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Item 9A. Controls and Procedures

2023-03-14 compared with 2022-03-09 · 1068 added, 1219 removed, 1183 unchanged (66% of the section changed)

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Further, the evaluation of the effectiveness of internal control over financial reporting described below was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

As permitted by SEC guidance, management excluded from its assessment the operations of the Banker Steel acquisition made during 2021, which is described in Note 5.

Acquisitions, Dispositions, and Deconsolidations to our Consolidated Financial Statements included in this Annual Report.

Banker Steel constituted 26.6% and 270.1% of total assets and net assets, respectively, as of December 31, 2021, and 22.4% and 6.1% of revenues and net income (loss), respectively, for the year ended December 31, 2021.

As of December 31, 2021, we were in the process of integrating Banker Steel's operations, including internal controls over financial reporting.

Such exclusion was in accordance with the SEC guidance that an assessment of a recently acquired business may be omitted in management’s report on internal controls over financial reporting, providing the acquisition took place within twelve months of management’s evaluation.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

19 unchanged sentences

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of Documents Filed

1) Financial Statements and Schedules

The financial statements as set forth under Item 8 of this Annual Report on Form 10-K are incorporated herein.

(b) Exhibit Index

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

(a) List of Documents Filed as Part of This Report:

1) Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Balance Sheets

Consolidated Statements of Stockholders’ Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2) Financial Statement Schedules

Financial statement schedules have been omitted since they either are not required, not applicable, or the information is otherwise included.

(3) Exhibit Index

The following is a list of exhibits filed (including those incorporated by reference) or furnished as part of this Annual Report on Form 10-K.

Number Description

2.1 Fourth Amended and Restated Limited Liability Company Agreement of Global Marine Holdings, LLC, dated as of November 30, 2017, by and among Global Marine Holdings, LLC and the Members party thereto (incorporated by reference to Exhibit 2.1 to HC2's Current Report on Form 8-K, filed on November 30, 2017) (File No.

2.2 Merger Agreement, dated as of May 2, 2018, by and among Janssen Biotech, Inc., Dogfish Merger Sub, Inc., Benevir Biopharm, Inc., and Shareholder Representative Services LLC, as holder representative (incorporated by reference to Exhibit 10.1 to HC2's Current Report on Form 8-K, filed on May 3, 2018) (File No.

2.3 Share Purchase Agreement dated January 30, 2020, by and among New Saxon 2019 Limited, Trafalgar AcquisitionCo., Ltd.

and Global Marine Holdings, Limited (solely for purposes of Section 2.04(a), Section 6.01, Section 6.02, Section 6.03, Section 6.07 and Article X) (incorporated by reference to Exhibit 2.1 to HC2's Current Report on Form 8-K, filed on January 30, 2020) (File No.

2.4 Agreement and Plan of Merger, dated as of December 30, 2020, by and among Beyond6, Inc., Greenfill Inc., Greenfill Merger, Inc., and HC2 Holdings, Inc., solely in its capacity as the Stockholders’ Representative (incorporated by reference to Exhibit 2.1 on HC2's Current Report on Form 8-K, filed December 31, 2020).

2.5 First Amendment to Agreement and Plan of Merger, dated as of January 15, 2021 (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by HC2 on January 19, 2021) (File No.

2.1 Fourth Amended and Restated Limited Liability Company Agreement of Global Marine Holdings, LLC, dated as of November 30, 2017, by and among Global Marine Holdings, LLC and the Members party thereto (incorporated by reference to Exhibit 2.1 to INNOVATE 's Current Report on Form 8-K, filed on November 30, 2017) (File No.

2.2 Merger Agreement, dated as of May 2, 2018, by and among Janssen Biotech, Inc., Dogfish Merger Sub, Inc., Benevir Biopharm, Inc., and Shareholder Representative Services LLC, as holder representative (incorporated by reference to Exhibit 10.1 to INNOVATE 's Current Report on Form 8-K, filed on May 3, 2018) (File No.

2.3 Share Purchase Agreement dated January 30, 2020, by and among New Saxon 2019 Limited, Trafalgar Acquisition Co., Ltd.

and Global Marine Holdings, Limited (solely for purposes of Section 2.04(a), Section 6.01, Section 6.02, Section 6.03, Section 6.07 and Article X) (incorporated by reference to Exhibit 2.1 to INNOVATE 's Current Report on Form 8-K, filed on January 30, 2020) (File No.

2.4 Agreement and Plan of Merger, dated as of December 30, 2020, by and among Beyond6, Inc., Greenfill Inc., Greenfill Merger, Inc., and INNOVATE C orp.

(f/k/a HC2 Holdings, Inc.

) , solely in its capacity as the Stockholders’ Representative (incorporated by reference to Exhibit 2.1 on INNOVATE 's Current Report on Form 8-K, filed December 31, 2020) (File No.

2.5 First Amendment to Agreement and Plan of Merger, dated as of January 15, 2021 , by and among Beyond6, Inc., Greenfill Inc., Greenfill Merger, Inc., and INNOVATE Corp (f/k/a HC2 Holdings, Inc.

) , solely in its capacity as the Stockholders’ Representative (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by INNOVATE on January 19, 2021) (File No.

2.6 Membership Interest Purchase Agreement, dated March 12, 2021 by and among DBM Global Inc., Bridge Fabrication Banker Holdings LLC, The Banker Family Irrevocable Trust #3 U/A/D December 22, 2009, Chesley F.

McPhatter, III, Richard Plant and Bridge Fabrication Banker Holdings LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by HC2 on March 15, 2021) (File No.

McPhatter, III, Richard Plant and Bridge Fabrication Banker Holdings LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by INNOVATE on March 15, 2021) (File No.

2.7 First Amendment to Membership Interest Purchase Agreement, dated May 25, 2021 by and among DBM Global Inc., Bridge Fabrication Banker Holdings LLC, The Banker Family Irrevocable Trust #3 U/A/D December 22, 2009, Chesley F.

McPhatter, III, Richard Plant and Bridge Fabrication Banker Holdings LLC (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by HC2 on May 27, 2021) (File No.

2.8 Stock Purchase Agreement, dated March 26, 2021, by and among HC2 Holdings 2, Inc., Continental Insurance Group, Ltd.

and Continental General Holdings LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by HC2 on March 29, 2021) (File No.

3.1 Second Amended and Restated Certificate of Incorporation of HC2 (incorporated by reference to Exhibit 3.1 to HC2’s Form 8-A, filed on June 20, 2011) (File No.

McPhatter, III, Richard Plant and Bridge Fabrication Banker Holdings LLC (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by INNOVATE on May 27, 2021) (File No.

2.8 Stock Purchase Agreement, dated March 26, 2021, by and among INNOVATE C orp 2 (f/k/a HC2 Holdings 2, Inc.

) , Continental Insurance Group, Ltd.

and Continental General Holdings LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by INNOVATE on March 29, 2021) (File No.

3.1 Second Amended and Restated Certificate of Incorporation of INNOVATE Corp (f/k/a HC2 Holdings, Inc.) (incorporated by reference to Exhibit 3.1 to INNOVATE ’s Form 8-A, filed on June 20, 2011) (File No.

3.2 Certificate of Ownership and Merger Merging PTGI Name Change, Inc.

into Primus Telecommunications Group, Incorporated (incorporated by reference to Exhibit 3.1 to HC2’s Current Report on Form 8-K, filed on October 18, 2013) (File No.

into Primus Telecommunications Group, Incorporated (incorporated by reference to Exhibit 3.1 to INNOVATE ’s Current Report on Form 8-K, filed on October 18, 2013) (File No.

3.3 Certificate of Ownership and Merger Merging HC2 Name Change, Inc.

into PTGI Holding, Inc.

(incorporated by reference to Exhibit 3.1 to HC2’s Current Report on Form 8-K, filed on April 11, 2014) (File No.

3.4 Certificate of Amendment to Second Amended and Restated Certificate of Incorporation of HC2 (incorporated by reference to Exhibit 3.1 to HC2’s Current Report on Form 8-K, filed on June 18, 2014) (File No.

(incorporated by reference to Exhibit 3.1 to INNOVATE ’s Current Report on Form 8-K, filed on April 11, 2014) (File No.

3.4 Certificate of Amendment to Second Amended and Restated Certificate of Incorporation of INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) (incorporated by reference to Exhibit 3.1 to INNOVATE ’s Current Report on Form 8-K, filed on June 18, 2014) (File No.

3.5 Certificate of Amendment No.

2 to Second Amended and Restated Certificate of Incorporation of HC2 Holdings, Inc.

(incorporated by reference to Exhibit 3.1 on HC2's Current Report on Form 10-K, filed on November 23, 2020 (File No.

3.6 Certificate of Amendment to the Certificate of Incorporation, as filed with the Secretary of State of Delaware on August 18, 2021, with an effective date of September 20, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 19, 2021) (File No.

3.7 Fourth Amended and Restated By-Laws of HC2 (incorporated by reference to Exhibit 3.1 to HC2's Current Report on Form 8-K, filed on February 25, 2019) (File No.

3.8 Amendment #1 to Fourth Amended and Restated By-Laws of INNOVATE Corp.

, effective September 20, 2021 (incorporated by reference to Exhibit 3.

2 to Second Amended and Restated Certificate of Incorporation of INNOVATE C orp .

(f/k/a HC2 Holdings, Inc.) (incorporated by reference to Exhibit 3.1 on INNOVATE 's Current Report on Form 10-K, filed on November 23, 2020 (File No.

3.6 Certificate of Amendment to Second Amended and Restated Certificate of Incorporation of INNOVATE Corp .

( f/k/a HC2 Holdings, Inc.) , as filed with the Secretary of State of Delaware on August 18, 2021, with an effective date of September 20, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 19, 2021) (File No.

3.7 Fourth Amended and Restated By-Laws of INNOVATE Corp (f/k/a HC2 Holdings, Inc.) (incorporated by reference to Exhibit 3.1 to INNOVATE 's Current Report on Form 8-K, filed on February 25, 2019) (File No.

3.8 Amendment #1 to Fourth Amended and Restated By-Laws of INNOVATE Corp., effective September 20, 2021 (incorporated by reference to Exhibit 3.

2 to the Current Report on Form 8-K filed on August 19, 2021) (File No.

3.9 Certificate of Designations of Series B Preferred Stock, dated August 30, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 30, 2021) (File No.

4.1 Indenture, dated as of November 20, 2018, by and among HC2, the guarantors party thereto and U.S.

Bank National Association (incorporated by reference to Exhibit 4.1 to HC2's Current Report on Form 8-K, filed on November 21, 2018) (File No.

4.2 Certificate of Designation for Series A Fixed-to-Floating Rate Perpetual Preferred Shares of DBM Global Inc., dated as of November 30, 2018 (incorporated by reference to Exhibit 2.4 to HC2's Current Report on Form 8-K, filed on December 4, 2018) (File No.

4.3 Certificate of Designation of Series A Fixed-to-Floating Rate Perpetual Preferred Stock of HC2 Broadcasting Holdings Inc., dated as of December 3, 2018 (incorporated by reference to Exhibit 2.15 to HC2's Annual Report on Form 10-K filed on March 12, 2019) (File No.

4.1 Indenture, dated as of November 20, 2018, by and among INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) , the guarantors party thereto and U.S.

Bank National Association (incorporated by reference to Exhibit 4.1 to INNOVATE 's Current Report on Form 8-K, filed on November 21, 2018) (File No.

4.2 Amended and Restated Certificate of Designation of Series A Fixed-to-Floating Rate Perpetual Preferred Stock of DBM Global Intermediate Holdco Inc.

(incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by HC2 Holdings, Inc.

("HC2") on July 7, 2021) (File No.

(incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by INNOVATE on July 7, 2021) (File No.

4.3 Secured Note dated October 24, 2019, by and among HC2 Station, HC2 LPTV, HC2 Broadcasting Inc.

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("HC2 Network") (collectively the "Subsidiary Borrowers"), HC2 Broadcasting Intermediate Holdings Inc.

("HC2 Intermediate") (the "Intermediate Parent"), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers"), and MSD PCOF Partners XVIII, LLC ("MSD") (incorporated by reference to Exhibit 4.12 to HC2's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

4.6 Amended and Restated Secured Note dated October 24, 2019, by and among HC2 Station, HC2 LPTV, HC2 Broadcasting, Amended and Restated Secured Note dated October 24, 2019, by and among HC2 Station, HC2 LPTV, HC2 Broadcasting, HC2 Network (collectively, the "Subsidiary Borrowers"), HC2 Intermediate (the "Intermediate Parent), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers", Great American Life Insurance Company ("GALIC") and Great American Insurance Company ("GAIC").

(collectively, the "Subsidiary Borrowers"), HC2 Intermediate (the "Intermediate Parent), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers", Great American Life Insurance Company ("GALIC") and Great American Insurance Company ("GAIC") (incorporated by reference to Exhibit 4.13 to HC2's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

4.7 First Omnibus Amendment to Secured Notes and Intercreditor Agreement by and among Station Group , LPTV , Broadcasting , Network , and HC2 Broadcasting Inc.

, Intermedia te Parent , Parent Borrower , and MSD PCOF Partners, XVIII, LLC ("MSD"), GA L IC and GAIC (incorporated by reference to Exhibit 4.1 to HC2’s Quarterly Report on Form 10-Q, filed on May 11, 2020) (File No.

4.8 First Supplemental Indenture dated August 19, 2020, between HC2 Holdings, Inc.

("HC2") and U.S.

Bank National Association (incorporated by reference to Exhibit 4.1 of HC2's Quarterly Report on Form 10-Q, filed on November 9, 2020) (File No.

4.90 Indenture governing the 8.500% senior secured notes due 2026, dated as of February 1, 2021, by and among HC2 Holdings, Inc., the guarantors party thereto and U.S.

Bank National Association (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by HC2 on February 1, 2021) (File No.

4.10 Form of 8.500% senior secured notes due 2026 (included in exhibit 4.1) (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by HC2 on February 1, 2021) (File No.

4.11 Indenture governing the 7.5% convertible senior notes due 2026, dated as of February 1, 2021, by and between HC2 Holdings, Inc.

Bank National Association (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by HC2 on February 1, 2021) (File No.

4.12 Form of 7.5% convertible senior notes due 2026 (included in exhibit 4.3) (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed by HC2 on February 1, 2021) (File No.

4.13 Certificate of Designation of Series A-3 Convertible Participating Preferred Stock of HC2 Holdings, Inc.

(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by HC2 Holdings, Inc.

("HC2") on July 7, 2021) (File No.

4.14 Certificate of Designation of Series A-4 Convertible Participating Preferred Stock of HC2 Holdings, Inc.

(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by HC2 Holdings, Inc.

("HC2") on July 7, 2021) (File No.

("HC2 Intermediate") (the "Intermediate Parent"), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers"), and MSD PCOF Partners XVIII, LLC ("MSD") (incorporated by reference to Exhibit 4.12 to INNOVATE 's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

4.4 Amended and Restated Secured Note dated October 24, 2019, by and among HC2 Station, HC2 LPTV, HC2 Broadcasting, HC2 Network (collectively, the "Subsidiary Borrowers"), HC2 Intermediate (the "Intermediate Parent), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers", Great American Life Insurance Company ("GALIC") and Great American Insurance Company ("GAIC").

(collectively, the "Subsidiary Borrowers"), HC2 Intermediate (the "Intermediate Parent), HC2 Broadcasting Holdings (the "Parent Borrower" and, together with the Intermediate Parent and the Subsidiary Borrowers, the "Borrowers", Great American Life Insurance Company ("GALIC") and Great American Insurance Company ("GAIC") (incorporated by reference to Exhibit 4.13 to INNOVATE 's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

4.5 First Omnibus Amendment to Secured Notes and Intercreditor Agreement by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC (incorporated by reference to Exhibit 4.1 to INNOVATE ’s Quarterly Report on Form 10-Q, filed on May 11, 2020) (File No.

4.6 First Supplemental Indenture dated August 19, 2020, between INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.

Bank National Association (incorporated by reference to Exhibit 4.1 of INNOVATE 's Quarterly Report on Form 10-Q, filed on November 9, 2020) (File No.

4.7 Indenture governing the 8.500% senior secured notes due 2026, dated as of February 1, 2021, by and among INNOVATE Corp.

( f/k/a HC2 Holdings, Inc.

) , the guarantors party thereto and U.S.

Bank National Association (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by INNOVATE on February 1, 2021) (File No.

4.8 Form of 8.500% senior secured notes due 2026 (included in exhibit 4.1) (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by INNOVATE on February 1, 2021) (File No.

4.9 Indenture governing the 7.5% convertible senior notes due 2026, dated as of February 1, 2021, by and between INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.

Bank National Association (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by INNOVATE on February 1, 2021) (File No.

4.10 Form of 7.5% convertible senior notes due 2026 (included in exhibit 4.3) (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed by I N NOVATE on February 1, 2021) (File No.

4.11 Certificate of Designation of Series A-3 Convertible Participating Preferred Stock of INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.

) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by INNOVATE on July 7, 2021) (File No.

4.12 Certificate of Designation of Series A-4 Convertible Participating Preferred Stock of INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.

) (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by INNOVATE on July 7, 2021) (File No.

4.13 Tax Benefits Preservation Plan, dated August 30, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on August 30, 2021) (File No.

4.16 Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

4.14 Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 7 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

4.15 Agreement Re:

Secured Notes, dated January 22, 2019, by and among HC2 Station, HC2 LPTV and the Institutional Investors (incorporated by reference to Exhibit 10.1 to HC2's Current Report on Form 8-K, filed on January 23, 2019) (File No.

10.1^ HC2 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit A to HC2’s Definitive Proxy Statement, filed on April 30, 2014) (File No.

10.2^ Reformed and Clarified Option Agreement, dated October 26, 2014, by and between HC2 and Philip Falcone (incorporated by reference to Exhibit 10.18.1 on HC2's Annual Report on Form 10-K, filed on March 16, 2015) (File No.

10.3^ Form of Option Agreement (Additional Time Contingent Option) by and between HC2 and Philip Falcone (incorporated by reference to Exhibit 10.18.2 on HC2's Annual Report on Form 10-K, filed on March 16, 2015) (File No.

10.4^ Form of Option Agreement (Contingent Option) by and between HC2 and Philip Falcone (incorporated by reference to Exhibit 10.18.3 on HC2's Annual Report on Form 10-K, filed on March 16, 2015) (File No.

10.5^ Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 on HC2’s Current Report on Form 8-K, filed on September 22, 2014) (File No.

10.6^ Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 on HC2’s Current Report on Form 8-K, filed on September 22, 2014) (File No.

10.7^ Amended and Restated Employment Agreement, effective as of November 25, 2020, by and between HC2 Holdings, Inc.

Secured Notes, dated January 22, 2019, by and among HC2 Station, HC2 LPTV and the Institutional Investors (incorporated by reference to Exhibit 10.1 to INNOVATE 's Current Report on Form 8-K, filed on January 23, 2019) (File No.

10.1^ INNOVATE Corp.

(f/k/a HC2 Holdings Inc.) 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit A to INNOVATE’s Definitive Proxy Statement, filed on April 30, 2014) (File No.

10.2^ Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 on INNOVATE ’s Current Report on Form 8-K, filed on September 22, 2014) (File No.

10.3^ Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 on INNOVATE ’s Current Report on Form 8-K, filed on September 22, 2014) (File No.

10.4^ Amended and Restated Employment Agreement, effective as of November 25, 2020, by and between INNOVATE Corp (f / k/a HC2 Holdings, Inc.

) and Wayne Barr, Jr.

(incorporated by reference to Exhibit 10.1 on HC2's Current Report on Form 8-K, filed on November 30, 2020) (File No.

10.8^ Employment Agreement dated as of March 1, 2015, by and between HC2 and Suzi R.

Herbst (incorporated by reference to Exhibit 10.55 to HC2's Annual Report on Form 10-K, filed on March 9, 2017) (File No.

10.9^ Employment Agreement dated as of September 11, 2017, by and between HC2 and Joseph Ferraro (incorporated by reference to Exhibit 10.1 to HC2's Quarterly Report on Form 10-Q, filed on November 8, 2017) (File No.

10.10^ Employment Agreement, dated May 20, 2015, by and between HC2 and Michael Sena (incorporated by reference to Exhibit 10.2 on HC2’s Quarterly Report on Form 10-Q, filed on August 10, 2015) (File No.

10.11^ Form of Employee Nonqualified Option Award Agreement (incorporated by reference to Exhibit 10.4 on HC2’s Quarterly Report on Form 10-Q, filed on August 9, 2016) (File No.

10.12^ Revised Form of Indemnification Agreement of HC2 (incorporated by reference to Exhibit 10.1 on HC2’s Quarterly Report on Form 10-Q, filed on November 9, 2016) (File No.

10.13^ Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to HC2's Current Report on Form 8-K, filed on June 14, 2017) (File No.

10.14^ HC2 Amended and Restated 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit B to the HC2 Definitive Proxy Statement filed on April 26, 2017 ) (File No.

(incorporated by reference to Exhibit 10.1 on INNOVATE 's Current Report on Form 8-K, filed on November 30, 2020) (File No.

10.5^ Employment Agreement dated as of March 1, 2015, by and between INNOVATE Corp (f/k/a HC2 Holdings, Inc.) and Suzi R.

Herbst (incorporated by reference to Exhibit 10.5 4 to INNOVATE 's Annual Report on Form 10-K, filed on March 9, 2017) (File No.

10.6^ Employment Agreement dated as of September 11, 2017, by and between INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) and Joseph Ferraro (incorporated by reference to Exhibit 10.1 to INNOVATE 's Quarterly Report on Form 10-Q, filed on November 8, 2017) (File No.

10.7^ Employment Agreement, dated May 20, 2015, by and between INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) and Michael Sena (incorporated by reference to Exhibit 10.2 on INNOVATE ’s Quarterly Report on Form 10-Q, filed on August 10, 2015) (File No.

10.8^ Form of Employee Nonqualified Option Award Agreement (incorporated by reference to Exhibit 10.4 on INNOVATE ’s Quarterly Report on Form 10-Q, filed on August 9, 2016) (File No.

10.9^ Revised Form of Indemnification Agreement of INNOVATE Corp .

(f/k/a HC2 Holdings, Inc.) (incorporated by reference to Exhibit 10.1 on INNOVATE ’s Quarterly Report on Form 10-Q, filed on November 9, 2016) (File No.

10.10^ Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to INNOVATE 's Current Report on Form 8-K, filed on June 14, 2017) (File No.

10.11^ INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) Amended and Restated 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit B to the INNOVATE Definitive Proxy Statement filed on April 26, 2017) (File No.

10.12 Securities Purchase Agreement dated as of June 27, 2017 among DTV Holding Inc., John N.

3 unchanged sentences

Dagen, Trustees of the Kim Ann Dagen Revocable Living Trust Agreement dated March 2, 1999, Madison Avenue Ventures, LLC, Paul Donner, Reeves Callaway, Don Shalhub, Shalhub Medical Investments PA, Tipi Sha, LLC, Luis O.

Suau, Irwin Podhajser and Humberto Garriga (incorporated by reference to Exhibit 10.1 to HC2's Current Report on Form 8-K, filed on June 28, 2017) (File No.

10.16 Investor Rights Agreement dated as of June 27, 2017 between DTV Holding Inc., DTV America Corporation and other signatories party thereto (incorporated by reference to Exhibit 10.2 to HC2's Current Report on Form 8-K, filed on June 28, 2017) (File No.

Suau, Irwin Podhajser and Humberto Garriga (incorporated by reference to Exhibit 10.1 to INNOVATE 's Current Report on Form 8-K, filed on June 28, 2017) (File No.

10.13 Investor Rights Agreement dated as of June 27, 2017 between DTV Holding Inc., DTV America Corporation and other signatories party thereto (incorporated by reference to Exhibit 10.2 to INNOVATE 's Current Report on Form 8-K, filed on June 28, 2017) (File No.

10.14 Asset Purchase Agreement dated as of June 27, 2017 among DTV Holding Inc., King Forward, Inc., Tiger Eye Broadcasting Corporation, Tiger Eye Licensing L.L.C.

and Bella Spectra Corporation (incorporated by reference to Exhibit 10.3 to HC2's Current Report on Form 8-K, filed on June 28, 2017) (File No.

10.18^ HC2 Second Amended and Restated 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit A to the HC2 Definitive Proxy Statement, filed on April 30, 2018) (File No.

10.19 Second Amended & Restated Limited Liability Company Agreement of Pansend Life Sciences, LLC, dated as of September 20, 2017, by and among HC2 Holdings 2, Inc., David Present and Cherine Plumaker (incorporated by reference to Exhibit 10.2 to HC2's Current Report on Form 8-K, filed on May 3, 2018) (File No.

and Bella Spectra Corporation (incorporated by reference to Exhibit 10.3 to INNOVATE 's Current Report on Form 8-K, filed on June 28, 2017) (File No.

10.15^ INNOVATE Corp (f/k/a HC2 Holdings, Inc.) Second Amended and Restated 2014 Omnibus Equity Award Plan (incorporated by reference to Exhibit A to INNOVATE's Definitive Proxy Statement, filed on April 30, 2018) (File No.

10.16 Second Amended & Restated Limited Liability Company Agreement of Pansend Life Sciences, LLC, dated as of September 20, 2017, by and among INNOVATE C orp 2 (f/k/a HC2 Holdings 2, Inc.

) , David Present and Cherine Plumaker (incorporated by reference to Exhibit 10.2 to INNOVATE 's Current Report on Form 8-K, filed on May 3, 2018) (File No.

10.17 Securities Purchase Agreement, by and between DBM Global Inc.

and DBM Global Intermediate Holdco Inc., dated November 30, 2018 (incorporated by reference to Exhibit 2.3 to HC2's Current Report on Form 8-K, filed on December 4, 2018) (File No.

and DBM Global Intermediate Holdco Inc., dated November 30, 2018 (incorporated by reference to Exhibit 2.3 to INNOVATE 's Current Report on Form 8-K, filed on December 4, 2018) (File No.

10.18 Ninth Amended and Restated Agreement Re:

Secured Notes dated October 24, 2019, among HC2 Station, HC2 LPTV, HC2 Network, HC2 Broadcasting, GALIC, GAIC and MSD (incorporated by reference to Exhibit10.38 to HC2's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

10.22 Investment Agreement, dated as of September 9, 2020, by and between HC2 Holdings, Inc.

and Lancer Capital, LLC (incorporated by reference to Exhibit 10.1 on HC2's Current Report on Form 8-K, filed on September 9, 2020 (File No.

10.23 Form of Registration Rights Agreement by and between HC2 and Lancer Capital LLC (included in Exhibit 10.1) (incorporated by reference to Exhibit 10.2 on HC2's Current Report on Form 8-K, filed on September 9, 2020 (File No.

10.24 Third Omnibus Ame ndment to Secured Notes and Second Amendment to Intercreditor Agreement by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC (incorporated by reference to Exhibit 10.3 on HC2's Current Report on Quarterly Report on Form 10-Q filed on November 9, 2020) (File No.

10.25 Credit Agreement, dated as of May 27, 2021, by and among DBM Global Inc., the other Borrowers listed on Schedule 1.1 thereto, the Lenders, which are party thereto from time to time and UMB Bank, n.a., a national banking association, as Letter of Credit Issuer and as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by HC2 Holdings, Inc.

("HC2") on May 27, 2021) (File No.

10.26 HC2 Preferred Support Agreement, dated July 1, 2021, by and among HC2 Holdings, Inc., Continental General Insurance Company and Continental General Holdings LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by HC2 on July 1, 2021) (File No.

10.27 DBM Common Support Agreement, dated July 1, 2021, by and among HC2 Holdings, Inc., Continental General Insurance Company and Continental General Holdings LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by HC2 on July 1, 2021 (File No.

10.28 Form of Exchange Agreement, dated July 1, 2021, by and among HC2 Holdings, Inc.

and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by HC2 Holdings, Inc.

("HC2") on July 7, 2021) (File No.

10.29 Second Amended and Restated Registration Rights Agreement, dated as of January 5, 2015, by and among HC2 Holdings, Inc., the initial purchasers of the Series A Preferred Stock, the initial purchasers of the Series A Preferred Stock and the purchasers of the Series A-2 Preferred Stock (incorporated by reference to Exhibit 10.2 on the Company's Current Report on Form 8-K, filed on January 9, 2015) (File No.

10.3 Letter Agreement dated March 26, 2021 by and between HC2 Holdings, Inc.

and Continental General Insurance Company (incorporated by reference to Exhibit 10.

5 to the Quarterly Report on Form 10- Q filed by HC2 on August 6 , 2021) (File No.

10.31 Fifth Omnibus Amendment to Secured Notes, Consent and Second Amendment to Asset Sale Under Secured Notes and Intercreditor Agreement , dated as of October 21, 2021 by and among HC2 Station Group, Inc., HC2 LPTV Holdings, Inc., HC2 Broadcasting Inc., HC2 Network Inc., HC2 Broadcasting License Inc., HC2 Broadcasting Intermediate H oldings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, Great American Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE Corp.

on October 27, 2021) (File No.

10.32^ Executive Severance Guidelines (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE Corp.

on October 27, 2021) (File No.

10.33 Second Omnibus Amendment to Secured Notes dated as of August 31, 2020, by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC (filed herewith).

10.34 Fourth Omnibus Amendment to Secured Notes and Third Amendment to Intercreditor Agreement, dated as of November 25, 2020, by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC (filed herewith),

Secured Notes dated October 24, 2019, among HC2 Station, HC2 LPTV, HC2 Network, HC2 Broadcasting, GALIC, GAIC and MSD (incorporated by reference to Exhibit 10.38 to INNOVATE 's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

10.19 Investment Agreement, dated as of September 9, 2020, by and between INNOVATE Corp (f/ k/a HC2 Holdings, Inc.

) and Lancer Capital, LLC (incorporated by reference to Exhibit 10.1 on INNOVATE 's Current Report on Form 8-K, filed on September 9, 2020 (File No.

10.20 Form of Registration Rights Agreement by and between INNOVATE Corp (f/k /a HC2 Holdings, Inc.) and Lancer Capital LLC (incorporated by reference to Exhibit 10.2 (included in Exhibit 10.1) on INNOVATE 's Current Report on Form 8-K, filed on September 9, 2020 (File No.

10.21 Third Omnibus Amendment to Secured Notes and Second Amendment to Intercreditor Agreement by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC (incorporated by reference to Exhibit 10.3 on INNOVATE 's Current Report on Quarterly Report on Form 10-Q filed on November 9, 2020) (File No.

10.22 Credit Agreement, dated as of May 27, 2021, by and among DBM Global Inc., the other Borrowers listed on Schedule 1.1 thereto, the Lenders, which are party thereto from time to time and UMB Bank, n.a., a national banking association, as Letter of Credit Issuer and as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on May 27, 2021) (File No.

10.23 INNOVATE Corp.

Executive Bonus Plan (filed herewith) .

10.36^ Form of Restricted Stock Award Agreement (filed herewith).

10.37^ Form of Stock Option Agreement (filed herewith).

10.38^ Form of Director Restricted Stock Award Agreement (filed herewith).

(f/k/a HC2 Holdings, Inc.) Preferred Support Agreement, dated July 1, 2021, by and among INNOVATE Corp.

, Continental General Insurance Company and Continental General Holdings LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on July 1, 2021) (File No.

10.24 DBM Common Support Agreement, dated July 1, 2021, by and among INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.

) , Continental General Insurance Company and Continental General Holdings LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE on July 1, 2021 (File No.

10.25 Form of Exchange Agreement, dated July 1, 2021, by and among INNOVATE Corp.

(f/ k/a HC2 Holdings, Inc.

) and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on July 7, 2021) (File No.

10.26 Second Amended and Restated Registration Rights Agreement, dated as of January 5, 2015, by and among INNOVATE Corp ( f/k/a HC2 Holdings, Inc.

) , the initial purchasers of the Series A Preferred Stock, the initial purchasers of the Series A Preferred Stock and the purchasers of the Series A-2 Preferred Stock (incorporated by reference to Exhibit 10.2 on INNOVATE's Current Report on Form 8-K, filed on January 9, 2015) (File No.

10.27 Letter Agreement dated March 26, 2021 by and between INNOVATE Corp (f/k/a HC2 Holdings, Inc.

) and Continental General Insurance Company (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed by INNOVATE's on August 6, 2021) (File No.

10.28 Fifth Omnibus Amendment to Secured Notes, Consent and Second Amendment to Asset Sale Under Secured Notes and Intercreditor Agreement, dated as of October 21, 2021 by and among HC2 Station Group, Inc., HC2 LPTV Holdings, Inc., HC2 Broadcasting Inc., HC2 Network Inc., HC2 Broadcasting License Inc., HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, Great American Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on October 27, 2021) (File No.

10.29^ Executive Severance Guidelines (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE o n October 27, 2021) (File No.

10.30 Second Omnibus Amendment to Secured Notes dated as of August 31, 2020, by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC ( incorporated by reference to Exhibi t 10.33 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

10.31 Fourth Omnibus Amendment to Secured Notes and Third Amendment to Intercreditor Agreement, dated as of November 25, 2020, by and among Station Group, LPTV, Broadcasting, Network, and HC2 Broadcasting Inc., Intermediate Parent, Parent Borrower, and MSD PCOF Partners, XVIII, LLC ("MSD"), GALIC and GAIC ( incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

10.32^ 2019 INNOVATE Corp.

Executive Bonus Plan ( incorporated by reference to Exhibit 10.35 to th e Annual Report on Form 10-k f iled on March 9, 2022) (File No.

001-35210) ).

10.33^ Form of Restricted Stock Award Agreement ( incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10 -K filed on March 9, 2022) (File No.

10.34^ Form of Stock Option Agreement ( incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

10.35^ Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

10.36 First Amendment to Credit Agreement dated as of August 2, 2022, among DBM Global Inc.

and the Other Borrowers, the Lenders, U MB Bank, as Administrative Agent and BMO Harris Bank N.A., as Syndication Agent (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 2 , 2022) (File No.

10.37 S eparation and Release Agreement by and between INNOVA TE Corp.

and Joseph A.

Ferraro dated September 13, 2022 (incorporated by reference to Exhibit 10.

1 to the Current Report on Form 8-K, filed on September 16, 2022) (File No.

10.38 Senior Secured Promissory Note dated as of July 13, 2022 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q , filed on November 2 , 2022) (File No.

10.39 S enior Secured Promissory Note dated as of August 8, 2022 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q , filed on November 2 , 2022) (File No.

10.40 Sixth Omnibus Amendment to Secured Notes, dated as of November 28, 2022 , by and among HC2 Station Group, Inc., HC2 LPTV Holdings, Inc., HC2 Broadcasting Inc., HC2 Network Inc., HC2 Broadcasting License Inc.

, DTV America Corporation , HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascent Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on November 29, 2022 ) (File No.

10.41 Letter Agreement with Continental General Insurance Company dated December 30, 2022 (inco rporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on January 5, 2023) (File No.

10.42 Seventh Omnibus Amendment to Secured Notes, dated as of December 30, 2022, by and among HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network Inc., HC2 Broadcasting License Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascent Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE on January 5, 2023) (File No.

10.43 M utual Release and Termination Agreement dated as of December 31, 2022, by and among Azteca International Corporation and TV Azteca, S.A.B.

, HC2 Network, Inc.

and TV Azteca , S.A.B.

(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by INNOVATE on January 5, 2023) (File No.

10.44 Senior Secured Promissory Note dated as of December 13, 2022 by and between R2 Technologies, Inc.

and Lancer Capital LLC (filed herewith)

21.1 Subsidiaries of INNOVATE (filed herewith).

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32.1* Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (furnished herewith).

101 The following materials from the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in extensible business reporting language (XBRL);

101 The following materials from the registrant’s Annual Report on Form 10-K for the fiscal years ended December 31, 2022, formatted in extensible business reporting language (XBRL);

(i) Consolidated Statements of Operations for the years ended December 31, 2022 and 2021, (ii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021, (iii) Consolidated Balance Sheets at December 31, 2022 and 2021, (iv) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021, and (vi) Notes to Consolidated Financial Statements (filed herewith).

104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (included as Exhibit 101).

* These certifications are being "furnished" and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

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FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Sena, and each of them, his true and lawful attorneys-in-fact, with full power and substitution, for him in any and all capacities, to execute and cause to be filed with the SEC any and all amendments to this Annual Report on Form 10-K, with exhibits thereto and other documents connected therewith and to perform any acts necessary to be done in order to file such documents, and hereby ratifies and confirms all that said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of March 14, 2023.

Signature Title

/S/ WAYNE BARR, JR.

President and Chief Executive Officer (Principal Executive Officer) and Director March 9, 2022

President and Chief Executive Officer (Principal Executive Officer) and Director

Wayne Barr, Jr.

/S/ MICHAEL J.

SENA Chief Financial Officer (Principal Financial and Accounting Officer) March 9, 2022

/S/ KENNETH S.

COURTIS Director March 9, 2022

SENA Chief Financial Officer (Principal Financial and Accounting Officer)

GLAZER Director

/S/ WARREN H.

GFELLER Director March 9, 2022

GLAZER Director March 9, 2022

/S/ MICHAEL GORZYNSKI Director March 9, 2022

Michael Gorzynski

/S/ SHELLY LOMBARD Director March 9, 2022

Shelly Lombard

GFELLER Director

GOLDSTEIN Director

/S/ AMY WILKINSON Director

Amy Wilkinson

INNOVATE CORP.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

Reports of Independent Registered Public Accounting Firm ( BDO USA, LLP , New York, NY ;

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP , New York, NY ;

PCAOB ID# 243 )

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2021 and 2020

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Balance Sheets

Consolidated Statements of Stockholders’ Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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(2) Summary of Significant Accounting Policies

(3) Discontinued Operations

(5) Acquisitions, Dispositions, and Deconsolidations

(3) Revenue and Contracts in Process

(4) Accounts Receivable, Net

(5) Inventory

(6) Investments

(7) Property, Plant and Equipment, Net

(8) Goodwill and Intangible Assets

(8) Goodwill and Intangibles, Net

(9) Acquisitions

(10) Discontinued Operations

(12) Other Assets, Accrued Liabilities and Other Liabilities

(13) Debt Obligations

(10) Supplementary Financial Information

(14) Income Taxes

(1 5 ) Commitments and Contingencies

(1 6 ) Employee Retirement Plans

(17) Share-Based Compensation

(18) Temporary Equity and Equity

(19) Related Parties

(17) Operating Segment and Related Information

(18) Basic and Diluted Income (Loss) Per Common Share

(20) Operating Segments and Related Information

(21) Basic and Diluted Loss Per Common Share

(2 2 ) Fair Value of Financial Instruments

(2 3 ) Supplementary Financial Information

(24) Subsequent Events

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We have audited the accompanying consolidated balance sheets of INNOVATE Corp.

(the “Company”) and subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Estimated Costs to Complete

As described in Note 4 to the consolidated financial statements, with respect to the Company's Infrastructure segment (DBM Global Inc.), the Company recognizes a significant portion of its revenue over time using the input method to measure the progress of costs incurred for its service and construction contracts.

The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers and financial professionals.

Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition.

We identified estimated costs to complete on specific revenue contracts as a critical audit matter.

The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions.

Total estimated costs to complete projects include various costs such as direct material, labor, subcontract costs, indirect labor, and fabrication plant overhead costs.

Changes in these estimates can have a significant impact on the revenue recognized each period.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs to Complete for a Certain Segment

As described in Note 3 to the consolidated financial statements, with respect to the Company's Infrastructure segment (“DBMG”), the Company recognizes a significant portion of its revenue over time using the input method to measure progress for its service and construction contracts based on the costs incurred towards delivery to complete projects.

The estimate of costs to complete these projects is based on direct materials and labor costs related to contract performance, subcontractor costs, indirect labor, and fabrication plant overhead costs.

Changes in the scope of the contract and price changes, the timing of when work has commenced, and probability that cost changes will be recovered are among the factors that influence the estimate of progress for measuring service and construction contracts.

We identified estimated costs to complete on specific revenue contracts at DBMG as a critical audit matter.

The determination of the total estimated costs to complete requires management to make significant estimates and assumptions regarding direct materials and labor, subcontract costs, indirect labor, and fabrication plant overhead costs.

Changes in the estimates of these costs can have a significant impact on the revenue recognized each period.

Auditing these elements involved especially challenging auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.

The primary procedures we performed to address this critical audit matter included:

• Assessing the reasonableness of the estimated costs to complete for a sample of open projects through:

(i) evaluating the reasonableness of project budgets and the nature of costs required to complete open projects, (ii) assessing the status of completion of respective projects through testing of a sample of project costs incurred to date, (iii) evaluating the reasonableness of project status by performing inquiries of project managers and assessing the nature of activities required to complete open projects, and (iv) performing retrospective review for open projects and investigating budget to actual variances (if any).

• Assessing the reasonableness of changes in estimated costs to complete during quarterly reviews and at year end and investigating reasons for changes in expected costs and project margins.

• Evaluating the reasonableness of a sample of project budgets for projects completed during the year through a retrospective review against actual performance at project completion.

Valuation of Investment in Securities

With respect to the sale of the Company's Insurance segment, Continental Insurance Group Ltd (“CIG”) disclosed in Note 3 to the consolidated financial statements, the carrying value of the deconsolidated entity included Level 3 fixed maturity securities and equity securities at the sale closing date, a portion of which were valued based on non-binding broker quotes, as disclosed in Note 2 to the consolidated financial statements.

The lack of visibility into assumptions used in non-binding broker quotes are significant unobservable inputs, which create greater subjectivity when determining the fair values.

We identified the use of non-binding broker quotes as a critical audit matter.

The use of non-binding broker quotes was the significant unobservable input and assumption used by the Company in determining the fair value of certain financial instruments reflected as Level 3 fixed maturity securities and equity securities in circumstances where vendor pricing was not available at the sale closing date.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the valuation methodologies used by the Company for Level 3 fixed maturity securities and equity securities at the sale closing date.

• Comparing the Company’s fair value estimates of Level 3 fixed maturity securities and equity securities at the sale closing date to a range of fair value estimates independently calculated utilizing valuation specialists.

We evaluated information that corroborated or contradicted the Company’s fair value estimates, including observable yields, transaction data for similar securities, and historical collateral performance data.

Accounting for Issuance of Preferred Stock

As described in Note 15 to the consolidated financial statements, on July 1, 2021 and as a part of the sale of CIG which resulted in the deconsolidation of the entity, the Company entered into an agreement to exchange the remaining shares of the Series A and Series A-2 Convertible Participating Preferred Stock held by the now deconsolidated CGIC for an equivalent number of Series A-3 and Series A-4 Convertible Participating Preferred Stock and issued DBMGi Series A Preferred Stock to the now deconsolidated CGIC.

The terms of the Series A-3 and Series A-4 remained substantially the same, except that the Series A-3 and Series A-4 will mature on July 1, 2026.

The Series A-3 and Series A-4 Preferred Stock were classified as temporary equity as of December 31, 2021.

The DBMGi Series A Preferred Stock is redeemable at any time, in whole or in part, at the option of the Company, or at any time or by the holder prior to July 2026.

The DBMGi Series A Preferred Stock was classified as temporary equity as of December 31, 2021.

We identified the accounting for issuance of preferred stock as a critical audit matter.

Significant judgments and highly complex technical accounting guidance are required in the determination of the scope of the applicable accounting guidance and appropriate balance sheet classification, including the identification and evaluation of embedded features potentially requiring bifurcation as derivatives as well as the determination of initial and subsequent recognition and measurement, and the determination of any resulting adjustments to earnings per share.

Auditing these elements involved especially challenging and complex auditor judgment due to extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Reading and analyzing the contract terms related to the issuance of Series A-3 and A-4 Preferred Stock and the issuance of DBMGi Series A Preferred Stock.

• Evaluating the reasonableness of the conclusions made by the Company related to the accounting treatment for issuance of preferred stock, including the Company’s consideration of relevant accounting standards to analyze the proper balance sheet classification, the embedded features, and the initial and subsequent recognition and measurement.

• Reviewing and recalculating the computation of the Company’s earnings per share as of December 31, 2021.

• Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of Management’s application of relevant accounting guidance for the issuance of Preferred Stock.

Accounting for Exchange of Convertible Notes

As described in Notes 2 and 9 to the consolidated financial statements, on February 1, 2021, the Company entered into exchange agreements by which the Company exchanged the 2022 Convertible Notes for newly issued 7.50% convertible notes due 2026.

The Company accounted for this exchange under the debt extinguishment model and the embedded conversion feature contained in the 2026 Convertible Notes was recorded as a premium on the 2026 Convertible Notes.

We identified accounting for the exchange of convertible notes as a critical audit matter.

Significant judgments and highly complex technical accounting guidance are required in the determination of (i) whether the exchange of convertible notes was a modification or extinguishment of debt;

(ii) whether the conversion feature should be bifurcated and accounted for as a derivative and the substantial premium model should be applied, and (iii) whether the convertible notes should be recorded as a liability in its entirety.

Auditing these elements involved especially challenging and complex auditor judgment due to the nature and extent of audit effort required to evaluate management’s application of highly complex technical accounting guidance to these elements, including the extent of specialized skills or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Reading and analyzing the contract terms of the Indenture for the 7.50% Convertible Senior Notes due 2026 related to the exchange of convertible notes.

• Evaluating the reasonableness of the conclusions made by the Company related to the accounting treatment for modification or extinguishment of debt, including the Company’s consideration of relevant accounting standards to analyze the conversion feature, premium and classification and presentation of the instrument as a whole in the consolidated balance sheet.

• Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of management’s application of relevant technical accounting guidance to the exchange of convertible notes.

• Testing the operating effectiveness of internal controls related to revenue recognition at DBMG, specifically controls over the formation and tracking of estimated costs to complete.

• Assessing the reasonableness of the estimated costs to complete for specific open projects through:

• Assessing the reasonableness of changes in estimated costs to complete for specific projects during quarterly reviews and at year end and investigating reasons for changes in expected costs and project margins.

• Evaluating the reasonableness of project budgets for specific projects during the year through a retrospective review against actual performance.

We have served as the Company's auditor since 2011.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes and our report dated March 9, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for each of the years then ended, and the related notes and our report dated March 14, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Banker Steel Holdco LLC, which was acquired on May 27, 2021, and which is included in the consolidated balance sheets of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the year then ended.

Banker Steel Holdco constituted 26.6% and 270.1% of total assets and net assets, respectively, as of December 31, 2021, and 22.4% and 6.1% of revenues and net income (loss), respectively, for the year then ended.

Management did not assess the effectiveness of internal control over financial reporting of Banker Steel Holdco LLC because of the timing of the acquisition which was completed on May 27, 2021.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Banker Steel Holdco, LLC.

Definition and Limitations of Internal Control over Financial Reporting

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(in millions, except per share amounts)

FINANCIAL INFORMATION

Financial Statements

Years Ended December 31,

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Depreciation and amortization 27.2 25.4

Other operating loss (gain) 0.6 ( 6.5 )

Loss from operations ( 10.6 ) ( 28.3 )

Other operating loss 0.7 0.6

Income (loss) from operations 13.4 ( 10.6 )

Other (expense) income:

Interest expense ( 52.0 ) ( 59.1 )

Loss on early extinguishment or restructuring of debt ( 12.5 ) ( 9.4 )

Loss on extinguishment of debt — ( 12.5 )

Loss from equity investees ( 1.3 ) ( 2.8 )

Other income 4.3 69.2

Other (expense) income, net ( 1.2 ) 4.3

Loss from continuing operations before income taxes ( 41.1 ) ( 80.7 )

1 unchanged sentence

Loss from continuing operations ( 42.0 ) ( 86.3 )

Loss from discontinued operations (including loss on sale of $ 159.9 million and $ 44.1 million for the years ended December 31, 2021 and 2020, respectively)

( 149.9 ) ( 48.4 )

Loss from discontinued operations (including net loss on disposal of $ 159.9 million for the year ended December 31, 2021)

Net loss ( 42.0 ) ( 236.2 )

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Preferred dividends and deemed dividends from conversions 4.9 2.2

Net loss attributable to common stock and participating preferred stockholders $ ( 229.7 ) $ ( 95.6 )

Loss per common share - continuing operations

Basic $ ( 1.05 ) $ ( 1.25 )

Diluted $ ( 1.05 ) $ ( 1.25 )

Loss per common share - discontinued operations

Basic $ ( 1.93 ) $ ( 0.63 )

Diluted $ ( 1.93 ) $ ( 0.63 )

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

Basic $ ( 2.98 ) $ ( 1.88 )

Diluted $ ( 2.98 ) $ ( 1.88 )

Weighted average common shares outstanding:

Basic 77.1 50.3

Diluted 77.1 50.3

See notes to Consolidated Financial Statements

Net loss attributable to common stockholders $ ( 40.8 ) $ ( 229.7 )

Loss per common share - continuing operations - basic and diluted $ ( 0.53 ) $ ( 1.05 )

Loss per common share - discontinued operations - basic and diluted $ — $ ( 1.93 )

Loss per share - basic and diluted $ ( 0.53 ) $ ( 2.98 )

Weighted average common shares outstanding - basic and diluted 77.5 77.1

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATE CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

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Net loss $ ( 42.0 ) $ ( 236.2 )

Other comprehensive (loss) income

Other comprehensive loss

Foreign currency translation adjustment, net of tax ( 0.2 ) 2.1

Unrealized (loss) gain on available-for-sale securities, net of tax ( 57.7 ) 191.6

Dispositions ( 334.0 ) 30.3

Other comprehensive (loss) income ( 389.6 ) 229.8

Comprehensive (loss) income ( 625.8 ) 127.7

Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests ( 7.8 ) ( 8.2 )

Comprehensive (loss) income attributable to INNOVATE Corp.

Unrealized loss on available-for-sale securities, net of tax — ( 57.7 )

Dispositions, net of tax — ( 334.0 )

Other comprehensive loss $ ( 0.2 ) $ ( 389.6 )

Comprehensive loss ( 42.2 ) ( 625.8 )

Comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests 5.8 7.8

Comprehensive loss attributable to INNOVATE Corp.

$ ( 36.4 ) $ ( 618.0 )

See notes to Consolidated Financial Statements

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATE CORP.

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(in millions, except share amounts)

2021 December 31,

Current assets

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Total assets $ 1,151.7 $ 1,080.6

Liabilities, temporary equity and stockholders’ (deficit) equity

Liabilities, temporary equity and stockholders’ deficit

Current liabilities

3 unchanged sentences

Contract liabilities 98.6 79.1

Liabilities held for sale — 5,306.7

Other current liabilities 20.1 18.3

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Total temporary equity 61.0 68.1

Stockholders’ (deficit) equity

Stockholders’ deficit

Common stock, $ 0.001 par value

Shares authorized:

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

160,000,000 as of both December 31, 2022 and 2021

Shares issued:

79,225,964 and 77,836,586 at December 31, 2021 and December 31, 2020, respectively

80,216,028 and 79,225,964 as of December 31, 2022 and 2021, respectively

Shares outstanding:

77,836,748 and 76,726,835 at December 31, 2021 and December 31, 2020, respectively

78,787,768 and 77,836,748 as of December 31, 2022 and 2021, respectively

Additional paid-in capital 330.1 330.6

Treasury stock, at cost:

1,389,216 and 1,109,751 shares at December 31, 2021 and December 31, 2020, respectively

1,428,260 and 1,389,216 shares as of December 31, 2022 and 2021, respectively

( 5.3 ) ( 5.2 )

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Total INNOVATE Corp.

stockholders’ (deficit) equity ( 84.3 ) 559.8

stockholders’ deficit ( 121.3 ) ( 84.3 )

Noncontrolling interest 30.7 28.1

Total stockholders’ (deficit) equity ( 56.2 ) 600.2

Total liabilities, temporary equity and stockholders’ (deficit) equity $ 1,080.6 $ 6,723.8

See notes to Consolidated Financial Statements

Total stockholders’ deficit ( 90.6 ) ( 56.2 )

Total liabilities, temporary equity and stockholders’ deficit $ 1,151.7 $ 1,080.6

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATE CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in millions)

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Share-based compensation — — 2.4 — — — 2.4 — 2.4 —

Fair value adjustment of redeemable noncontrolling interest — — ( 1.3 ) — — — ( 1.3 ) — ( 1.3 ) 1.3

Preferred stock accretion — — ( 2.0 ) — — — ( 2.0 ) — ( 2.0 ) 2.0

Fair value adjustment to redeemable noncontrolling interest — — 0.2 — — — 0.2 — 0.2 0.1

Taxes paid in lieu of shares issued for share-based compensation — — — ( 1.0 ) — — ( 1.0 ) — ( 1.0 ) —

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Issuance of common stock 1.1 — 0.2 — — — 0.2 — 0.2 —

Rights Offering 16.8 0.1 34.4 — — — 34.5 — 34.5 —

Issuance of preferred stock — — — — — — — — — 19.1

Series B Preferred Share Conversion 11.9 — 27.0 — — — 27.0 — 27.0 ( 27.0 )

Issuance of redeemable controlling interest — — — — — — — — — 40.9

Purchase of preferred stock by subsidiary — — ( 0.3 ) — — — ( 0.3 ) — ( 0.3 ) —

Redemption of preferred shares — — — — — — — — — ( 10.4 )

Transactions with noncontrolling interests — — ( 22.2 ) — — — ( 22.2 ) ( 12.7 ) ( 34.9 ) 9.4

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Net loss — — — — ( 227.5 ) — ( 227.5 ) ( 2.0 ) ( 229.5 ) ( 6.7 )

Other comprehensive income — — — — — 228.2 228.2 9.0 237.2 1.5

Other comprehensive (loss) income — — — — — ( 390.5 ) ( 390.5 ) 0.9 ( 389.6 ) —

Balance as of December 31, 2021 77.8 $ 0.1 $ 330.6 $ ( 5.2 ) $ ( 416.2 ) $ 6.4 $ ( 84.3 ) $ 28.1 $ ( 56.2 ) $ 68.1

Share-based compensation — — 2.4 — — — 2.4 — 2.4 —

Fair value adjustment of redeemable noncontrolling interest — — 0.2 — — — 0.2 — 0.2 0.1

Fair value adjustment to redeemable noncontrolling interest — — 0.2 — — — 0.2 — 0.2 ( 0.2 )

Taxes paid in lieu of shares issued for share-based compensation — — — ( 0.1 ) — — ( 0.1 ) — ( 0.1 ) —

Preferred stock dividend — — ( 2.2 ) — — — ( 2.2 ) — ( 2.2 ) —

Stock dividends — — ( 2.7 ) — — — ( 2.7 ) ( 1.3 ) ( 4.0 ) ( 1.2 )

Issuance of common stock 1.0 — — — — — — — — —

Issuance of preferred stock — — — — — — — — — 19.1

Issuance of redeemable noncontrolling interest — — — — — — — — — 40.9

Purchase of preferred stock by subsidiary — — ( 0.3 ) — — — ( 0.3 ) — ( 0.3 ) —

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

Spectrum warrant modification — — — — — — — 3.1 3.1 —

Issuance of preferred stock for dividend — — ( 0.9 ) — — — ( 0.9 ) — ( 0.9 ) 0.9

Transactions with noncontrolling interests — — 0.2 — — — 0.2 ( 0.2 ) — 0.2

Other — — 0.3 — — — 0.3 — 0.3 —

Net loss — — — — ( 227.5 ) — ( 227.5 ) ( 2.0 ) ( 229.5 ) ( 6.7 )

Net (loss) income — — — — ( 35.9 ) — ( 35.9 ) 0.8 ( 35.1 ) ( 6.9 )

Other comprehensive (loss) income — — — — — ( 0.5 ) ( 0.5 ) 0.2 ( 0.3 ) 0.1

Balance as of December 31, 2022 78.8 $ 0.1 $ 330.1 $ ( 5.3 ) $ ( 452.1 ) $ 5.9 $ ( 121.3 ) $ 30.7 $ ( 90.6 ) $ 61.0

(a) Inclusive of other comprehensive income, foreign currency cumulative translation adjustments totaled $ 7.3 million and $ 13.4 million as of December 31, 2021 and 2020, respectively.

See notes to Consolidated Financial Statements

(a) Inclusive of other comprehensive (loss) income, foreign currency cumulative translation adjustments totaled $ 7.1 million and $ 7.3 million as of December 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATE CORP.

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Loss from discontinued operations, net of tax — ( 149.9 )

( 86.3 ) ( 53.7 )

Adjustments to reconcile net loss to cash provided by operating activities

Loss from continuing operations ( 42.0 ) ( 86.3 )

Adjustments to reconcile net loss to cash (used in) provided by continuing operating activities

Share-based compensation expense 2.4 2.4

Depreciation and amortization 37.6 26.8

Depreciation and amortization (including amounts in cost of revenue) 42.2 37.6

Amortization of deferred financing costs and debt discount 3.4 10.5

Amortization of discount on investments, net — ( 0.1 )

Loss on extinguishment of debt 12.5 9.4

Loss on debt extinguishment — 12.5

Loss from equity investees 1.3 2.8

Asset impairment expense 2.1 2.8

Net realized and unrealized gains on investments — ( 72.5 )

Deferred income taxes 1.1 2.0

Other operating activities ( 4.2 ) ( 10.3 )

Other operating activities, net — ( 4.2 )

Changes in assets and liabilities, net of acquisitions:

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Other current assets ( 6.0 ) ( 0.3 )

Inventory ( 1.9 ) ( 1.4 )

Other assets 16.9 12.0

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Cash provided by discontinued operating activities — 33.5

Cash provided by operating activities 27.0 41.1

Cash (used in) provided by operating activities ( 9.5 ) 27.0

Cash flows from investing activities

1 unchanged sentence

Proceeds from disposal of property, plant and equipment 2.0 13.2

Sale of investments — 0.6

Sale of equity method investments — 85.5

Loan to equity method investee ( 4.5 ) —

Cash received from dispositions, net of cash disposed — 74.0

2 unchanged sentences

Other investing activities 0.7 1.0

Cash (used in) provided by continuing investing activities ( 1.9 ) 261.9

Cash used in continuing investing activities ( 22.5 ) ( 1.9 )

Cash used in discontinued investing activities — ( 221.3 )

Cash (used in) provided by investing activities ( 223.2 ) 162.1

Cash used in investing activities ( 22.5 ) ( 223.2 )

Cash flows from financing activities

Proceeds from (Repayments of) debt obligations 487.6 ( 4.1 )

Proceeds from debt obligations, net of deferred financing costs 10.7 457.1

Principal payments on debt obligations ( 28.3 ) ( 458.1 )

Proceeds from sale of preferred stock — 38.0

Cash received by subsidiary to issue preferred stock 10.5 37.2

Proceeds from line of credit, net of deferred financing costs 176.7 206.0

Payments on line of credit ( 85.1 ) ( 175.5 )

Redemption of preferred stock — ( 10.4 )

Cash received by subsidiary to issue preferred stock — 10.5

Transactions with noncontrolling interests — ( 13.5 )

Dividend payments ( 5.2 ) ( 2.9 )

Other financing activities ( 0.7 ) ( 1.3 )

Cash provided by (used in) continuing financing activities 11.9 ( 182.5 )

Cash provided by continuing financing activities 68.1 11.9

Cash used in discontinued financing activities — ( 7.6 )

Cash provided by (used in) financing activities 4.3 ( 204.5 )

Cash provided by financing activities 68.1 4.3

Effects of exchange rate changes on cash, cash equivalents and restricted cash ( 1.4 ) ( 1.3 )

Net decrease in cash and cash equivalents, including restricted cash and cash classified within assets held for sale ( 193.2 ) ( 0.2 )

Net increase (decrease) in cash and cash equivalents, including restricted cash and cash classified within assets held for sale 34.7 ( 193.2 )

Net decrease in cash and cash equivalents from discontinued operations — ( 195.4 )

2 unchanged sentences

Cash, cash equivalents and restricted cash, end of period $ 82.2 $ 47.5

See notes to Consolidated Financial Statements

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATE CORP.

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INNOVATE Corp.

("INNOVATE", formerly known as HC2 Holdings, Inc.) and, together with its consolidated subsidiaries, the "Company", "we" and "our") is a diversified holding company that has a portfolio of subsidiaries in a variety of operating segments.

("INNOVATE" and, together with its consolidated subsidiaries, the "Company", "we" and "our") is a diversified holding company that has a portfolio of subsidiaries in a variety of operating segments.

We seek to grow these businesses so that they can generate long-term sustainable free cash flow and attractive returns in order to maximize value for all stakeholders.

While the Company generally intends to acquire controlling equity interests in its operating subsidiaries, the Company may invest to a limited extent in a variety of debt instruments or noncontrolling equity interest positions.

While the Company generally intends to acquire controlling equity interests in its operating subsidiaries, the Company may invest to a limited extent in a variety of noncontrolling equity interest positions or debt instruments.

The Company’s shares of common stock trade on the NYSE under the symbol "VATE".

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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.

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 full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services.

Through GrayWolf Industrial Inc.

("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, Inc., DBMG manufactures pollution control scrubbers, tunnel liners, pressure vessels, strainers, filters, separators and a variety of customized products.

Through Banker Steel Holdco, LLC ("Banker Steel"), DBMG provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services.

The Company maintains an approximately 91 % controlling interest in DBMG.

Our Life Sciences segment is comprised of Pansend Life Sciences, LLC ("Pansend").

Our Life Sciences segment is comprised of Pansend Life Sciences, LLC ("Pansend"), its subsidiaries and equity method investments.

Pansend maintains controlling interests of approximately 80 % in Genovel Orthopedics, Inc.

2 unchanged sentences

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

("MediBeacon"), and an approximately 26 % interest in Triple Ring Technologies, Inc ("Triple Ring").

("MediBeacon"), a medical technology company specializing in the advances of fluorescent tracer agents and transdermal measurement, potentially enabling real-time, direct monitoring of kidney function, and an approximately 26 % interest in Triple Ring Technologies, Inc.

("Triple Ring"), a science and technology co-development company.

Our Spectrum segment is comprised of HC2 Broadcasting Holdings Inc.

("Broadcasting") and its subsidiaries.

Broadcasting strategically acquires and operates over-the-air broadcasting stations across the United States.

Broadcasting strategically acquired and operates over-the-air broadcasting stations across the United States.

In addition, Broadcasting, through its wholly-owned subsidiary, HC2 Network Inc.

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The Company maintains a 98 % controlling interest in Broadcasting and maintains a controlling interest of approximately 77 %, inclusive of approximately 10 % proxy and voting rights from minority holders of DTV America Corporation ("DTV").

On a fully diluted basis, the Company would have an approximately 86 % controlling interest in Broadcasting.

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

Included in the Other segment is the former Marine Services segment, which includes its holding company, Global Marine Holdings, LLC ("GMH"), in which the Company maintains approximately 73 % controlling interest.

GMH results include the current and prior year equity investment in HMN Technologies Co., Ltd.

GMH results include the current and prior year equity investment in HMN International Co., Ltd., formerly known as Huawei Marine Networks Co.

(“HMN”), its 19 % equity method investment, and the discontinued operations of Global Marine Systems Limited ("GMSL").

Also included in the Other segment is the discontinued operations of Beyond6, Inc.

("Beyond6"), Continental Insurance Group ("CIG") and PTGi International Carrier Services, Inc.

and its subsidiaries ("ICS").

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

("Beyond6"), and Continental Insurance Group ("CIG").

Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and all other subsidiaries over which the Company exerts control.

The accompanying Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and all other subsidiaries over which the Company exerts control.

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

For the years ended December 31, 2021 and December 31, 2020, the results of DBMG, Genovel, R2, 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.

4 unchanged sentences

Certain prior amounts have been reclassified or combined to conform to the current year presentation.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations (such as debt service and operating leases) and other cash needs for our operations for at least the next twelve months from the issuance of the Consolidated Financial Statements through a combination of available cash and distributions from our subsidiaries.

The ability of INNOVATE’s subsidiaries to make distributions to INNOVATE is subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, 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.

Although the Company believes, to the extent needed, 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.

Although the Company believes, to the extent needed, that it will be able to raise additional debt or 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 and dilute holders of common stock.

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 and any potential prolonging or worsening of the pandemic due to COVID-19 variants.

We are unable to predict the impact that COVID-19 will have on the Company's 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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

COVID-19 has continued to cause supply chain challenges related to labor shortages and supply chain disruptions, which may create significant delays in our ability to complete projects or deliver products.

The receipt of material from impacted areas has been slowed or disrupted and our suppliers are expected to face similar challenges in fulfilling orders.

In addition, reductions in the number of ocean carrier voyages, ocean freight capacity issues, congestion at major international gateways and other economic factors continue to persist worldwide due to COVID-19 and worldwide supply impacts as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container.

In addition, in the United States, trucking costs have risen dramatically due to driver shortages and increased labor costs, as well as new federal and state safety, environmental and labor regulations.

These changes, as well as COVID-19 related state and local restrictions on domestic trucking and the operation of distribution centers, may disrupt our supply chain, which may result in a delay in the completion of our projects and cause us to incur significant additional costs.

Although we may attempt to pass on certain of these increased costs to our customers, we may not be able to pass all of these cost increases on to our customers.

As a result, our margins may be adversely impacted by such cost increases.

These supply chain disruptions and transportation challenges could have a material adverse effect on our results of operations or financial condition.

The Company expects to continue to assess the evolving impact of the COVID-19 pandemic.

The COVID-19 pandemic has continued to adversely affect the Company’s business.

Labor shortages and supply chain disruptions have created significant delays in the Company’s ability to complete projects and deliver products, including in its Infrastructure and Life Sciences segments.

The Company’s receipt of materials from areas impacted by the pandemic was slowed or disrupted in 2022 and the Company expects its suppliers to continue to face similar challenges in fulfilling orders.

Transportation costs continued to increase in 2022 as a result of COVID-19 and these costs may continue to rise.

The Company has not been able to pass all of these cost increases on to its customers and, as a result, its margins have been adversely impacted.

In addition, the Company’s Life Sciences segment was adversely affected in 2022 by continuing requirements to implement COVID-19 operational measures at clinical trial sites, which resulted in some clinical trials being delayed.

Cash and Cash Equivalents

Cash and cash equivalents are comprised principally of amounts in money market accounts with original maturities of three months or less.

Restricted Cash

The Company's restricted cash balances consist of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on the Consolidated Balance Sheets, and are primarily comprised of security deposits for long-term leases, which are held in separate bank accounts.

The Company’s acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

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Accordingly, the Company cannot provide assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Equity Method Investments

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The Company applies the equity method to investments in common stock and to other investments when such other investments possess substantially identical subordinated interests to common stock.

In applying the equity method, the Company records the investment at cost and subsequently increases or decreases the carrying amount of the investment by its proportionate share of the net earnings or losses in (Loss) income from equity investees and other comprehensive income of the investee.

The Company records dividends or other equity distributions as reductions in the carrying value of the investment.

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Fair Value Measurements

General accounting principles for Fair Value Measurements and Disclosures define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

These principles also establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and describes three levels of inputs that may be used to measure fair value:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Active markets are defined as having the following characteristics for the measured asset/liability:

(i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information publicly available.

The Company’s Level 1 financial instruments consist primarily of publicly traded equity securities and highly liquid government bonds for which quoted market prices in active markets are available.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or market standard valuation techniques and assumptions with significant inputs that are observable or can be corroborated by

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

observable market data for substantially the full term of the assets or liabilities.

Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market.

The Company’s Level 2 financial instruments include corporate and municipal fixed maturity securities, mortgage-backed non-affiliated common stocks priced using observable inputs.

Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities.

When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the related assets or liabilities.

Level 3 assets and liabilities include those whose value is determined using market standard valuation techniques.

When observable inputs are not available, the market standard techniques for determining the estimated fair value of certain securities that trade infrequently, and therefore have little transparency, rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data.

These unobservable inputs can be based in large part on management judgment or estimation and cannot be supported by reference to market activity.

Even though unobservable, management believes these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing similar assets and liabilities.

For the Company’s invested assets, most of which relate to the 2020 held-for-sale assets of the Insurance segment, this category primarily includes private placements, asset-backed securities, and to a lesser extent, certain residential and commercial mortgage-backed securities, among others.

Prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques.

Non-binding broker quotes, which are utilized when pricing service information is not available, are reviewed for reasonableness based on the Company’s understanding of the market, and are generally considered Level 3.

Under certain circumstances, based on its observations of transactions in active markets, the Company may conclude the prices received from independent third-party pricing services or brokers are not reasonable or reflective of market activity.

In those instances, the Company would apply internally developed valuation techniques to the related assets or liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.

Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:

• Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data.

Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.

• Level 3 - Unobservable inputs that are supported by little or no market activities.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

The Company may utilize information from third parties, such as pricing services and brokers, to assist in determining the fair value for certain assets and liabilities;

however, management is ultimately responsible for all fair values presented in the Company’s financial statements.

This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices and pricing of assets and liabilities, and approving changes to valuation methodologies and pricing sources.

The selection of the valuation technique(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued and significant expertise and judgment is required .

The Company’s assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities and certain investments.

Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities.

Other financial assets and liabilities are carried at cost (initial fair value) with current fair value disclosed, if required.

Financial Instruments

Our financial instruments include cash and cash equivalents, marketable and non-marketable securities, including equity investments and certain other investments, accounts and notes receivable, accounts payable and other current liabilities, mandatorily redeemable noncontrolling interests and debt obligations.

Accounts Receivable

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For the years ended December 31, 2022 and 2021, the Company recorded bad debt expense of $ 0.9 million and $ 0.1 million, respectively.

INNOVATE CORP.

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Inventory is valued at the lower of cost or net realizable value under the first-in, first-out method.

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Expected outcomes of current or anticipated tax examinations, refund claims and tax-related litigation and estimates regarding additional tax liability (including interest and penalties thereon) or refunds resulting therefrom will be recorded based on the guidance provided by ASC 740 to the extent applicable.

INNOVATE CORP.

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We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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consolidated filing group will not be realized.

Therefore, a valuation allowance was maintained against the INNOVATE Corp.

Therefore, a full valuation allowance was maintained against the INNOVATE Corp.

consolidated filing group’s net deferred tax assets as of December 31, 2022.

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Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation, which is provided on the straight-line method over the estimated useful lives of the assets.

Property, plant and equipment are stated at cost less accumulated amortization and depreciation, which is provided on the straight-line method over the estimated useful lives of the assets.

Cost includes major expenditures for improvements and replacements which extend useful lives or increase capacity of the assets as well as expenditures necessary to place assets into readiness for use.

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Costs for internal use software that are incurred in the preliminary project stage and in the post-implementation stage are expensed as incurred.

Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software, beginning when the software project is ready for its intended use, over the estimated useful life of the software.

Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which range from 5 to 40 years for buildings and leasehold improvements, 3 to 15 years for equipment, furniture and fixtures, and 3 to 20 years for transportation equipment.

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Assets under construction are not depreciated until they are complete and available for use.

When assets are sold or otherwise retired, the costs and accumulated depreciation are removed from the books and the resulting gain or loss is included in operating results.

Property, plant and equipment that have been included as part of the assets held for sale are no longer depreciated from the time that they are classified as such.

When assets are sold or otherwise retired, the costs and accumulated amortization and depreciation are removed from the books and the resulting gain or loss is included in operating results.

Property, plant and equipment that have been included as part of the assets held for sale are no longer amortized or depreciated from the time that they are classified as such.

The Company periodically evaluates the carrying value of its property, plant and equipment based upon the estimated cash flows to be generated by the related assets.

If impairment is indicated, a loss is recognized.

If an impairment is indicated, a loss is recognized.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Goodwill and Other Intangible Assets

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Goodwill impairment is tested at least annually (October 1st) or when factors indicate potential impairment using a two-step process that begins with a qualitative evaluation of each reporting unit.

If such test indicates potential for impairment, a one-step quantitative test is performed and, if there is excess of a reporting unit's carrying amount over its fair value, impairment is recorded, not to exceed the total amount of goodwill allocated to the reporting unit.

If such test indicates potential for impairment, a one-step quantitative test is performed and, if there is excess of a reporting unit's carrying amount over its fair value, an impairment loss is recorded, not to exceed the total amount of goodwill allocated to the reporting unit.

Estimating the fair value of a reporting unit requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates.

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Changes to the underlying businesses could affect the future cash flows, which in turn could affect the fair value of the reporting unit.

Intangible assets not subject to amortization consist of certain licenses.

Intangible assets not subject to amortization consist of certain television broadcast licenses.

Such indefinite lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

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If the carrying amount of the intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to the excess.

INNOVATE CORP.

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Intangible assets subject to amortization consists of certain trade names, customer contracts and developed technology.

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The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset group.

An impairment loss is recorded if after determining that it is not recoverable, the carrying amount exceeds the fair value of the asset.

An impairment loss is recorded to the extent the carrying amount exceeds the fair value of the asset and such amount is not recoverable.

In addition to the foregoing, the Company reviews its goodwill and intangible assets for possible impairment whenever events or circumstances indicate that the carrying amounts of assets may not be recoverable.

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and significant changes in operations or business strategy.

For details regarding goodwill impairment, see Note 8.

Goodwill and Intangibles, net.

Television broadcast licenses generally are granted for eight-year periods.

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The assumptions are based on the average life of its historical capital asset additions and its historical asset purchase trend.

In some cases, due to the nature of a particular industry in which the company operates, the Company may assume that technology changes in such industry render all associated assets, including equipment, obsolete with no salvage value after their useful lives.

In some cases, due to the nature of a particular industry in which the company operates, such as the broadcast or infrastructure industry, the Company may assume that technology changes in such industry render all associated assets, including equipment, obsolete with no salvage value after their useful lives.

In certain circumstances in which the underlying assets could be leased for an additional period of time or salvaged, the Company includes such estimated cash flows in its estimate.

The estimate of the appropriate discount rate to be used to apply the present value technique in determining fair value was the Company’s weighted average cost of capital which is based on the effective rate of its debt obligations at the current market values (for periods during which the Company had debt obligations) as well as the current volatility and trading value of the Company’s common stock.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The estimate of the appropriate discount rate to be used to apply the present value model in determining fair value was the Company’s weighted average cost of capital which is based on the effective rate of its debt obligations at the current market values (for periods during which the Company had debt obligations) as well as the current volatility and trading value of the Company’s common stock.

The Company accounts for leases in accordance with ASC 842, Leases , which requires the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating and finance leases.

The Company determines if an arrangement is a lease at inception.

Operating leases are included in operating lease assets, current operating lease liabilities and long-term operating lease liabilities in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at the commencement date.

Finance leases are included in finance lease assets, current finance lease liabilities and long-term finance lease liabilities in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at commencement date.

Operating lease right-of-use assets are included in Other Assets and operating lease liabilities are included in both other Current Liabilities and Other Liabilities in the Consolidated Balance Sheets for their respective short-term and long-term portions and are recognized based on the present value of lease payments over the lease term at the commencement date.

Finance leases are included in property, plant and equipment and debt obligations, in the Consolidated Balance Sheets and are recognized based on the present value of lease payments over the lease term at commencement date.

The majority of the Company’s leases do not provide an implicit rate of return;

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As of December 31, 2022, the operating lease liability does not include any options to extend or terminate leases.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Presentation of Taxes Collected

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A change in the exchange rates between a subsidiary’s functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction.

That increase or decrease in expected functional currency cash flows is reported by the Company as a foreign currency transaction gain (loss).

That increase or decrease in functional currency cash flows, which occurs upon an actual transfer of one currency to another, is reported by the Company as a foreign currency transaction gain (loss).

The primary component of the Company’s foreign currency transaction gain (loss) is due to agreements in place with certain subsidiaries in foreign countries regarding intercompany transactions.

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Applicable U.S.

Generally Accepted Accounting Principals ("GAAP") requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria.

Generally Accepted Accounting Principles ("GAAP") requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria.

The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

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The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Deferred Financing Costs

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Actual results may differ from these estimates.

Significant estimates include allowance for doubtful accounts receivable, the extent of progress towards completion on contracts, contract revenue and costs on long-term contracts, valuation of certain investments and the insurance reserves, market assumptions used in estimating the fair values of certain assets and liabilities, the calculation used in determining the fair value of INNOVATE’s stock options required by ASC 718, Compensation - Stock Compensation ("ASC 718"), income taxes and various other contingencies.

Significant estimates include allowance for doubtful accounts receivable, the extent of progress towards completion on contracts, contract revenue and costs on long-term contracts, valuation of certain investments, market assumptions used in estimating the fair values of certain assets (including goodwill and intangibles) and liabilities, the calculation used in determining the fair value of INNOVATE’s stock options required by ASC 718, Compensation - Stock Compensation ("ASC 718"), income taxes and various other contingencies.

Estimates of fair value represent the Company’s best estimates developed with the assistance of independent appraisals or various valuation techniques and, where the foregoing have not yet been completed or are not available, industry data and trends and by reference to relevant market rates and transactions.

The estimates and assumptions are inherently subject to significant uncertainties and contingencies beyond the

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

control of the Company.

The estimates and assumptions are inherently subject to significant uncertainties and contingencies beyond the control of the Company.

Accordingly, the Company cannot provide assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

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Share-based compensation is recorded net of actual forfeitures.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable.

The Company maintains all cash and cash equivalents at accredited financial institutions, in amounts that exceed federally insured limits.

The Company has not experienced any losses in such accounts.

The Company holds $ 4.7 million and $ 8.5 million cash in foreign accounts as of December 31, 2021 and 2020, respectively.

The Company attempts to minimize the risks related to cash and cash equivalents by investing in a range of financial instruments as defined by the Company.

Concentrations of credit risk with respect to accounts receivable are limited by the large number of customers comprising the Company's customer base and their geographic and business dispersion.

The Company performs ongoing credit evaluations of the customers' financial condition and generally does not require collateral to support customer receivables.

For the year ended December 31, 2021, one customer exceeded 10% of the Company's revenue and accounted for approximately 13.9 %.

No customers accounted for more than 10% of accounts receivable.

For the fiscal year ended December 31, 2020, no customer accounted for more than 10% of the Company's revenue and no customers accounted for more than 10% of accounts receivable.

For the year ended December 31, 2021, one supplier accounted for more than 10% of the Company's accounts payable for approximately 15.1 %.

For the fiscal year ended December 31, 2020, no suppliers accounted for more than 10% of the Company's accounts payable.

Income (Loss) Per Common Share

Basic income (loss) per common share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted income (loss) per common share is computed using the weighted average number of shares of common stock, adjusted for the dilutive effect of potential common stock and related income from continuing operations, net of tax.

Potential common stock, computed using the treasury stock method or the if-converted method, includes options, warrants, restricted stock, restricted stock units and convertible preferred stock.

Diluted income (loss) per common share is computed using the weighted average number of shares of common stock, adjusted for the dilutive effect of potential common stock equivalents and related income from continuing operations, net of tax.

Potential common stock equivalents, computed using the treasury stock method or the if-converted method, include options, restricted stock, restricted stock units and convertible preferred stock.

In periods when the Company generates income, the Company calculates basic Earnings Per Share ("EPS") using the two-class method, pursuant to ASC No.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Other Income (Loss)

The following table provides information relating to Other income (in millions):

Years Ended December 31,

Loss on embedded derivatives $ ( 0.7 ) $ ( 2.8 )

Gain on sale of equity method investments — 71.2

Other income, net 5.0 0.8

Total $ 4.3 $ 69.2

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):

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

Restricted cash included in other assets 1.5 1.4

Total cash and cash equivalents and restricted cash $ 45.3 $ 24.7

Cash and cash equivalents, end of period $ 45.5 $ 43.8

Restricted cash included in other assets 2.0 1.5

Total cash and cash equivalents and restricted cash $ 47.5 $ 45.3

Cash and cash equivalents classified in Assets held for sale, beginning of period $ 195.2 $ 216.0

Restricted cash classified in Assets held for sale 0.2 0.2

Total cash and cash equivalents and restricted cash classified in Assets held for sale $ 195.4 $ 216.2

Cash and cash equivalents classified in Assets held for sale, end of period $ — $ 195.2

Restricted cash classified in Assets held for sale — 0.2

Total cash and cash equivalents and restricted cash classified in Assets held for sale $ — $ 195.4

Supplemental cash flow information:

Cash paid for interest $ 32.6 $ 65.1

Cash paid for taxes, net of refunds $ 5.4 $ 0.2

Non-cash investing and financing activities:

Property, plant and equipment included in accounts payable $ 1.4 $ 4.4

Investments included in accounts payable $ — $ 17.1

Issuance of preferred stock $ 19.1 $ —

Issuance of redeemable noncontrolling interest $ 40.9 $ —

Extinguishment of convertible note in exchange $ 51.8 $ —

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

Debt assumed in acquisitions $ 6.3 $ —

Reclassification

Certain previous year amounts have been reclassified to conform with current year presentations, as related to the reporting of new balance sheet line items:

• The recast of Beyond6, ICS, and CIG's results to discontinued operations.

Further, the reclassification of prior period assets and liabilities have been classified as held for sale.

Discontinued Operations for further information;

• As a result of the sale of ICS, and in accordance with ASC 280, the Company no longer considers the results of operations and balance sheets of the retained ICS entities as a separate segment.

Formerly the Telecommunications segment, these entities have been reclassified to the Other segment.

Operating Segment and Related Information for further information;

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

• As a result of the sale of Beyond6, and in accordance with ASC 280, the Company no longer considers the results of operations and balance sheets of Beyond6 as a separate segment.

Formerly the Clean Energy segment, this entity has been reclassified to the Other segment.

Operating Segment and Related Information for further information;

• As a result of the sale of CIG, and in accordance with ASC 280, the Company no longer considers the results of operations and Balance Sheets of CIG as a separate segment.

This entity has been reclassified to the Other segment.

Operating Segment and Related Information for further information;

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

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.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in the Current Year

Accounting for Investments-Equity Securities

ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) , was issued by the FASB in January 2020.

This update clarifies the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments.

The Company adopted this update as of January 1, 2021 and the update did not have a material impact on the Company's consolidated financial statements.

Accounting for Debt with Conversion Options

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , was issued by the FASB in August 2020.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options , that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per Share , to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

The standard is effective on January 1, 2024, but the Company elected early adoption as of January 1, 2021.

A modified retrospective method of transition was applied, which resulted in no impact to the Company.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

ASU 2021-08, Accounting for Contract Assets and Liabilities from Contracts with Customers (Topic 805) was issued by the FASB in October 2021.

This update requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue Recognition (Topic 606) .

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts by assessing how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree's financial statements.

The Company adopted this update as of January 1, 2021, and applied the guidance to the Company's acquisition of Banker Steel.

Accounting Pronouncements to be Adopted Subsequent to December 31, 2021

There were no new accounting pronouncements adopted during the year ended December 31, 2022.

Accounting Pronouncements to be Adopted in 2023

Credit Loss Standard

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).

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.

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.

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) , Measurement of Credit Losses on Financial Instruments .

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

Under the new expected loss model, which is based on historical experience, current conditions and reasonable and supportable forecasts, 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 Company is finalizing its implementation of the new credit losses standard and is updating certain of its business processes and internal controls to meet the reporting and disclosure requirement of the new ASU.

Based on historical trends, the financial condition of the Company’s customers and management’s expectations of economic and industry factors affecting the Company’s customers, the new guidance, which the Company will adopt on January 1, 2023, is not expected to materially affect the amount of expense recognized under the Company’s current practices and is not expected to have a material effect on the Company’s consolidated financial statements.

Other Recent Accounting Pronouncements

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) which contains optional practical expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”).

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which extended the period for utilization of the practical expedients under ASU 2020-04 through December 31, 2024.

The Company has instruments, including DBMGi's $ 40.9 million Series A Preferred Stock (Refer to Note 18.

Temporary Equity and Equity) and INNOVATE's $ 20.0 million line of credit agreement (Refer to Note 13.

Debt Obligations) that reference LIBOR.

DBMGi's Series A Preferred Stock and INNOVATE's line of credit agreement that reference LIBOR contain customary LIBOR replacement language, including, but not limited to, the use of replacement rates based on the secured overnight financing rate, and consequently these ASUs are not expected to have a material effect on the Company's consolidated financial statements.

Subsequent Events

ASC 855, Subsequent Events requires the Company to evaluate events that occur after the balance sheet date as of which the financial statements are issued, and to determine whether adjustments to or additional disclosures in the financial statements are necessary.

Subsequent Events for the summary of the subsequent events.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Discontinued Operations

The results of GMSL, ICS, Beyond6, and CIG and the related expenses directly attributable to the entities were reported as discontinued operations.

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

Years Ended December 31,

Revenue $ 1.7 $ 519.6

Life, accident and health earned premiums, net 55.7 115.1

Net investment income 92.4 188.9

Realized/unrealized gains (losses) on investments 5.1 ( 15.0 )

Total revenue 154.9 808.6

Cost of revenue 0.8 492.4

Policy benefits, changes in reserves, and commissions 126.0 250.0

Selling, general and administrative 21.1 62.0

Depreciation and amortization ( 11.0 ) ( 8.3 )

Other operating expenses — 0.3

Income from operations 18.0 12.2

Interest expense ( 0.5 ) ( 12.1 )

Loss on sale and liquidation of subsidiaries ( 159.9 ) ( 44.1 )

Income from equity investees — 0.5

Other loss ( 3.1 ) ( 2.3 )

Pre-tax loss from discontinued operations ( 145.5 ) ( 45.8 )

Income tax expense ( 4.4 ) ( 2.6 )

Loss from discontinued operations $ ( 149.9 ) $ ( 48.4 )

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of December 31, 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 Insurance segment, which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $ 544.0 million, inclusive of $ 344.0 million of Accumulated other comprehensive income ("AOCI").

The carrying value of the Insurance segment at the time of sale excluded cash of $ 62.5 million and investments of $ 26.7 million which were distributed to the Company through an extraordinary dividend immediately prior to the sale.

The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale.

The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While several factors impacted the fair value of the Insurance segment at the end of 2019, following discussions with our domestic regulator, changes in the asset management fee arrangement and expectations of future dividends primarily and ultimately resulted in the full impairment of the goodwill associated with the Insurance segment during the year ended December 31, 2019.

While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

As a result of the factors described above, combined with the risks associated with the long-term care insurance industry, the Company exited the segment and sold the business resulting in a $ 200.8 million loss on the sale of CIG.

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders.

The sale closed on January 15, 2021.

During the first quarter of 2021, the Company recognized a $ 39.2 million gain on the sale.

During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $ 0.5 million gain on the sale.

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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As a result of the repayment of $ 15.0 million Revolving Credit Agreement, the Company allocated the following interest and amortization of deferred financing costs and original issue discount for the years ended December 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Consolidated Statements of Operations:

Years Ended December 31,

Interest expense $ 0.1 $ 0.9

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

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 years ended December 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Consolidated Statements of Operations:

Years Ended December 31,

Interest expense $ 0.3 $ 3.2

Amortization of deferred financing costs and original issuance discount $ — $ 0.4

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 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 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 years ended December 31, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Consolidated Statement of Operations:

Years Ended December 31,

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 years ended December 31, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Consolidated Statements of Operations:

Years Ended December 31,

Interest expense $ — $ 2.2

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

The sale of ICS and its subsidiary, Go2 Tel, Inc., closed on October 31, 2020.

The Company recorded a $ 0.9 million gain on the sale and recognized $ 8.2 million of accumulated other comprehensive loss related to the realization of foreign currency translation of PTGi International Carrier Services Ltd., which was essentially liquidated in conjunction with the sale.

The proceeds were used for general corporate purposes.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

2021 December 31,

Current assets

Cash and cash equivalents $ — $ 195.2

Accounts receivable, net — 13.6

Other current assets 1.5 8.7

Total current assets 1.5 217.5

Investments — 4,610.2

Recoverable from reinsurers — 957.5

Deferred tax asset — 1.4

Property, plant and equipment, net — 90.5

Goodwill — 2.1

Intangibles, net — 11.7

Other assets — 51.2

Total assets held for sale $ 1.5 $ 5,942.1

Current liabilities

Accounts payable $ — $ 2.6

Accrued liabilities — 35.8

Current portion of debt obligations — 5.7

Other current liabilities — 7.4

Total current liabilities — 51.5

Life, accident and health reserves — 4,627.5

Annuity reserves — 228.8

Value of business acquired — 199.8

Deferred tax liability — 136.5

Debt obligations — 50.6

Other liabilities — 12.0

Total liabilities held for sale $ — $ 5,306.7

Refer to Note 24.

Subsequent Events for any subsequent events.

Revenue and Contracts in Process

ASC 606 aligns revenue recognition with the timing of when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

6 unchanged sentences

In determining if the collectability of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Identify the performance obligations in the contract

3 unchanged sentences

(a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract.

23 unchanged sentences

In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Recognize revenue as performance obligations are satisfied

6 unchanged sentences

The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

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

Years Ended December 31,

1 unchanged sentence

$ 1,594.3 $ 1,159.7

Spectrum 42.0 40.3

Life Sciences 4.3 3.5

Spectrum 38.7 42.0

Total revenue $ 1,637.3 $ 1,205.2

Accounts receivables, net, from contracts with customers consist of the following (in millions):

2021 December 31,

Accounts receivables with customers

1 unchanged sentence

$ 244.5 $ 226.8

Spectrum 9.4 7.3

Life Sciences 0.8 0.3

Spectrum 5.1 9.4

Total accounts receivables with customers $ 250.4 $ 236.5

15 unchanged sentences

Amounts billed and due from customers, as well as the amount of contract assets, are generally classified within current assets in the consolidated balance sheets.

Refer to Note 4.

Accounts Receivable, Net and Contract Assets and Contract Liabilities for related discussion.

Amounts expected to be collected beyond one year are classified as other long-term assets.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Service Contracts

4 unchanged sentences

Contract receivables arise principally from the balance of amounts due on progress billings on jobs under construction.

Retention on contract receivables are amounts due on progress billings, which are withheld until the completed project has been accepted by the customer.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Retention on contract receivables are amounts due on progress billings, which are withheld until a future period.

Disaggregation of Revenues

7 unchanged sentences

Industrial 409.5 292.5

Convention 85.8 10.6

Government 68.0 65.0

Healthcare 129.9 59.8

Convention 136.2 85.8

Transportation 50.2 52.7

Leisure 23.4 23.2

Government 34.8 68.0

Other 15.8 37.7

9 unchanged sentences

Our contract assets do not include capitalized costs to obtain and fulfill a contract.

Retainage for which the Company has an unconditional right to payment that is only subject to the passage of time are classified as accounts receivable.

Retainage receivable subject to conditions other than the passage of time, or conditional retainage, do not meet the definition of a receivable and are therefore included in contract assets and contract liabilities, as determined on a contract by contract basis.

Contract liabilities from our long-term construction contracts occur when amounts invoiced to our customers exceed revenues recognized.

4 unchanged sentences

Retainage agreements vary from project to project and balances could be outstanding for several months or years depending on a number of circumstances, such as contract-specific terms, project performance and other variables that may arise as the Company makes progress toward completion.

As of December 31, 2021 and 2020, the amount of retainage receivable estimated by management to be collected beyond one year is approximately 24.6 % and 1.0 % of the balance, respectively.

When payment of the retainage is contingent upon the Company fulfilling its obligations under the contract it does not meet the criteria to be included in accounts receivable and remains in the contract’s respective contract assets or contract liability, determined on a contract-by-contract basis.

The Company has reflected such amounts within the consolidated balance sheets as of December 31, 2021 and 2020.

While retainage receivable have historically been presented and disclosed within accounts receivable, the impact to correct this immaterial error in the December 31, 2020 balance sheet resulted in a reduction of previously stated accounts receivable amounting to $ 50.0 million, offset by an increase of $ 31.0 million to current contract assets and a $ 19.0 million reduction to current contract liabilities.

As of December 31, 2022 and 2021, the total retainage receivable was $ 127.8 million and $ 108.8 million, respectively, and the amount of retainage receivable estimated by management to be collected beyond one year is approximately 20.7 % and 24.6 % of the balance, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Contract assets and contract liabilities consisted of the following (in millions):

2021 December 31,

The Company has reflected such amounts within the Consolidated Balance Sheet as of December 31, 2022 and 2021.

Contract assets and contract liabilities and recognized earnings consisted of the following (in millions):

Years Ended December 31,

Costs incurred on contracts in progress $ 2,503.3 $ 2,161.5

Estimated earnings 378.9 316.4

Contract revenue earned on uncompleted contracts 2,882.2 2,477.9

progress billings 2,815.7 2,438.4

$ 66.5 $ 39.5

The above is included in the accompanying Consolidated Balance Sheets under the following line items:

Contract assets $ 165.1 $ 118.6

Contract liabilities ( 98.6 ) ( 79.1 )

$ 66.5 $ 39.5

Years Ended December 31,

Cost in excess of billings $ 90.7 $ 68.3

4 unchanged sentences

Contract liabilities $ ( 98.6 ) $ ( 79.1 )

The change in contract assets is a result of the recording of $ 122.4 million of contract assets driven by new commercial projects and $ 22.7 million of contract assets for projects acquired in the Banker Steel acquisition, offset by $ 113.1 million of contract assets transferred to receivables from contract assets recognized at the beginning of the period.

The change in contract liabilities is a result of periodic contract liabilities of $ 72.7 million driven largely by new commercial projects and $ 38.6 million of contract liabilities 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 $ 65.4 million.

The change in contract assets is a result of the recording of $ 205.3 million of contract assets driven by new commercial projects, offset by $ 158.8 million of contract assets transferred to receivables from contract assets recognized at the beginning of the period.

The change in contract liabilities is a result of periodic contract liabilities of $ 96.6 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 $ 77.1 million.

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

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

As of December 31, 2022, the transaction price allocated to remaining unsatisfied performance obligations consisted of the following (in millions):

Within One Year Within Five Years Total

8 unchanged sentences

Remaining unsatisfied performance obligations $ 1,346.9 $ 425.0 $ 1,771.9

DBMG's remaining unsatisfied performance obligations, otherwise referred to as backlog, increase with awards of new contracts and decrease as it performs work and recognizes revenue on existing contracts.

DBMG's remaining unsatisfied performance obligations increase with awards of new contracts and decrease as it performs work and recognizes revenue on existing contracts.

DBMG includes a project within its remaining unsatisfied performance obligations at such time the project is awarded and agreement on contract terms has been reached.

DBMG's remaining unsatisfied performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of total transaction price can be made.

DBMG expects to recognize this revenue over the next twenty four months.

Remaining unsatisfied performance obligations include unrecognized revenues to be realized from uncompleted construction contracts.

Although many of DBMG's contracts are subject to cancellation at the election of its customers, in accordance with industry practice, DBMG does not limit the amount of unrecognized revenue included within its remaining unsatisfied performance obligations due to the inherent substantial economic penalty that would be incurred by its customers upon cancellation.

DBMG expects to recognize this revenue approximately within the next 3.5 years.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Remaining unsatisfied performance obligations include unrecognized revenues to be realized from uncompleted construction contracts.

Life Sciences Segment

Beginning in 2021, R2 Technologies commercially launched its first systems product, the GlacialRx, and other topical consumables.

The GlacialRx system is primarily sold to dermatologist offices for an initial upfront fee.

Software on the device controls the number of times the device may be used to perform a treatment.

The initial upfront fee entitles the user to a defined number of uses.

After the initial prepurchased uses are exhausted, the dermatologist office can purchase additional uses of the treatment for an additional fee, resulting in recurring revenues to R2 Technologies as the devices are utilized.

Further, topical consumables are also separately sold to dermatologist offices which patients can utilize post-treatment to increase the efficacy of the treatment.

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

Beginning in 2021, R2 Technologies commercially launched its first systems product, the Glacial Rx, and other topical consumables.

The Glacial Rx system is sold to medical practices, or in certain cases leased for a small, initial upfront fee and recurring lease payments over a specified timeframe.

In order to operate the system, kits containing a cycle card with a set number of cycles must be purchased.

Once the cycles are exhausted, practices can purchase additional cards with additional cycles resulting in recurring revenues to R2 Technologies.

Further, topical consumables are contained in the kits sold to medical practices, which patients can utilize post-treatment to increase the efficacy of the treatment.

Beginning in 2022, R2 Technologies commercially launched its second systems product, the Glacial Spa.

The Glacial Spa device is a cooling experience used to even skin tone, and brighten and lighten skin and is intended to be operated by a trained aesthetician.

The Glacial Spa system is currently sold in China and distributed by Huadong’s existing sales force to spas.

Quarterly, R2 receives purchase orders for the Glacial Spa and other topical consumables from Huadong and recognizes the revenue upon shipment of the device to Huadong.

Payment Terms

R2 requires customers to remit payment upfront prior to shipping the devices.

Payment terms are expressly stated in our standard terms and conditions.

The invoiced amount to be received is recorded in Accounts Receivable, net on our Consolidated Balance Sheet.

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

Years Ended December 31,

19 unchanged sentences

Payment terms are expressly stated in our standard terms and conditions.

The invoiced amount to be received is recorded in accounts receivable on our balance sheet.

The invoiced amount to be received is recorded in Accounts Receivable on our Consolidated Balance Sheet.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Disaggregation of Revenues

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

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

Years Ended December 31,

5 unchanged sentences

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The transaction price allocated to remaining unsatisfied performance obligations consisted of $ 0.3 million, $ 4.3 million, and $ 0.1 million of network advertising, broadcasting station revenues, and other revenues, respectively, of which $ 3.3 million is expected to be recognized within one year and $ 1.4 million is expected to be recognized within five years .

Acquisitions, Dispositions, and Deconsolidations

Infrastructure Segment

As of December 31, 2022, the transaction price allocated to remaining unsatisfied performance obligations consisted of $ 2.5 million of broadcast station revenues of which $ 2.2 million is expected to be recognized within one year and $ 0.3 million is expected to be recognized within the next 2 years.

With the shut-down of HC2 Network as of December 31, 2022, the company no longer has any unsatisfied performance obligations related to network advertising or network distribution.

Accounts Receivable, Net

Accounts receivable, net as of the periods indicated consisted of the following (in millions):

Contracts in progress $ 244.8 $ 226.8

Unbilled retentions 0.2 0.4

Trade receivables 5.9 9.9

Other receivables 4.5 10.6

Allowance for doubtful accounts ( 0.5 ) ( 0.6 )

Total $ 254.9 $ 247.1

Inventory as of the periods indicated consisted of the following (in millions):

Raw materials and consumables $ 15.7 $ 14.3

Work in process 1.2 1.2

Finished goods 2.0 1.5

Total inventory $ 18.9 $ 17.0

The carrying values of the Company's investments as of the periods indicated were as follows (in millions):

December 31, 2022

Alternative (1)

Method Fair Value Total

Common stock $ — $ 3.0 $ — $ 3.0

Preferred stock and fixed maturities — — 4.6 4.6

Put option 11.3 — — 11.3

Investment in securities — 40.6 — 40.6

Total $ 11.3 $ 43.6 $ 4.6 $ 59.5

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

December 31, 2021

Alternative (1)

Method Fair Value Total

Common stock $ — $ 2.1 $ — $ 2.1

Preferred stock and fixed maturities 0.5 2.1 5.4 8.0

Put option 11.3 — — 11.3

Investment in securities — 34.6 — 34.6

Total $ 11.8 $ 38.8 $ 5.4 $ 56.0

(1) The Company accounts for its equity securities without readily determinable fair values under the measurement alternative election of ASC 321, whereby the Company can elect to measure an equity security without a readily determinable fair value, that does not qualify for the practical expedient to estimate fair value (net asset value), at its cost minus impairment, if any .

Pansend accounts for MediBeacon's preferred stock as an equity method investment, inclusive of any fixed maturity securities (notes) issued by Pansend to MediBeacon.

During the year ended December 31, 2022, Pansend issued MediBeacon a $ 4.5 million 8.0 % convertible note due March 2025, increasing the total outstanding principal to $ 5.0 million.

The increase in the net carrying value of the investment from the note was fully offset by additional equity method losses recognized on MediBeacon during the year ended December 31, 2022, and Pansend's net carrying amount of its investment in MediBeacon is zero as of December 31, 2022.

Equity Method Investments

The Company's equity method investments are comprised of investments in MediBeacon, Triple Ring and HMN.

The Company's share of net losses from its equity method investments totaled $ 1.3 million and $ 2.8 million for the years ended December 31, 2022 and 2021, respectively.

The Company accounts for its Triple Ring equity method investment results on a one-month lag basis.

Subsequent to year end, on March 6, 2023, the Company closed on the sale of its remaining 19 % interest in HMN.

Refer to Note 15.

Commitments and Contingencies and Note 24.

Subsequent Events for additional information on the Company's investment in HMN.

The following tables provide combined summarized unaudited financial information for the periods indicated for the Company's equity method investments (in millions):

Assets $ 786.4 $ 604.5

Liabilities 670.2 481.5

Equity $ 116.2 $ 123.0

Years Ended December 31,

Total revenues $ 672.3 $ 695.9

Gross profit $ 109.6 $ 107.0

Operating income $ 6.4 $ 15.5

Net income $ 5.0 $ 9.4

Property, Plant and Equipment, Net

Property, plant and equipment, net, ("PP&E") as of the periods indicated consisted of the following (in millions):

Equipment, furniture and fixtures, and software $ 196.0 $ 180.7

Building and leasehold improvements 44.8 43.0

Land 26.1 24.1

Construction in progress 8.4 8.9

Plant and transportation equipment 8.2 8.3

$ 283.5 $ 265.0

Accumulated depreciation 118.5 95.1

Total $ 165.0 $ 169.9

Depreciation expense was $ 25.6 million and $ 25.0 million for the years ended December 31, 2022 and 2021, respectively.

These amounts included $ 15.0 million and $ 12.2 million of depreciation expense recognized within cost of revenue for the years ended December 31, 2022 and 2021, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As of December 31, 2022 and December 31, 2021, the net book value of equipment under capital leases included in PP&E was $ 2.1 million and $ 0.2 million, respectively.

As of December 31, 2022 and December 31, 2021, the net book value of capitalized internal-use software included in PP&E was $ 35.6 million and $ 32.8 million, respectively.

Goodwill and Intangibles, Net

On an annual basis, in the fourth quarter, the Company performs its goodwill impairment review in accordance with ASC 350.

Estimating the fair value of a reporting unit requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates.

The assumptions about future cash flows and growth rates are based on the Company’s assessment of a number of factors, including the reporting unit’s recent performance against budget, performance in the market that the reporting unit serves, and industry and general economic data from third-party sources.

Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows.

Changes to the underlying businesses could affect the future cash flows, which in turn could affect the fair value of the reporting unit.

After considering all quantitative and qualitative factors, the Company has determined that, other than noted below, it is more likely than not that the reporting units' fair values exceed their carrying values as of the assessment date.

The Company also considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units.

Further, the Company assessed the current market capitalization, forecasts and the amount by which the fair values exceeded the carrying values.

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

Infrastructure

Spectrum Total

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

Acquisition 16.7 — 16.7

Translation ( 0.3 ) — ( 0.3 )

Balance at December 31, 2021 $ 106.0 $ 21.4 $ 127.4

Translation ( 0.3 ) — ( 0.3 )

Balance as of December 31, 2022 $ 105.7 $ 21.4 $ 127.1

Indefinite-lived Intangible Assets

The carrying amounts of indefinite-lived intangible assets as of the periods indicated were as follows (in millions):

FCC licenses $ 106.3 $ 106.5

Total $ 106.3 $ 106.5

For the years ended December 31, 2022 and 2021, the Company recorded impairment charges of $ 0.2 million and $ 0.7 million, respectively, which are reflected in Other operating loss in the Consolidated Statements of Operations.

The impairment charges related to non-core FCC licenses which were sold or expired, in order to bring their carrying value equal to the agreed upon sales price prior to the execution of the sale or expiration.

The weighted-average period prior to the next renewal for FCC licenses was 6.6 years and 3.0 years as of December 31, 2022 and 2021, respectively, after taking into consideration licenses that were successfully renewed shortly after year-end.

While broadcast television licenses are issued for a fixed period of time (generally eight years), renewals of these licenses have occurred routinely and at nominal cost.

In addition, the Company does not believe that the expiration or non-renewal of any of our FCC licenses would have a material adverse effect on the expected future cash flows and profitability.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Definite Lived Intangible Assets

The gross carrying amounts and accumulated amortization of definite lived intangible assets by major intangible asset class as of the periods indicated were as follows (in millions):

Weighted-Average Original Useful Life 2022 2021

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

Trade names 14 years $ 25.4 $ ( 8.0 ) $ 17.4 $ 25.4 $ ( 6.3 ) $ 19.1

Customer relationships and contracts 11 years 87.6 ( 35.4 ) 52.2 87.7 ( 21.6 ) 66.1

Channel sharing arrangements 35 years 12.6 ( 1.4 ) 11.2 12.6 ( 1.1 ) 11.5

Other 12 years 4.1 ( 1.1 ) 3.0 8.5 ( 3.3 ) 5.2

Total $ 129.7 $ ( 45.9 ) $ 83.8 $ 134.2 $ ( 32.3 ) $ 101.9

For the year ended December 31, 2022, the Company recorded impairment charges to definite lived intangible assets of $ 1.5 million, which are reflected in Other operating loss in our Consolidated Statements of Operations.

The impairment charges related to the HC2 Network Program License Agreement ("PLA") due to a decline in performance.

Amortization expense for definite lived intangible assets was $ 16.6 million and $ 12.6 million for the years ended December 31, 2022 and 2021, respectively, and was included in Depreciation and amortization in our Consolidated Statements of Operations.

Future estimated annual amortization expense for intangible assets as of December 31, 2022 is as follows (in millions):

Estimated Amortization

Thereafter 46.4

Infrastructure Segment

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 $ 145.0 million, which closed on May 27, 2021.

On May 27, 2021, the Company, through its subsidiary DBMG, closed on a transaction to acquire 100 % of Banker Steel Holdco LLC ("Banker Steel") for $ 145.0 million.

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 INNOVATE in the settlement of certain intercompany balances.

Banker Steel provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services.

Banker Steel, which is included in the Company's Infrastructure segment, provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services.

Banker Steel consists of six operating companies:

4 unchanged sentences

and Lynchburg Freight and Specialty LLC.

The transaction was accounted for as a business acquisition and the valuation was finalized in the last quarter of 2021.

The transaction was accounted for as a business acquisition and the valuation was finalized in the fourth quarter of 2021.

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

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Purchase Consideration at Fair Value

32 unchanged sentences

The portion of goodwill that is deductible for tax purposes is $ 14.0 million.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Acquisition costs incurred by DBMG in connection with the acquisition of Banker Steel were approximately $ 2.0 million, which were included in selling, general and administrative expenses.

For the year ended December 31, 2021, acquisition costs incurred by DBMG in connection with the acquisition of Banker Steel were $ 2.0 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 results of operations data for the year ended December 31, 2021 for Banker Steel since the date of acquisition (in millions):

Results of Operations and Unaudited Supplemental Pro Forma Information

The following table presents the results of operations data for the year ended December 31, 2021 for Banker Steel from the date of acquisition (in millions):

Year Ended December 31, 2021

Revenue $ 265.9

Net income from operations $ 15.5

Income from operations $ 15.5

Net income attributable to INNOVATE $ 8.8

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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The following table presents unaudited consolidated pro forma results of operations data as if the acquisition of Banker Steel had occurred at the beginning of 2021.

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):

Year Ended December 31, 2021 Year Ended December 31, 2020

Year Ended December 31, 2021

Revenue $ 1,402.7

Income (loss) from operations $ 0.9 $ 1.5

Income from operations $ 0.9

Net loss attributable to INNOVATE $ ( 219.2 )

3 unchanged sentences

During the year ended December 31, 2021, the Company increased its controlling interest in DTV from approximately 60 %, inclusive of approximately 10 % proxy and voting rights from minority holders, to approximately 77 %, inclusive of approximately 10 % proxy and voting rights from minority holders, from private purchases and proxy voting rights.

Other Segment

On January 30, 2020, the Company announced that, through its indirect subsidiary GMH in which the Company holds an approximately 73 % controlling interest, the Company entered into a definitive agreement to sell 100 % of the shares of GMSL to Trafalgar AcquisitionCo, Ltd.

and an affiliate of J.F.

Lehman & Company, LLC.

The total base consideration was $ 250.0 million, subject to customary purchase price adjustments, working capital adjustments, and a potential earn-out of up to $ 12.5 million at such time, if any, if J.F.

Lehman & Company, LLC and its investment affiliates achieve a specified multiple of their invested capital.

The purchase price is subject to customary potential downward or upward post-closing adjustments based on net working capital, cash, unpaid transaction expenses, indebtedness and certain of the Company’s pre-closing paid capital expenditures.

The Share Purchase Agreement contained customary representations, warranties and covenants for a transaction of this nature.

The transaction closed on February 28, 2020.

GMH received approximately $ 144.0 million of net proceeds from the sale, of which $ 36.8 million and $ 5.5 million were paid to noncontrolling interest holders and redeemable noncontrolling interest holders, respectively.

INNOVATE received net proceeds of approximately $ 100.8 million.

In connection with the closing of the transaction, the purchaser deposited (i) $ 1.25 million of the base price into an escrow fund for the purpose of securing certain indemnification obligations for losses payable in the first twelve months after closing and (ii) $ 1.91 million of the base price into an escrow fund for the purpose of securing a purchase price adjustment, if any, in favor of purchaser.

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 on the sale and recognized a $ 31.3 million of Accumulated other comprehensive loss, which was comprised of $ 17.2 million of actuarial losses on pension and $ 14.1 million of currency translation adjustments.

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.

Discontinued Operations and Exit Activities

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC ("Continental"), an entity controlled by Michael Gorzynski, a former director of the Company who also serves as executive chairman of Continental since October 2020.

Our previous segment incorporating CIG (the "Insurance segment"), which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $ 544.0 million, inclusive of $ 344.0 million of Accumulated other comprehensive income ("AOCI").

The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale.

The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

As a result of the factors described above, combined with the risks associated with the long-term care insurance industry, the Company exited the Insurance segment and sold the business resulting in a $ 200.8 million loss on the sale of CIG in the third quarter of 2021.

On September 3, 2022, INNOVATE and Continental entered into a tax cooperation agreement permitting Continental General Insurance Company ("CGIC") to consolidate into INNOVATE's 2021 U.S.

tax return for the six-month period INNOVATE owned CGIC, allowing CGIC to shield some of its income tax liability by utilizing a portion of INNOVATE's Net Operating Losses ("NOLs") while also converting a portion of INNOVATE's IRC Sec.

163(j) carryforward assets into NOLs.

Refer to Note 14.

Income Taxes for additional information regarding income tax attributes.

The net tax savings of $ 3.1 million on CGIC's income tax liability was split between CGIC and INNOVATE in accordance with the tax sharing agreement, which was executed on October 11, 2022.

INNOVATE recognized a current income tax benefit of $ 3.1 million in the current year and received $ 0.9 million as a result of the tax sharing agreement during the fourth quarter of 2022 and expects to receive the remaining $ 0.4 million in 2023.

As CGIC is no longer a subsidiary of INNOVATE, the $ 1.8 million tax benefit received by CGIC from the tax sharing agreement was treated as a deemed contribution, and therefore INNOVATE recognized an additional $ 1.8 million loss related to the previous sale of the subsidiary, through continuing operations.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On October 30, 2019, the Company announced the sale of its stake in HMN, its 49 % joint venture with Huawei Technologies Co., Ltd., to Hengtong Optic-Electric Co Ltd.

Under the terms of the Sale and Purchase Agreement, the sale of New Saxon’s 49 % interest in HMN will be affected in two tranches.

The sale of the portion of New Saxon’s 30 % interest of HMN, closed on May 12, 2020 (the "First HMN Close").

The remaining 19 % interest of HMN is retained by New Saxon and subject to a put option agreement by New Saxon, exercisable starting on the second year anniversary of the closing date of the First HMN Close at a price equal to the greater of the share price paid for the 30 % interest or fair market value as of the exercisable date.

In the second quarter of 2020, in conjunction with the first tranche of the sale, the Company received $ 85.5 million in cash, of which $ 17.5 million and $ 2.1 million were paid to noncontrolling interest holders and redeemable noncontrolling interest holders, respectively.

On the closing date, New Saxon recorded a $ 71.1 million gain, included in Other income (loss) in the Consolidated Statements of Operations.

The gain recognized includes $ 11.3 million related to the fair value of the put option.

In addition, on the closing date, the Company recorded a $ 7.2 million tax expense related to a foreign tax payment when the first tranche closed.

The sale of ICS and its subsidiary, Go2 Tel, Inc., closed on October 31, 2020.

The Company recorded a $ 0.9 million gain on the sale and recognized $ 8.2 million of Accumulated other comprehensive loss related to the realization of foreign currency translation of PTGi International Carrier Services Ltd., which was essentially liquidated in conjunction with the sale.

The proceeds were used for general corporate purposes.

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware Corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of the Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders, for a total purchase price, net of Beyond6's debt and transaction expenses, customary purchase price adjustments and escrow arrangements, of approximately $ 106.5 million.

On January 15, 2021, the Company closed on the sale of Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of the Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders, for a total purchase price, net of Beyond6's debt and transaction expenses, customary purchase price adjustments and escrow arrangements, of approximately $ 106.5 million.

Net proceeds received by INNOVATE at closing was cash consideration of approximately $ 70.0 million.

The sale closed on January 15, 2021.

During the first quarter of 2021, the Company recognized a $ 39.2 million gain on the sale.

During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $ 0.5 million gain on the sale.

The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale.

The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

Discontinued Operations for further details.

A portion of the proceeds from the sale of Beyond6 were used to repay $ 15.0 million of the then outstanding balance under the 6.75 % line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement") and repay $ 27.9 million of the Company's 2021 Senior Secured Notes.

On February 28, 2020, the Company, through its indirect subsidiary, GMH, in which the Company holds an approximately 73 % controlling interest, sold 100 % of the shares of GMSL to Trafalgar AcquisitionCo, Ltd.

and an affiliate of J.F.

Lehman & Company, LLC.

During the year ended December 31, 2021, the Company recognized a gain of $ 1.2 million as a result of an indemnity release related to the sale of GMSL.

Discontinued Operations Reporting

The results of Beyond6 and CIG, as well as the gain from GMSL, and the related expenses directly attributable to the entities were reported as discontinued operations.

Formerly part of the Marine Services, Telecommunications, and Clean Energy segments, these entities were previously reclassified to the Other segment.

Summarized operating results of the discontinued operations as of the periods indicated were as follows (in millions):

Years Ended December 31,

Revenue $ — $ 1.7

Life, accident and health earned premiums, net — 55.7

Net investment income — 92.4

Realized/unrealized gains on investments — 5.1

Total revenue — 154.9

Cost of revenue — 0.8

Policy benefits, changes in reserves, and commissions — 126.0

Selling, general and administrative — 21.1

Depreciation and amortization — ( 11.0 )

Income from operations — 18.0

Interest expense — ( 0.5 )

Loss on sale and liquidation of subsidiaries — ( 159.9 )

Other loss — ( 3.1 )

Pre-tax loss from discontinued operations — ( 145.5 )

Income tax expense — ( 4.4 )

Loss from discontinued operations $ — $ ( 149.9 )

Assets Held for Sale

As of December 31, 2022 the Company had no assets held for sale, and as of December 31, 2021, the Company had approximately $ 1.5 million of other current assets related to discontinued operations which were classified in Assets held for sale in the Consolidated Balance Sheet.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Accounts Receivable, net

Accounts receivable, net consist of the following (in millions):

2021 December 31,

Contracts in progress $ 226.8 $ 118.6

Unbilled retentions 0.4 0.3

Trade receivables 9.9 7.5

Other receivables 10.6 8.9

Allowance for doubtful accounts ( 0.6 ) ( 0.6 )

Total $ 247.1 $ 134.7

Property, Plant and Equipment, net

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

2021 December 31,

Equipment, furniture and fixtures, and software $ 180.7 $ 113.7

Building and leasehold improvements 43.0 41.0

Land 24.1 24.1

Construction in progress 8.9 3.1

Plant and transportation equipment 8.3 4.4

Accumulated depreciation 95.1 73.5

Total $ 169.9 $ 112.8

Depreciation expense was $ 25.0 million and $ 20.8 million for the years ended December 31, 2021 and 2020, respectively.

These amounts included $ 12.2 million and $ 9.1 million of depreciation expense recognized within cost of revenue for each of the years ended December 31, 2021 and 2020.

As of December 31, 2021 and 2020 the total net book value of equipment under capital leases consisted of $ 0.2 million and $ 0.9 million, respectively.

Goodwill and Intangibles, net

On an annual basis, the Company performs its goodwill impairment review in accordance with ASC 350.

Estimating the fair value of a reporting unit requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates.

Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows.

Changes to the underlying businesses could affect the future cash flows, which in turn could affect the fair value of the reporting unit.

The Company reports goodwill impairment charges within the Asset impairment expense line of our Consolidated Statements of Operations.

The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on each of the reporting units.

Further, the Company assessed the current market capitalization, forecasts and the amount of headroom in the 2021 impairment test.

As a result of the goodwill assessment, the Company determined that COVID-19's impact to the Spectrum segment in the first quarter of 2020 was a “triggering event” and, as required, performed a quantitative analysis, with the assistance of a third-party valuation firm, of the value of the Spectrum reporting unit and its indefinite-lived intangible assets.

Based on the analysis, the Company determined that the fair value of the Spectrum reporting unit and the related indefinite-lived intangible assets continue to exceed their carrying values and were not impaired as of March 31, 2020.

Exit Activities - HC2 Network Shut-Down

On December 31, 2022, Broadcasting shut-down the operations and broadcasting of the Azteca America network and, during the year ended December 31, 2022, terminated both the PLA and BSA with TV Azteca.

HC2 Network did not quality for held-for-sale or discontinued operations as of December 31, 2022 as HC2 Network was not significant to the Company, does not represent a strategic shift and will not have a major effect on the Company's operations and financial results.

As a result of the cessation of the Azteca operations, for the year ended December 31, 2022, the Company recognized employee-related termination costs of $ 0.7 million, which are included in Selling, general & administrative, and a net loss of $ 30 thousand which is included in Other (expense) income, net.

Restructuring Costs - DBM Global

DBMG incurred approximately $ 6.5 million of restructuring costs for the year ended December 31, 2022, which are reflected in Selling, general and administrative in the Consolidated Statements of Operations.

These costs relate to a one-time internal project to evaluate and revamp DBMG's internal operations and back-office functions across all departments, including finance & accounting, risk management, human resources, IT and purchasing to improve future state delivery models and reduce redundancy throughout the organization.

There are no remaining amounts accrued as of December 31, 2022.

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

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

As of the dates indicated, lease right-of-use assets and lease liabilities consisted of the following (in millions):

Right-of-use assets:

Operating lease (Other assets) $ 65.8 $ 69.6

Finance lease (Property, plant and equipment, net) 2.1 0.2

Total right-of-use assets $ 67.9 $ 69.8

Lease liabilities:

Current portion of operating lease (Other current liabilities) $ 17.1 $ 15.5

Non-current portion of operating lease (Other liabilities) 53.8 58.5

Finance lease (Debt obligations) 2.1 0.1

Total lease liabilities $ 73.0 $ 74.1

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

The information is presented as of, and for the years ended December 31, 2022 and 2021.

The Company has entered into operating and finance lease agreements primarily for land, office space, equipment and vehicles, expiring between 2023 and 2045.

For the year ended December 31, 2022, the Company recorded impairment charges to right-of-use assets of $ 0.5 million, which are reflected in Other operating loss, related to FCC licenses impaired.

In addition, for the year ended December 31, 2021, the Company recorded an impairment of the right-of-use-assets totaling $ 2.1 million, which is reflected in Other operating loss.

For the years ended December 31, 2022 and 2021, the Company recorded short-term lease costs totaling $ 34.8 million and $ 19.2 million, respectively.

The Company is expected to incur $ 10.8 million future short-term lease costs for the year ended December 31, 2023.

The following table summarizes the components of lease expense for the periods indicated (in millions):

Years Ended December 31,

Finance lease cost:

Amortization of right-of-use assets $ 0.2 $ 0.8

Interest on lease liabilities 0.1 —

Net finance lease cost 0.3 0.8

Operating lease cost 23.5 21.7

Variable lease cost 0.6 0.5

Sublease income ( 0.7 ) ( 0.5 )

Total lease cost $ 23.7 $ 22.5

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Determining the fair value of the Spectrum reporting unit and indefinite-lived intangible assets requires significant judgment and estimates by management, utilizing the income-approach, which utilizes several key inputs, including future cash flows consistent with management’s strategic plans, sales growth rates and a discount rate, amongst others.

Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, growth rates, pricing, and consumer tastes and preferences.

Given the inherent uncertainties in estimating the future impacts of the COVID-19 pandemic on global macroeconomic conditions and interest rates in general and on the Spectrum business, actual results may differ from management’s current estimates and could have an adverse impact on one or more of the assumptions used in our quantitative models related to the Spectrum reporting unit, resulting in potential impairment charges in subsequent periods.

At March 31, 2020, while the fair value of the Spectrum reporting unit declined, the fair value of the Spectrum reporting unit continued to exceed its carrying value.

At December 31, 2021 and at December 31, 2020, the Company further reviewed qualitative factors of potential impairment for Goodwill and Intangible assets, inclusive of further impact of COVID-19, and there were no triggering events which would indicate impairment may have occurred.

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

Infrastructure

Spectrum Total

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

Acquisitions 16.7 — 16.7

Translation ( 0.3 ) — ( 0.3 )

Balance at December 31, 2021 $ 106.0 $ 21.4 $ 127.4

Indefinite-lived Intangible Assets

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

December 31, 2021 December 31, 2020

FCC licenses $ 106.5 $ 113.0

Total $ 106.5 $ 113.0

For the year ended December 31, 2021, FCC licenses decreased $ 6.5 million predominantly as a result of our Spectrum segment selling non-core FCC licenses.

In addition, for the years ending December 31, 2021 and 2020, the Company recorded impairment charges of $ 0.7 million and $ 13.5 million, respectively, in Other operating loss (gain) related to select FCC licenses which were sold in order to bring their carrying value equal to the agreed upon sales price prior to the execution of the sale.

The weighted-average period prior to the next renewal for FCC licenses was 3.0 years and 2.4 years as of December 31, 2021 and 2020, respectively, after taking into consideration licenses that were successfully renewed shortly after year-end.

While broadcast television licenses are issued for a fixed period of time (generally eight years), renewals of these licenses have occurred routinely and at nominal cost.

In addition, the Company does not believe that the expiration or non-renewal of any of our FCC licenses would have a material adverse effect on the expected future cash flows and profitability.

Cash flow information related to leases for the periods indicated is as follows (in millions):

Years Ended December 31,

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

Operating cash flows from finance leases $ 0.1 $ —

Financing cash flows from finance leases $ 0.2 $ 0.7

Operating cash flows from operating leases $ 23.3 $ 21.9

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

Finance leases $ 2.2 $ 0.1

Operating leases $ 15.0 $ 48.3

The weighted-average remaining lease term and the weighted-average discount rate for finance leases and operating leases for the periods presented are as follows:

Years Ended December 31,

Weighted-average remaining lease term (years) - operating leases 7.5 7.5

Weighted-average remaining lease term (years) - finance leases 1.4 2.3

Weighted-average discount rate - operating leases 5.3 % 5.4 %

Weighted-average discount rate - finance leases 5.7 % 4.2 %

As of December 31, 2022, undiscounted cash flows for finance and operating leases are as follows (in millions):

Leases Finance

2023 $ 20.0 $ 1.8

2024 14.3 0.3

2025 10.8 0.1

Thereafter 28.6 —

Total future lease payments 86.3 2.2

Present values ( 15.4 ) ( 0.1 )

Total lease liability balance $ 70.9 $ 2.1

In November 2021, INNOVATE Corp.

entered into a ten-year lease agreement for a special purpose space in Palm Beach, Florida.

The new lease has not yet commenced, but will require future monthly lease payments of approximately $ 0.2 million over the entire lease term and yearly common area maintenance charges of $ 0.6 million, both of which are subject to 3 % annual upward adjustments, with total square footage of 20,950 .

The lease also provides for the Company to receive an allowance from the landlord of $ 2.1 million to be used toward costs to design, engineer, install, supply and construct improvements (the "Construction Allowance"), payable at the end of the construction period, of which $ 0.8 million is included in prepaid rent in Other Assets as of December 31, 2022.

The future lease payments and remaining unexpended amounts under the allowance are not yet recorded on our Consolidated Balance Sheet.

We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin in 2024.

Subsequent to December 31, 2022, the lease agreement was amended to extend the term of the lease to 15 years and to increase the Construction Allowance to a total of $ 4.4 million.

In December 2021, the Company entered into a five-year lease agreement with an option to extend the lease for another five years for office space in West Palm Beach, Florida.

The new lease has not commenced yet, but will require future monthly lease payments of approximately $ 0.1 million over the entire lease term, subject to 3 % annual upward adjustment, with total square footage of 15,786 .

Other than a $ 0.2 million deposit included in Other Assets, the future lease payments are not yet recorded on our Consolidated Balance Sheets, as the building is still under construction.

We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin in 2024.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Definite Lived Intangible Assets

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

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

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

Trade names 14 years $ 25.4 $ ( 6.3 ) $ 19.1 $ 18.0 $ ( 4.6 ) $ 13.4

Customer relationships and contracts 11 years 87.7 ( 21.6 ) 66.1 36.4 ( 12.1 ) 24.3

Channel sharing arrangements 35 years 12.6 ( 1.1 ) 11.5 20.2 ( 1.6 ) 18.6

Other 10 years 8.5 ( 3.3 ) 5.2 5.5 ( 2.7 ) 2.8

Total $ 134.2 $ ( 32.3 ) $ 101.9 $ 80.1 $ ( 21.0 ) $ 59.1

Amortization expense for definite lived intangible assets was $ 12.6 million and $ 6.0 million for the year ended December 31, 2021 and 2020, respectively, and was included in Depreciation and amortization in our Consolidated Statements of Operations.

For the year ended December 31, 2021, Channel sharing arrangements decreased $ 7.6 million predominantly as a result of our Spectrum segment selling a non-core channel sharing arrangement.

The Company estimates the annual amortization expense of amortizable intangible assets for the next five fiscal years will be as follows (in millions):

Estimated Amortization

Thereafter 51.2

Total $ 101.9

Other Assets, Accrued Liabilities and Other Liabilities

Other assets, which are reflected in non-current assets in the Consolidated Balance Sheets, as of the periods indicated consisted of the following (in millions):

Right-of-use assets $ 65.8 $ 69.6

Restricted cash - non-current 1.5 —

Other 4.6 3.7

Total other assets $ 71.9 $ 73.3

For the year ended December 31, 2022, the Company recorded impairment charges to right-of-use assets of $ 0.5 million, which are reflected in Other operating loss, related to FCC licenses impaired.

For the year ended December 31, 2021, the Company recorded impairment charges to right-of-use-assets totaling $ 2.1 million, which is reflected in Other operating loss.

Refer to Note 8.

Goodwill and Intangibles, Net for additional information.

Accrued liabilities as of the periods indicated consisted of the following (in millions):

Accrued expenses and other current liabilities $ 18.9 $ 24.5

Accrued payroll and employee benefits 30.8 38.9

Accrued interest 15.3 29.6

Accrued income taxes 0.4 0.4

Total accrued liabilities $ 65.4 $ 93.4

Other liabilities, which are reflected in non-current liabilities in the Consolidated Balance Sheets, as of the periods indicated consisted of the following (in millions):

Lease liability, net of current portion $ 53.8 $ 58.5

Other 17.4 4.8

Total other liabilities $ 71.2 $ 63.3

As of December 31, 2022 and 2021, there were $ 1.7 million and $ 1.6 million, respectively, of asset retirement obligations ("AROs") included in Other liabilities.

Accretion expense relating to these AROs was $ 0.1 million and zero for the years ended December 31, 2022 and 2021, respectively.

INNOVATE CORP.

1 unchanged sentence

Debt Obligations

Debt obligations consist of the following (in millions):

2021 December 31,

Debt obligations, including finance lease obligations, as of the periods indicated consisted of the following (in millions):

Years Ended December 31,

Infrastructure

LIBOR plus 5.85 % Note, due 2023

LIBOR plus 1.50 % Line of Credit

3.25 % Note due 2026

PRIME minus 1.10 % Line of Credit

$ 99.5 $ 107.2

Line of Credit due 2024

(PRIME minus 0.85 % and PRIME minus 1.10 % as of December 31, 2022, and 2021, respectively)

4.00 % Note due 2024

2 unchanged sentences

Obligations under finance leases 2.1 0.1

Total Infrastructure $ 243.0 $ 188.6

8.50 % Note due 2024

2 unchanged sentences

10.50 % Note due 2022

Other, various maturity dates — 2.9

Obligations under finance leases — 0.6

Total Spectrum $ 69.7 $ 52.2

Life Sciences

18.00 % Note due 2023

Total Life Sciences $ 10.8 $ —

Non-Operating Corporate

8.50 % Senior Secured Notes, due 2026

7.50 % Convertible Senior Notes, due 2026

7.50 % Convertible Senior Notes, due 2022

LIBOR plus 5.75 % Line of Credit

LIBOR plus 5.75 % Line of Credit, due 2024

Total Non-Operating Corporate $ 401.8 $ 390.0

Total outstanding principal $ 725.3 $ 630.8

Unamortized issuance discount, issuance premium, and deferred financing costs ( 10.9 ) ( 4.5 )

1 unchanged sentence

Debt obligations $ 683.8 $ 556.8

Aggregate finance lease and debt payments, including interest are as follows (in millions):

Aggregate finance lease and debt payments, including interest, as of December 31, 2022, were as follows (in millions):

Finance Leases Debt Total

3 unchanged sentences

2026 — 469.8 469.8

2026 — 487.3 487.3

Thereafter — — —

2 unchanged sentences

Total aggregate finance lease and debt payments $ 2.1 $ 723.2 $ 725.3

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

As of December 31, 2022, the interest rates on finance leases ranged from approximately 2.0 % to 6.0 %.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Infrastructure

In May 2021, DBMG repaid its LIBOR plus 1.50 % revolving line of credit under the Credit and Security Agreement with Wells Fargo Bank ("Revolving Line") and its term loan due 2023 under a financing agreement with TCW Asset Management Company LLC ("TCW Loan").

In May 2021, DBMG repaid its LIBOR plus 1.50 % revolving line of credit (the "Revolving Line") under the Credit and Security Agreement with Wells Fargo Bank and its term loan due 2023 (the "TCW Loan") under a financing agreement with TCW Asset Management Company LLC.

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 % with an effective interest 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 TCW Loan yielded a loss on extinguishment of $ 1.5 million included in Loss on early extinguishment or restructuring of debt in the Consolidated Statement of Operations.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On October 24, 2019, Spectrum issued $ 78.7 million 364-day secured notes (the "2020 Notes").

The 2020 Notes were comprised of a $ 36.2 million, 8.50 % tranche funded by an affiliate of MSD Partners, L.P.

(the “ 8.50 % Note”).

The remaining $ 42.5 million, 10.50 % tranche (the “ 10.50 % Note”) was a modification of the existing Secured Note, with certain institutional investors.

The 2020 Notes had an original maturity date of October 2020, and were amended multiple times during 2020 as further described below.

The net proceeds from the financing were used to retire Broadcasting’s existing debt, as well as fund pending acquisitions, working capital and general corporate purposes.

In connection with the issuance of the 10.50 % Note due 2020, Spectrum issued warrants to the same institutional investors to purchase 50,000 shares of common stock at $ 176.4 per share for a total purchase price of $ 8.8 million, or net settled, if exercised as of the issuance date, and as may be adjusted at any future exercise of the warrant pursuant to its terms.

The warrant has a five-year term and is immediately exercisable.

In February 2020, Spectrum amended its agreement governing its 8.50 % Note funded by MSD Partners, L.P., increasing the principal balance to $ 39.3 million.

The proceeds were used to repay principal and interest on existing debt.

In August 2020, Spectrum modified its agreement with MSD Partners, L.P.

and Great American Life Insurance Company to extend the maturity on its 8.50 % Note and 10.50 % Note to October 2021.

In September 2020, Spectrum further amended its agreement governing its 8.50 % Note, increasing the principal balance by $ 4.0 million to $ 43.3 million.

The proceeds were used to repay principal and interest on existing debt and for general business purposes.

In November 2020, Spectrum paid down $ 2.9 million of its 8.50 % Note and $ 3.0 million on other various notes.

In December 2020, Spectrum paid down $ 21.0 million and $ 9.6 million of its 8.50 % Note and 10.50 % Note, respectively from the proceeds from the sale of stations.

The proceeds received in 2021 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 2021 extinguishment of the Revolving Line and the TCW Loan yielded a loss on extinguishment of $ 1.6 million included in Loss on early extinguishment or restructuring of debt in the Consolidated Statements of Operations.

The UMB Term Loan expires May 31, 2026 and bears interest at a rate of 3.25 % with an effective interest rate of 3.3 %.

Interest is paid monthly.

The UMB Revolving Line expires May 31, 2024 and, as of December 31, 2022 and 2021, bore interest at a rate of Prime Rate minus 0.85 % and Prime Rate minus 1.10 %, respectively.

Interest is paid monthly.

The UMB Revolving Line associated with our Infrastructure segment contains customary restrictive and financial covenants related to debt levels and performance, including a Fixed Coverage Ratio covenant, as defined in the agreement.

On August 2, 2022, DBMG negotiated and finalized an amendment to its UMB Revolving Line which included a retrospective change to the terms of the Fixed Coverage Ratio, and an increase in the UMB Revolving Line commitment from $ 110.0 million to $ 135.0 million, among other things.

The $ 15.0 million note expires March 31, 2024 and bears interest at a rate of 4.00 %.

Interest is paid quarterly.

The $ 18.7 million note expires May 27, 2024 and bears interest at a rate of 8.00 %.

Interest is paid quarterly.

On August 30, 2021, Broadcasting repurchased $ 1.0 million of DTV's outstanding notes payable, inclusive of accrued interest, to certain institutional investors.

Also on August 30, 2021, DTV extended its remaining outstanding notes by 60 days.

On October 21, 2021, Broadcasting entered into the Fifth Omnibus Amendment to Secured Notes, Consent and Second Amendment to Asset Sale Under Secured Notes and Intercreditor Agreement (the “Amendment”), which, among other things, extended $ 52.2 million of its Senior Secured Notes, due October 21, 2021, through November 30, 2022.

and Great American Life Insurance Company, which, among other things, extended the $ 52.2 million of its Senior Secured Notes, due October 21, 2021, through November 30, 2022.

Concurrently, Broadcasting completed the last of a series of repurchases of all the outstanding secured notes, inclusive of accrued interest, of DTV America Corporation (“DTV”) for a total consideration of $ 6.2 million using a combination of cash on hand and proceeds from the sales on non-core assets.

1 unchanged sentence

Subsequent to these acquisitions, DTV’s debt is held by Broadcasting and eliminated in consolidation.

The extinguishment of DTV's debt yielded a loss on extinguishment of $ 1.0 million included in Loss on early extinguishment or restructuring of debt in the Consolidated Statement of Operations.

Non-Operating Corporate

On February 1, 2021, INNOVATE repaid its 2021 Senior Secured Notes and issued $ 330.0 million aggregate principal amount of 8.50 % senior secured notes due 2026 (the "2026 Senior Secured Notes").

In addition, the Company entered into exchange agreements with certain holders of approximately $ 51.8 million aggregate principal amount of its existing $ 55.0 million 7.50 % convertible senior notes due 2022 (the "2022 Convertible Notes"), pursuant to which the Company exchanged such holders' 2022 Convertible Notes for newly issued 7.50 % convertible notes due 2026 (the "2026 Convertible Notes").

The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company accounted for the transactions under the debt extinguishment model as the present value of cash flows under the terms of the 2026 Senior Secured Notes and 2026 Convertible Notes was at least 10% different from the present value of the remaining cash flows under the 2021 Senior Secured Notes and the 2022 Convertible Notes.

The extinguishment of the 2021 Senior Secured Notes yielded a loss on extinguishment of $ 4.5 million.

The extinguishment of the $ 51.8 million of 2022 Convertible Notes yielded a loss on extinguishment of $ 5.5 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.

2021 Senior Secured Notes

The Senior Secured Notes were issued under an indenture dated November 20, 2018, by and among the Company, the guarantors party thereto and U.S.

Bank National Association, a national banking association ("U.S.

Bank"), as trustee (the "Secured Indenture").

The Senior Secured Notes were issued at 98.75 % of par with a stated interest rate of 11.50 % and an effective interest rate of 13.20 %, which reflects a discount of $ 5.9 million.

In March 2020, with the cash proceeds from the sale of GMSL, INNOVATE redeemed $ 76.9 million of its Senior Secured Notes at a price equal to 104.5 % of the principal amount plus accrued interest through the redemption date.

INNOVATE recognized $ 5.4 million in extinguishment loss related to the redemption of its Senior Secured Notes, which is included in Loss on early extinguishment or restructuring of debt in our Consolidated Statement of Operations.

On November 28, 2022, Broadcasting entered into a Sixth Omnibus Amendment to Secured Notes, extending the maturity date of $ 52.2 million of its Senior Secured Notes from November 30, 2022, to December 30, 2022.

The terms of the notes were otherwise substantially unchanged.

On December 30, 2022, Broadcasting entered into a Seventh Omnibus Amendment to Secured Notes which, among other things, extended the maturity date of $ 52.2 million of its Senior Secured Notes, due December 30, 2022 to May 31, 2024.

The $ 52.2 million of Senior Secured Notes consisted of $ 19.3 million of 8.5 % Senior Secured Notes and $ 32.9 million of 10.5 % Senior Secured Notes.

The other terms of the $ 19.3 million 8.5 % Senior Notes remained the same.

At the time of the extension, HC2 Broadcasting had accrued interest and other fees of $ 6.9 million.

The interest rate on the $ 32.9 million 10.5 % Senior Notes was increased to 11.45 % and cumulative accrued interest and exit fees of $ 17.5 million were capitalized into the principal balance with both note extensions accounted for as debt modification events.

The new effective interest rates on the notes range from 12.8 % to 19.6 %.

All other terms were essentially the same.

Total outstanding principal after the refinancing was $ 69.7 million and $ 6.9 million of accrued interest and fees remain accrued, with total exit fees of $ 7.6 million which were recorded as original issue discount with a corresponding liability reflected in Other Liabilities.

Interest is capitalized and payable upon maturity of the principal.

Concurrently therewith and as part of the consideration for extending the 10.5 % Senior Notes, HC2 Broadcasting amended warrants to purchase 145,825 shares of common stock of HC2 Broadcasting Holdings, Inc.

common stock held by the lenders of the 10.5 % Senior Notes by extending the time to exercise such to the second half of 2026 and reducing the exercise price per share (i) from $ 140.00 to $ 0.01 in the case of the certain of the warrants and (ii) from $ 130.00 to $ 0.01 in the case of the remaining warrants.

The warrants have a five-year term and are exercisable at any time.

The change in the fair value of the warrants was recorded as original issue discount with a corresponding impact reflected in Noncontrolling interest of $ 3.1 million.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

In June 2020, with the cash proceeds from the partial sale of New Saxon's interest in HMN, INNOVATE redeemed $ 50.6 million of its Senior Secured Notes at a price equal to 104.5 % of the principal amount plus accrued interest through the redemption date.

INNOVATE recognized $ 3.4 million in extinguishment loss related to this redemption, which is included in Loss on early extinguishment or restructuring of debt in our Consolidated Statement of Operations.

In October 2020, INNOVATE redeemed an additional $ 2.1 million of its Senior Secured Notes at a price equal to 104.5 % of the principal amount plus accrued interest through the redemption date.

INNOVATE recognized $ 0.1 million in extinguishment loss related to this redemption, which is included in Loss on early extinguishment or restructuring of debt in our Consolidated Statement of Operations.

Life Sciences

On June 27, 2022, R2 Technologies issued a $ 0.5 million short-term 90 -day 12.0 % bridge financing loan with Lancer Capital, LLC ("Lancer"), a related party, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors.

On July 13, 2022, R2 Technologies entered into a note purchase agreement with Lancer.

The note payable bears interest at 12.0 % per annum and was funded in two tranches.

The first tranche of $ 5.0 million closed on July 13, 2022, and included the settlement of a $ 0.5 million short-term 90 -day 12.0 % bridge financing loan made on June 27, 2022 by Lancer, and an additional $ 4.5 million in cash.

The second tranche of $ 5.0 million closed on August 8, 2022.

On December 13, 2022, R2 Technologies closed on an additional $ 0.8 million 18.0 % note with Lancer and also increased the borrowing rate on the existing $ 10.0 million note to 18.0 %.

In addition, the maturity date on the $ 10.0 million note, was amended to the earlier of March 31, 2023 or within five business days after the date on which R2 Technologies receives an aggregate $ 20.0 million from the consummation of a debt or equity financing.

All other terms were substantially unchanged.

Interest is capitalized and payable upon maturity of the principal.

Subsequent to year end, on February 15, 2023 and February 28, 2023, R2 Technologies closed on an additional 18 % $ 0.5 million note and an additional 18 % $ 0.4 million with Lancer, respectively.

For the year ended December 31, 2022, R2 Technologies recognized interest expense related to the contractual interest coupon with Lancer of $ 0.8 million.

Non-Operating Corporate

2026 Senior Secured Notes

On February 1, 2021, INNOVATE repaid its 2021 Senior Secured Notes and issued $ 330.0 million aggregate principal amount of 8.50 % senior secured notes due February 1, 2026 (the "2026 Senior Secured Notes").

The 2026 Senior Secured Notes were issued under an indenture dated February 1, 2021, by and among the Company, the guarantors party thereto and U.S.

1 unchanged sentence

Bank"), as trustee (the "Secured Indenture").

The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The extinguishment of the 2021 Senior Secured Notes yielded a loss on extinguishment of $ 4.5 million.

The 2026 Senior Secured Notes were issued at 100 % of par, with a stated interest rate of 8.50 % and an effective interest rate of 9.26 %, which reflects $ 2.7 million of deferred financing fees.

For the years ended December 31, 2022 and 2021, interest expense recognize relating to both the contractual interest coupon and amortization of the deferred financing fees was $ 30.1 million and $ 27.2 million, respectively.

2022 Convertible Notes

The Convertible Notes were issued under a separate indenture dated November 20, 2018, between the Company and U.S.

Bank, as trustee (the "Convertible Indenture").

The Convertible Notes were issued at 100 % of par with an effective interest rate of 17.60 %, which reflects the $ 12.6 million discount and $ 2.0 million of deferred financing fees.

Each $1,000 of principal of the Convertible Notes will initially be convertible into 234.2971 shares of our common stock, which is equivalent to an initial conversion price of approximately $ 4.27 per share, subject to adjustment upon the occurrence of specified events.

In accordance with ASC Topic 815-15, Derivatives and Hedging, the embedded conversion feature contained in the Convertible Notes is required to be bifurcated and recorded as a derivative liability and marked to market in each reporting period.

The embedded conversion feature had a fair value of $ 12.5 million on the transaction date, which was recorded as a discount on the Convertible Notes and included within Other liabilities on our Consolidated Balance Sheets.

The fair value of the embedded conversion feature was $ 5.8 million as of December 31, 2020, the change in fair value from the transaction date being recorded within Other income.

In conjunction with the issuance of the Convertible Notes in 2018, the Company incurred a consent fee payable to preferred stockholders of $ 3.8 million.

This fee was recorded within the Preferred stock and deemed dividends line item of the Consolidated Statements of Operations as a deemed dividend.

At December 31, 2020, the Convertible Notes had a net carrying value of $ 48.1 million and an unamortized discount of $ 6.0 million.

Based on the closing price of our common stock of $ 3.26 on December 31, 2020, the if-converted value of the Convertible Notes did not exceed its principal value.

For the year ending December 31, 2020, interest expense recognized for the period relating to both the contractual interest coupon and amortization of the discount on the Convertible Notes was $ 4.1 million.

At December 31, 2021, the Convertible Notes had a net carrying value of $ 3.1 million and an unamortized discount of $ 0.1 million.

Based on the closing price of our common stock of $ 3.71 on December 31, 2021, the if-converted value of the Convertible Notes did not exceed its principal value.

For the year ending December 31, 2021, interest expense recognized for the period relating to both the contractual interest coupon and amortization of the discount on the Convertible Notes was $ 0.6 million.

On June 1, 2022, the 2022 Convertible Notes of $ 3.2 million matured, and the Company repaid the principal and accrued interest upon maturity.

For the years ended December 31, 2022 and 2021, interest expense recognized relating to both the contractual interest coupon and amortization of the discount on the 2022 Convertible Notes was $ 0.2 million and $ 0.6 million, respectively.

2026 Convertible Notes

3 unchanged sentences

The fair value of the embedded conversion feature contained in the 2026 Convertible Notes had a fair value of $ 12.3 million, which was recorded as a premium on the 2026 Convertible Notes.

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.

The 2026 Convertible Notes mature on August 1, 2026 unless earlier converted, redeemed or purchased.

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

Each $1,000 of principal of the 2026 Convertible Notes will initially be convertible into 234.2971 shares of our common stock, which is equivalent to an initial conversion price of approximately $ 4.27 per share, subject to adjustment upon the occurrence of specified events.

At December 31, 2021, the 2026 Convertible Notes had a carrying value of $ 61.2 million and an unamortized premium of $ 10.4 million.

As of December 31, 2022, the 2026 Convertible Notes had a net carrying value of $ 59.3 million inclusive of an unamortized premium of $ 8.3 million.

Based on the closing price of our common stock of $ 1.87 on December 31, 2022, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For the year ended December 31, 2021, interest expense recognized for the period relating to both the contractual interest coupon and amortization of discount net of premium was $ 3.6 million and $ 1.7 million, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Line of Credit

For the years ended December 31, 2022 and 2021, interest expense recognized relating to both the contractual interest coupon and amortization of discount net of premium was $ 1.9 million and $ 1.8 million, respectively.

Line of Credit - Revolving Credit Agreement

On February 23, 2021, the Company entered into a third amendment (the "Amendment") of the line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement").

Among other things, the Amendment (i) increases the aggregate principal amount of the Revolving Credit Agreement to $ 20.0 million, (ii) extends the maturity date of the Revolving Credit Amendment to February 23, 2024, (iii) updates the affirmative and negative covenants contained in the Amended Credit Agreement so that they are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes and (iv) reduces the interest rate margin applicable to loans borrowed under the Amended Credit Agreement to 5.75 % from the 6.75 % described above.

Among other things, the Amendment (i) increased the aggregate principal amount of the Revolving Credit Agreement to $ 20.0 million;

(ii) extended the maturity date of the Revolving Credit Amendment to February 23, 2024;

(iii) updated the affirmative and negative covenants contained in the Amended Credit Agreement so that they are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes;

and (iv) reduced the interest rate margin applicable to loans borrowed under the Amended Credit Agreement to 5.75 % from 6.75 %.

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

In May 2021, INNOVATE drew $ 5.0 million under the Revolving Credit Agreement.

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

In July 2022, the Company drew an additional $ 15.0 million under the Revolving Credit Agreement.

2026 Senior Secured Notes Terms and Conditions

29 unchanged sentences

At December 31, 2022, the Company was in compliance with all covenants contained in the 2026 Senior Secured Notes.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

2026 Convertible Notes Terms and Conditions

The 2022 Convertible Notes mature on June 1, 2022 unless earlier converted, redeemed or purchased.

The 2022 Convertible Notes accrue interest at a rate of 7.5 % per year.

Interest on the 2022 Convertible Notes is paid semi-annually on December 1 and June 1 of each year.

Issue Price .

The issue price of the Convertible Notes was 100 % of par.

The notes are the Company’s general unsecured and unsubordinated obligations and will rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness, and senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the notes.

The notes will be effectively subordinated to all of the Company’s existing and future secured indebtedness, including the Company’s Secured Notes, to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries, including trade credit.

Optional Redemption .

The Company could not redeem the notes prior to June 1, 2020.

From or after June 1, 2020, the Company may redeem for cash all of the notes if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (which need not be consecutive trading days) during any 30 consecutive trading-day period ending within five trading days prior to the date on which the Company provides notice of redemption.

The redemption price will equal 100 % of the principal amount of the notes being redeemed, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

Conversion Rights .

The 2022 Convertible Notes are convertible into shares of the Company’s common stock based on a conversion rate of 234.2971 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $ 4.27 per share of the Company’s common stock), at any time prior to the close of business on the business day immediately preceding the maturity date, in principal amounts of $1,000 or an integral multiple of $1,000 in excess thereof.

In addition, following a Make-Whole Fundamental Change (as defined in the indenture governing the 2022 Convertible Notes) or the Company’s delivery of a notice of redemption for the 2022 Convertible Notes, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with (i) such Make-Whole Fundamental Change or (ii) such notice of redemption.

However, to comply with certain listing standards of The New York Stock Exchange, the Company will settle in cash its obligation to increase the conversion rate in connection with a Make-Whole Fundamental Change or redemption until it has obtained the requisite stockholder approval.

Events of Default .

The indenture governing the 2022 Convertible Notes contains customary events of default which could, subject to certain conditions, cause the 2022 Convertible Notes to become immediately due and payable.

2026 Convertible Notes Terms and Conditions

The 2026 Convertible Notes mature on August 1, 2026 unless earlier converted, redeemed or purchased.

1 unchanged sentence

Interest on the 2026 Convertible Notes is paid semi-annually on February 1 and August 1 of each year.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Issue Price .

4 unchanged sentences

The Company may not redeem the notes prior to August 1, 2023.

On or after August 1, 2023, the Company may redeem for cash all of the notes if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (which need not be consecutive trading days) during any 30 consecutive trading-day period ending within five trading days prior to the date on which the Company provides notice of redemption.

On or after August 1, 2023, the Company may redeem for cash all of the notes if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (which need not be consecutive trading days) during any 30 consecutive trading-day period ending within 5 trading days prior to the date on which the Company provides notice of redemption.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Conversion Rights .

4 unchanged sentences

The Convertible Indenture contains customary events of default which could, subject to certain conditions, cause the 2026 Convertible Notes to become immediately due and payable.

As of December 31, 2022, the Company was in compliance with all covenants contained in the 2026 Convertible Notes.

Revolving Credit Agreement

3 unchanged sentences

As provided under a Collateral Trust Joinder, the lender was added as a secured party to the Collateral Trust Agreement, and accordingly the pari passu obligations and commitments under the Revolving Credit Agreement are secured equally and ratably by the collateral of the Secured Notes.

Any failure to comply with the restrictions in the agreements governing our indentures, or any agreement governing other indebtedness we could incur, may result in an event of default under those agreements.

Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.

INNOVATE is in compliance with its debt covenants as of December 31, 2022.

Supplementary Financial Information

Contracts in Progress

Contract assets and contract liabilities and recognized earnings consist of the following (in millions):

2021 December 31,

Costs incurred on contracts in progress $ 2,161.5 $ 752.9

Estimated earnings 316.4 139.0

Contract revenue earned on uncompleted contracts 2,477.9 891.9

progress billings 2,438.4 838.5

$ 39.5 $ 53.4

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

Contract assets $ 118.6 $ 86.6

Contract liabilities ( 79.1 ) ( 33.2 )

$ 39.5 $ 53.4

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Inventory consists of the following (in millions):

2021 December 31,

Raw materials and consumables $ 14.3 $ 8.7

Work in process 1.2 —

Finished goods 1.5 1.2

Total inventory $ 17.0 $ 9.9

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

December 31, 2021 December 31, 2020

Alternative (1)

Method Total Measurement

Alternative (1)

Common stock $ — $ 2.1 $ 2.1 $ — $ 2.5 $ 2.5

Preferred stock — 7.5 7.5 — 15.4 15.4

Fixed maturities 0.5 — 0.5 0.5 — 0.5

Put option 11.3 — 11.3 11.3 — 11.3

Equity method securities — 34.6 34.6 — 25.7 25.7

Total $ 11.8 $ 44.2 $ 56.0 $ 11.8 $ 43.6 $ 55.4

Fair Value of Financial Instruments Not Measured at Fair Value

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis.

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):

December 31, 2021 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Other invested assets $ 11.3 $ 11.3 $ — $ — $ 11.3

Total assets not accounted for at fair value $ 11.3 $ 11.3 $ — $ — $ 11.3

Debt obligations (1)

$ 626.3 $ 648.2 $ — $ 648.2 $ —

Total liabilities not accounted for at fair value $ 626.3 $ 648.2 $ — $ 648.2 $ —

December 31, 2020 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Other invested assets $ 11.3 $ 11.3 $ — $ — $ 11.3

Total assets not accounted for at fair value $ 11.3 $ 11.3 $ — $ — $ 11.3

Debt obligations (1)

$ 560.7 $ 579.2 $ — $ 579.2 $ —

Total liabilities not accounted for at fair value $ 560.7 $ 579.2 $ — $ 579.2 $ —

(1) Excludes certain lease obligations accounted for under ASC 842, Leases .

Debt Obligations.

The fair value of the Company’s long-term obligations was determined using Bloomberg Valuation Service BVAL.

The methodology combines direct market observations from contributed sources with quantitative pricing models to generate evaluated prices and classified as Level 2.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Carrying amounts of the Company's long-term obligations of $ 626.3 million and $ 560.7 million for the years ending December 31, 2021 and December 31, 2020 are inclusive of $( 4.5 ) million and $( 15.1 ) million of Unamortized issuance discount, issuance premium, and deferred financing costs.

See Footnote 9.

Debt Obligations for further information.

Equity Method Investments

For the year ended December 31, 2021, certain investments subject to Regulation S-X Rule 4-08(g) held by the Company in aggregate have met the significance criteria as defined under SEC guidance.

In accordance with Rule 8-03(b)(3) of Regulation S-X, the Company must assess whether its equity method investment is a significant equity method investment.

In evaluating the significance of this investment, the Company performed the income, asset, and investment tests described in S-X 3-05 and S-X 1-02(w).

Rule 8-03(b)(3) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20%.

Under the income test, the Company’s proportionate share of its equity method investee's aggregated net income exceeded the applicable threshold of 20%, and accordingly it is required to provide summarized income statement information for this investee for all periods presented.

The Company's share of net loss from its equity method investment totaled $ 2.8 million and $ 3.4 million for the years ended December 31, 2021 and 2020, respectively.

The following tables provide summarized financial information for the Company's equity method investments (in millions):

2021 December 31,

Assets $ 604.5 $ 524.2

Liabilities 481.5 405.9

Equity $ 123.0 $ 118.3

Years Ended December 31,

Total revenues $ 624.1 $ 468.2

Gross profit $ 95.5 $ 82.7

Income from continuing operations $ 11.5 $ 11.1

Net income $ 6.4 $ 6.8

Other Non-Current Assets

The following tables provide information relating to Other non-current assets (in millions):

2021 December 31,

Right of use asset $ 69.6 $ 39.8

Other 3.7 2.4

Total other non-current assets $ 73.3 $ 42.2

Accrued Liabilities

Accrued liabilities consist of the following (in millions):

2021 December 31,

Accrued expenses and other current liabilities $ 24.5 $ 27.9

Accrued payroll and employee benefits 38.9 34.7

Accrued interest 29.6 13.9

Accrued income taxes 0.4 0.6

Total accrued liabilities $ 93.4 $ 77.1

Other Non-Current Liabilities

The following tables provide information relating to Other non-current liabilities (in millions):

2021 December 31,

Lease liability, net of current portion $ 58.5 $ 31.6

Other 4.8 8.2

Total other non-current liabilities $ 63.3 $ 39.8

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

2021 December 31,

Right-of-use assets:

Operating lease (Other non-current assets) $ 69.6 $ 39.8

Finance lease (Property, plant and equipment, net) 0.2 0.9

Total right-of-use assets $ 69.8 $ 40.7

Lease liabilities:

Current portion of operating lease (Other current liabilities) $ 15.5 $ 11.2

Non-current portion of operating lease (Other non-current liabilities) 58.5 31.6

Finance lease (Debt obligations) 0.1 0.8

Total lease liabilities $ 74.1 $ 43.6

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

This information is presented as of, and for the years ended December 31, 2021 and 2020.

The Company has entered into operating and finance lease agreements primarily for land, office space, equipment and vehicles, expiring between 2022 and 2045.

In addition, for the year ended December 31, 2021, the Company recorded an impairment of the right-of-use assets totaling $ 2.1 million in Other operating loss (gain).

For the years ended December 31, 2021 and 2020, the Company recorded short-term lease costs totaling $ 19.2 million and $ 18.0 million, respectively.

The Company is expected to incur $ 9.9 million future short-term lease costs for the year ended December 31, 2022.

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

Years Ended December 31,

Finance lease cost:

Amortization of right-of-use assets $ 0.8 $ 0.9

Interest on lease liabilities — 0.1

Net finance lease cost 0.8 1.0

Operating lease cost 21.7 14.0

Variable lease cost 0.5 0.2

Sublease income ( 0.5 ) —

Total lease cost $ 22.5 $ 15.2

Cash flow information related to leases for the years ended December 31, 2021 and 2020 is as follows (in millions):

Years Ended December 31,

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

Operating cash flows from finance leases $ — $ 0.1

Financing cash flows from finance leases $ 0.7 $ 0.7

Operating cash flows from operating leases $ 21.9 $ 13.9

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

Finance leases $ 0.1 $ 0.1

Operating leases $ 48.3 $ 15.6

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As of December 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:

2021 December 31,

Weighted-average remaining lease term (years) - operating lease 7.5 4.0

Weighted-average remaining lease term (years) - finance lease 2.3 1.1

Weighted-average discount rate - operating lease 5.4 % 6.3 %

Weighted-average discount rate - finance lease 4.2 % 9.0 %

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

Leases Finance

2022 $ 18.7 $ 0.1

Thereafter 30.7 —

Total future lease payments 91.2 0.1

Present values ( 17.2 ) —

Total lease liability balance $ 74.0 $ 0.1

In November 2021, INNOVATE Corp.

entered into a ten-year lease agreement for a special purpose space in West Palm Beach, Florida.

The new lease also provides for the Company to receive an allowance from the Landlord of $ 2.1 million to be used toward costs to design, engineer, install, supply and to construct improvements which is payable at the end of the lease.

The future lease payments and the allowance are not yet recorded on our consolidated balance sheet.

We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin no later than November 2023.

Also in November 2021, the Company entered into a three-year lease agreement for office space in West Palm Beach, Florida.

The lease commencement date was November 15, 2021, and requires monthly lease payments of approximately $ 12.5 thousand over the entire lease term, subject to a 3 % annual upward adjustment, with total square footage of 2,723 .

The future lease payments and corresponding right of use asset of $ 0.4 million were recorded on our consolidated balance sheet as a lease liability.

In December 2021, the Company entered into a five-year lease agreement with an option to extend the lease for another five years for office space in West Palm Beach, Florida.

The new lease has not commenced yet, but will require future monthly lease payments of approximately $ 0.14 million over the entire lease term, subject to 3 % annual upward adjustment, with total square footage of 15,786 .

The future lease payments are not yet recorded on our consolidated balance sheet, as the building is still under construction.

We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin in the fourth quarter of 2023.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The provisions expense for income taxes for the years ended December 31, 2021 and 2020 were as follows (in millions):

The provisions expense for income taxes for the years indicated were as follows (in millions):

Years Ended December 31,

Current tax expense (benefit)

Federal $ ( 2.7 ) $ 0.1

1 unchanged sentence

Foreign ( 0.4 ) 1.8

Subtotal Current 3.7 0.4

Net current tax expense (benefit) ( 0.2 ) 3.7

Deferred tax expense (benefit)

Federal ( 0.6 ) 0.8

1 unchanged sentence

Foreign 1.6 0.9

Subtotal Deferred 1.9 6.6

Net deferred tax expense 1.1 1.9

Income tax expense $ 0.9 $ 5.6

The US and foreign components of income (loss) from continuing operations before income taxes for the years ended December 31, 2021 and 2020 were as follows (in millions):

The US and foreign components of income (loss) from continuing operations before income taxes for the years indicated were as follows (in millions):

Years Ended December 31,

2 unchanged sentences

Loss from continuing operations before income taxes $ ( 41.1 ) $ ( 80.7 )

The provisions expense for income taxes differed from the amount computed by applying the federal statutory income tax rate to income (loss) before income taxes due to the following items for the years ended December 31, 2021 and 2020 (in millions):

For the years indicated, the provisions expense for income taxes differed from the amount computed by applying the federal statutory income tax rate to income (loss) before income taxes due to the following items (in millions):

Years Ended December 31,

Tax provision (benefit) at federal statutory rate $ ( 17.0 ) $ ( 9.8 )

Tax (benefit) at federal statutory rate $ ( 8.6 ) $ ( 17.0 )

Permanent differences 0.3 0.4

6 unchanged sentences

Rate change 1.7 20.2

Transition to the Coronavirus Aid, Relief, and Economic Security Act — ( 10.9 )

Withholding Tax Expense — 7.3

Gain/loss on sale or deconsolidation of a subsidiary — ( 5.8 )

Outside basis difference 4.2 0.9

Contingent Liability — 2.2

AOCI Recycling — 2.1

Other 0.7 1.6

Equity Income/Loss ( 1.1 ) ( 0.6 )

Equity income ( 1.0 ) ( 1.1 )

Derivative — ( 1.8 )

Income tax (benefit) expense $ 5.6 $ 7.0

The income tax expense as of December 31, 2021 is $ 5.6 million.

The amount recorded primarily relates to tax expense as calculated under ASC 740 for taxpaying entities.

Income tax expense $ 0.9 $ 5.6

Income tax expense of $ 0.9 million for the year ended December 31, 2022 primarily relates to tax expense as calculated under ASC 740 for taxpaying entities, which was partially offset by the net tax savings of $ 3.1 million from the CGIC consolidation in the 2021 tax return, resulting in a partial release of the valuation allowance.

Discontinued Operations and Exit Activities in the Consolidated Financial Statements for additional information.

Additionally, the tax benefits associated with losses generated by the INNOVATE Corp.

tax consolidated group 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.

Income tax expense of $ 5.6 million for the year ended December 31, 2021 primarily relates to tax expense as calculated under ASC 740 for taxpaying entities.

Additionally, the tax benefits associated with losses generated by the INNOVATE Corp.

tax consolidated group 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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The income tax expense was $ 7.0 million for the years ended December 31, 2020.

The amount recorded primarily relates to tax expense incurred in China from the partial sale of HMN and the tax expense as calculated under ASC 740 for taxpaying 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 Coronavirus Aid, Relief, and Economic Security Act.

Additionally, the tax benefits associated with losses generated by the INNOVATE Corp.

tax consolidated group and certain other businesses were reduced by a full valuation allowance as we do not believe it is more-likely-than-not that the losses will be utilized.

Deferred income taxes reflect the net income tax effect of temporary differences between the basis of assets and liabilities for financial reporting purposes and for income tax purposes.

Net deferred tax balances are comprised of the following as of December 31, 2021 and 2020 (in millions):

Net deferred tax balances as of the years indicated were comprised of the following (in millions):

Net operating loss carryforwards $ 82.5 $ 63.8

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The realization of the deferred tax assets is dependent upon the generation of sufficient future taxable income, including capital gains.

If it is determined that the deferred tax assets cannot be realized, a valuation allowance must be established, with a corresponding charge to net income.

If it is determined that the deferred tax assets cannot be realized, a valuation allowance must be established, with a corresponding charge to net income (loss).

In accordance with ASC 740, the Company establishes valuation allowances for deferred tax assets that, in its judgment are not more likely-than-not realizable.

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The objective negative evidence evaluated was the group’s historical operating results over the prior three-year period.

The group is in a cumulative three-year loss as of December 31, 2021 which provide negative evidence that is difficult to overcome and would require a substantial amount of objectively verifiable positive evidence of future income to support the realizability of the group’s deferred tax assets.

The group is in a cumulative three-year loss as of December 31, 2022 which provides negative evidence that is difficult to overcome and would require a substantial amount of objectively verifiable positive evidence of future income to support the realizability of the group’s deferred tax assets.

While positive evidence exists by way of unrealized gains in the Company’s investments, management concluded that the negative evidence now outweighs the positive evidence.

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consolidated income tax return.

Generally, consolidation rules under the Internal Revenue Code require consolidation of like-kind entities with an 80% or greater equity ownership, and each individual state or foreign jurisdiction has their own distinct consolidation rules which vary.

At December 31, 2022, the Company has gross U.S.

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net operating loss carryforwards, in the amount of $ 104.4 million, generated prior to 2018 will expire, if unused, by 2037.

Pursuant to the rules under Section 382, the Company believes that it underwent an ownership changes on May 29, 2014 and $ 46.1 million gross U.S.

Pursuant to the rules under Section 382, the Company concluded that it underwent an ownership change on May 29, 2014 and $ 46.1 million gross U.S.

net operating losses recorded in the consolidated financial statements are subject to an annual limitation under IRC Sec.

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The company has reduced the net operating loss carryforward by $ 58.7 million for uncertain tax positions based on our interpretation of tax laws and regulations that are subject to varied interpretation by the IRS.

Below is a tabular reconciliation of the total amount of unrecognized tax benefits (in millions):

Below is a tabular reconciliation of the total amount of unrecognized tax benefits as of the years indicated (in millions):

Year Ended December 31,

Uncertain tax benefits - January 1 $ 17.6 $ 22.9

Gross increases - Tax positions in prior period — —

Gross decreases - Tax positions in prior period — ( 5.3 )

Gross increases - Tax positions in current period — 22.9

Settlement — —

Lapse in statute of limitations — —

Uncertain tax benefits - December 31 $ 17.6 $ 17.6

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Given the nature of tax audits, there is a risk that disputes may arise.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Commitments and Contingencies

Future minimum purchase obligations as of December 31, 2021 were as follows (in millions):

Total obligations $ 378.3

The Company’s future minimum purchase obligations are primarily for materials and subcontractor costs to be used in its construction projects.

Unrecorded future minimum purchase commitments as of December 31, 2022 were as follows (in millions):

Total commitments $ 291.8

The Company’s future minimum purchase commitments are primarily for materials and subcontractor costs to be used in its construction projects.

The amounts are fixed and determinable and do not include variable components.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company is subject to claims and legal proceedings that arise in the ordinary course of business.

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(“PTGi-ICS Ltd”), received notices from Her Majesty’s Revenue and Customs office in the U.K.

(the "HMRC") indicating that it was required to pay certain Value-Added Taxes ("VAT") for the 2015 and 2016 tax years.

("HMRC") indicating that it was required to pay certain Value-Added Taxes ("VAT") for the 2015 and 2016 tax years.

On February 15, 2022, the Upper Tribunal (Tax and Chancery) Chamber (the "Tax Tribunal") found in favor of PTGi-ICS Ltd.

HMRC has acknowledged that it will not appeal the Tax Tribunal’s decision and it must pay reasonable legal fees incurred by PTGi-ICS Ltd.

While repayment of the outstanding VAT payment is expected to be made soon, the Company shall separately pursue reimbursement of legal fees.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On August 1, 2022 ICS received £ 1.1 million (~$ 1.3 million) from HMRC for the VAT refunds previously withheld.

ICS is waiting on the repayment of the outstanding interest and costs.

The Company is working with HMRC agents to obtain full resolution.

Fair Value Investments Litigation

On October 1, 2020, Fair Value Investments Incorporated (“FVI”) filed a putative stockholder class action and derivative complaint in the Delaware Court of Chancery (the "Court") against INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) and certain of DBMG’s current and former officers and directors, including current and former INNOVATE officers and directors AJ Stahl, Kenneth S.

and certain of DBMG’s current and former officers and directors, including current and former INNOVATE officers and directors AJ Stahl, Kenneth S.

Courtis, Robert V.

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Ruling from the bench, the Court granted Defendants’ motions to dismiss, in part.

The Court dismissed all claims against all individual defendants other than Ronald Yagoda, including all claims against AJ Stahl, Kenneth S.

Courtis, Robert V.

Leffler, Jr., Philip A.

Falcone, Michael J.

Sena, and Paul Voigt.

The Court dismissed all claims against all individual defendants other than Ronald Yagoda, including all claims against Messrs.

Barr, Stahl, Courtis, Leffler, Falcone, Sena, and Voigt.

As to the two remaining defendants - INNOVATE Corp.

and Ronald Yagoda—the Court dismissed all claims regarding (i) DBMG acting as a guarantor or providing collateral for loans taken on by the Company;

and Yagoda - the Court dismissed all claims regarding:

(i) DBMG acting as a guarantor or providing collateral for loans by the Company;

(ii) DBMG’s issuance of dividends to its common and preferred stockholders in 2017–2020;

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and (iv) DBMG’s payments to the Company in 2016 and May 2017 pursuant to a Tax Sharing Agreement between DBMG and the Company.

The Company believes the surviving claims in the FVI Amended Complaint relating to (i) DBMG’s payments to the Company after May 2017 pursuant to a Tax Sharing Agreement between DBMG and the Company and (ii) DBMG’s issuance of preferred stock to the Company to finance DBMG’s 2018 acquisition of GrayWolf Industrial are without merit, and the Company intends to vigorously defend this litigation.

Discovery on the two remaining claims is underway.

On December 23, 2022, the parties entered into a Joint Stipulation and Proposed Scheduling Order which, among other things, scheduled the trial date for March 12-14, 2024.

On March 1, 2023, FVI's counsel filed a Motion to Withdraw and Temporarily Stay Proceedings, which motion was granted on March 9, 2023.

The Court ordered a 30 -day stay of the proceedings to allow FVI to engage new counsel.

The Company intends to vigorously defend this litigation.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

DTV Derivative Litigation

3 unchanged sentences

Plaintiffs named as defendants INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.), HC2 Broadcasting Holdings, Inc., HC2 Broadcasting Inc., and Continental General Insurance Corporation (the “INNOVATE Entities”) and certain current and former officers and directors of the INNOVATE Entities and DTV, including Phillip Falcone, Michael Sena, Wayne Barr, Jr., Les Levi, Paul Voigt, Ivan Minkov, and Paul Robinson (the “Individual Defendants”).

(f/k/a HC2 Holdings, Inc.), HC2 Broadcasting Holdings, Inc., HC2 Broadcasting Inc., and Continental General Insurance Corporation (the “INNOVATE Entities”) and certain current and former officers and directors of the INNOVATE Entities and DTV, including Philip Falcone, Michael Sena, Wayne Barr, Jr., Les Levi, Paul Voigt, Ivan Minkov, and Paul Robinson (the “Individual Defendants”).

Plaintiffs principally allege that the defendants breached their fiduciary duties and/or aided and abetted breaches of fiduciary duty by participating in a “scheme” in which the INNOVATE Entities (i) acquired majority voting and operating control over DTV;

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Defendants moved to dismiss the amended complaint in its entirety on August 25, 2021, and the parties completed briefing on the motions to dismiss on November 10, 2021.

The Court will hear argument on the motions to dismiss on March 29, 2022.

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

The Company intends to vigorously defend this litigation.

Separation from Philip A.

The Company has engaged in ongoing negotiations with Philip A.

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

On December 18, 2020, Mr.

Falcone filed a demand for arbitration against the Company with the American Arbitration Association ("AAA").

The Company filed its Answering Statement and Counterclaims with the AAA on March 5, 2021.

The Company contends that the claims in Mr.

Falcone’s demand are without merit and that the Company has both factual and legal defenses.

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

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.

The parties executed an agreement on January 31, 2022 memorializing the terms of their settlement.

The Company paid the settlement amount in February 2022 in accordance with the agreement except for a portion of the amount that will be paid following court approval.

The settlement reached was consistent with the amount accrued for.

The Court heard argument on the motions to dismiss on March 29, 2022.

On June 28, 2022, the Court requested that the parties submit supplemental briefing on the motions to dismiss by July 20, 2022.

The parties completed the supplemental briefing on July 20, 2022.

On October 28, 2022, the Court issued a Memorandum Opinion on Defendants’ motion to dismiss the Complaint.

First, the Court dismissed all claims against Continental General Insurance Corporation for lack of personal jurisdiction.

Second, the Court dismissed all claims the stockholder plaintiffs purported to assert directly.

Third, the Court dismissed as time-barred all claims challenging conduct that occurred before March 15, 2018, including claims challenging (i) the November 2017 acquisition of Azteca America by INNOVATE;

(ii) INNOVATE’s purported usurpation of the so-called “DTV Cast” technology;

and (iii) the WFWC-CD Station acquisition.

Fourth, the Court dismissed claims associated with the INNOVATE Entities’ purported purchases of unidentified broadcasting stations.

Fifth, the Court dismissed all claims challenging the Expense Sharing Agreement, and the Right to Use Agreement between INNOVATE and DTV, and certain Stock-Based Compensation Agreements.

Sixth, the Court dismissed the aiding and abetting claim against the INNOVATE Entities.

Seventh, the Court dismissed the civil conspiracy claim as to all defendants.

Lastly, the Court dismissed the option-holders’ claim for tortious interference with prospective business opportunities.

Thus, after the Court issued its October 28, 2022 Memorandum Opinion, the only claims to survive Defendants’ motion to dismiss are (i) a derivative claim against the INNOVATE Entities (other than Continental General), Levi, and Falcone for breach of fiduciary duty in connection with the $ 0.1 million Frank Digital acquisition;

(ii) a derivative claim for breach of fiduciary duty against the INNOVATE Entities (other than Continental General), in their capacities as DTV’s controlling stockholders, relating to the sale of six licenses (for less than $ 0.5 million) in connection with the Gray Media sale;

(iii) a derivative claim for breach of fiduciary duty against the INNOVATE Entities (other than Continental General) and Levi in connection with the transfer of licenses ultimately sold to TV-49 for $ 0.1 million;

and (iv) a derivative claim for waste against Levi and Falcone in connection with the sale of two stations to Lowcountry, which Lowcountry later sold for $ 0.2 million and $ 0.4 million, respectively.

The Company believes these remaining claims are without merit, and the Company intends to vigorously defend this litigation.

Marin Hospital Replacement Litigation

On October 20, 2022, McCarthy Building Companies, Inc.

(“McCarthy”) filed suit against Schuff Steel Company (“Schuff”), a subsidiary of DBMG, and Quality Assurance Engineering, Inc.

dba Consolidated Engineering Laboratories (“CEL”) in the Superior Court of the State of California for the County of Marin, styled McCarthy Building Companies, Inc.

Schuff Steel Company;

Quality Engineering, Inc.

dba Consolidated Engineering Laboratories, et al., Case No.

CIV2203963 (the “Action”).

In the Action, McCarthy alleges damages and delays caused by alleged failures in fabrication, erection, welding, and quality control by Schuff and improper quality assurance responsibilities by CEL on the Marin General Hospital Replacement Building (the “Project”).

McCarthy asserts claims against Schuff for breach of contract, express indemnity, breach of express warranties, negligence, equitable implied indemnity, breach of implied warranties, and declaratory relief.

On February 13, 2023.

Schuff filed its response denying liability to McCarthy and asserting a Cross-Complaint against McCarthy, and other companies involved in the design, construction, and quality assurance, who potentially are liable for damages and delays alleged by McCarthy on the Project.

In the Cross-Complaint, Schuff asserts claims for breach of contract, violation of statute, equitable indemnity apportionment, and contribution and express indemnity (the “Cross-Complaint”).

Schuff intends to vigorously defend this Action and aggressively pursue the Cross-Complaint and cannot reasonably estimate any range of potential loss at this time.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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 has responded to the demand and cannot determine at this time if the books and records demand will lead to litigation.

Other Commitments and Contingencies

Letters of Credit and Performance Bonds

As of December 31, 2022, DBMG had outstanding letters of credit of $ 2.6 million under credit and security agreements and performance bonds of $ 956.6 million.

As of December 31, 2021, DBM had outstanding letters of credit of $ 13.5 million under credit and security agreements and performance bonds of $ 900.8 million.

DBMG’s contract arrangements with customers sometimes require DBMG to provide performance bonds to partially secure its obligations under its contracts.

Bonding requirements typically arise in connection with private contracts and sometimes with respect to certain public work projects.

DBMG’s performance bonds are obtained through surety companies and typically cover the entire project price.

HMN Equity Interest

On October 30, 2019, the Company announced the sale of its New Saxon 2019 Limited (“New Saxon”) stake in HMN, its 49 % joint venture with Huawei Technologies Co., Ltd., to Hengtong Optic-Electric Co Ltd ("Hengtong").

Under the terms of the agreement, the sale of New Saxon’s 49 % interest in HMN will be affected in two tranches.

The first tranche, the sale of the portion of New Saxon’s 30 % interest of HMN, closed on May 12, 2020 (the "First HMN Close").

On June 24, 2022, New Saxon entered into a supplemental agreement for the outright sale of its remaining 19 % interest in HMN, which also changed the buyers from a Hong Kong entity to three Chinese entities.

The new agreement preserved the rights under the original put option agreement, giving the Company the ability to exercise the put option if the transaction did not close by October 31, 2022.

The significant terms and structure of the transaction did not otherwise change, and the transaction still required cash settlement.

Subsequent to December 31, 2022, the transaction received final regulatory approvals in China, and the transaction closed on March 6, 2023.

Refer to Note 24.

Subsequent Events for additional information.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable.

The Company maintains all cash and cash equivalents at accredited financial institutions, in amounts that exceed federally insured limits.

The Company has not experienced any losses in such accounts.

The Company holds $ 3.2 million and $ 4.7 million cash in foreign accounts as of December 31, 2022 and 2021, respectively.

The Company attempts to minimize the risks related to cash and cash equivalents by investing in a range of financial instruments as defined by the Company.

Concentrations of credit risk with respect to accounts receivable are limited by the large number of customers comprising the Company's customer base and their geographic and business dispersion.

The Company performs ongoing credit evaluations of the customers' financial condition and generally does not require collateral to support customer receivables.

For the years ended December 31, 2022, one customer exceeded 10% of the Company's revenue and accounted for approximately 23.8 % and one customer accounted for more than 10% of accounts receivable for approximately 11.5 %.

For the fiscal year ended December 31, 2021, one customer exceeded 10% of the Company's revenue and accounted for approximately 13.9 % and no customers accounted for more than 10% of accounts receivable.

For the year ended December 31, 2022, one supplier accounted for more than 10% of the Company's accounts payable for approximately 17.5 %.

For the fiscal year ended December 31, 2021, one supplier accounted for more than 10% of the Company's accounts payable for approximately 15.1 %.

Employee Retirement Plans

The Company and various subsidiaries maintain 401(k) retirement savings plans which cover eligible employees, including for certain, union steelworkers, and permits participants to contribute to the plans, subject to Internal Revenue Code restrictions and which features matching contributions of various percentages of the first 1 % to 5 % of employee annual salary contributions, depending on the subsidiary.

The Company made aggregate matching contributions of $ 2.9 million and $ 2.2 million for the years ended December 31, 2022 and 2021, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Multi-Employer Plans

Certain of the Company's Infrastructure segment workforce are subject to collective bargaining agreements.

The Company contributes to union-sponsored, multi-employer pension plans.

Contributions are made in accordance with negotiated labor contracts.

The passage of the Multi-Employer Pension Plan Amendments Act of 1980 (the Act) may, under certain circumstances, cause the Company to become subject to liabilities in excess of contributions made under collective bargaining agreements.

Generally, liabilities are contingent upon termination, withdrawal, or partial withdrawal from the plans.

Under the Act, liabilities would be based upon the Company's proportionate share of each plan's unfunded vested benefits.

The Company made contributions to various multi-employer pension plans totaling $ 35.0 million and $ 17.7 million during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, most of the Infrastructure segment's collective bargaining agreements are subject to automatic annual or other renewal unless either party elects to terminate the agreement on the scheduled expiration date.

Share-based Compensation

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The Restated 2014 Plan was approved by INNOVATE's stockholders at the annual meeting of stockholders held on June 14, 2017.

Subject to adjustment as provided in the Restated 2014 Plan, the Restated 2014 Plan authorizes the issuance of 3,500,000 shares of common stock of INNOVATE, plus any shares that again become available for awards under the 2014 Plan, plus any shares that again become available for awards under the Restated 2014 Plan.

Subject to adjustment as provided in the Restated 2014 Plan, the Restated 2014 Plan authorized the issuance of 3,500,000 shares of common stock of INNOVATE, plus any shares that again become available for awards under the 2014 Plan, plus any shares that again become available for awards under the Restated 2014 Plan.

On April 20, 2018, the Board of Directors, subject to stockholder approval, adopted the Second Amended and Restated 2014 Omnibus Equity Award Plan (the "Second A&R 2014 Plan").

The Second A&R 2014 Plan was approved by INNOVATE's stockholders at the annual meeting of stockholders held on June 13, 2018.

Subject to adjustment as provided in the Second A&R 2014 Plan, the Second A&R 2014 Plan authorizes the issuance of up to 3,500,000 shares of common stock of INNOVATE plus any shares that again become available for awards under the 2014 Plan or the Amended 2014 Plan.

The Second A&R 2014 Plan provides that no further awards will be granted pursuant to the Amended 2014 Plan.

Subject to adjustment as provided in the Second A&R 2014 Plan, the Second A&R 2014 Plan authorized the issuance of up to 3,500,000 shares of common stock of INNOVATE, plus any shares that again become available for awards under the 2014 Plan or the Restated 2014 Plan.

As of December 31, 2022, 1.0 million shares for awards remain available for issuance under Second A&R 2014 Plan.

The Second A&R 2014 Plan provides that no further awards will be granted pursuant to the 2014 Plan or the Restated 2014 Plan.

However, awards previously granted under either the 2014 Plan or the Amended 2014 Plan will continue to be subject to and governed by the terms of the 2014 Plan and Amended 2014 Plan, respectively.

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The guidance generally requires that such transactions be accounted for using a fair-value based method and share-based compensation expense be recorded, based on the grant date fair value, estimated in accordance with the guidance, for all new and unvested stock awards that are ultimately expected to vest as the requisite service is rendered.

The Company granted zero and 143,096 options during the year ended December 31, 2021 and 2020, respectively.

For the year ended December 31, 2020, the weighted average fair value at date of grant for options granted was $ 1.47 per option.

Year Ended December 31,

Expected option life (in years) 4.3 years

Risk-free interest rate 0.24 %

Expected volatility 62.23 %

Dividend yield — %

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 2.4 million and $ 3.0 million for the years ended December 31, 2021 and 2020, respectively.

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 2.4 million for both the years ended December 31, 2022 and 2021.

All grants are time based and vest either immediately or over a period established at grant, typically with a requisite service period of two to three years for the employee to vest in the stock-based award, subject to discretion by Compensation Committee of the Board of Directors.

There are no other substantive conditions for vesting.

The Company recognizes compensation expense for equity awards, reduced by actual forfeitures, using the straight-line basis.

The Company was authorized to issue approximately 2.2 million and 4.8 million shares for awards for the years ended December 31, 2021 and 2020, respectively.

The Company recognizes compensation expense for equity awards, reduced by actual forfeitures as they are incurred, using the straight-line basis.

INNOVATE CORP.

12 unchanged sentences

Unvested - December 31, 2022 1,141,806 $ 2.56

At December 31, 2021, the total unrecognized stock-based compensation expense related to unvested restricted stock was $ 1.2 million.

The unrecognized compensation cost is expected to be recognized over the remaining weighted average period of 1.8 years.

The aggregate vesting date fair value of the restricted stock awards which vested during the years ended December 31, 2022 and 2021 was $ 0.9 million and $ 2.0 million, respectively.

As of December 31, 2022, the total unrecognized stock-based compensation expense related to unvested restricted stock awards was $ 2.0 million and is expected to be recognized over the remaining weighted average period of 1.8 years.

Stock Options

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Outstanding - December 31, 2020 4,739,858 $ 5.13

Granted 143,096 $ 2.62

Exercised — $ —

Forfeited ( 142,503 ) $ 5.45

Expired ( 23,999 ) $ 5.31

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Granted 280,791 $ 3.25

Exercised — $ —

Forfeited — $ —

Expired ( 1,500 ) $ 4.06

Outstanding - December 31, 2021 4,715,859 $ 5.13

Eligible for exercise 4,714,509 $ 5.13

At December 31, 2021, the intrinsic value and average remaining life of the Company's outstanding options were $ 0.2 million and approximately 2.6 years, and intrinsic value and average remaining life of the Company's exercisable options were $ 0.2 million and approximately 2.6 years.

The maximum contractual term of the Company's exercisable options is approximately 10 years.

At December 31, 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 0.2 years.

There are 1,350 unvested stock options expected to vest, with a weighted average remaining life of 7.2 years, a weighted average exercise price of $ 2.62 , and an intrinsic value of $ 0.1 million.

Rights Offering

On September 9, 2020, INNOVATE announced its intention to commence a rights offering (the “Rights Offering”), pursuant to which each holder of its outstanding common stock and participating preferred stock would receive transferable subscription rights entitling such stockholder to purchase shares of INNOVATE’s common stock at a subscription price equal to $ 2.27 per share based on the last sale price for our common stock on the trading day prior to September 9, 2020.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On the same date, INNOVATE entered into an investment agreement (the "Investment Agreement") with Lancer Capital LLC ("Lancer Capital"), an investment fund led by Avram Glazer, the Chairman of our Board of Directors, pursuant to which Lancer Capital agreed to purchase up to $ 35.0 million of Series B Preferred Stock (as defined below) in connection with the Rights Offering based on subscription participation of common shareholders (the "Backstop Commitment").

The Investment Agreement provides for an advance of up to $ 10.0 million of the Backstop Commitment at the option of the Company.

On September 17, 2020, Lancer Capital funded $ 5.56 million, receiving 5,560 shares of Series B Preferred stock.

The Investment Agreement provides that, to the extent that Lancer Capital is precluded by applicable rules and regulations (including those of the NYSE, the Texas Department of Insurance and any other applicable regulators) from purchasing common stock by exercising rights received in the Rights Offering, Lancer Capital will purchase additional shares of Series B Preferred Stock (in excess of any Initial Funding amount) equivalent to its allocable participation right.

The Investment Agreement also restricts Lancer Capital from purchasing or otherwise acquiring any other rights we issue in the Rights Offering.

Lancer Capital did not receive any compensation or other consideration for entering into or consummating the Investment Agreement.

The Backstop Commitment is defined as a financial instrument and measurable at fair value on each reporting period.

INNOVATE used both market observable inputs and unobservable data to derive the fair value as of the reporting date.

The Backstop Commitment was classified as Level 3.

Fair value for the Backstop Commitment as of September 30, 2020, was zero .

The Backstop Commitment ceased upon the consummation of the Rights Offering.

On November 20, 2020, INNOVATE's stockholders voted to approve (i) an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock of the Company to 160,000,000 shares and (ii) the conversion of up to 35,000 shares of Series B preferred stock of the Company in connection with the Company’s Rights Offering.

On November 20, 2020, we completed the Rights Offering and issued a total of 28,716,820 shares of our common stock, 16,825,280 common shares were issued immediately, and 11,891,540 were issued from the conversion of 26,994 shares of Series B Preferred stock as noted below.

Net proceeds of the November 20, 2020 issuance was $ 59.6 million.

Inclusive of the initial Series B issuance on September 17, 2020, total net proceeds of the Rights Offering, after deducting the dealer manager fees and other offering expenses, were approximately $ 61.5 million.

Outstanding and exercisable - December 31, 2022 4,995,150 $ 5.02

The weighted-average grant-date fair value of the stock options granted during the year ended December 31, 2022 was $ 1.47 .

As of December 31, 2022, the intrinsic value and weighted-average remaining life of the Company's outstanding and exercisable stock options were zero and approximately 1.8 years, respectively.

The maximum contractual term of the Company's exercisable stock options is approximately 10 years.

As of December 31, 2022, there were no unvested stock options and no unrecognized stock-based compensation expenses related to unvested stock options.

Temporary Equity and Equity

Preferred Shares

The Company’s preferred shares authorized, issued and outstanding consisted of the following:

2021 December 31,

Preferred shares authorized, $ 0.001 par value

2 unchanged sentences

Series A-4 shares issued and outstanding 10,000 10,000

Series A-3 shares issued and outstanding 6,125 —

Series A-4 shares issued and outstanding 10,000 —

(1) In 2020, CGI, formerly a wholly owned subsidiary of the Company, owned 6,125 shares of Series A Preferred Stock and 10,000 shares of Series A-2 Preferred Stock which were eliminated in consolidation.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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, and on January 11, 2019, CGI purchased 10,000 shares of Series A-2 Preferred Stock.

In December 2018, CGI, a wholly owned subsidiary of the Company closed on the purchase of 6,125 shares of Series A Preferred Stock, and on January 11, 2019, CGI purchased 10,000 shares of Series A-2 Preferred Stock.

The shares and dividends accrued related to the Series A-2 Preferred Stock owned by CGI were eliminated in consolidation prior to its sale on July 1, 2021.

Discontinued Operations for further information.

Refer to Note 10.

Discontinued Operations and Exit Activities for further information.

Luxor and Corrib Conversions

2 unchanged sentences

In conjunction with the conversions, the Company agreed to provide the following two forms of additional consideration for as long as the Preferred Stock remained entitled to receive dividend payments (the "Additional Share Consideration"):

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

• 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 year ended December 31, 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 year ended December 31, 2020, 278,194 and 31,379 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 year ended December 31, 2021 was valued by the Company at $ 0.3 million and for the year ended December 31, 2020 was valued by the Company at $ 0.8 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.

For the year ended December 31, 2021, 119,784 and 13,477 shares of the Company's common stock were issued to Luxor and Corrib, respectively, in conjunction with the conversion agreements.

The fair value of the Additional Share Consideration for the year ended December 31, 2021 was valued by the Company at $ 0.3 million and was recorded within Preferred stock and deemed dividends from conversion line item of the 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.

2 unchanged sentences

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, formerly a wholly owned subsidiary of the Company, entered into a letter agreement with the Company to not redeem at maturity or seek redemption of 6,125 shares of the Company's Series A and 10,000 shares of the Company's Series A-2 Preferred Stock with a combined redemption value of $ 16.1 million with a current fair value as of December 31, 2021 of $ 18.8 million.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Series A-3 and A-4 Share Issuance and Conversion

On July 1, 2021 (the "Exchange Date") and as a part of the sale of CIG, INNOVATE entered into an exchange agreement (the "Exchange Agreement") with the now deconsolidated CGIC, who held the remaining shares of the Series A and Series A-2 Preferred Stock.

Per the Exchange Agreement, INNOVATE exchanged the Series A and Series A-2 shares that CGIC held for an equivalent number of Series A-3 Convertible Participating Preferred Stock ("Series A-3") and Series A-4 Convertible Participating Preferred Stock ("Series A-4"), respectively.

On July 1, 2021 (the "Exchange Date") as a part of the sale of CIG, INNOVATE entered into an exchange agreement (the "Exchange Agreement") with the now deconsolidated CGIC, who held the remaining shares of the Series A and Series A-2 Preferred Stock and was eliminated in consolidation prior to the sale of the Insurance segment on July 1, 2021.

Per the Exchange Agreement, INNOVATE exchanged 6,125 shares of the Series A and 10,000 shares of the Series A-2 shares that CGIC held for an equivalent number of Series A-3 Convertible Participating Preferred Stock ("Series A-3") and Series A-4 Convertible Participating Preferred Stock ("Series A-4"), respectively.

The terms remained substantially the same, except that the Series A-3 and Series A-4 will mature on July 1, 2026.

A cash payment of $ 0.3 million was made as a part of the exchange for accrued and unpaid dividends on the Series A and Series A-2 being exchanged.

Upon issuance of the Series A-3 and Series A-4 Preferred Stock on July 1, 2021, the Series A-3 and Series A-4 have been classified as temporary equity in the Company's Balance Sheet.

The Series A-3 and Series A-4 Preferred Stock accrues a cumulative quarterly cash dividend at an annualized rate of 7.50 %.

The accrued value of the Series A-3 and Series A-4 Preferred Stock will accrete quarterly at an annualized rate of 4.00 % that is reduced to 2.00 % or 0.0 % if the Company achieves specified rates of growth measured by increases in its net asset value;

Upon issuance of the Series A-3 and Series A-4 Preferred Stock on July 1, 2021, the Series A-3 and Series A-4 have been classified as temporary equity in the Company's Consolidated Balance Sheet with a combined redemption value of $ 16.1 million with a current fair value as of December 31, 2022 of $ 17.6 million.

The Series A-3 and Series A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of 7.50 %.

The accrued values of the Series A-3 and Series A-4 Preferred Stock accrete quarterly at an annualized rate of 4.00 % that is reduced to 2.00 % or 0.0 % 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 (A) the daily volume weighted average price ("VWAP") of the Company's common stock is less than a certain threshold amount, (B) the Company's common stock is not registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, (C) the Company's common stock is not listed on certain national securities exchanges or the Company is delinquent in the payment of any cash dividends.

The Series A-3 and Series A-4 Preferred Stock is also entitled to participate in cash and in-kind distributions to holders of shares of Company's common stock on an as-converted basis.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Subsequent Measurement.

13 unchanged sentences

Redemption by the Company / "Company Call Option".

At any time after the third anniversary of the Original Issue Date, the Company may redeem the Series A-3/Series A-4, in whole but not in part, at a price per share generally equal to 150 % of the accrued value per share, plus accrued but unpaid dividends (to the extent not included in the accrued value of the Series A-3/Series A-4), subject to the holder's right to convert prior to such redemption.

At any time after the third anniversary of the Original Issue Date, May 29, 2014, the Company may redeem the Series A-3/Series A-4, in whole but not in part, at a price per share generally equal to 150 % of the accrued value per share, plus accrued but unpaid dividends (to the extent not included in the accrued value of the Series A-3/Series A-4), subject to the holder's right to convert prior to such redemption.

Forced Conversion .

1 unchanged sentence

In the event of a forced conversion, the holders of Series A-3 and Series A-4 will have the ability to elect cash settlement in lieu of conversion if certain market liquidity thresholds for the Company's common stock are not achieved.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Liquidation Preference .

3 unchanged sentences

Voting Rights.

Except as required by applicable law, the holders of the shares of the Series A-3 and Series A-4 will be entitled to vote on an as-converted basis with the holders of the Series A-3 Preferred Stock and the Series A-4 Preferred Stock (on an as-converted basis), as applicable, and the holders of the Company’s common stock on all matters submitted to a vote of the holders of the Company's common stock with the holders of New Preferred Stock on certain matters, and separately as a class on certain limited matters.

Except as required by applicable law, the holders of the shares of the Series A-3 and Series A-4 will be entitled to vote on an as-converted basis with the holders of the Series A-3 Preferred Stock and the Series A-4 Preferred Stock (on an as-converted basis), as applicable, and the holders of the Company’s common stock on all matters submitted to a vote of the holders of the Company's common stock with the holders of Series A-3 Preferred Stock and Series A-4 Preferred Stock on certain matters, and separately as a class on certain limited matters.

Consent Rights.

3 unchanged sentences

In addition, subject to meeting certain ownership thresholds, certain initial purchasers of the Series A-3 Preferred Stock and the Series A-4 Preferred Stock will be entitled to participate in issuances of preferred securities and in debt transactions of the Company.

At December 31, 2021, Series A-3 Preferred Stock and Series A-4 Preferred Stock were convertible into 1,740,700 and 1,875,533 shares, respectively, of INNOVATE's common stock.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As of December 31, 2022, Series A-3 Preferred Stock and Series A-4 Preferred Stock were convertible into 1,740,700 and 1,875,533 shares, respectively, of INNOVATE's common stock.

Preferred Share Dividends

During the year ended December 31, 2021 and 2020, INNOVATE's Board of Directors (the "Board") declared cash dividends with respect to INNOVATE’s issued and outstanding Preferred Stock, excluding the Series A and Series A-2 Preferred Stock which was owned by CGIC and was eliminated in consolidation prior to the sale of the Insurance segment on July 1, 2021, as presented in the following table (in millions):

Declaration Date March 31, 2021 May 29, 2021 September 30, 2021 December 31, 2021

Holders of Record Date March 31, 2021 May 29, 2021 September 30, 2021 December 31, 2021

Payment Date April 15, 2021 June 4, 2021 October 15, 2021 January 15, 2022

Total Dividend $ 0.2 $ 0.1 $ 0.3 $ 0.3

During the years ended December 31, 2022 and 2021, INNOVATE's Board of Directors (the "Board") declared cash dividends with respect to INNOVATE’s issued and outstanding Preferred Stock, excluding the Series A and Series A-2 Preferred Stock which was owned by CGIC and was eliminated in consolidation prior to the sale of the Insurance segment on July 1, 2021, as presented in the following table (in millions):

Declaration Date March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022

2 unchanged sentences

Total Dividend $ 0.3 $ 0.3 $ 0.3 $ 0.3

Declaration Date March 31, 2021 May 29, 2021 September 30, 2021 December 31, 2021

Holders of Record Date March 31, 2021 May 29, 2021 September 30, 2021 December 31, 2021

Payment Date April 15, 2021 June 4, 2021 October 15, 2021 January 15, 2022

Total Dividend $ 0.2 $ 0.1 $ 0.3 $ 0.3

DBMGi Series A Preferred Stock Issuance

On November 30, 2018, CGIC purchased 40,000 shares of DBMGi's Series A Preferred Stock, which was eliminated in consolidation.

On July 1, 2021, as a part of the sale of CIG which results in the deconsolidation of the entity, INNOVATE was deemed to have issued $ 40.9 million of DBMGi Series A Preferred Stock to the now deconsolidated CGIC.

Upon issuance of the DBMGi Series A Preferred Stock on July 1, 2021, the DBMGi Series A Preferred Stock has been classified as temporary equity in the Company's Balance Sheet.

On July 1, 2021, as a part of the sale of CIG which resulted in the deconsolidation of the entity, INNOVATE was deemed to have issued $ 40.9 million of DBMGi Series A Preferred Stock to the now deconsolidated CGIC.

Upon issuance of the DBMGi Series A Preferred Stock on July 1, 2021, the DBMGi Series A Preferred Stock has been classified as temporary equity in the Company's Consolidated Balance Sheet.

As of December 31, 2022, there are 41,820.25 shares of DBMGi's Series A Preferred Stock outstanding and 500,000 shares with a par value of $ 0.001 each are authorized for issuance.

Redemption Option .

The DBMGi Preferred Stock is redeemable at any time, in whole or in part, at the option of the Company, or at any time or by the holder prior to July 2026.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The DBMGi Series A Preferred Stock will accrue a cumulative quarterly cash or payment in kind dividend at a rate of (a) for the first five years following the date of issuance, (i) 9.00 % per annum if dividends are paid in kind or (ii) 8.25 % per annum if dividends are paid in cash and (b) starting on the fifth anniversary of the date of issuance, a rate per annum equal to (i) LIBOR (as defined in the Certificate of Designation) plus a spread of 5.85 % (together, the “LIBOR Rate”) per annum, plus 0.75 % if dividends are paid in kind or (ii) the LIBOR Rate per annum in the case of dividends paid in cash.

Subsequent to the transition away from LIBOR beginning in 2023, the Certificate of Designation allows for a LIBOR Successor Rate, which allows the Company to reasonably determine an alternate benchmark rate (including any mathematical or other adjustments to the benchmarks (if any) incorporated therein) giving due consideration to any evolving or then existing convention for similar U.S.

dollar denominated syndicated credit facilities for such alternative benchmarks.

Subsequent Measurement.

The DBMGi Series A Preferred Stock will be subsequently measured each reporting period at its maximum redemption value, which is equal to the stated value plus all accrued, accumulated and unpaid dividends as of the end of each reporting period as they are currently redeemable.

The Company pays accrued dividends quarterly in cash (with an option to PIK), and there will likely not be any subsequent measurement adjustments recorded to the initial carrying amount.

The DBMGi Series A Preferred Stock is measured each reporting period at its maximum redemption value, which is equal to the stated value plus all accrued, accumulated and unpaid dividends as of the end of each reporting period as they are currently redeemable.

The Company pays accrued dividends quarterly in cash (with an option to PIK), and the Company does not expect to make any subsequent measurement adjustments recorded to the initial carrying amount.

As such no accretion will be recognized until future dividend payments would otherwise reduce the carrying value below its redemption value.

In such a case, the Company will adjust the carrying value to its maximum redemption amount.

During the year ending December 31, 2021, DBMGi's Board of Directors declared cash dividends with respect to DBMGi’s issued and outstanding Preferred Stock, as presented in the following table (in millions):

During the years ending December 31, 2022 and 2021, DBMGi's Board of Directors declared dividends with respect to DBMGi’s issued and outstanding Preferred Stock, as presented in the following tables (in millions):

Declaration Date March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022

Holders of Record Date March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022

Payment Date April 15, 2022 July 15, 2022 October 15, 2022 January 15, 2023

Total Dividend* $ 0.9 $ 0.9 $ 0.9 $ 0.9

*The dividends paid on April 15, 2022, October 15, 2022 and January 15, 2023 were paid in cash.

The DBMGi Board of Directors elected to pay the second quarter dividend payable July 15, 2022 in shares.

Declaration Date September 30, 2021 December 31, 2021

2 unchanged sentences

Total Dividend $ 0.8 $ 0.9

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Stockholders’ Rights Agreement

On August 30, 2021, the Company entered into a Tax Benefits Preservation Plan (the “Plan”) with Computershare Trust Company, N.A., as rights agent (the “Rights Agent”), and the Board of the Company declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock to stockholders of record at the close of business on September 9, 2021 (the “Record Date”).

The 2021 dividends were paid in cash.

Stockholders’ Rights Agreement - Tax Benefits Preservation Plan

On August 30, 2021, the Company entered into a Tax Benefits Preservation Plan (the “Preservation Plan”) between the Company and Computershare Trust Company, N.A., as Rights Agent.

The Preservation Plan is designed to protect the Company’s ability to use its tax net operating losses and certain other tax assets (“Tax Benefits”) by deterring an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder (the “Code”).

If any person or group acquires 4.9 % or more of the outstanding shares of the Company's Common Stock (subject to certain exceptions), there would be a triggering event under the Preservation Plan which could result in significant dilution in the ownership interest of such person or group.

As such, the Preservation Plan has anti-takeover effects.

In connection with the adoption of the Preservation Plan, the Company disclosed that given the change-over in the Company’s stock over the past several years, the Company was approaching the risk of losing its Tax Benefits.

Pursuant to Preservation Plan, the Board of the Company declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock to stockholders of record at the close of business on September 9, 2021 (the “Record Date”).

Each Right is governed by the terms of the Plan and entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share (a “Unit”) of Series B Preferred Stock, par value $ 0.001 per share (the “Series B Preferred Stock”), at a purchase price of $ 20.00 per Unit, subject to adjustment (the “Purchase Price”).

2 unchanged sentences

Subject to certain exceptions specified in the Plan, the Rights will separate from our shares of common stock then outstanding and a distribution date (the “Distribution Date”) will occur upon the earlier of (i) 10 business days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has become the beneficial owner of 4.9 % or more of our common stock and (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.

The Rights are not exercisable until the Distribution Date and will expire at the earliest of (i) 11:59 p.m.

(New York City time) on August 30, 2022 or such later date and time as may be determined by the Board and approved by the stockholders of the Company by a vote of the majority of the votes cast by the holders of shares entitled to vote thereon at a meeting of the stockholders of the Company prior to 11:59 p.m.

(New York City time) on August 30, 2022 (which later date and time shall be in no event later than 11:59 p.m.

(New York City time) on August 30, 2024), (ii) the time at which the Rights are redeemed or exchanged as provided in the Plan, (iii) the time at which the Board determines that the Plan is no longer necessary or desirable for the preservation of Tax Benefits, and (iv) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward.

Unless terminated early, the Tax Benefits Preservation Plan will terminate on August 30, 2022, unless at the Company’s 2022 annual meeting the Company’s stockholders approve an extension of the Tax Benefits Preservation Plan, in which case the Tax Benefits Preservation Plan would be extended and expire at the Company’s 2024 annual meeting.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Rights are not exercisable until the Distribution Date and will expire at the earliest of (i) 11:59 p.m.

(New York City time) on March 31, 2023 (as extended in June 2022 from August 30, 2022 to March 31, 2023) or such later date and time as may be determined by the Board and approved by the stockholders of the Company by a vote of the majority of the votes cast by the holders of shares entitled to vote thereon at a meeting of the stockholders of the Company prior to 11:59 p.m.

(New York City time) on March 31, 2023 (which later date and time shall be in no event later than 11:59 p.m.

Unless terminated early or extended by the Company's shareholders (to no later than 11:59 p.m.

(New York City time) on August 30, 2024), the Tax Benefits Preservation Plan will terminate on March 31, 2023.

Related Parties

Non-Operating Corporate

Pansend Life Sciences, LLC ("Pansend") has an investment in Triple Ring Technologies, Inc.

("Triple Ring").

A subsidiary of INNOVATE utilized the services of Triple Ring, incurring zero and $ 1.0 million in services for the years ended December 31, 2021 and 2020, respectively.

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

As part of the agreement, INNOVATE 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, in the same building.

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.

During the year ended December 31, 2021, and subsequent to the sale of CGIC on July 1, 2021, to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of December 31, 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, INNOVATE's Board of Directors declared cash dividends of $ 0.6 million to CGIC with respect to INNOVATE’s issued and outstanding Preferred Stock, and DBMGi's Board of Directors declared cash dividends of $ 1.7 million to CGIC with respect to DBMGi’s issued and outstanding Preferred Stock.

During the year ended December 31, 2021, and subsequent to the sale of CGIC on July 1, 2021, to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a former director of the Company until June 17, 2022 and who has also served as executive chairman of Continental since October 2020, INNOVATE's Board of Directors declared cash dividends of $ 0.6 million to CGIC with respect to INNOVATE’s issued and outstanding Preferred Stock, and DBMGi's Board of Directors declared cash dividends of $ 1.7 million to CGIC with respect to DBMGi’s issued and outstanding Preferred Stock.

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 $ 0.1 million.

For the year ended December 31, 2021, and 2020, DBMG incurred lease expense of $ 55 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 $ 3.6 million.

For the year ended December 31, 2021, and 2020, DBMG incurred lease expense of $ 1.0 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 year ended December 31, 2021, and 2020, DBMG incurred interest expense of $ 0.4 million and zero , respectively.

Refer to Footnote 9.

Debt Obligations to our Consolidated Financial Statements for additional information.

For the years ended December 31, 2022 and 2021, DBMG incurred lease expense of $ 97 thousand and $ 55 thousand, respectively.

Banker Steel has leased one plane from Banker Aviation LLC, a related party that is owned by Donald Banker, with monthly lease payments of $ 0.1 million and a total lease liability of $ 1.2 million.

During the first quarter 2022, one of the two plane leases was terminated.

For the years ended December 31, 2022 and 2021, DBMG incurred lease expense related to these leases of $ 1.3 million and $ 1.0 million, respectively.

Banker Steel also had a subordinated 11.0 % note payable of $ 6.3 million to Donald Banker, a related party, which was redeemed in full by DBMG on April 4, 2022.

For the years ended December 31, 2022 and 2021, DBMG incurred interest expense related to this note, of $ 0.2 million and $ 0.4 million, respectively.

Refer to Note 13.

Debt Obligations for additional information.

Life Sciences

During 2021, R2 Technologies paid $ 0.4 million of a milestone payment to Blossom Innovations, LLC, a related party.

Operating Segment and Related Information

The Company currently has one primary reportable geographic segment - United States.

On June 27, 2022, R2 Technologies issued a $ 0.5 million short-term 90 -day 12.0 % bridge financing loan with Lancer Capital, LLC ("Lancer"), a related party, an entity controlled by Avram A.

Glazer, Chairman of the Board of Directors of INNOVATE.

On July 13, 2022, R2 Technologies entered into a $ 10.0 million note purchase agreement with Lancer.

The note payable bears interest at 12.0 % per annum, and was funded in two tranches.

The first tranche of $ 5.0 million closed on July 13, 2022, and included the settlement of the $ 0.5 million short-term 90 -day 12.0 % bridge financing loan made on June 27, 2022 by Lancer, and an additional $ 4.5 million in cash.

The second tranche of $ 5.0 million closed on August 8, 2022.

On December 13, 2022, R2 Technologies closed on an additional $ 0.8 million 18.0 % note with Lancer and also increased the borrowing rate on the existing $ 10.0 million note to 18.0 %.

In addition, the maturity date on the existing $ 10.0 million note, was amended to the earlier of March 31, 2023 or within five business days after the date on which R2 Technologies receives an aggregate $ 20.0 million from the consummation of a debt or equity financing.

For the year ended December 31, 2022, R2 Technologies recognized interest expense of $ 0.8 million related to the notes with Lancer.

Subsequent to year end, on February 15, 2023 and February 28, 2023, R2 Technologies closed on an additional 18 % $ 0.5 million and an additional 18 % $ 0.4 million note with Lancer, respectively.

For the years ended December 31, 2022 and 2021, R2 Technologies recognized revenues of $ 3.0 million and $ 0.1 million, respectively, from sales to a subsidiary of Huadong, a related party of R2 Technologies.

The related accounts receivable totaled $ 0.6 million and zero , as of December 31, 2022 and 2021, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

For both the years ended December 31, 2022 and 2021, R2 Technologies incurred approximately $ 0.4 million of stock compensation and royalty expenses that were paid to Blossom Innovations, LLC, an investor and a related party of R2 Technologies.

During the year ended December 31, 2021, R2 Technologies paid $ 0.4 million of a milestone payment to Blossom Innovations, LLC.

Operating Segments and Related Information

The Company currently has one primary reportable geographic segment - United States and primarily all revenue is derived in the United States.

The Company has three reportable operating segments, plus our Other segment, based on management’s organization of the enterprise - Infrastructure, Life Sciences, Spectrum, and Other.

We also have included a Non-operating Corporate segment.

All inter-segment revenues are eliminated.

The Company's revenue concentration of 10% and greater are as follows:

All inter-segment revenues are eliminated on consolidation.

The Company's revenue concentrations of 10% and greater for the periods indicated were as follows:

Years Ended December 31,

1 unchanged sentence

Customer A Infrastructure 23.8 % 13.9 %

*Less than 10% revenue concentration

As a result of the sale of GMSL, ICS, and Beyond6, and in accordance with ASC 280, the Company no longer considers the results of operations and balance sheets of these entities and related subsidiaries as separate segments.

Formerly part of the Marine Services, Telecommunications, and Clean Energy segments, these entities and the investment in HMN have been reclassified to the Other segment.

In addition, as GMSL, ICS, Beyond6, and CIG are discontinued operations, all operating results of these entities have been reclassified to discontinued operations.

This has been reflected in the tables below for both the current and historical periods presented.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

Summarized financial information with respect to the Company’s operating segments for the periods indicated is as follows (in millions):

Years Ended December 31,

12 unchanged sentences

Non-operating Corporate ( 19.6 ) ( 23.1 )

Total loss from operations $ ( 10.6 ) $ ( 28.3 )

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

Total income (loss) from operations $ 13.4 $ ( 10.6 )

Years Ended December 31,

Loss from operations $ ( 10.6 ) $ ( 28.3 )

Reconciliation of the consolidated segment income (loss) from operating consolidated loss from continuing operations before income taxes 2022 2021

Income (loss) from operations $ 13.4 $ ( 10.6 )

Interest expense ( 52.0 ) ( 59.1 )

Loss on early extinguishment or restructuring of debt ( 12.5 ) ( 9.4 )

Loss on extinguishment of debt — ( 12.5 )

Loss from equity investees ( 1.3 ) ( 2.8 )

Other income 4.3 69.2

Other (expense) income, net ( 1.2 ) 4.3

Loss from continuing operations before income taxes $ ( 41.1 ) $ ( 80.7 )

Income tax expense ( 5.6 ) ( 7.0 )

Loss from continuing operations ( 86.3 ) ( 53.7 )

Loss from discontinued operations (including loss on sale of $ 159.9 million and $ 44.1 million for the years ended December 31, 2021 and 2020, respectively)

( 149.9 ) ( 48.4 )

Net loss ( 236.2 ) ( 102.1 )

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest 8.7 10.1

Net loss attributable to INNOVATE Corp.

( 227.5 ) ( 92.0 )

Preferred dividends and deemed dividends from conversions 2.2 3.6

Net loss attributable to common stock and participating preferred stockholders $ ( 229.7 ) $ ( 95.6 )

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Years Ended December 31,

8 unchanged sentences

Total depreciation and amortization $ 42.2 $ 37.6

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Years Ended December 31,

1 unchanged sentence

Infrastructure

$ 16.5 $ 18.3

Life Sciences 0.8 0.5

2 unchanged sentences

Total $ 20.7 $ 24.1

(*) The above capital expenditures exclude assets acquired under terms of capital lease and vendor financing obligations.

2021 December 31,

(*) The above capital expenditures exclude assets acquired under capital lease and other financing obligations.

Infrastructure

2 unchanged sentences

Total $ 59.5 $ 56.0

2021 December 31,

Equity Method Investees

Equity Method Investments (included in Investments above)

Infrastructure $ — $ 0.7

2 unchanged sentences

Total $ 43.6 $ 38.8

2021 December 31,

Infrastructure

4 unchanged sentences

Non-operating Corporate 15.2 25.3

Eliminations — ( 38.4 )

Total $ 1,151.7 $ 1,080.6

Basic and Diluted Income (Loss) Per Common Share

Basic and Diluted Loss Per Common Share

Earnings per share ("EPS") is calculated using the two-class method, which allocates earnings among common stock and participating securities to calculate EPS when an entity's capital structure includes either two or more classes of common stock or common stock and participating securities.

1 unchanged sentence

As such, shares of any unvested restricted stock of the Company are considered participating securities;

The dilutive effect of options and their equivalents (including non-vested stock issued under stock-based compensation plans), is computed using the "if-converted 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 year ended December 31, 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):

Years Ended December 31,

Loss from continuing operations $ ( 86.3 ) $ ( 53.7 )

Income (loss) from continuing operations attributable to noncontrolling interest and redeemable noncontrolling interest 7.8 ( 5.9 )

Loss from continuing operations attributable to the Company ( 78.5 ) ( 59.6 )

Preferred dividends, deemed dividends and repurchase gains 2.2 3.6

however, they do not participate in losses and as such are excluded from the computation of basic earnings (loss) per share during periods of net losses.

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

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company had no dilutive common share equivalents during the years ended December 31, 2022 and 2021 due to results from continuing operations being a loss, net of tax.

As of December 31, 2022, 868,104 common stock equivalents from unvested restricted stocks were excluded from the weighted average number of shares used to calculate diluted loss per share as their inclusion would have been anti-dilutive.

Other instruments that may, in the future, if the average market price of the Company's stock exceeds the conversion prices, have a dilutive effect on earnings per share, but were excluded from the computation of diluted net loss per share for the years ended December 31, 2022 and 2021 are:

preferred stock, convertible debt and stock options.

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

Years Ended December 31,

Loss from continuing operations $ ( 42.0 ) $ ( 86.3 )

Loss from continuing operations attributable to noncontrolling interest and redeemable noncontrolling interest 6.1 7.8

Loss from continuing operations attributable to INNOVATE Corp.

( 35.9 ) ( 78.5 )

Preferred dividends and deemed dividends from conversions 4.9 2.2

Loss from continuing operations attributable to INNOVATE common stockholders ( 40.8 ) ( 80.7 )

Loss from discontinued operations — ( 149.9 )

Income from discontinued operations attributable to noncontrolling interest and redeemable noncontrolling interest 0.9 16.0

Loss from discontinued operations attributable to noncontrolling interest and redeemable noncontrolling interest — 0.9

Loss from discontinued operations, net of tax and noncontrolling interest — ( 149.0 )

Net loss attributable to common stock and participating preferred stockholders $ ( 229.7 ) $ ( 95.6 )

Earnings allocable to common shares:

Participating shares at end of period:

Weighted-average common stock outstanding 77.1 50.3

Unvested restricted stock — —

Preferred stock (as-converted basis) — 0.4

Net loss attributable to common stockholders $ ( 40.8 ) $ ( 229.7 )

Numerator for loss per share - basic and diluted

Net loss from continuing operations attributable to common stock $ ( 40.8 ) $ ( 80.7 )

Net loss from discontinued operations attributable to common stock — ( 149.0 )

Net loss attributable to common stock - basic and diluted $ ( 40.8 ) $ ( 229.7 )

Denominator for basic and dilutive loss per share

Weighted average common shares outstanding 77.5 77.1

Loss per share - continuing operations - basic and diluted

$ ( 0.53 ) $ ( 1.05 )

Loss per share - discontinued operations - basic and diluted

$ — $ ( 1.93 )

Loss per share - basic and diluted

$ ( 0.53 ) $ ( 2.98 )

Fair Value of Financial Instruments

Fair Value of Financial Instruments Not Measured at Fair Value

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis.

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

December 31, 2022 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Other invested assets $ 11.3 $ 11.3 $ — $ — $ 11.3

Total assets not accounted for at fair value $ 11.3 $ 11.3 $ — $ — $ 11.3

Debt obligations (1)

$ 712.3 $ 643.0 $ — $ 643.0 $ —

Total liabilities not accounted for at fair value $ 712.3 $ 643.0 $ — $ 643.0 $ —

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

December 31, 2021 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Other invested assets $ 11.3 $ 11.3 $ — $ — $ 11.3

Total assets not accounted for at fair value $ 11.3 $ 11.3 $ — $ — $ 11.3

Debt obligations (1)

$ 626.3 $ 648.2 $ — $ 648.2 $ —

Total liabilities not accounted for at fair value $ 626.3 $ 648.2 $ — $ 648.2 $ —

(1) Excludes operating lease obligations accounted for under ASC 842, Leases .

Debt Obligations.

The fair value of the Company’s long-term obligations was determined using reporting from Citadel Securities.

The methodology combines direct market observations from contributed sources with quantitative pricing models to generate evaluated prices and classified as Level 2.

Supplementary Financial Information

Other (Expense) Income, net

The following table provides information relating to Other (expense) income, net for the periods indicated (in millions):

Years Ended December 31,

(Loss) on embedded derivatives $ — $ ( 0.7 )

Other (expense) income, net ( 1.2 ) 5.0

Total $ ( 1.2 ) $ 4.3

Percentage of loss allocated to:

Common stock 100.0 % 99.2 %

Unvested restricted stock — % — %

Preferred stock — % 0.8 %

Numerator for earnings per share, basic:

Net loss from continuing operations attributable to common stock, basic $ ( 80.7 ) $ ( 62.7 )

Net loss from discontinued operations attributable to common stock, basic $ ( 149.0 ) $ ( 32.1 )

Net loss attributable to common stock, basic $ ( 229.7 ) $ ( 94.8 )

Earnings allocable to common shares, diluted:

Numerator for earnings per share, diluted

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

Net loss from continuing operations attributable to common stock, basic $ ( 80.7 ) $ ( 62.7 )

Net loss from discontinued operations attributable to common stock, basic $ ( 149.0 ) $ ( 32.1 )

Net loss attributable to common stock, basic $ ( 229.7 ) $ ( 94.8 )

Denominator for basic and dilutive earnings per share

Weighted average common shares outstanding - basic 77.1 50.3

Effect of assumed shares under treasury stock method for stock options and restricted shares and if-converted method for convertible instruments — —

Weighted average common shares outstanding - diluted 77.1 50.3

Loss per share - continuing operations

Basic $ ( 1.05 ) $ ( 1.25 )

Diluted $ ( 1.05 ) $ ( 1.25 )

Loss per share - discontinued operations

Basic $ ( 1.93 ) $ ( 0.63 )

Diluted $ ( 1.93 ) $ ( 0.63 )

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

Basic $ ( 2.98 ) $ ( 1.88 )

Diluted $ ( 2.98 ) $ ( 1.88 )

Supplemental Cash Flow Information

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

Years Ended December 31,

Cash and cash equivalents, beginning of period $ 45.5 $ 43.8

Restricted cash 2.0 1.5

Restricted cash included in other assets (non-current) — —

Total cash, cash equivalents and restricted cash $ 47.5 $ 45.3

Cash and cash equivalents, end of period $ 80.4 $ 45.5

Restricted cash 0.3 2.0

Restricted cash included in other assets (non-current) 1.5 —

Total cash and cash equivalents and restricted cash $ 82.2 $ 47.5

Cash and cash equivalents classified in Assets held for sale, beginning of period $ — $ 195.2

Restricted cash classified in Assets held for sale — 0.2

Total cash and cash equivalents and restricted cash classified in Assets held for sale $ — $ 195.4

Supplemental cash flow information:

Cash paid for interest $ 42.5 $ 32.6

Cash paid for taxes, net of refunds $ 5.9 $ 5.4

Non-cash investing and financing activities:

Property, plant and equipment included in accounts payable $ 0.4 $ 1.4

Issuance of preferred stock $ 0.9 $ 19.1

Accrued interest and fees capitalized into principal debt $ 17.5 $ —

Issuance of redeemable noncontrolling interest $ — $ 40.9

Extinguishment of convertible note in exchange $ — $ 51.8

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

Debt assumed in acquisitions $ — $ 6.3

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Subsequent Events

On March 6, 2023, the Company closed on the sale of its remaining 19 % interest in HMN to subsidiaries and an affiliate of Hengtong Optic-Electric Co Ltd.

The sale was consummated pursuant to the terms of a supplemental agreement entered into by the parties in June 2022.

After taxes and transaction fees, INNOVATE received approximately $ 32 million in cash.

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-K

Item 9A. Controls and Procedures