INVE Technologies (INVE) Risk Analysis

Our executive officers and members of the Board of Directors may be deemed to have interests in the Asset Sale that may be different from or in addition to those of our stockholders, generally. These interests may create potential conflicts of interest. The Board of Directors was aware of these potentially differing interests and considered them, among other matters, in evaluating and negotiating the Purchase Agreement and in reaching its decision to approve the Purchase Agreement and the transactions thereunder.

Our common stock is currently listed on the Nasdaq Capital Market. We have no current plans to delist our common stock from Nasdaq. However, following completion of the Asset Sale, we may be considered a "public shell" company under the Nasdaq listing rules. Although Nasdaq evaluates whether a listed company is a public shell company based on a facts and circumstances determination, a Nasdaq-listed company with no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets is generally considered to be a public shell company. Listed companies determined to be public shell companies by Nasdaq may be subject to delisting proceedings or additional and more stringent listing criteria. Delisting would adversely affect the liquidity and market price of our common stock, impair our ability to pursue strategic acquisitions, reduce the types of investors that may be willing or able to invest in our common stock, result in the potential loss of confidence among investors, suppliers, customers, end users, and employees, reduce business development opportunities, and otherwise adversely affect our business. In addition, if following the Asset Sale we are determined to be a "shell company" for purposes of the federal securities laws, we would be subject to certain additional restrictions under the Securities Act of 1933, as amended, including restrictions on our ability to use Form S-8 to register securities under employee benefit plans, limitations on the availability of Rule 144 for resales of our securities, and limitations that may increase the time, expense and uncertainty associated with completing future acquisitions.

Our public disclosures regarding our anticipated Physical AI Solutions Business, opportunities, risks, capital requirements, market demand, acquisition plans, monetization strategies and expected results necessarily depend on estimates, expectations and assumptions that may prove to be incomplete, inaccurate or subject to rapid change. In many cases, we may have only limited third-party information on which to base such judgments. As a result, subsequent developments may differ materially from what is described in our public filings. If investors, regulators, counterparties or other stakeholders believe that our disclosures were incomplete, insufficiently qualified, overly optimistic or otherwise misleading, we could face reputational harm, litigation, regulatory scrutiny, stock price volatility and other adverse consequences. Any such developments could materially adversely affect our business and financial condition.

We have federal, state, and foreign net operating loss ("NOL") carryforwards and other tax attributes that may be available to offset future taxable income. If the Asset Sale is completed, we may experience an "ownership change" for purposes of Section 382 of the Internal Revenue Code. If an ownership change occurs, our ability to utilize our pre-ownership change NOLs and certain other tax attributes to offset future taxable income may become subject to significant annual limitations. These limitations could substantially reduce or defer the tax benefits associated with such NOLs, and could cause a portion of them to expire unused. As a result, we may be unable to realize the full benefit of our NOLs and other tax attributes, which could adversely affect our results of operations, cash flows, and financial condition. The ultimate availability of these tax attributes will depend on various factors, including future ownership changes, any future taxable income following completion of the Asset Sale, and applicable tax laws and regulations.

We have federal, state, and foreign net operating loss ("NOL") carryforwards and other tax attributes that may be available to offset future taxable income. Under Sections 382 and 383 of the Internal Revenue Code, if we experience an ownership change, our ability to utilize these NOLs and other tax attributes may become subject to significant annual limitations. In general, an ownership change occurs if one or more stockholders (or groups of stockholders) that own 5% or more of our stock increase their aggregate ownership by more than 50 percentage points over a rolling three-year period. Some changes in stock ownership may result from purchases and sales by our stockholders that are outside our control. The determination of whether an ownership change has occurred and the amount of any resulting limitation is complex and depends on numerous factual and legal determinations. We expect our NOLs and other tax attributes to be important in reducing the taxable gain that may result from the Asset Sale. However, if an ownership change occurs, we may be unable to utilize a significant portion of our NOLs or other tax attributes which could cause a significant portion of those NOLs and tax attributes to expire unused. As a result, we may be unable to realize the full benefit of our NOLs and other tax attributes, which could significantly increase our cash tax obligations and materially and adversely affect our results of operations, cash flows, and financial condition. The ultimate availability of these tax attributes will depend on various factors, including future equity issuances, acquisitions, redemptions, share repurchases or other changes in stock ownership (including those that may occur following completion of the Asset Sale), any future taxable income, and applicable tax laws and regulations.

In connection with the Asset Sale, we expect to receive Buyer Series C Shares with an agreed value of $50.0 million. There is currently no public market for Buyer's equity securities, and there can be no assurance that any public market for its equity securities will develop in the future or that we will otherwise be able to monetize our investment on favorable terms, or at all. In addition, our investment in Buyer will be subject to transfer restrictions that may limit our ability to monetize the investment. Subject to limited exceptions, we, or any liquidating trust, grantor trust or similar vehicle established for our benefit and/or the benefit of our stockholders, may transfer our Buyer Series C Shares only to a transferee that is an accredited investor, is not a competitor of Buyer, subject to specified exceptions, and is reasonably acceptable to Buyer. Any transfer also must satisfy a minimum share threshold. In addition, our Buyer Series C Shares will be subject to standard market stand-off restrictions in connection with certain liquidity events We may not be able to sell the preferred equity at the time, price or valuation we desire, or at all, and the value attributed to the preferred equity in the Asset Sale may not reflect the amount we ultimately realize, if any. The value of our Buyer Series C Shares will depend on Buyer's future performance, financial condition, liquidity, strategic decisions and ability to execute its business plan, all of which are outside of our control. In addition, because Buyer is a private company and not subject to reporting obligations applicable to public companies, our stockholders will have limited visibility into Buyer's financial performance and prospects. Following the Asset Sale, we do not expect to provide periodic financial or operating information or other metrics regarding Buyer's business or performance, other than information required to be disclosed in our periodic reports in connection with our accounting for our Buyer Series C Shares. If Buyer does not perform as expected, if there is not sufficient information about the Buyer available, if the value of Buyer's equity declines or if we are unable to realize liquidity from our investment, our financial condition, results of operations and the market price of our common stock could be adversely affected.

The closing of the Asset Sale is conditioned on the receipt of the Required Stockholder Approval, as well as the satisfaction of other closing conditions, including those referenced in the risk factor entitled "-We cannot be sure if or when the Asset Sale will be completed". In the event the Asset Sale is not completed or is delayed for any reason, our business, results of operations, financial condition and stock price may be harmed because: - management's and our employee's attention may be diverted from our day-to-day operations as they focus on matters related to the Asset Sale;- we may lose key employees if such employees experience uncertainty about their future roles with us or Buyer and decide to pursue other opportunities;- we may lose customers or vendors, harm existing customer or vendor relationships, and new customer or vendor contracts could be delayed or reduced;- activities related to the Asset Sale and related uncertainties may lead to a loss of revenue and market position unrelated to the Asset Sale that we may not be able to regain if the Asset Sale does not occur;- the failure to consummate, or delays in consummating, the Asset Sale may result in a negative impression of us with customers, potential customers or the investment community; and - our stock price may continue to fluctuate significantly based on announcements by us, Buyer or other third parties regarding the Asset Sale or our business. In addition, we have agreed to restrictions in the Purchase Agreement that limit how we conduct our business prior to the closing of the Asset Sale. Subject to certain exceptions, these restrictions require Buyer's prior written consent before we may take certain actions, including, among other things, making certain capital expenditures, investments and acquisitions, selling, transferring or disposing of our assets, entering into material contracts outside of the ordinary course of business, amending our organizational documents and incurring indebtedness. These restrictions may not be in our best interests and may disrupt or otherwise adversely affect our business and our relationships with our customers, prevent us from pursuing otherwise attractive business opportunities, limit our ability to respond effectively to competitive pressures, industry developments and future opportunities, and otherwise harm our business, financial results and operations. The occurrence of these or other events individually or in combination could have a material adverse effect on our business, results of operations, financial condition and stock price. If the Asset Sale is not completed, the Board of Directors, in discharging its fiduciary obligations, may evaluate other strategic alternatives that may be available, which alternatives may not be as favorable to our stockholders as the Asset Sale. These may include retaining and continuing to operate the IoT Business or pursuing an alternate sale transaction that would yield reduced consideration or involve significant delays. The Board of Directors may also decide to wind down the operations of the Company. Any future sale of substantially all of the assets of the Company or other transactions may be subject to further stockholder approval.

Our Board of Directors and management has broad discretion in the use of our cash resources. We intend to use cash to support our go-forward strategy, including pursuing acquisitions, to pay public company expenses, and for share repurchases. In connection with the Asset Sale, we will also contribute $25.0 million in cash to Buyer, subject to adjustment pursuant to the Purchase Agreement. Uses of our cash following the closing may not generate the expected benefits or returns. Our Board of Directors recently increased the size of our stock repurchase program to $40 million available for repurchases, and currently intends to return up to $40 million of capital to stockholders, which may be accomplished via dividends or other distributions as well as via share repurchases. Our cash resources will also be reduced by transaction-related fees and expenses, ongoing losses and the costs of operating as a public company. If we use significant cash for acquisitions, dividends, distributions or share repurchases and our acquisition strategy is delayed or unsuccessful, we may have fewer resources available to support our post-closing business plan. Because our cash resources are expected to be a significant component of our ability to execute our strategy following the closing of the Asset Sale, any substantial reduction in those resources could impair our ability to pursue strategic opportunities and could adversely affect our business, financial condition, results of operations and stock price.

Following the closing of the Asset Sale, we expect to significantly streamline our operations, and a significant number of our employees are expected to transfer to, or become employed by, Buyer. These transfers may not occur on the timeline expected or at all, employees may not accept offers from Buyer, local-law processes may create delays or uncertainty, and we may experience disruption, loss of institutional knowledge or employee attrition in connection with the transition. We expect to retain a small group of employees following the closing to support our go-forward business, including our public company, acquisition, integration and oversight functions. This limited initial operating team may constrain our ability to source acquisitions, integrate acquired businesses, manage our public company obligations and operate the business simultaneously. In addition, Kirsten Newquist, our Chief Executive Officer and a member of the Board of Directors, has informed us that she intends to resign from both positions following the closing of the Asset Sale. Following the closing of the Asset Sale, our Board of Directors intends to add senior leadership with experience in SaaS and M&A integration. We may not be able to retain or attract personnel with the experience necessary to identify, acquire, integrate and operate SaaS businesses, manage our public company obligations or manage our post-closing relationship with Buyer. The loss of employees, changes in management responsibilities, limitations on our ability to coordinate with Buyer, or uncertainty regarding our post-closing operating structure could disrupt our business, divert management's attention and impair our ability to execute our acquisition strategy. If we are unable to establish an effective post-closing management team and operating structure, our ability to implement our go-forward strategy could be adversely affected, which could adversely affect our business, financial condition, results of operations and stock price.

Following the Asset Sale, investors will have no historical financial information relevant to our anticipated Physical AI Solutions Business. Accordingly, historical results will not be indicative of future performance, and investors may find it difficult to evaluate our prospects, strategy, valuation and risks. This limited visibility may contribute to volatility in the price of our common stock, reduce analyst coverage and impair investor confidence. If investors are unable to assess our future prospects accurately, the market price of our common stock could be materially adversely affected.

The consummation of the Asset Sale is subject to the satisfaction or waiver, to the extent permitted by applicable law, of various conditions, including: - the Company having obtained the Required Stockholder Approval of the Asset Sale;- the absence of any order or law enjoining, restraining, prohibiting or making illegal the consummation of the Asset Sale;- the absence of any pending or overtly threatened legal proceeding challenging or seeking to restrain or prohibit the consummation of the Asset Sale;- each party's representations and warranties being true and correct to the applicable specified standard as of the date of the Purchase Agreement and as of the closing of the Asset Sale;- each party's material compliance with covenants required to be performed or complied with prior to or on the closing of the Asset Sale;- delivery of the stock certificate representing the Buyer Series C Shares;- delivery of the ancillary agreements;- delivery of the Purchased Assets and the Purchased Cash (each as defined in the Purchase Agreement); and - the filing by Buyer of a charter amendment with the Secretary of State of the State of Delaware to increase the authorized number of shares of Buyer Series C Preferred Stock. We cannot guarantee that the closing conditions set forth in the Purchase Agreement will be satisfied. If either party is unable to satisfy the closing conditions in the other party's favor or if other mutual closing conditions are not satisfied, a party will not be obligated to complete the Asset Sale.

We have and will continue to incur substantial expenses related to the Asset Sale, whether or not it is completed. We recorded transaction-related expenses of approximately $1.9 million through June 30, 2026, and we will incur additional costs and expenses until completion of the Asset Sale. In addition, we will incur additional financial advisory fees that are payable upon consummation of the Asset Sale. We may also be required to pay $750,000 to Buyer if we terminate the Purchase Agreement in certain circumstances.

Following the closing of the Asset Sale, we expect to have substantially reduced operations and to transition to a new business model focused on providing physical AI solutions through the acquisition of targeted compliance SaaS businesses in highly regulated industries that the Company believes may benefit from integration with Buyer's physical AI platform, including the incorporation of BLE- and RFID-enabled physical data. While certain members of our Board of Directors and management team have relevant experience, we have no operating history in this business as a company. As a result, investors will have limited basis on which to evaluate our prospects in this new business. We may be unable to retain existing employees or attract new employees with the expertise necessary to operate our go-forward strategy. Our anticipated Physical AI Solutions Business is subject to all of the risks, uncertainties and difficulties frequently encountered by companies entering a new and rapidly evolving market, many of which are beyond our control. We may fail to identify attractive opportunities, acquire suitable SaaS businesses, develop a viable operating model, generate revenue, achieve profitability or create stockholder value. If we are unable to execute this business plan successfully, our business, financial condition, results of operations and prospects could be materially and adversely affected, and the value of our common stock could decline substantially. We will need to build substantial parts of our business, including strategy, processes, controls, systems, counterparties, branding and market positioning. We may not be successful in doing so. We will also need to hire employees and management with the necessary expertise to execute our new business strategy, and we may not be able to do so. Companies attempting a transition of this magnitude often encounter unforeseen costs, delays, execution issues and strategic failures. If the Physical AI Solutions Business does not develop successfully, we may fail to generate meaningful revenue, incur substantial losses, need to raise additional capital on unfavorable terms, need to wind down the Company, or pursue additional strategic alternatives. Any such outcome could materially and adversely affect our stockholders.

Following the closing of the Asset Sale, we will continue to incur significant legal, accounting, administrative and other costs and expenses as a public company. Because we will have only nominal, if any, revenue following the sale of our IoT Business, these expenses will have an adverse effect on our operating results. If we are unable to generate sufficient revenue following the closing of the Asset Sale through the acquisition of one or more SaaS companies, these increased expenses as a percentage of our revenue may have an adverse effect on our ability to execute our go-forward strategy, remain listed on Nasdaq and create stockholder value.

Following the Asset Sale, we intend to change our corporate name and cease operating our historical IoT Business. This change in identity and strategic direction may create confusion among investors, counterparties, employees and other stakeholders regarding who we are, what business we are in and what capabilities we possess. Some market participants may question the credibility or viability of our new strategy or may be reluctant to transact business with us until we establish a track record in the new business. Any reputational challenges, uncertainty or skepticism arising from our abrupt change in business and identity could impair our ability to hire personnel, attract counterparties and create stockholder value.

Unless and until we complete one or more acquisitions of targeted SaaS businesses, we will not have a meaningful operating business, our revenue will consist solely of payments for transition services to Buyer, if any, and our operating activities will be significantly reduced. Although we are actively evaluating potential acquisition opportunities and currently intend to complete a SaaS acquisition shortly after the closing of the Asset Sale, there can be no assurance that we will do so on the timeline currently expected or at all. If we are unable to identify, negotiate and complete acquisitions that satisfy our strategic, financial, technical, regulatory and operational criteria, we may be unable to establish a viable operating business following the closing of the Asset Sale. Even if we complete one or more acquisitions, there can be no assurance that the acquired businesses will generate sufficient revenue or cash flow to sustain our operations, fund our growth or support our acquisition strategy. In that event, our Board of Directors may be required to consider other strategic alternatives, including additional asset sales, a merger, business combination, liquidation, dissolution or other wind-down transaction. Any such alternative may not be available on favorable terms, or at all, and may not result in meaningful value for our stockholders.

A key element of our expected post-closing strategy is to identify and acquire targeted compliance SaaS businesses that we believe may benefit from integration with Buyer's physical AI platform and access to Buyer's customer and partner network. The identification of suitable acquisition candidates is difficult, and we may not be able to complete acquisitions on favorable terms, or at all. Although we are actively evaluating potential acquisition opportunities and currently intend to complete a SaaS acquisition shortly after the closing of the Asset Sale, there can be no assurance that we will do so on the timeline currently expected or at all. With respect to any future acquisitions, we may not be able to integrate acquired businesses successfully, and we could assume unknown or contingent liabilities. Acquisitions involve significant risks, including difficulties integrating acquired businesses, technologies, products, services, operations, systems and personnel; failure to retain customers, partners, suppliers or key employees; disruption to our business; diversion of management's time and resources from other strategic initiatives and public company obligations; and failure to achieve anticipated revenue growth, margin expansion, operational efficiencies, customer access, licensing opportunities or other expected benefits. Although we expect to conduct due diligence on potential acquisitions, we may not identify all risks or liabilities before completing a transaction. Any acquisition could also result in significant write-offs, impairment charges, the incurrence of debt or contingent liabilities, integration costs or other expenses, any of which could harm our operating results. Changes in services, sources of revenue, product strategy, customer relationships, branding or rebranding initiatives may involve substantial costs and may not be favorably received by customers or other stakeholders. We may also need to divert cash from other uses, incur indebtedness or issue equity securities in order to fund acquisitions, integration activities or the operations of acquired businesses. If the trading price of our common stock is low or volatile, we may not be able to use our common stock as consideration for acquisitions on favorable terms, or at all. In addition, our stockholders may experience substantial dilution as a result of additional securities we may issue in connection with acquisitions, and open market sales of substantial amounts of our common stock issued to stockholders of companies we acquire could depress our stock price. Because our expected post-closing strategy depends on acquisitions, any failure to develop and maintain a pipeline of attractive SaaS targets or to complete acquisitions on acceptable terms could delay or prevent us from establishing a meaningful post-closing business. We may not realize the anticipated benefits of any acquisition, including expected revenue growth, expanded customer access, competitive differentiation, licensing opportunities, synergies with Buyer's platform or other strategic advantages. Even if these benefits are achieved, they may take longer to realize or require greater costs and resources than anticipated. If we are unable to complete and integrate acquisitions successfully, or if completed acquisitions do not perform as expected, our business, financial condition, results of operations and stock price could be materially adversely affected.