventure Convertible Line of Credit.
• Innventure, Inc. amended the Stock Appreciation Rights (SARs) for Executive Chairman Mike Otworth and Chief Strategy Officer Dr. John Scott, capping the maximum shares issuable at 1,875,000 per officer and clarifying settlement in Common Stock.
• At the 2025 Annual Meeting of Stockholders on June 25, 2025, all proposals were approved, including the election of three Class I directors, ratification of BDO USA, P.C. as auditor, and approval of common stock issuances related to agreements with YA II PN, Ltd. (Yorkville).

Sentiment

Score: 7

Explanation: The company successfully secured significant funding for its subsidiary and received strong shareholder approval for key corporate actions, including future capital raises. However, the high interest rate on some of the new debt and the potential for dilution from convertible notes introduce some financial caution.

Positives

• Accelsius successfully secured $13,000,000 in convertible unsecured promissory notes, providing capital for operations and debt repayment.
• The repayment of the Innventure Convertible Line of Credit with proceeds from the Term Convertible Notes strengthens Accelsius's financial structure.
• All proposals at the 2025 Annual Meeting of Stockholders were approved, indicating strong shareholder support for the company's governance and strategic financial initiatives, including future equity issuances.
• The election of three Class I directors for a three-year term ensures continuity in board leadership.
• Ratification of BDO USA, P.C. as the independent auditor for fiscal year 2025 maintains financial oversight.

Negatives

• The issuance of convertible notes, particularly the Bridge Convertible Note at 15% interest, indicates a higher cost of capital for Accelsius.
• The potential reduction in Innventure, Inc.'s indirect beneficial holdings in Accelsius upon conversion of the Term Convertible Notes could dilute its ownership stake.
• The Share Cap on executive SARs means that if the appreciation in Accelsius's value significantly exceeds the cap, the executives will not receive the full 'Spread' in shares, potentially limiting incentive alignment for extreme upside.
• The subordination of the new convertible notes to existing indebtedness with WTI Lenders and Yorkville indicates a lower priority for these new investors in a liquidation scenario.

Risks

• Potential dilution of Innventure, Inc.'s indirect beneficial holdings in Accelsius if the Term Convertible Notes are converted into Series A Units of Accelsius.
• The Bridge Convertible Notes bear a high interest rate of 15% per annum, increasing Accelsius's debt servicing costs.
• The new convertible notes are expressly subordinated in right of payment to existing indebtedness owed to WTI Fund X, Inc., WTI Fund XI, Inc., and YA II PN, Ltd. (Yorkville), meaning these senior lenders have priority in repayment.
• Restrictions on payment of the Bridge Convertible Notes and Term Convertible Notes exist prior to the repayment of certain existing indebtedness to WTI Lenders and Yorkville.
• The company's investment in the Bridge Convertible Notes and Conversion Units involves a high degree of risk, as stated in the lender representations.
• The company is involved in a civil lawsuit filed by Advanced Cooling Technologies, Inc. (case no. CI-23-03275) in the Court of Common Pleas of Lancaster County, Pennsylvania, though the company states it does not expect an adverse determination that could reasonably be expected to have a material adverse effect.

Future Outlook

Accelsius Holdings LLC plans to use the proceeds from the Term Convertible Notes to repay existing borrowings, and the company has secured shareholder approval for future equity issuances to YA II PN, Ltd. (Yorkville) which could provide additional capital. The conversion of the Bridge Convertible Note is tied to a future preferred equity round or common unit valuation.

Management Comments

• Based on external advice regarding the accounting implications related to the Appreciation Rights and cognizant of the aggregate share pool limit under the Equity Plan, the Company and the Grantee have determined that it is desirable and appropriate to amend the SAR Agreement to clarify that the Appreciation Rights will be settled in the form of Common Stock and to include a cap on the number of shares of Common Stock that may be issued in settlement of such Appreciation Rights.

Industry Context

The issuance of convertible notes by a subsidiary and the repayment of intercompany debt are common strategies for companies to manage capital structure and fund growth, especially for emerging companies or those with high-growth potential like Accelsius (implied by the nature of Innventure as an 'innovation' company). The high interest rate on the Bridge Convertible Note suggests a need for capital that might not be readily available through traditional, lower-cost debt, which is typical for early-stage or high-risk ventures. Shareholder approval for significant equity issuances to strategic investors like Yorkville is a standard mechanism for public companies to secure funding while complying with listing rules.

Comparison to Industry Standards

• The 15% interest rate on the Bridge Convertible Note is significantly higher than typical corporate debt for established companies, suggesting a higher risk profile or a more urgent need for capital, common for venture-backed or growth-stage companies.
• The conversion price for the Term Convertible Notes at $12.175 per unit for Series A Units of Accelsius aligns with the terms of Series A Preferred Units issued in early 2024, indicating consistency in valuation for this class of equity.
• The approval of issuing 20% or more of outstanding common stock to YA II PN, Ltd. (Yorkville) under Nasdaq Listing Rule 5635(d) is a standard compliance measure for significant dilutive financing events, comparable to similar transactions undertaken by other publicly traded growth companies seeking capital from institutional investors.

Management Changes

Corporate Governance

Legal Proceedings

• The company is aware of a civil lawsuit filed in the Court of Common Pleas of Lancaster County, Pennsylvania by Advanced Cooling Technologies, Inc. (case no. CI-23-03275), but does not expect an adverse determination that could reasonably be expected to have a material adverse effect.

Related Party Transactions

• Accelsius Holdings LLC issued $12,000,000 in Term Convertible Notes to certain investors, including WE-Inn LLC and Ascent Accelsius, A Series of Ascent X Innventure, LP, each considered a Related Party.
• Accelsius also sold a $1,000,000 Bridge Convertible Note to Joshua Claman, Chief Executive Officer of Accelsius, with an option for an additional $2,000,000.
• Innventure LLC entered into a letter agreement with Mr. Claman regarding the Innventure Convertible Line of Credit, agreeing not to seek repayment beyond the initial $12,000,000 while Bridge Convertible Notes are outstanding.

Stakeholder Impact

• Shareholders: Potential for dilution from the conversion of Term Convertible Notes and the approved future equity issuances to Yorkville. However, the capital raised supports the growth and financial stability of the subsidiary, Accelsius, which could ultimately benefit shareholders. The approval of all shareholder proposals indicates alignment with the company's strategic direction.
• Employees (Executives): Executive Chairman Mike Otworth and Chief Strategy Officer Dr. John Scott had their Stock Appreciation Rights (SARs) amended to clarify settlement in Common Stock and introduce a share cap of 1,875,000 shares each, impacting their potential compensation upside.
• Creditors (WTI Lenders, Yorkville): Their existing indebtedness is senior to the newly issued convertible notes, providing them with a higher priority in repayment.
• New Convertible Note Investors: These investors are providing capital to Accelsius but their notes are subordinated to existing senior debt, indicating a higher risk profile for their investment.

Next Steps

• Accelsius will apply proceeds from Term Convertible Notes to repay borrowings under the Innventure Convertible Line of Credit.
• Term Convertible Notes will be convertible into Series A Units of Accelsius on or after January 2, 2026.
• Bridge Convertible Notes are convertible into equity of Accelsius (preferred equity at a discount if certain conditions are met, or common units).
• The company will continue to operate under the approved corporate governance structure and with BDO USA, P.C. as its independent auditor for fiscal year 2025.
• Potential future issuances of additional Bridge Convertible Notes (up to $2,000,000) subject to Mr. Claman's discretion.
• Potential future issuances of common stock to Yorkville under the approved agreements.

Key Dates

Recommendation

Keywords

Innventure Inc., Accelsius Holdings LLC, convertible notes, promissory notes, stock appreciation rights, SARs, shareholder meeting, corporate governance, equity financing, debt financing, related party transactions, SEC filing, 8-K, Nasdaq, INV, WTI, Yorkville, executive compensation, dilution, corporate finance