What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 427 added, 287 removed, 835 unchanged (46% of the section changed)

Financial Statements

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Revenue $ 243.8 $ 181.8 $ 415.6 $ 368.4

4 unchanged sentences

Depreciation and amortization 4.8 4.5 8.7 8.8

Other operating loss 0.4 0.2

Other operating (income) loss ( 0.2 ) ( 2.3 ) 0.2 ( 2.1 )

Loss from operations ( 7.7 ) ( 8.9 ) ( 18.6 ) ( 22.5 )

2 unchanged sentences

Loss on early extinguishment or restructuring of debt ( 1.6 ) ( 3.4 ) ( 12.4 ) ( 9.2 )

Loss from equity investees ( 2.1 ) ( 2.5 )

Income (loss) from equity investees 0.2 ( 0.2 ) ( 1.9 ) ( 2.7 )

Other income 0.4 64.6 3.8 66.1

Loss from continuing operations before income taxes ( 41.8 ) ( 39.6 )

Income tax (expense) benefit ( 1.1 ) 9.7

Loss from continuing operations ( 42.9 ) ( 29.9 )

Income (loss) from discontinued operations (including gain on disposal of $ 40.4 million and loss on disposal of $ 39.3 million for the three months ended March 31, 2021 and 2020, respectively)

(Loss) income from continuing operations before income taxes ( 21.1 ) 33.0 ( 62.9 ) ( 6.6 )

Income tax expense ( 2.6 ) ( 12.0 ) ( 3.7 ) ( 2.3 )

(Loss) income from continuing operations ( 23.7 ) 21.0 ( 66.6 ) ( 8.9 )

(Loss) income from discontinued operations (including gain on disposal of $ 40.4 million and loss on disposal of $ 39.3 million for the six months ended June 30, 2021 and 2020, respectively)

( 1.5 ) 7.5 50.4 ( 63.6 )

Net income (loss) 9.0 ( 101.0 )

Net (loss) income ( 25.2 ) 28.5 ( 16.2 ) ( 72.5 )

Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest 1.7 ( 15.4 ) 5.3 2.5

Net income (loss) attributable to HC2 Holdings, Inc.

Net (loss) income attributable to HC2 Holdings, Inc.

( 23.5 ) 13.1 ( 10.9 ) ( 70.0 )

Preferred dividends and deemed dividends from conversions 0.2 0.4 0.6 0.8

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.2 $ ( 83.5 )

Loss per common share - continuing operations

Net (loss) income attributable to common stock and participating preferred stockholders $ ( 23.7 ) $ 12.7 $ ( 11.5 ) $ ( 70.8 )

(Loss) income per common share - continuing operations

Basic $ ( 0.29 ) $ 0.11 $ ( 0.82 ) $ ( 0.48 )

Diluted $ ( 0.29 ) $ 0.11 $ ( 0.82 ) $ ( 0.48 )

Income (loss) per common share - discontinued operations

(Loss) income per common share - discontinued operations

Basic $ ( 0.02 ) $ 0.15 $ 0.67 $ ( 1.06 )

Diluted $ ( 0.02 ) $ 0.14 $ 0.67 $ ( 1.06 )

Income (loss) per share - Net income (loss) attributable to common stock and participating preferred stockholders

(Loss) income per share - Net (loss) income attributable to common stock and participating preferred stockholders

Basic $ ( 0.31 ) $ 0.26 $ ( 0.15 ) $ ( 1.54 )

5 unchanged sentences

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)

Three Months Ended March 31,

Net income (loss) $ 9.0 $ ( 101.0 )

Other comprehensive income

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net (loss) income $ ( 25.2 ) $ 28.5 $ ( 16.2 ) $ ( 72.5 )

Other comprehensive income (loss)

Foreign currency translation adjustment ( 0.4 ) 3.8 ( 1.2 ) 4.0

Unrealized losses on available-for-sale securities ( 181.2 ) ( 276.0 )

Unrealized income (loss) on available-for-sale securities 123.5 283.8 ( 57.7 ) 7.8

Dispositions — ( 0.7 ) — 22.1

Other comprehensive loss ( 182.0 ) ( 253.0 )

Comprehensive loss ( 173.0 ) ( 354.0 )

Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests ( 3.7 ) ( 8.9 )

Comprehensive loss attributable to HC2 Holdings, Inc.

Other comprehensive income (loss) 123.1 286.9 ( 58.9 ) 33.9

Comprehensive income (loss) 97.9 315.4 ( 75.1 ) ( 38.6 )

Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 1.7 ) 16.2 ( 5.4 ) 7.3

Comprehensive income (loss) attributable to HC2 Holdings, Inc.

$ 96.2 $ 331.6 $ ( 80.5 ) $ ( 31.3 )

39 unchanged sentences

Shares authorized:

160,000,000 at March 31, 2021 and December 31, 2020, respectively

160,000,000 at June 30, 2021 and December 31, 2020, respectively

Shares issued:

78,949,329 and 77,836,586 at March 31, 2021 and December 31, 2020, respectively

79,208,998 and 77,836,586 at June 30, 2021 and December 31, 2020, respectively

Shares outstanding:

77,564,273 and 76,726,835 at March 31, 2021 and December 31, 2020, respectively

77,823,942 and 76,726,835 at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 354.8 355.7

Treasury stock, at cost:

1,385,056 and 1,109,751 shares at March 31, 2021 and December 31, 2020, respectively

1,385,056 and 1,109,751 shares at June 30, 2021 and December 31, 2020, respectively

( 5.2 ) ( 4.2 )

15 unchanged sentences

Shares Amount

Balance as of March 31, 2021 77.6 $ 0.1 $ 355.7 $ ( 5.2 ) $ ( 176.1 ) $ 215.1 $ 389.6 $ 23.9 $ 413.5 $ 18.0

Share-based compensation — — 0.6 — — — 0.6 — 0.6 —

Fair value adjustment of redeemable noncontrolling interest — — ( 0.1 ) — — — ( 0.1 ) — ( 0.1 ) 0.1

Preferred stock dividend — — ( 0.1 ) — — — ( 0.1 ) — ( 0.1 ) —

Issuance of common stock 0.2 — 0.5 — — — 0.5 — 0.5 —

Purchase of preferred stock by subsidiary — — ( 0.2 ) — — — ( 0.2 ) — ( 0.2 ) —

Redemption of Series A and A-2 Preferred Stock — — — — — — — — — ( 10.4 )

Transactions with noncontrolling interests — — ( 1.6 ) — — — ( 1.6 ) ( 0.5 ) ( 2.1 ) —

Net loss — — — — ( 23.5 ) — ( 23.5 ) ( 0.2 ) ( 23.7 ) ( 1.5 )

Other comprehensive income — — — — — 123.1 123.1 — 123.1 —

Balance as of June 30, 2021 77.8 $ 0.1 $ 354.8 $ ( 5.2 ) $ ( 199.6 ) $ 338.2 $ 488.3 $ 23.2 $ 511.5 $ 6.2

Common Stock Additional

Capital Treasury

Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total HC2 Stockholders' Equity Non-

Interest Total Stockholders’ Equity Temporary Equity

Shares Amount

Balance as of December 31, 2020 76.7 $ 0.1 $ 355.7 $ ( 4.2 ) $ ( 188.7 ) $ 396.9 $ 559.8 $ 40.4 $ 600.2 $ 15.7

4 unchanged sentences

Issuance of common stock 1.1 — 0.7 — — — 0.7 — 0.7 —

Purchase of preferred stock by subsidiary — — ( 0.2 ) — — — ( 0.2 ) — ( 0.2 ) —

Redemption of Series A and A-2 Preferred Stock — — — — — — — — — ( 10.4 )

Transactions with noncontrolling interests — — 0.8 — — — 0.8 ( 15.0 ) ( 14.2 ) 3.8

Other — — ( 2.9 ) — — — ( 2.9 ) — ( 2.9 ) —

Net income — — — — 12.6 — 12.6 ( 1.9 ) 10.7 ( 1.7 )

Net loss — — — — ( 10.9 ) — ( 10.9 ) ( 2.1 ) ( 13.0 ) ( 3.2 )

Other comprehensive loss — — — — — ( 58.7 ) ( 58.7 ) ( 0.1 ) ( 58.8 ) —

Balance as of June 30, 2021 77.8 $ 0.1 $ 354.8 $ ( 5.2 ) $ ( 199.6 ) $ 338.2 $ 488.3 $ 23.2 $ 511.5 $ 6.2

See notes to Condensed Consolidated Financial Statements

HC2 HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in millions)

Common Stock Additional

Capital Treasury

Stock Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total HC2 Stockholders' Equity Non-

Interest Total Stockholders’ Equity Temporary Equity

Shares Amount

Balance as of March 31, 2020 46.5 $ — $ 282.7 $ ( 4.2 ) $ ( 179.8 ) $ ( 84.6 ) $ 14.1 $ 46.4 $ 60.5 $ 18.6

Share-based compensation — — 0.3 — — — 0.3 — 0.3 —

Fair value adjustment of redeemable noncontrolling interest — — 2.9 — — — 2.9 — 2.9 ( 2.9 )

Preferred stock dividend — — ( 0.2 ) — — — ( 0.2 ) — ( 0.2 ) —

Issuance of common stock 0.1 — — — — — — — — —

Transactions with noncontrolling interests — — 2.8 — — — 2.8 ( 15.2 ) ( 12.4 ) 1.5

Net income — — — — 13.1 — 13.1 14.0 27.1 1.4

Other comprehensive income — — — — — 286.3 286.3 0.7 287.0 0.1

Balance as of June 30, 2020 46.6 $ — $ 288.5 $ ( 4.2 ) $ ( 166.7 ) $ 201.7 $ 319.3 $ 45.9 $ 365.2 $ 18.7

Common Stock Additional

11 unchanged sentences

Net loss — — — — ( 70.0 ) — ( 70.0 ) ( 1.0 ) ( 71.0 ) ( 1.5 )

Other comprehensive income (loss) — — — — — ( 253.3 ) ( 253.3 ) 7.7 ( 245.6 ) 1.3

Balance as of March 31, 2020 46.5 $ — $ 282.7 $ ( 4.2 ) $ ( 179.8 ) $ ( 84.6 ) $ 14.1 $ 46.4 $ 60.5 $ 18.6

Other comprehensive income — — — — — 33.0 33.0 8.4 41.4 1.4

Balance as of June 30, 2020 46.6 $ — $ 288.5 $ ( 4.2 ) $ ( 166.7 ) $ 201.7 $ 319.3 $ 45.9 $ 365.2 $ 18.7

See notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(Unaudited, in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

Net income (loss) $ 9.0 $ ( 101.0 )

Net loss $ ( 16.2 ) $ ( 72.5 )

Income (loss) from discontinued operations, net of tax 50.4 ( 63.6 )

7 unchanged sentences

Asset impairment expense 2.2 0.1

Net realized and unrealized gains on investments — ( 72.5 )

Deferred income taxes 1.3 —

12 unchanged sentences

Cash provided by discontinued operating activities 34.3 55.9

Cash (used in) provided by operating activities ( 2.5 ) 35.3

Cash (used in) provided by continuing operating activities ( 0.4 ) 47.8

Cash flows from investing activities

1 unchanged sentence

Proceeds from disposal of property, plant and equipment 1.1 0.6

Cash received from dispositions, net 71.2 144.0

Sale of investments — 85.5

Cash received from dispositions, net of cash disposed 71.2 144.0

Cash paid for acquisitions, net of cash acquired ( 128.5 ) —

Other investing activities 1.4 3.5

Cash provided by investing activities 66.4 140.8

Cash provided by (used in) discontinued investing activities 1.5 ( 80.7 )

Cash provided by investing activities 67.9 60.1

Cash (used in) provided by investing activities ( 62.8 ) 223.6

Cash (used in) provided by discontinued investing activities 31.6 ( 84.7 )

Cash (used in) provided by continuing investing activities ( 31.2 ) 138.9

Cash flows from financing activities

2 unchanged sentences

Cash received by subsidiary to issue preferred stock 10.0 10.0

Redemption of preferred stock ( 10.4 ) —

Transactions with noncontrolling interests ( 6.9 ) ( 62.1 )

Other financing activities ( 1.2 ) ( 4.2 )

Cash used in financing activities ( 31.6 ) ( 142.1 )

Cash used in discontinued financing activities ( 4.3 ) ( 6.1 )

Cash used in financing activities ( 35.9 ) ( 148.2 )

Cash (used in) provided by financing activities 73.6 ( 211.2 )

Cash (used in) provided by discontinued financing activities ( 7.6 ) ( 11.4 )

Cash (used in) provided by continuing financing activities 66.0 ( 222.6 )

Effects of exchange rate changes on cash, cash equivalents and restricted cash ( 0.7 ) 0.6

Net increase in cash and cash equivalents, including cash classified within assets held for sale 29.2 ( 52.4 )

Net increase (decrease) in cash and cash equivalents classified within current assets held for sale 18.3 ( 44.0 )

Net increase (decrease) in cash and cash equivalents, including cash classified within assets held for sale 33.7 ( 35.3 )

Net increase (decrease) in cash and cash equivalents from discontinued operations 58.3 ( 35.7 )

Net change in cash, cash equivalents and restricted cash ( 24.6 ) 0.4

13 unchanged sentences

("DBMG") and its wholly-owned subsidiaries.

DBMG is a fully integrated Industrial Construction, Structural Steel and Facility Maintenance provider that provides 3-D Building Information Modeling (“BIM”), detailing, fabrication and erection of structural steel and heavy steel plate.

DBMG is a fully integrated Industrial Construction, Structural Steel and Facility Maintenance provider that provides fabrication and erection of structural steel and heavy steel plate services and also fabricates trusses and girders and specializes in the fabrication and erection of large-diameter water pipe and water storage tanks, as well as 3-D Building Information Modeling (“BIM”) and detailing.

DBMG provides these services on commercial, industrial, and infrastructure construction projects such as high- and low-rise buildings and office complexes, hotels and casinos, convention centers, sports arenas and stadiums, shopping malls, hospitals, dams, bridges, mines, metal processing, refineries, pulp and paper mills and power plants.

DBMG also fabricates trusses and girders and specializes in the fabrication and erection of large-diameter water pipe and water storage tanks.

Through GrayWolf, DBMG provides integrated solutions for digital engineering, modeling and detailing, construction, heavy equipment installation and facility services including maintenance, repair, and installation to a diverse range of end markets.

Through Aitken Manufacturing, DBMG manufactures pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators and a variety of customized products.

Through the recently acquired Banker Steel, DBMG provides fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market.

The Company maintains an approximately 92 % controlling interest in DBMG.

3 unchanged sentences

("R2"), which develops aesthetic and medical technologies for the skin.

Pansend also invests in other early stage or developmental stage healthcare companies including an approximately 47 % interest in MediBeacon Inc., and an investment in Triple Ring Technologies, Inc.

Pansend also invests in other early stage or developmental stage healthcare companies including an approximately 47 % interest in MediBeacon Inc.

("MediBeacon"), and an investment in Triple Ring Technologies, Inc ("Triple Ring").

Our Spectrum segment is comprised of HC2 Broadcasting Holdings Inc.

3 unchanged sentences

("Network"), operates Azteca America, a Spanish-language broadcast network offering high quality Hispanic content to a diverse demographic across the United States.

The Company maintains an approximately 98 % controlling interest in HC2 Broadcasting and an approximately 57 % controlling interest in DTV America Corporation ("DTV") as well as approximately 19 % proxy and voting rights from minority holders.

The Company maintains an approximately 98 % controlling interest in HC2 Broadcasting and maintains a controlling interest of 76 %, inclusive of approximately 15 % proxy rights from minority holders of DTV America Corporation ("DTV").

Our Insurance segment is comprised of the discontinued operations of Continental Insurance Group Ltd.

("CIG") and its wholly-owned subsidiary Continental General Insurance Company ("CGI").

("CIG") and its wholly-owned subsidiaries Continental General Insurance Company ("CGI") and Continental LTC, Inc.

CGI provides long-term care, life, annuity, and other accident and health coverage that help protect policy and certificate holders from the financial hardships associated with illness, injury, loss of life, or income continuation.

The Company maintains a 100 % interest in CIG.

The Company maintains a 100 % interest in CIG which was sold subsequent to quarter end on July 1, 2021.

Our Other segment represents all other businesses or investments that do not meet the definition of a segment individually or in the aggregate.

10 unchanged sentences

All intercompany profits, transactions and balances have been eliminated in consolidation.

As of March 31, 2021, the results of DBMG, Genovel, R2, HC2 Broadcasting, CIG, GMH and Beyond6 have been consolidated into the Company’s results based on guidance from the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" 810, Consolidation) .

As of June 30, 2021, the results of DBMG, Genovel, R2, HC2 Broadcasting, CIG, GMH and Beyond6 have been consolidated into the Company’s results based on guidance from the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" 810, Consolidation) .

The remaining interests not owned by the Company are presented as a noncontrolling interest component of total equity.

7 unchanged sentences

These interim financial statements should be read in conjunction with the Company’s annual Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 10, 2021.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2021.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2021.

Use of Estimates and Assumptions

5 unchanged sentences

The ability of HC2’s subsidiaries to make distributions to HC2 is subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, regulatory requirements, availability of sufficient funds at each subsidiary and the approval of such payment by each subsidiary’s board of directors, which must consider various factors, including general economic and business conditions, tax considerations, strategic plans, financial results and condition, expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends, and such other factors each subsidiary’s board of directors considers relevant.

Our ability to sell assets and certain of our investments to meet our existing financing needs may also be limited by our existing financing instruments.

Although the Company believes that it will be able to raise additional equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company if at all.

Although the Company believes that it will be able to raise additional equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds on hand or expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company, if at all.

Such financing options, if pursued, may also ultimately have the effect of negatively impacting our liquidity profile and prospects over the long-term.

Our ability to sell assets and certain of our investments to meet our existing financing needs may also be limited by our existing financing instruments.

In addition, the sale of assets or the Company’s investments may also make the Company less attractive to potential investors or future financing partners.

There are many uncertainties regarding the current coronavirus ("COVID-19") pandemic, and the Company continues to closely monitor the impact of the COVID-19 pandemic, including the effectiveness of the vaccine programs, on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels.

We are unable to predict the impact that COVID-19 will have on its financial position and operating results due to numerous uncertainties, however as the pandemic continues, it may have an adverse effect on the Company’s results of operations, financial condition, or liquidity for fiscal year 2021.

3 unchanged sentences

Statement of Cash Flows

The following table provides a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows (in millions):

The following table provides a reconciliation of cash and cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows (in millions):

Cash and cash equivalents, beginning of period $ 43.8 $ 23.3

15 unchanged sentences

Property, plant and equipment included in accounts payable $ 2.1 $ 4.9

Investments included in accounts receivable $ — $ 20.0

Investments included in accounts payable $ — $ 8.5

Extinguishment of convertible note in exchange $ 51.8 $ —

Issuance of convertible note in exchange $ ( 51.8 ) $ —

Debt assumed in acquisitions $ 6.3 $ —

Reclassification

10 unchanged sentences

• The recast of prior year earnings per share as a result of the discontinued operations noted above.

This includes presenting EPS for Net (loss) income from continuing operations, Net (loss) income from discontinuing operations, and Net (loss) income.

This includes presenting EPS for Net income (loss) from continuing operations, Net income (loss) from discontinuing operations, and Net income (loss).

Basic and Diluted Income (Loss) Per Common Share for further details.

• Certain 2021 statement of cash flow items have been reclassified to conform to the current financial statement presentation.

These reclassifications have no effect on previously reported net income.

HC2 HOLDINGS, INC.

14 unchanged sentences

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , Measurement of Credit Losses on Financial Instruments, was issued by FASB in June 2016.

This standard is effective January 1, 2020 (with early adoption permitted), and will impact, at least to some extent, the Company's accounting and disclosure requirements for it's recoverable from reinsurers, accounts receivable, and mortgage loans.

This standard is effective January 1, 2020 (with early adoption permitted).

This new standard changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments, including trade receivables, from an incurred loss model to an expected loss model and adds certain new required disclosures.

Under the expected loss model, entities will recognize estimated credit losses over the entire contractual term of the instrument rather than delaying recognition of credit losses until it is probable the loss has been incurred.

The FASB has voted to delay the effective date of ASU 2016-13 to January 1, 2023 for smaller reporting companies with a revised ASU in the fourth quarter of 2019.

Currently, the Company continues to focus on developing models and procedures, with testing and refinement of models occurring in 2020 and 2021 with parallel testing to be performed in 2022.

Available for sale fixed maturity securities are not in scope of the new credit loss model, but will undergo targeted improvements to the current reporting model including the establishment of a valuation allowance for credit losses versus the current direct write down approach.

The Company will continue to identify any other financial assets not excluded from scope.

The Company plans to use the modified retrospective method which will include a cumulative effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption.

However, prospective application is required for purchased credit deteriorated assets previously accounted for under ASU 310-30 for debt securities for which an other-than-temporary impairment ("OTTI") was recognized prior to the date of adoption.

The Company does not currently expect to early adopt this standard and is currently evaluating the impact of this new accounting guidance on its Condensed Consolidated Financial Statements.

Outlined below are key areas of change, although there are other changes not noted below:

• Financial assets (or a group of financial assets) measured at amortized cost will be required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase.

• Credit losses relating to available for sale fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities and is anticipated to increase volatility in the Company's Condensed Consolidated Statements of Operations.

The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security.

Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value.

• The Company's Condensed Consolidated Statements of Operations will reflect the measurement of expected credit losses for newly recognized financial assets as well as the expected increases or decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

• Disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available for sale fixed maturity securities as well as an aging analysis for securities that are past due.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company anticipates a significant impact on its systems, processes and controls.

While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of items in scope and related cash flows are unchanged.

Focus areas will include, but not be limited to:

(i) updating procedures to reflect new guidance requiring establishment of allowance for credit losses on available for sale debt securities;

(ii) establishing procedures to review reinsurance risk to include but not limited to review of reinsurer ratings, trust agreements where applicable and historical and current performance;

(iii) establishing procedures to identify and review all remaining financial assets within scope;

and (iv) developing, testing, and implementing controls for newly developed procedures, as well as for additional annual reporting requirements.

The Company will not be required to adopt Topic 326 until January 1, 2023.

Currently, the Company continues to evaluate the potential impact of the new standard on its financial results.

Subsequent Events

4 unchanged sentences

Summarized operating results of the discontinued operations are as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Revenue $ — $ 117.5 $ 1.7 $ 331.6

1 unchanged sentence

Net investment income 48.5 48.4 92.4 100.3

Realized/unrealized gains (losses) on investments 9.5 ( 19.0 )

Realized/unrealized (losses) gains on investments ( 4.4 ) ( 0.5 ) 5.1 ( 19.5 )

Total revenue 71.4 194.9 154.9 470.6

3 unchanged sentences

Depreciation and amortization ( 5.1 ) ( 3.3 ) ( 11.0 ) ( 3.3 )

Income (loss) from operations 20.1 ( 31.5 )

(Loss) income from operations ( 2.1 ) 13.3 18.0 ( 18.0 )

Interest expense ( 0.1 ) ( 2.3 ) ( 0.5 ) ( 8.0 )

3 unchanged sentences

Pre-tax income (loss) from discontinued operations ( 2.2 ) 10.8 54.8 ( 63.1 )

Income tax (expense) benefit ( 5.1 ) 2.8

Income (loss) from discontinued operations $ 51.9 $ ( 71.1 )

On March 29, 2021, the Company announced the definitive agreement to sell its Insurance segment to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and a beneficial owner of approximately 6.6 % of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020.

The transaction value is approximately $ 90 million, inclusive of $ 65 million in cash plus certain assets at CGI.

The sale is pending regulatory approval.

Income tax benefit (expense) 0.7 ( 3.3 ) ( 4.4 ) ( 0.5 )

(Loss) income from discontinued operations $ ( 1.5 ) $ 7.5 $ 50.4 $ ( 63.6 )

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On March 29, 2021, the Company announced the entry into a definitive agreement (the "Stock Purchase Agreement") to sell its Insurance segment to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of June 30, 2021, a beneficial owner of approximately 6.6 % of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020.

The transaction value is approximately $ 90.0 million, inclusive of $ 65.0 million in cash plus certain assets of CGI.

As of the first quarter of 2021, the Insurance segment met the held-for-sale criteria under ASC 205-20 and has been presented in discontinued operations.

The sale closed on July 1, 2021, subsequent to quarter end.

Subsequent Events for further information.

The sale of GMSL closed on February 28, 2020.

At the time of the sale, the Company recorded a $ 39.3 million loss on the sale, inclusive of recognizing a $ 31.3 million loss from the realization of AOCI.

At the time of the sale, the Company recorded a $ 39.3 million loss on the sale and recognized $ 31.3 million of Accumulated other comprehensive loss.

During the fourth quarter of 2020, the Company recognized a gain on sale of $ 2.4 million as a result of the cash collateralized bonding facility release.

During the first quarter of 2021, the Company recognized a gain of $ 1.2 million as a result of indemnity release.

The net proceeds from the sale of GMSL were used to repay $ 15.0 million under the Revolving Credit Agreement and redeem $ 76.9 million aggregate principal amount of the Company's 11.5 % senior secured notes due 2021 (the "2021 Senior Secured Notes"), plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As a result of the repayment of $ 15.0 million Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three months ended March 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:

Three Months Ended March 31,

During the first quarter of 2021, the Company recognized a gain of $ 1.2 million as a result of an indemnity release.

The net proceeds from the sale of GMSL were used to repay $ 15.0 million of the then outstanding balance under the Revolving Credit Agreement and redeem $ 76.9 million aggregate principal amount of the Company's 11.5 % senior secured notes due 2021 (the "2021 Senior Secured Notes"), plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

As a result of the repayment of $ 15.0 million Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three and six months ended June 30, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest expense $ — $ — $ — $ 0.2

Amortization of deferred financing costs and original issuance discount $ — $ — $ — $ 0.1

As a result of the mandatory redemption of $ 76.9 million of 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three months ended March 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

As a result of the mandatory redemption of $ 76.9 million of 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and six months ended June 30, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest expense $ — $ — $ — $ 2.2

7 unchanged sentences

The Company recognized a $ 39.2 million gain on the sale.

A portion of the proceeds from the sale of Beyond6 were used to repay $ 15.0 million under the Revolving Credit Agreement and repay $ 27.9 million of the Company's 2021 Senior Secured Notes.

As a result of the repayment of $ 15.0 million Revolving Credit Agreement, the Company allocated the following interest for the three months ended March 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

A portion of the proceeds from the sale of Beyond6 were used to repay $ 15.0 million of the then outstanding balance under the Revolving Credit Agreement and repay $ 27.9 million of the Company's 2021 Senior Secured Notes.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As a result of the repayment of $ 15.0 million Revolving Credit Agreement, the Company allocated the following interest for the three and six months ended June 30, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest expense $ — $ 0.2 $ 0.1 $ 0.2

As a result of the repayment of $ 27.9 million of the 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three months ended March 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

As a result of the repayment of $ 27.9 million of the 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and six months ended June 30, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Interest expense $ — $ 0.8 $ 0.3 $ 1.6

Amortization of deferred financing costs and original issuance discount $ — $ 0.1 $ — $ 0.2

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Summarized assets and liabilities of the discontinued operations are as follows (in millions):

26 unchanged sentences

Total liabilities held for sale $ 5,261.6 $ 5,306.7

In addition, as of June 30, 2021, the Company had $ 5.2 million of assets from its Spectrum segment classified as Assets held for sale in continuing operations related to certain station licenses and assets.

Revenue from contracts with customers consist of the following (in millions):

Three Months Ended March 31,

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Infrastructure

1 unchanged sentence

Spectrum 10.6 9.5 21.1 19.6

Life Sciences 1.2 — 1.2 —

Total revenue $ 243.8 $ 181.8 $ 415.6 $ 368.4

5 unchanged sentences

Spectrum 8.5 7.3

Life Sciences 0.1 —

Total accounts receivables with customers $ 352.3 $ 175.8

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Infrastructure Segment

The following table disaggregates DBMG's revenue by market (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Commercial $ 84.8 $ 54.0 $ 134.3 $ 116.8

11 unchanged sentences

2021 December 31,

Contract assets $ 65.7 $ 55.6

Contract liabilities $ 58.5 $ 52.2

The change in contract assets is a result of the recording of $ 35.5 million of costs in excess of billings driven by new commercial projects, offset by $ 25.4 million of costs in excess of billings transferred to receivables from contract assets recognized at the beginning of the period.

The change in contract liabilities is a result of periodic billing in excess of costs of $ 38.7 million driven largely by new commercial projects, offset by revenue recognized that was included in the contract liability balance at the beginning of the period in the amount of $ 32.4 million.

Costs and recognized earnings in excess of billings on uncompleted contracts $ 63.7 $ 55.6

Billings in excess of costs and recognized earnings on uncompleted contracts $ ( 146.8 ) $ ( 52.2 )

The change in contract assets is a result of the recording of $ 35.6 million of costs in excess of billings on uncompleted contracts driven by new commercial projects and $ 1.9 million of costs in excess of billings on uncompleted contracts for projects acquired in the Banker Steel acquisition, offset by $ 29.4 million of costs in excess of billings on uncompleted contracts transferred to receivables from contract assets recognized at the beginning of the period.

The change in contract liabilities is a result of periodic billing in excess of costs on uncompleted contracts of $ 114.4 million driven largely by new commercial projects and $ 55.0 million of billings in excess of costs on uncompleted contracts for projects acquired as a result of the Banker Steel acquisition, offset by revenue recognized that was included in the contract liability balance at the beginning of the period in the amount of $ 74.8 million.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The transaction price allocated to remaining unsatisfied performance obligations consisted of the following (in millions):

1 unchanged sentence

Commercial $ 580.5 $ 620.2 $ 1,200.7

Convention 67.3 — 67.3

Healthcare 33.8 — 33.8

Industrial 201.3 — 201.3

2 unchanged sentences

Leisure 7.0 — 7.0

Healthcare 51.1 — 51.1

Convention 52.7 — 52.7

Other 5.6 — 5.6

2 unchanged sentences

This backlog represents commitments under master service agreements that are estimated amounts of work to be performed based on customer communications, historic experience and knowledge of our customers' intentions.

Life Sciences Segment

The following table disaggregates the Life Sciences segment's revenue by type (in millions):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Systems revenue $ 1.2 $ — $ 1.2 $ —

Total Life Sciences segment revenue $ 1.2 $ — $ 1.2 $ —

Spectrum Segment

The following table disaggregates the Spectrum segment's revenue by type (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Network advertising $ 4.8 $ 4.0 $ 9.5 $ 9.0

2 unchanged sentences

Other 0.6 0.7 1.1 1.2

Total revenue from contracts with customers 10.5 10.1

Other revenue — —

Total Spectrum segment revenue $ 10.6 $ 9.5 $ 21.1 $ 19.6

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The transaction price allocated to remaining unsatisfied performance obligations consisted of $ 1.7 million, $ 6.9 million, and $ 0.1 million of network advertising, broadcasting station revenues, and other revenues, respectively, of which $ 5.6 million is expected to be recognized within one year and $ 3.1 million is expected to be recognized within five years.

2 unchanged sentences

Banker Steel Acquisition

On March 15, 2021, the Company announced that DBMG entered into an agreement to acquire 100 % of Banker Steel Holdco LLC ("Banker Steel") for approximately $ 145.0 million, which is expected to close in the second quarter of 2021.

Banker Steel provides fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction industries.

On March 15, 2021, the Company announced that DBMG entered into an agreement to acquire 100 % of Banker Steel Holdco LLC ("Banker Steel") for $ 145.0 million, which closed on May 27, 2021.

The acquisition was financed with $ 64.1 million from a partial draw on a new $ 110.0 million revolving credit facility, $ 49.6 million of sellers' notes, $ 6.3 million of assumed debt of Banker Steel, and $ 25.0 million in cash received from HC2 in the settlement of certain intercompany balances.

Banker Steel provides fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market.

Banker Steel consists of six operating companies:

Banker Steel Co., LLC;

NYC Constructors, LLC;

Derr & Isbell Construction LLC;

Innovative detailing and Engineering Solutions;

and Lynchburg Freight and Specialty LLC.

The transaction was accounted for as business acquisition.

The preliminary allocation of the fair value of consideration transferred among the identified assets acquired, liabilities assumed, intangibles and residual goodwill are summarized as follows (in millions):

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Purchase Consideration at Fair Value

Partial draw on new $ 110.0 million revolving credit facility

Sellers' notes 49.6

Bankers Steel debt - assumed 6.3

Gross consideration 145.0

Transaction costs 0.4

Bankers debt - assumed 6.3

R&W premium paid by seller 0.5

Net consideration $ 137.8

Cash and cash equivalents $ 9.3

Accounts receivable, net 111.3

Costs recognized in earnings in excess of billings on uncompleted contracts 1.9

Assets held for sale 0.7

Other current assets 7.3

Property, plant, and equipment, net 62.6

Other assets 40.2

Intangibles, net 58.5

Goodwill 10.3

Total assets to be acquired 302.1

Accounts Payable 39.1

Billings in excess of costs and recognized earnings on uncompleted contracts 55.0

Other current liabilities 29.6

Other liabilities 34.2

Long-term debt, less current portion 6.4

Total liabilities to be assumed 164.3

Total net assets acquired $ 137.8

The size and breadth of the Banker Steel acquisition necessitates use of the allowable measurement period to adequately analyze all the factors used in establishing the asset and liability fair values as of the acquisition date.

The preliminary acquisition accounting is based upon the Company’s estimates of fair value.

The primary areas of the preliminary acquisition accounting that are not yet finalized include the following:

(i) finalizing the review and valuation of property and equipment (including the models, key assumptions, estimates and inputs used), (ii) finalizing the review and valuation of related intangible assets (including key assumptions, inputs and estimates), (iii) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), (iv) finalizing our review of certain assets acquired and liabilities assumed, (v) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities.

As the initial acquisition accounting is based on our preliminary assessments, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates.

We will continue to evaluate these items, until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805.

Goodwill was determined based on the residual differences between fair value of consideration transferred and the value assigned to acquired assets and liabilities.

Among the factors that contributed to goodwill was approximately $ 58.5 million assigned to intangibles, including customer relationships of $ 34.0 million with a useful life of 18 years, trade names of $ 7.4 million with a useful life of 15 years, existing customer contracts of $ 15.1 million with a useful life of 2 years and leasehold interests of $ 2.0 million with varying useful life.

Goodwill is not amortized and is no t deductible for tax purposes.

Acquisition costs incurred by DBMG in connection with the acquisition of Banker Steel were approximately $ 1.5 million, which were included in selling, general and administrative expenses.

The acquisition costs were primarily related to legal, accounting and valuation services.

The following schedule presents the unaudited results of operations data for the three and six months ended June 30, 2021 for Banker Steel since the date of acquisition (in millions):

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Revenue $ 39.5 $ 39.5

Net income from operations $ 1.3 $ 1.3

Net income attributable to HC2 Holdings $ 0.6 $ 0.6

Pro Forma Adjusted Summary

The following schedule presents unaudited consolidated pro forma results of operations data as if the acquisition of Banker Steel had occurred on January 1, 2020.

This information does not purport to be indicative of the actual results that would have occurred if the acquisitions had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in millions):

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Revenue $ 326.1 $ 252.5 $ 613.1 $ 517.0

Income (loss) from operations $ 1.5 $ ( 7.3 ) $ ( 7.1 ) $ ( 16.7 )

Net income (loss) attributable to HC2 Holdings $ ( 15.7 ) $ 10.5 $ ( 2.6 ) $ ( 70.3 )

Spectrum Segment

During the six months ended June 30, 2021, the Company increased its controlling interest in DTV from 60 %, inclusive of approximately 10 % proxy and voting rights from minority holders, to approximately 76 %, inclusive of 15 % proxy and voting rights from minority holders, from private purchases and proxy voting rights.

Insurance Segment

The transaction value is approximately $ 90 million, inclusive of $ 65 million in cash plus certain assets at CGI.

The sale is pending regulatory approval.

On March 29, 2021, the Company announced the entry into the Stock Purchase Agreement to sell its Insurance segment to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of June 30, 2021, a beneficial owner of approximately 6.6 % of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020.

The transaction value is approximately $ 90.0 million, inclusive of $ 65.0 million in cash plus certain assets of CGI.

The sale closed on July 1, 2021, subsequent to quarter end.

Subsequent Events for further information.

Other Segment

11 unchanged sentences

Following the closing, the purchaser paid an amount equal to $ 2.4 million on the earlier of December 31, 2020 and the date on which a cash collateralized bonding facility was released.

In the first quarter of 2020, the Company recorded a $ 39.3 million loss, inclusive of recognizing a $ 31.3 million loss from the realization of AOCI.

In the first quarter of 2020, the Company recorded a $ 39.3 million loss on the sale and recognized a $ 31.3 million of Accumulated other comprehensive loss.

During the fourth quarter of 2020, the Company recognized a gain on sale of $ 2.4 million as a result of the cash collateralized bonding facility release.

32 unchanged sentences

Property, Plant and Equipment, net

Property, plant and equipment consists of the following (in millions):

Property, plant and equipment, net consists of the following (in millions):

2021 December 31,

6 unchanged sentences

Total $ 173.3 $ 112.8

Depreciation expense was $ 4.7 million and $ 5.1 million for the three months ended March 31, 2021 and 2020, respectively.

These amounts included $ 2.3 million and $ 2.3 million of depreciation expense recognized within cost of revenue for each of the three months ended March 31, 2021 and 2020.

Depreciation expense was $ 5.3 million and $ 5.2 million for the three months ended June 30, 2021 and 2020, respectively.

These amounts included $ 2.8 million and $ 2.3 million of depreciation expense recognized within cost of revenue for each of the three months ended June 30, 2021 and 2020.

Depreciation expense was $ 10.0 million and $ 10.3 million for the six months ended June 30, 2021 and 2020, respectively.

These amounts included $ 5.0 million and $ 4.6 million of depreciation expense recognized within cost of revenue for each of the six months ended June 30, 2021 and 2020.

Goodwill and Intangibles, net

The carrying amount of goodwill by segment were as follows (in millions):

The carrying amount of goodwill by segment was as follows (in millions):

Infrastructure

1 unchanged sentence

Balance at December 31, 2020 $ 89.6 $ 21.4 $ 111.0

Acquisitions 10.3 — 10.3

Translation ( 0.2 ) — ( 0.2 )

Balance at March 31, 2021 $ 89.5 $ 21.4 $ 110.9

Balance at June 30, 2021 $ 99.7 $ 21.4 $ 121.1

Indefinite-lived Intangible Assets

The carrying amount of indefinite-lived intangible assets were as follows (in millions):

March 31, 2021 December 31, 2020

The carrying amount of indefinite-lived intangible assets was as follows (in millions):

June 30, 2021 December 31, 2020

FCC licenses $ 107.5 $ 113.0

Total $ 107.5 $ 113.0

For the three months ended March 31, 2021, FCC licenses decreased $ 4.4 million due to reclassifications to held-for-sale as a result of our Spectrum segment entering into certain agreements to sell non-core FCC licenses.

For the six months ended June 30, 2021, FCC licenses decreased $ 5.5 million predominately related to the reclassification to held-for-sale as a result of our Spectrum segment entering into certain agreements to sell non-core FCC licenses.

HC2 HOLDINGS, INC.

2 unchanged sentences

The gross carrying amount and accumulated amortization of amortizable intangible assets by major intangible asset class were as follows (in millions):

Weighted-Average Original Useful Life March 31, 2021 December 31, 2020

Weighted-Average Original Useful Life June 30, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

Trade names 14 years $ 25.4 $ ( 5.4 ) $ 20.0 $ 18.0 $ ( 4.6 ) $ 13.4

Customer relationships 9 years 36.4 ( 12.9 ) 23.5 36.4 ( 12.1 ) 24.3

Customer relationships and contracts 11 years 85.4 ( 14.5 ) 70.9 36.4 ( 12.1 ) 24.3

Channel sharing arrangements 35 years 20.1 ( 1.9 ) 18.2 20.2 ( 1.6 ) 18.6

1 unchanged sentence

Total $ 139.3 $ ( 24.8 ) $ 114.5 $ 80.1 $ ( 21.0 ) $ 59.1

Amortization expense for definite lived intangible assets was $ 1.5 million and $ 1.5 million for the three months ended March 31, 2021 and 2020, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Amortization expense for definite lived intangible assets was $ 2.3 million and $ 1.5 million for the three months ended June 30, 2021 and 2020, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Amortization expense for definite lived intangible assets was $ 3.8 million and $ 3.0 million for the six months ended June 30, 2021 and 2020, respectively, and was included in Depreciation and amortization in our Condensed Consolidated Statements of Operations.

Excluding the impact of any future acquisitions, dispositions or change in foreign currency, the Company estimates the annual amortization expense of amortizable intangible assets for the next five fiscal years will be as follows (in millions):

1 unchanged sentence

Thereafter 64.7

Total $ 114.5

HC2 HOLDINGS, INC.

5 unchanged sentences

LIBOR plus 5.85 % Note, due 2023

$ 70.6 $ 71.6

LIBOR plus 1.50 % Line of Credit

LIBOR plus 3.25 % Note, due 2026

LIBOR plus 2.15 % Line of Credit

4.00 % Note due 2024

8.00 % Note due 2024

Other, various maturity dates 6.5 —

Obligations under finance leases 0.1 0.2

9 unchanged sentences

LIBOR plus 5.75 % Line of Credit

Issuance discount, issuance premium, and deferred financing costs ( 3.3 ) ( 15.1 )

Unamortized issuance discount, issuance premium, and deferred financing costs ( 3.1 ) ( 15.1 )

current portion of debt obligations ( 70.2 ) ( 433.6 )

12 unchanged sentences

The interest rates on the finance leases range from approximately 2.0 % to 10.0 %.

Infrastructure

In May 2021, DBMG repaid its revolving line of credit under the Credit and Security Agreement with Wells Fargo Bank ("Revolving Line") and its term loan under a financing agreement with TWC Asset Management Company LLC ("TWC Loan").

In addition, DBMG entered into a new credit facility with UMB Bank ("UMB").

Under the terms of the agreement, UMB agreed to a $ 110.0 million term loan ("UMB Term Loan") and $ 110.0 million revolving credit agreement ("UMB Revolving Line").

The UMB Term loan expires in 2026 and will bear interest at a rate of 3.25 %.

The UMB Revolving Line expires in 2024 and will bear interest at a rate of Prime Rate minus 1.10 %.

The proceeds were used to fully repay DBMG's existing debt obligations, fund a portion of the Banker Steel acquisition, and provide additional working capital capacity to DBMG.

The extinguishment of the Revolving Line and the TWC Loan yielded a loss on extinguishment of $ 1.6 million included in Loss on early extinguishment or restructuring of debt in the Condensed Consolidated Statement of Operations.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Non-Operating Corporate

5 unchanged sentences

The extinguishment of the $ 51.8 million of 2022 Convertible Notes yielded a loss on extinguishment of $ 5.4 million, an acceleration of the amortization of discount of $ 5.3 million, and extinguishment of the bifurcated conversion option classified as equity of $ 7.7 million.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Senior Secured Notes

10 unchanged sentences

The 2026 Convertible Notes have an effective interest rate of 3.21 %, which reflects the $ 12.3 million premium and $ 1.1 million of deferred financing fees.

At March 31, 2021, the 2026 Convertible Notes had a carrying value of $ 62.8 million and an unamortized premium of $ 12.0 million.

Based on the closing price of our common stock of $ 3.94 on March 31, 2021, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For the three months ended March 31, 2021, interest cost recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $ 0.6 million and zero , respectively.

At June 30, 2021, the 2026 Convertible Notes had a carrying value of $ 62.2 million and an unamortized premium of $ 11.4 million.

Based on the closing price of our common stock of $ 3.98 on June 30, 2021, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For the six months ended June 30, 2021, interest cost recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $ 1.6 million and $ 0.8 million, respectively.

Line of Credit

2 unchanged sentences

Except as modified by the Amendment, the terms of the Revolving Credit Agreement remain in effect.

There are no outstanding borrowings on the Revolving Credit Agreement as of March 31, 2021.

HC2 is in compliance with our debt covenants as of March 31, 2021.

In May 2021, HC2 drew $ 5.0 million of the Revolving Credit Agreement.

The Company used the proceeds to fund the redemption of the Company's Series A and A-2 Preferred Stock.

HC2 is in compliance with its debt covenants as of June 30, 2021.

Supplementary Financial Information

1 unchanged sentence

Costs and recognized earnings in excess of billings on uncompleted contracts and billings in excess of costs and recognized earnings on uncompleted contracts consist of the following:

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

2021 December 31,

1 unchanged sentence

Estimated earnings 254.0 139.0

1,865.6 891.9

Less progress billings 1,948.7 888.5

$ ( 83.1 ) $ 3.4

The above is included in the accompanying condensed consolidated balance sheet under the following line items:

1 unchanged sentence

Billings in excess of costs and recognized earnings on uncompleted contracts ( 146.8 ) ( 52.2 )

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

$ ( 83.1 ) $ 3.4

Carrying values of other invested assets were as follows (in millions):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Alternative Equity

9 unchanged sentences

The table excludes carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and other current liabilities, and other assets and liabilities that approximate fair value due to relatively short periods to maturity (in millions):

March 31, 2021 Fair Value Measurement Using:

June 30, 2021 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

34 unchanged sentences

2021 December 31,

Lease liability $ 31.6 $ 31.6

Lease liability, net of current portion $ 60.4 $ 31.6

Other 10.2 8.2

Total other non-current liabilities $ 70.6 $ 39.8

Operating lease right-of-use-assets and finance leases are recognized in the Consolidated Balance Sheets within Other assets and Property, plant and equipment, net, respectively.

Operating lease liability and finance lease liability are recognized in the Consolidated Balance Sheets within Other liabilities and Debt obligations, respectively.

As of March 31, 2021 and December 31, 2020, lease right-of-use assets and lease liabilities consists of the following (in millions):

Operating lease right-of-use-assets and finance leases are recognized in the Condensed Consolidated Balance Sheets within Other assets and Property, plant and equipment, net, respectively.

Operating lease liability and finance lease liability are recognized in the Condensed Consolidated Balance Sheets within Other liabilities and Debt obligations, respectively.

As of June 30, 2021 and December 31, 2020, lease right-of-use assets and lease liabilities consist of the following (in millions):

2021 December 31,

9 unchanged sentences

The tables below present financial information associated with the Company's leases.

This information is presented as of, and for the three months ended March 31, 2021 and 2020.

This information is presented as of, and for the three and six months ended June 30, 2021 and 2020.

The Company has entered into operating and finance lease agreements primarily for land, office space, equipment and vehicles, expiring between 2021 and 2045.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The following table summarizes the components of lease expense for the three months ended March 31, 2021 and 2020 (in millions):

Three Months Ended March 31,

The following table summarizes the components of lease expense for the three and six months ended June 30, 2021 and 2020 (in millions):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Finance lease cost:

Amortization of right-of-use assets $ 0.3 $ 0.3 $ 0.6 $ 0.6

Interest on lease liabilities — — — 0.1

Net finance lease cost 0.3 0.3 0.6 0.7

2 unchanged sentences

Total lease cost $ 4.7 $ 3.9 $ 8.6 $ 8.1

Cash flow information related to leases for the three months ended March 31, 2021and 2020 are as follows (in millions):

Three Months Ended March 31,

Cash flow information related to leases for the three and six months ended June 30, 2021and 2020 is as follows (in millions):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ — $ 0.1 $ — $ 0.1

Financing cash flows from finance leases $ 0.2 $ 0.3 $ 0.5 $ 0.5

1 unchanged sentence

Right-of-use assets obtained in exchange for new lease liabilities

Finance leases $ — $ 0.1 $ — $ 0.1

Operating leases $ 37.3 $ 3.6 $ 41.2 $ 12.1

As of March 31, 2021 and December 31, 2020, the weighted-average remaining lease term and the weighted-average discount rate for finance leases and operating leases are as follows:

As of June 30, 2021 and December 31, 2020, the weighted-average remaining lease term and the weighted-average discount rate for finance leases and operating leases are as follows:

2021 December 31,

3 unchanged sentences

Weighted-average discount rate - finance lease 7.0 % 8.9 %

As of March 31, 2021, undiscounted cash flows for finance and operating leases are as follows (in millions):

As of June 30, 2021, undiscounted cash flows for finance and operating leases are as follows (in millions):

Leases Finance

5 unchanged sentences

The Company used the Annual Effective Tax Rate ("ETR") approach of ASC 740-270, Interim Reporting, to calculate its 2021 interim tax provision.

Income tax expense was $ 1.1 million and an income tax benefit of $ 9.7 million for the three months ended March 31, 2021 and 2020, respectively.

The income tax expense recorded for the three months ended March 31, 2021 relates to the projected expense as calculated under ASC 740 for taxpaying entities.

Additionally, the tax benefits associated with losses generated by the HC2 Holdings, Inc.

consolidated income tax return and certain other businesses have been reduced by a full valuation allowance as we do not believe it is more-likely-than-not that the losses will be utilized prior to expiration.

The income tax benefit recorded for the three months ended March 31, 2020 primarily relates to a one-time, discrete tax benefit from the carryback of net operating losses at the Insurance segment as a result of the enactment of the CARES Act on March 27, 2020.

Income tax was an expense of $ 2.6 million and $ 12.0 million for the three months ended June 30, 2021 and 2020, respectively.

The income tax expense recorded for the three months ended June 30, 2021 primarily relates to the projected expense as calculated under ASC 740 for tax paying entities.

Additionally, the tax benefits associated with losses generated by the HC2 Holdings, Inc.

The income tax expense recorded for the three months ended June 30, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and projected expense as calculated under ASC 740 for tax paying entities.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Income tax was an expense of $ 3.7 million and $ 2.3 million for the six months ended June 30, 2021 and 2020, respectively.

The income tax expense recorded for the six months ended June 30, 2021 primarily relates to the projected expense as calculated under ASC 740 for tax paying entities.

Additionally, the tax benefits associated with losses generated by the HC2 Holdings, Inc.

The income tax expense recorded for the six months ended June 30, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and projected expense as calculated under ASC 740 for tax paying entities which was mostly offset by a tax benefit from the carryback of net operating losses at the Insurance segment as a result of the enactment of the CARES Act.

Net Operating Losses

1 unchanged sentence

net operating loss carryforwards available to reduce future taxable income in the amount of $ 170.3 million, of which a portion is subject to annual limitation under IRC Sec.

Based on estimates as of March 31, 2021, the Company expects that approximately $ 96.0 million of the gross U.S.

Based on estimates as of June 30, 2021, the Company expects that approximately $ 96.0 million of the gross U.S.

net operating loss carryforwards would be available to offset taxable income in 2021.

14 unchanged sentences

Tax years 2002 - 2020 remain open for examination.

CARES Act Payroll Tax Deferral

Tax payment deferrals provided for under the CARES Act resulted in liabilities for deferred payroll tax payments.

The Company elected to defer approximately $ 10.9 million of its employer payroll tax obligation as of June 30, 2021.

The Company is required to remit 50 percent of the deferred tax balance on or before December 31, 2021 and the remaining 50 percent on or before December 31, 2022, resulting in $ 5.4 million included in Accrued liabilities and $ 5.5 million included in Other liabilities.

We continue to monitor any effects that may result from the CARES Act.

Commitments and Contingencies

4 unchanged sentences

The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate.

If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary for its Condensed Consolidated Financial Statements not to be misleading.

If a matter is both probable to result in a liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary for its Condensed Consolidated Financial Statements not to be misleading.

If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the Company's Condensed Consolidated Financial Statements.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Based on a review of the current facts and circumstances with counsel in each of the matters disclosed, management has provided for what is believed to be a reasonable estimate of loss exposure.

5 unchanged sentences

We do not believe the assessment to be probable and expect to prevail based on the facts and merits of our existing VAT position.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Fair Value Investments Litigation

30 unchanged sentences

Plaintiffs allege that the Individual Defendants (i) “prompted” the HC2 Entities to purchase more than 100 low-power television (“LPTV”) broadcast stations originally identified for potential acquisition by DTV, (ii) allowed the HC2 Entities to misappropriate DTV technology, known as “DTV Cast,” (iii) caused DTV to transfer unspecified LPTV broadcasting station licenses to HC2 affiliates “without paying any value,” and (iv) transferred to the HC2 Entities unspecified DTV broadcasting stations that had been “repacked” by the FCC.

HC2 believes the allegations in the Bocock Complaint are without merit and the HC2-related defendants intend to move to dismiss the complaint.

Defendants moved to dismiss the Complaint on May 19, 2021.

On June 23, 2021, plaintiffs amended their complaint.

In the amended complaint, plaintiffs assert the same claims they asserted in their initial complaint, added a claim for waste associated with DTV’s purported transfer of licenses and construction permits for less than fair value, and dropped Paul Robinson as a defendant.

HC2 believes the allegations in the amended complaint are without merit and the HC2-related defendants intend to move to dismiss the amended complaint.

HC2 intends to vigorously defend this litigation.

OSHA Complaint

On November 4, 2020, the Company received notice that a complaint was filed on August 27, 2020, with the U.S.

Department of Labor (OSHA Complaint Number 2-4173-20-156), by a former employee of Continental Insurance Group Ltd.

alleging retaliatory employment practices in violation of the whistleblower provisions of the Sarbanes-Oxley Act.

The Company submitted a position statement to the DOL denying the material allegations in the complaint.

On April 27, 2021, the matter was resolved pursuant to a confidential settlement agreement that did not have a material impact on the Company's financial statements.

Separation from Philip A.

1 unchanged sentence

Falcone, the former Chairman, President and Chief Executive Officer of the Company, regarding his separation.

Falcone rejected the Company’s most recent severance offer, and on December 18, 2020, Mr.

On December 18, 2020, Mr.

Falcone filed a demand for arbitration against the Company with the American Arbitration Association.

3 unchanged sentences

Falcone filed his Answer to the Company’s Counterclaims on March 19, 2021.

In addition, Mr.

Falcone made two books and records demands of the Company, which the Company has denied, including in light of the fact that Mr.

Falcone is no longer a director of the Company.

The Company and Mr.

Falcone mediated on July 14, 2021, and on July 19, 2021, both the Company and Mr.

Falcone accepted the mediator’s proposal, and the Company has reserved for an amount consistent with the mediator’s proposal.

Books and Records Demand

On July 28, 2021, the Company received a demand from a company stockholder pursuant to 8 Del.

§ 220 to inspect books and records of the Company relating to, among other things, the Company's sale of its Insurance segment.

The Company is currently evaluating a response, and cannot determine at this time if the books and records demand will lead to litigation.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Currently, the Canada Revenue Agency ("CRA") is auditing a subsidiary previously held by the Company.

1 unchanged sentence

To date, CRA has not proposed any specific adjustments and the audit is ongoing.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Share-based Compensation

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 0.5 million and $ 1.5 million for the three months ended March 31, 2021 and 2020, respectively.

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 1.1 million and $ 1.5 million for the six months ended June 30, 2021 and 2020, respectively.

All grants are time based and vest either immediately or over a period established at grant.

11 unchanged sentences

Forfeited ( 31,171 ) $ 2.62

Unvested - March 31, 2021 825,416 $ 3.73

At March 31, 2021, the total unrecognized stock-based compensation expense related to unvested restricted stock was $ 2.1 million.

Unvested - June 30, 2021 765,498 $ 4.00

At June 30, 2021, the total unrecognized stock-based compensation expense related to unvested restricted stock was $ 2.0 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 2.2 years.

12 unchanged sentences

Expired ( 21,599 ) $ 5.45

Outstanding - March 31, 2021 4,739,858 $ 5.13

Outstanding - June 30, 2021 4,718,259 $ 5.13

Eligible for exercise 4,716,909 $ 5.13

At March 31, 2021, the intrinsic value and average remaining life of the Company's outstanding options were $ 0.2 million and approximately 3.4 years, and intrinsic value and average remaining life of the Company's exercisable options were $ 0.2 million and approximately 3.4 years.

At March 31, 2021, the total unrecognized stock-based compensation expense related to unvested stock options was $ 0.1 million.

At June 30, 2021, the intrinsic value and average remaining life of the Company's outstanding options were $ 0.2 million and approximately 3.1 years, and intrinsic value and average remaining life of the Company's exercisable options were $ 0.2 million and approximately 3.1 years.

At June 30, 2021, the total unrecognized stock-based compensation expense related to unvested stock options was $ 0.1 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 0.7 years.

9 unchanged sentences

Series A-2 shares issued and outstanding (1)

Series A Shares

In connection with the issuance of the Series A Convertible Preferred Stock, the Company adopted a Certificate of Designation of Series A Convertible Participating Preferred Stock on May 29, 2014 (the "Series A Certificate").

In connection with the issuance of the Series A-1 Preferred Stock on September 22, 2014, the Company adopted the Certificate of Designation of Series A-1 Convertible Participating Preferred Stock (the "Series A-1 Certificate") and also amended and restated the Series A Certificate.

In connection with the issuance of the Series A-2 Preferred Stock on January 5, 2015, the Company adopted the Certificate of Designation of Series A-2 Convertible Participating Preferred Stock (the "Series A-2 Certificate") and also amended and restated the Series A Certificate and the Series A-1 Certificate.

On August 10, 2015, the Company adopted certain Certificates of Correction of the Certificates of Amendment to the Certificates of Designation of the Series A Certificate, the Series A-1 Certificate and the Series A-2 Certificate, and on June 24, 2016 the Company adopted certain amendments to the Series A-1 Certificate of Designation.

The Series A Certificate, the Series A-1 Certificate and the Series A-2 Certificate together, as amended, are referred to as the "Certificates of Designation."

The following summary of the terms of the Preferred Stock and the Certificates of Designation is qualified in its entirety by the complete terms of the Certificates of Designation.

The Preferred Stock accrues a cumulative quarterly cash dividend at an annualized rate of 7.50 %.

The accrued value of the Preferred Stock will accrete quarterly at an annualized rate of 4.00 % that is reduced to 2.00 % or 0.00 % if the Company achieves specified rates of growth measured by increases in its net asset value;

provided, that the accreting dividend rate will be 7.25 % in the event that (i) the daily volume weighted average price ("VWAP") of the common stock is less than a certain threshold amount, (ii) the common stock is not registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, (iii) following May 29, 2015, the common stock is not listed on certain national securities exchanges or (iv) the Company is delinquent in the payment of any cash dividends.

The Preferred Stock is also entitled to participate in cash and in-kind distributions to holders of shares of common stock on an as-converted basis.

Optional Conversion.

Each share of Preferred Stock may be converted by the holder into common stock at any time based on the then applicable conversion price.

Pursuant to the Series A Certificate, each share of Series A Preferred Stock is currently convertible at a conversion price of $ 3.52 .

Pursuant to the Series A-2 Certificate, each share of Series A-2 Preferred Stock is currently convertible at a conversion price of $ 5.34 .

Such conversion prices are subject to adjustment for dividends, certain distributions, stock splits, combinations, reclassifications, reorganizations, mergers, recapitalizations and similar events, as well as in connection with issuances of equity or equity-linked or other comparable securities by the Company at a price per share (or with a conversion or exercise price or effective issue price) that is below the applicable conversion price (which adjustment shall be made on a weighted average basis).

Redemption by the Holders / Automatic Conversion.

On May 29, 2021, holders of the Preferred Stock are entitled to cause the Company to redeem the Preferred Stock at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Preferred Stock).

Each share of Preferred Stock that is not so redeemed will be automatically converted into shares of common stock at the conversion price then in effect.

Upon a change of control (as defined in the Certificates of Designation) holders of the Preferred Stock are entitled to cause the Company to redeem their Preferred Stock at a price per share of Preferred Stock equal to the greater of (i) the accrued value of the Preferred Stock, which amount would be multiplied by 150 % in the event of a change of control occurring on or prior to May 29, 2017, plus any accrued and unpaid dividends (to the extent not included in the accrued value of Preferred Stock), and (ii) the value that would be received if the share of Preferred Stock were converted into common stock immediately prior to the change of control.

Redemption by the Company.

At any time after May 29, 2017, the Company may redeem the Preferred Stock, in whole but not in part, at a price per share generally equal to 150 % of the original accrued value or on that date, plus accrued but unpaid dividends (to the extent not included in the accrued value of Preferred Stock), subject to the holder’s right to convert prior to such redemption.

Forced Conversion.

After May 29, 2017, the Company may force conversion of the Preferred Stock into common stock if the common stock’s thirty-day VWAP exceeds 150 % of the then-applicable Conversion Price and the common stock’s daily VWAP exceeds 150 % of the then applicable Conversion Price for at least twenty trading days out of the thirty trading day period used to calculate the thirty-day VWAP.

In the event of a forced conversion, the holders of Preferred Stock will have the ability to elect cash settlement in lieu of conversion if certain market liquidity thresholds for the common stock are not achieved.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Liquidation Preference.

The Series A Preferred Stock ranks at parity with the Series A-2 Preferred Stock.

In the event of any liquidation, dissolution or winding up of the Company (any such event, a "Liquidation Event"), the holders of Preferred Stock are entitled to receive per share the greater of (i) the accrued value of the Preferred Stock, which amount would be multiplied by 150 % in the event of a Liquidation Event occurring on or prior to May 29, 2017, plus any accrued and unpaid dividends (to the extent not included in the accrued value of Preferred Stock), and (ii) the value that would be received if the share of Preferred Stock were converted into common stock immediately prior to such occurrence.

The Preferred Stock will rank junior to any existing or future indebtedness but senior to the common stock and any future equity securities other than any future senior or pari-passu preferred stock issued in compliance with the Certificates of Designation.

Voting Rights.

Except as required by applicable law, the holders of the shares of each series of Preferred Stock are entitled to vote on an as-converted basis with the holders of the other series of Preferred Stock (on an as-converted basis) and holders of the Company’s common stock on all matters submitted to a vote of the holders of common stock.

Certain series of Preferred Stock are entitled to vote with the holders of certain other series of Preferred Stock on certain matters, and separately as a class on certain limited matters.

Subject to maintenance of certain ownership thresholds by the initial purchasers of the Series A Preferred Stock also have the right to vote shares of Preferred Stock as a separate class for at least one director, as discussed below under "Board Rights."

Consent Rights.

For so long as any of the Preferred Stock is outstanding, consent of the holders of shares representing at least 75 % of certain of the Preferred Stock then outstanding is required for certain material actions.

Participation Rights.

Pursuant to the securities purchase agreements entered into with the initial purchasers of the Series A Preferred Stock and the Series A-2 Preferred Stock, subject to meeting certain ownership thresholds, certain purchasers of the Series A Preferred Stock and the Series A-2 Preferred Stock are entitled to participate, on a pro-rata basis in accordance with their ownership percentage, determined on an as-converted basis, in issuances of equity and equity linked securities by the Company.

In addition, subject to meeting certain ownership thresholds, certain initial purchasers of the Series A Preferred Stock and the Series A-2 Preferred Stock will be entitled to participate in issuances of preferred securities and in debt transactions of the Company.

As of March 31, 2021, Preferred A shares and Preferred A-2 shares were convertible into 1,835,695 and 751,880 shares, respectively, of HC2 common stock, excluding CGI shares eliminated in consolidation, as discussed below.

(1) CGI, a wholly owned subsidiary of the Company, owns 6,125 shares of Series A Preferred Stock and 10,000 shares of Series A-2 Preferred Stock which are eliminated in consolidation.

Preferred Share Activity

Series A Shares

On December 18, 2018, and December 20, 2018, CGI, a wholly owned subsidiary of the Company closed on the purchase of 6,125 shares of Series A Preferred Stock, which, as of March 31, 2021, is convertible into a total of 1,763,706 shares of the Company's common stock.

The shares and dividends accrued related to the Series A Preferred shares owned by CGI are eliminated in consolidation.

On January 11, 2019, CGI purchased 10,000 shares of Series A-2 Preferred Stock, which, as of March 31, 2021, is convertible into a total of 1,879,699 shares of the Company's common stock.

On December 18, 2018, and December 20, 2018, CGI, a wholly owned subsidiary of the Company closed on the purchase of 6,125 shares of Series A Preferred Stock, which, as of June 30, 2021, is convertible into a total of 1,763,706 shares of the Company's common stock.

The shares and dividends accrued related to the Series A Preferred Stock owned by CGI are eliminated in consolidation.

On January 11, 2019, CGI purchased 10,000 shares of Series A-2 Preferred Stock, which, as of June 30, 2021, is convertible into a total of 1,872,659 shares of the Company's common stock.

The shares and dividends accrued related to the Series A-2 Preferred Stock owned by CGI are eliminated in consolidation.

Luxor and Corrib Conversions

3 unchanged sentences

• The Company agreed that in the event that Corrib and Luxor would have been entitled to any Participating Dividends payable, had they not converted the Preferred Stock (as defined in the respective Series A and Series A-1 Certificate of Designation), after the date of their Preferred Share conversion, then the Company will issue to Corrib and Luxor, on the date such Participating Dividends become payable by the Company, in a transaction exempt from the registration requirements of the Securities Act the number of shares of common stock equal to (a) the value of the Participating Dividends Corrib or Luxor would have received pursuant to Sections (2)(c) and (2)(d) of the respective Series A and Series A-1 Certificates of Designation, divided by (b) the Thirty Day VWAP (as defined in the respective Series A and Series A-1 Certificates of Designation) for the period ending two business days prior to the underlying event or transaction that would have entitled Corrib or Luxor to such Participating Dividend had Corrib’s or Luxor’s Preferred Stock remain unconverted.

• The Company agreed that it will issue to Corrib and Luxor, on each quarterly anniversary commencing May 29, 2017 (or, if later, the date on which the corresponding dividend payment is made to the holders of the outstanding Preferred Stock), through and until the Maturity Date (as defined in the respective Series A and Series A-1 Certificates of Designation), in a transaction exempt from the registration requirements of the Securities Act the number of shares of common stock equal to (a) 1.875 % the Accrued Value (as defined in the respective Series A and Series A-1 Certificates of Designation) of Corrib’s or Luxor’s Preferred Stock as of the Closing Date (as defined in applicable Voluntary Conversion Agreements) divided by (b) the Thirty Day VWAP (as defined in the respective Series A and Series A-1 Certificate of Designation) for the period ending two business days prior to the applicable Dividend Payment Date (as defined in the respective Series A and Series A-1 Certificate of Designation).

For the six months ended June 30, 2021, 119,784 and 13,477 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the conversion agreements.

For the six months ended June 30, 2020, 159,400 and 17,933 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the conversion agreements.

The fair value of the Additional Share Consideration for the six months ended June 30, 2021 was valued by the Company at $ 0.3 million and for the six months ended June 30, 2020 was valued by the Company at $ 0.4 million on the date of issuance and was recorded within Preferred stock and deemed dividends from conversion line item of the Condensed Consolidated Statements of Operations as a deemed dividend.

On May 29, 2021, pursuant to the terms of the Additional Share Consideration, the final Participating Dividend payments were made to Luxor and Corrib.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

For the three months ended March 31, 2021, 49,075 and 5,521 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the conversion agreements.

For the three months ended March 31, 2020, 77,794 and 8,752 shares of the Company's common stock have been issued to Luxor and Corrib, respectively, in conjunction with the conversion agreements.

The fair value of the Additional Share Consideration for the three months ended March 31, 2021 and 2020 was valued by the Company at $ 0.2 million on the date of issuance and was recorded within Preferred stock and deemed dividends from conversion line item of the Consolidated Statements of Operations as a deemed dividend.

Redemption and Conversion of Series A and A-2 Shares

On May 29, 2021, pursuant to the Certificate of Designation, holders of the Series A and A-2 Preferred Stock caused the Company to redeem the Series A and A-2 Preferred Stock at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Series A and A-2 Preferred Stock), of which $ 10.4 million was paid in cash to holders of the Series A and A-2 Preferred Stock.

Each share of Series A and A-2 Preferred Stock that was not so redeemed was automatically converted into shares of common stock at the conversion price then in effect, of which 50,410 shares of the Company's common stock were issued in lieu of cash to holders of the Series A Preferred Stock.

In connection with the Stock Purchase Agreement, CGI, a wholly owned subsidiary of the Company, entered into a letter agreement with Continental General Holdings, LLC to not redeem at maturity or seek redemption of the $ 16.1 million Preferred Stock.

On July 1, 2021, subsequent to quarter end, CGI exchanged their Series A and Series A-2 Preferred Stock for new classes of Series A-3 and Series A-4 Preferred Stock with an extended maturity of July 1, 2026, with other terms substantially unchanged from the terms of the Series A and Series A-2 Preferred Stock.

Preferred Share Dividends

During the three months ended March 31, 2021 and 2020, HC2's Board of Directors declared cash dividends with respect to HC2’s issued and outstanding Preferred Stock, excluding Preferred Stock owned by CGI which is eliminated in consolidation, as presented in the following table (in millions):

Declaration Date March 31, 2021

Holders of Record Date March 31, 2021

Payment Date April 15, 2021

During the six months ended June 30, 2021 and 2020, HC2's Board of Directors declared cash dividends with respect to HC2’s issued and outstanding Preferred Stock, excluding Preferred Stock owned by CGI which is eliminated in consolidation, as presented in the following table (in millions):

Declaration Date March 31, 2021 May 29, 2021

Holders of Record Date March 31, 2021 May 29, 2021

Payment Date April 15, 2021 June 4, 2021

Total Dividend $ 0.2 $ 0.1

Declaration Date March 31, 2020

Holders of Record Date March 31, 2020

Payment Date April 15, 2020

Declaration Date March 31, 2020 June 30, 2020

Holders of Record Date March 31, 2020 June 30, 2020

Payment Date April 15, 2020 July 15, 2020

Total Dividend $ 0.2 $ 0.2

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Related Parties

Non-Operating Corporate

Pansend has an investment in Triple Ring Technologies, Inc.

("Triple Ring").

Various subsidiaries of HC2 utilize the services of Triple Ring, incurring zero and $ 0.7 million in services for the three months ended March 31, 2021 and 2020, respectively.

Various subsidiaries of HC2 utilize the services of Triple Ring, incurring zero and $ 0.3 million in services for the three months ended June 30, 2021 and 2020, and zero and $ 1.0 million in services for the six months ended June 30, 2021 and 2020, respectively.

In September 2018, the Company entered into a 75 -month lease for office space.

As part of the agreement, HC2 was able to pay a lower security deposit and lease payments, and received favorable lease terms as consideration for landlord required cross default language in the event of default of the shared space leased by Harbinger Capital Partners, formerly a related party.

With the adoption of ASC 842, as of January 1, 2019, this lease was recognized as a right of use asset and lease liability on the Consolidated Balance Sheets.

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

With the adoption of ASC 842, as of January 1, 2019, this lease was recognized as a right of use asset and lease liability on the Condensed Consolidated Balance Sheets.

Infrastructure

Banker Steel, a subsidiary of DBMG, has leased two office spaces from 2940 Fulks St LLC, a related party that is owned by Donald Banker, CEO of Banker Steel and a related party, with monthly lease payments of $ 10 thousand and a total lease liability of $ 0.2 million.

For the three months ended June 30, 2021, and 2020, DBMG incurred lease expense of $ 10 thousand and zero , respectively, and for the six months ended June 30, 2021, and 2020, DBMG incurred lease expense of $ 10 thousand and zero , respectively.

Banker Steel has leased two planes from Banker Aviation LLC, a related party that is owned by Donald Banker, a related party, with monthly lease payments of $ 0.2 million and a total lease liability of $ 4.5 million.

For the three months ended June 30, 2021, and 2020, DBMG incurred lease expense of $ 0.2 million and zero , respectively, and for the six months ended June 30, 2021, and 2020, DBMG incurred lease expense of $ 0.2 million and zero , respectively.

Banker Steel also has a subordinated note payable of $ 6.3 million to Donald Banker, a related party, that has a maturity date of June 30, 2024 at a 11 % interest rate.

For the three months ended June 30, 2021, and 2020, DBMG incurred interest expense of $ 0.1 million and zero , respectively, and for the six months ended June 30, 2021, and 2020, DBMG incurred interest expense of $ 0.1 million and zero , respectively.

Operating Segment and Related Information

8 unchanged sentences

Summary information with respect to the Company’s operating segments is as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Infrastructure

$ 232.0 $ 172.3 $ 393.3 $ 348.8

Life Sciences 1.2 — 1.2 —

Spectrum 10.6 9.5 21.1 19.6

Total revenue $ 243.8 $ 181.8 $ 415.6 $ 368.4

Three Months Ended March 31,

Loss (income) from operations

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Income (loss) from operations

Infrastructure

$ 2.2 $ 4.5 $ 4.4 $ 7.1

Life Sciences ( 4.5 ) ( 3.5 ) ( 9.3 ) ( 6.7 )

3 unchanged sentences

Total loss from operations $ ( 7.7 ) $ ( 8.9 ) $ ( 18.6 ) $ ( 22.5 )

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Loss from operations $ ( 7.7 ) $ ( 8.9 ) $ ( 18.6 ) $ ( 22.5 )

1 unchanged sentence

Loss on early extinguishment or restructuring of debt ( 1.6 ) ( 3.4 ) ( 12.4 ) ( 9.2 )

Loss from equity investees ( 2.1 ) ( 2.5 )

Income (loss) from equity investees 0.2 ( 0.2 ) ( 1.9 ) ( 2.7 )

Other income 0.4 64.6 3.8 66.1

Loss from continuing operations before income taxes ( 41.8 ) ( 39.6 )

Income tax (expense) benefit ( 1.1 ) 9.7

Loss from continuing operations ( 42.9 ) ( 29.9 )

Income (loss) from discontinued operations (including gain on disposal of $ 40.4 million and loss on disposal of $ 39.3 million for the three months ended March 31, 2021 and 2020, respectively)

(Loss) income from continuing operations before income taxes ( 21.1 ) 33.0 ( 62.9 ) ( 6.6 )

Income tax expense ( 2.6 ) ( 12.0 ) ( 3.7 ) ( 2.3 )

(Loss) income from continuing operations ( 23.7 ) 21.0 ( 66.6 ) ( 8.9 )

(Loss) income from discontinued operations (including gain on disposal of $ 40.4 million and loss on disposal of $ 39.3 million for the six months ended June 30, 2021 and 2020, respectively)

( 1.5 ) 7.5 50.4 ( 63.6 )

Net income (loss) 9.0 ( 101.0 )

Net (loss) income ( 25.2 ) 28.5 ( 16.2 ) ( 72.5 )

Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest 1.7 ( 15.4 ) 5.3 2.5

Net income (loss) attributable to HC2 Holdings, Inc.

Net (loss) income attributable to HC2 Holdings, Inc.

( 23.5 ) 13.1 ( 10.9 ) ( 70.0 )

Preferred dividends and deemed dividends from conversions 0.2 0.4 0.6 0.8

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.2 $ ( 83.5 )

Three Months Ended March 31,

Net (loss) income attributable to common stock and participating preferred stockholders $ ( 23.7 ) $ 12.7 $ ( 11.5 ) $ ( 70.8 )

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Depreciation and Amortization

Infrastructure

$ 3.3 $ 2.7 $ 5.7 $ 5.3

Life Sciences 0.1 0.1 0.1 0.1

Spectrum 1.4 1.7 2.9 3.4

Total 4.8 4.5 8.7 8.8

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended March 31,

Depreciation expense recognized within cost of revenue

2.8 2.3 5.0 4.6

Total depreciation and amortization $ 7.6 $ 6.8 $ 13.7 $ 13.4

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Capital Expenditures (*)

Infrastructure

$ 3.9 $ 1.1 $ 5.5 $ 3.4

Life Sciences 0.3 0.1 0.5 0.1

8 unchanged sentences

Total $ 53.1 $ 55.4

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

2021 December 31,

13 unchanged sentences

The dilutive effect of options and their equivalents (including non-vested stock issued under stock-based compensation plans), is computed using the "treasury" method as this measurement was determined to be more dilutive between the two available methods in each period.

The Company had no dilutive common share equivalents during the three months ended March 31, 2021 and 2020 due to results from continuing operations being a loss, net of tax.

The Company had no dilutive common share equivalents during the six months ended June 30, 2021 and 2020 due to results from continuing operations being a loss, net of tax.

The following table presents a reconciliation of net income (loss) used in basic and diluted EPS calculations (in millions, except per share amounts):

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Three Months Ended March 31,

Loss from continuing operations $ ( 42.9 ) $ ( 29.9 )

Loss attributable to noncontrolling interest and redeemable noncontrolling interest 2.8 2.8

Loss from continuing operations attributable to the Company ( 40.1 ) ( 27.1 )

Preferred dividends, deemed dividends and repurchase gains 0.4 0.4

Loss from continuing operations attributable to HC2 common stockholders ( 40.5 ) ( 27.5 )

Income (loss) from discontinued operations 51.9 ( 71.1 )

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Loss) income from continuing operations $ ( 23.7 ) $ 21.0 $ ( 66.6 ) $ ( 8.9 )

Income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest 1.6 ( 15.3 ) 4.4 ( 12.5 )

Income (loss) from discontinued operations, net of tax and noncontrolling interest 52.7 ( 56.0 )

Net income (loss) attributable to common stock and participating preferred stockholders $ 12.2 $ ( 83.5 )

(Loss) income from continuing operations attributable to the Company ( 22.1 ) 5.7 ( 62.2 ) ( 21.4 )

Preferred dividends, deemed dividends and repurchase gains 0.2 0.4 0.6 0.8

(Loss) income from continuing operations attributable to HC2 common stockholders ( 22.3 ) 5.3 ( 62.8 ) ( 22.2 )

(Loss) income from discontinued operations ( 1.5 ) 7.5 50.4 ( 63.6 )

(Loss) income attributable to noncontrolling interest and redeemable noncontrolling interest 0.1 ( 0.1 ) 0.9 15.0

(Loss) income from discontinued operations, net of tax and noncontrolling interest ( 1.4 ) 7.4 51.3 ( 48.6 )

Net (loss) income attributable to common stock and participating preferred stockholders $ ( 23.7 ) $ 12.7 $ ( 11.5 ) $ ( 70.8 )

Earnings allocable to common shares:

9 unchanged sentences

Numerator for earnings per share, basic:

Net loss from continuing operations attributable to common stock, basic $ ( 39.0 ) $ ( 27.5 )

Net income (loss) from discontinued operations attributable to common stock, basic $ 50.7 $ ( 56.0 )

Net income (loss) attributable to common stock, basic $ 11.7 $ ( 83.5 )

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Net (loss) income from continuing operations attributable to common stock, basic $ ( 22.3 ) $ 5.0 $ ( 62.8 ) $ ( 22.2 )

Net (loss) income from discontinued operations attributable to common stock, basic $ ( 1.4 ) $ 7.1 $ 51.3 $ ( 48.6 )

Net (loss) income attributable to common stock, basic $ ( 23.7 ) $ 12.1 $ ( 11.5 ) $ ( 70.8 )

Earnings allocable to common shares, diluted:

1 unchanged sentence

Effect of assumed shares under the if-converted method for convertible instruments $ — $ — $ — $ —

Net loss from continuing operations attributable to common stock, basic $ ( 39.0 ) $ ( 27.5 )

Net income (loss) from discontinued operations attributable to common stock, basic $ 50.7 $ ( 56.0 )

Net income (loss) attributable to common stock, basic $ 11.7 $ ( 83.5 )

Net (loss) income from continuing operations attributable to common stock, basic $ ( 22.3 ) $ 5.0 $ ( 62.8 ) $ ( 22.2 )

Net (loss) income from discontinued operations attributable to common stock, basic $ ( 1.4 ) $ 7.1 $ 51.3 $ ( 48.6 )

Net (loss) income attributable to common stock, basic $ ( 23.7 ) $ 12.1 $ ( 11.5 ) $ ( 70.8 )

Denominator for basic and dilutive earnings per share

2 unchanged sentences

Weighted average common shares outstanding - diluted 77.0 48.8 77.1 45.9

Loss per share - continuing operations

(Loss) income per share - continuing operations

Basic $ ( 0.29 ) $ 0.11 $ ( 0.82 ) $ ( 0.48 )

Diluted $ ( 0.29 ) $ 0.11 $ ( 0.82 ) $ ( 0.48 )

Income (loss) per share - discontinued operations

(Loss) income per share - discontinued operations

Basic $ ( 0.02 ) $ 0.15 $ 0.67 $ ( 1.06 )

Diluted $ ( 0.02 ) $ 0.14 $ 0.67 $ ( 1.06 )

Income (loss) per share - Net income (loss) attributable to common stock and participating preferred stockholders

(Loss) income per share - Net (loss) income attributable to common stock and participating preferred stockholders

Basic $ ( 0.31 ) $ 0.26 $ ( 0.15 ) $ ( 1.54 )

Diluted $ ( 0.31 ) $ 0.25 $ ( 0.15 ) $ ( 1.54 )

HC2 HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Subsequent Events

In preparing the unaudited Condensed Consolidated Financial Statements, the Company has evaluated events and transactions occurring after March 31, 2021 for recognition and/or disclosure purposes.

Based on this evaluation, there were no subsequent events from March 31, 2021 through the date the financial statements were issued.

On July 1, 2021, the Company completed the previously announced sale of its insurance segment, comprised of CIG and its wholly-owned subsidiaries, Continental General Insurance Company and Continental LTC Inc., to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of June 30, 2021, a beneficial owner of approximately 6.6 % of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020.

The total transaction value of approximately $ 90.0 million consists of a combination of $ 65.0 million in cash plus securities plus certain assets at CGI.

On July 1, 2021, CGI exchanged their Series A and Series A-2 Preferred Stock for new classes of Series A-3 and A-4 Preferred Stock with an extended maturity of July 1, 2026 and a redemption option at the Company's discretion, with other terms substantially unchanged from the terms in the Series A and Series A-2 Preferred Stock.

Concurrently with the sale of CGI and the exchange of the Series A and Series A-2 Preferred stock for new classes of Series A-3 and A-4 Preferred Stock, Michael Gorzynski, a director of the Company and executive chairman of Continental, increased his beneficial ownership of the Company's outstanding common stock to 10.8 %.

On July 14, 2021, HC2 Broadcasting had entered into an Asset Purchase Agreement for $ 6.5 million to sell its non-core channel share agreement.

On August 2, 2021, HC2 Broadcasting finalized the sale of two of its non-core full power stations for $ 4.0 million.

On July 21, 2021, the Company provided an additional $ 15.0 million in Series C funding to R2 Technologies Inc.

at a post-money valuation of $ 150.0 million.

The investment was made through HC2’s Life Sciences subsidiary, Pansend Life Sciences, LLC, increasing the Company's fully diluted ownership to 50.4 %.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements