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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-03-06 · 969 added, 1006 removed, 1258 unchanged (61% of the section changed)

14 unchanged sentences

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

Auditor Attestation Report

Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting, which is on page F-4 of this report.

Changes in 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended December 31, 2024, several of our subsidiaries successfully completed an implementation of a new Enterprise Resource Planning ("ERP") system, which replaced operating and financial systems and resulted in changes to internal controls over financial reporting.

We have taken steps to ensure that appropriate controls are in place and operating effectively in the new system environment.

These changes have been and will continue to be subject to our evaluation of the operating effectiveness of internal controls over financial reporting.

Other than as disclosed above, there have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

There were no "non-Rule 10b5-1 trading arrangements" (as defined in Item 408 of Regulation S-K of the Exchange Act) adopted , modified, or terminated during the quarter ended December 31, 2024, by our directors and Section 16 officers.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

31 unchanged sentences

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 INNOVATE's Current Report on Form 8-K, filed on November 30, 2017) (File No.

2.2 Merger Agreement, dated as of May 1 , 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 Corp.

(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 INNOVATE on March 15, 2021) (File No.

2.7 First Amendment to Membership Interest Purchase Agreement, dated May 2 7 , 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 INNOVATE on May 27, 2021) (File No.

2.1 Stock Purchase Agreement, dated March 26, 2021, by and among INNOVATE Corp 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 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 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 INNOVATE Corp.

(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.

3.1 Fourth Amended and Restated By-Laws of INNOVATE Corp (f/k/a HC2 Holdings, Inc.) dated February 21, 2019 (incorporated by reference to Exhibit 3.1 to INNOVATE's Current Report on Form 8-K, filed on February 25, 2019) (File No.

3.2 Amendment #1 to Fourth Amended and Restated By-Laws of INNOVATE Corp., (f/k/a HC2 Holdings Inc.) 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 of INNOVATE Corp.

(f/k/a HC2 Holdings, Inc.) 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 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.

0 0 1-3 5 210)

3.3 Third Amended and Restated Certificate of Incorporation of INNOVATE Corp., dated September 30, 2024 (incorporated by reference to Exhibit 4.1 to INNOVATE's Form S-8 Registration Statement, filed with the SEC on October 30, 2024 (File No.

4.1 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 INNOVATE on July 7, 2021) (File No.

dated July 1, 2021 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by INNOVATE on July 7, 2021) (File No.

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

2 unchanged sentences

("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.) and U.S.

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.

4.3 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.

4.4 First Omnibus Amendment to Secured Notes and Intercreditor Agreement dated as of February 21, 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 4.1 to INNOVATE’s Quarterly Report on Form 10-Q, filed on May 11, 2020) (File No.

4.5 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 Exhibit 10.33 to the Annual Report on Form 10-K filed on March 9, 2022) (File No.

4.6 Third Omnibus Amendment to Secured Notes and Second Amendment to Intercreditor Agreement dated as of September 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 10.3 on INNOVATE's Current Report on Quarterly Report on Form 10-Q filed on November 9, 2020) (File No.

4.7 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.

4.8 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.

4.9 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.

4.10 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.

4.11 Eighth Omnibus Amendment to Secured Notes, dated as of August 8, 2023, by and among, HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascend Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

4.12 Ninth Omnibus Amendment to Secured Notes, dated as of November 9, 2023, by and among, HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascend Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

4.13 Side Letter to Ninth Omnibus Amendment to Secured Notes, dated as of November 9, 2023, by and among,HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network, Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings, Inc., HC2 Broadcasting Holdings, Inc., and MassMutual Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

4.14 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 Exhibit 10.38 to INNOVATE's Annual Report on Form 10-K, filed on March 16, 2020) (File No.

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

1 unchanged sentence

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.

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

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

1 unchanged sentence

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 INNOVATE 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.

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

4.19 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.

1 unchanged sentence

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.

4.16 Tax Benefits Preservation Plan, dated as of April 1, 2023, by and between INNOVATE Corp.

and Computershare Trust Company, N.A.

(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by INNOVATE on April 3, 2023) (File No.

4.21 Registration Rights Agreement dated as of September 9, 2020, by and between INNOVATE Corp and Lancer Capital LLC (incorporated by reference to Exhibit 10.2 ( filed herewith )

4.22 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.

001-35210 ) .

4.23 Registration Rights Agreement dated as of March 5, 2024 by and between INNOVATE Corp.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.71 to the Annual Report on Form 10-K filed on March 6, 2024 (File No.

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 29, 2014) (File No.

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.

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.

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 INNOVATE's Current Report on Form 8-K, filed on November 30, 2020) (File No.

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 5 to INNOVATE's Annual Report on Form 10-K, filed on March 9, 2017) (File No.

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.

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.

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.

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.

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.

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.

F orm of Employee Nonqualified Option Award Agreement (incorporated by reference to Exhibit 10.4 o n INNOVATE's Quarterly Report on Form 10-Q, filed on August 9, 2016 (File No.

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

4 unchanged sentences

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 INNOVATE's Current Report on Form 8-K, filed on June 28, 2017) (File No.

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 Corp 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 INNOVATE's Current Report on Form 8-K, filed on December 4, 2018) (File No.

10.18 Ninth Amended and Restated Agreement Re:

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.

10.8 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.

(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.

10.9 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.

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

Executive Severance Guidelines effective October 21, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE on October 27, 2021) (File No.

2019 INNOVATE Corp.

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

Executive Bonus Plan effective April 25, 2019 (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-k filed on March 9, 2022) (File No.

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.

3 unchanged sentences

and the Other Borrowers, the Lenders, UMB 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 Separation and Release Agreement by and between INNOVATE 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 Senior 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.

10.16 Letter Agreement with Continental General Insurance Company dated December 30, 2022 (incorporated 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.

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

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(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 ( incorporated herein by reference to Exhibit 10.44 to the Annual Report on Form 10-K filed by INNOVATE on March 14 , 2023) (File No.

10.45 Senior Secured Promissory Note dated as of February 15, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10- Q filed by INNOVATE on May 10, 2023) (File No.

10.46 Senior Secured Promissory Note dated as of February 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

2 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.47 Senior Secured Promissory Note dated as of March 31, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC ( incorporated by reference to Exhibit 10.

3 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.48 Senior Secured Promissory Note dated as of April 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

4 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.18 Stock Purchase Agreement dated as of May 9, 2023 by and between INNOVATE Corp.

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

5 t o Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.50 Subordinated Unsecured Promissory Note dated as of May 9, 2023 by and between INNOVATE Corp.

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

6 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.51 Stock Purchase Agreement dated as of May 9, 2023 by and between INNOVATE Corp.

and Continental General Insurance Company (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

and Continental General Insurance Company (incorporated by reference to Exhibit 10.5 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.19 Subordinated Unsecured Promissory Note dated as of May 9, 2023 by and between INNOVATE Corp.

and Continental General Insurance Company (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.53 Senior Secured Promissory Note dated as of May 12, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

3 to Quarterly Report on Form 10-Q filed by INNOVATE on August 9 , 2023) (File No.

10.54 Senior Secured Promissory Note dated as of May 31, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

4 to Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.55 Senior Secured Promissory Note dated as of June 14, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

5 to Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.56 Amendment of Senior Secured Promissory Notes dated as of June 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

6 to Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.57 Senior Secured Promissory Note dated as of June 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.

7 to Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.53 Senior Secured Promissory Note and amendment dated as of July 14, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.54 Amendment of Senior Secured Promissory Notes dated as of July 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.55 Senior Secured Promissory Note dated as of July 28, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.56 Eighth Omnibus Amendment to Secured Notes, dated as of August 8, 2023, by and among, HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascend Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.57 Financial Support Commitment from Lancer Capital LLC dated August 8, 2023 (incorporated by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q filed by INNOVATE on August 9, 2023) (File No.

10.58 Senior Secured Promissory Note dated as of August 15, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) ( File No.

10.59 Amendment of Senior Secured Promissory Notes dated as of August 15, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

10.60 Separation Agreement dated as of September 21, 2023 by and between Suzi Herbst and INNOVATE Corp.

(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on September 21, 2023) (File No.

and Continental General Insurance Company (incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed by INNOVATE on May 10, 2023) (File No.

10.20 Employment Agreement dated as of October 6, 2023 by and between Paul K.

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(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on October 11, 2023) (File No.

10.62 Amended and Restated Financial Support Commitment Letter from Lancer Capital LLC dated November 7, 2023 (incorporated by reference to Exhibit 10.

10 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

10.63 Ninth Omnibus Amendment to Secured Notes, dated as of November 9, 2023, by and among, HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings Inc., HC2 Broadcasting Holdings Inc., MSD PCOF Partners XVIII, LLC, MassMutual Ascend Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

10.64 Side Letter to Ninth Omnibus Amendment to Secured Notes, dated as of November 9, 2023, by and among,HC2 Station Group, Inc., HC2 Broadcasting Inc., HC2 Network, Inc., DTV America Corporation, HC2 Broadcasting Intermediate Holdings, Inc., HC2 Broadcasting Holdings, Inc., and MassMutual Life Insurance Company and Great American Insurance Company (incorporated by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q filed by INNOVATE on November 9, 2023) (File No.

10.65 Amendment of Senior Secured Promissory Notes dated as of November 15, 2023 by and between R2 Technologies, Inc.

and Lancer Capital LLC (filed herewith).

10.21 Amended and Restated Senior Secured Promissory Note dated as of January 31, 2024 by and between R2 Technologies, Inc.

and Lancer Capital LLC (incorporated by reference to Exhibit 10.72 to the Annual Report on Form 10-K filed by INNOVATE on March, 6, 2024) (File No.

10.22 INNOVATE Corp.

Clawback Policy effective November 2, 2023 (filed herewith).

Clawback Policy effective November 2, 2023 (incorporated by reference to Exhibit 10.66 to the Annual Report on Form 10-K filed by INNOVATE on March 6, 2024) (File No.

10.23 INNOVATE Corp.

Insider Trading Policy effective November 2, 2023 (filed herewith).

Insider Trading Policy effective November 2, 2023 (incorporated by reference to Exhibit 10.67 to the Annual Report on Form 10-K filed by INNOVATE on March 6, 2024) (File No.

10.24 Second Amendment to Credit Agreement, dated as of December 12, 2023, among DBM Global Inc.

and the other Borrowers, the Lenders, UMB Bank, n.a., as Administrative Agent and BMO Harris Bank N.A., as Syndication Agent (filed herewith).

10.69 S ublease Agreement dated as of December 19, 2023, by and between INNOVATE Corp.

and Palm Beach Cultural Innovation Center Inc.

(filed herewith).

10.70 Investment Agreement dated as of March 5, 2024 by and between INNOVATE Corp.

and Lancer Capital LLC (filed herewith)

10.71 R egistration Rights Agreement dated as of March 5 , 2024 by and between INNOVATE Corp.

and Lancer Capital LLC (filed herewith).

10.72 A mended and Restated Senior Secured Promissory Note dated January 31, 2024 by and between R2 Technologies , Inc.

and the other Borrowers, the Lenders, UMB Bank, n.a., as Administrative Agent and BMO Harris Bank N.A., as Syndication Agent (incorporated by reference to Exhibit 10.68 to the Annual Report on Form 10-K filed by INNOVATE on March 6, 2024) (File No.

10.25 Amendment of Senior Secured Promissory Note dated effective as of April 30, 2024 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 May 5, 2024) (File No.

10.26 Collateral Trust Agreement dated as of November 20, 2018 among HC2 Holdings, Inc., the other Grantors from time to time party hereto, U.S.

Bank National Association, as Trustee under the Indenture and U.S.

Bank National Association, as Collateral Trustee (incorporated by reference to Exhibit 10.

3 to the Quarterly Report on Form 10-Q filed on August 7 , 2024) (File No.

10.27 Amendment No.

1 to Collateral Trust Agreement, dated as of February 1, 2021, to the Collateral Trust Agreement, dated as of November 20, 2018 (the "Collateral Trust Agreement") (incorporated by reference to Exhibit 10.

4 to the Quarterly Report on Form 10-Q filed on August 7 2024) (File No.

10.28 Collateral Trust Joinder - Additional Pari Passu Obligations dated February 1, 202 1 (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed on August 7, 2024) (File No.

10.29 Third Amendment to Credit Agreement dated as of June 28, 2024, by and among DBM Global Inc., the other Borrowers listed on Schedule 1.1 hereto and UMB BANK, N.A.

((incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed on August 7, 2024) (File No.

10.30 Amendment No.

2 of Senior Secured Promissory Note dated effective as of May 17, 2024 by and between R2 Technologies, Inc.

and Lancer Capital LLC ((incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q filed on August 7, 2024) (File No.

10.31 INNOVATE Corp Second Amended and Restated 2014 Omnibus Equity Award Plan , as amended (incorporated by reference to Exhibit A to INNOVATE’s Information Statement on Schedule 14C, filed with the SEC on October 7, 2024) (File No.

10.32 Third Amended & Restated Limited Liability Company Agreement of Pansend Life Sciences, LLC, dated as of November 21, 2019, by and among INNOVATE Corp 2 (f/k/a HC2 Holdings 2, Inc.), David Present and Cherine Plumaker (filed herewith)

Form of Restricted Stock Unit Award Agreement (filed herewith)

10.34 Amendment No.

3 of Senior Secured Promissory Note dated, effective as of December 31, 2024, by and between R2 Technologies, Inc.

and Lancer Capital LLC (filed herewith)

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101 The following materials from the registrant’s Annual Report on Form 10-K for the fiscal years ended December 31, 2024 and 2023, formatted in extensible business reporting language (XBRL);

(i) Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, (ii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023 and 2022, (iii) Consolidated Balance Sheets at December 31, 2023 and 2022, (iv) Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2023 and 2022, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022, and (vi) Notes to Consolidated Financial Statements (filed herewith).

(i) Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 , (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024 and 2023 , (iii) Consolidated Balance Sheets a s of December 31, 2024 and 2023 , (iv) Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2024 and 2023 , (v) Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 , 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, 2024, formatted in Inline XBRL (included as Exhibit 101).

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INNOVATE CORP.

INDEX TO FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( BDO USA, P.C.

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(13) Commitments and Contingencies

(1 4 ) Employee Retirement Plans

(14) Employee Retir e ment Plans

(1 5 ) Share-Based Compensation

(1 6 ) Temporary Equity and Equity

(1 6 ) Equity and Temporary Equity

(1 7 ) Related Parties

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

(the “Company”) as of December 31, 2023 and 2022, 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 (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2024 and 2023, 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, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 6, 2024, expressed an unqualified opinion thereon.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has maturities of certain debt obligations that exceed its current and forecasted cash balances within one year from the date of this report.

These conditions raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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(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, 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 and the timing of when work has commenced are among the factors that influence the estimate of cost and progress for measuring service and construction contracts.

We identified certain 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, labor, and subcontractor 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 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs to Complete for the Infrastructure Segment

As described in Note 3 to the consolidated financial statements, revenue for the Company’s Infrastructure Segment (“DBMG”) was $1.072 billion for the year ended December 31, 2024.

DBMG performs its services primarily under fixed-price contracts and recognizes revenue over time using the input method to measure progress for its projects.

The most reliable measure of progress is the cost incurred towards delivery of the completed project.

Costs include all direct material and labor costs related to contract performance, subcontractor costs, indirect labor, and fabrication plant overhead costs, which are charged to contract costs as incurred.

Revisions in estimates during the course of contract work are reflected in the accounting period in which the facts requiring the revision become known.

Provisions for estimated losses on uncompleted contracts are made in the period a loss on a contract becomes determinable.

We identified the estimate of certain costs to be incurred towards delivery of projects for specific revenue contracts at DBMG as a critical audit matter.

Estimating future direct materials, labor, and subcontractor costs included in the measurement of progress of projects for specific revenue contracts at DBMG required significant judgment.

Auditing these elements involved especially challenging auditor judgment in evaluating the reasonableness of the estimated direct materials, labor, and subcontractor costs over the duration of these contracts.

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

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

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

(i) assessing the status of completion through testing of a sample of project costs incurred to date, (ii) evaluating the reasonableness of project budgets through performing gross margin analysis using subsequently available information, (iii) assessing the reasonableness of changes in the certain estimated costs to complete and investigating reasons for changes in expected costs and project margins, and (iv) evaluating the reasonableness of project status by performing inquiries of project management personnel and assessing the nature of activities required to complete open projects.

• Assessing the reasonableness of the estimated direct materials, labor, and subcontractor costs included in the measurement of the progress of projects for specific revenue contracts at DBMG through:

(i) evaluating the reasonableness of project budgets through performing gross margin analysis using subsequently available information, (ii) assessing the reasonableness of revisions in the estimated direct materials, labor, and subcontractor costs and investigating reasons for changes in expected costs and project margins, and (iii) evaluating the reasonableness of project cost estimates to complete by performing inquiries of project management personnel and assessing the nature of activities required to complete open projects.

/s/ BDO USA, P.C.

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March 31, 2025

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

INNOVATE CORP.

Opinion on Internal Control over Financial Reporting

We have audited INNOVATE Corp.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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, 2023 and 2022, 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 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

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

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, P.C.

March 6, 2024

INNOVATE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(in millions, except shares and per share amounts)

Year Ended December 31,

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Depreciation and amortization 17.6 20.2

Other operating loss 1.3 0.7

Other operating (income) loss ( 9.0 ) 1.3

Income from operations 40.0 26.5

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Loss from equity investees ( 2.3 ) ( 9.4 )

Other income (expense), net 16.7 ( 1.2 )

Other income, net 3.4 16.7

Loss from operations before income taxes ( 33.4 ) ( 34.4 )

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Preferred dividends 1.2 2.4

Net loss attributable to common stockholders $ ( 37.6 ) $ ( 40.8 )

Loss per share - basic and diluted $ ( 0.48 ) $ ( 0.53 )

Net loss attributable to common stockholders and participating preferred stockholders $ ( 35.8 ) $ ( 37.6 )

Loss per common share - basic and diluted (1)

$ ( 3.08 ) $ ( 4.81 )

Weighted-average common shares outstanding - basic and diluted (1)

10,696,274 7,814,620

(1) Basic and diluted loss per common share and weighted-average common shares outstanding for the year ended December 31, 2023, have been retroactively adjusted to reflect the 1-for-10 reverse stock split effected on August 8, 2024.

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

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Inventory 20.8 22.4

Assets held for sale 3.1 —

Other current assets 21.0 17.7

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Total liabilities 1,034.8 1,179.9

Commitments and contingencies

Commitments and contingencies (Note 13)

Temporary equity

Preferred stock Series A-3 and Series A-4, $ 0.001 par value

Preferred Stock Series A-3 and Preferred Stock Series A-4, $ 0.001 par value

Shares authorized:

20,000,000 as of both December 31, 2023 and 2022

Shares issued and outstanding:

6,125 of Series A-3 and 10,000 of Series A-4 as of both December 31, 2023 and 2022

6,125 of Series A-3 and 10,000 of Series A-4

Redeemable non-controlling interest ( 0.5 ) ( 1.0 )

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Shares authorized:

160,000,000 as of both December 31, 2023 and 2022

250,000,000 and 160,000,000 , respectively

Shares issued:

80,722,983 and 80,216,028 as of December 31, 2023 and 2022, respectively

13,410,179 and 8,072,300 (1) , respectively

Shares outstanding:

79,234,991 and 78,787,768 as of December 31, 2023 and 2022, respectively

13,261,379 and 7,923,500 (1) , respectively

Additional paid-in capital (1)

Treasury stock, at cost:

1,487,992 and 1,428,260 shares as of December 31, 2023 and 2022, respectively

148,800 (1) shares

( 5.4 ) ( 5.4 )

Accumulated deficit ( 521.9 ) ( 487.3 )

Accumulated other comprehensive (loss) income ( 1.1 ) 5.9

Accumulated other comprehensive loss ( 3.2 ) ( 1.1 )

Total INNOVATE Corp.

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Total liabilities, temporary equity and stockholders’ deficit $ 891.1 $ 1,043.6

(1) Common stock, Shares issued, Shares outstanding, Additional paid-in capital, and Treasury stock as of December 31, 2023, have been retroactively adjusted to reflect the 1-for-10 reverse stock split effected on August 8, 2024.

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in millions)

Common Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Comprehensive Income (Loss) (a) Total INNOVATE Stockholders' (Deficit) Equity Non-controlling Interest Total Stockholders' (Deficit) Equity Temporary Equity

Shares Amount

(in millions, except share amounts)

Temporary Equity

Stockholders' (Deficit) Equity

Preferred Stock and Redeemable Non-Controlling Interest

Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Comprehensive Income (Loss) (b)

Total INNOVATE Stockholders' (Deficit) Equity Non-controlling Interest Total Stockholders' (Deficit) Equity

Balance as of December 31, 2022 $ 61.0 7,878.8 $ — $ 330.2 $ ( 5.3 ) $ ( 452.1 ) $ 5.9 $ ( 121.3 ) $ 30.7 $ ( 90.6 )

Share-based compensation — — — 2.2 — — — 2.2 — 2.2

Fair value adjustment to redeemable non-controlling interest — — 0.2 — — — 0.2 — 0.2 ( 0.2 )

Taxes paid in lieu of shares issued for share-based compensation — ( 6.0 ) — — ( 0.1 ) — — ( 0.1 ) — ( 0.1 )

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

Preferred stock dividends ( 1.3 ) — — ( 1.3 ) — — — ( 1.3 ) — ( 1.3 )

Issuance of common stock — 50.7 — — — — — — — —

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

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

Distributions to non-controlling interests ( 5.2 ) — — — — — — — ( 10.7 ) ( 10.7 )

Transactions with non-controlling interests — — — ( 2.8 ) — — — ( 2.8 ) 2.9 0.1

Other 9.0 — — — — — — — ( 9.0 ) ( 9.0 )

DBMGi preferred stock repurchase ( 41.8 ) — — — — — — — — —

Net (loss) income ( 5.9 ) — — — — ( 35.2 ) — ( 35.2 ) 2.2 ( 33.0 )

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

Other comprehensive loss ( 0.4 ) — — — — — ( 7.0 ) ( 7.0 ) ( 2.3 ) ( 9.3 )

Balance as of December 31, 2023 $ 15.4 7,923.5 $ — $ 328.3 $ ( 5.4 ) $ ( 487.3 ) $ ( 1.1 ) $ ( 165.5 ) $ 13.8 $ ( 151.7 )

Share-based compensation — — — 3.4 — — — 3.4 — 3.4

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

Preferred stock dividends ( 0.3 ) — — ( 1.2 ) — — — ( 1.2 ) — ( 1.2 )

Issuance of common stock — 224.8 — — — — — — — —

Issuance of preferred stock in private placement 31.3 — — — — — — — — —

Rights offering, net of transaction costs — 530.6 — 1.9 — — — 1.9 — 1.9

Series C Preferred Share Conversion ( 31.3 ) 4,469.4 — 31.3 — — — 31.3 — 31.3

Reverse stock split — 113.1 — — — — — — — —

Effect of Series D investment in R2 Technologies 1.1 — — ( 13.2 ) — — — ( 13.2 ) 12.1 ( 1.1 )

Distributions to non-controlling interests — — — — — — — — ( 0.3 ) ( 0.3 )

Transactions with non-controlling interests — — — ( 0.4 ) — — — ( 0.4 ) 0.2 ( 0.2 )

Other — — — — — — — ( 9.0 ) ( 9.0 ) 9.0

DBMGi preferred stock liability repurchase — — — — — — — — — ( 41.8 )

Net (loss) income — — — — ( 35.2 ) — ( 35.2 ) 2.2 ( 33.0 ) ( 5.9 )

Net loss ( 0.6 ) — — — — ( 34.6 ) — ( 34.6 ) ( 4.5 ) ( 39.1 )

Other comprehensive loss — — — — — — ( 2.1 ) ( 2.1 ) ( 0.2 ) ( 2.3 )

Balance as of December 31, 2024 $ 15.6 13,261.4 $ — $ 350.1 $ ( 5.4 ) $ ( 521.9 ) $ ( 3.2 ) $ ( 180.4 ) $ 21.1 $ ( 159.3 )

$ ( 5.4 ) $ ( 487.3 ) $ ( 1.1 ) $ ( 165.5 ) $ 13.8 $ ( 151.7 ) $ 15.4

(a) Inclusive of other comprehensive (loss) income, foreign currency cumulative translation adjustments totaled a loss of $ 2.4 million and income of $ 4.6 million as of December 31, 2023 and 2022, respectively.

(a) The number and amount of shares and Additional Paid-in Capital as of December 31, 2022, and as of and for the year ended December 31, 2023, have been retroactively adjusted to reflect the 1-for-10 reverse stock split effected on August 8, 2024.

Refer to Note 2.

Summary of Significant Accounting Policies.

(b) Inclusive of other comprehensive loss, foreign currency cumulative translation adjustments totaled a loss of $ 4.5 million and $ 2.4 million as of December 31, 2024 and 2023, respectively.

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

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Net loss $ ( 39.7 ) $ ( 38.9 )

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

Adjustments to reconcile net loss to cash provided by operating activities

Share-based compensation expense 3.4 2.2

Depreciation and amortization (including amounts in cost of revenue) 32.9 36.0

Gain on lease modification

Amortization of deferred financing costs and debt discount

Net loss on repurchase or extinguishment of debt

Loss from equity investees 2.3 9.4

Gain on sale of investments and step-up of equity method investments

Realized and unrealized losses (gains) on investments

Asset impairment expense 0.1 1.8

Deferred income tax (benefit) expense

Deferred income tax expense (benefit)

Other operating activities, net ( 2.0 ) 2.1

Changes in assets and liabilities, net of acquisitions:

Changes in assets and liabilities:

Accounts receivable 91.8 ( 25.7 )

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Other liabilities ( 14.9 ) 2.9

Cash provided by (used in) operating activities

Cash provided by operating activities

Cash flows from investing activities

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( 2.3 ) ( 4.0 )

Proceeds from the sale of investments

Purchase of investments

Proceeds from sale of equity method investments

Cash paid for asset acquisitions

Other investing activities 0.5 0.7

Cash provided by (used in) investing activities 39.1 ( 22.5 )

Cash (used in) provided by investing activities

( 13.9 ) 39.1

Cash flows from financing activities

Proceeds from rights offering and private placement, net of issuance costs

Proceeds from lines of credit

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Proceeds from other debt obligations, net of deferred financing costs

Principal payments on other debt obligations ( 37.1 ) ( 28.3 )

Principal payments for and repurchases of other debt obligations

( 28.0 ) ( 37.1 )

Purchase of preferred stock — ( 7.0 )

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Other financing activities — ( 0.3 )

Cash (used in) provided by financing activities ( 65.3 ) 68.1

Cash used in financing activities

( 26.5 ) ( 65.3 )

Effects of exchange rate changes on cash, cash equivalents and restricted cash ( 1.7 ) ( 0.2 )

Net increase in cash and cash equivalents, including restricted cash

Net (decrease) increase in cash and cash equivalents, including restricted cash

Cash, cash equivalents and restricted cash, beginning of year

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("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.

The Company seeks 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 non-controlling equity interest positions or debt instruments.

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Infrastructure, Life Sciences, Spectrum, and Other which includes businesses that do not meet the separately reportable segment thresholds.

Our Infrastructure segment is comprised of DBM Global Inc.

The Company's Infrastructure segment is comprised of DBM Global Inc.

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

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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.

Through Banker Steel, a division of Schuff Steel Company, DBMG provides full-service fabricated structural steel and erection services primarily for the U.S.

East Coast and Southeast commercial and industrial construction markets, in addition to full design-assist services.

The Company maintains a 91.2 % controlling interest in DBMG.

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

Pansend maintains controlling interests of 80.0 % in Genovel Orthopedics, Inc.

("Genovel"), which seeks to develop products to treat early osteoarthritis of the knee and 56.6 % in R2 Technologies, Inc.

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

Pansend also invests in other early stage or developmental stage healthcare companies and as of December 31, 2023, had a 46.2 % interest in MediBeacon Inc.

("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, a 1.9 % fully diluted interest in Triple Ring Technologies, Inc.

The Company's Life Sciences segment is comprised of Pansend Life Sciences, LLC ("Pansend"), its subsidiaries and its equity investments.

Pansend maintains a controlling interest of 80.0 % in Genovel Orthopedics, Inc.

("Genovel"), which seeks to develop products to treat early osteoarthritis of the knee, and also has a controlling interest of 81.4 % ( 56.6 % as of December 31, 2023) in R2 Technologies, Inc.

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

Pansend also invests in other early stage or developmental stage healthcare companies and, as of December 31, 2024, had a 45.9 % interest ( 46.2 % as of December 31, 2023) in MediBeacon Inc.

("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 maintained a 1.6 % fully diluted interest in Triple Ring Technologies, Inc.

("Triple Ring"), a science and technology co-development company, and a 20.1 % interest in Scaled Cell Solutions, Inc.

("Scaled Cell"), an immunotherapy company developing a novel autologous cell therapy system to potentially improve current CAR-T treatments.

Our Spectrum segment is comprised of HC2 Broadcasting Holdings Inc.

The Company's Spectrum segment is comprised of HC2 Broadcasting Holdings Inc.

("Broadcasting") and its subsidiaries.

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

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

The Company maintains a 98.0 % controlling interest in Broadcasting and maintains a controlling interest of approximately 69.2 %, inclusive of 2.8 % proxy rights from minority holders of DTV America Corporation ("DTV").

On a fully diluted basis, the Company would have a 85.8 % 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.

On a fully diluted basis, the Company would have an 85.8 % controlling interest in Broadcasting.

The Company's 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 TIC Holdco, Inc.

("TIC"), and the former Marine Services segment, which includes its holding company, Global Marine Holdings, LLC ("GMH"), in which the Company maintains a 72.8 % controlling interest.

GMH's results include its subsidiary's prior 19.0 % equity method investment in HMN International Co., Ltd., formerly known as Huawei Marine Networks Co.

("TIC"), which was dissolved May 23, 2024, and the former Marine Services segment, which included its holding company, Global Marine Holdings, LLC ("GMH") in which the Company maintained a 72.8 % controlling interest until its dissolution on December 13, 2024.

GMH's prior period results included its subsidiary's prior 19.0 % equity method investment in HMN International Co., Ltd., formerly known as Huawei Marine Networks Co.

(“HMN”), until it was sold on March 6, 2023.

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

Basis of Presentation and Liquidity

Basis of Presentation

The accompanying Consolidated Financial Statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

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

The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information.

All such adjustments are of a normal recurring nature.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On February 23, 2024, the Company's Board of Directors (the “Board”) approved a plan to proceed with a $ 19.0 million rights offering for its common stock and fixed March 6, 2024 as the record date for holders of common stock entitled to participate in the rights offering.

On March 5, 2024, the Company set the subscription price at which the rights would be exercisable at $ 0.70 per share and entered into an investment agreement (the “Investment Agreement”) with Lancer Capital LLC (“Lancer Capital”), a related party and an entity controlled by Avram A.

Glazer, the Chairman of the Board and a beneficial owner of 29.1 % of the Company's common stock, pursuant to which the rights offering will be backstopped by Lancer Capital.

Pursuant to the Investment Agreement, Lancer Capital will also purchase an additional $ 16.0 million of the Company’s new Series C Preferred Stock in a private placement transaction to close concurrently with the settlement of the rights offering.

For more information regarding the back-stop and private placement commitments from Lancer Capital under the Investment Agreement, refer to Note 22.

Subsequent Events.

At this time, management believes that the Company will be able to continue to meet its liquidity requirements and fund its fixed obligations (such as debt service and operating leases) and other cash needs for its operations for at least the next twelve months from the issuance of the Consolidated Financial Statements through a combination of available cash on hand, distributions from the Company’s subsidiaries and the rights offering together with the back-stop and private placement commitments from Lancer Capital under the Investment Agreement.

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 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 the Company is 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.

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 accounts for acquisitions 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.

Estimates of fair value included in the Consolidated Financial Statements, in conformity with ASC 820, Fair Value Measurements and Disclosures , represent the Company’s best estimates and valuations developed, when needed, with the assistance of independent appraisers or, where such valuations have not yet been completed or are not available, industry data and trends and by reference to relevant market rates and transactions.

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

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

In addition, unless noted, all share and per share amounts of common stock, options and restricted stock and any associated debt or preferred stock conversion rates contained in the historical periods presented within these Consolidated Financial Statements have been retroactively adjusted to reflect the one-for-ten reverse stock split of the Company's issued and outstanding common stock that was effected by the Company on August 8, 2024 (the "Reverse Stock Split"), as if it had occurred at the beginning of the earliest period presented.

Refer to Note 16.

Equity and Temporary Equity for information relating to the 2024 Reverse Stock Split and adjustments resulting from the Reverse Stock Split.

Going Concern

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern.

However, as of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

The principal conditions leading to this conclusion are the upcoming maturities and covenants of the Company's Corporate Senior Secured Notes, other current debt at Corporate and certain of the Company's subsidiaries, as well as from certain cross-default provisions in the Company's Senior Secured Notes.

Based on these conditions, the Company may not be able to meet its obligations at maturity and comply with certain cross-default provisions under the Senior Secured Notes over the next twelve months.

Management has evaluated the significance of these conditions in relation to the Company's ability to meet its obligations.

The potential inability to refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing, raises substantial doubt about the Company's ability to continue as a going concern.

The Company plans to alleviate these conditions through various initiatives it is currently exploring, including refinancing the debt at Corporate and its subsidiaries, pursuing asset sales, and raising additional capital.

However, there can be no assurance that the Company will have the ability to raise additional capital when needed, be successful in any asset sales, or refinance its existing debt, on attractive terms, or at all nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with the Company’s debt covenants or other possible events of default.

Further, there can be no assurance that the Company will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity date.

There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern.

These Consolidated Financial Statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, or expenses that may result if the Company is unable to continue as a going concern.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities and various disclosures within these consolidated financial statements as of the date of the consolidated financial statements and the reported amounts of net revenue and expenses during the reporting period These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances.

Actual results may differ from these estimates.

Significant estimates include the recognition of revenue and project profit or loss, which require estimates regarding the extent of progress towards completion on contracts and contract revenue and costs on long-term contracts;

allowances for credit losses;

fair value estimates, including the 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 equity awards 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 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.

Equity Method Investments

The Company utilizes the equity method to account for investments when it possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee.

The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee, such as with our investments in MediBeacon and Scaled Cell, of which we own an approximately 46.2 % interest in MediBeacon and an approximately 20.1 % interest in Scaled Cell as of December 31, 2023.

This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.

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 (loss) of the investee.

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

In the event that net losses of the investee reduce the carrying amount to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if the Company has not committed to provide financial support to the investee.

Such additional equity method losses, if any, are based upon the change in the Company's claim on the investee’s book value.

Cash and Cash Equivalents and Restricted Cash

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

The Company considers all highly liquid investments purchased with original maturities of three months or less from the date of purchase to be cash equivalents.

The Company maintains its current cash with financial institutions with balances that may exceed federally insured limits.

Cash and cash equivalents are maintained at financial institutions that management considers to be of high credit quality.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Measurement Alternative Investments

The Company utilizes the measurement alternative method to account for investments when it does not possess the ability to exercise significant influence or control and the investment does not have a readily determinable fair value.

Under this method, investments are initially recognized at cost and subsequently measured at cost, adjusted for any observable changes in the fair value of the investment.

In addition, the Company reviews the carrying value of investments measured under the measurement alternative for impairment on a regular basis.

If there is an indication of impairment, the Company assesses whether the carrying value of the investment exceeds its recoverable amount.

Any impairment losses are recognized in the financial statements.

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 in the Consolidated Balance Sheets in the Other current assets and Other assets (noncurrent) as applicable, and are primarily comprised of security deposits for long-term leases, which are held in separate bank accounts.

Fair Value Measurements

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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’s assets and liabilities that are measured at fair value on a recurring basis include cash equivalents.

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, redeemable non-controlling interests and debt obligations.

Accounts Receivable

Accounts receivable are stated at amounts due from customers net of provision for expected credit losses.

Our allowance for doubtful accounts considers historical experience, the age of certain receivable balances, credit history, current economic conditions and other factors that may affect the counterparty’s ability to pay.

As of January 1, 2023 the company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.

At each balance sheet date, all potentially uncollectible accounts are assessed individually for the purpose of determining the appropriate provision for doubtful accounts.

The Company’s assets and liabilities that are measured at fair value on a recurring basis include investment(s) in marketable equity securities.

Our financial assets measured at fair value on a non-recurring basis include equity securities without readily determinable fair values.

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

Allowance for Credit Losses

The Company maintains allowances for credit losses, for its financial assets, primarily for accounts receivable and contract assets, in accordance with Accounting Standards Codification ("ASC") Financial Instruments - Credit Losses (Topic 326).

Accounts receivable are stated at amounts due from customers net of allowance for expected credit losses.

The measurement and recognition of the allowance for credit losses involves the use of judgment and represents management’s estimate of expected lifetime credit losses based on historical experience and trends, current conditions and reasonable and supportable forecasts.

Any changes in these assumptions can lead to a change in the estimate.

Management’s assessment of expected credit losses includes consideration of current and expected economic, market and industry factors affecting the Company’s customers, including their financial condition and other factors affecting their ability to pay;

the aging of account balances;

historical credit loss experience;

customer concentrations;

and customer credit-worthiness;

among other factors.

Management has elected to use a risk-based, pool-level segmentation framework to calculate the expected loss rate.

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The Company may also establish an allowance for credit losses for specific receivables when it is probable that the receivable will not be collected and the loss can be reasonably estimated.

Amounts are written off against the allowance when they are considered to be uncollectible, and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate.

The policy for determining past due status is based on the contractual payment terms of each customer.

Once collection efforts by the Company are exhausted, the determination for charging off uncollectible receivables is made.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

At each balance sheet date, all past due or potentially uncollectible accounts are assessed individually for the purpose of determining the appropriate allowance for credit losses.

Once collection efforts by the Company are exhausted, the determination for charging off uncollectible receivables is made and the receivable is written off against the allowance , and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate.

Inventory, which is primarily composed of steel components for construction projects at DBM, is valued at the lower of cost or net realizable value under the first-in, first-out method.

Provision for obsolescence is made where appropriate and is charged to cost of revenue in the Consolidated Statements of Operations.

Short-term work in progress on contracts is stated at cost less foreseeable losses.

These costs include only direct labor and expenses incurred to date and exclude any allocation of overhead.

The policy for long-term work in progress contracts is disclosed within the Revenue and Cost Recognition accounting policy.

The policy for long-term work in progress contracts is disclosed within the Revenue and Cost Recognition accounting policy in Note 3.

Revenue and Contracts in Process.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The ability to exercise significant influence is presumed when an investor possesses more than 20% of the voting interests of the investee, such as with our investments in MediBeacon and Scaled Cell, of which we own a 45.9 % interest in MediBeacon and a 20.1 % interest in Scaled Cell as of December 31, 2024.

This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is restricted.

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 and other comprehensive income (loss) of the investee, as well as any changes as a result of changes in ownership.

Such additional equity method losses, if any, are based upon the change in the Company's claim on the investee’s book value.

We carry investments in marketable equity securities at fair value and record the changes in fair values in the Consolidated Statement of Operations as a component of Other income, net.

Under this method, investments are initially recognized at cost and subsequently measured at cost, adjusted for any observable changes in the fair value of the investment.

In addition, the Company reviews the carrying value of investments measured under the measurement alternative for impairment on a regular basis.

If there is an indication of impairment, the Company assesses whether the carrying value of the investment exceeds its recoverable amount.

Any impairment losses are recognized in the financial statements.

The Company's investments are recorded as a separate line in the Company’s Consolidated Balance Sheets.

Income or loss from equity method investments is recorded as a separate line item in the Consolidated Statements of Operations.

Changes in the fair value of equity securities and impairments recognized for measurement alternative method investments, if any, are recorded within Other income, net in the Consolidated Statements of Operations.

Accounting for Income Taxes

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The appropriateness and amount of the valuation allowance are based on cumulative history of losses and our assumptions about the future taxable income of each affiliate and the timing of the reversal of deferred tax assets and liabilities.

In relation to tax effects for accumulated OCI, our policy is to release the tax effects of amounts reclassified from accumulated OCI to pre-tax income (loss) from continuing operations.

In relation to tax effects for accumulated other comprehensive income ("OCI"), our policy is to release the tax effects of amounts reclassified from accumulated OCI to pre-tax income (loss) from continuing operations.

Any remaining tax effect in accumulated OCI is released following a portfolio approach.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Property, Plant and Equipment

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.

Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Cost includes finance costs incurred prior to the asset being available for use.

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, which we regularly evaluate.

The estimated useful lives of the assets 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.

Leasehold improvements are amortized over the lives of the leases or estimated useful lives of the assets, whichever is shorter.

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

Land is not depreciated.

Purchased property and equipment is recorded at cost, or, if acquired in a business combination, at the acquisition date fair value.

Cost includes the original purchase price of the asset, the costs attributable to bringing the asset to its working condition for its intended use and finance costs incurred prior to the asset being available for use, as well as any subsequent major expenditures for improvements and replacements which extend useful lives or increase capacity of the assets.

Expenditures for maintenance and repairs are expensed as incurred.

Finance lease assets are recognized based on the present value of minimum future lease payments.

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, typically 3 years.

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.

Leasehold improvements are amortized over the lives of the leases or estimated useful lives of the assets, whichever is shorter.

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 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.

The Company periodically utilizes a qualitative assessment to evaluate whether it is more likely than not that the fair value of its property, plant and equipment is less than its carrying value, and, if so, quantitatively evaluates the carrying value of its property, plant and equipment based upon the estimated cash flows to be generated by the related assets.

If an impairment is indicated, a loss is recognized.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Estimates of fair value included in the Consolidated Financial Statements represent the Company’s best estimates and valuations developed, when needed, with the assistance of independent appraisers or, where such valuations have not yet been completed or are not available, industry data and trends and by reference to relevant market rates and transactions.

Such 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.

Goodwill and Other Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but, rather, tested for impairment.

The Company tests goodwill and indefinite lived intangibles for impairment at least annually in the fourth quarter (October 1st) or when factors indicate potential impairment (i.e., events occur or circumstances change that indicate the potential impairment under ASC 350, Intangibles - Goodwill and Other ("ASC 350").

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

The Company tests goodwill for impairment at least annually in the fourth quarter (October 1st) or when factors indicate that the carrying amounts of assets may not be recoverable and there is a potential impairment.

The factors that management considers important, and which could trigger an impairment review, include, but are not limited to:

a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit;

a significant decline in the market value of our common stock or debt securities for a sustained period;

a significant decline in the market value of the Company's common stock or debt securities for a sustained period;

a material adverse change in economic, financial market, industry or sector trends;

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and significant changes in operations or business strategy.

Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the impairment provisions of ASC 360, Property, plant, and equipment ("ASC 360").

The Company elected to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, and if so, a quantitative test is performed.

The quantitative evaluation for impairment of indefinite lived intangibles follows the same approach as described with goodwill above and consists of a comparison of the fair value of an intangible asset with its carrying amount.

The quantitative evaluation for impairment of indefinite lived intangibles consists of a comparison of the fair value of an intangible asset with its carrying amount.

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.

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Based on qualitative assessments performed as of October 1, 2024, management determined it was more likely than not that the fair value of its reporting units and the fair value of the indefinite-lived intangible assets exceeded their carrying values, and, as such, no impairment was required.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Intangible assets not subject to amortization (i.e.

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These finite lived intangible assets are amortized based on their estimated useful lives.

Such assets are subject to the impairment provisions of ASC 360, wherein impairment is recognized and measured only if there are events and circumstances that indicate that the carrying amount may not be recoverable.

Impairment on such assets is recognized and measured only if there are events and circumstances that indicate that the carrying amount may not be recoverable.

The amount of impairment of other long-lived assets (excluding goodwill) is calculated as the amount by which the carrying value of the asset exceeds the fair market value of the asset, which is generally determined based on projected discounted future cash flows.

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 to the extent the carrying amount of the asset or asset group exceeds the fair value and is not recoverable.

Refer to Note 8.

Goodwill and Intangibles, Net for any intangible impairments recorded during the years presented.

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

They are renewable after application and reviewed by the FCC and historically are renewed except in rare cases in which a petition to deny, a complaint or an adverse finding as to the licensee's qualifications results in loss of the license.

They are renewable after application and reviewed by the Federal Communications Commission ("FCC") and historically are renewed except in rare cases in which a petition to deny, a complaint or an adverse finding as to the licensee's qualifications results in loss of the license.

Valuation of Long-lived Assets

The Company reviews long-lived assets for impairment whenever events or changes indicate that the carrying amount of an asset may not be recoverable.

In making such evaluations, the Company compares the expected undiscounted future cash flows to the carrying amount of the assets.

In the event of such conditions, the Company compares the expected undiscounted future cash flows to the carrying amount of the assets.

If the total of the expected undiscounted future cash flows is less than the carrying amount of the assets, the Company is required to make estimates of the fair value of the long-lived assets in order to calculate the impairment loss equal to the difference between the fair value and carrying value of the assets.

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The Company derives future cash flow estimates from its historical experience and its internal business plans, which include consideration of industry trends, competitive actions, technology changes, regulatory actions, available financial resources for marketing and capital expenditures and changes in its underlying cost structure.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company makes assumptions about the remaining useful life of its long-lived assets.

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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 accounts for leases on the balance sheet as lease assets and lease liabilities for leases classified as operating and finance leases.

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

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.

Operating lease right-of-use assets are included in Other Assets, and operating lease liabilities are included in other current liabilities and other liabilities (non-current) as applicable 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;

therefore, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

therefore, the Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments.

The incremental borrowing rate represents the rate of interest that would be paid to borrow on a collateralized basis over a similar term.

The Company determines its incremental borrowing rate using a portfolio approach based on information available as of the lease commencement date, including applicable lease terms and the current economic environment.

For lease agreements that contain non-lease components, the Company elected to combine lease and non-lease components as a single lease component.

The Company has operating leases for land, office space, and certain Company vehicles and equipment and finance leases for certain Company vehicles and equipment.

The leases are expiring between 2024 and 2045.

Leases with an initial term of twelve months or less are not recorded on the balance sheets.

Leases with an initial term of twelve months or less are not recorded on the balance sheet unless they are expected to be renewed.

Lease expense is recognized on a straight-line basis over the lease term.

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As of December 31, 2024, the operating lease liability does not include any options to extend or terminate leases.

Presentation of Taxes Collected

The Company reports a value-added tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between the Company and a customer on a net basis (excluded from revenues).

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Foreign Currency Transactions

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If there is a planned or completed sale or liquidation of the Company's ownership in a foreign operation, the relevant foreign currency translation adjustment is recognized in the Consolidated Statement of Operations.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

In these consolidated financial statements, “$” means U.S.

dollars, unless otherwise noted.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.

Applicable U.S.

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.

Convertible instruments are generally accounted for as a single unit of account.

ASC 815 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 included 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 embodied 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.

The Company accounts for convertible instruments, when it has been determined that the embedded conversion options should not be bifurcated from their host instruments, as follows:

The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards.

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.

Debt discounts under these arrangements are amortized using the effective interest method over the term of the related debt to their stated date of redemption as a component of Interest expense in the Consolidated Statement of Operations.

Deferred Financing Costs

The Company capitalizes certain expenses incurred in connection with its debt and line of credit obligations and amortizes them over the term of the respective debt agreement.

The amortization expense of the deferred financing costs is included in interest expense on the Consolidated Statements of Operations.

If the Company extinguishes portions of its debt prior to the maturity date, deferred financing costs are charged to expense on a pro-rata basis and are included in loss on early extinguishment or restructuring of debt on the Consolidated Statements of Operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of net revenue and expenses during the reporting period.

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, 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.

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.

The Company capitalizes certain expenses incurred in connection with its debt and line of credit obligations as reductions of the outstanding loan balances as a component of the carrying amount of Debt obligations in the Consolidated Balance Sheet and amortizes them using the effective interest method over the term of the respective debt agreement as a component of Interest expense in the Consolidated Statements of Operations.

Share-Based Compensation

The Company accounts for share-based compensation issued to employees and non-employees in accordance with the provisions of ASC 718 .

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for using a fair-value based method.

The Company records share-based compensation expense for all new and unvested stock options that are ultimately expected to vest as the requisite service is rendered.

The Company issues new shares of common stock upon the exercise of stock options.

The Company uses a Black-Scholes option valuation model to determine the grant date fair value of share-based compensation under ASC 718.

Share-based compensation includes restricted shares, restricted stock units and stock options, which are measured based on the grant date fair values and are recognized on a straight-line basis over the requisite service or vesting period.

Any forfeitures are recorded as they occur.

Non-cash stock-based compensation expense is included within general and administrative expense in the consolidated statements of operations.

Grants of restricted shares and restricted stock units are valued based on the closing market share price of INNOVATE's common stock as reported on the New York Stock Exchange (the “market price”) on the date of grant.

The Company uses a Black-Scholes option valuation model to determine the grant date fair value of stock options.

The Black-Scholes model incorporates various assumptions including the expected term of awards, volatility of stock price, risk-free rates of return and dividend yield.

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The Company uses a dividend yield of zero in the Black-Scholes option valuation model as it does not anticipate paying cash dividends in the foreseeable future.

Share-based compensation is recorded net of actual forfeitures.

Share-based compensation is recorded net of actual forfeitures as they occur.

INNOVATE CORP.

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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.

260, Earnings Per Share .

The two-class method is required as the shares of the Company’s preferred stock qualify as participating securities, having the right to receive dividends should dividends be declared on common stock.

Under this method, earnings for the period are allocated to the common stock and preferred stock to the extent that each security may share in earnings as if all of the earnings for the period had been distributed.

The Company does not use the two-class method in periods when it generates a loss as the holders of the preferred stock do not participate in losses.

Discontinued Operations

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations , the Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that has or will have a major effect on the Company's operations and financial results when the business is disposed of or classified as held-for-sale.

Under ASC 360, Property, Plant and Equipment , assets may be classified as held-for-sale even though the discontinued operations criteria is not met.

For the years ended December 31, 2023 and 2022, there were no discontinued operations.

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

Refer to Note 19.

Basic and Diluted Loss Per Common Share for additional information.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in the Current Year

Credit Losses Standard

In June 2016, the FASB issued 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 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 adoption of ASU 2016-13 and its related amendments on January 1, 2023, did not have any effect on the Company’s Consolidated Financial statements and the Company did not record any effects through retained earnings.

For the amounts calculated for the Current Expected Credit Loss (“CECL”) model subsequent to initial transition, the Company recognizes the expense in the Consolidated Statements of Operations, and the amount is presented within general and administration costs rather than a separate line.

Refer to Note 4.

Accounts Receivable, Net.

The Company reviewed its entire portfolio of assets recognized on the balance sheet as of January 1, 2023, and identified Accounts Receivable and Contract Assets as the material impacted assets in-scope of Topic 326.

The risk of credit losses from the remaining portfolio of assets was concluded to be immaterial.

Accounts Receivable and Contract Assets are presented net of allowances for credit losses.

Refer to Note 4.

Accounts Receivable, Net.

Accounting Pronouncements Issued But Pending Adoption

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842):

Common Control Arrangements (“ASU 2023-01”) to improve the guidance for applying Topic 842 , Leases, to related party arrangements between entities under common control.

ASU 2023-01 improves current GAAP by clarifying the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in practice.

The provisions of this ASU that apply to public companies include a requirement for entities to amortize leasehold improvements associated with common control leases over the useful life of the common control group.

ASU 2023-01 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating this ASU but does not expect ASU 2023-01 to have a material effect on the Company’s consolidated financial statements.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On October 9, 2023, the FASB issued ASU 2023-06 Disclosure Improvements:

Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06") , which modifies certain disclosure and presentation requirements of a variety of Topics in the Codification and is intended to both clarify or improve such requirements and align the requirements with the SEC's regulations.

The Company is in the process of evaluating the amendments provided in this ASU and believes certain of the disclosure improvements may be applicable to the Company's interim or annual disclosures, for example, disclosures related to:

earnings-per-share computation for dilutive securities, preferred stock, amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on short-term borrowings.

The effective date for each amendment is the effective date of the removal of the related disclosure from Regulation S-X or Regulation S-K, with early adoption prohibited.

The Company will apply the provisions prospectively as such provisions become effective and does not expect ASU 2023-06 to have a material impact on the Company's consolidated financial statements.

On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07") .

ASU 2023-07 improves reportable segment disclosure requirements to enable investors to better understand an entity's overall performance, primarily through enhanced disclosures about significant segment expenses.

In addition, ASU 2023-07 enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements such as those related to the Company's Chief Operating Decision Maker ("CODM").

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-07 improves reportable segment disclosures by requiring enhanced disclosures about significant segment expenses.

The guidance was effective for the Company for annual periods beginning on January 1, 2024, and did not have a significant impact on the related disclosures within these Consolidated Financial Statements.

Refer to Note 18.

Operating Segments and Related Information.

Accounting Pronouncements Issued But Pending Adoption

On November 26, 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments ("ASU 2024-04").

The amendments in this update affect entities that settle convertible debt instruments for which the conversion privileges were changed to induce conversion.

The amendments clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

ASU 2024-04 is effective for fiscal years beginning after December 15, 2025, and interim periods within those annual reporting periods.

The Company is currently evaluating the potential effect of this ASU on the Company’s Consolidated Financial Statements.

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The amendments in this ASU require disclosure, in the notes to financial statements, of specified information about certain costs and expenses, including the total amount of selling expenses incurred in the period and an entity's definition of selling expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, as further amended in ASU 2025-01.

The Company is currently evaluating this ASU, which will only have an effect on the disclosures within the Company’s Consolidated Financial Statements.

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Improvements to Income Tax Disclosures ("ASU 2023-09").

ASU 2023-09 improves income tax disclosure requirements related to rate reconciliation income taxes paid and other miscellaneous tax disclosures to enhance their transparency and decision usefulness to investors.

These enhancements allow investors to better assess how an entity's operations, related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating this ASU, which will only have an effect on the disclosures within the Company’s consolidated financial statements.

ASU 2023-09 improves income tax disclosures by adding requirements related to the tax rate reconciliation, disaggregation of income taxes paid and other miscellaneous tax disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and the Company will reflect updates to its tax disclosures pursuant to the requirements of ASU 2023-09 in its future filings, as applicable.

Subsequent Events

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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

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In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Determine the transaction price

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Allocate the transaction price to performance obligations in the contract

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price.

The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers.

If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all available information such as market conditions and internal pricing guidelines.

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

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative stand-alone selling price.

The Company determines the stand-alone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers.

If the stand-alone selling price is not observable, the Company estimates the stand-alone selling price taking into account all available information such as market conditions and internal pricing guidelines.

In certain circumstances, the stand-alone 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

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(a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

The Company has determined that one or more of these three criteria are met for such contracts.

For performance obligations satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of that performance obligation.

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 consists of the following (in millions):

Presentation of Taxes Collected

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

Year Ended December 31,

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Total revenue $ 1,107.1 $ 1,423.0

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

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

Infrastructure

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Total accounts receivables with customers $ 188.2 $ 273.2

As of January 1, 2022, total accounts receivable, net, from contracts with customers were $ 236.5 million.

As of January 1, 2023, accounts receivable, net, from contracts with customers totaled $ 250.4 million.

Infrastructure Segment

DBMG performs its services primarily under fixed-price contracts and recognizes revenue over time using the input method to measure progress for its projects.

The nature of the projects does not provide measurable value to the customer over time and control does not transfer to the customer at discrete points in time.

There is typically no alternative use to the Company for the partially completed construction project, resulting in the recognition of revenue over time as progress is made towards completion rather than at a single point in time.

The customer receives value based on the amount of work that has been completed towards the delivery of the completed project.

The most reliable measure of progress is the cost incurred towards delivery of the completed project.

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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

For service contracts (including maintenance contracts) where we have the right to consideration from the customer in an amount that corresponds directly with the value received by the customer based on our performance to date, revenue is recognized when services are performed and contractually billable.

For all other types of service contracts, revenue is recognized over time using the input method to measure progress because it best depicts the transfer of value to the customer.

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

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Disaggregation of Revenues

DBMG's revenues are principally derived from contracts to provide fabrication and erection services to its customers.

Contracts represent majority of the revenue of the Infrastructure segment and are generally recognized over time.

A majority of contracts are domestic, fixed priced, and are within one year .

Contracts represent the majority of the revenue of the Infrastructure segment and are generally recognized over time.

A majority of contracts are domestic, fixed priced, and are completed within one year .

Disaggregation of the Infrastructure segment, by market or type of customer, is used to evaluate its financial performance.

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Government 11.7 11.2

Energy 9.2 15.8

Leisure 9.6 8.1

Energy 7.2 9.2

Total revenue from contracts with customers $ 1,069.9 $ 1,396.4

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The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.

Retainage receivable represents amounts invoiced to customers where payments have been partially withheld (usually less than 10 %) pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project.

Retainage receivable represents amounts invoiced to customers where payments have been partially withheld (usually 10 % or less) pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project.

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, 2024 and 2023, the total retainage receivable was $ 94.1 million and $ 120.6 million, respectively, and the amount of retainage receivable estimated by management to be collected beyond one year is approximately 18.8 % and 9.0 % 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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

Year Ended December 31,

The Company has reflected such amounts within the Consolidated Balance Sheets.

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

Costs incurred on contracts in progress $ 1,435.2 $ 2,811.8

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$ ( 2.8 ) $ ( 34.9 )

Year Ended December 31,

Cost in excess of billings $ 73.8 $ 90.7

Cost in excess of billings and estimated earnings $ 50.8 $ 73.8

Conditional retainage 55.5 44.8

Contract assets $ 106.3 $ 118.6

Billings in excess of costs $ ( 229.3 ) $ ( 152.0 )

Billings in excess of costs and estimated earnings $ ( 147.7 ) $ ( 229.3 )

Conditional retainage 38.6 75.8

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As of January 1, 2023, contract assets were $ 165.1 million and contract liabilities were $ 98.6 million.

The change in contract assets during the year ended December 31, 2023 is a result of the recording of $ 86.6 million of contract assets driven by new commercial projects, offset by $ 133.1 million of contract assets transferred to receivables from contract assets recognized at the beginning of the year.

The change in contract liabilities during the year ended December 31, 2023 is a result of periodic contract liabilities of $ 146.2 million driven largely by new commercial projects, offset by revenue recognized that was included in the contract liability balance at the beginning of the year in the amount of $ 91.3 million.

Contract assets and liabilities fluctuate period to period based on various factors, including, among others, changes in the number and size of projects in progress at period end;

variability in billing and payment terms, such as up-front or advance billings, interim or milestone billings, or deferred billings;

and recognized unapproved change orders, contract claims and changes in estimated costs to complete in the normal course of business.

The change in contract assets during the years ended December 31, 2024 and 2023, is a result of the recording of $ 68.0 million and $ 86.6 million, respectively, of contract assets driven by new commercial projects, offset by $ 80.3 million and $ 133.1 million, respectively, of contract assets transferred to receivables from contract assets recognized at the beginning of the year, including from certain large projects completed or nearing completion and the corresponding billing of amounts previously recorded as contract assets.

The change in contract liabilities during the years ended December 31, 2024 and 2023, is a result of the recording of periodic contract liabilities of $ 102.3 million and $ 146.2 million, respectively, driven largely by new commercial projects, offset by revenue recognized that was included in the contract liability balance at the beginning of the year in the amount of $ 146.7 million and $ 91.3 million, respectively, including from certain large projects completed or nearing completion.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

2 unchanged sentences

Healthcare $ 172.6 $ 128.7 $ 301.3

Industrial 193.5 1.0 194.5

Transportation 133.3 58.1 191.4

Commercial 158.5 6.1 164.6

Industrial 144.0 0.3 144.3

Government 87.1 22.8 109.9

Convention 9.5 — 9.5

Leisure 11.1 11.4 22.5

Convention 7.5 — 7.5

Energy 2.1 — 2.1

Remaining unsatisfied performance obligations $ 716.2 $ 227.4 $ 943.6

3 unchanged sentences

DBMG expects to recognize this revenue approximately within the next 2.3 years.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

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This product launched into the United States and Canada in 2023, marketed as Glacial fx.

This device is sold into nonmedical markets and is a cooling experience used to even skin tone and brighten and lighten skin.

It is intended to be operated by a trained esthetician.

This device is sold into nonmedical markets as a cooling experience used to even skin tone and brighten and lighten skin and is intended to be operated by a trained esthetician.

Glacial Rx and Glacial fx are sold in North America using a direct sales force.

In certain cases, these systems are leased for a small, initial upfront fee and recurring lease payments over a specified timeframe.

Glacial fx is also sold in Canada.

In international markets, R2 Technologies sells Glacial Rx, Glacial fx and Glacial Spa through distributors.

Currently, R2 Technologies has contracts with distributors to sell these products into the following countries:

Mexico, United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Australia, Hong Kong, Singapore, Vietnam, China, United Kingdom, France, Kuwait, and India.

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

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Within North America, revenue is recognized on shipment.

For international sales, shipping terms are Ex Works, wherein R2 makes its products available at a specific location, but the buyer is required to pay the transportation costs.

For international sales, shipping terms are Ex Works, wherein R2 Technologies makes its products available at a specific location, but the buyer is required to pay the transportation costs.

Revenue is recognized once an agreed upon freight carrier is selected and goods are picked up by the freight carrier.

Payment Terms

In both North America and internationally, R2 generally requires customers to remit payment upfront prior to shipment.

In both North America and internationally, R2 Technologies generally requires customers to remit payment upfront prior to shipment.

These payment terms are expressly stated in the standard terms and conditions.

In certain circumstances within North America, R2 accepts longer payment terms not to exceed one year .

In certain circumstances within North America, R2 Technologies accepts longer payment terms not to exceed one year .

Any payment plan variation is expressly disclosed in the master services agreement which is required to be signed in conjunction with each sale by every customer.

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

The invoiced amount to be received is recorded in Accounts Receivable, Net, in the Consolidated Balance Sheet.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

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Transaction prices are based on the contract terms, with no material judgments or estimates.

Network advertising revenue is generated primarily from the sale of television airtime for programs or advertisements.

Network advertising revenue is recognized when the program or advertisement is broadcast.

Revenues are reported net of agency commissions, which are calculated as a stated percentage applied to gross billings.

The Network advertising contracts are generally short-term in nature.

Network distribution revenue consists of payments received from cable, satellite and other multiple video program distribution systems for their retransmission of our network content.

Network distribution revenue is recognized as earned over the life of the retransmission consent contract and varies from month to month.

Variable fees are usage/sales based, calculated on the average number of subscribers, and recognized as revenue when the usage occurs.

Transaction prices are based on the contract terms, with no material judgments or estimates.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Payment Terms

2 unchanged sentences

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

Disaggregation of Revenues

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

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Broadcast station $ 25.7 $ 21.9

Network advertising — 14.8

Network distribution — 2.8

Other 0.6 1.5

Total Spectrum segment revenue $ 25.7 $ 22.5

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Total $ 194.0 $ 278.4

(1) Allowance for doubtful accounts as of December 31, 2022, prior to the adoption of ASU 2016-13.

(2) There was no change to the allowance for expected credit losses as a result of the adoption of ASU 2016-13 on January 1, 2023.

As of January 1, 2022, total accounts receivable, net were $ 247.1 million.

For the year ended December 31, 2023, the Company recognized a net provision for expected credit losses of $ 2.3 million, of which $ 2.2 million related to a receivable at our Infrastructure segment expensed as a result of a legacy customer bankruptcy.

For the year ended December 31, 2022, the Company recognized provisions for doubtful accounts of $ 0.9 million.

As of January 1, 2023, accounts receivable, net totaled $ 254.9 million.

For the years ended December 31, 2024 and 2023, the Company recognized a reversal of expected credit losses of $ 0.1 million and expected credit losses of $ 2.3 million, respectively, which primarily related to a receivable at the Company's Infrastructure segment expensed as a result of a legacy customer bankruptcy in 2023.

Direct write-downs of accounts receivable charged against the allowance totaled $ 0.2 million and $ 2.4 million for the years ended December 31, 2024 and 2023, respectively.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Inventory consisted of the following (in millions):

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Total inventory $ 20.8 $ 22.4

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

December 31, 2023

The carrying values of the Company's investments, by category, were as follows (in millions):

Fair Value (2)

Alternative (3)

Method Fair Value Total

Common stock $ 0.9 $ 0.9 $ — $ 1.8

Total $ 0.9 $ 0.9 $ — $ 1.8

December 31, 2024 $ 0.9 $ 1.8 $ 0.9 $ 3.6

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

(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 .

The Company's investments as of December 31, 2023 are comprised of investments in MediBeacon, Triple Ring and Scaled Cell, and, as of December 31, 2022, were comprised of investments in MediBeacon, Triple Ring and HMN.

The Company's investments in Scaled Cell and MediBeacon are measured using the equity method of accounting and the Company's investment in Triple Ring is measured using the measurement alternative method as of December 31, 2023.

Until a partial sale of the Triple Ring common stock investment on November 30, 2023, the Triple Ring common stock investment was measured using the equity method of accounting (and on a one month lag basis) and the Triple Ring preferred stock investment was measured at fair value until it was sold on November 30, 2023.

HMN was measured using the equity method investment method of accounting until it was sold on March 6, 2023.

The Company's share of net losses from its equity method investments totaled $ 9.4 million and $ 1.3 million for the years ended December 31, 2023 and 2022, respectively.

Triple Ring and Scaled Cell

On November 30, 2023, the Company sold 546,709 shares of its common stock of Triple Ring and 804,375 shares of its preferred stock of Triple Ring and exchanged 255,333 of Triple Ring common stock for 240,613 shares of Scaled Cell (valued at $ 0.9 million).

As a part of this transaction, the Company received $ 5.0 million in cash proceeds and recognized a loss of $ 0.2 million on the sale of the investment, which is reflected in Other income (expense), net, in the Consolidated Statement of Operations for the year ended December 31, 2023.

As of December 31, 2023, the Company holds 240,613 shares of Scaled Cell, representing a 20.1 % interest.

Subsequent to the sale, the Company still holds 229,488 shares of common stock of Triple Ring, reflecting a 7.2 % interest ( 1.9 % on a fully diluted basis), and accounts for Triple Ring under the measurement alternative method as of December 31, 2023.

As of December 31, 2022 and prior to the sale in November 2023, the Company held a 25.8 % interest in Triple Ring.

Pansend accounts for its preferred stock investment in MediBeacon under the equity method of accounting, inclusive of any fixed maturity securities (notes) issued by Pansend to MediBeacon.

On March 15, 2022, MediBeacon issued Pansend a $ 4.5 million 8.0 % convertible note due March 2025, increasing the total outstanding principal due by MediBeacon to Pansend to $ 5.0 million.

Prior to December 6, 2023, MediBeacon issued $ 2.0 million in 12 % convertible note payable to Pansend, increasing the total outstanding principal by MediBeacon to Pansend to $ 7.0 million.

On December 6, 2023, MediBeacon terminated the $ 6.5 million of prior outstanding convertible notes with Pansend and simultaneously issued a new 12 % convertible note with an aggregate original principal amount of $ 7.2 million, which comprised of the prior outstanding convertible principal amounts and unpaid accrued interest of $ 0.7 million which was capitalized into the new principal balance, with future interest payable upon maturity of the note.

Subsequent to December 6, 2023, MediBeacon issued $ 2.0 million in 12 % convertible notes payable to Pansend, and, as of December 31, 2023, the total outstanding principal by MediBeacon to Pansend was $ 9.7 million, comprised of $ 9.2 million of convertible notes and $ 0.5 million of secured notes payable.

Subsequent to year end, on February 12, 2024, MediBeacon issued Pansend an additional $ 0.5 million 12 % convertible note.

As a result of these modifications and additional note issuances with MediBeacon during the year ended December 31, 2023, Pansend recognized $ 4.7 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero .

December 31, 2023 $ 0.9 $ — $ 0.9 $ 1.8

(1) The Company's equity method investments as of both December 31, 2024 and 2023, were comprised of MediBeacon and Scaled Cell.

(2) The Company's fair value investment in common stock of a publicly traded company was purchased during the year ended December 31, 2024.

(3) The Company's measurement alternative method investment as of both December 31, 2024 and 2023, was comprised of Triple Ring.

The Company's share of net losses from its equity method investments was $ 2.3 million and $ 9.4 million for the years ended December 31, 2024 and 2023, respectively.

Pansend accounts for its preferred stock investment in MediBeacon under the equity method of accounting, inclusive of any fixed maturity securities (notes) issued by MediBeacon to Pansend.

During the year ended December 31, 2024, MediBeacon issued an aggregate $ 2.3 million of 12 % convertible notes to Pansend with each note due to Pansend in three years from date of issuance.

As a result of these note issuances with MediBeacon, during the year ended December 31, 2024, Pansend recognized $ 2.3 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon, including the notes, had been previously reduced to zero .

During the year ended December 31, 2023, as a result of note modifications and additional note issuances with MediBeacon, Pansend recognized $ 4.7 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero .

In addition, as a result of an equity transaction in the first quarter of 2023 at MediBeacon with Huadong, Pansend's ownership in MediBeacon decreased from approximately 47.2 % as of December 31, 2022, to approximately 46.2 % subsequent to the transaction, and as a result, Pansend recognized a gain of $ 3.8 million, which was included in Other income, net, in the Consolidated Statement of Operations for the year ended December 31, 2023, and which increased Pansend's carrying amount of its investment in MediBeacon.

Concurrently, Pansend recognized equity method losses of $ 3.8 million which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero .

As of December 31, 2024 and 2023, MediBeacon's total outstanding principal amount of notes due to Pansend was $ 12.0 million and $ 9.7 million, respectively.

Interest income earned by Pansend from the MediBeacon notes totaled $ 1.4 million and $ 0.5 million for the years ended December 31, 2024 and 2023, respectively, and the related accrued interest receivable was $ 1.7 million and $ 0.3 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, Pansend's carrying amount of its investment in MediBeacon remained at zero , inclusive for December 31, 2024 and 2023, of the $ 12.0 million and $ 9.7 million in convertible and secured promissory notes which were offset against recognized equity method losses, and Pansend has cumulative unrecognized equity method losses relating to MediBeacon of $ 17.0 million.

Subsequent to year end, in January 2025, MediBeacon received approval from the U.S.

Food and Drug Administration ("FDA") for its Transdermal GFR Measurement System ("TGFR").

Pursuant to the terms of MediBeacon's convertible notes, upon the FDA approval, Pansend's convertible notes and the related accrued interest together totaling $ 12.9 million were converted into Series 3 Preferred Stock.

In addition and concurrently, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $ 7.5 million milestone payment from Huadong for MediBeacon preferred stock was in process.

Once completed, these transactions will decrease Pansend's ownership in MediBeacon from approximately 45.9 % prior to the transactions to approximately 44.7 % subsequent to the transaction.

On a fully diluted basis, Pansend's ownership in MediBeacon will decrease from 40.1 % to 39.7 %.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On February 23, 2023, pursuant to its amended commercial partnership with Huadong Medicine Co.

Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, MediBeacon issued $ 7.5 million of its preferred stock to Huadong, which decreased Pansend's ownership in MediBeacon from approximately 47.2 % as of December 31, 2022 to approximately 46.2 % subsequent to the transaction.

As a result of this equity transaction, Pansend recognized a gain of $ 3.8 million in Other income (expense), net in the Consolidated Statements of Operations for the year ended December 31, 2023, which increased Pansend's carrying amount of its investment in MediBeacon.

As of December 31, 2023, Pansend's carrying amount of its investment in MediBeacon remains at zero , inclusive of the $ 9.7 million in convertible notes which have been offset against recognized losses, and has cumulative unrecognized equity method losses relating to MediBeacon of $ 8.0 million.

For the years ended December 31, 2023 and 2022, Pansend earned $ 0.5 million and $ 0.3 million, respectively, of interest income from the convertible notes with MediBeacon.

Marketable Securities

In October 2024, the Company purchased common shares in the open market of a publicly traded company for approximately $ 2.0 million, which represents less than 1 % of the total outstanding common stock of the issuer.

These securities are remeasured at fair value each reporting period using the externally quoted market price, a Level 1 input.

For the year ended December 31, 2024, unrealized fair value losses of $ 0.2 million related to these securities were included in Other income, net in the Consolidated Financial Statements.

Triple Ring and Scaled Cell

On November 30, 2023, the Company sold the majority of its equity method investment in Triple Ring, in which it had held 25.8 % interest and, in exchange, received 240,613 shares of Scaled Cell (valued at $ 0.9 million) and $ 5.0 million in cash proceeds.

The Company recognized a loss of $ 0.2 million on the sale of the investment, which is reflected in Other income (expense), net, in the Consolidated Statement of Operations for the year ended December 31, 2023.

Subsequent to the transaction, and as of December 31, 2023, the Company held a 7.2 % common interest ( 1.9 % on a fully diluted basis) in Triple Ring, which is accounted for using the measurement alternative method.

As of December 31, 2024, the Company holds a 7.2 % common interest ( 1.6 % on a fully diluted basis).

As of both December 31, 2024 and 2023, the Company still held 240,613 shares of Scaled Cell, representing a 20.1 % interest.

The Company accounts for its equity securities without readily determinable fair values under the measurement alternative election of ASC 321, Investments—Equity Securities , 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.

On March 6, 2023, the Company, through New Saxon 2019 Limited (“New Saxon”), an indirect subsidiary of GMH, closed on the sale of its remaining 19.0 % 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.

New Saxon received gross proceeds of $ 54.2 million and interest income of $ 0.5 million, of which $ 4.4 million was withheld for a foreign tax payment.

For the year ended December 31, 2023, $ 15.9 million was distributed to GMH's non-controlling interest holders and redeemable non-controlling interest holders pursuant to the partnership agreement.

New Saxon recognized a gain on sale of $ 12.2 million, which is included in Other income (expense), net in the Consolidated Statement of Operations for the year ended December 31, 2023.

During the year ended December 31, 2023, New Saxon received gross proceeds of $ 54.2 million and interest income of $ 0.5 million, of which $ 4.4 million was withheld for a foreign tax payment, and $ 15.9 million was distributed to GMH's non-controlling interest holders and redeemable non-controlling interest holders pursuant to the partnership agreement.

New Saxon recognized a gain on sale of $ 12.2 million, which was included in Other income, net, in the Consolidated Statement of Operations for the year ended December 31, 2023.

During the year ended December 31, 2024, a final distribution of $ 0.3 million was released to GMH's non-controlling interest holders pursuant to the partnership agreement, relating to amounts that were previously withheld for reserves and contingencies.

Subsequently, both New Saxon and GMH were dissolved before the end of 2024, and the Company recognized no gain or loss on dissolution.

Property, Plant and Equipment, Net

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These amounts included $ 15.3 million and $ 15.8 million of depreciation expense recognized within cost of revenue for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2023 and 2022, the net book value of equipment under finance leases included in PP&E was $ 2.3 million and $ 2.1 million, respectively.

As of December 31, 2023 and 2022, the gross value of capitalized internal-use software included in PP&E was $ 40.9 million and $ 35.6 million, respectively, and the net book value was $ 9.9 million and $ 5.6 million, respectively.

As of December 31, 2023, $ 3.1 million in assets held for sale are presented separately in the Consolidated Balance Sheet and primarily consist of two buildings and their associated building improvements at the Company's Infrastructure segment.

As of December 31, 2024, and December 31, 2023, the net book value of equipment held under finance leases included in PP&E was $ 0.5 million and $ 2.3 million, respectively.

As of December 31, 2024, and December 31, 2023, the gross value of capitalized internal-use software included in PP&E was $ 20.7 million and $ 15.0 million, respectively, and the net book value was $ 9.8 million and $ 5.9 million, respectively.

Assets held-for-sale are included within Other current assets in the Consolidated Balance Sheets.

As of December 31, 2024, there were $ 7.0 million in assets held-for-sale, which primarily consisted of one building, equipment and land and the associated improvements at the Company's Infrastructure segment.

As of December 31, 2023, there were $ 3.1 million in assets held-for-sale, which primarily consisted of two buildings and the associated building improvements at the Company's Infrastructure segment, which were subsequently sold.

INNOVATE CORP.

5 unchanged sentences

Balance at December 31, 2022

Translation ( 0.3 ) — ( 0.3 )

Balance at December 31, 2022 $ 105.7 $ 21.4 $ 127.1

$ 105.7 $ 21.4 $ 127.1

Translation adjustments

Balance as of December 31, 2023

$ 105.7 $ 21.4 $ 127.1

Translation adjustments

( 0.4 ) — ( 0.4 )

Balance as of December 31, 2024

$ 105.3 $ 21.4 $ 126.7

Indefinite-lived Intangible Assets

2 unchanged sentences

Total $ 107.7 $ 106.3

For the year ended December 31, 2022, the Company recorded impairment charges of $ 0.2 million 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.

There were no impairment charges recorded to indefinite lived intangible assets for the year ended December 31, 2023.

During the year ended December 31, 2024, the Spectrum segment completed the purchases of five Low Power Television licenses and stations for an aggregate consideration of $ 1.5 million, with $ 0.3 million payable on or before April 12, 2025.

The acquisitions were accounted for as asset acquisitions.

The weighted-average period prior to the next renewal for FCC licenses was 5.4 years and 6.2 years as of December 31, 2024 and 2023, respectively, after taking into consideration licenses that were successfully renewed shortly after year-end.

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

Weighted-Average Original Useful Life 2023 2022

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

Weighted-Average Original Useful Life December 31, 2024

Gross Carrying Amount Accumulated Amortization Net

Trade names 15 years $ 25.1 $ ( 11.0 ) $ 14.1

3 unchanged sentences

Total $ 129.0 $ ( 64.3 ) $ 64.7

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 the Consolidated Statements of Operations.

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

There were no impairment charges recorded to definite lived intangible assets for the year ended December 31, 2023.

Amortization expense for definite lived intangible assets was $ 11.1 million and $ 16.6 million for the years ended December 31, 2023 and 2022, respectively, and was included in Depreciation and amortization in the Consolidated Statements of Operations.

Weighted-Average Original Useful Life December 31, 2023

Gross Carrying Amount Accumulated Amortization Net

Trade names 15 years $ 25.2 $ ( 9.4 ) $ 15.8

Customer relationships and contracts 11 years 87.6 ( 44.2 ) 43.4

Channel sharing arrangements 35 years 12.6 ( 1.8 ) 10.8

Other 12 years 3.9 ( 1.3 ) 2.6

Total $ 129.3 $ ( 56.7 ) $ 72.6

Amortization expense for definite lived intangible assets was $ 7.9 million and $ 11.1 million for the years ended December 31, 2024 and 2023, respectively.

Amortization expense is included in Depreciation and amortization in the Consolidated Statements of Operations.

INNOVATE CORP.

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Thereafter 36.1

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.

The Company has entered into operating leases for land, office space, and certain Company vehicles and equipment and has entered into finance leases for certain Company vehicles and equipment.

The leases will expire between 2025 and 2045.

Right-of-use lease assets and lease liabilities consisted of the following (in millions):

Balance Sheet Location December 31,

Right-of-use assets:

Operating lease (Other assets) $ 58.0 $ 65.8

Finance lease (Property, plant and equipment, net) 2.3 2.1

Operating lease

Other assets (non-current) $ 53.7 $ 58.0

Finance lease

Property, plant and equipment, net 0.5 2.3

Total right-of-use assets $ 54.2 $ 60.3

Lease liabilities:

Current portion of operating lease (Other current liabilities) $ 13.5 $ 17.1

Non-current portion of operating lease (Other liabilities) 48.6 53.8

Finance lease (Debt obligations) 2.4 2.1

Current portion of operating lease

Other current liabilities $ 12.9 $ 13.5

Non-current portion of operating lease

Other liabilities 43.5 48.6

Finance lease

Debt obligations

Total lease liabilities $ 57.0 $ 64.5

The Company has entered into operating and finance lease agreements primarily for land, office space, equipment and vehicles, expiring between 2024 and 2045.

For the year ended December 31, 2023, the Company recorded impairment charges to right-of-use assets of $ 0.6 million, primarily related to FCC licenses impaired.

For the year ended December 31, 2022, the Company recorded an impairment charge to right-of-use-assets of $ 0.5 million.

Impairment charges are included in Other operating loss in the Consolidated Statements of Operations.

For the years ended December 31, 2023 and 2022, the Company recorded short-term lease costs totaling $ 39.2 million and $ 34.8 million, respectively.

Based on the short-term leases executed as of December 31, 2023, the Company expects that it will incur approximately $ 8.5 million in estimated short-term lease costs for the year ended December 31, 2024.

The tables below present financial information associated with the Company's leases as of, and for the years ended December 31, 2023 and 2022.

For the year ended December 31, 2023, the Company recorded an impairment charge to right-of-use-assets of $ 0.6 million, that primarily related to FCC licenses impaired.

Impairment charges are included in Other operating (income) loss in the Consolidated Statements of Operations.

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

The following table summarizes the components of lease expense (in millions):

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Sublease income ( 0.7 ) ( 0.7 )

Total non-current lease cost

Short-term lease costs

Total lease cost

$ 47.9 $ 61.8

Based on the short-term leases executed as of December 31, 2024, the Company expects that it will incur approximately $ 9.0 million in estimated short-term lease costs for the year ended December 31, 2025.

INNOVATE CORP.

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

Operating cash flows from finance leases $ 0.2 $ 0.1

Financing cash flows from finance leases $ 0.4 $ 0.2

Operating cash flows from operating leases $ 22.8 $ 23.3

Operating cash flows for operating leases (1)

$ 19.3 $ 22.8

Operating cash flows for finance leases

Financing cash flows for finance leases

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

Finance leases $ 0.8 $ 2.2

Operating leases $ 18.5 $ 9.3

The weighted-average remaining lease term and the weighted-average discount rate for finance leases and operating leases are as follows:

Finance leases $ — $ 0.8

(1) For the year ended December 31, 2024, excludes $ 4.0 million received for a lease modification incentive.

See below for additional information.

The weighted-average remaining lease term and the weighted-average discount rate for the Company's leases were as follows:

Year ended December 31,

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amounts representing interest ( 13.1 ) —

Total lease liability balance $ 62.1 $ 2.4

In November 2021, INNOVATE Corp.

entered into a ten-year lease arrangement for a special purpose space in Palm Beach, Florida, which was amended in February 2023, to extend the term of the lease to 15 years, with future monthly lease payments of approximately $ 0.2 million over the entire lease term and annual common area maintenance charges of $ 0.6 million, both of which are subject to a 3 % annual upward adjustment, with total square footage of 25,184 , as amended.

Total lease liability

On May 1, 2024, a subsidiary of DBMG amended the termination date of three property leases that had an original expiry date of March 31, 2031.

In exchange, and as an inducement for DBMG to early terminate, the landlord agreed to pay DBMG $ 12.0 million in surrender fees in three equal installments, contingent on timely vacate and inspection milestones, of which DBMG has received $ 4.0 million in surrender fees as of December 31, 2024, with the remaining two $ 4.0 million payments due to DBMG due within five business days of the vacate dates in 2025 and 2027.

After final surrender of the properties, DBMG will have no further obligations under these leases.

The Company accounted for this transaction as a lease modification, and recognized a $ 8.7 million gain on lease modification, which is included in Other operating (income) loss in the Consolidated Statement of Operations for the year ending December 31, 2024.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

In November 2021, INNOVATE entered into a ten-year lease arrangement for a special purpose space in Palm Beach, Florida, which was amended in February 2023 to extend the term of the lease to 15 years, with future monthly lease payments of approximately $ 0.2 million over the entire lease term and annual common area maintenance charges of $ 0.6 million, both of which are subject to a 3 % annual upward adjustment, with total square footage of 25,184 , as amended.

The lease had not yet commenced for accounting purposes as the space was still under construction, and, therefore, future lease payments were not recorded on the Company's Consolidated Balance Sheets.

In December 2023, the Company entered into a sublease agreement with Palm Beach Cultural Innovation Center, Inc.

1 unchanged sentence

Glazer, the Chairman of INNOVATE's Board of Directors, who is also on the board of directors of PBCIC.

Pursuant to the sublease, the Company allows PBCIC use of the underlying space and, as consideration, PBCIC has agreed to undertake all of the tenant’s build-out costs and related obligations under the lease agreement between the Company, as tenant, and RPP Palm Beach Property LP, as landlord.

As of December 31, 2023, the lease has not yet commenced.

The Company previously recorded $ 1.1 million in prepaid rent related to this lease, which was written-off in December 2023 upon the execution of the sublease to PBCIC and is reflected in Other operating loss in the Consolidated Statement of Operations.

The Company also incurred other expenses of $ 1.1 million since inception related to the special purpose space and PBCIC, of which $ 0.7 million and $ 0.4 million are reflected in Selling, general and administrative in the Consolidated Statement of Operations for the years ended December 31, 2023 and 2022, respectively.

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 the Company's Consolidated Balance Sheets, as the building is still under construction.

Management expects 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

Pursuant to the sublease, PBCIC would have use of the underlying space and, as consideration, PBCIC agreed to undertake all of the tenant’s build-out costs and related obligations under the lease agreement between the Company, as tenant, and RPP Palm Beach Property LP, as landlord.

Effective March 29, 2024, the Company assigned the lease, as amended, and the sublease to an affiliate of Mr.

Glazer, releasing the Company of all obligations under the lease, as amended, and the sublease.

The Company previously recorded $ 1.1 million in prepaid rent related to this lease, which was written-off in December 2023 upon the execution of the sublease to PBCIC.

While there were no new expenses incurred during 2024, the Company also previously incurred other expenses of $ 1.1 million since inception related to the special purpose space and PBCIC, of which $ 0.7 million is included in Selling, general and administrative in the Consolidated Statement of Operations for the year ended December 31, 2023.

In December 2021, the Company entered into a five-year lease agreement for corporate office space in West Palm Beach, Florida, that would, on commencement of the lease, require future monthly lease payments of approximately $ 0.1 million over the entire lease term, subject to 3 % annual upward adjustment.

This lease had not yet commenced as the building was still under construction, and therefore, other than a $ 0.2 million deposit included in Other assets as of December 31, 2023, future lease payments were not recorded on the Company's Consolidated Balance Sheets.

On March 29, 2024, the Company assigned the lease to Lancer Capital, an entity controlled by Mr.

Glazer, releasing the Company of all obligations under the lease.

The $ 0.2 million security deposit on the lease was also assigned to Lancer Capital and written-off in March 2024.

Other Assets, Accrued Liabilities and Other Liabilities

3 unchanged sentences

$ 10.9 $ 11.2

Assets held-for-sale

Income tax receivable

2 unchanged sentences

$ 21.0 $ 17.7

Other assets, which are reflected in non-current assets in the Consolidated Balance Sheets, consisted of the following (in millions):

Other assets, which are reflected within non-current assets in the Consolidated Balance Sheets, consisted of the following (in millions):

Right-of-use assets $ 53.7 $ 58.0

2 unchanged sentences

Total other assets $ 62.3 $ 61.3

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Accrued Liabilities

2 unchanged sentences

Accrued payroll and employee benefits 34.1 29.2

Accrued interest 17.1 15.3

Accrued interest and exit fees (current portion)

Accrued sales and use taxes

1 unchanged sentence

Total accrued liabilities $ 109.7 $ 70.8

Restructuring Costs

DBMG incurred approximately $ 2.1 million and $ 6.5 million of restructuring costs for the years ended December 31, 2023 and 2022, which are included in Selling, general and administrative expenses 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 were no remaining amounts accrued as of December 31, 2023.

HC2 Network Shut-Down

On December 31, 2022, Broadcasting shut-down the operations and broadcasting of the Azteca America network and, terminated both the PLA and BSA with TV Azteca.

HC2 Network did not qualify for discontinued operations presentation as HC2 Network was not significant to the Company, did not represent a strategic shift and would not have a major effect on the Company's operations and financial results.

As a result of the cessation of the Azteca operations, the Company no longer has any unsatisfied performance obligations related to network advertising or network distribution.

During the year ended December 31, 2022, the Company recognized employee-related termination costs of $ 0.7 million, which are included in Selling, general & administrative expenses in the Consolidated Statement of Operations, and a net loss of $ 30 thousand which is included in Other (expense) income, net, in the Consolidated Statement of Operations.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Other Liabilities

Other current liabilities consisted of the following (in millions):

Lease liability, current $ 13.5 $ 17.1

Other Current Liabilities

Total other current liabilities $ 16.1 $ 20.1

Other liabilities, which are reflected in non-current liabilities in the Consolidated Balance Sheets, consisted of the following (in millions):

Lease liability, net of current portion $ 48.6 $ 53.8

Other current liabilities consisted of the following (in millions):

Operating lease liability, current portion

$ 12.9 $ 13.5

Other 4.3 2.6

Total other current liabilities $ 17.2 $ 16.1

Other Liabilities

Other liabilities, which are reflected within non-current liabilities in the Consolidated Balance Sheets, consisted of the following (in millions):

Operating lease liability, net of current portion

$ 43.5 $ 48.6

Accrued interest and exit fees (non-current portion)

Total other liabilities $ 46.8 $ 82.7

As of December 31, 2023 and 2022, there were $ 1.9 million and $ 1.7 million, respectively, of asset retirement obligations ("AROs") included in Other liabilities.

Accretion expense relating to the AROs was $ 0.2 million and $ 0.1 million for the years ended December 31, 2023 and 2023, respectively.

Asset Retirement Obligations

The changes in the carrying amounts of the Company's Asset Retirement Obligations ("ARO") included in Other liabilities above are as follows (in millions):

Carrying value, beginning of year $ 1.9 $ 1.7

Accretion expense 0.2 0.2

Revisions in estimated cash flows ( 0.2 ) —

Carrying value, end of year

The AROs relate to Spectrum’s tower leases and related tower assets, which are removable and can be retired or redeployed elsewhere.

The Company’s obligations represent the present value of future costs associated with the removal of certain assets imposed by the existing tower lease agreements.

As of December 31, 2024, there was $ 0.7 million of non-current accrued interest included in Other liabilities.

As of December 31, 2023, there was $ 14.9 million of non-current accrued interest and $ 15.9 million of exit fees payable included in Other liabilities.

As of December 31, 2022, there was $ 5.5 million of non-current accrued interest and $ 7.6 million of exit fees payable.

Refer to Note 11.

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Debt obligations, including finance lease obligations, consisted of the following (in millions):

Year Ended December 31,

Infrastructure

2 unchanged sentences

3.25 % Term Loan due 2026

4.00 % Note due 2024

PRIME minus 0.75 % Term Loan due 2026

4.00 % Note due 2024

6 unchanged sentences

Life Sciences

20.00 % Note due 2024

18.00 % Note due 2023

20.00 % Notes due 2025

Total Life Sciences $ 24.0 $ 17.4

3 unchanged sentences

7.50 % Convertible Senior Notes due 2026

SOFR plus 5.75 % Line of Credit

SOFR plus 5.75 % Line of Credit due 2025

CGIC Unsecured Note due 2026 31.0 35.1

3 unchanged sentences

current portion of debt obligations ( 162.2 ) ( 30.5 )

Debt obligations $ 679.3 $ 683.8

Debt obligations, net of current portion $ 500.6 $ 679.3

As of December 31, 2024, estimated future aggregate finance lease and debt payments, including interest, were as follows (in millions):

3 unchanged sentences

2027 0.1 — 0.1

2027 0.2 — 0.2

2028 0.1 — 0.1

Total minimum principal and interest payments

0.6 747.1 747.7

Amount representing interest (1)(2)

— ( 79.4 ) ( 79.4 )

Total aggregate finance lease and debt payments $ 0.6 $ 667.7 $ 668.3

(1) Excludes exit fees for Spectrum and R2 Technologies.

(2) Excludes additional estimated interest payments of $ 0.4 million resulting from the extension subsequent to year end of the Non-Operating Corporate SOFR plus 5.75 % Line of Credit from May 16, 2025, to August 1, 2025, and excludes additional estimated interest due of $ 2.9 million resulting from the extension subsequent to year end of the R2 Technologies 20.0 % Note with Lancer Capital from December 31, 2024, to August 1, 2025.

The interest rates on finance leases ranged from approximately 3.0 % to 6.8 %.

Infrastructure

DBMG has a $ 135.0 million Revolving Line with UMB that bears interest at a prime rate minus a spread with an interest rate floor of 4.25 %.

The Revolving Line with UMB matures on August 15, 2025.

The outstanding balance was $ 45.0 million and $ 100.0 million, as of December 31, 2024 and 2023, respectively, and availability for revolving loans was $ 89.9 million and $ 34.9 million as of December 31, 2024 and 2023, respectively.

Interest is paid monthly and the effective interest rate on the Revolving Line with UMB was 6.98 % and 8.33 % as of December 31, 2024 and 2023, respectively.

The Revolving Line with UMB also includes a commitment fee equal to 0.25 % per annum times the average daily unused availability under the line.

DBMG also has a $ 74.6 million 3.25 % term loan due 2026 (the " 3.25 % UMB Term Loan"), which expires May 31, 2026, and bears interest, which is paid monthly, at an annual rate of 3.25 % with an effective interest rate of 3.3 %.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Infrastructure

DBMG has a $ 135.0 million Revolving Line with UMB that bears interest at a Prime Rate minus a spread.

On December 12, 2023, DBMG and UMB entered into an amendment to the agreement that extended the maturity date of the Revolving Line from May 31, 2024 to August 15, 2025, increased the interest rate spread for the Revolving Line by 0.35 % across all tiers, and established an interest rate floor of 4.25 %.

The effective interest rate on the Revolving Line was 8.33 % and 6.88 % as of December 31, 2023, and 2022, respectively.

Interest is paid monthly.

The Revolving Line also includes a commitment fee equal to 0.25 % per annum times the average daily unused availability under the line.

DBMG also has a $ 91.4 million UMB Term Loan, which expires May 31, 2026, and bears interest at an annual rate of 3.25 % with an effective interest rate of 3.3 %.

Interest is paid monthly.

The UMB Term Loan and UMB Revolving Line associated with the Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, as defined in their agreements.

The $ 5.0 million note expires March 31, 2024 and bears interest at an annual rate of 4.00 %.

Interest is paid quarterly.

During the year ended December 31, 2023, DBM Global repaid the 8.00 % note in full.

On June 28, 2024, DBM and UMB entered into the Third Amendment to the UMB Credit Agreement, which added an incremental separate term loan of $ 25.0 million to the existing credit facility ("PRIME minus 0.75% Term Loan due 2026"), with the same interest rate as the Revolving Line with UMB and the same maturity date as the initial 3.25 % UMB Term Loan.

Principal payments and interest are paid monthly.

The UMB term loans and Revolving Line with UMB associated with the Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, as defined in their agreements.

The 4.00 % note matured on March 31, 2024, and was fully redeemed on April 2, 2024.

Refer to Note 17.

Related Parties for additional information.

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, 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.

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 remained accrued, with total exit fees of $ 7.6 million which were recorded as original issue discount with a corresponding liability reflected in Other Liabilities in the Consolidated Balance Sheet.

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 in December 2022, 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 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 Non-controlling interest of $ 3.1 million.

On August 8, 2023, Broadcasting entered into an Eighth Amendment to Secured Notes with its lenders which extended the maturity date of its Senior Secured Notes aggregate principal amount of $ 69.7 million, from May 31, 2024 to August 15, 2024.

In exchange, Broadcasting incurred an additional exit fee of $ 1.1 million which was recorded as original issue discount with a corresponding liability reflected in Other Liabilities in the Consolidated Balance Sheet.

On November 9, 2023, Broadcasting entered into a Ninth Amendment to its Secured Notes with its lenders which extended the maturity date of its Senior Secured Notes aggregate principal amount of $ 69.7 million, from August 15, 2024 to August 15, 2025.

In exchange, Broadcasting will pay additional exit fees of $ 7.2 million which are payable on the earlier of maturity or repayment of the principal.

Interest is also capitalized and payable upon maturity of the principal.

In addition, the time to exercise the related warrants was extended to August 2027.

As of December 31, 2023, the effective interest rates on the notes, as amended, ranged from 20.6 % to 24.0 % per annum.

In addition, INNOVATE Corp.

entered into a related side letter with the institutional investors, whereby INNOVATE Corp.

has agreed to utilize proceeds from the sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of Broadcasting's Senior Secured Notes.

Assuming there are sufficient proceeds remaining after such repayment, an additional $ 1.0 million fee is payable if repayment occurs by November 9, 2024, or $ 2.0 million if repayment occurs after that date.

In exchange for the additional fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc.

and equity interests in DTV America.

The Company accounted for the transactions related to the Eighth Amendment, Ninth Amendment and the side letter as debt modification events under US GAAP as the present value of cash flows under the amended terms of Broadcasting's Senior Secured Notes was less than 10% different from the present value of cash flows under the original terms of the notes.

As a result of the modifications, and as of December 31, 2023, the Company has total capitalized estimated exit fees of $ 15.9 million, which are reflected in Other Liabilities in the Consolidated Balance Sheet.

DBMG is in compliance with its debt covenants as of December 31, 2024.

The maturity date of Spectrum's 8.50 % and 11.45 % Notes is August 15, 2025, as amended in November 2023.

As a result of amendments to extend the maturity date during the year ended December 31, 2023, additional exit fees of $ 8.3 million were incurred.

The exit fees associated with the notes, which are payable on the earlier of maturity or repayment of the principal, were recorded as original issue discount and are being amortized over the remaining life of the notes, which is assumed to be the maturity date.

A corresponding liability for the total exit fees of $ 15.9 million is reflected within Accrued Liabilities in the Consolidated Balance Sheet as of December 31, 2024, and within Other Liabilities (non-current) in the Consolidated Balance Sheet as of December 31, 2023.

Interest is capitalized and payable upon maturity of the notes, of which there was $ 20.5 million and $ 12.9 million of accrued but unpaid interest as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, the weighted-average effective interest rate on the notes, as amended, was 22.8 % per annum.

During November 2023, concurrently with Broadcasting's execution of the Ninth Amendment to Secured Notes, which among other things extended the maturity of the notes, INNOVATE entered into a related side letter with the lenders, whereby INNOVATE agreed to utilize proceeds from a sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of Broadcasting's Senior Secured Notes.

Assuming there are sufficient proceeds remaining after such repayment, an additional $ 2.0 million is payable for payments made after November 9, 2024, and in exchange for the additional $ 2.0 million fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc.

and their equity interests in DTV America.

The lenders hold warrants to purchase 145,825 shares of common stock of HC2 Broadcasting Holdings, Inc which can be exercised at any time until August 2027 at an exercise price of $ 0.01 per share.

Life Sciences

During the year ended December 31, 2023, R2 Technologies closed on $ 6.6 million of additional notes from Lancer Capital, including $ 1.3 million of unpaid accrued interest which was capitalized into the principal balance, increasing the aggregate outstanding principal to $ 17.4 million as of December 31, 2023.

The interest rate on the outstanding principal balance also increased to 20 % per annum during 2023.

The notes expired on January 31, 2024, and, effective January 31, 2024, a new 20 % note with an aggregate original principal amount of $ 20.0 million was issued, which was comprised of all prior outstanding principal amounts and unpaid accrued interest of $ 2.6 million which was capitalized into the new principal balance.

The 20 % $ 20.0 million note also included an exit fee, which would be 10.5 % of the principal amount being repaid as of April 30, 2024.

As a result of the addition of the exit fee effective January 31, 2024, the transaction was determined to be an extinguishment of debt under ASC 470-50, Debt - Modifications and Extinguishments, and the exit fee payable to the existing lender of $ 2.2 million was included as a loss on debt extinguishment within Other income, net in the Consolidated Statement of Operations.

The original maturity date of the 20 % $ 20.0 million note was April 30, 2024, or within five business days of the date on which R2 Technologies receives an aggregate $ 20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital.

Effective May 17, 2024, the maturity date of the note was extended to December 31, 2024, and the exit fees were amended.

The May 17, 2024, amendment was determined to be a modification of debt under ASC 470-50, Debt - Modifications and Extinguishments, as the terms of the debt were not determined to be substantially different, including taking into consideration the ability to prepay the debt at anytime, and, therefore, the increases in exit fees are being amortized using the effective interest method.

The exit fee, as amended, and as of December 31, 2024, was equal to 11.90 % of the principal amount being repaid.

Effective July 31, 2024, an additional exit fee of $ 1.0 million was incurred under the amendment, which increased by $ 1.0 million each month until the end of November 2024.

As of December 31, 2024, total exit fees payable were $ 7.9 million.

The exit fees were amortized over the term of the note using the effective interest rate method and are included in interest expense.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Life Sciences

During the year ended December 31, 2022, R2 Technologies entered into various note purchase agreements with Lancer Capital, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, for an aggregate $ 10.8 million in notes at a 18 % per annum interest rate as of December 31, 2022.

During 2023, R2 closed on an additional $ 6.6 million of notes, including $ 1.3 million of unpaid accrued interest which was capitalized into the new principal balance, increasing the aggregate outstanding principal to $ 17.4 million as of December 31, 2023.

The per annum interest rate on the outstanding principal balance also increased to 20 %.

In addition, after various amendments throughout 2023, R2 entered into an amendment with Lancer Capital on November 15, 2023 to extend the maturity date of all outstanding prior existing notes to the earlier of January 31, 2024 or within five business days of the date on which R2 receives an aggregate $ 20.0 million from the consummation of a debt or equity financing.

Subsequent to year end, the notes expired on January 31, 2024.

Effective January 31, 2024, R2 and Lancer Capital simultaneously issued a new 20 % note with an aggregate original principal amount of $ 20.0 million, which is comprised of the prior outstanding principal amounts and unpaid accrued interest of $ 2.6 million, which was capitalized into the new principal balance, with future interest payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest will be capitalized monthly into the principal balance.

The maturity date of the new note is April 30, 2024 or within five business days of the date on which R2 Technologies receives an aggregate $ 20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital.

The new note also includes an exit fee payable upon the earliest of the maturity date, the acceleration date of the principal amount of the note, for any reason as defined in the agreement, or the date upon which any prepayment is made.

The exit fee shall be equal to 10.20 % if payment is made anytime from February 1, 2024 through February 29, 2024, 10.37 % if payment is made anytime from March 1, 2024 through March 31, 2024, and 10.54 % if payment is made anytime from April 1, 2024 through April 30, 2024.

For the years ended December 31, 2023 and 2022, R2 Technologies recognized interest expense related to the contractual interest coupon with Lancer Capital of $ 2.9 million and $ 0.8 million, respectively.

Subsequent to year end, with an effective date of December 31, 2024, the maturity date of the note was extended to August 1, 2025.

In addition, the exit fee continues to increase by 0.17 % each month until maturity and an additional exit fee of $ 1.0 million was incurred under the amendment, which also continues to increase by $ 1.0 million each month until maturity.

The exit fees are payable on the earliest of the maturity date, the date of the acceleration of the principal amount of the note for any reason or, if any portion of the note is prepaid at any time, the date of such prepayment of the note.

A new $ 5.0 million default fee will be payable on August 1, 2025, in the event all obligations under the note, including principal, any accrued and unpaid interest, and exit fees, are not repaid in full prior to the August 1, 2025, maturity date.

Interest on the note, as amended, is payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest is capitalized monthly into the principal balance.

Interest expense, including amortization of all exit fees, related to the note(s) with Lancer Capital was $ 9.8 million and $ 2.9 million for the years ended December 31, 2024 and 2023, respectively.

For the year ended December 31, 2024, in accordance with the 20 % note agreement, additional unpaid cash interest due of $ 4.0 million was capitalized into the principal balance.

As of December 31, 2024, the total outstanding amount relating to the note was $ 31.9 million, inclusive of $ 24.0 million of principal and capitalized interest, which total is included within Current portion of debt obligations in the Consolidated Balance Sheet, and $ 7.9 million in total accrued exit fees which are included within Accrued liabilities in the Consolidated Balance Sheet.

As of December 31, 2023, accrued interest, which had not yet been capitalized into the principal balance, was $ 2.4 million, and was included within Accrued liabilities in the Consolidated Balance Sheet.

As of December 31, 2024 and 2023, the effective interest rate on the notes, as amended, was 57.8 % and 20.0 %, respectively.

Non-Operating Corporate

2026 Senior Secured Notes

The $ 330.0 million aggregate principal amount of 8.50 % senior secured notes due February 1, 2026 (the "2026 Senior Secured Notes") was issued in 2021 at 100 % of par, with a stated annual interest rate of 8.50 % and an effective interest rate of 9.3 %, which reflects $ 10.8 million of deferred financing fees, including underwriting fees.

For both the years ended December 31, 2023 and 2022, aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees, was $ 30.1 million.

The Company has $ 330.0 million aggregate principal amount of 8.50 % senior secured notes due February 1, 2026 (the "2026 Senior Secured Notes"), which were issued in 2021 at 100 % of par.

The 2026 Senior Secured Notes have a stated annual interest rate of 8.50 % and have an effective interest rate of 9.3 %, which reflects $ 10.8 million of deferred financing fees, including underwriting fees.

Interest is payable semi-annually in arrears on February 1st and August 1st of each year.

Aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees was $ 30.4 million and $ 30.1 million, respectively, for the years ended December 31, 2024 and 2023, respectively.

2026 Convertible Notes

The $ 51.8 million of 7.50 % convertible notes (the "2026 Convertible Notes") were issued under a separate indenture dated February 1, 2021, between the Company and U.S.

The original $ 51.8 million aggregate principal amount of 7.50 % convertible notes (the "2026 Convertible Notes") were issued under a separate indenture dated February 1, 2021, between the Company and U.S.

Bank, as trustee (the "Convertible Indenture").

The 2026 Convertible Notes mature on August 1, 2026 unless earlier converted, redeemed or purchased.

The 2026 Convertible Notes were issued at 100 % of par with a stated annual interest rate of 7.50 %.

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 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.

During the year ended December 31, 2024, INNOVATE repurchased $ 2.9 million principal amount of its 2026 Convertible Notes at a market discount for $ 1.1 million, which is inclusive of accrued interest of $ 0.1 million, and recognized a $ 1.9 million gain on debt repurchase within Other income, net in the Consolidated Statement of Operations.

As of December 31, 2024, the 2026 Convertible Notes held by third parties had a net carrying value of $ 52.3 million inclusive of an unamortized premium of $ 3.8 million and unamortized deferred financing costs of $ 0.4 million.

As of December 31, 2023, the 2026 Convertible Notes had a net carrying value of $ 57.3 million inclusive of an unamortized premium of $ 6.0 million and unamortized deferred financing costs of $ 0.5 million.

Interest is payable semi-annually in arrears on February 1st and August 1st of each year.

Aggregate interest expense recognized relating to both the contractual interest coupon and amortization of discount net of premium and deferred financing costs was $ 1.7 million and $ 1.9 million, for the years ended December 31, 2024 and 2023, respectively.

Each $1,000 of principal of the 2026 Convertible Notes is convertible into 23.6327 shares of our common stock, which is equivalent to a conversion price of approximately $ 42.31 per share, both as adjusted for the 2024 Reverse Stock Split and subject to further adjustment upon the occurrence of specified events.

Based on the closing price of our common stock of $ 4.94 on December 31, 2024, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.

For both the years ended December 31, 2023 and 2022, aggregate interest expense recognized relating to both the contractual interest coupon and amortization of discount net of premium and deferred financing costs was $ 1.9 million.

2022 Convertible Notes

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 year ended December 31, 2022, interest expense recognized relating to both the contractual interest coupon and amortization of the discount on the 2022 Convertible Notes was $ 0.2 million.

INNOVATE CORP.

2 unchanged sentences

The Company has a revolving credit agreement with MSD PCOF Partners IX, LLC ("MSD"), which has a maximum commitment of $ 20.0 million ("Revolving Line of Credit").

The Revolving Line of Credit has an interest rate margin applicable to loans borrowed under the Revolving Line of Credit of 5.75 % and interest is paid quarterly.

The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0 % calculated based off the actual daily amount of unused availability under the revolving credit line with MSD.

On April 25, 2023, the Company extended the maturity date of its Revolving Credit Agreement from February 23, 2024, to March 16, 2025, and also changed the benchmark rates for interest to SOFR-based rates and lowered the amount of net cash proceeds from certain asset sales in excess of which a prepayment is required from $ 50.0 million to $ 10.0 million.

As of both December 31, 2024 and 2023, the outstanding balance was $ 20.0 million.

The maturity date of the Revolving Line of Credit, as amended on May 6, 2024, was May 16, 2025.

Subsequent to year end, on March 6, 2025, the maturity date of the Revolving Line of Credit was extended to August 1, 2025, with all other terms substantially unchanged.

The Revolving Line of Credit has an interest rate margin applicable to loans borrowed under the Revolving Line of Credit of 5.75 %, and the benchmark rates for the interest are SOFR-based rates.

As of December 31, 2024 and 2023, the effective interest rate on the Revolving Line of Credit, as amended, was 10.6 % and 11.3 %, respectively.

Interest is paid quarterly in arrears.

The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0 % calculated based off the actual daily amount of unused availability under the Revolving Line of Credit with MSD, and also includes a requirement for a prepayment if net cash proceeds from certain asset sales in excess of $ 10.0 million are received.

The affirmative and negative covenants governing the Revolving Line of Credit are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the 2026 Senior Secured Notes.

In March 2023, the Company paid down $ 15.0 million of the Revolving Credit Agreement, and in May 2023 and July 2023, INNOVATE drew an aggregate additional $ 15.0 million under the Revolving Credit Agreement, bringing the outstanding balance to $ 20.0 million as of December 31, 2023.

CGIC Unsecured Note Due 2026

On May 9, 2023, in connection with the redemption of the DBMGi Preferred Stock, the Company issued a subordinated unsecured promissory note to Continental General Insurance Company ("CGIC") in the principal amount of $ 35.1 million (the "CGIC Unsecured Note").

On May 9, 2023, in connection with the redemption of DBM Global Intermediate Holdco Inc.'s Series A Fixed-to-Floating Rate Perpetual Preferred Stock (the “DBMGi Series A Preferred Stock”), the Company issued a subordinated unsecured promissory note to Continental General Insurance Company ("CGIC") in the principal amount of $ 35.1 million (the "CGIC Unsecured Note").

Refer to Note 16.

Temporary Equity and Equity for additional information.

The CGIC Note is due February 28, 2026, and bears interest at 9 % per annum through May 8, 2024, 16 % per annum from May 9, 2024 to May 8, 2025, and 32 % per annum thereafter, and the effective interest rate on the note is 18.1 %.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $ 3 million or 12.5 % of the proceeds from certain equity sales.

Equity and Temporary Equity for additional information.

The CGIC Note, which is due February 28, 2026, bore interest at 9.0 % per annum through May 8, 2024, bears interest at 16.0 % per annum from May 9, 2024, to May 8, 2025, and 32.0 % per annum thereafter.

As of December 31, 2024 and 2023, the effective interest rate on the note, as adjusted, was 17.5 %, and 18.1 %, respectively.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $ 3.0 million or 12.5 % of the net proceeds from certain equity sales.

As a result of the closing of the Rights Offering on April 24, 2024, INNOVATE redeemed $ 4.1 million of the CGIC Unsecured Note on April 26, 2024.

Other covenants in the CGIC Unsecured Note are generally consistent with the Company's Indenture governing the 8.50 % Senior Secured Notes due 2026, dated as of February 1, 2021, by and among the Company, the guarantors party thereto and U.S.

Bank National Association.

For the year ended December 31, 2023, interest expense recognized relating to the CGIC Unsecured Note was $ 4.1 million and cash paid for interest to CGIC was $ 1.8 million.

For the years ended December 31, 2024 and 2023, interest expense recognized relating to the CGIC Unsecured Note was $ 5.7 million and $ 4.1 million, respectively, and cash paid for interest to CGIC was $ 4.6 million and $ 1.8 million, respectively.

Accrued interest related to the CGIC notes was $ 3.4 million and $ 2.0 million as of December 31, 2024 and 2023, respectively.

2026 Senior Secured Notes Terms and Conditions

17 unchanged sentences

• any proceeds and supporting obligations thereof.

The Secured Indenture permits the Company, under specified circumstances, to incur additional debt in the future that could equally and ratably share in the collateral.

The amount of such debt is limited by the covenants contained in the Secured Indenture.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Secured Indenture permits the Company, under specified circumstances, to incur additional debt in the future that could equally and ratably share in the collateral.

The amount of such debt is limited by the covenants contained in the Secured Indenture.

Restricted Payments.

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Conversion Rights .

The 2026 Convertible Notes are convertible into shares of the Company’s common stock based on an initial 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.

The 2026 Convertible Notes are convertible into shares of the Company’s common stock based on a conversion rate of 23.6327 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $ 42.31 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 Convertible Indenture) or the Company’s delivery of a notice of redemption for the 2026 Convertible Notes, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2026 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.

However, to comply with certain listing standards of the NYSE, 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 .

3 unchanged sentences

MSD PCOF Partners IX, LLC

The Revolving Credit Agreement matures on March 16, 2025.

The maturity date of the Revolving Line of Credit, as amended on May 6, 2024, was May 16, 2025.

Subsequent to year end, on March 6, 2025, the maturity date of the Revolving Line of Credit was extended to August 1, 2025, with all other terms substantially unchanged.

Obligations under the Revolving Credit Agreement constitute a First-Out Debt, as defined in the Secured Indenture, and are secured on a pari passu basis with the 2026 Senior Secured Notes.

2 unchanged sentences

Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.

2026 Unsecured CGIC Note:

The 2026 Unsecured CGIC Note matures on February 28, 2026.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The 2026 Unsecured CGIC Notes accrues interest at a rate 9 % per year through May 8, 2024, 16 % per year from May 9, 2024 to May 8, 2025, and 32 % per year thereafter.

2026 Unsecured CGIC Note:

The 2026 Unsecured CGIC Note matures on February 28, 2026.

The 2026 Unsecured CGIC Notes accrued interest at a rate 9 % per year through May 8, 2024, and accrues at 16 % per year from May 9, 2024 to May 8, 2025, and 32 % per year thereafter.

Interest on the 2026 Convertible Notes is paid monthly, on the last day of each month or next succeeding business day.

13 unchanged sentences

Year Ended December 31,

Current tax expense (benefit)

Current tax expense

Federal $ 0.6 $ —

1 unchanged sentence

Foreign 0.7 5.3

Net current tax expense (benefit) $ 9.8 $ ( 0.2 )

Net current tax expense

Deferred tax expense (benefit)

Federal $ 0.2 $ 0.3

State 0.2 0.1

Foreign 0.3 ( 5.8 )

Net deferred tax (benefit) expense

Net deferred tax expense (benefit)

$ 0.5 $ ( 5.3 )

5 unchanged sentences

Loss from continuing operations before income taxes

$ ( 33.4 ) $ ( 34.4 )

INNOVATE CORP.

14 unchanged sentences

Income tax expense $ 6.3 $ 4.5

Income tax expense of $ 4.5 million for the year ended December 31, 2023 primarily relates to the tax expense as calculated under ASC 740 for taxpaying entities, for which there was an increase in current state tax expense at certain taxpaying entities due to an increase in profitability.

The tax expense for the year ended December 31, 2023 includes a $ 1.1 million net tax benefit, consisting of a current tax expense of $ 4.4 million related to a foreign withholding tax payment and a deferred tax benefit of $ 5.5 million related to the reversal of the deferred tax liability associated with the $ 11.3 million HMN put option agreement and the expected foreign withholding taxes on the book over tax outside basis difference in the investment, both of which were related to the sale of New Saxon's 19 % investment in HMN on March 6, 2023.

Income tax expense of $ 6.3 million for the year ended December 31, 2024, primarily relates to the tax expense for taxpaying entities, for which there was an increase in current federal tax expense due to INNOVATE's U.S.

consolidated group utilizing its remaining unlimited NOLs in 2024 and due to the Tax Cuts and Jobs Act's 80% limitation on net operating losses incurred after 2017.

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 the Company does not believe it is more-likely-than not that the losses will be utilized prior to expiration.

Income tax expense of $ 0.9 million for the year ended December 31, 2022 primarily related 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.

Income tax expense of $ 4.5 million for the year ended December 31, 2023, primarily relates to the tax expense for taxpaying entities and includes a $ 1.1 million net tax benefit, consisting of a current tax expense of $ 4.4 million related to a foreign withholding tax payment and a deferred tax benefit of $ 5.5 million related to the reversal of the deferred tax liability associated with the $ 11.3 million HMN put option agreement and the expected foreign withholding taxes on the book over tax outside basis difference in the investment, both of which were related to the sale of New Saxon's 19 % investment in HMN on March 6, 2023.

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 prior to expiration.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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.

14 unchanged sentences

Basis difference in intangibles ( 30.4 ) ( 30.4 )

Lease termination ( 1.5 ) —

Other deferred tax liabilities ( 1.2 ) ( 1.8 )

1 unchanged sentence

Net deferred tax liabilities $ ( 2.8 ) $ ( 2.1 )

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Net deferred tax asset per Consolidated Balance Sheet

Deferred tax liabilities per Consolidated Balance Sheet

Total net deferred tax liabilities

$ ( 2.8 ) $ ( 2.1 )

Deferred tax assets refer to assets that are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

2 unchanged sentences

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.

The Company establishes valuation allowances for deferred tax assets that, in its judgment are not more likely-than-not realizable.

These judgments are based on projections of future income or loss and other positive and negative evidence by individual tax jurisdiction.

Changes in industry and economic conditions and the competitive environment may impact these projections.

In accordance with ASC Topic 740, during each reporting period the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to its valuation allowances are appropriate.

During each reporting period, the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to its valuation allowances are appropriate.

Management evaluated the need to maintain the valuation allowance against the deferred taxes of the INNOVATE Corp.

2 unchanged sentences

The group is in a cumulative three-year loss as of December 31, 2024, 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.

While positive evidence exists by way of unrealized gains in the Company’s investments, management concluded that the negative evidence outweighs the positive evidence.

Thus, it is more likely than not that the group’s US deferred tax assets will not be realized.

2 unchanged sentences

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.

As of December 31, 2024, the Company has not recognized any deferred tax liabilities associated with undistributed earnings of its foreign subsidiaries, as these earnings are considered permanently reinvested.

Determination of the amount of unrecognized deferred income tax liability is not practicable because of the complexities associated with its hypothetical calculation.

Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to U.S.

income taxes and withholding taxes payable in various foreign jurisdictions, which could potentially be offset by foreign tax credits.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Net Operating Losses

At December 31, 2024, the Company had gross U.S.

net operating loss carryforwards available to reduce future taxable income of the U.S.

net operating loss ("NOL") carryforwards available to reduce future taxable income of the U.S.

consolidated group in the amount of $ 174.3 million.

The Company expects that approximately $ 117.7 million of the gross U.S.

net operating loss carryforwards would be available to offset taxable income in 2024 and later periods.

NOL carryforwards would be available to offset taxable income in 2025 and later periods.

This estimate may change based on changes to actual results reported on the 2024 U.S.

The amount of U.S.

net operating loss carryforwards reflected in the financial statements differ from the amounts reported on the U.S.

tax return due to uncertain tax positions related to tax laws and regulations that are subject to varied interpretation by the IRS.

NOL carryforwards reflected in the financial statements differ from the amounts reported on the U.S.

tax return due to uncertain tax positions related to tax laws and regulations that are subject to varied interpretation by the Internal Revenue Service ("IRS").

enacted Public Law 115-97, known informally as the Tax Cuts and Jobs Act (the "TCJA") in 2017, U.S.

net operating loss carryforwards in the amount of $ 121.9 million, generated after 2017 have an indefinite carryforward period.

net operating loss carryforwards, in the amount of $ 57.3 million, generated prior to 2018 will expire, if unused, by 2037.

Additionally, the Company has $ 138.0 million of gross U.S.

net operating loss carryforwards from its subsidiaries that do not qualify to be included in the INNOVATE Corp.

NOL carryforwards in the amount of $ 139.7 million, generated after 2017 have an indefinite carryforward period.

NOL carryforwards, in the amount of $ 34.6 million, generated prior to 2018 will expire, if unused, by 2037.

Additionally, as of December 31, 2024, the Company had $ 149.4 million of gross U.S.

NOL carryforwards from its subsidiaries that do not qualify to be included in the INNOVATE U.S.

consolidated income tax return, including $ 102.8 million from R2, $ 44.1 million from DTV America, and other entities of $ 2.5 million.

Of the $ 149.4 million of gross U.S.

net operating loss carryforwards, $ 101.9 million was generated after 2017 and will have an indefinite carryforward period;

NOL carryforwards, $ 113.3 million was generated after 2017 and will have an indefinite carryforward period;

the remaining $ 36.1 million was generated prior to 2018 and will expire, if unused, by 2037.

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.

NOLs recorded in the consolidated financial statements are subject to an annual limitation under IRC Sec.

382 of approximately $ 2.3 million.

1 unchanged sentence

The Company believes the issuance resulted in a Section 382 ownership change and $ 31.7 million gross U.S.

net operating losses recorded in the consolidated financial statements are subject to IRC Sec.

The purchase of GrayWolf Industrial on November 30, 2018 triggered a Section 382 ownership change.

$ 57.1 million of federal net operating losses acquired are subject to an annual limitation between $ 3.0 million and $ 4.0 million for the first five years beginning in 2019 and $ 1.1 million afterwards.

NOLs recorded in the consolidated financial statements are subject to IRC Sec.

The purchase of GrayWolf on November 30, 2018 triggered a Section 382 ownership change.

$ 57.1 million of gross U.S.

NOLs acquired are subject to an annual limitation between $ 3.0 million and $ 4.0 million for the first five years beginning in 2019 and $ 1.1 million afterwards.

$ 25.4 million of the GrayWolf U.S.

net operating losses subject to Section 382 were generated in 2018, and, therefore, they do not expire.

NOLs subject to Section 382 were generated in 2018, and, therefore, they do not expire.

Additionally, the Company has $ 11.4 million of acquired U.S.

net operating losses from DTV America, which is subject to an annual limitation under Section 382 of the Internal Revenue Code.

NOLs from DTV America, which is subject to an annual limitation under Section 382 of the Internal Revenue Code.

As of December 31, 2024, the Company had foreign operating loss carryforwards of approximately $ 0.8 million.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Unrecognized Tax Benefits

2 unchanged sentences

The Company did not have any unrecognized tax benefits as of December 31, 2024 and 2023, related to uncertain tax positions that would impact the effective income tax rate if recognized.

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.

The Company has reduced the NOL 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 as of the years indicated (in millions):

9 unchanged sentences

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

5 unchanged sentences

Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s Consolidated Financial Statements.

Such legal matters may include, but is not limited to, actions or claims relating to sensitive data, including proprietary business information and intellectual property, personally identifiable information of employees and contractors, cyber-attacks, data breaches and non-compliance with contractual or other legal obligations.

Litigation and other legal matters are inherently unpredictable and subject to substantial uncertainties and adverse resolutions could occur.

In addition, litigation and other legal matters, including class-action lawsuits, government investigations and regulatory proceedings can be costly to defend and, depending on the class size and claims, could be costly to settle.

The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its Consolidated Financial Statements.

4 unchanged sentences

Any legal or other expenses associated with the litigation are accrued for as the expenses are incurred.

The Company maintains liability insurance that insures it against workers’ compensation, personal and bodily injury, property damage, directors’ and officers’ liability, errors and omissions, cyber liability, employment practices liability.

There can be no assurance that the liability insurance will cover all events or that the limits of coverage will be sufficient to fully cover all liabilities.

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

While acknowledging the uncertainties of litigation, management believes that the ultimate outcome of litigation will not have a material effect on its financial position and will defend itself vigorously.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

DTV Derivative Litigation

On March 15, 2021, 22 DTV stockholders and eight holders of DTV stock options filed a stockholder class action and derivative complaint in the Delaware Court of Chancery in an action styled Bocock, et al., v.

On March 15, 2021, holders of DTV stock and options filed a stockholder class action and derivative complaint in the Delaware Court of Chancery in an action styled Bocock, et al., v.

HC2 Holdings, Inc.

2021-0224 (Del.

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 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;

(ii) exploited that control to misappropriate DTV’s assets and business opportunities for the benefit of the INNOVATE Entities;

and (iii) purchased DTV stock at a discount to fair value and diminished the value of DTV stock options.

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

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

On June 23, 2021, plaintiffs amended their complaint.

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

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 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 (the "Gray Media Claim");

(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

On February 8, 2024, the Court granted Plaintiffs’ motion for leave to file a second amended complaint.

The proposed second amended complaint (i) names DTV as a nominal defendant, (ii) removes the Gray Media Claim, and (iii) removes all Plaintiffs other than James Bocock and Stan V.

Smith on Behalf of the Stan V.

Smith Trust dated April 30, 1993.

The Court ordered Plaintiffs to file their second amended complaint on or before February 13, 2024.

On February 14, 2024, Plaintiffs filed their second amended complaint.

The Company believes these remaining claims are without merit, and the Company intends to vigorously defend this litigation.

Marin Hospital Replacement Litigation

Plaintiffs asserted claims for breach of fiduciary duty, aiding and abetting breaches of fiduciary duty, and waste against, among others, INNOVATE (f/k/a HC2 Holdings, Inc.), certain of INNOVATE’s subsidiaries, and certain current and former DTV officers and directors in connection with certain sales and purchases of broadcast stations and licenses.

Defendants moved to dismiss the complaint in its entirety.

On October 28, 2022, the Court issued a Memorandum Opinion granting in part and denying in part Defendants’ motions to dismiss.

On February 14, 2024, the plaintiffs amended their complaint to further narrow their claims.

On July 22, 2024, the parties reached an agreement in principle to settle the litigation for $ 125,000 .

The parties have submitted the settlement for Court approval, which is pending.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Marin General Hospital Replacement Litigation

On October 20, 2022, McCarthy Building Companies, Inc.

10 unchanged sentences

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

Meruelo Television Litigation

On August 8, 2023, Meruelo Television, LLC (“Plaintiff”) commenced a lawsuit in the Superior Court of the State of California, Los Angeles County, with the filing of a complaint naming as defendants HC2 Network, Inc.

(“HC2”), INNOVATE Corp.

(“INNOVATE” and, together with HC2, "Defendants"), and Does 1 through 20, in the matter titled Meruelo Television, LLC v.

HC2 Network, Inc., et al.

Ct.) Case No.

23ST-cv-18552.

On September 29, 2023, Defendants filed a Notice of Removal, removing the case from California state court to federal court in the U.S.

District Court for the Central District of California, where it has been assigned Case No.

2:23-cv-08184-AB-BFM.

On October 27, 2023, Plaintiff filed its First Amended Complaint (the “FAC”), asserting six (6) causes of action against Defendants:

(1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Negligent Misrepresentation, (4) Intentional Misrepresentation, (5) Tortious Interference with Contract, and (6) Tortious Interference with Prospective Economic Relations.

On November 11, 2023, Defendants filed a motion to dismiss the FAC (Defendants’ “Motion”).

On January 30, 2024, the Court granted Defendants’ Motion, dismissing all claims asserted against Innovate and, with the exception of the First Cause of Action for Breach of Contract, dismissing all claims against HC2.

The Court further granted Plaintiff leave to file, within twenty-one ( 21 ) days, a second amended complaint to repleading the claims against Innovate and the Fourth and Fifth Causes of Action against HC2.

On February 20, 2024, Plaintiff filed its Second Amended Complaint (the “SAC”).

The SAC asserts only one cause of action, Count I for breach of the Agreement, as against both HC2 and INNOVATE.

Whereas INNOVATE is a non-party to the Agreement at issue, Plaintiff alleges that Innovate can be held liable under Count I as the alleged alter ego of HC2.

Defendants are assessing their potential response to the SAC.

INNOVATE is unable to assess the probability of loss or range of potential loss from this litigation at this time and intends to vigorously defend the litigation.

On August 8, 2023, Meruelo Television, LLC (“Plaintiff”) commenced a lawsuit in the Superior Court of the State of California, Los Angeles County, subsequently removed to federal court in the U.S.

District Court for the Central District of California, titled Meruelo Television, LLC v.

HC2 Network, Inc.

(C.D.Cal.) Case No.

2:23-cv-08184-AB-BFM (the “Lawsuit”), asserting claims against defendants HC2 Network, Inc.

(“HC2”) and INNOVATE Corp.

(“INNOVATE” or the “Company” and, together with HC2, the “Defendants”).

On April 9, 2024, Plaintiff and Defendants filed in the Lawsuit a Stipulation of Dismissal, as so-ordered by the Court on April 16, 2024, whereby Plaintiff dismissed without prejudice its claims as against INNOVATE, while retaining its claim against HC2.

On October 28, 2024, the parties stipulated to dismiss the remaining claims in the Lawsuit.

On November 1, 2024, the Court entered an Order dismissing of the Lawsuit with prejudice.

Other Commitments and Contingencies

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The ratings of the bonding companies utilized by DBMG are highly rated, ranging from A-, A, A+ and AA.

Concentrations of Credit Risk and Significant Suppliers

Concentrations of Credit Risk

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

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The Company has not experienced any losses in such accounts.

The Company held $ 6.3 million and $ 4.1 million of cash and restricted cash in foreign accounts as of December 31, 2023 and 2022, respectively.

The Company held $ 5.5 million and $ 6.3 million of cash and restricted cash in foreign accounts as of December 31, 2024 and 2023, respectively, none of which is covered by the Federal Deposit Insurance Corporation ("FDIC").

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.

In addition, concentrations of credit risk at DBM with respect to receivables are limited as the Company’s customers tend to be larger general contractors and subcontractors on adequately funded projects and the Company has certain lien rights.

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, 2023, two customers exceeded 10% of the Company's revenue and accounted for approximately 29.2 % and 11.4 %, respectively, and two customers accounted for more than 10% of accounts receivable, net, for approximately 30.0 % and 11.5 %, respectively.

For the year 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, net, for approximately 11.5 %.

For the year ended December 31, 2023, no suppliers accounted for more than 10% of the Company's accounts payable.

For the fiscal year ended December 31, 2022, one supplier accounted for more than 10% of the Company's accounts payable for approximately 17.5 %.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company's revenue and accounts receivable concentrations of 10% and greater were as follows:

Year Ended December 31,

Segment Revenue Accounts Receivable Revenue Accounts Receivable

Customer A Infrastructure 14.4 % * 29.2 % 30.0 %

Customer B Infrastructure 10.3 % * * *

Customer C Infrastructure * * 11.4 % *

Infrastructure * * * 11.5 %

Infrastructure * 10.3 % * *

*Less than 10% concentration

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 feature matching contributions of various percentages of the first 3 % to 5 % of employee annual salary contributions, depending on the subsidiary.

The Company made aggregate matching contributions of $ 3.3 million and $ 2.9 million for the years ended December 31, 2023 and 2022, respectively.

The Company and various subsidiaries maintain 401(k) retirement savings plans which cover eligible employees, including for certain, union steelworkers, and permit participants to contribute to the plans, subject to Internal Revenue Code restrictions and which feature matching contributions of various percentages of the first 3 % to 5 % of employee annual salary contributions, depending on the subsidiary.

The Company made aggregate matching contributions of $ 2.8 million for the year ended December 31, 2024, of which $ 1.1 million was reflected as a component of Cost of revenue in the Consolidated Statements of Operations, and $ 1.7 million was reflected as a component of Selling, general and administrative in the Consolidated Statements of Operations.

The Company made aggregate matching contributions of $ 3.3 million for the year ended December 31, 2023, of which $ 1.5 million was reflected as a component of Cost of revenue in the Consolidated Statements of Operations, and $ 1.8 million was reflected as a component of Selling, general and administrative in the Consolidated Statements of Operations.

Multi-Employer Plans

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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 $ 17.3 million and $ 35.0 million during the years ended December 31, 2023 and 2022, respectively.

The Company made contributions to various multi-employer pension plans totaling $ 9.8 million and $ 17.3 million during the years ended December 31, 2024 and 2023, respectively, which was reflected as a component of Cost of revenue in the Consolidated Statements of Operations.

As of December 31, 2024, approximately 8.3 % of DBMG’s employees are covered under various collective bargaining agreements.

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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, 2023, 0.8 million shares for awards remain available for issuance under the Second A&R 2014 Plan.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Second A&R 2014 Plan provides that no further awards will be granted pursuant to the 2014 Plan or the Restated 2014 Plan.

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The Company typically issues new shares of common stock upon the exercise of stock options, as opposed to using treasury shares.

The Company follows guidance which addresses the accounting for share-based payment transactions whereby an entity receives employee services in exchange for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments.

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.

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 2.2 million and $ 2.4 million for the years ended December 31, 2023 and 2022, respectively.

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.

On September 30, 2024, the Board of Directors adopted, subject to stockholder approval, an amendment to the Second A&R 2014 Plan to increase the number of shares of the Company's common stock, par value $ 0.001 per share, available for issuance thereunder to 1,300,000 (the “Plan Amendment”).

Prior to the adoption by the Board of Directors, there were a total of 101,943 shares of common stock available for future award under the "Second A&R 2014 Plan.

The Plan Amendment was approved by holders of a majority in voting power on October 4, 2024, by written consent in lieu of a special meeting, and was effective as of October 29, 2024.

As of December 31, 2024, 463,763 shares for awards remain available for issuance under the Second A&R 2014 Plan, as amended.

Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $ 3.4 million and $ 2.2 million for the years ended December 31, 2024 and 2023, respectively, which is reflected as a component of Selling, general and administrative expenses in the Consolidated Statements of Operations.

All grants are time based and vest either immediately or over a period established at grant, typically with a requisite service period of one to three years for a member of the Board of Directors or an employee to vest in the stock-based award, subject to discretion by Compensation Committee.

There are no other substantive conditions for vesting.

The Company recognizes compensation expense for equity awards, reduced by actual forfeitures as they are incurred, using the straight-line basis.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Restricted Stock

A summary of INNOVATE’s restricted stock activity is as follows:

Shares Weighted Average Grant Date Fair Value

Restricted Stock and Restricted Stock Units

A summary of INNOVATE’s restricted stock and restricted stock unit activity (as adjusted for the Reverse Stock Split) is as follows:

Number of Shares

Weighted Average Grant Date Fair Value

Unvested - December 31, 2022 114,180 $ 25.60

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Vested ( 102,304 ) $ 23.20

Forfeited ( 45,289 ) $ 3.68

Unvested - December 31, 2023 62,572 $ 29.48

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Unvested - December 31, 2024 294,663 $ 8.12

The aggregate vesting date fair value of the restricted stock awards which vested during the years ended December 31, 2023 and 2022 was $ 1.9 million and $ 0.9 million, respectively.

As of December 31, 2023, the total unrecognized stock-based compensation expense related to unvested restricted stock awards was $ 1.0 million and is expected to be recognized over the remaining weighted average period of 1.4 years.

The aggregate vesting date fair value of the restricted stock and restricted stock units which vested during the years ended December 31, 2024 and 2023, was $ 0.9 million and $ 1.9 million, respectively.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to unvested restricted stock and restricted stock units was $ 1.4 million and is expected to be recognized over the remaining weighted-average period of 1.0 year.

Stock Options

A summary of INNOVATE’s stock option activity is as follows:

Shares Weighted Average Exercise Price

A summary of INNOVATE’s stock option activity (as adjusted for the Reverse Stock Split) is as follows:

Number of Stock Options

Weighted Average Exercise Price

Outstanding - December 31, 2022 499,515 $ 50.20

Granted 280,791 $ 3.25

Expired ( 35,233 ) $ 31.20

Outstanding and exercisable- December 31, 2023 464,282 $ 51.68

Granted 200,000 $ 14.61

Expired ( 446,549 ) $ 52.02

Outstanding and exercisable - December 31, 2023 4,642,811 $ 5.17

The weighted-average grant-date fair value of the stock options granted during the year ended December 31, 2022 was $ 1.47 .

Outstanding - December 31, 2024

217,733 $ 16.94

Exercisable - December 31, 2024

117,733 $ 27.74

As of December 31, 2024, the intrinsic value and weighted-average remaining life of the Company's outstanding and exercisable stock options were zero and approximately 7.9 years, respectively.

The maximum contractual term of the Company's exercisable stock options is approximately ten years .

As of December 31, 2023, there were no unvested stock options and no unrecognized stock-based compensation expense related to unvested stock options.

Temporary Equity and Equity

As of December 31, 2024, there were 100,000 unvested stock options and $ 0.4 million of unrecognized stock-based compensation expense related to unvested stock options and is expected to be recognized over the remaining period of 0.7 years.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Interim CEO Equity Awards

On October 29, 2024, when the Plan Amendment became effective, the following awards which were previously awarded to the Company's Interim Chief Executive Officer ("Interim CEO"), that were subject to stockholder approval of the Plan Amendment to increase the number of shares of common stock available thereunder to satisfy the settlement of the grant, became effective:

(i) 95,322 of restricted stock unit awards ("RSUs"), which were awarded on October 11, 2023;

(ii) 100,000 option awards with a strike price of $ 25.00 (as retroactively adjusted for the Reverse Stock Split in 2024) and an expiration date of September 15, 2033, which were awarded on September 15, 2023;

(iii) 142,857 of RSUs, which were awarded on August 19, 2024;

and (iv) 100,000 option awards with a strike price of $ 4.22 and an expiration date of September 15, 2034, which were awarded on September 15, 2024.

The fair value of each option award was determined on the date of grant using the Black-Scholes option-pricing model using the following assumptions:

December 31, 2024

Stock price at date of grant

Expected term

5.1 years - 5.6 years

Risk-free interest rate

Expected volatility

80.9 % - 82.7 %

Expected dividend yield

Grant date fair value per option

$ 2.67 - $ 4.75

The expected option term of the Company's "plain vanilla" stock options granted reflect the application of the simplified method, as prescribed by Staff Accounting Bulletin Topic 14 .

The simplified method was used as the Company does not believe it has sufficient historical exercise data to provide a reasonable basis for the expected term of its stock option grants.

The simplified method will be used until such time as the Company has stock option exercise experience in which to reasonably determine the expected life.

The risk-free interest rate for the expected term of the option is based on the U.S.

Treasury yield curve in effect at the time of grant.

Volatility and expected dividend yield are calculated using INNOVATE's historical volatility and dividend history.

Equity and Temporary Equity

Authorized Share Capital

The Company held its annual meeting of stockholders on June 18, 2024, where the Company’s stockholders approved an increase in the authorized number of common shares from 160,000,000 to 250,000,000 .

Reverse Stock Split

On August 8, 2024, the Company effected a 1-for-10 reverse stock split of its issued and outstanding common stock (the “Reverse Stock Split”) following stockholder approval.

The Reverse Stock Split became effective at 5:00 p.m.

Eastern Standard Time.

The Reverse Stock Split was implemented for the primary purpose of regaining compliance with the minimum bid price requirement for continued listing of the Company’s common stock on the NYSE.

As a result of the Reverse Stock Split, every ten shares of the Company’s common stock issued and outstanding were automatically reclassified and changed into one new share of the Company’s common stock, with whole shares issued for fractional shares.

Proportionate adjustments were made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, as well as to the number of shares issuable under the Company’s equity incentive plans and conversion of the Company’s outstanding convertible securities.

The common stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable.

The Reverse Stock Split did not change the $ 0.001 par value per share of the common stock or the authorized number of shares of common stock or preferred stock.

As a result of the Reverse Stock Split, the number of outstanding common shares was reduced from 130,529,931 to 13,166,057 , inclusive of an additional 113,064 incremental whole shares issued for fractional shares.

Unless noted, all share and per share amounts of common stock, options and restricted stock and any associated debt or preferred stock conversion rates contained in the historical periods presented within these Consolidated Financial Statements have been retroactively adjusted to reflect the one-for-ten Reverse Stock Split as if it had occurred at the beginning of the earliest period presented.

Rights Offering and Concurrent Private Placement

On March 8, 2024, the Company commenced a $ 19.0 million rights offering ("Rights Offering") for its common stock.

Pursuant to the Rights Offering, the Company distributed to each holder of the Company’s common stock, Series A-3 Convertible Participating Preferred Stock, Series A-4 Convertible Participating Preferred Stock and the 2026 Convertible Notes as of March 6, 2024 (the “rights offering record date”), transferable subscription rights to purchase 2.86 shares ( 0.2858 shares on a pre Reverse Stock Split basis) of the Company’s common stock at a price of $ 7.00 per whole share ($ 0.70 per whole share on a pre Reverse Stock Split basis).

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Per the concurrent investment agreement entered into with Lancer Capital (the "Investment Agreement"), the Rights Offering was backstopped by Lancer Capital, an investment fund led by Avram A.

Glazer, the Chairman of the Board and the Company’s largest stockholder.

Due to limitations on the common stock that can be issued to Lancer Capital under the rules of the NYSE, in lieu of exercising its subscription rights, pursuant to the Investment Agreement, Lancer Capital would purchase up to $ 19.0 million of the Company’s newly issued Series C Non-Voting Participating Convertible Preferred Stock (the “Series C Preferred Stock”), for an issue price of $ 1,000 per share.

In connection with the backstop commitment, and as a result of limitations in the amount common equity that can be raised under the Company’s effective shelf registration statement on Form S-3, Lancer Capital also agreed to purchase an additional $ 16.0 million of Series C Preferred Stock in a private placement transaction ("Concurrent Private Placement") which was to close concurrently with the settlement of the Rights Offering.

Lancer Capital did not receive any compensation or other consideration for entering into or consummating the Investment Agreement.

As the Rights Offering had not yet settled by March 28, 2024, in accordance with the Investment Agreement, Lancer Capital purchased $ 25.0 million of Series C Preferred Stock, referred to as the "equity advance." On April 24, 2024, the Company completed and closed on the Rights Offering and issued a total of 530,611 shares of common stock ( 5,306,105 shares of common stock on a pre Reverse Stock Split basis) for $ 3.7 million.

Based on the number of shares of common stock actually sold upon exercise of the rights to third party investors, there were no excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance that the Company was required to redeem, and Lancer Capital purchased an additional approximately 6,286 Series C Preferred Stock for $ 6.3 million under the backstop commitment.

In total, the Company received $ 35.0 million in aggregate gross proceeds related to the Rights Offering and Concurrent Private Placement and incurred $ 1.8 million in dealer manager fees and other related costs which have been capitalized into Additional paid in capital ("APIC").

INNOVATE has been utilizing and expects to continue to use the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and working capital.

In addition, as a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, and consequently, on April 26, 2024, INNOVATE redeemed $ 4.1 million of the CGIC Unsecured Note.

Under the rules of the NYSE, because the shares purchased by Lancer Capital were greater than 20% of the Company's common stock outstanding before the issuance of the Series C Preferred Stock, those shares of Series C Preferred Stock were not allowed to be converted until stockholder approval of such issuance was obtained.

On June 18, 2024, the Company held its annual shareholder meeting where Company's shareholders approved the conversion of the Series C Preferred Stock into common stock.

As a result, approximately 31,286 shares of Series C Preferred Stock, which were held by Lancer Capital, were converted into 4,469,390 shares of common stock ( 44,693,895 shares of common stock on a pre Reverse Stock Split basis).

See " Series C Preferred Stock " below for additional information.

The Company waived its Tax Benefits Preservation Plan to permit persons exercising rights to acquire 4.9 % or more of the outstanding common stock upon the exercise thereof without becoming an Acquiring Person (as defined in the Tax Benefits Preservation Plan).

Preferred Shares

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Series A-4 shares issued and outstanding 10,000 10,000

Series C Preferred Stock

On March 5, 2024, the Company's Board of Directors approved a Certificate of Designation for 35,000 Series C Preferred Stock.

The certificate of designation authorized the existing 20,000,000 shares of preferred stock, par value $ 0.001 to apply to this series.

On March 28, 2024, the Company amended its amended and restated certificate of incorporation by filing the Certificate of Designations of the Series C Preferred Stock with the Secretary of State of the State of Delaware.

The Series C Preferred Stock was intended to be the economic equivalent of common stock, participating on an as-converted basis in all dividends, distributions, merger consideration and all other consideration receivable by holders of common stock, and a means through which the Backstop Arrangement and Concurrent Private Placement could be effected prior to the completion of the stockholder vote and the satisfaction of any other regulatory requirements.

The issued Series C Preferred Stock was classified as temporary equity as it was not mandatorily redeemable due to the presence of substantive conversion features and would only have become mandatorily redeemable on the sixth anniversary of initial issuance if not previously converted.

The Series C Preferred Stock was recognized at fair value upon issuance, net of total allocated issuance costs.

As the Series C Preferred Stock was contingently redeemable, subsequent accretion to redemption value including accreted dividends would only have occurred if the contingency was resolved and the redemption had become probable (i.e., if stockholder approval was no longer reasonably possible).

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On March 28, 2024, INNOVATE issued and sold 25,000 shares of its Series C Preferred Stock, par value $ 0.001 per share for the aggregate purchase price of $ 25.0 million to Lancer Capital.

On April 24, 2024, INNOVATE issued and sold an additional approximately 6,286 shares of its Series C Preferred Stock for the aggregate purchase price of $ 6.3 million to Lancer Capital.

The Series C Preferred Stock became convertible upon the approval of shareholders during the annual shareholder meeting held on June 18, 2024, and consequently the approximately 31,286 Series C Preferred Stock held by Lancer Capital were converted at their conversion price of $ 7.00 ($ 0.70 on a pre Reverse Stock Split basis) into 4,469,390 shares of INNOVATE's common stock ( 44,693,895 on a pre Reverse Stock Split basis).

Prior to the conversion, holders of the Series C Preferred Stock were entitled to receive dividends anytime the Company declared a dividend on its common stock (excluding dividends consisting in whole or in part of common stock).

The dividend amount would be based on the number of shares (including fractions) of common stock into which the shares of Series C Preferred Stock were convertible on the applicable record date multiplied by the dividend per share declared on the Company's common stock.

As of December 31, 2024, there were no Series C Preferred Stock outstanding.

On September 30, 2024, the Company filed a Certificate of Elimination to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, eliminating from the Second Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designation with respect to its Series C Preferred Stock, no shares of which were then issued and outstanding.

Series A-3 and Series A-4 Shares

Issuance and Conversion.

On July 1, 2021 (the "Exchange Date") as a part of the sale of Continental Insurance Group ("CIG"), INNOVATE entered into an exchange agreement (the "Exchange Agreement") with Continental General Insurance Company ("CGIC"), also a former subsidiary, which held the remaining shares of the Company's previous Series A and Series A-2 Preferred Stock and was eliminated in consolidation prior to the sale of the Company's former Insurance segment on July 1, 2021.

On July 1, 2021 (the "Exchange Date") as a part of the sale of Continental Insurance Group ("CIG"), INNOVATE entered into an exchange agreement (the "Exchange Agreement") with CGIC, also a former subsidiary, which held the remaining shares of the Company's previous Series A and Series A-2 Preferred Stock and was eliminated in consolidation prior to the sale of the Company's former 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 mature on July 1, 2026.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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 and with a current fair value of $ 16.4 million as of December 31, 2023.

Since the time of 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 and with a current fair value of $ 16.4 million as of December 31, 2024, which is inclusive of the $ 0.3 million accrued dividend payable on January 15, 2025.

On September 30, 2024, the Company filed a Certificate of Elimination to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, eliminating from the Second Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designation with respect to its Series A Preferred Stock and Series A-2 Preferred Stock, no shares of which were then issued and outstanding.

The Series A-3 and Series A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of 7.50 %.

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Any cash dividends paid directly reduce the carrying value of the Series A-3 and Series A-4 Preferred Stock until the carrying value equals the redemption value.

The Company has a history of paying dividends on its preferred stock and expects to continue to pay such dividends each quarter.

Once the carrying value is equal to the redemption value, the dividends declared are accrued by debiting retained earnings, or if retained earnings is a deficit, then by debiting additional paid in capital.

The Company has a history of paying dividends on its Series A-3 and Series A-4 Preferred Stock and expects to continue to pay such dividends each quarter.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Optional Conversion.

Each share of Series A-3 and Series A-4 may be converted by the holder into shares of the Company's common stock at any time based on the then-applicable conversion price.

Each share of Series A-3 is initially convertible at a conversion price of $ 4.25 (as it may be adjusted from time to time, the "Series A-3 Conversion Price"), and each share of Series A-4 is initially convertible at a conversion price of $ 8.25 (as it may be adjusted from time to time, the "Series A-4 Conversion Price") (“collectively the “Conversion Prices”).

Each share of Series A-3 was initially convertible at an accrued value of $ 1,000 per share divided by a conversion price of $ 4.25 (as it may be adjusted from time to time, the "Series A-3 Conversion Price"), and each share of Series A-4 was initially convertible at an accrued value of $ 1,000 per share divided by a conversion price of $ 8.25 (as it may be adjusted from time to time, the "Series A-4 Conversion Price") (collectively the “Conversion Prices” and unadjusted for the Reverse Stock Split).

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

Actual conversion prices at the time of the exchange in 2021 were $ 3.52 for the Series A and $ 5.33 for the Series A-2.

Actual conversion prices at the time of the exchange in 2021 were $ 3.52 for the Series A and $ 5.33 for the Series A-2 (on a pre Reverse Stock Split basis).

As a result of the Rights Offering and Concurrent Private Placement, and due to the anti-dilution provisions contained in the terms of the Series A-3 Preferred Stock and Series A-4 Preferred Stock, as of April 24, 2024, the conversion price of the Series A-3 Preferred Stock was adjusted to $ 2.38 (on a pre Reverse Stock Split basis) and the conversion price of the Series A-4 Preferred Stock was adjusted to $ 3.47 (on a pre Reverse Stock Split basis).

As a result of the Reverse Stock Split, the conversion prices were further adjusted, and as of August 8, 2024, the conversion price of the Series A-3 Preferred Stock was adjusted to $ 23.63 , and the conversion price of the Series A-4 Preferred Stock was adjusted to $ 34.40 .

Redemption by the Holders / Automatic Conversion.

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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 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.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Consent Rights.

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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.

As of December 31, 2023, 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 years ended December 31, 2023 and 2022, INNOVATE's Board of Directors (the "Board") declared cash dividends with respect to INNOVATE’s issued and outstanding Preferred Stock, as presented in the following table (in millions):

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

As of December 31, 2023, the Series A-3 Preferred Stock and Series A-4 Preferred Stock were convertible into 174,070 ( 1,740,700 on a pre Reverse Stock Split basis) and 187,554 ( 1,875,533 on a pre Reverse Stock Split basis) shares, respectively of INNOVATE's common stock.

As a result of the Rights Offering and Concurrent Private Placement in 2024, and due to the anti-dilution provisions contained in the terms of the Series A-3 Preferred Stock and Series A-4 Preferred Stock, the conversion prices were adjusted, and as of April 24, 2024, the Series A-3 Preferred Stock and Series A-4 Preferred Stock were convertible into 256,986 ( 2,569,858 on a pre Reverse Stock Split basis) and 288,177 ( 2,881,761 on a pre Reverse Stock Split basis) shares, respectively, of INNOVATE's common stock.

As of December 31, 2024, subsequent to the Reverse Stock Split, the Series A-3 Preferred Stock and Series A-4 Preferred Stock were convertible into 259,212 and 290,672 shares, respectively, of INNOVATE's common stock.

Series A-3 and Series A-4 Preferred Share Dividends

During the years ended December 31, 2024 and 2023, INNOVATE's Board of Directors (the "Board") declared cash dividends with respect to INNOVATE’s issued and outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock, as presented in the following tables (in millions):

Declaration Date and Holders of Record Date March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024

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DBMGi Series A Preferred Stock

On November 30, 2018, CGIC purchased 40,000 shares of DBMGi's Series A Fixed-to-Floating Rate Perpetual Preferred Stock (the “DBMGi Preferred Stock”), which was then eliminated in consolidation.

On July 1, 2021, as a part of the sale of CIG which resulted in the deconsolidation of the entity, the Company was deemed to have issued $ 40.9 million of DBMGi Series A Preferred Stock to the then deconsolidated CGIC.

On November 30, 2018, CGIC purchased 40,000 shares of DBMGi Series A Preferred Stock, which was then eliminated in consolidation.

DBM Global Intermediate Holdco Inc.

("DBMGi") is 100 % owned by INNOVATE and owns 91.2 % of DBMG.

On July 1, 2021, as a part of the sale of CGIC, which resulted in the deconsolidation of the entity, the Company was deemed to have issued $ 40.9 million of DBMGi Series A Preferred Stock to the then deconsolidated CGIC.

Upon the deemed issuance of the DBMGi Series A Preferred Stock on July 1, 2021, the DBMGi Series A Preferred Stock was classified as temporary equity in the Company's Consolidated Balance Sheet.

There are 500,000 shares with a par value of $ 0.001 each authorized for issuance.

Subsequent to the issuance of the DBMGi Preferred Stock, 1,820.25 shares were issued as payment in kind for dividends, resulting in a total of 41,820.25 shares of DBMGi's Series A Preferred Stock outstanding.

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.

On March 15, 2023, DBMGi received a redemption notice from CGIC requesting that DBMGi redeem 41,820.25 shares of DBMGi Preferred Stock, representing all of the issued and outstanding shares of DBMGi Preferred Stock, within 60 days of the notice, or by May 15, 2023.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC whereby INNOVATE purchased the 41,820.25 shares of DBMGi Preferred Stock for full satisfaction of the redemption notice.

In full consideration of the DBMGi Preferred Stock as well as the accrued dividend of $ 0.4 million, the Company paid CGIC $ 7.1 million on May 9, 2023, and issued a subordinated unsecured promissory note to CGIC in the principal amount of $ 35.1 million.

The promissory note is due February 28, 2026, and bears interest at 9 % per annum through May 8, 2024, 16 % per annum from May 9, 2024 to May 8, 2025, and 32 % per annum thereafter.

Subsequent to the issuance of the DBMGi Series A Preferred Stock, 1,820.25 shares were issued as payment in kind for dividends, resulting in a total of 41,820.25 shares of DBMGi's Series A Preferred Stock outstanding.

The DBMGi Series A Preferred Stock was 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.

On March 15, 2023, DBMGi received a redemption notice from CGIC requesting that DBMGi redeem 41,820.25 shares of DBMGi Series A Preferred Stock, representing all of the issued and outstanding shares of DBMGi Series A Preferred Stock, within 60 days of the notice, or by May 15, 2023.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC whereby INNOVATE purchased the 41,820.25 shares of DBMGi Series A Preferred Stock for full satisfaction of the redemption notice.

In full consideration of the DBMGi Series A Preferred Stock as well as the accrued dividend of $ 0.4 million, the Company paid CGIC $ 7.1 million on May 9, 2023, and issued a subordinated unsecured promissory note to CGIC in the principal amount of $ 35.1 million.

The promissory note is due February 28, 2026, and bore interest at 9.0 % per annum through May 8, 2024, bears interest at 16.0 % per annum from May 9, 2024, to May 8, 2025, and 32.0 % per annum thereafter.

Refer to Note 11.

1 unchanged sentence

The DBMGi Series A Preferred Stock was measured each reporting period at its maximum redemption value, which was equal to the stated value plus all accrued, accumulated and unpaid dividends as of the end of each reporting period, as they were currently redeemable.

The carrying amount as of May 9, 2023 was $ 41.8 million as well as the accrued dividend of $ 0.4 million and, subsequently, there was no gain or loss on the purchase of the DBMGi Preferred Stock from CGIC.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The carrying amount as of May 9, 2023, was $ 41.8 million as well as the accrued dividend of $ 0.4 million and, subsequently, there was no gain or loss on the purchase of the DBMGi Series A Preferred Stock from CGIC.

The DBMGi Series A Preferred Stock accrued 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.

1 unchanged sentence

dollar denominated syndicated credit facilities for such alternative benchmarks.

Subsequent to May 9, 2023, the date that INNOVATE purchased the DBMGi Preferred Stock, the dividends are eliminated on consolidation.

The dividends and equivalent amounts paid (excluding amounts eliminated on consolidation) are presented in the following tables (in millions):

Subsequent to May 9, 2023, the date that INNOVATE purchased the DBMGi Series A Preferred Stock, the dividends were eliminated on consolidation.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

During the year ended December 31, 2023, DBMGi's Board of Directors declared dividends with respect to DBMGi’s issued and outstanding DBMGi Series A Preferred Stock.

The dividend paid on April 17, 2023, was paid in cash and no dividends were subsequently declared;

however, in connection with the Stock Purchase Agreement entered into with CGIC on May 9, 2023, an equivalent amount of the dividends that had accrued through May 8, 2023, was paid to CGIC on May 9, 2023, as part of the purchase price:

$ 0.1 million was paid in cash and $ 0.3 million was included in the principal amount of the new unsecured note that was issued on May 9, 2023.

The dividend that accrued for the remaining portion of that period was eliminated on consolidation subsequent to the purchase.

The declared dividends and equivalent amounts paid during the year ended December 31, 2023, are presented in the following table (in millions):

Declaration Date and Holders of Record Date March 31, 2023 May 9, 2023

1 unchanged sentence

Total Dividend

*The dividend paid on April 17, 2023 was a cash dividend.

In connection with the Stock Purchase Agreement entered into with CGIC on May 9, 2023, an equivalent amount of the dividend that had accrued through May 8, 2023 was paid to CGIC on May 9, 2023 as part of the purchase price.

$ 0.1 million was paid in cash and $ 0.3 million was included in the principal amount of the new unsecured note that was issued on May 9, 2023.

The dividends that accrued for the remaining portion of those periods were eliminated on consolidation subsequent to the purchase.

Declaration Date and 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 cash dividends.

The DBMGi Board of Directors elected to pay the second quarter 2022 dividend payable July 15, 2022 in shares.

R2 Technologies Non-Controlling Interests

The Company has redeemable and non-redeemable non-controlling interests related to R2 Technologies in the form of convertible preferred stock that is redeemable upon the occurrence of a change in control, as defined in the respective agreements.

The Company has non-redeemable and redeemable non-controlling interests related to R2 Technologies in the form of common stock as well as convertible preferred stock that is redeemable upon the occurrence of a change in control, as defined in the respective agreements.

If an event is not solely within the control of the Company, it is classified outside of permanent equity in the mezzanine section of the Company's Consolidated Balance Sheets.

The Company adjusts the carrying value of the non-controlling interests based on an allocation of subsidiary earnings (losses) based on ownership interests.

As of December 31, 2023, the Company has reclassified $ 9.0 million of R2 redeemable non-controlling interest to non-controlling interest in accordance with the considerations of ASC 480.

As of December 31, 2023, and 2022, it was not deemed probable that the non-controlling interests will become redeemable as no change in control has occurred or is expected to occur;

therefore, no additional adjustment or remeasurement was required under ASC 480-10.

As a result of allocation of losses in accordance with ASC 810, the redeemable non-controlling interest related to R2 was negative $ 1.0 million and negative $ 3.8 million as of December 31, 2023, and 2022, respectively.

As of December 31, 2024 and 2023, it was not deemed probable that the amounts relating to convertible preferred stock in non-controlling interests will become redeemable as no change in control has occurred or is expected to occur;

therefore, no additional adjustments or remeasurements were required under ASC 480-10, Distinguishing Liabilities from Equity.

On June 20, 2024, Pansend closed on a new Series D Preferred Stock ("Series D") investment in R2 Technologies.

As part of the transaction, R2 Technologies converted its intercompany notes and accrued interest with Pansend, together with an additional cash investment from Pansend, into new Series D convertible participating preferred stock, for a total new additional investment of $ 21.3 million, which is also eliminated on consolidation and increased Pansend's ownership in R2 Technologies to 81.4 % as compared to 56.8 % prior to the transaction.

Pansend's ownership in R2 Technologies was 81.4 % and 56.6 %, as of December 31, 2024 and 2023, respectively.

Subsequent to year end, on February 20, 2025, Pansend closed on a new $ 3.5 million convertible 13.0 % note instrument with R2 Technologies, which is convertible, together with any accrued interest at the time of conversion, into new Series E Convertible Preferred Stock ("Series E") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control, as defined in the agreement.

The transaction is eliminated on consolidation.

As a result of the allocation of losses, the redeemable non-controlling interest related to R2 Technologies was negative $ 0.5 million and negative $ 1.0 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, the Company had negative $ 4.9 million and negative $ 10.5 million, respectively, of R2 Technologies non-controlling interests reflected within Non-controlling interests within the Consolidated Balance Sheets.

Liquidation Preference

R2 Technologies has issued multiple A, B, and C-series participating convertible preferred stock (the "R2 Preferred Shares"), all of which contain a liquidation preference.

In the event of a liquidation event, each Preferred Share has a liquidation preference to be paid out of the assets legally available for distribution, which entitles the holder of each series A and series C R2 Preferred Share to receive, before any payments to holders of junior securities, the sum of the following:

R2 Technologies has issued multiple A, B, C and D-series, and, in the future potentially E-series, participating convertible preferred stock (the "R2 Technologies Preferred Shares"), all of which contain a liquidation preference.

In the event of a liquidation event, each Preferred Share has a liquidation preference to be paid out of the assets legally available for distribution, which entitles the holder of each series A, series C, series D and series E (upon conversion of the aforementioned $ 3.5 million note that is convertible into Series E) R2 Technologies Preferred Shares to receive, before any payments to holders of junior securities, the sum of the following:

(i) the accrued value in cash;

(ii) all accrued and unpaid dividends, including basic dividends and accreting dividends, if any, and (iii) an amount, in cash or otherwise, equivalent to what the holder would receive if they had converted the R2 Preferred Shares into R2 common stock or reference property just before the liquidation event.

Series B R2 Preferred Shareholders would be entitled to receive, before any payments to holders of junior securities, the greater of (i) the sum of (A) the accrued value in cash, plus (B) all accrued and unpaid dividends, including basic dividends and accreting dividends, if any, or (ii) an amount, in cash or otherwise, equivalent to what the holder would receive if they had converted the R2 Preferred Shares into R2 common stock or reference property just before the liquidation event.

(ii) all accrued and unpaid dividends, including basic dividends and accreting dividends, if any, and (iii) an amount, in cash or otherwise, equivalent to what the holder would receive if they had converted the R2 Technologies Preferred Shares into R2 Technologies common stock or reference property just before the liquidation event.

Series B R2 Technologies Preferred Shareholders would be entitled to receive, before any payments to holders of junior securities, the greater of (i) the sum of (A) the accrued value in cash, plus (B) all accrued and unpaid dividends, including basic dividends and accreting dividends, if any, or (ii) an amount, in cash or otherwise, equivalent to what the holder would receive if they had converted the R2 Technologies Preferred Shares into R2 Technologies common stock or reference property just before the liquidation event.

If the assets of R2 Technologies legally available for distribution are insufficient to pay these obligations in full, R2 Technologies Preferred Shareholders and holders of any parity securities share the remaining assets in proportion to the full respective amounts to which they are entitled.

After receiving the full liquidation preference, R2 Technologies Preferred Shareholders have no further claim to R2 Technologies' assets, except for any new securities or instruments received as part of the liquidation preference.

The value of non-cash assets distributed equals their fair market value on the distribution date.

No holder of junior securities receives any payment unless the entire liquidation preference of R2 Technologies Preferred Shares is paid.

If there is insufficient cash to pay the entire liquidation preference and any liquidation preference in respect of any parity securities in full in cash upon a liquidation event, R2 Technologies Preferred Shareholders and parity securities holders will share available cash proportionally.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

If the assets of R2 legally available for distribution are insufficient to pay these obligations in full, R2 Preferred Shareholders and holders of any parity securities share the remaining assets in proportion to the full respective amounts to which they are entitled.

After receiving the full liquidation preference, R2 Preferred Shareholders have no further claim to R2's assets, except for any new securities or instruments received as part of the liquidation preference.

The value of non-cash assets distributed equals their fair market value on the distribution date.

No holder of junior securities receives any payment unless the entire liquidation preference of R2 Preferred Shares is paid.

If there is insufficient cash to pay the entire liquidation preference and any liquidation preference in respect of any parity securities in full in cash upon a liquidation event, R2 Preferred Shareholders and parity securities holders will share available cash proportionally.

R2 Technologies' total liquidation preference upon a hypothetical liquidation event, including the liquidation preference for Pansend Life Sciences, LLC, was $ 143.5 million and $ 112.3 million as of December 31, 2024 and 2023, respectively, of which $ 51.8 million and $ 48.0 million as of December 31, 2024 and 2023, respectively, was attributable to redeemable and non-redeemable non-controlling interests, inclusive of initial preferred stock and unpaid accreted dividends.

However, as of both December 31, 2023, and 2022, R2 Technologies had negative net assets after consideration of intercompany and third party debt, and, therefore, there would be no legally available funds to satisfy such liquidation preferences upon a hypothetical liquidation event.

However, as of both December 31, 2024 and 2023, R2 Technologies had negative net assets after consideration of intercompany and third party debt, as applicable, and, therefore, there would be no legally available funds to satisfy such liquidation preferences upon a hypothetical liquidation event.

Stockholders’ Rights Agreement - Tax Benefits Preservation Plan

On August 30, 2021, the Company entered into a Tax Benefits Preservation Plan (the “2021 Preservation Plan”) with Computershare Trust Company, N.A., as Rights Agent.

The 2021 Preservation Plan was intended 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 2021 Preservation Plan which could result in significant dilution in the ownership interest of such person or group.

As such, the 2021 Preservation Plan has anti-takeover effects.

In connection with the adoption of the 2021 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.

The 2021 Preservation Plan terminated on March 31, 2023.

On April 1, 2023, the Company entered into a new Tax Benefits Preservation Plan (the “2023 Preservation Plan”) with Computershare Trust Company, N.A., as rights agent (the “Rights Agent”), and the Board of Directors of the Company declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $ 0.001 per share, of the Company (the “Common Stock”) to stockholders of record at the close of business on April 10, 2023 (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 $ 15.00 per Unit, subject to adjustment (the “Purchase Price”).

Rights Certificates and Exercise Period

Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate rights certificates (“Rights Certificates”) will be distributed.

Subject to certain exceptions specified in the 2023 Preservation Plan, the Rights will separate from the Common Stock then outstanding and a distribution date (the “Distribution Date”) will occur upon the earlier of (i) ten 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 the shares of the Common Stock (the “Stock Acquisition Date”) and (ii) ten 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.

Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates (or, in the case of book entry shares, by the notations in the book entry accounts) and will be transferred with and only with such Common Stock, (ii) new Common Stock certificates issued after the Record Date will contain a notation incorporating the 2023 Preservation Plan by reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.

Pursuant to the 2023 Preservation Plan, the Company reserves the right (prior to the occurrence of a Triggering Event (as defined below) and upon any exercise of Rights) to make the necessary and appropriate rounding adjustments so that only whole shares of Series B Preferred Stock will be issued.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The definition of “Acquiring Person” contained in the 2023 Preservation Plan contains several exemptions, including for (i) the Company or any of the Company’s subsidiaries;

(ii) any employee benefit plan of the Company, or of any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan;

(iii) any person who becomes the beneficial owner of 4.9 % or more of the shares of the Common Stock then outstanding as a result of (x) a reduction in the number of shares of Common Stock by the Company due to a or (y) a stock dividend, stock split, reverse stock split or similar transaction, unless and until such person increases his ownership by more than 0.5 % over such person’s lowest percentage stock ownership on or after the consummation of the relevant transaction;

(iv) any person who, together with all affiliates and associates of such person, was the beneficial owner of 4.9 % or more of the shares of the Common Stock then outstanding on the date of the 2023 Preservation Plan, unless and until such person and its affiliates and associates increase their aggregate ownership by more than 0.5 % over their lowest percentage stock ownership on or after the date of the 2023 Preservation Plan or decrease their aggregate percentage stock ownership below 4.9 %;

(v) any person who, within ten business days of being requested by the Company to do so, certifies to the Company that such person became an Acquiring Person inadvertently or without knowledge of the terms of the Rights and who, together with all affiliates and associates, thereafter within ten business days following such certification disposes of such number of shares of Common Stock so that it, together with all affiliates and associates, ceases to be an Acquiring Person;

(vi) any person that the Board, in its sole discretion, has affirmatively determined shall not be deemed 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 June 30, 2024 (as extended in June 2023 from October 31, 2023 to June 30, 2024) 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 June 30, 2024 (which later date and time shall be in no event later than 11:59 p.m.

(New York City time) on October 1, 2026), (ii) the time at which the Rights are redeemed or exchanged as provided in the 2023 Preservation Plan, (iii) the time at which the Board determines that the 2023 Preservation 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.

On May 6, 2024, the Company terminated its Tax Benefits Preservation Plan entered into on April 1, 2023 (the “2023 Preservation Plan”) because the Company’s Board of Directors determined that the 2023 Preservation Plan was no longer necessary or desirable for the preservation of the Company’s ability to use its tax NOLs and other certain tax assets.

In connection with the termination of the 2023 Preservation Plan, the Company has taken routine actions to deregister the related preferred stock purchase rights under the Securities Exchange Act of 1934, and to delist the preferred stock purchase rights from the NYSE.

These actions were administrative in nature and had no effect on the Company’s common stock, which will continue to be listed on the NYSE.

Related Parties

Non-Operating Corporate

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, a company controlled by a former CEO of INNOVATE and 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.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC, a significant shareholder, in the principal amount of $ 35.1 million.

During the first quarter of 2024, in connection with the Rights Offering, the Company entered into an Investment Agreement with Lancer Capital, an entity controlled by Avram A.

Glazer, pursuant to which Lancer Capital agreed to the Backstop Commitment to purchase up to $ 19.0 million of Series C Preferred Stock in connection with the Rights Offering and to purchase $ 16.0 million of Series C Preferred Stock in a Concurrent Private Placement, of which $ 25.0 million would be purchased before the closing of the Rights Offering if the Rights Offering did not close by March 28, 2024.

As a result of the extension of the Rights Offering, on March 28, 2024, Lancer Capital funded the equity advance of $ 25.0 million to the Company and received 25,000 shares of Series C Preferred Stock.

As a result, Mr.

Glazer's beneficial ownership increased from 29.1 % as of March 5, 2024, immediately prior to the start of the Rights Offering, to 48.8 % as of March 31, 2024.

On April 24, 2024, as a result of the closing of the Rights Offering and Concurrent Private Placement, Lancer Capital purchased an additional approximately 6,286 shares of Series C Preferred Stock for $ 6.3 million, increasing Mr.

Glazer's beneficial ownership to 52.1 %.

On June 18, 2024, the Company held its annual shareholder meeting where the Company's shareholders approved the conversion of the Series C Preferred Stock into common stock.

As a result, approximately 31,286 Series C Preferred Stock held by Lancer Capital were converted into 4,469,390 shares of INNOVATE's common stock ( 44,693,895 on a pre Reverse Stock Split basis).

Refer to Note 16.

Debt Obligations and Note 16.

Temporary Equity and Equity for additional information.

In December 2023, the Company entered into a sublease agreement with PBCIC, a Florida not-for-profit corporation and related party to Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, who is also on the board of directors of PBCIC.

Pursuant to the sublease, the Company allows PBCIC use of the underlying space with no required lease payments and, as consideration, PBCIC has agreed to undertake all of the tenant’s build-out costs and related obligations under the lease agreement between the Company, as tenant, and RPP Palm Beach Property LP, as landlord.

Equity and Temporary Equity for additional information.

As of December 31, 2024, Mr.

Glazer's beneficial ownership was 51.2 %.

Lancer Capital held $ 2.0 million of principal amount of the Company's 7.50 % 2026 Convertible Notes, as of both December 31, 2024 and 2023.

As of December 31, 2024, the $ 2.0 million in 7.50 % 2026 Convertible Notes are convertible into 47,265 shares of common stock of INNOVATE.

Refer to Note 11.

Debt Obligations for additional information on the 7.50 % 2026 Convertible Notes.

During both the years ended December 31, 2024 and 2023, Lancer Capital earned $ 150 thousand in interest relating to these notes.

In December 2023, the Company entered into a sublease agreement for a special purpose space with PBCIC, a Florida not-for-profit corporation and related party to Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors and a significant shareholder, who is also on the board of directors of PBCIC.

In March 2024, the Company assigned this lease to an entity controlled by Mr.

In addition, in March 2024, the Company assigned a lease for office space to an entity controlled by Mr.

Refer to Note 9.

Leases for additional information.

Lancer Capital, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, held $ 2.0 million of principal amount of the Company's $ 51.8 million 7.5 % 2026 Convertible Notes, as of both December 31, 2023 and 2022.

The $ 2.0 million in notes are convertible into 468,594 shares of common stock of INNOVATE Corp.

upon conversion.

In September 2018, the Company entered into a 75 -month lease for office space which expired in December 2024.

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, a company controlled by a former CEO of INNOVATE and formerly a related party, in the same building.

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

As of December 31, 2024, there was no remaining lease liability or corresponding right-of-use asset.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC in the principal amount of $ 35.1 million.

CGIC is a former significant shareholder and is the shareholder of the Series A-3 Preferred Stock and Series A-4 Preferred Stock.

As a result of the closing of the Rights Offering on April 24, 2024, INNOVATE redeemed $ 4.1 million of the CGIC Unsecured Note on April 26, 2024.

Refer to Note 11.

Debt Obligations for additional information on the 2026 Convertible Notes.

During both the years ended December 31, 2023 and 2022, Lancer Capital earned $ 0.2 million in interest relating to these notes.

Debt Obligations and Note 16.

Equity and Temporary Equity for additional information.

Infrastructure

Banker Steel previously leased two planes from Banker Aviation, LLC, a related party that is owned by Donald Banker, the former CEO of Banker Steel.

During the first quarter of 2022, one of the two plane leases was terminated, and during the fourth quarter of 2023, the second plane lease was terminated.

For the years ended December 31, 2023 and 2022, DBMG incurred lease expense related to these leases of $ 1.2 million and $ 1.3 million, respectively.

DBMG and Banker Steel, jointly and severally, have a subordinated 4.0 % note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25 % interest, and jointly and severally also had a subordinated 8.0 % note payable to Donald Banker's family trust.

During the year ended December 31, 2023, DBMG made $ 12.1 million in scheduled repayments of the principal on these notes and made accelerated repayments of $ 16.6 million in full settlement of the 8.0 % subordinated note.

Banker Steel also previously had a subordinated 11.0 % note payable to Donald Banker of $ 6.3 million, which was redeemed in full by DBMG on April 4, 2022.

As of December 31, 2023, the 4.0 % note payable had a remaining balance of $ 5.0 million.

Banker Steel previously leased two planes from Banker Aviation, LLC, a former related party and entity that is owned by Donald Banker, who was the CEO of Banker Steel until December 2023.

Both leases had been terminated by the fourth quarter of 2023.

For the year ended December 31, 2023, DBMG incurred related lease expenses of $ 1.2 million.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

For the years ended December 31, 2023 and 2022, DBMG incurred aggregate interest expense related to these notes of $ 1.5 million and $ 2.3 million, respectively, and the accrued interest was $ 0.1 million and $ 0.5 million as of December 31, 2023 and 2022, respectively.

DBMG and Banker Steel, jointly and severally, had a subordinated 4.0 % note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25 % interest, and jointly and severally also had a subordinated 8.0 % note payable to Donald Banker's family trust, the latter of which was fully paid off in December 2023.

The 4.0 % note and associated accrued interest matured on March 31, 2024, and was fully redeemed on April 2, 2024.

During the year ended December 31, 2024, DBMG made $ 5.0 million in scheduled principal payments on the 4.0 % note.

DBMG incurred aggregate interest expense related to these notes of $ 25 thousand and $ 1.5 million for the years ended December 31, 2024 and 2023, respectively.

Accrued interest was $ 0.1 million as of December 31, 2023.

Life Sciences

During the year ended December 31, 2022, R2 Technologies entered into various note purchase agreements with Lancer Capital, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, for an aggregate $ 10.8 million in notes at a 18 % per annum interest rate as of December 31, 2022.

The per annum interest rate on the outstanding principal balance also increased to 20 %.

Subsequent to year end, the notes expired on January 31, 2024.

Effective January 31, 2024, R2 and Lancer Capital simultaneously issued a new note with an aggregate original principal amount of $ 20.0 million, which is comprised of the prior outstanding principal amounts and unpaid accrued interest of $ 2.6 million, which was capitalized into the new principal balance, with future interest payable monthly in cash or, if not paid in cash, accrued and unpaid interest is capitalized monthly into the principal balance.

As of December 31, 2023 and 2022, R2 Technologies had accrued interest payable to Lancer Capital of $ 2.4 million and $ 0.8 million, respectively.

For the years ended December 31, 2023 and 2022, R2 Technologies recognized revenues of $ 0.7 million and $ 3.0 million, respectively, from sales to a subsidiary of Huadong, a related party of R2 Technologies.

The were no related receivables from this subsidiary of Huadong as of December 31, 2023 and there were $ 0.6 million of related receivables from this subsidiary with Huadong as of December 31, 2022.

For the years ended December 31, 2023 and 2022, R2 Technologies incurred approximately $ 0.3 million and $ 0.4 million, respectively, of stock compensation and royalty expenses related to Blossom Innovations, LLC, an investor of R2 Technologies since 2014.

As of December 31, 2024 and 2023, R2 Technologies had $ 24.0 million and $ 17.4 million, respectively, in principal amount of 20.0 % senior secured promissory notes due to Lancer Capital.

Refer to Note 11.

Investments for transactions with equity method investees of the Company, refer to Note 9.

Leases for related party transactions related to a lease and refer to Note 22.

Subsequent Events for a related party transaction with Lancer Capital.

Debt Obligations for additional information and for a subsequent event related to the extension of the maturity date of the 20.0 % senior secured promissory notes due to Lancer Capital.

For the years ended December 31, 2024 and 2023, R2 Technologies recognized $ 1.4 million and $ 0.7 million, respectively, of revenue from sales and profit sharing agreements with a subsidiary of Huadong, a related party of R2.

There were $ 0.1 million of related receivables from this subsidiary of Huadong as of December 31, 2024, and there were no related receivables from this subsidiary of Huadong as of December 31, 2023.

Share-based compensation and royalty expenses related to Blossom Innovations, LLC, an investor of R2 Technologies since 2014, totaled $ 1.1 million and $ 0.3 million, for the years ended December 31, 2024 and 2023, respectively.

Refer to Note 6.

Investments for transactions with equity method investees of the Company.

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.

The Company currently has one primary reportable geographic segment - United States, and primarily all revenue is derived in the United States, and primarily all PP&E and intangible assets reside in the United States.

The reportable segments are identified based on the nature of the services and products provided, the organizational structure, and the internal reporting system used by the Chief Operating Decision Maker ("CODM") to assess performance and allocate resources.

The Company has three reportable operating segments, plus the Other segment, based on management’s organization of the enterprise - Infrastructure, Life Sciences, Spectrum, and Other.

The Company also has a Non-Operating Corporate segment.

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There are no inter-segment revenues.

The Company's revenue concentrations of 10% and greater were as follows:

Refer to Note 1.

Organization and Business for additional information on the organizational structure of the business and Note 3.

Revenue and Contracts in Process for additional information on the products and services offered by each segment.

The Chief Operating Decision Maker ("CODM") for the Company is the Interim CEO, Paul Voigt.

The CODM is primarily responsible for allocating resources at all levels that do not require board approval.

The CODM monitors the performance of each segment and is responsible for making strategic decisions regarding capital and resource allocation.

The CODM uses a combination of monthly reports, which detail revenue and income (loss) from operations, and quarterly summaries, which include detailed breakdowns of each segment's income (loss) from operations, to evaluate segment performance, allocate resources and make strategic decisions.

These financial metrics are used to view operating trends, perform analytical comparisons and benchmark performance between periods and to monitor budget-to-actual variances on a monthly basis.

The primary GAAP metric used by the CODM in assessing segment performance is income (loss) from operations.

Financial information, including revenue and expenses, with respect to the Company’s operating segments, is as follows (in millions):

Year Ended December 31, 2024

Segment 2023 2022

Customer A Infrastructure 29.2 % 23.8 %

Customer B Infrastructure 11.4 % *

* Less than 10% revenue concentration

Infrastructure Life Sciences Spectrum Non-Operating Corporate Other and Eliminations INNOVATE

Revenue $ 1,071.6 $ 9.8 $ 25.7 $ — $ — $ 1,107.1

Cost of revenue 880.4 6.4 11.5 — — 898.3

Selling, general and administrative expenses

123.1 17.1 7.3 12.7 — 160.2

Depreciation and amortization 12.0 0.4 5.1 0.1 — 17.6

Other operating (income) loss (1)

( 9.6 ) — 0.4 0.2 — ( 9.0 )

Income (loss) from operations $ 65.7 $ ( 14.1 ) $ 1.4 $ ( 13.0 ) $ — $ 40.0

Capital expenditures (2)

$ 17.6 $ — $ 1.4 $ — $ — $ 19.0

Investments (3)

$ — $ 1.8 $ — $ 1.8 $ — $ 3.6

$ 683.6 $ 11.9 $ 178.9 $ 16.7 $ — $ 891.1

(1) Other operating income at our Infrastructure segment for the year ended December 31, 2024, related mainly to a gain on a lease modification and a net gain on the sale and disposal of various properties.

(2) Capital expenditures reflect cash expenditures.

(3) The Company's equity method investments in the Life Sciences segment totaled $ 0.9 million as of December 31, 2024.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

Year Ended December 31, 2023

Infrastructure

Infrastructure Life Sciences Spectrum Non-Operating Corporate Other and Eliminations INNOVATE

Revenue $ 1,397.2 $ 3.3 $ 22.5 $ — $ — $ 1,423.0

Cost of revenue 1,192.6 2.6 11.8 — — 1,207.0

Selling, general and administrative expenses 126.0 15.2 9.0 15.8 2.0 168.0

Depreciation and amortization 14.4 0.5 5.2 0.1 — 20.2

Other operating (income) loss (1)

( 0.2 ) — ( 0.1 ) 0.5 1.1 1.3

Life Sciences 3.3 4.3

Spectrum 22.5 38.7

Total revenue $ 1,423.0 $ 1,637.3

Year Ended December 31,

Income (loss) from operations

Infrastructure

$ 64.4 $ ( 15.0 ) $ ( 3.4 ) $ ( 16.4 ) $ ( 3.1 ) $ 26.5

Life Sciences ( 15.0 ) ( 20.1 )

Spectrum ( 3.4 ) ( 3.8 )

Other ( 3.1 ) ( 0.6 )

Non-Operating Corporate

Capital expenditures (2)

$ 16.6 $ 0.5 $ 1.0 $ 0.3 $ — $ 18.4

Total income from operations

Investments (3)

$ — $ 1.8 $ — $ — $ — $ 1.8

$ 851.4 $ 8.3 $ 176.6 $ 7.3 $ — $ 1,043.6

(1) Other operating loss for the year ended December 31, 2023, primarily consisted of a write-off of prepaid rent at the Other segment and an impairment of leasehold improvements at the Non-Operating Corporate segment for unutilized office space.

(2) Capital expenditures reflect cash expenditures.

(3) The Company's equity method investments in the Life Sciences segment totaled $ 0.9 million as of December 31, 2023.

Year Ended December 31,

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Loss from equity investees ( 2.3 ) ( 9.4 )

Other income (expense), net 16.7 ( 1.2 )

Other income, net 3.4 16.7

Loss from operations before income taxes $ ( 33.4 ) $ ( 34.4 )

Year Ended December 31,

Depreciation and Amortization

Infrastructure

$ 14.4 $ 21.0

Infrastructure recognized within cost of revenue

Total Infrastructure 30.1 36.0

Life Sciences 0.5 0.3

Life Sciences recognized within cost of revenue

Total Life Sciences

Spectrum 5.2 5.8

Non-Operating Corporate

Total depreciation and amortization $ 36.0 $ 42.2

Year Ended December 31,

Capital Expenditures (*)

Infrastructure

$ 16.6 $ 16.5

Life Sciences 0.5 0.8

Spectrum 1.0 3.3

Non-Operating Corporate

Total $ 18.4 $ 20.7

(*) The above capital expenditures exclude assets acquired under finance lease and other financing obligations.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Life Sciences $ 1.8 $ 7.6

Total $ 1.8 $ 59.5

Equity Method Investments (included in Investments above)

Life Sciences $ 0.9 $ 3.0

Total $ 0.9 $ 43.6

Infrastructure

$ 851.4 $ 879.3

Life Sciences 8.3 15.4

Spectrum 176.6 188.2

Non-Operating Corporate

Total $ 1,043.6 $ 1,151.7

Basic and Diluted Loss Per Common Share

Earnings (loss) per share 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.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities.

As such, shares of any unvested restricted stock of the Company are considered participating securities;

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.

Earnings (loss) 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.

Unvested share-based payment awards and Series C Preferred Stock that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities.

As such, shares of any unvested restricted stock and Series C Preferred Stock of the Company are considered participating securities;

however, unvested shares of restricted stock 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 Company had no dilutive common stock equivalents during the years ended December 31, 2024 and 2023, due to the results from continuing operations being a loss, net of tax.

For the years ended December 31, 2023, and 2022, 951,861 and 868,104 , respectively, of common stock equivalents from unvested restricted stock 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, 2023 and 2022 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):

For the years ended December 31, 2024 and 2023, 171,565 and 95,187 , respectively, of common stock equivalents from unvested restricted stock awards and unvested restricted stock units 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 EPS, but were excluded from the computations of diluted net loss per share, and may be excluded from computations of diluted EPS in the future, are:

convertible preferred stock, convertible debt, and stock options.

Refer to Note 15.

Share-based Compensation and Note 16.

Equity and Temporary Equity for additional information on INNOVATE's equity instruments.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

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

Year Ended December 31,

4 unchanged sentences

Preferred dividends 1.2 2.4

Net loss attributable to common stockholders $ ( 37.6 ) $ ( 40.8 )

Weighted-average common stock outstanding 78.1 77.5

Loss per share - basic and diluted $ ( 0.48 ) $ ( 0.53 )

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Net loss attributable to common stockholders and participating preferred stockholders $ ( 35.8 ) $ ( 37.6 )

Loss allocable to common shares:

Participating shares

Weighted-average common shares outstanding (1)

10,696,274 7,814,620

Series C Preferred stock 947,307 —

Total 11,643,581 7,814,620

Percentage of loss allocated to:

Common stock 91.9 % 100.0 %

Series C Preferred stock 8.1 % — %

Numerator for loss per share

Net loss attributable to common stock holders, basic and diluted $ ( 32.9 ) $ ( 37.6 )

Net loss attributable to Series C holder, basic and diluted

$ ( 2.9 ) $ —

Denominator for loss per share:

Weighted-average common shares outstanding - basic and diluted (1)

10,696,274 7,814,620

Weighted-average Series C shares outstanding - basic and diluted

Loss per common share - basic and diluted (1)

$ ( 3.08 ) $ ( 4.81 )

Loss per Series C share - basic and diluted

$ ( 3.08 ) $ —

(1) Basic and diluted loss per common share and weighted-average common shares outstanding for the year ended December 31, 2023, in the table above have been retroactively adjusted to reflect the 1-for-10 reverse stock split effected on August 8, 2024.

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):

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

The following tables 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 and not measured using the equity method of accounting, with fair values shown according to the fair value hierarchy.

The tables exclude carrying amounts for cash and cash equivalents and restricted cash (Level 1 measurements), accounts receivable and contract assets, accounts payable, contract liabilities and other current liabilities, and other assets and liabilities (Level 2 measurements) that approximate fair value due to the relatively short periods to maturity (in millions):

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

December 31, 2024 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Carrying Value Estimated Fair Value Quoted Prices (Level 1)

Significant Other Observable Inputs

Significant Unobservable Inputs

Measurement alternative investment (1)

8 unchanged sentences

December 31, 2023 Fair Value Measurement Using:

Carrying Value Estimated Fair Value Level 1 Level 2 Level 3

Carrying Value Estimated Fair Value Quoted Prices (Level 1)

Significant Other Observable Inputs

Significant Unobservable Inputs

Measurement alternative investment (1)

4 unchanged sentences

Total liabilities not accounted for at fair value $ 707.4 $ 621.8 $ — $ 621.8 $ —

(1) Was comprised of a put option that related to the Company's 19 % investment in HMN, which was sold March 6, 2023.

(1) Refer to Note 6.

2 unchanged sentences

Debt Obligations.

The fair value of the Company’s long-term obligations was determined using reporting from externally quoted market prices for INNOVATE's 8.50 % 2026 Senior Secured Notes and for INNOVATE's 7.50 % Convertible Senior Notes due 2026, which are reflected as Level 1 fair value measurements.

All other long-term obligations of the Company are reflected as Level 2 fair value measurements, as this methodology combines direct recent transaction activity or, if available, market observations from contributed sources with quantitative pricing models or fair value reports from valuation providers to generate evaluated prices and are classified as Level 2 fair value measurements.

All other long-term obligations of the Company are also reflected as Level 2 fair value measurements, as this methodology combines direct recent transaction activity or, if available, market observations from contributed sources with quantitative pricing models or fair value reports from valuation providers to generate evaluated prices and are classified as Level 2 fair value measurements.

Certain long-term obligations have a fair value estimate equal to their carrying value due to recent transaction activity.

The fair value of the debt instruments is disclosed for informational purposes and does not necessarily represent the amount that would be realized upon settlement or transfer.

Fair Value of Financial Instruments Measured at Fair Value

The Company's investment in marketable securities is measured at fair value, using publicly available quoted market prices, a Level 1 input.

Refer to Note 6.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Supplementary Financial Information

Other income (expense), net

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

Other income, net

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

Year Ended December 31,

1 unchanged sentence

Gain on step-up of equity method investment — 3.8

Total $ 16.7 $ ( 1.2 )

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Net loss on repurchase or extinguishment of debt ( 0.3 ) —

Interest income 2.6 1.3

Foreign currency translation gain (loss) 1.3 ( 0.4 )

Total other income, net

Supplemental Cash Flow Information

3 unchanged sentences

$ 80.8 $ 80.4

Restricted cash 0.3 2.0

Restricted cash included in other current assets

Restricted cash included in other assets (non-current) 0.6 1.5

3 unchanged sentences

$ 48.8 $ 80.8

Restricted cash 0.9 0.3

Restricted cash included in other current assets

Restricted cash included in other assets (non-current) 0.5 0.6

3 unchanged sentences

Cash paid for interest $ 48.6 $ 49.0

Cash paid for taxes, net of refunds $ 6.7 $ 5.9

Cash paid for income taxes, net of refunds

Non-cash investing and financing activities:

Unsecured note issued in connection with purchase of preferred stock and payment of dividends $ — $ 35.1

Accrued interest, exit fees and other fees capitalized into principal debt

Accrued interest capitalized into principal debt

Property, plant and equipment included in accounts payable or accrued expenses $ 0.5 $ 0.9

Issuance of preferred stock $ — $ 0.9

Subsequent Events

Rights Offering and Private Placement

On February 23, 2024, the Company's Board of Directors approved a plan to proceed with a $ 19.0 million rights offering for its common stock and fixed March 6, 2024 as the record date for holders of common stock entitled to participate in the rights offering.

On March 5, 2024, the Company set the subscription price at which the rights would be exercisable at $ 0.70 per share and entered into an investment agreement (the “Investment Agreement”) with Lancer Capital, a related party and an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors and a beneficial owner of 29.1 % of the Company's common stock, pursuant to which the rights offering will be backstopped by Lancer Capital.

Because the rules of the NYSE prohibit the issuance to Lancer Capital of more than 1 % of our common stock outstanding before the issuance unless stockholder approval of such issuance is obtained, in lieu of purchasing common stock under the back-stop arrangement Lancer Capital will purchase up to $ 19.0 million of Series C Non-Voting Participating Convertible Preferred Stock, par value $ 0.001 per share (“Series C Preferred Stock”) to be newly authorized by the Company.

The Series C Preferred Stock is intended to be the economic equivalent of common stock, participating on an as-converted basis in all dividends, distributions, merger consideration and all other consideration receivable by holders of common stock, and a means through which the back-stop arrangement can be effected prior to the completion of the stockholder vote and the satisfaction of any other regulatory requirements.

Pursuant to the Investment Agreement, and as a result of limitations on the amount that can be raised under the Company’s effective shelf registration statement on Form S-3, Lancer Capital will also purchase an additional $ 16.0 million of Series C Preferred Stock in a private placement transaction to close concurrently with the settlement of the rights offering.

Under the rules of the NYSE, because the shares Lancer Capital will purchase in the concurrent private placement are greater than 20% of our common stock outstanding before the issuance of the Series C Preferred, those shares of Series C Preferred Stock may not be converted unless stockholder approval of such issuance is obtained.

The Investment Agreement provides that, in the event that for any reason the rights offering is not settled by March 28, 2024, then Lancer Capital will purchase $ 25 million of Series C Preferred Stock.

The Company refers to this arrangement as the “equity advance.” Upon the closing of the rights offering, to the extent that Lancer Capital would have, based on the number of shares of common stock actually sold upon exercise of the rights, purchased less than $ 25 million of Series C Preferred Stock under the back-stop commitment and the concurrent private placement, the Company will redeem the excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance at the redemption price of $ 1,000 per share from the proceeds of the rights offering.

The Series C Preferred Stock terms are set forth in a form of certificate of designations attached as Exhibit A to the Investment Agreement and include a liquidation preference junior to the Company’s existing preferred stock and equal to the Company’s common stock (other than a preference of $ 0.001 per share of Series Preferred Stock that will be paid to the holders of thereof before any payment or distribution is made to the holders of the common stock).

The certificate of designations for the Series C Preferred Stock will be filed with the Secretary of State of the State of Delaware on the early of the closing of the equity advance of the settlement of the rights offering.

In connection with the Investment Agreement, on March 5, 2024 the Company and Lancer entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which the Company granted Lancer certain customary shelf demand and piggyback registration rights with respect to the common stock issuable upon conversion of the Series C Preferred Stock purchased under the Investment Agreement.

INNOVATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Assuming that the Company proceeds with the rights offering and that shares of Series C Preferred Stock are issued to Lancer pursuant to the Investment Agreement the Company intends to seek stockholder approval for the conversion of the Series C Preferred Stock into shares of our common stock at the Company’s 2024 annual stockholders meeting.

The Series C Preferred Stock to be issued to Lancer pursuant to the Investment Agreement will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Refer to Note 6.

Investments for details related to the FDA approval received for MediBeacon's TGFR subsequent to year end.

Refer to Note 11.

Debt Obligations for details related to amendments to the Company's debt instruments subsequent to year end.

Refer to Note 16.

Equity and Temporary Equity for details related to R2 Technologies' issuance of a convertible note subsequent to year end.

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