VATE 10-K & 10-Q changes, risk factors and insider trading

•Ability to meet working capital and long term liquidity requirements

•Risks associated with the misuse by customers, physicians and technicians of Pansend's products or the products of Pansend's investees

•Ability of Pansend and its investees to effectively protect itstheir intellectual property and the impact of a failure to do so

•Impact of legislation and FCC regulations, including with respect to broadcasting licenses, or Congressional legislationlicenses.

INNOVATE’s principal source of cash and cash flow is distributions from its subsidiaries. Thus, its ability to service its debt, including the $330.0 million in aggregate principal amount of 8.5% Senior Secured Notes due 2026 (the "2026 Senior Secured Notes"), $48.9 million aggregate principal of 7.50% convertible senior notes due 2026 (the "2026 Convertible Notes"), $31.0$360.4 million aggregate principal amount of 16.0%new unsecured10.50% notes2027 issuedSenior toSecured Notes, $53.5 million aggregate principal amount of new 9.50% 2027 Convertible Notes, $1.9 million aggregate principal amount remaining of 8.50% 2026 Senior Secured Notes, $0.2 million aggregate principal amount remaining of 7.50% 2026 Convertible Notes, $45.9 million principal amount of the Continental General Insurance Company ("CGIC") due 2026 (the "CGIC Unsecured Note") and the $20.0 million secured revolving credit agreement (the “Revolving Credit Agreement”), of which $20.0 million was drawn as of December 31, 2024,2025, and to finance future acquisitions, is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions to INNOVATE. INNOVATE’s subsidiaries are separate legal entities, and although they may be wholly-owned or controlled by INNOVATE, they have no obligation to make any funds available to INNOVATE, whether in the form of loans, dividends, distributions or otherwise. The ability of INNOVATE’s subsidiaries to distribute cash to it is, and will remain subject to, among other things, restrictions that are contained in its subsidiaries’ financing agreements, availability of sufficient funds and applicable state laws and regulatory restrictions. For instance, DBMG is a borrower under credit facilities that restrict their ability to make distributions or loans to INNOVATE. Specifically, DBMG is party to credit agreements that include certain financial covenants that can limit the amount of cash available to make upstream dividend payments to INNOVATE. For additional information, refer to Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources".

Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations, including under our outstanding indebtedness, and our obligations under our outstanding shares of preferred stock, could harm our business, financial condition and results of operations. Our ability to make payments on and to refinance our indebtedness and outstanding preferred stock and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control. For a description of our and our subsidiaries' indebtedness, refer to Note 11. Debt Obligations included into the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

If our business does not generate sufficient cash flowflows from operations or if future borrowings are not available to us in an amount sufficient to enable us and our subsidiaries to pay our indebtedness or make mandatory redemption payments with respect to our outstanding shares of preferred stock, or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness or redeem the preferred stock, out of legally available funds, on or before the maturity thereof, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on us.

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 of our Corporate Senior Secured Notes, other current debt at Corporate and certain of our subsidiaries as well as from certain cross-default provisions in the Company's Senior Secured Notes.obligations. 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 2027 Senior Secured Notes over the next twelve months.months, or any potential breach of the milestone covenant of our 2027 Senior Secured Notes, which has required the Company to commence a sales process for all or substantially all of DBM Global’s assets or equity interests in accordance with certain dates and deadlines. Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information. The Company plans to alleviate these conditions through various initiatives it is currently exploring, including refinancing the debt at Corporate and our subsidiaries, pursuing asset sales, and potentially refinancing debt 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, additional capital raises, or refinancethe refinancing of its existing debt, on attractive terms,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.dates. 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. The potential inability to complete any assets sales, refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing or raise sufficient cash to pay the debt at maturity would have a material adverse effect on our financial condition and likely cause the price of the Company’s common stock to decline.

The instruments and agreements governing our indebtednessindebtedness, and Certificatesour Third Amended and Restated Certificate of Designation for our outstanding shares of preferred stockIncorporation contain various covenants that limit our discretion in the operation of our business and/or require us to meet financial maintenance tests and othercertain covenants. The failure to comply with such tests and covenants could have a material adverse effect on us.

The debt facilities at our subsidiaries contain similar covenants applicable to each respective subsidiary. These covenants may limit our ability to effectively operate our businesses. For example, DBMG has an indemnity agreement with its surety bond provider that also contains covenants on retention of capital and working capital requirements for DBMG, which may limit the amount of dividends DBMG may pay to its stockholders.

Any failure to comply with the restrictions in the agreementsindentures governing INNOVATE’s 2027 Senior Secured Notes or any other instrument or agreement governing our indentures,existing indebtedness, or any agreement governing other indebtedness we couldmay incur,incur in the future, may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt. If any of these risks were to occur, our business and operations could be materially and adversely affected. Refer to FootnoteNote 11. Debt Obligations to our Consolidated Financial Statements included in thethis Annual Report on Form 10-K for additional information.

TheOur CertificatesThird Amended and Restated Certificate of DesignationIncorporation provideprovides the holders of our preferredSeries stockA-3 and Series A-4 Preferred Stock with consent and voting rights with respect to certain of the matters referred to above, in addition to certain corporate governance rights. These restrictions may interfere with our ability to obtain financings or to engage in other business activities, which could have a material adverse effect on our business and operations.

We have a significant amount of indebtedness and outstanding shares of preferred stock. As of December 31, 2024,2025, our total principal amount of outstanding debt was $668.3$687.2 million and the accrued value of our outstanding preferred stock had a combined redemption value of $16.1$9.3 million and a current fair value of $16.4$9.6 million as of December 31, 2024,2025, which is inclusive of the $0.3 million of accrued dividendcash payable on January 15, 2025.dividends. We may not generate enough cash flow to satisfy our obligations under such indebtedness and other arrangements. This significant amount of indebtedness poses risks such as risk of inability to repay such indebtedness, as well as:

•our 2026 Senior Secured Notes are secured by substantially all of INNOVATE’s assets and those of certain of INNOVATE’s subsidiaries that have guaranteed the 2026 Senior Secured Notes, including certain equity interests in our other subsidiaries and other investments, as well as certain intellectual property and trademarks, and those assets cannot be pledged to secure other financings;

•our having to divert a significant portion of our cash flowflows from operations to payments on our indebtedness and other arrangements, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

In addition, it is possible that we may need to incur additional indebtedness or enter into additional financing arrangements in the future in the ordinary course of business. The terms of the Secured Indenture and our subsidiaries’ other financing arrangements allow us to incur additional debt and issue additional shares of preferred stock, subject to certain limitations. If additional indebtedness is incurred or equity is issued, the risks described above could intensify. In addition, our inability to maintain certaincompliance leveragewith ratiosour debt covenants could result in acceleration of all or a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations.

We cannot assure you that our business will generate cash flowflows from operations in an amount sufficient to fund our liquidity needs. If our cash flows and capital resources are insufficient, we may be forced to reduce or delay capital expenditures, sell assets and/or seek additional capital or financings. Our ability to obtain future financings will depend on the condition of the capital markets and our financial condition at such time. Any financings could be at high interest rates and may require us to comply with covenants in addition to, or more restrictive than, covenants in our current financing documents, which could further restrict our business operations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such disposition may not be adequate to meet our obligations. For the years ended December 31, 20242025 and 2023,2024, we recognized cash flows provided by operating activities of $9.1$146.6 million and $26.5$9.1 million, respectively.

Loss of our key management or other personnel, including the 2023 unexpected passing of our Chief Executive Officer, President and Director, could adversely impact our business.

We believe that the future success of INNOVATE and its operating subsidiaries is largely dependent and will depend to a significant extent upon the performance, skills, experience and efforts of our senior management and certain other key personnel. If, for any reason, one or more senior executives or key personnelpersonnel, including our Interim CEO, were not to remain active in our Company, our results of operations could be adversely affected.

In future periods, if the process required by Section 404 of the Sarbanes-Oxley Act of 2002, (the "Sarbanes-Oxley Act") reveals or we otherwise identify one or more material weaknesses or significant deficiencies, the correction of any such material weakness or significant deficiency could require additional remedial measures including additional personnel which could be costly and time-consuming. If a material weakness exists as of a future period year-endperiod-end (including a material weakness identified prior to year-end for which there is an insufficient period of time to evaluate and confirm the effectiveness of the corrections or related new procedures), our management will be unable to report favorably as of such future period year-end to the effectiveness of our internal control over financial reporting. If we are unable to assert that our internal control over financial reporting is effective in any future period, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the trading price of our common stock and potentially subject us to additional and potentially costly litigation and governmental inquiries/investigations.

Our business requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although we have not experienced any labor shortages to date, we have observed an overall tightening and increasingly competitive labor market sincein 2021.recent years. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary and wages, social benefits and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.

Although the majority of our productsoperations are manufactured and sold inside ofwithin the United States, we conduct various operations outside the United States. As a result, we face exposure to movements in currency exchange rates. These exposures include but are not limited to:

On February 26, 2024, the Company was notified by the New York Stock Exchange ("NYSE") that the average closing price of the Company's common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price required by Section 802.01C of the NYSE Listed Company Manual (“Section 802.01C”). Pursuant to Section 802.01C, the Company had a period of six months following the receipt of the notice to regain compliance with the minimum share price requirement. On August 27, 2024, subsequent to a reverse stock split effected by the Reverse Stock Split,Company, the Company was notified by the NYSE that it had again regained compliance with this listing standard. If the Company's average closing price of the Company's common stock falls below $1.00 per share again and the Company is unable to regain compliance with the $1.00 share price rule within the mandated cure period, the NYSE will initiate procedures to suspend and delist the Common Stock. If the common stock ultimately were to be delisted from the NYSE, it could negatively impact the Company by, among other things, (i) reducing the liquidity and market price of the Company’s common stock; (ii) reducing the number of investors willing to hold or acquire the Company’s common stock, which could negatively impact the Company’s ability to raise equity financing; and (iii) limiting the Company’s ability to sell its common stock in certain states within the United States, also potentially impacting the Company’s ability to raise financing. If the Company’s common stock is delisted from NYSE, the price paid by investors may not be recovered.

Despite our implementation of industry-accepted security measures and technology, our information systems are vulnerable to and have been subject to cyber-attacks, computer viruses, malicious codes, unauthorized access, phishing efforts, denial-of-service attacks and other cyber-attacks and we expect to be subject to similar attacks in the future as such attacks become more sophisticated and frequent. Although to date, such attacks have not had a material impact on our financial condition, results of operations or liquidity, there can be no assurance that our cybersecurity measures and technology will adequately protect us from these and other risks, including internal and external risks such as natural disasters and power outages and internal risks such as insecure coding and human error. Attacks perpetrated against our information systems could result in loss of assets and critical information, theft of intellectual property or inappropriate disclosure of confidential information and could expose us to legal and remediation costs and reputational damage. The inappropriate disclosure of confidential information or risk of theft of our intellectual property could result from the inappropriate use of AI systems by our employees, personnel, or business partners with access to such information, which could have an adverse effect on our business. In addition, the unexpected or sustained unavailability of the information systems or the failure of these systems to perform as anticipated for any reason, including cybersecurity attacks and other intentional hacking, could subject us to additional legal costs and claims if there is loss, disclosure or misappropriation of or access to our customers’ information and could result in service interruptions, safety failures, security violations, regulatory compliance failures, an inability to protect information and assets against intruders, sensitive data being lost or manipulated and could otherwise disrupt our businesses and result in decreased performance, operational difficulties and increased costs, any of which could adversely affect our business, results of operations, financial condition or liquidity.

Our ability to utilize our net operating loss ("NOL") and other tax carryforward amounts, suchincluding asdisallowed interest carryforwards under Code Section 163(j) disallowed interest carryforwards, to reduce taxable income in future years, may be limitedsubject to limitations for various reasons. As a result of the enactment of the Tax Cuts and Jobs Act ("TCJA"), the deduction for NOLs arising in tax years after December 31, 2017, will be limited to 80% of taxable income, although they can be carried forward indefinitely. NOLs that arose prior to the years beginning January 1, 2018 are still subject to the same carryforward periods.

As of December 31, 2024, the U.S. consolidated group had approximately $174.3 million of federal NOL carryforwards and $222.2 million of Code Section 163(j) interest limitation carryforwards available to offset our future taxable income, which NOLs will begin to expire in 2034. Pursuant to the Code Sections 382 and 383, use of our NOLs and certain other tax attributes may be limited by an “ownership change” within the meaning of Code Section 382 and applicable Treasury Regulations. If a corporation undergoes an “ownership change,” which is generally defined as an increase of more than 50% of the value of a corporation’s stock owned by certain “5-percent shareholders” (as such term is defined in Internal Revenue Code Section 382) over a rolling three-year period, the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change income or taxes may be limited.

Additionally,For example, if substantial acquisitions of our common stock are reported by new beneficial owners, and we issue shares of our preferred stock, convertible into our common stock, we would conduct a Code Section 382 review. The conclusions of this review could indicate that an ownership change has occurred. For example, as a result of our common stock offering in November 2015 and our purchase of GrayWolf in November 2018, we triggered additional ownership changes at GrayWolf, imposing additional limitations on the use of the acquired NOL carryforward amounts. There can be no assurance that future ownership changes would not further negatively impact our NOL carryforward amounts because any future annual Section 382 limitation will ultimately depend on the value of our equity as determined for these purposes and the amount of unrealized gains immediately prior to such ownership change.

The global economy and capital and credit markets have experienced exceptional turmoil and upheaval over the past several years. Ongoing concerns about the systemic impact of potential long-term and widespread recession and potentially prolonged economic recovery, volatile energy costs, fluctuating commodity prices and interest rates, volatile exchange rates, geopolitical issues, including the armed conflictconflicts in UkraineUkraine, the Middle East and Israel,Venezuela, among others, natural disasters and pandemic illness, instability in credit markets, cost and terms of credit, consumer and business confidence and demand, a changing financial, regulatory and political environment, and substantially increased unemployment rates have all contributed to increased market volatility and diminished expectations for many established and emerging economies, including those in which we operate. Furthermore, austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major financial trading markets may adversely affect world economic conditions and have an adverse impact on our business. These general economic conditions could have a material adverse effect on our cash flow from operations, results of operations and overall financial condition.

Climate change related events, such as increased frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions, and other natural disasters, may have both immediate and long-term impacts on our business, financial condition and results of operations. While we seek to mitigate our business risks associated with climate change by establishing robust environmental programs and partnering with organizations who are also focused on mitigating their own climate-related risks, we recognize that there are inherent climate change-related risks wherever business is conducted. While there have been no direct impacts to the financial statements, any of our primary locations could be vulnerable to the adverse effects of climate change, including drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with wildfire prevention.prevention, hurricanes, floods, rising sea levels. Changing market dynamics, global policy developments and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt our business, the business of our third-party suppliers and the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. In addition, infrastructure owners could face increased costs to maintain their assets, which could result in reduced profitability and fewer resources for strategic investment. These types of physical risks could in turn lead to transitional risks (i.e., the degree to which society responds to the threat of climate change), such as market and technology shifts, including decreased demand for our services and solutions, reputational risks, such as how our values and practices regarding a low carbon transition are viewed by external and internal stakeholders, and policy and legal risks, such as the extent to which low carbon transitions are driven by the governments of the jurisdictions in which we operate around the globe, all of which could have a material adverse impact on our business, financial condition and results of operations.

•outbreaks of pandemic diseases, including new COVID-19 variants, or fear of such outbreaks;

•political instability, war and civil disturbances or other conflicts and risks that may limit or disrupt markets, such as terrorist attacks, piracy and kidnapping;

We have made investments in and own a majority stake in a number of development stage companies, primarily in our Life Sciences segment. Each of these companies is at an early stage of development and is subject to all business risks associated with a new enterprise, including constraints on their financial and personnel resources, lack of established credit, the need to establish meaningful and beneficial vendor and customer relationships and uncertainties regarding product development and future revenues. We anticipate that many of these companies will continue to incur substantial additional operating losses for at least the next several years and expect their losses to increase as research and development efforts expand. There can be no assurance as to when or whether any of these companies will be able to develop significant sources of revenue or that any of their respective operations will become profitable, even if any of them ishave or are able to commercialize any products. As a result, we may not realize any returns on our investments in these companies, which could adversely affect our business, results of operations, financial condition or liquidity.

There may be tax consequences associated with our disposition, acquisition, investment, holding and dispositionholding of target companies and assets.

We may incur significant taxes in connection with effecting dispositions, acquisitions of, or investments in, holding, receiving payments from, operating or disposingoperating of target companies and assets. Our decision to sell a particular asset, make a particular acquisition, sell a particular asset or increase or decrease a particular investment may be based on considerations other than the timing and amount of taxes owed as a result thereof. We may remain liable for certain tax obligations of certain disposed companies, and we may be required to make material payments in connection therewith.

We have, in the past, indirectly through our subsidiaries, formed joint ventures, and may in the future engage in similar joint ventures with third parties. In such circumstances, we may not be in a position to exercise significant decision-making authority if we do not own a substantial majority of the equity interests of such joint venture or otherwise have contractual rights entitling us to exercise such authority. These ventures may involve risks not present werewhen a third party is not involved, including the possibility that partners might become insolvent or fail to fund their share of required capital contributions. In addition, partners may have economic or other business interests or goals that are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Disputes between us and partners may result in litigation or arbitration that would increase our costs and expenses and divert a substantial amount of management’s time and effort away from our businesses. We may also, in certain circumstances, be liable for the actions of our third-party partners which could have a material adverse effect on us.

We and our subsidiaries and our investees rely on trademark, copyright, trade secret, contractual restrictions and patent rights to protect our intellectual property and proprietary rights and if these rights are impaired, then our and our investees' ability to generate revenue and our competitive positionpositions may be harmed.

We are a diversified holding company with principal operations conducted through three operating platforms or reportable segments as of December 31, 2025: Infrastructure ("DBMG"), Life Sciences ("Pansend"), and Spectrum, plus our Other segment, which includes businesses that do not meet the separately reportable segment thresholds. For additional information on our business, refer to Note 1. Organization and Business to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Examples of other items that may cause our results or demand for our services to fluctuate materially from quarter to quarter include: weather or project site conditions; customer spending patternspatterns, including seasonal trends, and the financial condition of our customers and their access to capital; our profit margins ofon projects performed during any particular period; rising interest rates and inflation; and regulatory, economic, political and market conditions on a regional, national or global scale.

We continually evaluate strategic and business alternatives within our operating segments, which may include the following: operating, growing or acquiring additional assets or businesses related to current or historical operations; or winding down or selling our existing operations. In the longer-term,longer term, we may evaluate opportunities to acquire assets or businesses unrelated to our current or historical operations. In the event we were to enter into a strategic transaction to sell any of our existing operations, our intention is to use available proceeds from such transaction to address our capital structure.

During 2024, including subsequent to year end,2025, as part of our strategic process, we have engaged in several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.

Refer to Note 11. Debt Obligations included into the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on the note and theits various amendments during the years ended December 31, 2024 and 2023.amendments.

On June 20, 2024, Pansend closed on a new Series D Preferred Stock ("Series D") investment in R2. As part ofDuring the transaction,year 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 ofended December 31, 2024 and 2023, respectively. Subsequent to year end, on February 20, 2025, Pansend closed on aseveral new $3.5 millionintercompany convertible 13.0% note instrumentinstruments with R2 Technologies, whichand isfunded convertible,a total of $7.5 million to R2 Technologies. The outstanding principal amounts of the notes, together with any interest then accrued interestand unpaid, is convertible at the timeoption of conversion,Pansend into shares of a new Series E Convertible Preferred Stock ("Series E") or new Series F Convertible Preferred Stock ("Series F") in R2 TechnologiesTechnologies, as applicable to each note, upon written notice to R2 Technologies and hasthe notes have a maturity datedate, of the earlier of July 31, 2025,2026, or a change in control,control of R2 Technologies, as defined in the agreement.notes. TheThese transactionnotes isand related intercompany interest are eliminated on consolidation. Subsequent to year end, in February and March 2026, an additional $0.3 million in intercompany convertible 13.0% notes with R2 Technologies was funded. Refer to Note 16. Equity and Temporary Equity included into the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on R2 Technologies' convertible preferred stock and convertible notes.

Subsequent to year end, inOn January 17, 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 of $11.4 million and the related accrued interest of $1.5 million, together totaling $12.9 millionmillion, were converted into Series 3 Preferred Stock. In addition, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $7.5 million milestone investmentpayment infrom itsHuadong Medicine Co. Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, to MediBeacon for MediBeacon preferred stock bywas Huadong wasreceived in process.the Thisfirst willquarter decreaseof 2025. As a result of these transactions, Pansend's ownership in MediBeacon decreased from approximately 45.9% prior to the transactiontransactions to approximately 44.7% subsequent to the transaction.transactions. On a fully diluted basis, Pansend's ownership in MediBeacon will decreasedecreased from 40.1% prior to 39.7%.the transactions to 39.7% subsequent to the transactions. Refer to Note 6. Investments, which is incorporated herein by reference, for additional information.

Revenue: Revenue for the year ended December 31, 2024,2025, decreasedincreased $315.9$138.9 million to $1,107.1$1,246.0 million from $1,423.0$1,107.1 million for the year ended December 31, 2023.2024. The decreaseincrease was primarily driven by our Infrastructure segment, and to a lesser extent our Life Sciences segment, which was partially offset by increasesa decrease at our Life Sciences and Spectrum segments.segment. The decreaseincrease at our Infrastructure segment was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable year on certain large commercial construction projects, which was partially offset by timing and size of projects at the industrial maintenance and repair business, Banker Steel and the construction modeling and detailing business, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business,business atin Bankerthe Steelcomparable and DBMG's commercial structural steel fabrication and erection business, both ofyear, which also had increased activity in the prior year on certain large commercial construction projects that have since been completed in the current year. This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.completed. The increase at our Life Sciences segment was attributable to R2 Technologies, primarily driven by increases in Glacial Spa and Glacial fx unit sales outside North America, as well as an increase in consumable sales in North AmericaAmerica, andwhich worldwidewas ofpartially alloffset R2by Technologies'a products,decrease includingin Glacial systemsfx andunit consumables.sales in North America. The increasedecrease at our Spectrum segment was primarily driven by networkthe launchestermination of certain customers in the current year and expandeda coveragedownturn within existingthe customers.direct response advertising market, which was partially offset by the launch of new networks subsequent to the comparable year.

Loss from equity investees: Loss from equity investees for the year ended December 31, 2024,2025, decreasedincreased $7.1$3.6 million to $2.3$5.9 million from $9.4$2.3 million for the year ended December 31, 2023.2024. The decreaseincrease in loss was due to aan decreaseincrease in losses recognized from MediBeacon, Triple Ring and HMN.MediBeacon. During the year ended December 31, 2024,2025, as a result of additionalthe convertiblefirst notequarter investmentsequity intransactions MediBeaconthat byoccurred Pansend,upon FDA approval of MediBeacon's TGFR, Pansend's basis in MediBeacon increased by $2.3$5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizedrecognizing $2.3$5.9 million of equity method losses that were previously unrecognized,unrecognized. whereas duringDuring the year ended December 31, 2023, as a result of $4.7 million convertible note investments in MediBeacon by Pansend and a $3.8 million equity transaction with Huadong,2024, Pansend's basis in MediBeacon had increased by $8.5$2.3 million anddue to the issuance of additional convertible note investments in the comparable year, resulting in Pansend hadrecognizing recognized $8.5$2.3 million of equity method losses that were previously unrecognized. As of both December 31, 20242025 and 2023,2024, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. The partial sale of Triple Ring was completed during the fourth quarter of 2023, which resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting. Our previous investment in HMN was sold on March 6, 2023 and had losses for the approximately two months of ownership in 2023. Thus, no equity method losses from either Triple Ring or HMN were recognized in the current year. Refer to Note 6. Investments included into the Consolidated Financial Statements of this Annual Report on Form 10-K10-K. which is incorporated herein by reference, for additional information on our equity investments.

Income tax expense: Income tax expense for the year ended December 31, 2024,2025, increaseddecreased $1.8$3.8 million to $6.3$2.5 million from $4.5$6.3 million for the year ended December 31, 2023.2024. The increasedecrease was primarily driven by the taxdecrease expensein pre-tax results, as well as the limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group utilizing its remaining unlimited NOLs in 2024the comparable year. These limitations arose from Internal Revenue Code Section 382 and due to the Tax Cuts and Jobs Act's 80%80 percent limitation on net operating lossesNOLs incurred after 2017 and the unrepeated $1.1 million tax benefit, consisting of a current tax expense of $4.4 million related to a foreign 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 put option, both of which were related to the sale of New Saxon's 19.0% investment in HMN on March 6, 2023.2017.

The Organization for Economic Cooperation and Development ("OECD") has announced an Inclusive Framework on Base Erosion and Profit Shifting including a Pillar Two Model to provide for a 15% global minimum tax on the earnings of multinational corporations with consolidated revenue over €750 million. Many jurisdictions have enacted Pillar Two legislation that startsstarted to become effective in 2024. The OECD, and its member countries, continue to release new guidance and legislation on Pillar Two. Based on current enacted laws, Pillar Two is not expected to materially impact our effective tax rate or cash flows in the next year. We will continue to evaluate the impact on our financial position as new legislation or guidance is introduced which could change our current assessment.

In the Company's Consolidated Financial Statements, other operating (income) loss includes: (i) (gain) loss on sale or disposal of assets; (ii) lease termination costs and (gains) losses on lease modifications; (iii) asset impairment expense; and (iv) accretion of asset retirement obligations; andas (v) Federal Communications Commission (the "FCC") reimbursements.applicable. Each table summarizes the results of operations of our operating segments (in millions).

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026 (the "2025 Annual Report"), and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section in our 2025 Annual Report as well as below in this Form 10-Q and the section below entitled "Special Note Regarding Forward-Looking Statements" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, "INNOVATE" means INNOVATE Corp. and the "Company," "we", "us" and "our" mean INNOVATE together with its consolidated subsidiaries. "U.S. GAAP" means accounting principles generally accepted in the United States of America.

We are a diversified holding company with principal operations conducted through three operating platforms or reportable segments as of MarchJune 31,30, 2026: Infrastructure ("DBMG"), Life Sciences ("Pansend"), and Spectrum, plus our Other segment, which includes businesses that do not meet the separately reportable segment thresholds.

In the below section within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we compare, pursuant to U.S. GAAP and SEC disclosure rules, the Company’s results of operations for the three and six months ended MarchJune 31,30, 2026, as compared to the three and six months ended MarchJune 31,30, 2025.

The following table summarizes our results of continuing operations (in millions):

Revenue: Revenue for the three months ended MarchJune 31,30, 2026, increased $90.6$179.6 million to $364.8$421.6 million from $274.2$242.0 million for the three months ended MarchJune 31,30, 2025. Revenue for the six months ended June 30, 2026, increased $270.2 million to $786.4 million from $516.2 million for the six months ended June 30, 2025. The increaseincreases waswere primarily driven by our Infrastructure segment, which was partially offset by decreases at our Life Sciences and Spectrum segments. The increase at our Infrastructure segment was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable period on certain large construction projects, which was partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed. The decrease at our Life Sciences segment was attributable to R2 Technologies, primarily driven by net decreases in Glacial fx and Glacial Rxsystem unit sales indue Northto America,liquidity which were partially offset by an increase in Glacial Spa unit sales outside North America.constraints. The decrease at our Spectrum segment was primarily driven by the termination of a few networks and individual markets subsequent to the comparable period.period, partially offset by the launch of new networks.

Income from operations: Income from operations for the three months ended MarchJune 31,30, 2026,2026 increased $6.6$29.6 million to $10.0$34.5 million from $3.4$4.9 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to a net increase in gross profit of $8.0$33.9 million, a decrease in other operating losses of $1.2 million and a net decrease in depreciation and amortization of $0.2$0.9 million, partially offset by a net increase in selling, general and administrative ("SG&A") expenses of $1.6$6.4 million. The net increase in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects in the current period, which had increased activity subsequent to the comparable period, whichcombined waswith changes in the estimate of the cost to complete those projects recognized in the ordinary course driven by efficiencies recognized around certain projects, partially offset by our Spectrum and Life Sciences segmentssegment due to the decreasesdecrease in revenue. The decrease in other operating losses was driven by our Infrastructure segment due to unrepeated losses on the sales of various properties and an unrepeated loss on lease modification in the comparable period. The decrease in depreciation and amortization was primarily driven by the Spectrum segment's cessation of depreciation and amortization on its long-lived assets subsequent to its classification as held for sale on May 29, 2026. The increase in SG&A was primarily driven by our Infrastructure segmentsegment, primarily due to anthe increasetiming inof compensation-related expensesexpenses, due to timing, as well asand an increase at our Non-Operating CorporateSpectrum segment primarily driven by transaction-related expenses incurred in the current period related to potential dispositions.period. These increases in SG&A were partially offset by a decrease in SG&A at our Life Sciences segment due to a reductionreductions in compensation-related expenses at R2 Technologies and Pansend.

Interest expense: Interest expense for the three months ended MarchJune 31,30, 2026,2026 increased $4.3$6.2 million to $24.5$27.6 million from $20.2$21.4 million for the three months ended MarchJune 31,30, 2025. Interest expense for the six months ended June 30, 2026, increased $10.5 million to $52.1 million from $41.6 million for the six months ended June 30, 2025. The increase in interest expense was primarily driven by our Non-Operating Corporate and Spectrum segments. The increase at our Non-Operating Corporate segment was due to the indebtedness refinancing transactions completed subsequent to the comparable period, which resulted in increased principal balances due to the capitalization of fees and interest, and certain increases in interest rates, leading to increased interest expense including amortization of fees. The increase at our Spectrum segment was primarily due to the New Spectrum Loan Agreement entered into in the current period, under which the effective interest rate includes the stated interest rate and accretion of a contractually specified minimum return on the New Spectrum Loan Agreement through its stated maturity. These increases were partially offset by our Life Sciences segment due to the refinancing of their debt subsequent to the comparable period, which removed certain exit and default fees and decreased the stated interest rate, which was partially offset by the higher outstanding principal amount. ReferThe toincrease Notein 11.interest Debtexpense Obligationswas toalso partially offset by our Infrastructure segment primarily driven by the Condensednet Consolidateddecrease Financialin Statementsprincipal of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on the indebtedness refinancing transactions.balance.

Loss from equity investees: Loss from equity investees for the threesix months ended MarchJune 31,30, 2026, decreased $5.9 million to zero from $5.9 million for the threesix months ended MarchJune 31,30, 2025. The decrease was due to a decrease in losses recognized from MediBeacon. During the threesix months ended MarchJune 31,30, 2025, as a result of the unrepeated equity transactions that occurred upon FDA approval of MediBeacon's TGFR in the comparable period, Pansend's basis in MediBeacon increased by $5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizing $5.9 million of equity method losses that were previously unrecognized. As of both MarchJune 31,30, 2026 and MarchJune 31,30, 2025, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. Refer to Note 6.7. Investments to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on our equity investments.

OtherGain income,(loss) neton extinguishment of debt: OtherGain income,on netextinguishment of debt for the three and six months ended MarchJune 31,30, 2026,2026 decreasedincreased $3.7$18.7 million to $0.3a gain of $18.4 million from $4.0a loss of $0.3 million for the three and six months ended MarchJune 31,30, 2025. The decreasegain wason primarilyextinguishment drivenof bydebt for the unrepeatedthree $4.4and millionsix step-upmonths gainended followingJune MediBeacon's30, FDA2026 approvalrelated into the comparableSpectrum period,refinancing whichtransaction was partially offset by an unrepeated legal settlement expense at our Non-Operating Corporate segment induring the comparablecurrent period. Refer to Note 20.3. SupplementaryAssets Financialand InformationLiabilities Held for Sale to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on otherthe income,refinancing net.transaction. The loss on extinguishment of debt of $0.3 million for the three and six months ended June 30, 2025 related to our Infrastructure segment's refinancing.

Income tax expense: Income tax expense for the three months ended MarchJune 31,30, 2026,2026 decreasedincreased $4.2$8.9 million to $2.9$13.1 million from $7.1$4.2 million for the three months ended MarchJune 31,30, 2025. Income tax expense for the six months ended June 30, 2026, increased $4.7 million to $16.0 million from $11.3 million for the six months ended June 30, 2025. The movementincreases in tax expense waswere primarily driven by the impact of projectedhigher pre-tax resultsincome oncombined with an increase in the annual effective tax raterate, including theas a result of limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group as a result of theunder Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.

Revenue: Revenue for the three months ended MarchJune 31,30, 2026,2026 increased $93.0$180.9 million to $357.9$414.0 million from $264.9$233.1 million for the three months ended MarchJune 31,30, 2025. Revenue for the six months ended June 30, 2026, increased $273.9 million to $771.9 million from $498.0 million for the six months ended June 30, 2025. The increaseincreases waswere primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection businessbusiness, which had increased activity subsequent to the comparable period on certain large construction projects, combined with changes in the estimate of the cost to complete those projects recognized in the ordinary course driven by efficiencies recognized around certain projects, and to a lesser extent, at the newconstruction modularmodeling and detailing business and the constructionnew modeling and detailingmodular business. The increases were partially offset by a decrease at the industrial maintenance and repair business due to the timing and size of projects, which had increased activity in the comparable period on certain large construction projects that have since been completed.

Cost of revenue: Cost of revenue for the three months ended MarchJune 31,30, 2026,2026 increased $83.5$146.2 million to $307.0$337.6 million from $223.5$191.4 million for the three months ended MarchJune 31,30, 2025. The increase was primarily driven by the increase in revenue at DBMG's commercial structural steel fabrication and erection business due to the increased activity subsequent to the comparable period on certain large construction projects, and to a lesser extent, an increase at the new modular business and the construction modeling and detailing business due to the increases in revenue. The increases in cost of revenue were partially offset by a decrease at the industrial maintenance and repair business as a result of the decrease in revenue due to the timing of project activity on certain large construction projects that have been completed subsequent to the comparable period.

Selling, general and administrative: Selling, general and administrative expense for the three months ended MarchJune 31,30, 2026,2026 increased $2.7$7.3 million to $32.0$34.1 million from $29.3$26.8 million for the three months ended MarchJune 31,30, 2025. Selling, general and administrative expense for the six months ended June 30, 2026, increased $10.0 million to $66.1 million from $56.1 million for the six months ended June 30, 2025. The increaseincreases waswere primarily driven by anthe increasetiming inof compensation-related expenses due to timing.expenses.

Revenue: Revenue for the three months ended MarchJune 31,30, 2026,2026 decreased $1.5$1.0 million to $1.6$2.2 million from $3.1$3.2 million for the three months ended MarchJune 31,30, 2025. The decrease in revenue was attributable to R2 Technologies, primarily driven by decreases in Glacial fx and Glacial Rx unit sales in North America,America which were partially offset by an increase inand Glacial Spa unit sales outside North America.America due to liquidity constraints.

Cost of revenue: Cost of revenueRevenue for the threesix months ended MarchJune 31,30, 2026, decreased $0.9$2.5 million to $1.4$3.8 million from $2.3$6.3 million for the threesix months ended MarchJune 31,30, 2025. The decrease in cost of revenue was attributable to R2 Technologies, primarily driven by the decrease in revenue noted above and, to a lesser extent, the related decreases in warrantyGlacial expensesfx and royaltyGlacial expenses.Rx unit sales in North America due to liquidity constraints.

Selling, general and administrative: Selling, general and administrative expense for the three months ended MarchJune 31,30, 2026,2026 decreased $1.4$2.2 million to $2.3$1.6 million from $3.7$3.8 million for the three months ended MarchJune 31,30, 2025. Selling, general and administrative expense for the six months ended June 30, 2026, decreased $3.6 million to $3.9 million from $7.5 million for the six months ended June 30, 2025. The decreasedecreases waswere primarily driven by a reductionreductions in compensation-related expenses at R2 Technologies and Pansend.

Revenue: Revenue for the three months ended MarchJune 31,30, 2026,2026 decreased $0.9$0.3 million to $5.3$5.4 million from $6.2$5.7 million for the three months ended MarchJune 31,30, 2025. Revenue for the six months ended June 30, 2026, decreased $1.2 million to $10.7 million from $11.9 million for the six months ended June 30, 2025. The decreasedecreases waswere primarily driven by the termination of a few networks and individual markets subsequent to the comparable period.period, which was partially offset by the launch of new networks.

Selling,Cost generalof and administrativerevenue: Selling,Cost generalof and administrative expensesrevenue for the three months ended MarchJune 31,30, 2026 increased $0.5slightly by $0.3 million to $3.4$3.2 million from $2.9 million for the three months ended MarchJune 31,30, 2025. TheCost increaseof wasrevenue primarilyfor driventhe six months ended June 30, 2026 increased slightly by $0.9$0.3 million ofto expenses$6.1 inmillion from $5.8 million for the currentsix periodmonths relatedended toJune potential30, dispositions, which was partially offset by a decrease in compensation-related expenses.2025.