Innovate Corp (NYSE: VATE) posts Q2 profit but flags going concern risk
Rhea-AI Filing Summary
INNOVATE Corp. reported much stronger operating results for the quarter ended June 30, 2026, led by its Infrastructure segment. Revenue was $421.6 million versus $242.0 million a year earlier, and net income attributable to INNOVATE was $10.7 million compared with a $19.8 million loss. Basic EPS turned to a profit of $0.74 from a loss of $1.67. For the first half of 2026 the company still posted a net loss of $4.7 million, but operating cash flow was positive at $20.9 million.
The balance sheet remains highly leveraged and in deficit. Total assets were $1,006.7 million against $626.4 million of debt, including $553.9 million classified as current, and stockholders’ deficit was $228.6 million. Management states there is “substantial doubt” about the company’s ability to continue as a going concern within one year due to upcoming maturities and covenant risks on the 10.50% 2027 Senior Secured Notes and other obligations. To address this, INNOVATE is pursuing asset sales, including a Spectrum broadcasting merger that reclassifies that segment as held for sale, and exploring refinancings and capital raises. Infrastructure backlog remained large, with $1,901.0 million in remaining performance obligations.
Positive
- For Q2 2026, revenue increased to $421.6 million from $242.0 million a year earlier, and net income attributable to INNOVATE improved to $10.7 million from a $19.8 million loss, with basic EPS swinging to $0.74 from a $1.67 loss.
- The Infrastructure segment reported remaining performance obligations of $1,901.0 million, providing multi‑year revenue visibility from awarded construction contracts across industrial, commercial, healthcare, government, transportation and other markets.
Negative
- Management explicitly states there is substantial doubt about the company’s ability to continue as a going concern within one year, driven by upcoming debt maturities, cross‑default provisions, and milestone covenants tied to the 10.50% 2027 Senior Secured Notes.
- Total debt outstanding was $626.4 million, including $553.9 million classified as current, while total stockholders’ deficit was $228.6 million, indicating high leverage and a negative equity position.
Filing Explained
Spectrum control would transfer to CONX while INNOVATE retains 25 percent, but the merger remains unclosed and conditional.
As an unaudited quarterly report, this filing updates INNOVATE’s interim financial statements and liquidity disclosures. The proposed Spectrum merger remains unclosed: if completed, control of Broadcasting would move to CONX, which would own
The filing classifies Spectrum as held for sale, but not as discontinued operations; the stated merger conditions include regulatory approvals and the absence of a declared default under the new Spectrum loan. This means the accounting classification is in place before the proposed disposal has completed.
After quarter-end, consenting noteholders permitted interest due on
The Spectrum Merger Agreement permits termination if closing has not occurred by
Key Figures
Q2 2026 revenue: $421.6 million
Q2 2026 net income attributable to INNOVATE: $10.7 million
Six‑month net loss: $4.7 million
+5 more
8 metrics
Q2 2026 revenue
$421.6 million
Revenue for the three months ended June 30, 2026
Q2 2026 net income attributable to INNOVATE
$10.7 million
Net income attributable to INNOVATE Corp. for the quarter ended June 30, 2026
Six‑month net loss
$4.7 million
Net loss for the six months ended June 30, 2026
Cash from operating activities
$20.9 million
Cash provided by operating activities for the six months ended June 30, 2026
Total assets
$1,006.7 million
Total assets as of June 30, 2026
Total debt principal
$626.4 million
Total outstanding principal on debt obligations as of June 30, 2026
Current portion of debt
$553.9 million
Debt obligations classified as current as of June 30, 2026
Infrastructure remaining performance obligations
$1,901.0 million
Transaction price allocated to remaining unsatisfied Infrastructure performance obligations as of June 30, 2026
Key Terms
going concern, held for sale, Bridge Loan Facility, Convertible Senior Notes, +2 more
6 terms
going concern financial
"there is substantial doubt about the Company's ability to continue as a going concern"
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
held for sale financial
"Spectrum segment met the criteria for classification as held for sale in accordance with ASC 360-10"
An asset or a group of assets classified as 'held for sale' is one the company intends to sell rather than keep using, and management has committed to that plan with an active effort to find a buyer. Investors care because these items are removed from ongoing operating results and valued differently, offering a clearer view of the business’s continuing performance—think of it like marking a piece of furniture for the garage sale rather than counting it as part of your regular household setup.
Bridge Loan Facility financial
"provides for a bridge loan facility in an aggregate principal amount of $105 million"
A bridge loan facility is short-term financing that helps a company cover an immediate cash need while it arranges longer-term funding, like a temporary bridge spanning a river until a permanent road is built. For investors, it matters because it signals short-term liquidity pressure or planned transactions, can carry higher interest or fees, and may affect future equity or debt terms if the company must refinance, dilute shares, or accept tighter covenants.
Convertible Senior Notes financial
"newly issued 9.5% Convertible Senior Notes due 2027"
Convertible senior notes are a type of loan that a company issues to investors, which can be turned into company shares later on. They are called "senior" because they are paid back before other debts if the company runs into trouble. This allows investors to earn interest like a loan but also have the chance to own part of the company if its value rises.
remaining unsatisfied performance obligations financial
"transaction price allocated to remaining unsatisfied performance obligations consisted of the following"
Option Agreement financial
"entered into an Option Agreement pursuant to which HC2 Holdco has the right to purchase equity interests"
An option agreement is a contract that gives one party the right, but not the obligation, to buy or sell a specific asset (like company shares or property) at a pre-agreed price within a set time period. Think of it like a reservation or ticket that holds a purchase at today’s terms for later — it matters to investors because it can create potential future value or liability, change ownership stakes, and affect share dilution and company control.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did INNOVATE Corp. (VATE) perform financially in Q2 2026?
INNOVATE Corp. (VATE) posted much stronger Q2 2026 results, with revenue of $421.6 million versus $242.0 million a year earlier and net income attributable to INNOVATE of $10.7 million compared with a $19.8 million loss, turning basic EPS to $0.74 from a $1.67 loss.
What is INNOVATE Corp. (VATE)’s debt and equity position as of June 30, 2026?
As of June 30, 2026, INNOVATE had $626.4 million of total debt principal, with $553.9 million classified as current. Total assets were $1,006.7 million, but stockholders’ deficit was $228.6 million, reflecting a highly leveraged capital structure and negative equity.
Why does INNOVATE Corp. (VATE) disclose substantial doubt about going concern?
Management states there is substantial doubt about INNOVATE’s ability to continue as a going concern within one year because of upcoming debt maturities, potential cross‑defaults under the 10.50% 2027 Senior Secured Notes, and milestone covenants requiring a sales process for DBM Global (DBMG).
What is happening with INNOVATE Corp. (VATE)’s Spectrum segment and the CONX deal?
The Spectrum segment is classified as held for sale. INNOVATE agreed to a Spectrum Merger where CONX CORP. will own about 75% of the surviving entity and INNOVATE about 25%, subject to regulatory approvals, supported by a $105 million Spectrum Bridge Loan Facility.
How large is INNOVATE Corp. (VATE)’s Infrastructure backlog?
Within Infrastructure, DBM Global reported $1,901.0 million in remaining unsatisfied performance obligations as of June 30, 2026. Of this, $1,543.3 million is expected to be recognized within one year and $357.7 million within two to five years, reflecting strong contracted demand.
What were INNOVATE Corp. (VATE)’s cash flows in the first half of 2026?
For the six months ended June 30, 2026, INNOVATE generated $20.9 million of cash from operating activities, used $20.6 million in investing (mainly capital expenditures), and used $22.6 million in financing. Cash, cash equivalents and restricted cash ended at $88.4 million.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM | ||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |||||
For the quarterly period ended June 30, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |||||
Commission File No. 001-35210
(Exact name of registrant as specified in its charter) | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(212 ) 235-2691
(Registrant’s telephone number, including area code)
____________________________________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| N/A | ||||||||
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 3, 2026, 13,641,866 shares of common stock, par value $0.001, were outstanding.
INNOVATE CORP.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements (Unaudited) | 2 | ||||||
Condensed Consolidated Statements of Operations | 2 | |||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) | 3 | |||||||
Condensed Consolidated Balance Sheets | 4 | |||||||
Condensed Consolidated Statements of Stockholders’ Deficit | 5 | |||||||
Condensed Consolidated Statements of Cash Flows | 7 | |||||||
Notes to Condensed Consolidated Financial Statements | 8 | |||||||
(1) Organization and Business | 8 | |||||||
(2) Summary of Significant Accounting Policies | 9 | |||||||
(3) Held for Sale | 12 | |||||||
(4) Revenue and Contracts in Process | 15 | |||||||
(5) Accounts Receivable, Net | 18 | |||||||
(6) Inventory | 18 | |||||||
(7) Investments | 18 | |||||||
(8) Property, Plant and Equipment, Net | 19 | |||||||
(9) Goodwill and Intangibles, Net | 19 | |||||||
(10) Leases | 20 | |||||||
(11) Other Assets, Accrued Liabilities and Other Liabilities | 21 | |||||||
(12) Debt Obligations | 23 | |||||||
(13) Income Taxes | 29 | |||||||
(14) Commitments and Contingencies | 30 | |||||||
(15) Share-Based Compensation | 31 | |||||||
(16) Equity and Temporary Equity | 32 | |||||||
(17) Related Parties | 35 | |||||||
(18) Operating Segments and Related Information | 36 | |||||||
(19) Basic and Diluted Earnings (Loss) Per Common Share | 38 | |||||||
(20) Fair Value of Financial Instruments | 39 | |||||||
(21) Supplementary Financial Information | 41 | |||||||
(22) Subsequent Events | 41 | |||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 43 | ||||||
| Item 4. | Controls and Procedures | 68 | ||||||
PART II. OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 68 | ||||||
| Item 1A. | Risk Factors | 68 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 69 | ||||||
| Item 5. | Other Information | 70 | ||||||
| Item 6. | Exhibits | 70 | ||||||
SIGNATURES | ||||||||
1
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except shares and per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Other operating loss (income) | ( | ||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Gain (loss) on extinguishment of debt | ( | ( | |||||||||||||||||||||
| Loss from equity investees | ( | ||||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Income (loss) from operations before income taxes | ( | ( | |||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Net income (loss) | ( | ( | ( | ||||||||||||||||||||
| Net (income) loss attributable to non-controlling interests and redeemable non-controlling interests | ( | ( | |||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | ( | ( | ( | ||||||||||||||||||||
| Less: Preferred stock dividends | |||||||||||||||||||||||
| Net income (loss) attributable to common stockholders and participating preferred stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Earnings (loss) per common share | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Other comprehensive (loss) income | ||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | ( | |||||||||||||||||||||||||
| Other comprehensive (loss) income | $ | ( | $ | $ | $ | |||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Comprehensive (income) loss attributable to non-controlling interests and redeemable non-controlling interests | ( | ( | ||||||||||||||||||||||||
| Comprehensive income (loss) attributable to INNOVATE Corp. | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
INNOVATE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except share amounts)
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Contract assets | ||||||||||||||
| Inventory | ||||||||||||||
| Current assets held for sale | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Investments | ||||||||||||||
| Deferred tax asset | ||||||||||||||
| Property, plant and equipment, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangibles, net | ||||||||||||||
Assets held for sale | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities, temporary equity and stockholders’ deficit | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued liabilities | ||||||||||||||
| Current portion of debt obligations | ||||||||||||||
| Contract liabilities | ||||||||||||||
| Current liabilities held for sale | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Deferred tax liability | ||||||||||||||
| Debt obligations | ||||||||||||||
| Liabilities held for sale | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies (Note 14) | ||||||||||||||
| Temporary equity | ||||||||||||||
Preferred Stock Series A-3 and Preferred Stock Series A-4, $ | ||||||||||||||
Shares authorized: | ||||||||||||||
| Redeemable non-controlling interests | ( | |||||||||||||
| Total temporary equity | ||||||||||||||
| Stockholders’ deficit | ||||||||||||||
Common stock, $ | ||||||||||||||
Shares authorized: | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Treasury stock, at cost: | ( | ( | ||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total INNOVATE Corp. stockholders’ deficit | ( | ( | ||||||||||||
| Non-controlling interests | ||||||||||||||
| Total stockholders’ deficit | ( | ( | ||||||||||||
| Total liabilities, temporary equity and stockholders’ deficit | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in millions, except share amounts)
| Temporary Equity | Stockholders' (Deficit) Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock and Redeemable Non-Controlling Interests | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Accumulated Comprehensive (Loss) Income (a) | Total INNOVATE Stockholders' (Deficit) Equity | Non-Controlling Interests | Total Stockholders' (Deficit) Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares (thousands) | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with redeemable non-controlling interests | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld to satisfy tax withholdings | — | ( | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with non-controlling interests and redeemable non-controlling interests | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | ( | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
(a) Inclusive of other comprehensive income (loss), foreign currency cumulative translation adjustments totaled a loss of $3.1 million and $3.3 million as of June 30, 2026 and December 31, 2025, respectively.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in millions, except share amounts)
| Temporary Equity | Stockholders' (Deficit) Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock and Redeemable Non-Controlling Interests | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Accumulated Comprehensive Income (Loss) (a) | Total INNOVATE Stockholders' (Deficit) Equity | Non-Controlling Interests | Total Stockholders' (Deficit) Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares (thousands) | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld to satisfy tax withholdings | — | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of forfeitures | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld to satisfy tax withholdings | ( | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends | — | — | ( | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of forfeitures | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with non-controlling interests | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
(a) Inclusive of other comprehensive income (loss), foreign currency cumulative translation adjustments totaled a loss of $3.4 million and $4.5 million as of June 30, 2025 and December 31, 2024, respectively
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
INNOVATE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
| Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net loss to cash provided by operating activities | ||||||||||||||
| Share-based compensation expense | ||||||||||||||
| Depreciation and amortization (including amounts in cost of revenue) | ||||||||||||||
Amortization of deferred financing costs and debt discount | ||||||||||||||
| (Gain) loss on extinguishment of debt | ( | |||||||||||||
| Loss from equity investees | ||||||||||||||
| Gain on lease modifications | ( | |||||||||||||
| Loss (gain) on investments | ( | |||||||||||||
Deferred income tax expense | ( | |||||||||||||
| Other operating activities, net | ||||||||||||||
Changes in assets and liabilities: | ||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||
| Contract assets | ||||||||||||||
| Other current assets | ( | |||||||||||||
| Inventory | ||||||||||||||
| Other assets | ||||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Accrued liabilities | ||||||||||||||
| Contract liabilities | ||||||||||||||
| Other current liabilities | ( | |||||||||||||
| Other liabilities | ( | ( | ||||||||||||
| Cash provided by operating activities | ||||||||||||||
| Cash flows from investing activities | ||||||||||||||
| Purchase of property, plant and equipment | ( | ( | ||||||||||||
| Proceeds from disposal of property, plant and equipment | ||||||||||||||
Purchase of investments | ( | ( | ||||||||||||
Cash paid for asset acquisitions | ( | ( | ||||||||||||
| Cash used in investing activities | ( | ( | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
Proceeds from lines of credit, net of deferred financing costs | ||||||||||||||
| Payments on lines of credit | ( | ( | ||||||||||||
Proceeds from other debt obligations, net of deferred financing costs | ||||||||||||||
| Principal payments for other debt obligations | ( | ( | ||||||||||||
Deferred financing costs paid to third parties | ( | |||||||||||||
| Dividend payments | ( | ( | ||||||||||||
| Other financing activities | ( | ( | ||||||||||||
| Cash used in financing activities | ( | ( | ||||||||||||
| Effects of exchange rate changes on cash, cash equivalents and restricted cash | ||||||||||||||
| Net decrease in cash and cash equivalents, including restricted cash and cash classified within assets held for sale | ( | ( | ||||||||||||
| Decrease in cash and cash equivalents from assets held for sale | ||||||||||||||
| Net decrease in cash and cash equivalents, including restricted cash | ( | ( | ||||||||||||
Cash, cash equivalents and restricted cash, beginning of period | ||||||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Business
INNOVATE Corp. ("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. 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. The Company’s shares of common stock trade on the New York Stock Exchange ("NYSE") under the symbol "VATE".
As of June 30, 2026, the Company had three reportable segments, plus the Company's Other segment, based on management's organization of the enterprise: Infrastructure, Life Sciences, Spectrum, and Other which includes businesses that do not meet the separately reportable segment thresholds or requirements.
The Company is currently pursuing highly substantial asset dispositions, including a sales process for all or substantially all of DBMG's assets or equity interests, and the Spectrum Merger (as defined herein). It has also made substantial changes to its debt arrangements and other liabilities, including following June 30, 2026, and expects to make further changes. These ongoing actions will substantially alter the Company’s business, prospects, cash flow, results of operations and financial position going forward and all information herein should be evaluated in light of these changes and potential changes. Refer to Note 22. Subsequent Events for further information.
Infrastructure
The Company's Infrastructure segment is comprised of DBM Global Inc. ("DBMG") and its wholly-owned subsidiaries. DBMG is a fully integrated industrial construction, structural steel and facility maintenance provider that provides fabrication and erection of structural steel and heavy steel plate services and also fabricates trusses and girders and specializes in the fabrication and erection of large-diameter water pipe and water storage tanks, as well as 3-D Building Information Modeling (“BIM”) and detailing. DBMG provides these services on commercial, industrial, and infrastructure construction projects such as high- and low-rise buildings and office complexes, hotels and casinos, convention centers, sports arenas and stadiums, shopping malls, hospitals, dams, bridges, mines, metal processing, refineries, pulp and paper mills and power plants. Through GrayWolf Industrial Inc. ("GrayWolf"), DBMG provides integrated solutions for digital engineering, modeling and detailing, construction, heavy equipment installation and facility services including maintenance, repair, and installation to a diverse range of end markets. Through GrayWolf Modular DBMG delivers scalable, productized data center infrastructure — spanning white space, air handling, power, and cooling, as well as fully integrated assemblies. This approach shifts critical scope off-site, reducing on-site construction, improving schedule certainty, and enabling faster, repeatable deployment at scale to meet increasing density and speed-to-market demands. 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, 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.
Life Sciences
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 80.8 % (81.0 % as of December 31, 2025) 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 has a 44.6 % 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, maintained a 1.6 % fully diluted interest in Triple Ring Technologies, Inc. ("Triple Ring"), a science and technology co-development company, and maintained 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.
Spectrum
The Company's Spectrum segment is comprised of HC2 Broadcasting Holdings Inc. ("Broadcasting or HC2") and its subsidiaries. Broadcasting strategically acquires and operates over-the-air broadcasting stations across the United States. As of June 30, 2026, the Company had a 100.0 % controlling interest in Broadcasting, on both a voting and fully diluted basis. The Company also had a controlling interest of approximately 76.5 %, inclusive of 2.8 % proxy rights from minority holders, of DTV America Corporation ("DTV"). As of December 31, 2025, the Company had a 98.0 % controlling interest in Broadcasting and had a controlling interest of approximately 69.2 %, inclusive of 2.8 % proxy rights from minority holders, of DTV. On a fully diluted basis, the Company would have an 85.8 % controlling interest in Broadcasting as of December 31, 2025.
8
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On May 29, 2026, the Company entered into a definitive agreement pursuant to which INNOVATE will sell a controlling interest in Broadcasting to CONX CORP. (“CONX”). After the closing of the transaction, it is expected that CONX will own approximately 75 % of Broadcasting and INNOVATE will own approximately 25 % of Broadcasting through HC2 Broadcasting Holdco, LLC ("HC2 Holdco"). The closing of the transaction is subject to customary conditions, including (a) receipt of regulatory approvals, including certain approvals of the Federal Communications Commission ("FCC") and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (b) that the obligations under the New Spectrum Loan Agreement (as defined in Note 3. Assets and Liabilities Held for Sale) shall not have been declared due and payable. Refer to Note 3. Assets and Liabilities Held for Sale for additional information regarding the transaction.
During the second quarter of 2026, the Company's Spectrum segment met the criteria for classification as held for sale in accordance with ASC 360-10 Property, Plant, and Equipment ("ASC 360-10"). As a result, the assets and liabilities of the Spectrum segment are presented as held for sale in the current period, and the prior period assets and liabilities of the Spectrum segment have been reclassified as held for sale for comparability purposes. While the Spectrum segment met the criteria for held for sale classification, it did not meet the criteria for classification as discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20"), as the anticipated disposal does not represent a strategic shift that will have a major effect on the Company's operations and financial results.
Other
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. The Other segment primarily includes holding companies for legacy businesses.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and all other subsidiaries over which the Company exerts control. All intercompany profits, transactions and balances have been eliminated in consolidation. The remaining interests not owned by the Company are presented as a non-controlling interest component of total equity.
Basis of Presentation
The accompanying interim unaudited Condensed Consolidated Financial Statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). 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. Certain information and note disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), have been condensed or omitted in these interim unaudited Condensed Consolidated Financial Statements pursuant to such rules and regulations.
These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s annual audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 26, 2026. The results of operations for the three and six months ended June 30, 2026, are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2026. Certain prior amounts have been reclassified or combined to conform to the current year presentation. For example, prior period assets and liabilities of the Spectrum segment were reclassified as held for sale, and the prior period loss on debt extinguishment was reclassified from other expense, net, to a separate line item in the statement of operations. Refer to Note 3. Assets and Liabilities Held for Sale.
Liquidity and Going Concern
The accompanying unaudited Condensed 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 of the Company's debt obligations. Based on these conditions, the Company may not be able to meet its obligations at maturity nor comply with certain cross-default provisions under the 10.50 % 2027 Senior Secured Notes over the next twelve months, or any potential breach of the milestone covenant of the 10.50 % 2027 Senior Secured Notes Indenture which has required the Company to commence and proceed with a sales process for all or substantially all of DBMG's assets or equity interests in accordance with certain dates and deadlines. Refer to Note 12. Debt Obligations for additional information.
9
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
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 pursuing asset sales, potentially refinancing debt and raising additional capital. However, there can be no assurance that the Company will have the ability to be successful in any asset sales, additional capital raises, or the refinancing of 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 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. For further information regarding asset sales and debt obligations, refer to Note 1. Organization and Business, Note 3. Assets and Liabilities Held for Sale (describing the Spectrum Merger and related transactions) and Note 22. Subsequent Events (describing amendments to, and payments on, the 10.50 % 2027 Senior Secured Notes and 2027 Convertible Notes).
These unaudited Condensed 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
Held for Sale and Discontinued Operations
Recent Accounting Pronouncements
Accounting Pronouncements Adopted in the Current Year
On July 30, 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05, Financial Instruments - Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"). The amendments in ASU 2025-05 provide entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606 (Revenue from Contracts with Customers). The practical expedient allows entities to assume that current conditions as of the balance sheet date will not change for the remaining life of an asset when developing reasonable and supportable forecasts as part of the estimation of expected credit losses. The guidance was effective for the Company for interim and annual periods beginning on January 1, 2026, and the Company is utilizing the practical expedient. The adoption of this ASU did not have a significant effect on the Company’s Condensed Consolidated Financial Statements.
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. The guidance was effective for the Company for interim and annual periods beginning on January 1, 2026. The adoption of this ASU did not have an effect on the Company's Condensed Consolidated Financial Statements.
Accounting Pronouncements Issued But Pending Adoption
On April 23, 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock ("ASU 2026-01"). The amendments in this ASU improve GAAP by providing authoritative guidance for the initial measurement of paid-in-kind (" PIK") dividends on equity-classified preferred stock and requires that these PIK dividends be initially measured on the basis of the PIK dividend rate stated in the preferred stock agreement. ASU 2026-01 is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods. Entities may apply the amendments in this ASU either on a prospective basis or on a modified retrospective basis for equity-classified preferred stock instruments that are outstanding as of the initial application date. The Company is currently evaluating the potential effect of this ASU on the Company’s Condensed Consolidated Financial Statements.
10
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
On September 18, 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"). The amendments in ASU 2025-06 modernize the accounting for software costs that are accounted for under Subtopic 350-40 by removing all references to prescriptive and sequential software development stages throughout Subtopic 350-40. Under ASU 2025-06, an entity is required to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable the project will be completed and the software will be used to perform the function intended (referred to as the "probable-to-complete recognition threshold"). ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Entities may apply the amendments retrospectively for all prior periods presented in the financial statements, prospectively or under a modified retrospective approach based on the status of the project and whether software costs were capitalized before the date of adoption. The Company expects that it will apply the new guidance prospectively and is currently evaluating the potential effect of this ASU on future transactions; however, the Company does not expect this ASU to have a significant effect on the Company’s Condensed Consolidated Financial Statements.
On May 12, 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a VIE ("ASU 2025-03"). The amendments in ASU 2025-03 require an entity, involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business, to consider certain factors to determine which entity is the accounting acquirer. ASU 2025-03 is effective prospectively for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods. The Company is currently evaluating the potential effect of this ASU on future transactions; however, the Company does not expect this ASU to have a material effect on the Company’s Condensed 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 ("ASU 2024-03"). 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, with effective dates as clarified by ASU 2025-01 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, 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. The Company is currently evaluating this ASU, which will only have an effect on the disclosures within the Company’s Condensed Consolidated Financial Statements.
Subsequent Events
Subsequent to quarter end, the Company participated in a number of transactions or other events affecting its debt and capital structure, including transactions that reduced its near-term cash interest and other funding requirements:
These transactions and events include:
(i)supplemental indentures to the 10.50 % 2027 Senior Secured Notes Indenture and the 2027 Convertible Notes Indenture permitting the interest payable on August 1, 2026 in respect of the period from February 1, 2026 through July 31, 2026 on notes held by consenting holders to be paid in kind, together with a consent fee equal to 1.5 % of the principal amount consented, paid through the issuance of additional notes (as a result of which the Company paid $3.6 million in cash interest rather than $22.6 million which would otherwise have been due);
(ii) the declaration by DBMG of a $12.0 million cash dividend, of which INNOVATE received $11.0 million;
(iii)the amendment and extension of the maturity of R2 Technologies’ secured promissory note with Lancer Capital (which had a total principal balance as of June 30, 2026 of $50.9 million) from August 1, 2026 to December 31, 2026, as well as the conversion of R2 Technologies’ preferred equity to common equity, which resulted in Pansend's controlling interest in R2 Technologies increasing from 80.8 %, prior to the transaction, to 85.0 %;
(iv)the permitted redemption, defeasance or payment at maturity of the $0.2 million aggregate principal amount of 2026 Convertible Notes that matured on August 1, 2026;
(v)the delivery by the holder of the Company’s outstanding Series A-3 and Series A-4 Preferred Stock (which had a combined redemption value of $9.7 million as of June 30, 2026) of a redemption notice, in respect of which the Company did not have sufficient legally available funds, with the result that those shares remain outstanding;
(vi)the Company’s sale of marketable securities for aggregate proceeds of $0.6 million; and
(vii)the conversion of the note due to Pansend from MediBeacon into a new convertible note.
11
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
3. Assets and Liabilities Held for Sale
Pending Disposal of Controlling Interest in Spectrum
Merger Agreement
On May 29, 2026, Broadcasting and HC2 Holdco, a newly formed entity, each now an indirect wholly owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Spectrum Merger Agreement”) with HC2 Merger Sub, LLC, a Delaware limited liability company ("Merger Sub"), and CONX, pursuant to which Merger Sub will merge with and into Broadcasting (the “Spectrum Merger”), with Broadcasting surviving the Merger as a subsidiary of CONX (the “Surviving Entity”). On the terms and subject to the conditions set forth in the Merger Agreement, at the closing of the Spectrum Merger (the “Closing”), (a) the shares of common stock, par value $0.001 per share, of Broadcasting (the “Broadcasting Common Stock”) (other than shares of Broadcasting Common Stock held by Merger Sub after giving effect to the closing of the Merger) will be converted into the right to receive 25 % of the shares of common stock of the Surviving Entity to be outstanding immediately following the Closing, subject to certain adjustments as set forth in the Merger Agreement, and (b) the membership interests of Merger Sub outstanding immediately prior to the Closing will be converted into 75 % of the shares of common stock of the Surviving Entity to be outstanding immediately following the Closing, subject to certain adjustments as set forth in the Merger Agreement, which represents the value attributable to (i) the extinguishment of the New Spectrum Loan Agreement (as defined below) and (ii) the funding of an aggregate $75 million in equity commitments by CONX in favor of the Surviving Entity from time to time, at or following the Closing, which equity commitments are subject to certain adjustments as set forth in the Spectrum Merger Agreement.
The Closing is subject to customary conditions, including (a) receipt of regulatory approvals, including certain approvals of the FCC and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (b) that the obligations under the New Spectrum Loan Agreement (as defined below) shall not have been declared due and payable. There can be no assurance that these approvals will be obtained in a timely manner or at all, or that the transaction will be completed on the anticipated terms or timeline.
The Merger Agreement provides customary termination rights for the parties, including if the Merger has not occurred on or prior to November 29, 2026, subject to two potential extensions to March 1, 2027 and May 29, 2027 in the event the only condition to the Spectrum Merger that remains unsatisfied as of such dates is the receipt of certain regulatory approvals and certain other exceptions, and contains certain indemnification obligations by the parties thereto in connection with breaches of certain representations and warranties and certain covenants contained in the Merger Agreement, subject to certain exceptions.
In addition, Broadcasting closed on a refinancing transaction, as discussed in the Spectrum Debt section below.
During the second quarter of 2026, the Company's Spectrum segment met the criteria for classification as held for sale in accordance with ASC 360-10. As a result, the assets and liabilities of the Spectrum segment are presented as held for sale in the current period, and the prior period assets and liabilities of the Spectrum segment have been reclassified as held for sale for comparability purposes. While the Spectrum segment met the criteria for held for sale classification, it did not meet the criteria for classification as discontinued operations in accordance with ASC 205-20, as the anticipated disposal does not represent a strategic shift that will have a major effect on the Company's operations and financial results.
12
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Summarized assets and liabilities held for sale of the Spectrum segment are as follows (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | $ | $ | ||||||||||||
| Non-current assets | ||||||||||||||
| Property, plant and equipment, net | $ | $ | ||||||||||||
| Goodwill | ||||||||||||||
Intangibles, net (1) | ||||||||||||||
| Other assets | ||||||||||||||
| Total non-current assets | $ | $ | ||||||||||||
| Total assets held for sale | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued liabilities | ||||||||||||||
Current portion of debt obligations (2) | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-current liabilities | ||||||||||||||
| Deferred tax liability | $ | $ | ||||||||||||
| Other liabilities | ||||||||||||||
| Total non-current liabilities | $ | $ | ||||||||||||
| Total liabilities held for sale | $ | $ | ||||||||||||
(1) Intangibles, net, as of June 30, 2026, includes indefinite-lived intangible assets of $108.1 million and channel sharing arrangements with a gross value of $12.6 million and net book value of $9.9 million. Intangibles, net, as of December 31, 2025 includes indefinite-lived intangible assets of $107.9 million and channel sharing arrangements with a gross value of $12.6 million and net book value of $10.1 million.
(2) Debt obligations consisted of the following (in millions):
| Maturity Date | June 30, 2026 | December 31, 2025 | |||||||||||||||
| Spectrum | |||||||||||||||||
Bridge loan facility (3) | May 29, 2027 | $ | $ | ||||||||||||||
| September 30, 2026 | |||||||||||||||||
| September 30, 2026 | |||||||||||||||||
| Total outstanding principal | $ | $ | |||||||||||||||
| Unamortized premium net of unamortized deferred financing costs | ( | ||||||||||||||||
| Debt obligations, current | $ | $ | |||||||||||||||
(3) The contractual maturity date of the debt is May 29, 2027; however, upon consummation of the Spectrum Merger, the debt, including all accrued and capitalized interest thereon, will be extinguished in full.
13
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The fair values of the Spectrum segment's debt obligations were as follows (in millions):
| Fair Value Measurement Using: | ||||||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
| June 30, 2026 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
December 31, 2025 (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The methodology for the Level 2 fair value measurements 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. The Level 3 fair value measurements were estimated using an income approach based on the expected future cash flows, discounted at an estimated market yield. The discount rate, or yield to maturity, was derived from a synthetic credit rating and corresponding market spread analysis as of the valuation date to estimate an option-adjusted spread which was then applied to the applicable risk-free curve, consistent with market observable inputs for similarly rated debt. 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.
Option Agreement
In connection with the Spectrum Merger, on May 29, 2026, CONX, Merger Sub, Broadcasting, HC2 Holdco and the Company entered into an Option Agreement (the “Option Agreement”), pursuant to which HC2 Holdco has the right, but not the obligation, to purchase from CONX up to an aggregate of 15 % of the equity interests in the Surviving Entity (the “Surviving Entity Equity Interests”), on a fully diluted basis, for a maximum aggregate option purchase price of $45 million, at any time during the period commencing on the closing date of the Spectrum Merger and ending on the date that is 18 months from the closing date (the "Option Expiration Date").
The Option Agreement also provides that, from the date of the Option Agreement until the Option Expiration Date, in the event that the Company or any of its affiliates consummates any asset sale (as defined in the Option Agreement), the Company must cause HC2 Holdco to apply the net cash proceeds from such asset sale to exercise the option, subject to certain exceptions and a working capital reserve.
CONX Affiliate Letter Agreement
In connection with entry into the Merger Agreement, CONX, an affiliate of CONX (the “CONX Affiliate”), and the Company entered into a letter agreement, dated as of May 29, 2026 (the “CONX Affiliate Letter Agreement”), pursuant to which CONX and the Company granted the CONX Affiliate the option to acquire up to 80.1 % of the equity interests of the Surviving Entity, on a fully-diluted basis, at any time during the -year period following the date of the CONX Affiliate Letter Agreement, at a price equal to the fair market value of the equity interests acquired, calculated as of the expected date of the closing of such option. If the CONX Affiliate exercises the option, the Company will have a certain period of time to exercise its option under the Option Agreement, after which, if not exercised, the option under the Option Agreement will automatically terminate. If the CONX Affiliate exercises such option, the CONX Affiliate would first acquire all of the equity interests of Broadcasting held by CONX, together with an additional amount of equity interests from INNOVATE necessary to reach the 80.1 % threshold, subject to INNOVATE's right to require the CONX Affiliate to first acquire all of INNOVATE’s remaining equity interests in Broadcasting. The Company may elect to require the CONX Affiliate to acquire all of the equity interests held by the Company at the later to occur of the Closing or the closing of such option exercise by the CONX Affiliate.
14
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Spectrum Debt
On August 4, 2025, Spectrum had entered into a Tenth Omnibus Amendment to Secured Notes and Limited Consent to MSD Secured Note and Intercreditor Agreement with the note holders of Spectrum's $69.7 million 8.50 % and 11.45 % Notes (the “Spectrum Notes”) to, among other things, extend the maturity of such notes from August 15, 2025 to September 30, 2026 (the “Spectrum Notes Extension”). In connection with the Spectrum Notes Extension in August 2025, INNOVATE entered into a related side letter (the "Spectrum Letter") with the lenders, which required the Company to meet certain milestones with respect to strategic alternatives for the Spectrum segment, such that, if the Spectrum Notes were not repaid in full in cash on or before November 1, 2025, the Spectrum Letter provided that the Company was required to commence an alternative strategic process for HC2B which includes a sale of HC2B with the net proceeds to be applied to the Spectrum Notes. The November 1, 2025 milestone was not reached and in accordance with the Spectrum Letter, management initiated a strategic process for HC2B.
In connection with the Spectrum merger, on May 29, 2026, Broadcasting entered into a loan agreement (the “New Spectrum Loan Agreement”), as borrower, with Merger Sub, as lender, and HC2 Holdco and certain of Broadcasting’s subsidiaries, as guarantors. The New Spectrum Loan Agreement provides for a bridge loan facility in an aggregate principal amount of $105 million (the “Bridge Loan Facility”) which was funded on a single drawing on May 29, 2026. The proceeds of the Bridge Loan Facility were used to (a) fully satisfy and discharge all non-contingent obligations, including all accrued and unpaid interest and fees, under the Spectrum Notes, (b) repurchase equity interests in Broadcasting and DTV held by holders of the Spectrum Notes; and (c) to pay related transaction costs. As a result of these transactions and the Spectrum Merger agreement, the milestones associated with the Spectrum Letter were satisfied in full. Prior to repurchase, the lenders held 20,408 shares of common stock in HC2B, 2,222,222 shares of common stock in DTV, and warrants to purchase 145,825 shares of common stock of HC2B which could have been exercised at any time until August 31, 2028, at an exercise price of $0.01 per share. These redeemable equity interests in HC2B and DTV were repurchased at a nominal amount and were recorded against APIC. As a result of the repurchases of these redeemable non-controlling interests, the Company's voting ownership in Broadcasting and DTV increased from 98.0 % to 100.0 % and from 69.2 % to 76.5 %, respectively.
The total carrying amount of the Spectrum Notes at the time of extinguishment was approximately $123.2 million, including accrued interest and exit fees of $56.8 million, and the total payoff amount was $104.8 million. As a result, a gain on extinguishment of debt of $18.4 2.8 million were capitalized to the new debt and are being amortized over the term of the new debt.
Loans under the Bridge Loan Facility (“Spectrum Loans”) will accrue interest at a rate per annum equal to 8.00 %, payable quarterly in kind by capitalizing such interest as additional principal of the Spectrum Loans on each interest payment date. The Spectrum Loans mature on May 29, 2027; however, upon consummation of the Spectrum Merger, the Spectrum Loans (including all accrued and capitalized interest thereon) will be extinguished in full. Broadcasting may not voluntarily prepay the Spectrum Loans prior to maturity. The Spectrum loans also include a yield protection premium clause, which specifies that in the event of any early repayment or acceleration of the Spectrum Loans, or the Spectrum Loans reaching maturity without the occurrence of the consummation of the Spectrum Merger, Broadcasting is required to repay in cash an amount sufficient to result in a minimum cash return on the original principal amount of the Spectrum Loans, including all accrued and capitalized interest thereon, at a ratio of 1.5 to 1.0. The yield protection premium is being amortized over the term of the Spectrum Loans using the effective interest rate method. As of June 30, 2026, the effective interest rate on the Spectrum Loans was approximately 54.0 % per annum.
The New Spectrum Loan Agreement contains certain affirmative and negative covenants that limit the ability of Broadcasting and the guarantors, among other things, and subject to certain exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, and pay dividends and make other restricted payments. The New Spectrum Loan Agreement contains certain events of default, including relating to a change of control and termination of the Spectrum Merger Agreement.
4. Revenue and Contracts in Process
Revenue from contracts with customers consisted of the following (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
Infrastructure | $ | $ | $ | $ | ||||||||||||||||||||||
| Life Sciences | ||||||||||||||||||||||||||
| Spectrum | ||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
15
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Accounts receivable, net, from contracts with customers consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
Infrastructure | $ | $ | ||||||||||||
| Life Sciences | ||||||||||||||
Total accounts receivable with customers | $ | $ | ||||||||||||
As of January 1, 2025, accounts receivable, net, from contracts with customers, as recast to exclude assets held for sale, totaled $186.3 million.
Infrastructure Segment
The following table disaggregates DBMG's revenue by market (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Industrial | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| Healthcare | ||||||||||||||||||||||||||
| Government | ||||||||||||||||||||||||||
| Transportation | ||||||||||||||||||||||||||
Energy | ||||||||||||||||||||||||||
| Leisure | ||||||||||||||||||||||||||
| Convention | ||||||||||||||||||||||||||
| Total revenue from contracts with customers | $ | $ | $ | $ | ||||||||||||||||||||||
| Other revenue | ||||||||||||||||||||||||||
| Total Infrastructure segment revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Contract assets and contract liabilities consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Costs incurred on contracts in progress | $ | $ | ||||||||||||
| Estimated earnings | ||||||||||||||
| Contract revenue earned on uncompleted contracts | ||||||||||||||
| Less: progress billings | ||||||||||||||
| $ | ( | $ | ( | |||||||||||
The above is included in the accompanying Condensed Consolidated Balance Sheets under the following line items: | ||||||||||||||
| Contract assets | $ | $ | ||||||||||||
| Contract liabilities | ( | ( | ||||||||||||
| $ | ( | $ | ( | |||||||||||
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Cost in excess of billings and estimated earnings | $ | $ | ||||||||||||
| Conditional retainage | ||||||||||||||
| Contract assets | $ | $ | ||||||||||||
| Billings in excess of costs and estimated earnings | $ | ( | $ | ( | ||||||||||
| Conditional retainage | ||||||||||||||
| Contract liabilities | $ | ( | $ | ( | ||||||||||
As of January 1, 2025, contract assets were $106.3 million and contract liabilities were $109.1 million.
16
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The change in contract liabilities during the six months ended June 30, 2026 and 2025, is a result of the recording of periodic contract liabilities of $176.4 million and $154.1 million, respectively, driven primarily by large initial billings on new commercial projects, partially offset by revenue recognized that was included in the contract liability balance at the beginning of the year in the amount of $165.6 million and $90.4 million, respectively.
The change in contract assets during the six months ended June 30, 2026 and 2025, is a result of the recording of $24.1 million and $42.2 million, respectively, of contract assets driven by new commercial projects, partially offset by $35.6 million and $65.5 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.
Transaction Price Allocated to Remaining Unsatisfied Performance Obligations
As of June 30, 2026, the transaction price allocated to remaining unsatisfied performance obligations consisted of the following (in millions):
| Within One Year | Within Two to Five Years | Total | ||||||||||||||||||
| Industrial | $ | $ | $ | |||||||||||||||||
| Transportation | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Healthcare | ||||||||||||||||||||
| Government | ||||||||||||||||||||
| Energy | ||||||||||||||||||||
Convention | ||||||||||||||||||||
| Leisure | ||||||||||||||||||||
| Remaining unsatisfied performance obligations | $ | $ | $ | |||||||||||||||||
DBMG's remaining unsatisfied performance obligations increase with awards of new contracts and decrease as it performs work and recognizes revenue on existing contracts. DBMG includes a project within its remaining unsatisfied performance obligations at such time the project is awarded and agreement on contract terms has been reached. DBMG's remaining unsatisfied performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of total transaction price can be made. DBMG expects to recognize this revenue approximately within the next 2.0 years.
Remaining unsatisfied performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of DBMG's contracts are subject to cancellation at the election of its customers, in accordance with industry practice, DBMG does not limit the amount of unrecognized revenue included within its remaining unsatisfied performance obligations due to the inherent substantial economic penalty that would be incurred by its customers upon cancellation.
Life Sciences Segment
The following table disaggregates the Life Sciences segment's revenue by type (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Systems and consumables revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Total Life Sciences segment revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Spectrum Segment
The following table disaggregates the Spectrum segment's revenue by type (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Broadcast station | $ | $ | $ | $ | ||||||||||||||||||||||
| Total Spectrum segment revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Transaction Price Allocated to Remaining Unsatisfied Performance Obligations
17
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
5. Accounts Receivable, Net
Accounts receivable, net, consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Contracts in progress | $ | $ | ||||||||||||
| Unbilled retentions | ||||||||||||||
| Trade receivables | ||||||||||||||
| Other receivables | ||||||||||||||
Allowance for expected credit losses | ( | ( | ||||||||||||
| Total | $ | $ | ||||||||||||
As of January 1, 2025, accounts receivable, net, as recast to exclude assets held for sale, totaled $192.1 million.
6. Inventory
Inventory consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Raw materials and consumables | $ | $ | ||||||||||||
| Work in process | ||||||||||||||
| Finished goods | ||||||||||||||
| Total inventory | $ | $ | ||||||||||||
7. Investments
The carrying values of the Company's investments, by accounting category, were as follows (in millions):
Date | Equity Method (1) | Fair Value (2) | Measurement Alternative (3) | Total | ||||||||||||||||||||||
| June 30, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||
(1) The Company's equity method investments were comprised of MediBeacon and Scaled Cell as of both June 30, 2026 and December 31, 2025.
(2) The Company's fair value investments in common stock are comprised of marketable equity securities in a publicly traded company that were purchased in April 2026 and sold subsequent to quarter end in July 2026.
(3) The Company's measurement alternative method investment was comprised of Triple Ring as of both June 30, 2026 and December 31, 2025.
The Company's recognized share of net losses from its equity method investments was zero and $5.9 million for the six months ended June 30, 2026 and 2025, respectively.
MediBeacon
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.
On 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 million, 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 payment from Huadong Medicine Co. Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, to MediBeacon for MediBeacon preferred stock was received in the first quarter of 2025. As a result of these transactions, Pansend's ownership in MediBeacon decreased slightly and Pansend recognized a step-up gain of $4.4 million which is reflected in Other income, net in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2025, which increased Pansend's carrying amount of its investment in MediBeacon. Concurrently, Pansend recognized equity method losses of $5.9 million, driven by the $4.4 million step-up gain and $1.5 million of interest from the conversion of the convertible notes, which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero .
MediBeacon's total outstanding principal amount of the note due to Pansend was $0.5 30 thousand and $0.1 million for the six months ended June 30, 2026 and 2025, respectively. The related accrued interest receivable was $0.4 0.5 million note had a maturity date of July 5, 2026. Refer to Note 22. Subsequent Events for additional information.
18
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
As of June 30, 2026, Pansend's carrying amount of its investment in MediBeacon remained at zero , inclusive of the $0.5 million in secured promissory notes which has been offset against recognized equity method losses, and Pansend has cumulative unrecognized equity method losses relating to MediBeacon of $22.6 million.
Marketable Securities
In April 2026, the Company purchased common shares in the open market of a publicly traded company for approximately $0.5 million. These securities are remeasured at fair value each reporting period using the externally quoted market prices, Fair Value Level 1 inputs. For both the three and six months ended June 30, 2026, unrealized fair value losses of $0.1 0.6 million.
In October 2024, the Company purchased common shares in the open market of a publicly traded company for approximately $2.0 million, and in March 2025, the Company purchased common shares in the open market of another publicly traded company for $0.3 million. In July 2025, all of these shares were sold for aggregate proceeds of $2.9 million. Prior to their disposal, these securities were remeasured at fair value each reporting period using the externally quoted market prices, Fair Value Level 1 inputs. For the three months and six months ended June 30, 2025, unrealized fair value gains of $0.3 million and $0.5 million, respectively, related to these securities were included in Other income, net in the Condensed Consolidated Financial Statements.
8. Property, Plant and Equipment, Net
Property, plant and equipment, net, ("PP&E") consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Equipment, furniture and fixtures, and software | $ | $ | ||||||||||||
| Building and leasehold improvements | ||||||||||||||
| Land | ||||||||||||||
| Construction in progress | ||||||||||||||
| Plant and transportation equipment | ||||||||||||||
| $ | $ | |||||||||||||
| Less: Accumulated depreciation | ||||||||||||||
| Total | $ | $ | ||||||||||||
Depreciation expense was $5.3 million and $5.5 million for the three months ended June 30, 2026 and 2025, respectively. These amounts included $3.5 million and $3.0 million of depreciation expense recognized within cost of revenue for the three months ended June 30, 2026 and 2025, respectively. Depreciation expense was $11.0 million and $11.4 million for the six months ended June 30, 2026 and 2025, respectively. These amounts included $6.7 million and $6.5 million of depreciation expense recognized within cost of revenue for the six months ended June 30, 2026 and 2025, respectively.
As of June 30, 2026 and December 31, 2025, the gross value of capitalized internal-use software included in PP&E was $23.2 million and $20.9 million, respectively, and the net book value as of June 30, 2026 and December 31, 2025, was $6.9 million and $6.6 million, respectively.
Other assets held for sale, for our segments that are not presented as held for sale, are included within Other current assets in the Condensed Consolidated Balance Sheets. As of June 30, 2026, there were $5.4 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. The Spectrum segment met the criteria for classification as held for sale during the second quarter of 2026. Refer to Note 3. Assets and Liabilities Held for Sale for more information.
9. Goodwill and Intangibles, Net
Goodwill
The carrying amounts of goodwill were as follows (in millions):
Infrastructure | ||||||||
Balance as of December 31, 2025 | $ | |||||||
Translation adjustments | ||||||||
| Balance as of June 30, 2026 | $ | |||||||
19
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Definite-Lived Intangible Assets
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 | June 30, 2026 | |||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||
| Trade names | $ | $ | ( | $ | ||||||||||||||||||||||
| Customer relationships and contracts | ( | |||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||||||||
| Weighted-Average Original Useful Life | December 31, 2025 | |||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||
| Trade names | $ | $ | ( | $ | ||||||||||||||||||||||
| Customer relationships and contracts | ( | |||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||||||||
Amortization expense for definite-lived intangible assets was $1.7 million and $1.9 million for the three months ended June 30, 2026 and 2025, respectively. Amortization expense for definite-lived intangible assets was $3.4 million and $3.9 million for the six months ended June 30, 2026 and 2025, respectively. Amortization expense is included in Depreciation and amortization in the Condensed Consolidated Statements of Operations.
10. Leases
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 2026 and 2045. Right-of-use lease assets and lease liabilities consisted of the following (in millions):
| Balance Sheet Location | June 30, 2026 | December 31, 2025 | |||||||||||||||
| Right-of-use assets: | |||||||||||||||||
| Other assets (non-current) | $ | $ | |||||||||||||||
| Property, plant and equipment, net | |||||||||||||||||
| Total right-of-use assets | $ | $ | |||||||||||||||
| Lease liabilities: | |||||||||||||||||
| Other current liabilities | $ | $ | |||||||||||||||
| Other liabilities | |||||||||||||||||
Debt obligations | |||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Net finance lease cost | ||||||||||||||||||||||||||
| Operating lease cost | ||||||||||||||||||||||||||
| Variable lease cost | ||||||||||||||||||||||||||
Total non-current lease cost | $ | $ | ||||||||||||||||||||||||
| Short-term lease costs | ||||||||||||||||||||||||||
Total lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
20
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Cash flow information related to leases is as follows (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||
Operating cash flows for operating leases (1) | $ | $ | $ | $ | ||||||||||||||||||||||
Financing cash flows for finance leases | $ | $ | $ | $ | ||||||||||||||||||||||
| Right-of-use assets obtained in exchange for new lease liabilities: | ||||||||||||||||||||||||||
| Operating leases | $ | $ | $ | $ | ||||||||||||||||||||||
| Finance leases | $ | $ | $ | $ | ||||||||||||||||||||||
(1) The above amounts exclude $4.0
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 received $4.0 million in surrender fees in 2024 and $4.0 million in surrender fees in 2025, with the remaining $4.0 million payment due to DBMG due within business days of the vacate date in 2027 for the remaining property lease. After final surrender of the properties, DBMG will have no further obligations under these leases.
The weighted-average remaining lease terms and the weighted-average discount rates for the Company's leases were as follows:
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Weighted-average remaining lease term (years) - operating leases | ||||||||||||||
| Weighted-average remaining lease term (years) - finance leases | ||||||||||||||
| Weighted-average discount rate - operating leases | % | % | ||||||||||||
| Weighted-average discount rate - finance leases | % | % | ||||||||||||
Future minimum lease commitments (undiscounted) as of June 30, 2026, were as follows (in millions):
| Operating Leases | Finance Leases | ||||||||||
| 2026 (remaining period) | $ | $ | |||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| 2030 | |||||||||||
| Thereafter | |||||||||||
| Total future minimum lease payments | |||||||||||
| Less: amounts representing interest | ( | ||||||||||
Total lease liability | $ | $ | |||||||||
11. Other Assets, Accrued Liabilities and Other Liabilities
Other Current Assets
Other current assets consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
Prepaid assets | $ | $ | ||||||||||||
| Other assets held for sale | ||||||||||||||
Income tax receivable | ||||||||||||||
Other | ||||||||||||||
Total other current assets | $ | $ | ||||||||||||
21
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Other Assets
Other assets, which are reflected within non-current assets in the Condensed Consolidated Balance Sheets, consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Right-of-use assets | $ | $ | ||||||||||||
| Restricted cash - non-current | ||||||||||||||
| Other | ||||||||||||||
| Total other assets | $ | $ | ||||||||||||
Accrued Liabilities
Accrued liabilities consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Accrued expenses | $ | $ | ||||||||||||
| Accrued payroll and employee benefits | ||||||||||||||
| Accrued interest and exit fees | ||||||||||||||
Accrued sales and use taxes | ||||||||||||||
Accrued income taxes | ||||||||||||||
| Total accrued liabilities | $ | $ | ||||||||||||
Other Current Liabilities
Other current liabilities consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| $ | $ | |||||||||||||
| Other | ||||||||||||||
| Total other current liabilities | $ | $ | ||||||||||||
Other Liabilities
Other liabilities, which are reflected within non-current liabilities in the Condensed Consolidated Balance Sheets, consisted of the following (in millions):
| June 30, 2026 | December 31, 2025 | |||||||||||||
Operating lease liability, net of current portion | $ | $ | ||||||||||||
Other | ||||||||||||||
| Total other liabilities | $ | $ | ||||||||||||
22
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
12. Debt Obligations
Debt obligations, including finance lease obligations, consisted of the following (in millions):
Maturity Date | June 30, 2026 | December 31, 2025 | |||||||||||||||
Infrastructure | |||||||||||||||||
SOFR plus | May 20, 2030 | $ | $ | ||||||||||||||
SOFR plus | May 20, 2030 | ||||||||||||||||
| Obligations under finance leases | Various | ||||||||||||||||
| Total Infrastructure | $ | $ | |||||||||||||||
| Life Sciences | |||||||||||||||||
| Lancer Promissory Note | December 31, 2026 (1) | $ | $ | ||||||||||||||
| Total Life Sciences | $ | $ | |||||||||||||||
| Non-Operating Corporate | |||||||||||||||||
| February 1, 2027 | $ | $ | |||||||||||||||
| March 1, 2027 | |||||||||||||||||
| CGIC Promissory Note | April 30, 2027 | ||||||||||||||||
SOFR plus | September 15, 2026 | ||||||||||||||||
| February 1, 2026 | |||||||||||||||||
| August 1, 2026 | |||||||||||||||||
| Total Non-Operating Corporate | $ | $ | |||||||||||||||
| Total outstanding principal | $ | $ | |||||||||||||||
| Unamortized issuance discount, issuance premium, and deferred financing costs | ( | ( | |||||||||||||||
Less: current portion of debt obligations | ( | ( | |||||||||||||||
Debt obligations, net of current portion | $ | $ | |||||||||||||||
(1) Maturity date as extended in July 2026. Refer to Note 22. Subsequent Events for additional information.
As of June 30, 2026, estimated future aggregate finance lease and principal debt payments based on contractual maturities, excluding interest and exit fees, were as follows (in millions):
| Finance Leases | Debt | Total | ||||||||||||||||||
2026 (remaining period) | $ | $ | $ | |||||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| 2029 | ||||||||||||||||||||
| 2030 | ||||||||||||||||||||
Total aggregate finance lease and debt principal payments | $ | $ | $ | |||||||||||||||||
The interest rates on finance leases ranged from approximately 3.0 % to 5.6 %.
23
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Infrastructure
On May 20, 2025, DBMG entered into an Amended and Restated Credit agreement (the "DBMG Credit Agreement"), with the lenders which are party thereto from time to time (each a “Lender” and collectively the “Lenders”) and UMB BANK, N.A. ("UMB"). The DBMG Credit Agreement provides DBMG with senior secured debt financing in an amount up to $220.0 million in the aggregate, consisting of (i) a senior secured revolving credit facility (the “DBMG Revolving Facility”) in an aggregate amount of $135.0 million and (ii) a senior secured term loan facility in the amount of $85.0 million. The DBMG Credit Agreement also contains an accordion feature to increase the allowable size of the DBMG Revolving Facility by an additional $50.0 million. The DBMG Revolving Facility and the term loan facility will mature on May 20, 2030. DBMG entered into the DBMG Credit Agreement to fully repay DBMG’s existing debt obligations and provide additional working capital capacity.
The term loan and borrowings under the DBMG Credit Agreement bear interest at a rate per annum equal to a SOFR Rate plus a variable spread based on a Senior Funded Indebtedness to EBITDA Ratio as defined in the agreement with an interest rate floor of 4.25 % per annum. Interest is paid monthly on DBMG's revolving loans, and the effective interest rate on DBMG's revolving loans was 6.3 % and 6.8 %, as of June 30, 2026 and December 31, 2025, respectively. The DBMG Revolving Facility has an unused commitment fee of 0.50 % per annum times the average daily unused availability under the line. Principal payments and interest on DBMG's term loan are paid monthly, and the effective interest rate was 6.9 % and 7.4 %, as of June 30, 2026 and December 31, 2025.
At the time of entering into the DBMG Credit Agreement, deferred financing fees totaling $1.8 million were capitalized as original issue discounts and included in the carrying amount of the debt in the Condensed Consolidated Balance Sheet and $0.1 million in fees paid to third parties were expensed. Capitalized fees are amortized over the remaining life of the debt under the effective interest rate method and are included in interest expense.
DBMG had availability for revolving loans of $129.2 million and $119.9 million, as of June 30, 2026 and December 31, 2025, respectively.
The obligations of the Borrowers under the new DBMG Credit Agreement are guaranteed by certain domestic subsidiaries of DBMG. As security for the Borrowers’ obligations under the DBMG Credit Agreement, (i) DBMG and its domestic subsidiaries have granted a first priority lien on substantially all their tangible and intangible personal property, including, without limitation, accounts receivable, equipment and the equity interests of certain of DBMG’s direct and indirect subsidiaries, and (ii) certain of the domestic subsidiaries of DBMG have granted a first priority lien on ten parcels of real estate owned by such subsidiaries.
The DBMG Credit Agreement contains usual and customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio; and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the DBMG Credit Agreement. The DBMG Credit Agreement contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the DBMG debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of June 30, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement. DBMG is in compliance with its debt covenants as of June 30, 2026.
Life Sciences
On August 4, 2025, Lancer Capital LLC ("Lancer"), a related party, and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note (the "Lancer Note"), which was previously amended multiple times as further described below, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The Lancer Note can be repaid at any time with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The amended Lancer Note has an interest rate of 12 % and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance.
The total initial principal amount of the amended Lancer Note on August 4, 2025 was $43.5 million, which incorporated the $20.0 million principal amount of the note as previously amended effective January 31, 2024 (which was comprised of a principal amount of $17.4 million and unpaid accrued interest of $2.6 million), accrued interest of $7.0 million and $16.5 million in accrued exit fees which had been incurred from January 31, 2024 through August 4, 2025. In addition, a new 5 % extension fee of $2.2 million was capitalized into the principal amount on August 4, 2025 and is being amortized over the term of the note using the effective interest rate method and is included in interest expense.
As of both June 30, 2026 and December 31, 2025, the effective interest rate on the note, as amended, was 17.0 2.1 million and $5.2 million for the three months ended June 30, 2026 and 2025, respectively and was $4.1 million and $9.7 million for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025, in accordance with the 12 % note agreement, $3.0 million and $2.5 million, respectively, of accrued interest, excluding exit fees and extension fees, was capitalized into the principal balance.
24
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
As of June 30, 2026, the total carrying amount relating to the note, which is included within the Current portion of debt obligations in the Condensed Consolidated Balance Sheet, was $50.7 million, inclusive of $50.9 million of principal (which includes capitalized interest and fees), partially offset by $0.2 million of the unamortized OID for the extension fee. As of December 31, 2025, the total carrying amount relating to the note, which is included within the Current portion of debt obligations in the Condensed Consolidated Balance Sheet, totaled $46.6 million, inclusive of $47.9 million of principal (which includes capitalized interest and fees), partially offset by $1.3 million of the unamortized OID for the extension fee.
Refer to Note 22. Subsequent Events for additional information.
Spectrum (Held for Sale)
In connection with the Spectrum Merger, on May 29, 2026, Broadcasting entered into the New Spectrum Loan Agreement, which provides for the Bridge Loan Facility in an aggregate principal amount of $105 million, which was funded on a single drawing on May 29, 2026. Refer to Note 3. Assets and Liabilities Held for Sale for additional information.
Non-Operating Corporate
In August 2025, the Company closed on an exchange offer and consent solicitation to eligible holders of its 8.50 % senior secured notes due 2026 ("8.50 % 2026 Senior Secured Notes") to exchange such notes for newly issued 10.50 % senior secured notes due 2027 (the “10.50 % 2027 Senior Secured Notes”). The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “10.50 % 2027 Senior Secured Notes Trustee”) and collateral trustee, entered into an indenture (the “10.50 % 2027 Senior Secured Notes Indenture”) governing the 10.50 % 2027 Senior Secured Notes and the Company issued $360.4 million aggregate principal amount of 10.50 % 2027 Senior Secured Notes as consideration for the exchange of $328.1 million aggregate principal amount of the 8.50 % 2026 Senior Secured Notes. The new principal amount includes fees payable to the lenders and $52.50 principal amount of 10.50 % 2027 Senior Secured Notes per $1,000 principal amount of 8.50 % 2026 Senior Secured Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 8.50 % 2026 Senior Secured Notes that was due on August 1, 2025. The 10.50 % 2027 Senior Secured Notes mature on February 1, 2027. Total fees and additional interest of $18.3 million payable to the lenders and capitalized into the new principal amount under the exchange offer was recorded as an OID and remaining unamortized deferred financing fees of $1.3 million allocated from the 8.50 % 2026 Senior Secured Notes exchanged will be amortized into interest expense over the term of the notes using the effective interest rate method.
The 10.50 % 2027 Senior Secured Notes accrue interest at a rate of 10.50 % per year, payable semi-annually on February 1st and August 1st of each year, commencing on February 1, 2026. Total interest of $18.9 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. All subsequent interest payments are payable in cash. Refer to Note 22. Subsequent Events regarding amendments to, and interest payments on, the 10.50 % 2027 Senior Secured Notes.
Aggregate interest expense for the new 10.50 % 2027 Senior Secured Notes, including the contractual interest coupon and amortization of fees was $13.3 million and $26.3 million for the three and six months ended June 30, 2026, respectively.
As of June 30, 2026, the total carrying amount related to the notes was $371.0 million, inclusive of $379.3 million aggregate principal outstanding (which includes capitalized interest), partially offset by $7.7 million of the unamortized OID and $0.6 million of unamortized deferred financing fees. As of December 31, 2025, the total carrying amount related to the notes was $345.5 million, inclusive of $360.4 million aggregate principal outstanding, partially offset by $13.9 million of the unamortized OID and $1.0 million of unamortized deferred financing fees. The effective interest rate on the 10.50 % 2027 Senior Secured Notes was 14.4
The Company’s obligations under the 10.50 % 2027 Senior Secured Notes Indenture are irrevocably and unconditionally guaranteed, jointly and severally, by the same guarantors that guarantee the 8.50 % 2026 Senior Secured Notes (the “Subsidiary Guarantors”). The 10.50 % 2027 Senior Secured Notes and the related guarantees are senior secured obligations of the Company and the Subsidiary Guarantors. The 10.50 % 2027 Senior Secured Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from the registration requirements of the Securities Act.
If the Company completes certain asset sales, the terms of the 10.50 % 2027 Senior Secured Notes Indenture may require the Company, in certain circumstances, to make an offer to purchase the 10.50 % 2027 Senior Secured Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101 % of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase.
25
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The 10.50 % 2027 Senior Secured Notes Indenture contains covenants limiting, among other things, the ability of the Company, and, in certain cases, the Company’s subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50 % 2027 Senior Secured Notes Indenture required the Company to meet certain milestones with respect to strategic alternatives for its operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50 % 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, the Company was thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which the Company had either met or extended as of June 30, 2026. The June 1, 2026 milestone for an executed purchase agreement was extended to August 28, 2026 and the Company is in compliance with the milestone covenants requirements as of the date of the filing of this Quarterly Report on Form 10-Q. As of June 30, 2026, the Infrastructure segment did not meet the criteria for held for sale or discontinued operations in accordance with ASC 360-10 and ASC 205-20.
The 10.50 % 2027 Senior Secured Notes Indenture contains customary events of default which could, subject to certain conditions, cause the 10.50 % 2027 Senior Secured Notes to become immediately due and payable, including, but not limited to defaults by the Company in the payment of the principal of any of the 10.50 % 2027 Senior Secured Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise (other than pursuant to an offer to purchase by the Company) or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 10.50 % 2027 Senior Secured Notes Indenture for a period of 60 days following notice by the 10.50 % 2027 Senior Secured Notes Trustee or the holders of at least 30 % in aggregate principal amount of the 10.50 % 2027 Senior Secured Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; certain events of bankruptcy or insolvency; and failure to comply with the milestone covenant described above.
In connection with the Spectrum agreements entered into on May 29, 2026 (refer to Note 3. Assets and Liabilities Held for Sale), the Company, certain subsidiary guarantors, and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “Trustee”) and notes collateral agent (in such capacity, the “Collateral Agent”), entered into an amended supplemental indenture (the “Amended 10.50 % 2027 Senior Secured Notes Supplemental Indenture”) to the 10.50 % 2027 Senior Secured Notes Indenture. Pursuant to the Amended 10.50 % 2027 Senior Secured Notes Supplemental Indenture, certain provisions of the 10.50 % 2027 Senior Secured Notes Indenture, including certain definitions and negative covenants, were amended with the consent of the holders of at least a majority in aggregate principal amount of the Notes outstanding voting as a single class (the “Requisite Holders”). In addition, the Requisite Holders consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the Indentures as a result thereof.
The original $330.0 million aggregate principal amount of 8.50 % senior secured notes due February 1, 2026 (the "8.50 % 2026 Senior Secured Notes") were issued in 2021 at 100 % of par. In August 2025, the Company exchanged $328.1 million aggregate principal amount of the 8.50 % 2026 Senior Secured Notes for new 10.50 % 2027 Senior Secured Notes, as discussed above. Subsequent to the exchange, the Company had $1.9 million aggregate principal amount of the 8.50 % 2026 Senior Secured Notes remaining. On February 2, 2026, the Company repaid the remaining principal balance and all accrued interest.
The 2026 Senior Secured Notes had a stated annual interest rate of 8.50 % and had an effective interest rate of 9.3 %, which reflected the initial $10.8 million of deferred financing fees in 2021, including underwriting fees. Interest was 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 $7.7 million and $15.3 million for the three and six months ended June 30, 2025, respectively.
2027 Convertible Notes
On August 4, 2025, the Company exchanged $48.7 million of the then outstanding aggregate principal amount of the 2026 Convertible Notes for $53.5 million aggregate principal amount of newly issued 9.5 % Convertible Senior Secured Notes due 2027 (the “2027 Convertible Notes”). The new principal amount included fees payable to the lenders and $47.50 principal amount of 2027 Convertible Notes per $1,000 principal amount of 2026 Convertible Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 2026 Convertible Notes that was due on August 1, 2025. The 2027 Convertible Notes mature on March 1, 2027, unless earlier converted, redeemed or purchased.
The 2027 Convertible Notes will be convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, based on an initial conversion rate of 23.6327 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to an initial 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 $1.00 in excess thereof. In addition, following a Make-Whole Fundamental Change (as defined in the 2027 Convertible Notes Indenture) or the Company’s delivery of a notice of redemption for the 2027 Convertible Notes, the Company will, in certain circumstances, be required to increase the conversion rate for a holder who elects to convert its 2027 Convertible Notes in connection with (i) such Make-Whole Fundamental Change or (ii) such notice of redemption.
26
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The initial maximum number of securities underlying the 2027 Convertible Notes, assuming the largest “make-whole” addition to the conversion rate under the 2027 Convertible Notes Indenture, and assuming that the Company has obtained the requisite stockholder approval referred to above, was 1,543,174 shares of the Company’s common stock.
As of June 30, 2026, each $1,000 of principal of the 2027 Convertible Notes is convertible into 23.6327 shares of the Company's common stock, for a total of 1,323,315 shares of common stock, which is equivalent to a conversion price of approximately $42.31 per share, as adjusted for the reverse stock split in 2024 and subject to further adjustment upon the occurrence of specified events. Based on the closing price of our common stock on June 30, 2026, the if-converted value of the 2027 Convertible Notes did not exceed its principal value.
The 2027 Convertible Notes accrue interest at a rate of 9.5 % per year. Interest on the 2027 Convertible Notes is paid semi-annually on February 1st and August 1st of each year, commencing on February 1, 2026. Total interest of $2.5 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. All subsequent interest payments are payable in cash. Refer to Note 22. Subsequent Events regarding amendments to, and payments on, the 2027 Convertible Notes.
Aggregate interest expense, including the contractual interest coupon and amortization was $1.5 million and $3.0 million for the three and six months ended June 30, 2026, respectively.
The following amounts were recorded as an OID or deferred financing cost and are being amortized into interest expense over the term of the new 2027 Convertible Notes using the effective interest rate method: total new fees and additional interest of $2.9 million payable to the lenders and capitalized into the principal amount for the convertible notes exchanged, remaining unamortized deferred financing fees of $0.2 million allocated from the 2026 Convertible Notes exchanged, and a discount of $0.5 million, attributable to the increase in fair value of the embedded conversion option, offset partially by $2.4 million in remaining unamortized premiums allocated from the 2026 Convertible Notes exchanged. The effective interest rate on the 2027 Convertible Notes is 11.1 %.
As of June 30, 2026, the total carrying amount related to the notes was $55.4 million, inclusive of $56.0 million aggregate principal outstanding (which includes capitalized interest), partially offset by a remaining unamortized net OID of $0.5 million and unamortized deferred financing fees of $0.1 million. As of December 31, 2025, the total carrying amount related to the notes was $52.5 million, inclusive of $53.5 million aggregate principal outstanding, partially offset by a remaining unamortized net OID of $0.8 million and unamortized deferred financing fees of $0.2 million
The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “2027 Convertible Notes Trustee”) and collateral trustee, entered into an indenture (the “2027 Convertible Notes Indenture”), dated as of August 4, 2025, governing the 2027 Convertible Notes. If the Company completes certain asset sales, the 2027 Convertible Notes Indenture may require the Company in certain circumstances to make an offer to purchase the 2027 Convertible Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101 % of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Additionally, if the Company undergoes a Fundamental Change, subject to certain conditions, the Company may be required to purchase all or any portion of the 2027 Convertible Notes for cash at 100 % of the principal amount to be purchased, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the applicable purchase date. The Fundamental Change definition excludes ownership of the Company’s equity by Lancer Capital LLC and its affiliates.
The 2027 Convertible Notes Indenture contains covenants limiting, among other things, the ability of the Company, and, in certain cases, the Company’s subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. These covenants are subject to a number of important exceptions and qualifications.
The 2027 Convertible Notes Indenture contains customary events of default, including cross-default provisions with other INNOVATE debt instruments, which could, subject to certain conditions, cause the 2027 Convertible Notes to become immediately due and payable, including, but not limited to defaults by the Company in the payment of the principal of any of the 2027 Convertible Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 2027 Convertible Notes Indenture for a period of 60 days following notice by the 2027 Convertible Notes Trustee or the holders of at least 25 % in aggregate principal amount of the 2027 Convertible Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.
27
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
In connection with the Spectrum agreements entered into on May 29, 2026 (refer to Note 3. Assets and Liabilities Held for Sale), the Company, certain subsidiary guarantors, and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “Trustee”) and notes collateral agent (in such capacity, the “2027 Convertible Notes Collateral Agent”), entered into an amended supplemental indenture (the “Amended 2027 Convertible Notes Supplemental Indenture”) to the 2027 Convertible Notes Indenture. Pursuant to the Amended 2027 Convertible Notes Supplemental Indenture, certain provisions of the 2027 Convertible Notes Indenture, including certain definitions and negative covenants, were amended with the consent of the holders of at least a majority in aggregate principal amount of the notes outstanding voting as a single class (the “2027 Convertible Notes Requisite Holders”). In addition, the 2027 Convertible Notes Requisite Holders consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the Indentures as a result thereof.
2026 Convertible Notes
The original 7.50 % convertible notes (the "2026 Convertible Notes") were issued under an indenture dated February 1, 2021, between the Company and U.S. Bank, as trustee. As discussed above, on August 4, 2025, pursuant to the Exchange Agreements, the Company exchanged $48.7 million aggregate principal amount of the 2026 Convertible Notes for new 2027 Convertible Notes. Subsequent to the exchanges and, as of June 30, 2026, the Company had $0.2 million aggregate principal remaining of the 2026 Convertible Notes.
The 2026 Convertible Notes mature on August 1, 2026, unless earlier converted, redeemed or purchased. Refer to Note 22. Subsequent Events for information regarding repayment of the 2026 Convertible Notes.
The 2026 Convertible Notes were issued in 2021 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 an initial fair value of $12.3 million, which was recorded as a premium on the 2026 Convertible Notes. The 2026 Convertible Notes had an initial effective interest rate of 3.21 %, which reflected the initial $12.3 million premium and $1.1 million of deferred financing fees.
As of both June 30, 2026 and December 31, 2025, the remaining 2026 Convertible Notes had a net carrying value of $0.2 3.0
Interest was 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 insignificant for the three and six months ended June 30, 2026, and was $0.4 million and $0.8 million for the three and six months ended June 30, 2025, respectively.
Each $1,000 of principal of the 2026 Convertible Notes is convertible into 23.6327 shares of INNOVATE's common stock, which is equivalent to a conversion price of approximately $42.31 per share, for a total of 3,781 shares of common stock, as adjusted for the reverse stock split in 2024, and subject to further adjustment upon the occurrence of specified events. Based on the closing price of our common stock on June 30, 2026, the if-converted value of the 2026 Convertible Notes did not exceed its principal value.
Revolving Line of Credit
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"). As of both June 30, 2026 and December 31, 2025, the outstanding balance was $20.0 5.75 %, and the benchmark rates for the interest are SOFR-based rates. As of June 30, 2026 and December 31, 2025, the interest rate on the Revolving Line of Credit was 9.7 % and 10.0 %, 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 on the actual daily amount of unused availability under the Revolving Line of Credit with MSD, and also includes a requirement for prepayment using the net cash proceeds received from certain asset sales. The affirmative and negative covenants governing the Revolving Line of Credit are substantially consistent with the affirmative and negative covenants contained in the indentures that govern the Company's senior secured notes.
On August 4, 2025, the Company and MSD entered into an Eighth Amendment to Credit Agreement, which among other things, extended the maturity of the 2020 Revolving Credit Agreement to September 15, 2026, and added a new $0.4 million extension fee that is payable on the earlier of maturity date or date of prepayment of the debt. The $0.4 million extension fee and third-party legal costs of $0.3 million incurred under the amendment are being amortized into interest expense over the term of the Revolving Line of Credit.
Any failure to comply with the restrictions in the agreements governing the Company's indentures, or any agreement governing other indebtedness the Company could incur, may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.
In connection with the Spectrum agreements entered into on May 29, 2026, the Company entered into a ninth amendment (the “Ninth Amendment”) to the Credit Agreement with MSD. Pursuant to the Ninth Amendment, certain provisions of the MSD Credit Agreement, including certain definitions and negative covenants, were amended with the consent of MSD. In addition, MSD consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the MSD Credit Agreement as a result thereof.
28
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
CGIC Promissory Note
On August 4, 2025, the Company and CGIC entered into a Subordinated Secured Promissory Note to, among other things, extend the maturity of its existing subordinated unsecured promissory note with CGIC (the “CGIC Note”) from February 28, 2026 to April 30, 2027, and secure the amended CGIC Note by a third priority lien on the same collateral securing the 10.50 % 2027 Senior Secured Notes and the 2027 Convertible Notes. The amended CGIC Note has a stated interest rate of 16.0 % and an effective interest rate of 14.6 8,063 shares of Series A-4 Preferred Stock of the Company held by CGIC, and unpaid accrued dividends for the A-3 and A-4 Preferred Stock were exchanged for an additional principal amount of the CGIC Note, on a dollar-for-dollar basis (the “Preferred Stock Exchange”). The additional principal amount incurred under the Preferred Stock Exchange was $9.6 million (reflective of the $9.1 million accrued value of the Series A-4 Preferred Stock and $0.5 million in accrued dividends on the Series A-3 and A-4 Preferred Stock). In addition, an extension fee and accrued interest of $2.4 million on the CGIC Note through July 31, 2025, were capitalized to the new principal amount of the CGIC Note, for a total new aggregate outstanding principal amount of $43.0 million. The new extension fee was recorded as an OID to the carrying amount of the note and is being amortized into interest expense over the term of the CGIC Note using the effective interest rate method.
The original CGIC subordinated unsecured promissory note, which was issued at 100 % of par entered into in 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”), had a principal amount of $35.1 million, an original maturity date of February 28, 2026, and bore interest at 9.0 % per annum through May 8, 2024, 16.0 % per annum from May 9, 2024 to May 8, 2025, and 32.0 % per annum thereafter.
For the three months ended June 30, 2026 and 2025, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the discount, was $1.8 million and $1.3 million, respectively, and cash paid for interest to CGIC was zero and $2.0 million, respectively. For the six months ended June 30, 2026 and 2025, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the discount, was $3.5 million and $2.7 million, respectively, and cash paid for interest to CGIC was zero and $3.2 million. During the six months ended June 30, 2026, in accordance with the terms of the amended CGIC Note, $3.8 million of interest was capitalized into the principal balance. As of June 30, 2026, the total carrying amount related to the CGIC Note was $50.3 million, inclusive of $49.7 million of principal (including capitalized interest) and a net unamortized premium of $0.6 million. As of December 31, 2025, the total carrying amount of the note was $46.8 million, inclusive of $45.9 million of principal (including capitalized interest) and a net unamortized premium of $0.9 million.
The terms of the CGIC Note include a mandatory prepayment requirement which requires the Company to prepay the CGIC Note (together with all accrued and unpaid interest and all other amounts payable under the CGIC Note), after the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50 % 2027 Senior Secured Notes, the 10.50 % 2027 Senior Secured Notes Indenture, the 2027 Convertible Notes, the 2027 Convertible Notes Indenture and all other Senior Debt (or, in each case, under any refinancing indebtedness in respect thereof), upon the occurrence of an Asset Sale (as defined in the agreement), in an amount equal to the Net Cash Proceeds (as defined in the agreement) from such Asset Sale, with such prepayment due no later than two (2) Business Days after the receipt of such Net Cash Proceeds by the Company (or its subsidiary, if applicable) from such Asset Sale.
The note contains customary events of default and contains cross-default provisions with other INNOVATE debt instruments which could, subject to certain conditions, cause the note to become immediately due and payable.
13. Income Taxes
The Company uses the Annual Effective Tax Rate ("ETR") approach of ASC 740-270, Interim Reporting, to calculate its interim tax provision.
Income tax expense was $13.1 million and $4.2 million for the three months ended June 30, 2026 and 2025, respectively. Income tax expense was $16.0 million and $11.3 million for the six months ended June 30, 2026 and 2025, respectively. Income tax expense primarily relates to the tax expense as calculated for taxpaying entities, including the tax expense/benefit associated with the INNOVATE Corp. U.S. consolidated group due to the Tax Cut and Jobs Act's 80 percent limitation on net operating losses incurred after 2017. Additionally, the tax benefits associated with losses generated by certain other businesses have been reduced by a full valuation allowance as management does not believe it is more-likely-than-not that the losses will be utilized.
Net Operating Losses
At December 31, 2025, the Company had gross U.S. net operating loss ("NOL") carryforwards available to reduce future taxable income of the U.S. consolidated group in the amount of $176.3 million. The Company expects that approximately $123.0 million of the gross U.S. NOL carryforwards would be available to offset taxable income in 2026 and later periods. This estimate may change based on changes to actual results reported on the 2025 U.S. tax return. The amount of U.S. 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").
29
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Due to U.S. enacted Public Law 115-97, known informally as the Tax Cuts and Jobs Act (the "TCJA") in 2017, U.S. NOL carryforwards in the amount of $141.8 million, generated after 2017 have an indefinite carryforward period. U.S. NOL carryforwards, in the amount of $34.5 million, generated prior to 2018 will expire, if unused, by 2037.
Additionally, as of December 31, 2025, the Company had $164.3 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 $115.7 million from R2 Technologies, $45.9 million from DTV, and other entities of $2.7 million. Of the $164.3 million of gross U.S. NOL carryforwards, $128.2 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.
Unrecognized Tax Benefits
The Company follows the provision of ASC 740 which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. The Company is subject to challenge from various taxing authorities relative to certain tax planning strategies, including certain intercompany transactions as well as regulatory taxes.
The Company did not 58.7 million for uncertain tax positions based on our interpretation of tax laws and regulations that are subject to varied interpretations by the IRS.
Examinations
The Company conducts business globally, and as a result, INNOVATE or one or more of its subsidiaries files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. Tax years 2002-2024 remain open for examination.
The Company is currently under examination in various state and foreign tax jurisdictions. The open tax years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the applicability of income tax credits for the relevant tax period. Given the nature of tax audits, there is a risk that disputes may arise.
14. Commitments and Contingencies
Litigation
The Company is subject to claims and legal proceedings that arise in the ordinary course of business. 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 Condensed Consolidated Financial Statements. Such legal matters may include, but are 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 Condensed Consolidated Financial Statements. The Company records a liability in its Condensed Consolidated Financial Statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated as well as any legal costs incurred related to the litigation. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amount of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary for its Condensed Consolidated Financial Statements not to be misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the Company's Condensed Consolidated Financial Statements. 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, and 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.
30
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
GrayWolf Collective Action Claim
On March 24, 2026, a subsidiary of DBM Global, GrayWolf Integrated Construction Company, received a draft of a purported Collective Action Complaint entitled Hilario Riviera, Individually and for Others Similarly Situated v. GrayWolf Integrated Construction Company (the "Draft Complaint") alleging that GrayWolf failed to properly pay Riviera for all hours worked because GrayWolf automatically rounded the punch in and punch out times for work to the nearest half hour for GrayWolf’s own primary benefit and to the detriment of Riviera and other hourly employees. The Draft Complaint also states that GrayWolf paid Riviera and other hourly employees “per diems,” not reasonably calculated to reimburse expenses and based on time worked, but GrayWolf excluded “per diems” from their regular rate of pay for overtime purposes. The action is purported to be brought under the Fair Labor Standards Act (the "FLSA") on behalf of hourly employees for the last three years who had wages rounded or received "per diems". GrayWolf has entered into a “Tolling Agreement” with the Plaintiff to stay any statute of limitations while GrayWolf investigates this matter and expects that it will vigorously contest the allegations. Accordingly, the Company cannot reasonably estimate any range of potential loss at this time.
Other Commitments and Contingencies
Letters of Credit and Performance Bonds
As of June 30, 2026, DBMG had outstanding letters of credit of $5.8 million under credit and security agreements and performance bonds of $548.9 million. As of December 31, 2025, DBMG had outstanding letters of credit of $0.1 million under credit and security agreements and performance bonds of $680.2 million. DBMG’s contract arrangements with customers sometimes require DBMG to provide performance bonds to partially secure its obligations under its contracts. Bonding requirements typically arise in connection with private contracts and sometimes with respect to certain public work projects. DBMG’s performance bonds are obtained through surety companies and typically cover the entire project price. The ratings of the bonding companies utilized by DBMG are highly rated, ranging from A-, A, A+, AA- and AA.
Concentrations of Credit Risk
The Company's revenue, accounts receivable and accounts payable concentrations of 10% and greater were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | June 30, 2026 | December 31, 2025 | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Revenue | Revenue | Revenue | Revenue | Accounts Receivable | Accounts Receivable | Accounts Payable | Accounts Payable | |||||||||||||||||||||||||||||||||||||||||||||
| Customer A | Infrastructure | * | * | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer B | Infrastructure | * | * | * | * | ||||||||||||||||||||||||||||||||||||||||||||||||
| Customer C | Infrastructure | * | * | * | * | ||||||||||||||||||||||||||||||||||||||||||||||||
| Customer D | Infrastructure | * | * | * | * | * | |||||||||||||||||||||||||||||||||||||||||||||||
| Supplier A | Infrastructure | ||||||||||||||||||||||||||||||||||||||||||||||||||||
*Less than 10% concentration
Pending Merger and Disposal of Controlling Interest in Spectrum
Refer to Note 3. Assets and Liabilities Held for Sale for additional information.
15. Share-based Compensation
Total share-based compensation expense recognized by the Company and its subsidiaries under all equity compensation arrangements was $0.4 million and $0.7 million for the three months ended June 30, 2026 and 2025, respectively, and was $1.0 million and $1.5 million for the six months ended June 30, 2026 and 2025, respectively, which is included within Selling, general and administrative expenses in the Condensed 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 to three years for a member of the Board of Directors or an employee to vest in the share-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.
31
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Restricted Stock and Restricted Stock Units
A summary of INNOVATE’s restricted stock and restricted stock unit activity is as follows:
Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Unvested - December 31, 2025 | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Unvested - June 30, 2026 | $ | ||||||||||
The aggregate vesting date fair value of the restricted stock and restricted stock units which vested during the six months ended June 30, 2026 and 2025, was $1.2 million and $0.6 million, respectively. As of June 30, 2026, the total unrecognized share-based compensation expense related to unvested restricted stock and restricted stock units was $0.3 million and is expected to be recognized over the remaining weighted-average period of 0.9 years.
Stock Options
A summary of INNOVATE’s stock options is as follows:
Number of Stock Options | Weighted-Average Exercise Price | ||||||||||
| Outstanding - December 31, 2025 and June 30, 2026 | $ | ||||||||||
| Exercisable - December 31, 2025 and June 30, 2026 | $ | ||||||||||
As of June 30, 2026, the intrinsic value and weighted-average remaining life of the Company's outstanding and exercisable stock options were $1.4 million and approximately 7.9 years, respectively. The maximum contractual term of the Company's exercisable stock options is approximately ten years . As of June 30, 2026, there were 100,000 unvested stock options and $0.1 million of unrecognized share-based compensation expense related to unvested stock options which is expected to be recognized over the remaining period of 0.2 years.
16. Temporary Equity
Preferred Shares
The Company’s preferred shares authorized, issued and outstanding consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||||||||
Preferred shares authorized, $ | ||||||||||||||
| Series A-3 shares issued and outstanding | ||||||||||||||
| Series A-4 shares 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 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 redemption date was July 1, 2026. Refer to Note 22. Subsequent Events for information on the redemption notice delivered with respect to the Company’s outstanding Series A-3 and Series A-4 Preferred Stock.
On August 4, 2025, INNOVATE closed on a Preferred Stock Exchange with CGIC that resulted in the redemption of 8,063 shares of Series A-4 Preferred Stock of the Company and unpaid accrued dividends for the A-3 and A-4 Preferred Stock for an additional principal amount of the CGIC Note. Refer to Note 12. Debt Obligations for additional information.
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 Preferred Stock have been classified as temporary equity in the Company's Condensed Consolidated Balance Sheet. The Series A-3 and remaining A-4 Preferred Stock have a combined redemption value of $9.7 million (which includes accreted dividends) and a current fair value of $10.3 million as of June 30, 2026, which is inclusive of $0.6 million in accrued cash dividends.
32
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Dividends. The Series A-3 and Series A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of 7.50 %. The accrued values of the Series A-3 and Series A-4 Preferred Stock accrete quarterly at an annualized rate of 4.00 % that is reduced to 2.00 % or 0.0 % if the Company achieves specified rates of growth measured by increases in its net asset value; provided, that the accreting dividend rate will be 7.25 % in the event that (A) the daily volume weighted-average price ("VWAP") of the Company's common stock is less than a certain threshold amount, (B) the Company's common stock is not registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or (C) the Company's common stock is not listed on certain national securities exchanges or the Company is delinquent in the payment of any cash dividends. The Series A-3 and Series A-4 Preferred Stock is also entitled to participate in cash and in-kind distributions to holders of shares of Company's common stock on an as-converted basis.
During the first and second quarters of 2026, the Board did not declare any cash dividends with respect to INNOVATE’s issued and outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock. Aggregate quarterly dividends of $0.4 million and $0.3 million, respectively, for the first and second quarters of 2026, included the annual cash dividend of 7.5 % per annum which was accrued and also the accreting dividend of 7.25 % per annum.
During the three months ended March 31, 2025, 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 table (in millions):
2025 | |||||||||||
| Declaration Date and Holders of Record Date | March 31, 2025 | ||||||||||
| Payment Date | April 15, 2025 | ||||||||||
| Total Dividend | $ | ||||||||||
During the three months ended June 30, 2025, the Board did not declare any cash dividends with respect to INNOVATE’s issued and outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock. An aggregate quarterly dividend of $0.7 million included the annual cash dividend of 7.5 % per annum which was accrued and also the accreting dividend of 7.25 % per annum.
In addition, during the second quarter of 2025, the Company recorded the accretion and accrual of additional dividends of $1.3 million related to prior years, and $0.2 million related to the first quarter of 2025. This included cumulative accreting dividends, which were recorded following the determination that such dividends had accreted due to the daily VWAP of the Company's common stock trading at less than $1 at various dates since 2022, as adjusted for the 2024 Reverse Stock Split. These adjustments during the second quarter of 2025 that related to prior years resulted in: (i) an increase in the accrued value of the preferred stock of $1.3 million; (ii) a decrease in Additional Paid-In Capital (APIC) of $1.3 million; (iii) an increase in accrued liabilities of $0.1 million; and (iv) an increase in net loss attributable to common shareholders of $1.3 million. The Company evaluated the effects of the adjustment, both qualitatively and quantitatively, and does not believe the adjustment was material to any prior interim or annual periods that were affected.
On August 4, 2025, $0.5 million in accrued quarterly dividends was exchanged for an additional principal amount of the CGIC Note as part of the Preferred Stock Exchange. Refer to Note 12. Debt Obligations for additional information.
Subsequent Measurement. The Company elected to account for the Series A-3 and Series A-4 Preferred Stock by immediately recognizing changes in the redemption value as they occur. The carrying values of the Series A-3 and Series A-4 Preferred Stock are adjusted to equal what the redemption amount would be as if the redemption were to occur at the end of the reporting period as if it were also the redemption date for the Series A-3 and Series A-4 Preferred Stock. 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. 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 historically paid cash dividends on its Series A-3 and Series A-4 Preferred Stock and expects to continue to either accrete and accrue or pay such dividends each quarter.
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. As of June 30, 2026, each share of the Series A-3 Preferred Stock was convertible at an accrued value of $1,000 per share, divided by the conversion price of $23.63 (as it may be adjusted from time to time, the "Series A-3 Conversion Price"), and each share of Series A-4 Preferred Stock was convertible at an accrued value of $1,000 per share divided by the conversion price of $34.40 (as it may be adjusted from time to time, the "Series A-4 Conversion Price") (collectively the “Conversion Prices”). The Conversion Prices have historically been adjusted from time to time and continue to be subject to potential adjustment for dividends, certain distributions, reverse stock splits or 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).
As of June 30, 2026, the Series A-3 Preferred Stock and Series A-4 Preferred Stock, including the accrued value of accreting dividends, were convertible into 311,475 and 67,673 shares, respectively, of INNOVATE's common stock. As of December 31, 2025, the Series A-3 Preferred Stock and Series A-4 Preferred Stock, including the accrued value of accreting dividends, were convertible into 299,518 and 65,075 shares, respectively, of INNOVATE's common stock.
33
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Redemption by the Holders / Automatic Conversion. On July 1, 2026, holders of the Series A-3 and Series A-4 became entitled to cause the Company to redeem, out of legally available funds, the Series A-3 and Series A-4 at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Series A-3 and Series A-4). Each share of Series A-3 and Series A-4 that is not so redeemed will be automatically converted into shares of the Company's common stock at the Conversion Price then in effect. Refer to Note 22. Subsequent Events for information on the redemption notice delivered with respect to the Company’s outstanding Series A-3 and Series A-4 Preferred Stock.
Upon a change of control (as defined in the Company's Third Amended and Restated Certificate of Incorporation) holders of the Series A-3 and Series A-4 shall be entitled to cause the Company to redeem their shares of Series A-3 and Series A-4 at a price per share of Series A-3 and Series A-4 equal to the greater of (i) the accrued value of the Series A-3 and Series A-4, plus any accrued and unpaid dividends (to the extent not included in the accrued value of Series A-3 and Series A-4 Preferred Stock), and (ii) the value that would be received if the share of Series A-3 and Series A-4 were converted into shares of the Company's common stock immediately prior to the change of control.
Redemption by the Company / "Company Call Option". At any time, the Company may redeem the Series A-3 and Series A-4, in whole but not in part, at a price per share generally equal to 150 % of the accrued value per share, plus accrued but unpaid dividends (to the extent not included in the accrued value of the Series A-3 and Series A-4), subject to the holder's right to convert prior to such redemption.
Forced Conversion. The Company may force conversion of the Series A-3 and Series A-4 into shares of the Company's common stock if the common stock's thirty-day VWAP exceeds 150 % of the then-applicable Conversion Price and the common stock’s daily VWAP exceeds 150 % of the then-applicable Conversion Price for at least 20 trading days out of the trading day period used to calculate the 30 -day VWAP. In the event of a forced conversion, the holders of Series A-3 and Series A-4 will have the ability to elect cash settlement in lieu of conversion if certain market liquidity thresholds for the Company's common stock are not achieved.
Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Company (any such event, a “Liquidation Event”), the holders of Series A-3 and Series A-4 will be entitled to receive per share the greater of (i) the accrued value of the Series A-3 and Series A-4, plus any accrued and unpaid dividends (to the extent not included in the accrued value of Series A-3 and Series A-4), and (ii) the value that would be received if the share of Series A-3 and Series A-4 were converted into shares of the Company's common stock immediately prior to such occurrence. The Series A-3 and Series A-4 will rank junior to any existing or future indebtedness but senior to the Company's common stock and any future equity securities other than any future senior or pari passu preferred stock issued in compliance with the Company's Third Amended and Restated Certificate of Incorporation. The Series A-3 Preferred Stock and the Series A-4 Preferred Stock rank at parity.
Voting Rights. Except as required by applicable law, the holders of the shares of the Series A-3 and Series A-4 will be entitled to vote on an as-converted basis with the holders of the Company’s common stock on all matters submitted to a vote of the holders of the Company's common stock.
Consent Rights. For so long as any of the Series A-3 and Series A-4 is outstanding, consent of the holders of shares representing at least 75 % of certain of the Series A-3 and Series A-4 then outstanding is required for certain material actions.
Participation Rights. Pursuant to the securities purchase agreements entered into with the initial purchasers of the Series A-3 Preferred Stock and the Series A-4 Preferred Stock, subject to meeting certain ownership thresholds, certain purchasers of the Series A-3 Preferred Stock and the Series A-4 Preferred Stock are entitled to participate, on a pro-rata basis in accordance with their ownership percentage, determined on an as-converted basis, in issuances of equity and equity linked securities by the Company. In addition, subject to meeting certain ownership thresholds, certain initial purchasers of the Series A-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.
R2 Technologies Non-Controlling Interests
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, the non-controlling interest is classified outside of permanent equity in the mezzanine section of a Company's Consolidated Balance Sheet. 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 June 30, 2026 and December 31, 2025, 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.
34
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
During the six months ended June 30, 2026, Pansend funded $0.3 million in intercompany convertible 13.0 % notes with R2 Technologies, bringing the total intercompany notes principal balance to $7.8 million. The outstanding principal amounts of the notes, together with any interest then accrued and unpaid, is convertible at the option of Pansend into shares of a new series E Convertible Preferred Stock ("Series E") or new series F Convertible Preferred Stock ("Series F") in R2 Technologies, as applicable to each note, upon written notice to R2 Technologies and the notes had a maturity date, of the earlier of July 31, 2026, or a change in control of R2 Technologies, as defined in the notes. These notes and related intercompany interest are eliminated on consolidation. Refer to Note 22. Subsequent Events for additional information.
As a result of the allocation of losses, the redeemable non-controlling interest related to R2 Technologies was negative $1.1 million and negative $1.0 million as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026 and December 31, 2025, the Company had negative $10.6 million and negative $9.2 million, respectively of R2 Technologies non-controlling interests reflected within Non-controlling interests within the Condensed Consolidated Balance Sheets.
Liquidation Preference
R2 Technologies has issued multiple A, B, C and D-series, participating convertible preferred stock and also had convertible notes that were convertible into E-series and F-series (the "R2 Technologies Preferred Shares"), all of which shares 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, Series E (upon conversion of the aforementioned notes that are convertible into Series E) and Series F (upon conversion of the aforementioned notes that are convertible into Series F) 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 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. Refer to Note 22. Subsequent Events for additional information.
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.
As of both June 30, 2026 and December 31, 2025, 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 any liquidation preferences upon a liquidation event.
Spectrum Redeemable Non-Controlling Interests
Refer to Note 3. Assets and Liabilities Held for Sale for information regarding the Spectrum segment's redeemable non-controlling interests.
17. Related Parties
Non-Operating Corporate
As of June 30, 2026, Lancer Capital held $2.3 million of the Company's 2027 Convertible Notes, which were issued on August 4, 2025, in exchange for the $2.0 million of principal amount of the Company's 2026 Convertible Notes held by Lancer prior to the exchange. The principal amount of the 2027 Convertible Notes includes capitalized interest and extension fees. As of June 30, 2026, the $2.3 million in 2027 Convertible Notes are convertible into 54,338 shares of common stock of INNOVATE. As of December 31, 2025, Lancer Capital held the $2.2 million in 2027 Convertible Notes which were convertible into 51,874 shares of common stock of INNOVATE. For each of the six months ended June 30, 2026 and 2025, Lancer Capital earned $0.1
CGIC is a former significant shareholder and is the shareholder of the Company's Series A-3 Preferred Stock and Series A-4 Preferred Stock. Refer to Note 16. Temporary Equity for additional information. In addition, as of June 30, 2026 and December 31, 2025, the Company owed $49.7 million and $45.9 million, respectively, in principal amount of a promissory note owed to CGIC. Refer to Note 12. Debt Obligations for additional information. During the six months ended June 30, 2026, the Company paid $0.6 million to CGIC related to a tax refund received from the IRS.
35
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Refer to Note 22. Subsequent Events for information on the redemption notice delivered with respect to the Company’s outstanding Series A-3 and Series A-4 Preferred Stock.
Life Sciences
As of June 30, 2026 and December 31, 2025, R2 Technologies had $50.9 million and $47.9 million, respectively, in principal amount of a 12.0 % senior secured promissory note due to Lancer Capital. Refer to Note 12. Debt Obligations and Note 22. Subsequent Events for additional information.
For the three months ended June 30, 2026 and 2025, R2 Technologies recognized revenue of $0.6 million and $1.0 million, respectively from sales and profit sharing agreements with a subsidiary of Huadong, a related party of R2 Technologies and $1.1 million and $1.4 million for the six months ended June 30, 2026 and 2025. There were $0.3 million and $0.6 million of related receivables from this subsidiary of Huadong as of June 30, 2026 and December 31, 2025, respectively.
Share-based compensation and royalty expenses related to Blossom Innovations, LLC ("Blossom"), an investor of R2 Technologies since 2014, totaled $0.1 million and $0.2 million, for the three months ended June 30, 2026 and 2025, respectively, and totaled $0.2 million and $0.5 million for the six months ended June 30, 2026 and 2025, respectively. The related payables, and amounts accrued due to Blossom totaled $0.6 million and $0.5 million as of June 30, 2026, and December 31, 2025, respectively.
Refer to Note 7. Investments for transactions with equity method investees of the Company.
18. Segments and Related Information
The Company currently operates in one primary geography - United States, and substantially all revenue is derived in the United States, and substantially all PP&E and intangible assets reside in the United States. The Company's 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. As of June 30, 2026, the Company had three
During the second quarter of 2026, the Company's Spectrum segment met the criteria for classification as held for sale in accordance with ASC 360-10. As a result, the assets and liabilities of the Spectrum segment are presented as held for sale in the current period, and the prior period assets and liabilities of the Spectrum segment have been reclassified as held for sale for comparability purposes. While the Spectrum segment met the criteria for held for sale classification, it did not meet the criteria for classification as discontinued operations in accordance with ASC 205-20, as the anticipated disposal does not represent a strategic shift that will have a major effect on the Company's operations and financial results.
Refer to Note 3. Assets and Liabilities Held for Sale for additional information.
The 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 U.S. 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):
36
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
| Three Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
| Capital cash expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
Other operating loss(1) | ||||||||||||||||||||||||||||||||||||||
Income (loss) from operations | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
Capital cash expenditures | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(1) Other operating loss for the three months ended June 30, 2025, primarily consisted of a loss on lease modification and a loss on the sales of various properties at our Infrastructure segment.
| Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
| Other operating income | ( | ( | ||||||||||||||||||||||||||||||||||||
Income (loss) from operations | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
| Capital cash expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||||||||
Other operating loss (1) | ||||||||||||||||||||||||||||||||||||||
Income (loss) from operations | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||||||||||||||
Capital cash expenditures | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
(1) Other operating loss for the six months ended June 30, 2025, primarily consisted of a loss on lease modification and a loss on the sale of various properties at our Infrastructure segment.
37
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
Certain balance sheet data: | ||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||
| Infrastructure | Life Sciences | Non-Operating Corporate | Other and Eliminations | Sub-Total | Spectrum - Held for Sale | Total | ||||||||||||||||||||||||||||||||||||||
Investments (1) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Infrastructure | Life Sciences | Non-Operating Corporate | Other and Eliminations | Sub-Total | Spectrum - Held for Sale | Total | ||||||||||||||||||||||||||||||||||||||
Investments (1) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
(1) The Company's equity method investments in its Life Sciences segment totaled $0.9
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Reconciliation of the consolidated segment income from operations to consolidated income (loss) from operations before income taxes: | ||||||||||||||||||||||||||
| Income from operations | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Gain (loss) on extinguishment of debt | ( | ( | ||||||||||||||||||||||||
| Loss from equity investees | ( | |||||||||||||||||||||||||
| Other income, net | ||||||||||||||||||||||||||
| Income (loss) from operations before income taxes | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
19. Basic and Diluted Earnings (Loss) Per Common Share
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, 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 shares of Series A-3 and Series A-4 preferred stock outstanding, of the Company are considered participating securities; however, these securities do not participate in losses and, as such, are excluded from the computation of basic 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 share-based compensation plans), is computed using the "if-converted method" if this measurement is determined to be more dilutive than the treasury stock method in a period.
For the three months ended June 30, 2026, the Company included 593,201 of common stock equivalents in the weighted average number of shares used to calculate diluted EPS. The Company had no 286,770 of common stock equivalents from unvested restricted stock awards were excluded from the weighted-average number of shares used to calculate diluted EPS as their inclusion would have been anti-dilutive. For the three and six months ended June 30, 2025, 288,588 and 291,378 , 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 EPS 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 for the six months ended June 30, 2026 and for the three and six months ended June 30, 2025, 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. Temporary Equity for additional information on INNOVATE's equity instruments.
38
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
The following table presents a reconciliation of net income (loss) to net income (loss) used in the basic and diluted EPS calculations (in millions, except shares and per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Net (income) loss attributable to non-controlling interests and redeemable non-controlling interests | ( | ( | ||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | ( | ( | ( | |||||||||||||||||||||||
| Less: Preferred stock dividends | ||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders and participating preferred stockholders | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Earnings (loss) allocable to common shares: | ||||||||||||||||||||||||||
| Participating shares | ||||||||||||||||||||||||||
| Weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Unvested restricted stock | ||||||||||||||||||||||||||
| Series A-3 and Series A-4 Preferred Stock (as converted) | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| Percentage of earnings (loss) allocated to: | ||||||||||||||||||||||||||
| Common stock | % | % | % | % | ||||||||||||||||||||||
| Unvested restricted stock | % | % | % | % | ||||||||||||||||||||||
| Series A-3 and Series A-4 Preferred Stock | % | % | % | % | ||||||||||||||||||||||
| Numerator for earnings (loss) per share: | ||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders - basic | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Effect of assumed shares under the treasury stock method for stock options and unvested restricted stock | ||||||||||||||||||||||||||
| Net income (loss) attributable to common stock holders - diluted | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Denominator for earnings (loss) per share: | ||||||||||||||||||||||||||
| Weighted-average common shares outstanding - basic | ||||||||||||||||||||||||||
| Effect of assumed shares under the treasury stock method for stock options and unvested restricted stock | ||||||||||||||||||||||||||
| Weighted-average common shares outstanding - diluted | ||||||||||||||||||||||||||
| Earnings (Loss) per share | ||||||||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Diluted | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
20. Fair Value of Financial Instruments
Fair Value of Financial Instruments Not Measured at Fair Value
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 present 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
39
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
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):
| June 30, 2026 | Fair Value Measurement Using: | |||||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
Measurement alternative investment (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total assets not accounted for at fair value | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Debt obligations (2) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total liabilities not accounted for at fair value | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) Refer to Note 7. Investments for additional information.
(2) Excludes lease obligations accounted for under ASC 842, Leases.
| December 31, 2025 | Fair Value Measurement Using: | |||||||||||||||||||||||||||||||
| Carrying Value | Estimated Fair Value | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
Measurement alternative investment (1) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total assets not accounted for at fair value | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
Debt obligations (2) | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total liabilities not accounted for at fair value | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(2) Excludes lease obligations accounted for under ASC 842, Leases.
Debt Obligations. The fair value of the Company’s long-term obligations was determined using reporting from externally quoted market prices for INNOVATE's 10.50 % 2027 Senior Secured Notes, 8.50 % 2026 Senior Secured Notes, 9.5 % Convertible Senior Secured Notes due 2027, and 7.50 % Convertible Senior Notes due 2026, which are reflected as Level 2 fair value measurements due to limited recently available observable trading activity for these instruments. The methodology for the Level 2 fair value measurements 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. The Level 3 fair value measurements, including those for the Company's other debt instruments, were estimated using an income approach based on the expected future cash flows, discounted at an estimated market yield. The discount rate, or yield to maturity, was derived from a synthetic credit rating and corresponding market spread analysis as of the valuation date to estimate an option-adjusted spread which was then applied to the applicable risk-free curve, consistent with market observable inputs for similarly rated debt. Certain debt 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 investments in marketable securities are measured at fair value, using publicly available quoted market prices, a Level 1 input. Refer to Note 7. Investments.
40
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
21. Supplementary Financial Information
Other income, net
The following table provides information relating to Other income, net (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Gain on step-up of equity method investment | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Foreign currency translation losses | ( | ( | ( | ( | ||||||||||||||||||||||
| Unrealized fair value (loss) gain on securities | ( | ( | ||||||||||||||||||||||||
Other | ( | ( | ||||||||||||||||||||||||
Total other income, net | $ | $ | $ | $ | ||||||||||||||||||||||
Supplemental Cash Flow Information
The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows (in millions):
| Six Months Ended June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
Cash and cash equivalents, beginning of the period | $ | $ | ||||||||||||
| Restricted cash included in other assets (non-current) | ||||||||||||||
Total cash, cash equivalents and restricted cash, beginning of the period | $ | $ | ||||||||||||
Cash and cash equivalents, end of the period | $ | $ | ||||||||||||
| Restricted cash included in other assets (non-current) | ||||||||||||||
Total cash and cash equivalents and restricted cash, end of the period | $ | $ | ||||||||||||
| Cash and cash equivalents classified in Assets held for sale, beginning of period | $ | $ | ||||||||||||
| Restricted cash classified in Assets held for sale | ||||||||||||||
| Total cash and cash equivalents and restricted cash classified in Assets held for sale | $ | $ | ||||||||||||
| Cash and cash equivalents classified in Assets held for sale, end of period | $ | $ | ||||||||||||
| Restricted cash classified in Assets held for sale | ||||||||||||||
| Total cash and cash equivalents and restricted cash classified in Assets held for sale | $ | $ | ||||||||||||
Supplemental cash flow information: | ||||||||||||||
| Cash paid for interest | $ | $ | ||||||||||||
| Cash paid for income taxes, net of refunds | $ | $ | ||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||
Accrued interest and fees capitalized into principal debt (1) | $ | $ | ||||||||||||
Property, plant and equipment included in accounts payable or accrued expenses (2) | $ | $ | ||||||||||||
(1) Includes accrued interest of $0.8 million capitalized into principal debt for the Bridge Loan Facility for the six months ended June 30, 2026.
22. Subsequent Events
Subsequent to quarter end, the Company participated in a number of transactions or other events affecting its debt and capital structure, including transactions that reduced its near-term cash interest and other funding requirements:
These transactions and events include:
41
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
(i)supplemental indentures to the 10.50 % 2027 Senior Secured Notes Indenture and the 2027 Convertible Notes Indenture permitting the interest payable on August 1, 2026 in respect of the period from February 1, 2026 through July 31, 2026 on notes held by consenting holders to be paid in kind, together with a consent fee equal to 1.5 % of the principal amount consented, paid through the issuance of additional notes (as a result of which the Company paid $3.6 million in cash interest rather than $22.6 million which would otherwise have been due);
(ii) the declaration by DBMG of a $12.0 million cash dividend, of which INNOVATE received $11.0 million;
(iii)the amendment and extension of the maturity of R2 Technologies’ secured promissory note with Lancer Capital (which had a total principal balance as of June 30, 2026 of $50.9 million) from August 1, 2026 to December 31, 2026, as well as the conversion of R2 Technologies’ preferred equity to common equity, which resulted in Pansend's controlling interest in R2 Technologies increasing from 80.8 %, prior to the transaction, to 85.0 %;
(iv)the permitted redemption, defeasance or payment at maturity of the $0.2 million aggregate principal amount of 2026 Convertible Notes that matured on August 1, 2026;
(v)the delivery by the holder of the Company’s outstanding Series A-3 and Series A-4 Preferred Stock (which had a combined redemption value of $9.7 million as of June 30, 2026) of a redemption notice, in respect of which the Company did not have sufficient legally available funds, with the result that those shares remain outstanding;
(vi)the sale of the Company’s marketable securities for aggregate proceeds of $0.6 million; and
(vii)the conversion of the note due to Pansend from MediBeacon into a new convertible note.
On July 31, 2026, the parties to the 10.50 % 2027 Senior Secured Notes Indenture amended that indenture to permit interest for the period from February 1, 2026 through July 31, 2026 on notes held by consenting holders to be paid in kind in respect of the August 1, 2026 interest payment by increasing the principal amount of the notes or issuing additional notes. Consenting holders also received a consent fee equal to 1.5 % of the principal amount of the notes, for which they granted consent, paid through the issuance of additional 10.50 % 2027 Senior Secured Notes. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. As a result, on August 3, 2026, the total outstanding amount of 10.50 % 2027 Senior Secured Notes increased to $400.9 million and the Company paid $3.1 million in cash interest rather than $19.9 million (which would otherwise have been due). The supplemental indenture also permitted related additional note issuances and waived defaults arising from the amendments and issuances.
2027 Convertible Notes
On July 31, 2026, the parties to the 2027 Convertible Notes Indenture amended that indenture to permit interest for the period from February 1, 2026 through July 31, 2026 on notes held by consenting holders to be paid in kind in respect of the August 1, 2026 interest payment by increasing the principal amount of the notes or issuing additional notes. Consenting holders also received a consent fee equal to 1.5 % of the principal amount of the notes, for which they granted consent, paid through the issuance of additional 2027 Convertible Notes. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. As a result, on August 3, 2026 the total outstanding amount of 2027 Convertible Notes increased to $58.9 million and the Company paid $0.5 million in cash interest rather than $2.7 million (which would otherwise have been due). The supplemental indenture also permitted related additional note issuances and waived defaults arising from the amendments and issuances.
Lancer, which is a related party, consented to the amendment in respect of the 2027 Convertible Notes that it holds, and accordingly received
an aggregate of $0.1 million principal amount of the additional 2027 Convertible Notes issued as payment in kind of interest for the interest
period from February 1, 2026 through July 31, 2026 together with the related consent fee.
2026 Convertible Notes
The 7.5 % Convertible Notes due 2026 had an aggregate principal amount of $0.2 million, matured on August 1, 2026, and were redeemed on August 3, 2026. The July 31, 2026 supplemental indentures permitted their redemption, defeasance or payment at maturity.
DBMG Dividend
On July 8, 2026, DBMG declared a $12.0 million cash dividend which was paid on August 3, 2026, of which INNOVATE received $11.0 million.
R2 Technologies
On July 31, 2026, the maturity of R2 Technologies' secured promissory note with Lancer was extended from August 1, 2026 to the earlier of December 31, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The total principal balance as of June 30, 2026, which includes capitalized interest and fees was $50.9 million.
42
INNOVATE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(Unaudited)
On July 28, 2026, R2 Technologies' preferred equity outstanding, and outstanding convertible promissory notes held by Pansend were converted to common equity. As a result of the conversion, Pansend's controlling interest in R2 Technologies increased from 80.8 %, prior to the transaction, to 85.0 %. Refer to Note 16. Temporary Equity for additional information of R2 Technologies' preferred equity.
Series A-3 and Series A-4 Preferred Stock July 1, 2026 Redemption Date
On June 30, 2026, the holder of our outstanding Series A-3 and Series A-4 Preferred Stock delivered a redemption notice requiring the Company to redeem those shares at the redemption price (accrued value plus all accrued and unpaid dividends, to the extent not included in the accrued value). The Company did not have sufficient legally available funds to pay the redemption price in cash or other assets. Under the terms of the certificates of designation, because the preferred shares were not redeemed when required, they remain outstanding and continue to be entitled to all powers, designations, preferences, and other rights, including the right to accrual and payment of dividends and conversion rights. Accordingly, because the shares remain outstanding and the holder continues to be entitled to the contractual rights and preferences associated with those shares, the Series A-3 and Series A-4 Preferred Stock continue to be classified in temporary equity. For a description of the terms of the Series A-3 and A-4 Preferred Stock, including the dividend, accretion, conversion, and redemption mechanics, refer to Note 16. Temporary Equity.
MediBeacon
On July 2, 2026, the $0.5 million principal note due to Pansend, which had a maturity of July 5, 2026, together with all accrued and unpaid interest of $0.4 million was converted into a new convertible note of principal amount $0.9 million. The new note has an interest rate of 8.0 % per annum and a maturity date of July 2, 2029, unless earlier converted or repaid. The outstanding principal and accrued interest automatically convert into equity securities upon a Qualified Financing (as defined in the note), at a 20 % discount to the lowest price per share in such financing. In the event of a Strategic Transaction (as defined in the note) (such as a sale or merger) prior to maturity, Pansend is entitled to repayment of twice the outstanding balance in cash, unless Pansend elects to convert the note into common stock at a fixed price of $74.00 per share. If neither a Qualified Financing nor a Strategic Transaction occurs by the maturity date, the outstanding balance is payable in cash. The note is unsecured and subordinated to existing senior debt, and contains customary events of default and transfer restrictions.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 currently pursuing highly substantial asset dispositions, including a sales process for all or substantially all of DBMG's assets or equity interests (the "Potential DBMG Sale") and the Spectrum Merger. We have also made substantial changes to our debt arrangements and other liabilities and expect to make further changes. These ongoing actions will substantially alter our business, prospects, cash flow, results of operations and financial position going forward and all information herein should be evaluated in light of these changes, and potential changes.
In particular, the anticipated Spectrum Merger, if completed, and any Potential DBMG Sale, if successfully negotiated and closed, would substantially reshape our business and, as a result, our past financial results may not be a reliable indicator of future performance and historical trends should not be unduly used to anticipate results or trends in future periods.
If the Spectrum Merger is consummated and a Potential DBMG Sale is negotiated and consummated, it would eliminate substantially all of our consolidated operating revenue, and our assets would consist largely of net cash or other proceeds of the Potential DBMG Sale, remaining after required repayments of indebtedness (of which we currently expect there may be none), our minority interest in the Surviving Entity, our remaining Life Sciences segment and limited remaining Other segment activities.
Thereafter, our primary source of income would be expected to be any dividends or distributions from our minority investments and interest earned on our marketable securities and cash and cash equivalents, as we pursued strategic opportunities.
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Additionally, the Potential DBMG Sale would introduce additional liquidity risk because its consummation would trigger the Change in Control provisions of the DBMG Credit Agreement and result in repayment or other payment obligations under certain instruments, including the Revolving Line of Credit, the 10.50% 2027 Senior Secured Notes and the 2027 Convertible Notes. If cash consideration for any Potential DBMG Sale and other available funds are not sufficient or available when required, a shortfall could prevent or delay the closing of any Potential DBMG Sale, result in defaults or cross-defaults, accelerate other obligations and further impair the Company’s ability to continue as a going concern. If we fail to consummate sufficient asset sales, including the Potential DBMG Sale, or the value of the consideration received is less than anticipated, we would be in violation of covenants under our indebtedness (absent waivers), would likely be unable to satisfy our debt service obligations and may be unable to continue as a going concern.
Our Business and Our Operations
We are a diversified holding company with principal operations conducted through three operating platforms or reportable segments as of June 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.
For additional information on our business, refer to Note 1. Organization and Business to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
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, 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 2026, as part of our strategic process, we have engaged in and are contemplating several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.
Recent Developments
Spectrum
During the second quarter of 2026, our Spectrum segment met the criteria for classification as held for sale in accordance with ASC 360-10 Property, Plant, and Equipment ("ASC 360-10"). As a result, the assets and liabilities of the Spectrum segment are presented as held for sale in the current period, and the prior period assets and liabilities of the Spectrum segment have been reclassified as held for sale for comparability purposes. While the Spectrum segment met the criteria for held for sale classification, it did not meet the criteria for classification as discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20"), as the anticipated disposal does not represent a strategic shift that will have a major effect on our operations and financial results.
On May 29, 2026, HC2 Broadcasting Holdings Inc. (“Broadcasting”) closed on a refinancing transaction. In addition, Broadcasting and HC2 Broadcasting Holdco, LLC (“HC2 Holdco”), subsidiaries of INNOVATE, entered into a definitive agreement pursuant to which INNOVATE will sell a controlling interest in Broadcasting to CONX CORP. (“CONX”), subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals. After the closing of the transaction, it is expected that CONX will own approximately 75% of Broadcasting and INNOVATE will own approximately 25% of Broadcasting through HC2 Holdco.
The Closing is subject to customary conditions, including (a) receipt of regulatory approvals, including certain approvals of the Federal Communications Commission ("FCC") and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (b) that the obligations under the New Spectrum Loan Agreement (as defined in Note 3. Assets and Liabilities Held for Sale) shall not have been declared due and payable.
The Merger Agreement provides customary termination rights for the parties, including if the Merger has not occurred on or prior to November 29, 2026, subject to two potential extensions to March 1, 2027 and May 29, 2027 in the event the only condition to the Spectrum Merger that remains unsatisfied as of such dates is the receipt of certain regulatory approvals and certain other exceptions, and contains certain indemnification obligations by the parties thereto in connection with breaches of certain representations and warranties and certain covenants contained in the Merger Agreement, subject to certain exceptions.
Refer to Note 3. Assets and Liabilities Held for Sale to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
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Corporate Debt
The 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we had either met or extended as of June 30, 2026, and we were in compliance with the milestone covenants requirements. Refer to Note 12. Debt Obligations 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 10.50% 2027 Senior Secured Notes and other Corporate debt.
The covenants contained in the DBMG Credit Agreement contain a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of our Infrastructure segment's debt in the future upon certain events, including a sale of DBMG.
Subsequent to quarter end, interest due on August 1, 2026 on our 10.50% 2027 Senior Secured Notes and 2027 Convertible Notes, held by consenting holders, was paid in kind, and those holders received additional notes as a 1.5% consent fee. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
DBMG Dividend
Subsequent to quarter end, on July 8, 2026, DBMG declared a $12.0 million cash dividend which was paid on August 3, 2026, of which INNOVATE received $11.0 million.
Life Sciences - Financing
On July 31, 2026, the maturity of R2 Technologies' secured promissory note with Lancer was extended from August 1, 2026 to the earlier of December 31, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The total principal balance as of June 30, 2026, which includes capitalized interest and fees was $50.9 million.
As of June 30, 2026, there were $7.8 million in intercompany 13.0% convertible notes with R2 Technologies. On July 28, 2026, R2 Technologies' preferred equity outstanding, and outstanding convertible promissory notes held by Pansend were converted to common equity. As a result of the conversion, Pansend's controlling interest in R2 Technologies increased from 80.8%, prior to the transaction, to 85.0%. Refer to Note 22. Subsequent Events and to Note 16. Temporary Equity to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which are incorporated herein by reference, for additional information on R2 Technologies' convertible preferred stock and convertible notes.
Series A-3 and Series A-4 Preferred Stock
On June 30, 2026, the holder of our outstanding Series A-3 and Series A-4 Preferred Stock delivered a redemption notice requiring the Company to redeem those shares at the redemption price (accrued value plus all accrued and unpaid dividends, to the extent not included in the accrued value). The Company did not have sufficient legally available funds to pay the redemption price in cash or other assets. Under the terms of the certificates of designation, because the preferred shares were not redeemed when required, they remain outstanding and continue to be entitled to all powers, designations, preferences, and other rights, including the right to accrual and payment of dividends and conversion rights. For a description of the terms of the Series A-3 and A-4 Preferred Stock, including the dividend, accretion, conversion, and redemption mechanics, refer to Note 16. Temporary Equity to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
Equity Method Investments
MediBeacon
On March 31, 2026, MediBeacon received the European Union ("EU") CE mark certification under the EU Medical Device Regulation ("MDR") for its TGFRTM Monitor and TGFRTM Reusable sensor. The certification confirms that the Monitor and Sensor have met the robust safety, quality, and performance standards required under EU MDR.
As of June 30, 2026, Pansend's carrying amount of its investment in MediBeacon remained at zero, inclusive of the $0.5 million in secured promissory notes which has been offset against recognized equity method losses, and Pansend has cumulative unrecognized equity method losses relating to MediBeacon of $22.6 million. Subsequent to quarter end, on July 2, 2026, the $0.5 million principal note due to Pansend, which had a maturity of July 5, 2026, together with all accrued and unpaid interest of $0.4 million was converted into a new convertible note of principal amount $0.9 million. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
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Additional Subsequent Events
Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on other events that occurred subsequent to June 30, 2026.
Cyclical Patterns
Our segments' operations can be highly cyclical. Our volume of business in our Infrastructure segment may be adversely affected by declines or delays in projects, which may vary by geographic region. Project schedules, particularly in connection with large, complex, and longer-term projects can also create fluctuations in the services provided, which may adversely affect us in any given period.
For example, in connection with larger, more complicated projects, the timing of obtaining permits and other approvals may be delayed, and we may need to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on such projects when they move forward.
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 patterns, including seasonal trends, and the financial condition of our customers and their access to capital; our profit margins on 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.
Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.
Financial Presentation Background
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 June 30, 2026, as compared to the three and six months ended June 30, 2025.
We are currently pursuing highly substantial asset dispositions, including a sales process for all or substantially all of DBMG's assets or equity interests, and the Spectrum Merger. We have also made changes to our debt arrangements and other liabilities, including following June 30, 2026, and expect to make further changes. These ongoing actions will substantially alter our business, prospects, cash flow and financial position going forward and all information herein should be evaluated in light of these changes and potential changes. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for further information.
Results of Operations
The following table summarizes our results of continuing operations (in millions):
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| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
Infrastructure | $ | 414.0 | $ | 233.1 | $ | 180.9 | $ | 771.9 | $ | 498.0 | $ | 273.9 | ||||||||||||||||||||||||||
| Life Sciences | 2.2 | 3.2 | (1.0) | 3.8 | 6.3 | (2.5) | ||||||||||||||||||||||||||||||||
| Spectrum | 5.4 | 5.7 | (0.3) | 10.7 | 11.9 | (1.2) | ||||||||||||||||||||||||||||||||
| Total revenue | $ | 421.6 | $ | 242.0 | $ | 179.6 | $ | 786.4 | $ | 516.2 | $ | 270.2 | ||||||||||||||||||||||||||
| Income (loss) from operations | ||||||||||||||||||||||||||||||||||||||
Infrastructure | $ | 39.5 | $ | 10.6 | $ | 28.9 | $ | 55.5 | $ | 19.7 | $ | 35.8 | ||||||||||||||||||||||||||
| Life Sciences | (0.7) | (2.8) | 2.1 | (2.9) | (5.8) | 2.9 | ||||||||||||||||||||||||||||||||
| Spectrum | (1.6) | (0.3) | (1.3) | (2.0) | (0.1) | (1.9) | ||||||||||||||||||||||||||||||||
Non-Operating Corporate | (2.7) | (2.6) | (0.1) | (6.1) | (5.5) | (0.6) | ||||||||||||||||||||||||||||||||
Total income from operations | $ | 34.5 | $ | 4.9 | $ | 29.6 | $ | 44.5 | $ | 8.3 | $ | 36.2 | ||||||||||||||||||||||||||
| Interest expense | (27.6) | (21.4) | (6.2) | (52.1) | (41.6) | (10.5) | ||||||||||||||||||||||||||||||||
| Gain (loss) on extinguishment of debt | 18.4 | (0.3) | 18.7 | 18.4 | (0.3) | 18.7 | ||||||||||||||||||||||||||||||||
| Loss from equity investees | — | — | — | — | (5.9) | 5.9 | ||||||||||||||||||||||||||||||||
| Other income, net | 0.2 | — | 0.2 | 0.5 | 4.0 | (3.5) | ||||||||||||||||||||||||||||||||
| Income (loss) from operations before income taxes | $ | 25.5 | $ | (16.8) | $ | 42.3 | $ | 11.3 | $ | (35.5) | $ | 46.8 | ||||||||||||||||||||||||||
| Income tax expense | (13.1) | (4.2) | (8.9) | (16.0) | (11.3) | (4.7) | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 12.4 | $ | (21.0) | $ | 33.4 | $ | (4.7) | $ | (46.8) | $ | 42.1 | ||||||||||||||||||||||||||
| Net (income) loss attributable to non-controlling interests and redeemable non-controlling interests | (1.7) | 1.2 | (2.9) | (1.4) | 2.5 | (3.9) | ||||||||||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | $ | 10.7 | $ | (19.8) | $ | 30.5 | $ | (6.1) | $ | (44.3) | $ | 38.2 | ||||||||||||||||||||||||||
| Less: Preferred stock dividends | 0.3 | 2.2 | (1.9) | 0.7 | 2.5 | (1.8) | ||||||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders and participating preferred stockholders | $ | 10.4 | $ | (22.0) | $ | 32.4 | $ | (6.8) | $ | (46.8) | $ | 40.0 | ||||||||||||||||||||||||||
Revenue: Revenue for the three months ended June 30, 2026, increased $179.6 million to $421.6 million from $242.0 million for the three months ended June 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 increases were 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 system unit sales due to liquidity 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, partially offset by the launch of new networks.
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Income from operations: Income from operations for the three months ended June 30, 2026 increased $29.6 million to $34.5 million from $4.9 million for the three months ended June 30, 2025. The increase was due to a net increase in gross profit of $33.9 million, a decrease in other operating losses of $1.2 million and a decrease in depreciation and amortization of $0.9 million, partially offset by a net increase in selling, general and administrative ("SG&A") expenses of $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, 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, partially offset by our Life Sciences segment due to the decrease 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 segment, primarily due to the timing of compensation-related expenses, and an increase at our Spectrum segment primarily driven by transaction-related expenses incurred in the current period. These increases in SG&A were partially offset by a decrease in SG&A at our Life Sciences segment due to reductions in compensation-related expenses at R2 Technologies and Pansend.
Income from operations for the six months ended June 30, 2026, increased $36.2 million to $44.5 million from $8.3 million for the six months ended June 30, 2025. The increase was primarily due to a net increase in gross profit of $41.9 million, a decrease in other operating losses of $1.2 million and a decrease in depreciation and amortization of $1.1 million, partially offset by a net increase in SG&A expenses of $8.0 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, 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, partially offset by our Spectrum and Life Sciences segments due to the decreases 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 segment, primarily due to the timing of compensation-related expenses, an increase at our Spectrum segment primarily driven by transaction-related expenses incurred in the current period, and an increase at our Non-Operating Corporate segment primarily driven by expenses related to potential dispositions and strategic transactions in the current period. These increases in SG&A were partially offset by a decrease in SG&A at our Life Sciences segment due to reductions in compensation-related expenses at R2 Technologies and Pansend.
Interest expense: Interest expense for the three months ended June 30, 2026 increased $6.2 million to $27.6 million from $21.4 million for the three months ended June 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. The increase in interest expense was also partially offset by our Infrastructure segment primarily driven by the net decrease in principal balance.
Loss from equity investees: Loss from equity investees for the six months ended June 30, 2026, decreased to zero from $5.9 million for the six months ended June 30, 2025. The decrease was due to a decrease in losses recognized from MediBeacon. During the six months ended June 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 June 30, 2026 and June 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 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.
Gain (loss) on extinguishment of debt: Gain on extinguishment of debt for the three and six months ended June 30, 2026 increased $18.7 million to a gain of $18.4 million from a loss of $0.3 million for the three and six months ended June 30, 2025. The gain on extinguishment of debt for the three and six months ended June 30, 2026 related to the Spectrum refinancing transaction during the current period. Refer to Note 3. Assets and Liabilities 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 the refinancing 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.
Other income, net: Other income, net for the three months ended June 30, 2026 increased to $0.2 million from zero for the three months ended June 30, 2025. The increase was primarily driven by an increase in interest income and a decrease in foreign currency translation losses from our Infrastructure segment, which was partially offset by a decrease in unrealized fair value gains on marketable securities at our Non-Operating Corporate segment.
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Other income, net for the six months ended June 30, 2026, decreased $3.5 million to $0.5 million from $4.0 million for the six months ended June 30, 2025. The decrease was primarily driven by the unrepeated $4.4 million step-up gain following MediBeacon's FDA approval in the comparable period and a decrease in unrealized fair value gains on marketable securities at our Non-Operating Corporate segment. These decreases were partially offset by an unrepeated legal settlement expense at our Non-Operating Corporate segment in the comparable period, as well as an increase in interest income and a decrease in foreign currency translation losses from our Infrastructure segment. Refer to Note 21. Supplementary Financial Information to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information on other income, net.
Income tax expense: Income tax expense for the three months ended June 30, 2026 increased $8.9 million to $13.1 million from $4.2 million for the three months ended June 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 increases in tax expense were primarily driven by higher pre-tax income combined with an increase in the annual effective tax rate, including as a result of limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group under Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.
Segment Results of Operations
In the Company's Condensed 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; and (iii) asset impairment expense; as applicable. Each table summarizes the results of operations of our operating segments (in millions).
Infrastructure Segment
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
| Revenue | $ | 414.0 | $ | 233.1 | $ | 180.9 | $ | 771.9 | $ | 498.0 | $ | 273.9 | ||||||||||||||||||||||||||
| Cost of revenue | 337.6 | 191.4 | 146.2 | 644.6 | 414.9 | 229.7 | ||||||||||||||||||||||||||||||||
| Selling, general and administrative | 34.1 | 26.8 | 7.3 | 66.1 | 56.1 | 10.0 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 2.8 | 3.1 | (0.3) | 5.7 | 6.2 | (0.5) | ||||||||||||||||||||||||||||||||
| Other operating loss | — | 1.2 | (1.2) | — | 1.1 | (1.1) | ||||||||||||||||||||||||||||||||
| Income from operations | $ | 39.5 | $ | 10.6 | $ | 28.9 | $ | 55.5 | $ | 19.7 | $ | 35.8 | ||||||||||||||||||||||||||
Revenue: Revenue for the three months ended June 30, 2026 increased $180.9 million to $414.0 million from $233.1 million for the three months ended June 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 increases were 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, 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 construction modeling and detailing business and the new modular 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 June 30, 2026 increased $146.2 million to $337.6 million from $191.4 million for the three months ended June 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.
Cost of revenue for the six months ended June 30, 2026, increased $229.7 million to $644.6 million from $414.9 million for the six months ended June 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 June 30, 2026 increased $7.3 million to $34.1 million from $26.8 million for the three months ended June 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 increases were primarily driven by the timing of compensation-related expenses.
49
Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2026 decreased $0.3 million to $2.8 million from $3.1 million for the three months ended June 30, 2025. Depreciation and amortization for the six months ended June 30, 2026 decreased $0.5 million to $5.7 million from $6.2 million for the six months ended June 30, 2025. The decreases were primarily driven by a decrease in intangible amortization at our Banker Steel business as a result of intangible assets that have become fully amortized subsequent to the comparable periods.
Other operating loss: Other operating loss for the three months ended June 30, 2026 decreased to zero from $1.2 million for the three months ended June 30, 2025. Other operating loss for the six months ended June 30, 2026 decreased to zero from $1.1 million for the six months ended June 30, 2025. Other operating loss in the comparable periods related to unrepeated losses on the sales of various properties and an unrepeated loss on lease modification.
Life Sciences Segment
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
| Revenue | $ | 2.2 | $ | 3.2 | $ | (1.0) | $ | 3.8 | $ | 6.3 | $ | (2.5) | ||||||||||||||||||||||||||
| Cost of revenue | 1.3 | 2.1 | (0.8) | 2.7 | 4.4 | (1.7) | ||||||||||||||||||||||||||||||||
| Selling, general and administrative | 1.6 | 3.8 | (2.2) | 3.9 | 7.5 | (3.6) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | — | 0.1 | (0.1) | 0.1 | 0.2 | (0.1) | ||||||||||||||||||||||||||||||||
| Loss from operations | $ | (0.7) | $ | (2.8) | $ | 2.1 | $ | (2.9) | $ | (5.8) | $ | 2.9 | ||||||||||||||||||||||||||
Revenue: Revenue for the three months ended June 30, 2026 decreased $1.0 million to $2.2 million from $3.2 million for the three months ended June 30, 2025. The decrease was attributable to R2 Technologies, primarily driven by decreases in Glacial fx unit sales in North America and Glacial Spa unit sales outside North America due to liquidity constraints.
Revenue for the six months ended June 30, 2026, decreased $2.5 million to $3.8 million from $6.3 million for the six months ended June 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 due to liquidity constraints.
Cost of revenue: Cost of revenue for the three months ended June 30, 2026 decreased $0.8 million to $1.3 million from $2.1 million for the three months ended June 30, 2025. Cost of revenue for the six months ended June 30, 2026, decreased $1.7 million to $2.7 million from $4.4 million for the six months ended June 30, 2025. The decreases in cost of revenue were attributable to R2 Technologies, primarily driven by the decrease in revenue noted above and, to a lesser extent, the related decreases in warranty expenses and royalty expenses.
Selling, general and administrative: Selling, general and administrative expense for the three months ended June 30, 2026 decreased $2.2 million to $1.6 million from $3.8 million for the three months ended June 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 decreases were primarily driven by reductions in compensation-related expenses at R2 Technologies and Pansend.
Spectrum Segment
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
| Revenue | $ | 5.4 | $ | 5.7 | $ | (0.3) | $ | 10.7 | $ | 11.9 | $ | (1.2) | ||||||||||||||||||||||||||
| Cost of revenue | 3.2 | 2.9 | 0.3 | 6.1 | 5.8 | 0.3 | ||||||||||||||||||||||||||||||||
| Selling, general and administrative | 3.1 | 1.9 | 1.2 | 4.8 | 3.8 | 1.0 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | 0.7 | 1.2 | (0.5) | 1.9 | 2.4 | (0.5) | ||||||||||||||||||||||||||||||||
Other operating income | — | — | — | (0.1) | — | (0.1) | ||||||||||||||||||||||||||||||||
(Loss) income from operations | $ | (1.6) | $ | (0.3) | $ | (1.3) | $ | (2.0) | $ | (0.1) | $ | (1.9) | ||||||||||||||||||||||||||
Revenue: Revenue for the three months ended June 30, 2026 decreased $0.3 million to $5.4 million from $5.7 million for the three months ended June 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 decreases were primarily driven by the termination of a few networks and individual markets subsequent to the comparable period, which was partially offset by the launch of new networks.
Cost of revenue: Cost of revenue for the three months ended June 30, 2026 increased slightly by $0.3 million to $3.2 million from $2.9 million for the three months ended June 30, 2025. Cost of revenue for the six months ended June 30, 2026 increased slightly by $0.3 million to $6.1 million from $5.8 million for the six months ended June 30, 2025.
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Selling, general and administrative: Selling, general and administrative expense for the three months ended June 30, 2026 increased $1.2 million to $3.1 million from $1.9 million for the three months ended June 30, 2025. Selling, general and administrative for the six months ended June 30, 2026 increased $1.0 million to $4.8 million from $3.8 million for the six months ended June 30, 2025. The increases were primarily driven by transaction-related expenses incurred in the current period.
Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2026 decreased $0.5 million to $0.7 million from $1.2 million for the three months ended June 30, 2025. Depreciation and amortization for the six months ended June 30, 2026 decreased $0.5 million to $1.9 million from $2.4 million for the six months ended June 30, 2025. The decreases were primarily driven by the cessation of depreciation and amortization on long-lived assets subsequent to May 29, 2026, as a result of the Spectrum segment's classification as held for sale.
Non-Operating Corporate
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
| Selling, general and administrative | $ | 2.7 | $ | 2.6 | $ | 0.1 | $ | 6.1 | $ | 5.5 | $ | 0.6 | ||||||||||||||||||||||||||
| Loss from operations | $ | (2.7) | $ | (2.6) | $ | (0.1) | $ | (6.1) | $ | (5.5) | $ | (0.6) | ||||||||||||||||||||||||||
Selling, general and administrative: Selling, general and administrative expenses for the three months ended June 30, 2026 increased $0.1 million to $2.7 million from $2.6 million for the three months ended June 30, 2025. Selling, general and administrative expenses for the six months ended June 30, 2026 increased $0.6 million to $6.1 million from $5.5 million for the six months ended June 30, 2025. The increases were primarily driven by expenses incurred in the current period related to potential dispositions and strategic transactions, which were partially offset by a decrease in compensation-related expenses.
Loss from Equity Investees
| Six Months Ended June 30, | ||||||||||||||||||||
| 2026 | 2025 | (Increase) / Decrease | ||||||||||||||||||
| Life Sciences | $ | — | $ | (5.9) | $ | 5.9 | ||||||||||||||
| Loss from equity investees | $ | — | $ | (5.9) | $ | 5.9 | ||||||||||||||
Life Sciences: Loss from equity investees within our Life Sciences segment for the six months ended June 30, 2026, decreased $5.9 million to zero from $5.9 million for the six months ended June 30, 2025. The decrease in loss was due to a decrease in losses recognized from MediBeacon as none were recognized during the six months ended June 30, 2026. Refer to Loss from equity investees in the Results of Operations section above for more information. Refer to Note 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.
Non-GAAP Financial Measures and Other Information
Adjusted EBITDA
Adjusted EBITDA is not a measurement recognized under U.S. GAAP. In addition, other companies may define Adjusted EBITDA differently than we do, which could limit its usefulness.
Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-U.S. GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance.
The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) attributable to INNOVATE Corp., excluding: discontinued operations, if applicable; depreciation and amortization; other operating (income) loss (which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, (gains) losses on lease modifications, and asset impairment expense); interest expense; (gain) loss on extinguishment of debt; other (income) expense, net; income tax expense (benefit); non-controlling interests; share-based compensation expense; realignment and exit costs; facility commissioning costs; debt refinancing costs; and acquisition and disposition costs.
Adjusted EBITDA by segment is summarized as follows:
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| (in millions): | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase / (Decrease) | 2026 | 2025 | Increase / (Decrease) | |||||||||||||||||||||||||||||||||
Infrastructure | $ | 48.7 | $ | 19.3 | $ | 29.4 | $ | 71.7 | $ | 36.0 | $ | 35.7 | ||||||||||||||||||||||||||
| Life Sciences | (0.8) | (2.6) | 1.8 | (2.8) | (11.3) | 8.5 | ||||||||||||||||||||||||||||||||
| Spectrum | 0.4 | 1.0 | (0.6) | 1.1 | 2.4 | (1.3) | ||||||||||||||||||||||||||||||||
Non-Operating Corporate | (2.0) | (2.0) | — | (4.0) | (4.2) | 0.2 | ||||||||||||||||||||||||||||||||
| Other and Eliminations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 46.3 | $ | 15.7 | $ | 30.6 | $ | 66.0 | $ | 22.9 | $ | 43.1 | ||||||||||||||||||||||||||
The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp. to Adjusted EBITDA for the three months ended June 30, 2026 and 2025:
| (in millions) | Three Months Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||||
Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | $ | 26.4 | $ | (2.3) | $ | 8.4 | $ | (21.8) | $ | — | $ | 10.7 | ||||||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 2.8 | — | 0.7 | — | — | 3.5 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 3.5 | — | — | — | — | 3.5 | ||||||||||||||||||||||||||||||||
| Interest expense | 1.4 | 2.1 | 6.8 | 17.3 | — | 27.6 | ||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | — | — | (18.4) | — | — | (18.4) | ||||||||||||||||||||||||||||||||
| Other (income) expense, net | (1.8) | — | 1.9 | (0.3) | — | (0.2) | ||||||||||||||||||||||||||||||||
| Income tax expense | 11.1 | — | — | 2.0 | — | 13.1 | ||||||||||||||||||||||||||||||||
| Non-controlling interests | 2.5 | (0.6) | (0.2) | — | — | 1.7 | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | 0.4 | — | 0.4 | ||||||||||||||||||||||||||||||||
| Realignment and exit costs | 0.2 | — | — | — | — | 0.2 | ||||||||||||||||||||||||||||||||
Facility commissioning costs | 2.4 | — | — | — | — | 2.4 | ||||||||||||||||||||||||||||||||
| Debt refinancing costs | — | — | — | 0.2 | — | 0.2 | ||||||||||||||||||||||||||||||||
| Acquisition and disposition costs | 0.2 | — | 1.2 | 0.2 | — | 1.6 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 48.7 | $ | (0.8) | $ | 0.4 | $ | (2.0) | $ | — | $ | 46.3 | ||||||||||||||||||||||||||
| (in millions) | Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||
Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | $ | 5.5 | $ | (6.5) | $ | (6.1) | $ | (12.7) | $ | — | $ | (19.8) | ||||||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 3.1 | 0.1 | 1.2 | — | — | 4.4 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 3.0 | — | — | — | — | 3.0 | ||||||||||||||||||||||||||||||||
| Other operating loss | 1.2 | — | — | — | — | 1.2 | ||||||||||||||||||||||||||||||||
| Interest expense | 2.4 | 5.2 | 3.9 | 9.9 | — | 21.4 | ||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | 0.3 | — | — | — | — | 0.3 | ||||||||||||||||||||||||||||||||
| Other (income) expense, net | (0.3) | — | 2.3 | (2.0) | — | — | ||||||||||||||||||||||||||||||||
| Income tax expense | 2.1 | — | — | 2.1 | — | 4.2 | ||||||||||||||||||||||||||||||||
| Non-controlling interests | 0.6 | (1.4) | (0.4) | — | — | (1.2) | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | 0.7 | — | 0.7 | ||||||||||||||||||||||||||||||||
| Realignment and exit costs | 1.4 | — | 0.1 | — | — | 1.5 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 19.3 | $ | (2.6) | $ | 1.0 | $ | (2.0) | $ | — | $ | 15.7 | ||||||||||||||||||||||||||
52
Infrastructure: Net income from our Infrastructure segment for the three months ended June 30, 2026, increased $20.9 million to $26.4 million from $5.5 million for the three months ended June 30, 2025. Adjusted EBITDA from our Infrastructure segment for the three months ended June 30, 2026, increased $29.4 million to $48.7 million from $19.3 million for the three months ended June 30, 2025. The increase in Adjusted EBITDA was primarily driven by an increase in revenue and gross profit at DBMG's commercial structural steel fabrication and erection business, 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, by an increase in revenue and gross profit at the construction modeling and detailing business. The increase was partially offset by an increase in recurring SG&A expenses, primarily driven by the timing of compensation-related expenses and a decrease in revenue and gross profit at our industrial maintenance and repair business due to timing of certain large construction projects in the comparable period that have since been completed.
Life Sciences: Net loss from our Life Sciences segment for the three months ended June 30, 2026, decreased $4.2 million to $2.3 million from $6.5 million for the three months ended June 30, 2025. Adjusted EBITDA loss from our Life Sciences segment for the three months ended June 30, 2026, decreased $1.8 million to $0.8 million from $2.6 million for the three months ended June 30, 2025. The decrease in Adjusted EBITDA loss was primarily driven by decreases in compensation-related expenses at R2 Technologies and Pansend.
Spectrum: Net income from our Spectrum segment for the three months ended June 30, 2026, increased $14.5 million to income of $8.4 million from a loss of $6.1 million for the three months ended June 30, 2025. Adjusted EBITDA from our Spectrum segment for the three months ended June 30, 2026, decreased $0.6 million to $0.4 million from $1.0 million for the three months ended June 30, 2025. The decrease in Adjusted EBITDA was primarily driven by the net decrease in revenue (as discussed in the Revenue section above) and an increase in cost of revenue.
Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the three months ended June 30, 2026, increased $9.1 million to $21.8 million from $12.7 million for the three months ended June 30, 2025. Adjusted EBITDA loss from our Non-Operating Corporate segment for the three months ended June 30, 2026, remained consistent at $2.0 million as compared to the three months ended June 30, 2025.
The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp. to Adjusted EBITDA for the six months ended June 30, 2026 and 2025:
| (in millions) | Six Months Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||||
Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | $ | 35.7 | $ | (5.6) | $ | 1.9 | $ | (38.1) | $ | — | $ | (6.1) | ||||||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 5.7 | 0.1 | 1.9 | — | — | 7.7 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 6.7 | — | — | — | — | 6.7 | ||||||||||||||||||||||||||||||||
| Other operating income | — | — | (0.1) | — | — | (0.1) | ||||||||||||||||||||||||||||||||
| Interest expense | 3.2 | 4.0 | 10.8 | 34.1 | — | 52.1 | ||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | — | — | (18.4) | — | — | (18.4) | ||||||||||||||||||||||||||||||||
| Other (income) expense, net | (1.9) | — | 4.4 | (3.0) | — | (0.5) | ||||||||||||||||||||||||||||||||
| Income tax expense | 15.2 | — | — | 0.8 | — | 16.0 | ||||||||||||||||||||||||||||||||
| Non-controlling interests | 3.4 | (1.4) | (0.6) | — | — | 1.4 | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | 0.1 | — | 0.9 | — | 1.0 | ||||||||||||||||||||||||||||||||
| Realignment and exit costs | 0.5 | — | — | — | — | 0.5 | ||||||||||||||||||||||||||||||||
Facility commissioning costs | 3.0 | — | — | — | — | 3.0 | ||||||||||||||||||||||||||||||||
| Debt refinancing costs | — | — | — | 0.2 | — | 0.2 | ||||||||||||||||||||||||||||||||
| Acquisition and disposition costs | 0.2 | — | 1.2 | 1.1 | — | 2.5 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 71.7 | $ | (2.8) | $ | 1.1 | $ | (4.0) | $ | — | $ | 66.0 | ||||||||||||||||||||||||||
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| (in millions) | Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||
Infrastructure | Life Sciences | Spectrum | Non-Operating Corporate | Other and Eliminations | INNOVATE | |||||||||||||||||||||||||||||||||
| Net income (loss) attributable to INNOVATE Corp. | $ | 10.1 | $ | (14.1) | $ | (11.5) | $ | (28.8) | $ | — | $ | (44.3) | ||||||||||||||||||||||||||
| Adjustments to reconcile net income (loss) to Adjusted EBITDA: | ||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 6.2 | 0.2 | 2.4 | — | — | 8.8 | ||||||||||||||||||||||||||||||||
| Depreciation and amortization (included in cost of revenue) | 6.5 | — | — | — | — | 6.5 | ||||||||||||||||||||||||||||||||
| Other operating loss | 1.1 | — | — | — | — | 1.1 | ||||||||||||||||||||||||||||||||
| Interest expense | 4.5 | 9.7 | 7.6 | 19.8 | — | 41.6 | ||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | 0.3 | — | — | — | — | 0.3 | ||||||||||||||||||||||||||||||||
| Other (income) expense, net | (0.6) | (4.5) | 4.5 | (3.4) | — | (4.0) | ||||||||||||||||||||||||||||||||
| Income tax expense | 4.4 | — | — | 6.9 | — | 11.3 | ||||||||||||||||||||||||||||||||
| Non-controlling interests | 1.0 | (2.8) | (0.7) | — | — | (2.5) | ||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | 0.2 | — | 1.3 | — | 1.5 | ||||||||||||||||||||||||||||||||
| Realignment and exit costs | 2.5 | — | 0.1 | — | — | 2.6 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 36.0 | $ | (11.3) | $ | 2.4 | $ | (4.2) | $ | — | $ | 22.9 | ||||||||||||||||||||||||||
Infrastructure: Net income from our Infrastructure segment for the six months ended June 30, 2026, increased $25.6 million to $35.7 million from $10.1 million for the six months ended June 30, 2025. Adjusted EBITDA from our Infrastructure segment for the six months ended June 30, 2026, increased $35.7 million to $71.7 million from $36.0 million for the six months ended June 30, 2025. The increase in Adjusted EBITDA was primarily driven by an increase in revenue and gross profit at DBMG's commercial structural steel fabrication and erection business, 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, by an increase in revenue and gross profit at the construction modeling and detailing business. The increase was partially offset by a decrease in revenue and gross profit at our industrial maintenance and repair business due to timing of certain large construction projects in the comparable period that have since been completed and an increase in recurring SG&A expenses, primarily driven by the timing of compensation-related expenses.
Life Sciences: Net loss from our Life Sciences segment for the six months ended June 30, 2026, decreased $8.5 million to $5.6 million from $14.1 million for the six months ended June 30, 2025. Adjusted EBITDA loss from our Life Sciences segment for the six months ended June 30, 2026, decreased $8.5 million to $2.8 million from $11.3 million for the six months ended June 30, 2025. The decrease in Adjusted EBITDA loss was primarily due to a decrease in equity method losses recognized from MediBeacon, as discussed in the Loss from Equity Investees section above, and a decrease in SG&A expenses, primarily driven by decreases in compensation-related expenses at R2 Technologies and Pansend. These decreases were partially offset by a decrease in gross profit at R2 Technologies, driven by the decrease in revenue (as discussed in the Revenue section above).
Spectrum: Net income from our Spectrum segment for the six months ended June 30, 2026, increased $13.4 million to $1.9 million from a loss of $11.5 million for the six months ended June 30, 2025. Adjusted EBITDA from our Spectrum segment for the six months ended June 30, 2026, decreased $1.3 million to $1.1 million from $2.4 million for the six months ended June 30, 2025. The decrease in Adjusted EBITDA was primarily driven by the net decrease in revenue (as discussed in the Revenue section above) and an increase in cost of revenue.
Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the six months ended June 30, 2026, increased $9.3 million to $38.1 million from $28.8 million for the six months ended June 30, 2025. Adjusted EBITDA loss from our Non-Operating Corporate segment for the six months ended June 30, 2026, decreased slightly by $0.2 million to $4.0 million from $4.2 million for the six months ended June 30, 2025.
Backlog
Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on projects in backlog. Projects in backlog consist of awarded contracts, letters of intent, notices to proceed, change orders, and purchase orders obtained. Backlog increases as contract commitments are obtained, decreases as revenues are recognized and increases or decreases to reflect modifications in the work to be performed under the contracts. Backlog is converted to sales in future periods as work is performed or projects are completed. Backlog can be significantly affected by the receipt or loss of individual contracts.
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Infrastructure
As of June 30, 2026, DBMG's backlog was $1,901.0 million, consisting of $1,810.2 million under contracts or purchase orders and $90.8 million under letters of intent or notices to proceed. Approximately $1,137.4 million, representing 59.8% of DBMG’s backlog as of June 30, 2026, was attributable to five contracts, letters of intent, notices to proceed or purchase orders. If one or more of these projects terminate or reduce their scope, DBMG’s backlog could decrease substantially. DBMG's backlog may, from time to time, include additional backlog amounts that are not included in the remaining unsatisfied performance obligations disclosed in Note 4. Revenue and Contracts in Process. This additional backlog may include commitments under master service agreements that are estimated amounts of work to be performed based on customer communications, historic performance and knowledge of our customers' intentions.
Liquidity and Capital Resources
Indebtedness
Non-Operating Corporate
10.50% Senior Secured Notes due 2027
In August 2025, we closed on an exchange offer and consent solicitation to eligible holders of our 8.50% senior secured notes due 2026 ("8.50% 2026 Senior Secured Notes") to exchange such notes for newly issued 10.50% senior secured notes due 2027 (the “10.50% 2027 Senior Secured Notes”). The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “10.50% 2027 Senior Secured Notes Trustee”) and collateral trustee, entered into an indenture (the “10.50% 2027 Senior Secured Notes Indenture”) governing the 10.50% 2027 Senior Secured Notes and we issued $360.4 million aggregate principal amount of 10.50% 2027 Senior Secured Notes as consideration for the exchange of $328.1 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes. The new principal amount includes fees payable to the lenders and $52.50 principal amount of 10.50% 2027 Senior Secured Notes per $1,000 principal amount of 8.50% 2026 Senior Secured Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 8.50% 2026 Senior Secured Notes that was due on August 1, 2025. The 10.50% 2027 Senior Secured Notes mature on February 1, 2027. Total fees and additional interest of $18.3 million payable to the lenders and capitalized into the new principal amount under the exchange offer was recorded as an OID and remaining unamortized deferred financing fees of $1.3 million allocated from the 8.50% 2026 Senior Secured Notes exchanged will be amortized into interest expense over the term of the notes using the effective interest rate method.
The 10.50% 2027 Senior Secured Notes accrue interest at a rate of 10.50% per year, payable semi-annually on February 1st and August 1st of each year, commencing on February 1, 2026. Total interest of $18.9 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment.
Pursuant to a July 31, 2026 supplemental indenture, interest due on August 1, 2026 on notes held by consenting holders was paid in kind, and those holders received additional notes as a 1.5% consent fee. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
Aggregate interest expense for the new 10.50% 2027 Senior Secured Notes, including the contractual interest coupon and amortization of fees was $13.3 million and $26.3 million for the three and six months ended June 30, 2026, respectively.
As of June 30, 2026, the total carrying amount related to the notes was $371.0 million, inclusive of $379.3 million aggregate principal outstanding (which includes capitalized interest), partially offset by $7.7 million of the unamortized OID and $0.6 million of unamortized deferred financing fees. The effective interest rate on the 10.50% 2027 Senior Secured Notes was 14.4% as of June 30, 2026.
Our obligations under the 10.50% 2027 Senior Secured Notes Indenture are irrevocably and unconditionally guaranteed, jointly and severally, by the same guarantors that guarantee the 8.50% 2026 Senior Secured Notes (the “Subsidiary Guarantors”). The 10.50% 2027 Senior Secured Notes and the related guarantees are senior secured obligations for us and the Subsidiary Guarantors. The 10.50% 2027 Senior Secured Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from the registration requirements of the Securities Act.
If we complete certain asset sales (an "Asset Sale"), the terms of the 10.50% 2027 Senior Secured Notes Indenture may require us, in certain circumstances, to make an offer to purchase the 10.50% 2027 Senior Secured Notes with the net cash proceeds from such an Asset Sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. For transactions constituting a Change of Control, we will be required to make an offer to purchase the 10.50% 2027 Senior Secured Notes for cash at a price equal to 101% of their aggregate principal amount on the date of purchase, plus any accrued and unpaid interest to the date of repurchase.
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The 10.50% 2027 Senior Secured Notes Indenture contains covenants limiting, among other things, our ability, and, in certain cases, our subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025 the Company needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which has been initiated and is proceeding, has separate milestone requirements, which we had either met or extended as of June 30, 2026, and we were in compliance with the milestone covenants requirements. The June 1, 2026 milestone for an executed purchase agreement was extended to August 28, 2026 and the Company is in compliance with the milestone covenants requirements as of the date of the filing of this Quarterly Report on Form 10-Q.
The 10.50% 2027 Senior Secured Notes Indenture contains customary events of default which could, subject to certain conditions, cause the 10.50% 2027 Senior Secured Notes to become immediately due and payable, including, but not limited to defaults by us in the payment of the principal of any of the 10.50% 2027 Senior Secured Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise (other than pursuant to an offer to purchase by the Company) or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 10.50% 2027 Senior Secured Notes Indenture for a period of 60 days following notice by the 10.50% 2027 Senior Secured Notes Trustee or the holders of at least 30% in aggregate principal amount of the 10.50% 2027 Senior Secured Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; certain events of bankruptcy or insolvency; and failure to comply with the milestone covenant described above.
In connection with the Spectrum agreements entered into on May 29, 2026 (refer to Note 3. Assets and Liabilities Held for Sale to the Condensed Consolidated Financial Statements), the Company, certain subsidiary guarantors, and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “Trustee”) and notes collateral agent (in such capacity, the “Collateral Agent”), entered into an amended supplemental indenture (the “Amended 10.50% 2027 Senior Secured Notes Supplemental Indenture”) to the 10.50% 2027 Senior Secured Notes Indenture. Pursuant to the Amended 10.50% 2027 Senior Secured Notes Supplemental Indenture, certain provisions of the 10.50% 2027 Senior Secured Notes Indenture, including certain definitions and negative covenants, were amended with the consent of the holders of at least a majority in aggregate principal amount of the Notes outstanding voting as a single class (the “Requisite Holders”). In addition, the Requisite Holders consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the Indentures as a result thereof.
8.50% Senior Secured Notes due 2026
The original $330.0 million aggregate principal amount of 8.50% senior secured notes due February 1, 2026 (the "8.50% 2026 Senior Secured Notes") were issued in 2021 at 100% of par. In August 2025, we exchanged $328.1 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes for new 10.50% 2027 Senior Secured Notes, as discussed above. Subsequent to the exchange, we had $1.9 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes remaining. On February 2, 2026, the Company repaid the remaining principal balance and all accrued interest.
The 2026 Senior Secured Notes had a stated annual interest rate of 8.50% and had an effective interest rate of 9.3%, which reflected the initial $10.8 million of deferred financing fees in 2021, including underwriting fees. Interest was payable semi-annually in arrears on February 1st and August 1st of each year.
2027 Convertible Notes
On August 4, 2025, we exchanged $48.7 million of the then outstanding aggregate principal amount of the 2026 Convertible Notes for $53.5 million aggregate principal amount of newly issued 9.5% Convertible Senior Secured Notes due 2027 (the “2027 Convertible Notes”). The new principal amount included fees payable to the lenders and $47.50 principal amount of 2027 Convertible Notes per $1,000 principal amount of 2026 Convertible Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 2026 Convertible Notes that was due on August 1, 2025. The 2027 Convertible Notes mature on March 1, 2027, unless earlier converted, redeemed or purchased.
The 2027 Convertible Notes will be convertible into cash, shares of our common stock, or a combination thereof, at the Company’s election, based on an initial conversion rate of 23.6327 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to an initial conversion price of approximately $42.31 per share of our 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 $1.00 in excess thereof. In addition, following a Make-Whole Fundamental Change (as defined in the 2027 Convertible Notes Indenture) or our delivery of a notice of redemption for the 2027 Convertible Notes, we will, in certain circumstances, be required to increase the conversion rate for a holder who elects to convert its 2027 Convertible Notes in connection with (i) such Make-Whole Fundamental Change or (ii) such notice of redemption.
The initial maximum number of securities underlying the 2027 Convertible Notes, assuming the largest “make-whole” addition to the conversion rate under the 2027 Convertible Notes Indenture, and assuming that we have obtained the requisite stockholder approval referred to above, was 1,543,174 shares of our common stock.
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As of June 30, 2026, each $1,000 of principal of the 2027 Convertible Notes is convertible into 23.6327 shares of our common stock, for a total of 1,323,315 shares of common stock, which is equivalent to a conversion price of approximately $42.31 per share, as adjusted for the reverse stock split in 2024 and subject to further adjustment upon the occurrence of specified events. Based on the closing price of our common stock on June 30, 2026, the if-converted value of the 2027 Convertible Notes did not exceed its principal value.
The 2027 Convertible Notes accrue interest at a rate of 9.5% per year. Interest on the 2027 Convertible Notes is paid semi-annually on February 1st and August 1st of each year, commencing on February 1, 2026. Total interest of $2.5 million, incurred from August 4, 2025 through January 31, 2026, was paid in kind and capitalized into the principal balance for the February 1, 2026 payment. Subsequent to quarter end, pursuant to a July 31, 2026 supplemental indenture, interest due on August 1, 2026 on notes held by consenting holders was paid in kind, and those holders received additional notes as a 1.50% consent fee. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
Aggregate interest expense, including the contractual interest coupon and amortization was $1.5 million and $3.0 million for the three and six months ended June 30, 2026, respectively.
The following amounts were recorded as an OID or deferred financing cost and are being amortized into interest expense over the term of the new 2027 Convertible Notes using the effective interest rate method: total new fees and additional interest of $2.9 million payable to the lenders and capitalized into the principal amount for the convertible notes exchanged, remaining unamortized deferred financing fees of $0.2 million allocated from the 2026 Convertible Notes exchanged, and a discount of $0.5 million, attributable to the increase in fair value of the embedded conversion option, offset partially by $2.4 million in remaining unamortized premiums allocated from the 2026 Convertible Notes exchanged. The effective interest rate on the 2027 Convertible Notes is 11.1%.
As of June 30, 2026, the total carrying amount related to the note was $55.4 million, inclusive of $56.0 million aggregate principal outstanding (which includes capitalized interest), partially offset by a remaining unamortized net OID of $0.5 million and unamortized deferred financing fees of $0.1 million.
The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “2027 Convertible Notes Trustee”) and collateral trustee, entered into an indenture (the “2027 Convertible Notes Indenture”), dated as of August 4, 2025, governing the 2027 Convertible Notes. If we complete certain asset sales, the 2027 Convertible Notes Indenture may require us in certain circumstances to make an offer to purchase the 2027 Convertible Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. Additionally, if we undergo a Fundamental Change, subject to certain conditions, we may be required to purchase all or any portion of the 2027 Convertible Notes for cash at 100% of the principal amount to be purchased, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the applicable purchase date. The Fundamental Change definition excludes ownership of our equity by Lancer Capital LLC and its affiliates.
The 2027 Convertible Notes Indenture contains covenants limiting, among other things, our ability and, in certain cases, our subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. These covenants are subject to a number of important exceptions and qualifications.
The 2027 Convertible Notes Indenture contains customary events of default, including cross-default provisions with other INNOVATE debt instruments, which could, subject to certain conditions, cause the 2027 Convertible Notes to become immediately due and payable, including, but not limited to defaults by us in the payment of the principal of any of the 2027 Convertible Notes when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise or in the payment of interest on any note when the same becomes due and payable, and the default continues for a period of 30 days; failure to comply with certain other covenants in the 2027 Convertible Notes Indenture for a period of 60 days following notice by the 2027 Convertible Notes Trustee or the holders of at least 25% in aggregate principal amount of the 2027 Convertible Notes then outstanding; failure to pay or otherwise default on material debt; or failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $20 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.
In connection with the Spectrum agreements entered into on May 29, 2026 (refer to Note 3. Assets and Liabilities Held for Sale to the Condensed Consolidated Financial Statements), the Company, certain subsidiary guarantors, and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “Trustee”) and notes collateral agent (in such capacity, the “2027 Convertible Notes Collateral Agent”), entered into an amended supplemental indenture (the “Amended 2027 Convertible Notes Supplemental Indenture”) to the 2027 Convertible Notes Indenture. Pursuant to the Amended 2027 Convertible Notes Supplemental Indenture, certain provisions of the 2027 Convertible Notes Indenture, including certain definitions and negative covenants, were amended with the consent of the holders of at least a majority in aggregate principal amount of the notes outstanding voting as a single class (the “2027 Convertible Notes Requisite Holders”). In addition, the 2027 Convertible Notes Requisite Holders consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the Indentures as a result thereof.
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2026 Convertible Notes
The original 7.50% convertible notes (the "2026 Convertible Notes") were issued under an indenture dated February 1, 2021, between us and U.S. Bank, as trustee. As discussed above, on August 4, 2025, pursuant to the Exchange Agreements, we exchanged $48.7 million aggregate principal amount of the 2026 Convertible Notes for new 2027 Convertible Notes. Subsequent to the exchanges and, as of June 30, 2026, we had $0.2 million aggregate principal remaining of the 2026 Convertible Notes. As of June 30, 2026, the remaining 2026 Convertible Notes had a net carrying value of $0.2 million. The effective interest rate on the remaining 2026 Convertible Notes as of June 30, 2026 was 3.0%.
The 2026 Convertible Notes matured on August 1, 2026, together with all outstanding interest and were redeemed on August 3, 2026. Refer to Note 22. Subsequent Events to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Revolving Line of Credit
We have a revolving credit agreement with MSD PCOF Partners IX, LLC ("MSD"), which has a maximum commitment of $20.0 million ("Revolving Line of Credit"). As of June 30, 2026, the outstanding balance was $20.0 million. The maturity date of the Revolving Line of Credit, as amended on August 4, 2025, is September 15, 2026. 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 June 30, 2026, the interest rate on the Revolving Line of Credit was 9.7%. 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 on the actual daily amount of unused availability under the Revolving Line of Credit with MSD, and also includes a requirement for prepayment using the net cash proceeds received from certain asset sales. The affirmative and negative covenants governing the Revolving Line of Credit are substantially consistent with the affirmative and negative covenants contained in the indentures that govern our senior secured notes.
On August 4, 2025, INNOVATE and MSD entered into an Eighth Amendment to Credit Agreement, which among other things, extended the maturity of the 2020 Revolving Credit Agreement to September 15, 2026, and added a new $0.4 million extension fee that is payable on the earlier of maturity date or date of prepayment of the debt. The $0.4 million extension fee and third-party legal costs of $0.3 million incurred under the amendment are being amortized into interest expense over the term of the Revolving Line of Credit.
Any failure to comply with the restrictions in the agreements governing our indentures, or any agreement governing other indebtedness we could incur, may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.
In connection with the Spectrum agreements entered into on May 29, 2026, we entered into a ninth amendment (the “Ninth Amendment”) to the Credit Agreement with MSD. Pursuant to the Ninth Amendment, certain provisions of the MSD Credit Agreement, including certain definitions and negative covenants, were amended with the consent of MSD. In addition, MSD consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the MSD Credit Agreement as a result thereof.
CGIC Promissory Note
On August 4, 2025, the Company and CGIC entered into a Subordinated Secured Promissory Note to, among other things, extend the maturity of our existing subordinated unsecured promissory note with CGIC (the “CGIC Note”) from February 28, 2026 to April 30, 2027, and secure the amended CGIC Note by a third priority lien on the same collateral securing the 10.50% 2027 Senior Secured Notes and the 2027 Convertible Notes. The amended CGIC Note has an interest rate of 16.0%, and an effective interest rate of 14.6% as of June 30, 2026. Interest on the amended CGIC Note will be paid monthly and in kind through August 31, 2026. All interest payments thereafter will be payable in cash, in arrears. As part of the agreement with CGIC, the accrued value of 8,063 shares of Series A-4 Preferred Stock of the Company held by CGIC, and unpaid accrued dividends for the A-3 and A-4 Preferred Stock were exchanged for an additional principal amount of the CGIC Note, on a dollar-for-dollar basis (the “Preferred Stock Exchange”). The additional principal amount incurred under the Preferred Stock Exchange was $9.6 million (reflective of the $9.1 million accrued value of the Series A-4 Preferred Stock and $0.5 million in accrued dividends on the Series A-3 and A-4 Preferred Stock). In addition, an extension fee and accrued interest of $2.4 million on the CGIC Note through July 31, 2025, were capitalized to the new principal amount of the CGIC Note, for a total new aggregate outstanding principal amount of $43.0 million. The new extension fee was recorded as an OID to the carrying amount of the note and is being amortized into interest expense over the term of the CGIC Note using the effective interest rate method.
The original CGIC subordinated unsecured promissory note, which was issued at 100% of par entered into in 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”), had a principal amount of $35.1 million original maturity date of February 28, 2026, and bore interest at 9.0% per annum through May 8, 2024, 16.0% per annum from May 9, 2024 to May 8, 2025, and 32.0% per annum thereafter.
For the three and six months ended June 30, 2026, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the discount, was $1.8 million and $3.5 million, respectively. During the six months ended June 30, 2026, in accordance with the terms of the amended CGIC Note, $3.8 million of interest was capitalized into the principal balance. As of June 30, 2026, the total carrying amount related to the note was $50.3 million, inclusive of $49.7 million of principal (including capitalized interest) and a net unamortized premium of $0.6 million.
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The terms of the CGIC Note include a mandatory prepayment requirement which requires us to prepay the CGIC Note (together with all accrued and unpaid interest and all other amounts payable under the CGIC Note), after the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50% 2027 Senior Secured Notes, the 10.50% 2027 Senior Secured Notes Indenture, the 2027 Convertible Notes, the 2027 Convertible Notes Indenture and all other Senior Debt (or, in each case, under any refinancing indebtedness in respect thereof), upon the occurrence of an Asset Sale (as defined in the agreement), in an amount equal to the Net Cash Proceeds (as defined in the agreement) from such Asset Sale, with such prepayment due no later than two (2) Business Days after the receipt of such Net Cash Proceeds by us (or our subsidiary, if applicable) from such Asset Sale.
The note contains customary events of default and contains cross-default provisions with our other debt instruments which could, subject to certain conditions, cause the note to become immediately due and payable.
Infrastructure
On May 20, 2025, DBMG entered into an Amended and Restated Credit agreement (the "DBMG Credit Agreement"), with the lenders which are party thereto from time to time (each a “Lender” and collectively the “Lenders”) and UMB BANK, N.A. ("UMB"). The DBMG Credit Agreement provides DBMG with senior secured debt financing in an amount up to $220.0 million in the aggregate, consisting of (i) a senior secured revolving credit facility (the “DBMG Revolving Facility”) in an aggregate amount of $135.0 million and (ii) a senior secured term loan facility in the amount of $85.0 million. The DBMG Credit Agreement also contains an accordion feature to increase the allowable size of the DBMG Revolving Facility by an additional $50.0 million. The DBMG Revolving Facility and the term loan facility will mature on May 20, 2030. DBMG entered into the DBMG Credit Agreement to fully repay DBMG’s existing debt obligations and provide additional working capital capacity.
The term loan and borrowings under the DBMG Credit Agreement bear interest at a rate per annum equal to a SOFR Rate plus a variable spread based on a Senior Funded Indebtedness to EBITDA Ratio as defined in the agreement with an interest rate floor of 4.25% per annum. Interest is paid monthly on DBMG's revolving loans, and the effective interest rate on DBMG's revolving loans was 6.3% as of June 30, 2026. The DBMG Revolving Facility has an unused commitment fee of 0.50% per annum times the average daily unused availability under the line. Principal payments and interest on DBMG's term loan are paid monthly, and the effective interest rate was 6.9% as of June 30, 2026.
At the time of entering into the DBMG Credit Agreement, deferred financing fees totaling $1.8 million were capitalized as original issue discounts and included in the carrying amount of the debt in the Condensed Consolidated Balance Sheet and $0.1 million in fees paid to third parties were expensed. Capitalized fees are amortized over the remaining life of the debt under the effective interest rate method and are included in interest expense.
DBMG had availability for revolving loans of $129.2 million as of June 30, 2026.
The obligations of the Borrowers under the new DBMG Credit Agreement are guaranteed by certain domestic subsidiaries of DBMG. As security for the Borrowers’ obligations under the DBMG Credit Agreement, (i) DBMG and its domestic subsidiaries have granted a first priority lien on substantially all their tangible and intangible personal property, including, without limitation, accounts receivable, equipment and the equity interests of certain of DBMG’s direct and indirect subsidiaries, and (ii) certain of the domestic subsidiaries of DBMG have granted a first priority lien on ten parcels of real estate owned by such subsidiaries.
The DBMG Credit Agreement contains usual and customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio; and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the DBMG Credit Agreement. The DBMG Credit Agreement contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the DBMG debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of June 30, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement.
DBMG is in compliance with its debt covenants as of June 30, 2026.
Life Sciences
On August 4, 2025, Lancer Capital LLC ("Lancer"), a related party, and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note (the "Lancer Note"), which was previously amended multiple times as further described below, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The Lancer Note can be repaid at any time with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The Lancer Note has an interest rate of 12% and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance.
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On July 31, 2026, the maturity of R2 Technologies' secured promissory note with Lancer was extended from August 1, 2026 to the earlier of December 31, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies.
The total initial principal amount of the amended Lancer Note on August 4, 2025 was $43.5 million, which incorporated the $20.0 million principal amount of the note as previously amended effective January 31, 2024 (which was comprised of a principal amount of $17.4 million and unpaid accrued interest of $2.6 million), accrued interest of $7.0 million and $16.5 million in accrued exit fees which had been incurred from January 31, 2024 through August 4, 2025. In addition, a new 5% extension fee of $2.2 million was capitalized into the principal amount on August 4, 2025 and is being amortized over the term of the note using the effective interest rate method and is included in interest expense.
As of June 30, 2026, the effective interest rate on the note, as amended, was 17.0%. Interest expense, including amortization of fees, related to the Lancer Note was $2.1 million and $4.1 million for the three months and six months ended June 30, 2026, respectively. For the six months ended June 30, 2026, in accordance with the 12% note agreement, $3.0 million of accrued interest, excluding exit fees and extension fees, was capitalized into the principal balance.
As of June 30, 2026, the total carrying amount relating to the note, which is included within the Current portion of debt obligations in the Condensed Consolidated Balance Sheet, was $50.7 million, inclusive of $50.9 million of principal (which includes capitalized interest and fees), partially offset by $0.2 million of the unamortized OID for the extension fee.
Spectrum (Held for Sale)
On August 4, 2025, Spectrum had entered into a Tenth Omnibus Amendment to Secured Notes and Limited Consent to MSD Secured Note and Intercreditor Agreement with the note holders of Spectrum's $69.7 million 8.50% and 11.45% Notes (the “Spectrum Notes”) to, among other things, extend the maturity of such notes from August 15, 2025 to September 30, 2026 (the “Spectrum Notes Extension”). In connection with the Spectrum Notes Extension in August 2025, we entered into the Spectrum Letter with the lenders, which required us to meet certain milestones with respect to strategic alternatives for the Spectrum segment, such that, if the Spectrum Notes were not repaid in full in cash on or before November 1, 2025, the Spectrum Letter provided that we were required to commence an alternative strategic process for HC2B which includes a sale of HC2B with the net proceeds to be applied to the Spectrum Notes. The November 1, 2025 milestone was not reached and in accordance with the Spectrum Letter, management initiated a strategic process for HC2B.
In connection with the Spectrum merger, on May 29, 2026, Broadcasting entered into a loan agreement (the “New Spectrum Loan Agreement”), as borrower, with Merger Sub, as lender, and HC2 Holdco and certain of Broadcasting’s subsidiaries, as guarantors. The New Spectrum Loan Agreement provides for a bridge loan facility in an aggregate principal amount of $105 million (the “Bridge Loan Facility”) which was funded on a single drawing on May 29, 2026. The proceeds of the Bridge Loan Facility were used to (a) fully satisfy and discharge all non-contingent obligations, including all accrued and unpaid interest and fees, under the Spectrum Notes, (b) repurchase equity interests in Broadcasting and DTV held by holders of the Spectrum Notes; and (c) to pay related transaction costs. As a result of these transactions and the Spectrum Merger agreement, the milestones associated with the Spectrum Letter were satisfied in full. Prior to repurchase, the lenders held 20,408 shares of common stock in HC2B, 2,222,222 shares of common stock in DTV, and warrants to purchase 145,825 shares of common stock of HC2B which could have been exercised at any time until August 31, 2028, at an exercise price of $0.01 per share. These redeemable equity interests in HC2B and DTV were repurchased at a nominal amount and were recorded against APIC. As a result of the repurchases of these redeemable non-controlling interests, our ownership in Broadcasting and DTV increased from 98.0% to 100.0% and from 69.2% to 76.5%, respectively.
The total carrying amount of the Spectrum Notes at the time of extinguishment was approximately $123.2 million, including accrued interest and exit fees of $56.8 million, and the total payoff amount was $104.8 million. As a result, a gain on extinguishment of debt $18.4 million was recognized and included within Gain (loss) on extinguishment of debt on the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026. Additional related transaction costs of $2.8 million were capitalized to the new debt and are being amortized over the term of the new debt.
Loans under the Bridge Loan Facility (“Spectrum Loans”) will accrue interest at a rate per annum equal to 8.00%, payable quarterly in kind by capitalizing such interest as additional principal of the Spectrum Loans on each interest payment date. The Spectrum Loans mature on May 29, 2027; however, upon consummation of the Spectrum Merger, the Spectrum Loans (including all accrued and capitalized interest thereon) will be extinguished in full. Broadcasting may not voluntarily prepay the Spectrum Loans prior to maturity. The Spectrum Loans also include a yield protection premium clause, which specifies that in the event of any early repayment or acceleration of the Spectrum Loans, or the Spectrum Loans reaching maturity without the occurrence of the consummation of the Spectrum Merger, Broadcasting is required to repay in cash an amount sufficient to result in a minimum cash return on the original principal amount of the Spectrum Loans, including all accrued and capitalized interest thereon, at a ratio of 1.5 to 1.0. The yield protection premium is being amortized over the term of the Spectrum Loans. As of June 30, 2026, the effective interest rate on the Spectrum Loans was approximately 54.0% per annum.
The New Spectrum Loan Agreement contains certain affirmative and negative covenants that limit the ability of Broadcasting and the Guarantors, among other things, and subject to certain exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, and pay dividends and make other restricted payments. The New Spectrum Loan Agreement contains certain events of default, including relating to a change of control and termination of the Spectrum Merger Agreement.
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Refer to Note 3. Assets and Liabilities Held for Sale to the Condensed Consolidated Financial Statements, which is incorporated by reference herein, for additional information.
Restrictive Covenants
Pursuant to the 8.50% 2026 Senior Secured Notes Supplemental Indenture executed in August 2025, substantially all of the restrictive covenants for the 8.50% 2026 Senior Secured Notes were eliminated.
The indenture governing the 2027 Senior Secured Notes dated August 4, 2025, by and among INNOVATE, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “10.50% 2027 Senior Secured Notes Trustee”) and collateral trustee (the "10.50% 2027 Senior Secured Notes Indenture"), contains certain affirmative and negative covenants limiting, among other things, the ability of the Company, and, in certain cases, the Company’s subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025, we needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we were thus required to commence a sales process for DBMG. The sales process for DBMG, which had been initiated and is proceeding, has separate milestone requirements, which we have either met or extended as of June 30, 2026 and we were compliance with the milestone covenants requirements.
In connection with the Spectrum agreements entered into on May 29, 2026, INNOVATE, certain subsidiary guarantors, and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “Trustee”) and notes collateral agent (in such capacity, the “Collateral Agent”), entered into an amended supplemental indenture (the “Amended 10.50% 2027 Senior Secured Notes Supplemental Indenture”) to the 10.50% 2027 Senior Secured Notes Indenture. Pursuant to the 10.50% 2027 Senior Secured Notes Supplemental Indenture, certain provisions of the 10.50% 2027 Senior Secured Notes Indenture, including certain definitions and negative covenants, were amended with the consent of the holders of at least a majority in aggregate principal amount of the Notes outstanding voting as a single class (the “Requisite Holders”). In addition, the Requisite Holders consented to the transactions related to the Spectrum Merger and the New Loan Agreement and waived any and all defaults, events of default or other defaults that may have occurred, or that may arise under the Indentures as a result thereof.
In connection with the Spectrum Notes Extension in August 2025, we entered into the Spectrum Letter with the lenders, which required us to meet certain milestones with respect to strategic alternatives for the Spectrum segment, such that, if the Spectrum Notes were not repaid in full in cash on or before November 1, 2025, the Spectrum Letter provided that we were required to commence an alternative strategic process for HC2B which includes a sale of HC2B with the net proceeds to be applied to the Spectrum Notes. The November 1, 2025 milestone was not reached and in accordance with the Spectrum Letter, management initiated a strategic process for HC2B.
On May 29, 2026, Broadcasting closed on a refinancing transaction. In addition, Broadcasting and HC2 Holdco, subsidiaries of INNOVATE, entered into a definitive agreement pursuant to which INNOVATE will sell a controlling interest in Broadcasting to CONX, subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals.
In connection with the Spectrum merger, on May 29, 2026, Broadcasting entered into a loan agreement (the “New Spectrum Loan Agreement”), as borrower, with Merger Sub, as lender, and HC2 Holdco and certain of Broadcasting’s subsidiaries, as guarantors. The New Spectrum Loan Agreement provides for the Bridge Loan Facility which was funded on a single drawing on May 29, 2026. The proceeds of the Bridge Loan Facility were used to (a) fully satisfy and discharge all non-contingent obligations, including all accrued and unpaid interest and fees, under the Spectrum Notes; (b) repurchase equity interests in Broadcasting and DTV held by holders of the Spectrum Notes; and (c) to pay related transaction costs. As a result of these transactions and the Spectrum Merger agreement, the milestones associated with the Spectrum Letter were satisfied in full.
The New Spectrum Loan Agreement contains certain affirmative and negative covenants that limit the ability of Broadcasting and the Guarantors, among other things, and subject to certain exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, and acquisitions, and pay dividends and make other restricted payments. The New Loan Agreement contains certain events of default, including relating to a change of control and termination of the Merger Agreement.
The instruments governing the Company’s Series A-3 Preferred Stock and Series A-4 Preferred Stock also limit our and our subsidiaries ability to take certain actions, including, among other things, to incur additional indebtedness; issue additional Series A-3 Preferred Stock and Series A-4 Preferred Stock; engage in transactions with affiliates; and make certain restricted payments. These limitations are subject to a number of important exceptions and qualifications.
We have conducted our operations in a manner that has resulted in compliance with the indentures, and as of June 30, 2026, we are in compliance with the covenants of our debt agreements.
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The debt instruments associated with our Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the agreement. The debt instruments associated with our Infrastructure segment also contain a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the segment's debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of June 30, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement.
As of June 30, 2026, our Infrastructure segment was in compliance with the covenants of its debt agreement.
Short- and Long-Term Liquidity Considerations and Risks
Our Non-Operating Corporate segment's liquidity needs have primarily been for interest payments on our senior secured notes, convertible notes, Revolving Line of Credit, CGIC Note, and dividend payments, out of legally available funds, on our Series A-3 and Series A-4 Preferred Stock and recurring operational expenses. As a result of our debt refinancing transactions in 2025 as discussed in "Indebtedness" above, certain interest payments for our Corporate debt will be or have been paid in kind and therefore will be incorporated into the respective principal balances to be paid on maturity or redemption of the respective debt.
On a consolidated continuing operations basis, and excluding our Spectrum segment, as of June 30, 2026, we had $87.8 million of cash and cash equivalents, excluding restricted cash, compared to $108.2 million as of December 31, 2025. On a stand-alone basis, as of June 30, 2026, our Non-Operating Corporate segment had cash and cash equivalents of $1.5 million, as compared to $4.2 million as of December 31, 2025.
Our subsidiaries' principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of steel construction equipment and other equipment, development of back-office systems, operating costs and expenses, and income taxes.
As of June 30, 2026, we had $626.4 million of principal indebtedness on a consolidated continuing operations basis (excluding Spectrum debt) compared to $617.5 million as of December 31, 2025, a net increase of $8.9 million, due to increases in debt at our Non-Operating Corporate and Life Sciences segments, partially offset by a decrease in debt at our Infrastructure segment. The increase at our Non-Operating Corporate segment was due to the capitalization of an aggregate $25.2 million of accrued interest into the outstanding principal balances for our 10.50% 2027 Senior Secured Notes, 9.50% 2027 Convertible Notes and CGIC Note, partially offset by a $1.9 million principal payment for the redemption of the remaining 8.50% 2026 Senior Secured Notes that matured in 2026. The increase at our Life Sciences segment was due to the capitalization of fees and unpaid accrued interest of $3.0 million at R2 Technologies into the outstanding principal balance of their note with Lancer. These increases in debt were partially offset by a $17.4 million decrease in debt at our Infrastructure segment due to repayments on their credit facility and amortization payments on their term loan.
On a stand-alone basis, our Non-Operating Corporate segment principal indebtedness, all of which matures within the next twelve months, was $505.2 million and $481.9 million as of June 30, 2026 and December 31, 2025, respectively. The June 30, 2026 indebtedness balance consists of the $379.3 million aggregate principal amount of 10.50% 2027 Senior Secured Notes, $56.0 million aggregate principal amount of 9.50% 2027 Convertible Notes, $0.2 million aggregate principal amount remaining of 7.50% 2026 Convertible Notes, $49.7 million principal amount of the CGIC Note and $20.0 million aggregate principal amount drawn on our Revolving Line of Credit.
We have entered into agreements for the Spectrum Merger. If consummated, the Spectrum Merger would extinguish the Bridge Loan Facility.
Our Non-Operating Corporate segment is required to make semi-annual interest payments on the 10.50% 2027 Senior Secured Notes and on the 2027 Convertible Notes, on February 1st and August 1st of each year. For the first interest period, which was the interest period ending on January 31, 2026, interest was paid in kind. Subsequent to quarter end, interest due on August 1, 2026 on notes held by consenting holders was also paid in kind, and those holders received additional notes as a 1.5% consent fee. Notes held by non-consenting holders remained subject to the existing cash interest payment requirements. Interest payments on the CGIC Note are required monthly; however, interest will be paid in kind through August 31, 2026. All remaining interest payments will be paid in cash in arrears. We are also required to make quarterly interest payments on our Revolving Line of Credit and semi-annual interest payments on the 2026 Convertible Notes on February 1st and August 1st of each year.
We are required to make dividend payments, out of legally available funds, on our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock on January 15th, April 15th, July 15th, and October 15th of each year. The Series A-3 Preferred Stock and Series A-4 Preferred Stock have a redemption date of July 1, 2026. On the maturity date, the holders were entitled to redeem, out of legally available funds, the Series A-3 Preferred Stock and Series A-4 Preferred Stock at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Series A-3 and Series A-4); however, at this time the Company does not have legally available funds to complete the redemption.
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On June 30, 2026, the holder of our outstanding Series A-3 and Series A-4 Preferred Stock delivered a redemption notice requiring the Company to redeem those shares at the redemption price (accrued value plus all accrued and unpaid dividends, to the extent not included in the accrued value). The Company did not have sufficient legally available funds to pay the redemption price in cash or other assets. Under the terms of the certificates of designation, because the preferred shares were not redeemed when required, they remain outstanding and continue to be entitled to all powers, designations, preferences, and other rights, including the right to accrual and payment of dividends and conversion rights.
The Series A-3 and Series A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of 7.50%. The accrued values of the Series A-3 and Series A-4 Preferred Stock accrete quarterly at an annualized rate of 4.00% that is reduced to 2.00% or 0.0% if the Company achieves specified rates of growth measured by increases in its net asset value; provided, that the accreting dividend rate will be 7.25% in the event that (A) the daily volume weighted-average price ("VWAP") of the Company's common stock is less than a certain threshold amount, (B) the Company's common stock is not registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or (C) the Company's common stock is not listed on certain national securities exchanges or the Company is delinquent in the payment of any cash dividends.
During the first and second quarters of 2026, the Board did not declare any cash dividends with respect to INNOVATE’s issued and outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock. Aggregate quarterly dividends of $0.4 million and $0.3 million, respectively, for the first and second quarters of 2026, included the annual cash dividend of 7.5% per annum which was accrued and also the accreting dividend of 7.25% per annum. Refer to Note 16. Temporary Equity for additional information.
Our Non-Operating Corporate segment received $0.8 million in net tax sharing payments from our Infrastructure segment for the six months ended June 30, 2026. Additionally, our Non-Operating Corporate segment received $2.7 million and $7.3 million in dividends from our Infrastructure segment during the three and six months ended June 30, 2026, respectively. Subsequent to quarter end, on July 8, 2026, DBMG declared a $12.0 million cash dividend which was paid on August 3, 2026, of which our Non-Operating Corporate segment received $11.0 million.
We have financed our growth and operations to date, and expect to finance our future growth and operations, through public offerings and private placements of debt and equity securities, credit facilities, vendor financing, finance lease financing and other financing arrangements, as well as cash generated from the operations of our subsidiaries.
Going Concern
The accompanying unaudited Condensed 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 of the Company's debt obligations. Based on these conditions, we may not be able to meet our obligations at maturity nor comply with certain cross-default provisions under the 10.50% 2027 Senior Secured Notes over the next twelve months, or any potential breach of the milestone covenant of the 10.50% 2027 Senior Secured Notes Indenture which has required the Company to commence and proceed with a sales process for all or substantially all of DBMG's assets or equity interests in accordance with certain dates and deadlines. Refer to Note 12. Debt Obligations to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
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.
Management plans to alleviate these conditions through various initiatives it is currently exploring, including pursuing asset sales, potentially refinancing debt and raising additional capital. However, there can be no assurance that we will have the ability to be successful in any asset sales, additional capital raises, or the refinancing of our 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 our debt covenants or other possible events of default. Further, there can be no assurance that we 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 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 unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q 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.
While we have noted the conditions above regarding our ability to continue as a going concern, it is important to note that our largest subsidiary, DBMG, is operationally profitable, continues to maintain a strong financial position and remains in good standing with its lenders. Under INNOVATE’s Senior Secured Notes Indenture, DBMG is a restricted subsidiary, not a guarantor, and INNOVATE’s equity interests in DBMG are pledged as collateral.
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Capital Expenditures
Capital expenditures are set forth in the table below (in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
Infrastructure | $ | 9.9 | $ | 5.1 | $ | 18.8 | $ | 9.2 | ||||||||||||||||||
| Life Sciences | — | (0.1) | — | — | ||||||||||||||||||||||
| Spectrum | 0.5 | 1.1 | 1.1 | 1.6 | ||||||||||||||||||||||
| Total | $ | 10.4 | $ | 6.1 | $ | 19.9 | $ | 10.8 | ||||||||||||||||||
Summary of Consolidated Cash Flows
The below table summarizes the cash provided by or used in our activities (in millions):
| Six Months Ended June 30, | Change | |||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| Cash provided by operating activities | $ | 20.9 | $ | 26.3 | $ | (5.4) | ||||||||||||||
| Cash used in investing activities | (20.6) | (10.2) | (10.4) | |||||||||||||||||
| Cash used in financing activities | (22.6) | (32.2) | 9.6 | |||||||||||||||||
| Effects of exchange rate changes on cash, cash equivalents and restricted cash | — | 0.8 | (0.8) | |||||||||||||||||
| Net decrease in cash and cash equivalents, including restricted cash and cash classified within assets held for sale | $ | (22.3) | $ | (15.3) | $ | (7.0) | ||||||||||||||
| Decrease in cash and cash equivalents from assets held for sale | 1.9 | 1.4 | 0.5 | |||||||||||||||||
| Net decrease in cash and cash equivalents, including restricted cash | $ | (20.4) | $ | (13.9) | $ | (6.5) | ||||||||||||||
Operating Activities
Cash provided by operating activities was $20.9 million for the six months ended June 30, 2026, as compared to $26.3 million for the six months ended June 30, 2025, a decrease of $5.4 million. Cash flows from operations are primarily influenced by changes in the timing of demand for services and by operating margins, but can also be affected by working capital needs associated with our operations. For the six months ended June 30, 2026, the decrease in cash flows from operating activities was primarily driven by our Infrastructure segment, partially offset by an improvement at our Non-Operating Corporate segment. The decrease in operating cash flows at our Infrastructure segment was primarily due to a decrease in working capital from normal business fluctuations in contract-related assets and liabilities, other current assets and liabilities resulting from the timing of regular bill payment activities and ordinary project activity. The net decrease in working capital inflows at our Infrastructure segment was partially offset by an increase in net income after non-cash adjustments. Our Non-Operating Corporate segment's decrease in cash used in operating activities was primarily due to decreases in cash paid for interest and, to a lesser extent cash paid for taxes.
Investing Activities
Cash used in investing activities was $20.6 million for the six months ended June 30, 2026, as compared to $10.2 million for the six months ended June 30, 2025, an increase in cash used in investing activities of $10.4 million. Capital expenditures totaled $19.9 million, or $19.8 million net of proceeds from disposals, for the six months ended June 30, 2026, as compared to $10.8 million, or $9.6 million net proceeds from disposals, for the six months ended June 30, 2025, for a net increase in cash used in investing activities of $10.2 million. The increase was primarily driven by increased PP&E additions in the current period at our Infrastructure segment, and higher PP&E sales in the prior period. In addition there was a $0.2 million increase in cash outflows for the purchase of marketable investments at our Non-Operating Corporate Segment.
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Financing Activities
Cash used in financing activities was $22.6 million for the six months ended June 30, 2026, as compared to $32.2 million for the six months ended June 30, 2025, a decrease in cash used in financing activities of $9.6 million. The decrease in financing cash outflows was primarily driven by our Infrastructure segment which had a net decrease in cash outflows from term loan activity of $12.9 million and a net decrease in credit facility related repayments of $0.6 million. The decrease in payments for other debt obligations at our Infrastructure segment was partially offset by increases in payments for other debt obligations at our Spectrum and Non-Operating Corporate segments. Our Spectrum segment had a net increase in cash outflows for other debt obligations and third party financing costs of $2.4 million, related to their recent refinancing, in which the proceeds related to the new $105 million CONX bridge loan facility were used to repay $104.6 million to the 8.50% and 11.45% Spectrum Note holders (inclusive of principal, and exit fees and paid in kind interest capitalized into the principal balance) and $2.8 million was paid for third party refinancing transaction fees. The increase in cash outflows at our Non-Operating Corporate segment was due to the redemption of the remaining $1.9 million in principal amount of the 8.50% 2026 Senior Secured Notes that matured in the current period. For the six months ended June 30, 2026, dividend payments paid by our Non-Operating Corporate segment to the holders of our Series A-3 Preferred Stock and Series A-4 Preferred Stock decreased by $0.6 million, partially offset by an increase in dividends paid by our Infrastructure segment of $0.2 million, as compared to the prior period.
Infrastructure
Cash Flows
Cash flows from operating activities are the principal source of cash used to fund DBMG’s operating expenses, interest payments on debt, and capital expenditures. DBMG's short-term cash needs are primarily for working capital to support operations including receivables, inventories, and other costs incurred in performing on its contracts. DBMG attempts to structure the payment arrangements under its contracts to match costs incurred under the project. To the extent it is able to bill in advance of costs incurred, DBMG generates working capital through billings in excess of costs and recognized earnings on uncompleted contracts. DBMG relies on its credit facilities to meet its working capital needs. DBMG believes that its available funds, cash generated by operating activities and funds available under its bank credit facilities will be adequate to meet all funding requirements for its operating expenses, working capital needs, interest payments on debt and capital expenditures for the foreseeable future. However, DBMG may expand its operations through future acquisitions and may require additional equity or debt financing.
DBMG is required to make monthly interest payments on all of its debt. Based upon the June 30, 2026, debt balance, DBMG anticipates that its interest payments will be approximately $1.1 million for each remaining quarter of 2026.
The DBMG Credit Agreement contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the DBMG debt in the future upon certain events, including a sale of DBMG. As the Change in Control clause has not been triggered, the DBMG debt instruments remain classified as non-current as of June 30, 2026, except amounts due within the next 12 months, as originally defined in the DBMG Credit Agreement. Refer to Note 12. Debt Obligations to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
New Accounting Pronouncements
For information on new accounting pronouncements, refer to Note 2. Summary of Significant Accounting Policies to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for additional information.
Critical Accounting Estimates
There have been no material changes in the Company’s critical accounting policies during the period ended June 30, 2026. For information about critical accounting policies and estimates, refer to “Critical Accounting Estimates” under Item 7 of our 2025 Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 26, 2026.
Related Party Transactions
For a discussion of our Related Party Transactions, refer to Note 17. Related Parties to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
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Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains or incorporates a number of "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations, and are not strictly historical statements. In some cases, you can identify forward-looking statements by terminology such as "if," "may," "should," "believe," "anticipate," "future," "forward," "potential," "estimate," "opportunity," "goal," "objective," "growth," "outcome," "could," "expect," "intend," "plan," "strategy," "provide," "commitment," "result," "seek," "pursue," "ongoing," "include" or in the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties and are not guarantees of performance, results, or the creation of stockholder value, although they are based on our current plans or assessments which we believe to be reasonable as of the date hereof.
Factors that could cause actual results, events and developments to differ include, without limitation: the ability of our subsidiaries (including target businesses following their acquisition) to generate sufficient net income and cash flows to make upstream cash distributions, capital market conditions, our and our subsidiaries’ ability to identify any suitable future acquisition opportunities, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, conditions to, and the timetable for, completing current and future acquisitions and dispositions and the successful integration of acquisitions with INNOVATE or the applicable subsidiary, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes.
Forward-looking statements are not guarantees of performance. You should understand that the following important factors, in addition to those discussed under the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 26, 2026, and the documents incorporated herein by reference, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. You should also understand that many factors described under one heading below may apply to more than one section in which we have grouped them for the purpose of this presentation. As a result, you should consider all of the following factors, together with all of the other information presented herein, in evaluating our business and that of our subsidiaries.
INNOVATE Corp. and Subsidiaries
Our actual results or other outcomes may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:
•our dependence on distributions from our subsidiaries to fund our operations and payments on our obligations;
•substantial doubt about our ability to continue operating as a going concern;
•our ability to consummate asset sales on anticipated terms and timing or at all and to realize sufficient proceeds, including from any non-cash proceeds to satisfy our outstanding obligations;
•our ability to obtain FCC regulatory approval for the Spectrum Merger in a timely manner or at all;
•our anticipated business profile following the highly substantial asset dispositions we are pursuing, including the potential absence of material operating revenue and uncertainty regarding the nature of any future operations;
•the impact on our business and financial condition of our substantial indebtedness and the significant additional indebtedness and other financing obligations we may incur;
•the impact of covenants in the Indentures governing INNOVATE’s 2027 Senior Secured Notes, 2027 Convertible Notes, 2026 Convertible Notes, CGIC Subordinated Secured Promissory Note and Revolving Line of Credit, our Third Amended and Restated Certificate of Incorporation and all other subsidiary debt obligations as summarized in Note 12. Debt Obligations to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and any future amendments or other new financing agreements on our ability to operate our business and finance our pursuit of acquisition opportunities;
•our possible inability to generate sufficient liquidity, margins, earnings per share, cash flow and working capital from our operating segments;
•our dependence on certain key personnel including the passing in 2023 of Mr. Barr, our former CEO, President and Director and the successful transition of his management responsibilities;
•bank failures or other similar events that could adversely affect our and our customers' and vendors' liquidity and financial performance;
•our possible inability to hire and retain qualified executive management, sales, technical and other personnel;
•the potential for, and our ability to, remediate future material weaknesses in our internal controls over financial reporting;
•changes in market conditions, including from political regulatory or market uncertainty, changes in foreign exchange rates, interest rates or inflation, supply chain disruptions, labor shortages and increases in overall price levels, including in transportation costs;
•the uncertain effects of U.S. and foreign government actions affecting international trade and economic policy, including changes in volatility in tariffs and trade policies and retaliatory actions, on credit markets, customers, and customer retention, and demand for our products and services;
•increased competition in the markets in which our operating segments conduct their businesses;
•limitations on our ability to successfully identify any strategic acquisitions or business opportunities and to compete for these opportunities with others who have greater resources;
•our ability to effectively increase the size of our organization, if needed, and manage our growth;
•the impact of expending significant resources in considering acquisition targets or business opportunities that are not consummated;
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•our expectations and timing with respect to our ordinary course acquisition activity and whether such acquisitions are accretive or dilutive to stockholders;
•the effect any interests our officers, directors, stockholders and their respective affiliates may have in certain transactions in which we are involved;
•uncertain global economic conditions in the markets in which our operating segments conduct their businesses;
•the effects related to or resulting from ongoing and recent geopolitical events, such as the conflicts in Ukraine, the Middle East, and Venezuela, including the imposition of additional sanctions and export controls, as well as the broader impact to financial markets and the global macroeconomic and geopolitical environment;
•the impact of catastrophic events, including natural disasters, pandemic illness and the outbreak of war, or acts of terrorism;
•potential impacts on our business resulting from climate change, greenhouse gas regulations, and the impact of climate change-related changes on the frequency and severity of weather patterns;
•the impact of additional material charges associated with our oversight of acquired or target businesses and the integration of our financial reporting;
•tax consequences associated with our acquisition, holding and disposition of target companies and assets;
•our ability to remain in compliance with the listing standards of the NYSE;
•the ability of our operating segments to attract and retain customers;
•our expectations regarding the timing, extent and effectiveness of our cost reduction initiatives and management’s ability to moderate or control discretionary spending;
•management’s plans, goals, forecasts, expectations, guidance, objectives, strategies and timing for future operations, acquisitions, synergies, asset dispositions, fixed asset and goodwill impairment charges, tax and withholding expense, selling, general and administrative expenses, product plans, performance and results;
•management’s assessment of market factors and competitive developments, including pricing actions and regulatory rulings;
•our expectations and timing with respect to any strategic dispositions and sales of our operating subsidiaries, or businesses, that we may make in the future and the effect of any such dispositions or sales on our results of operations;
•the possibility of indemnification claims arising out of divestitures of businesses; and
•our possible inability to raise additional capital when needed or refinance our existing debt, on attractive terms, or at all.
Infrastructure / DBM Global Inc.
Our actual results or other outcomes of DBMG, and, thus, our Infrastructure segment, may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:
•adverse impacts from weather affecting DBMG’s performance and timeliness of completion of projects, which could lead to increased costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;
•cost overruns on fixed-price or similar contracts or failure to receive timely or proper payments on cost-reimbursable contracts, whether as a result of improper estimates, performance, disputes, or otherwise;
•uncertain timing and funding of new contract awards, as well as project cancellations;
•potential impediments and limitations on our ability to complete ordinary course acquisitions in anticipated time frames or at all;
•changes in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;
•changes in economic conditions, including from the impact of inflationary pressures and changes in interest rates;
•adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the potential effect of such claims or litigation on DBMG’s business, financial condition, results of operations or cash flow;
•risks associated with labor productivity, including performance of subcontractors that DBMG hires to complete projects;
•its ability to realize cost savings from expected performance of contracts, whether as a result of improper estimates, performance, or otherwise;
•its ability to settle or negotiate unapproved change orders and claims;
•fluctuating revenue resulting from a number of factors, including the cyclical nature of the individual markets in which our customers operate;
•our possible inability to raise additional capital when needed or refinance our existing debt, on attractive terms, or at all; and
•lack of necessary liquidity to provide bid, performance, advance payment and retention bonds, guarantees, or letters of credit securing DBMG’s obligations under bids and contracts, or to finance expenditures prior to the receipt of payment for the performance of contracts.
Life Sciences / Pansend Life Sciences, LLC
Our actual results or other outcomes of Pansend Life Sciences, LLC, and, thus, our Life Sciences segment, may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:
•our Life Sciences segment’s ability to invest in development stage companies;
•Indebtedness of R2 Technologies that will mature on December 31, 2026 (following the amendment described in Note 22. Subsequent Events);
•our Life Sciences segment’s ability to develop products and treatments related to its portfolio companies;
•medical advances in healthcare and biotechnology;
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•governmental regulation in the healthcare industry; and
•our Life Sciences segment possible inability to raise additional capital when needed or refinance its existing debt, on attractive terms, or at all.
Spectrum / HC2 Broadcasting Holdings Inc.
Our actual results or other outcomes of Broadcasting, and, thus, our Spectrum business, which is reflected as held for sale in the Condensed Consolidated Financial Statements, may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:
•our ability to consummate the Spectrum Merger, on anticipated terms and timing or at all; and
•whether the CONX Affiliate exercises its option under the CONX Affiliate Letter Agreement, whether we exercise our option and the price realized upon any such exercise.
We caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this document. Neither we nor any of our subsidiaries undertake any duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this document or to reflect actual outcomes, except as required by applicable law.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our Interim Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended (the "Exchange Act") as of the end of the period covered by this report. Based on this evaluation, our Interim Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2026, our disclosure controls and procedures were effective. Disclosure controls and procedures mean our controls and other procedures that are designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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 June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to claims and legal proceedings that arise in the ordinary course of business. 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 Condensed Consolidated Financial Statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its Condensed Consolidated Financial Statements. The Company records a liability in its Condensed Consolidated Financial Statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary for the Condensed Consolidated Financial Statements not to be misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its Condensed Consolidated Financial Statements. Refer to Note 14. Commitments and Contingencies of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference for additional information.
ITEM 1A. RISK FACTORS
The Risk Factors set forth below supplement and, as applicable, update, and should be read together with, the risk factors set forth in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. The Company is currently pursuing highly substantial asset dispositions. It has also made changes to its debt arrangements and other liabilities, including following June 30, 2026, and expects to make further changes. These ongoing actions will substantially alter the Company’s business, prospects, cash flow and financial position going forward and all information herein, including information incorporated by reference herein, should be evaluated in light of these changes and potential changes. Refer to Note 22. Subsequent Events for further information.
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If we fail to consummate the Spectrum Merger, the Bridge Loan Facility may become due on terms we do not expect to have the resources to satisfy, which could trigger defaults under our debt instruments and materially adversely affect our financial condition, liquidity and ability to continue as a going concern.
The Spectrum Merger involves the transfer of FCC broadcasting licenses held by our Spectrum segment. FCC approval is required for such transfers, and there can be no assurance that such approval will be obtained in a timely manner or at all. Any delay or denial of FCC approval could delay or prevent the consummation of the Spectrum Merger and expose Broadcasting and its guarantors to repayment or acceleration of the Bridge Loan Facility. The FCC regulatory approval process may also impose conditions on the transfer that could reduce the benefits of the transaction.
If we fail to consummate the Spectrum Merger, the Bridge Loan Facility under the New Loan Agreement would remain outstanding and, absent consummation of the Merger by the first anniversary of the Loan Closing Date, Broadcasting would be required to repay in cash an amount sufficient to result in a minimum cash return of 1.5:1.0 on the original principal amount of the Loans, including all accrued and capitalized interest, which the Company does not expect Broadcasting or the guarantors to have the resources to satisfy. In addition, termination of the Merger Agreement would constitute an event of default under the New Loan Agreement, potentially accelerating the Bridge Loan Facility obligations. The closing is subject to conditions that may not be satisfied, including receipt of FCC approval and expiration or termination of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, waiting period, and the Merger Agreement is terminable by either party if the Merger has not occurred by November 29, 2026, subject to extensions to March 1, 2027 and May 29, 2027 if only specified regulatory conditions remain unsatisfied. Any failure or material delay in consummating the Spectrum Merger could therefore trigger defaults or cross-defaults under our debt instruments and have a material adverse effect on our financial condition, results of operations, liquidity and ability to continue as a going concern.
Even if the Merger is consummated, the Company does not expect to receive any cash proceeds from the Spectrum Merger; the Company's retained 25% equity interest in the Surviving Entity would be illiquid absent exercise of the CONX Affiliate's option under the CONX Affiliate Letter Agreement, the timing, price and occurrence of which are uncertain. In addition, the Option Agreement may require the Company to apply net cash proceeds from future asset sales to exercise the option to acquire additional Surviving Entity equity, subject to applicable exceptions and the requirements of our debt instruments, which could limit the proceeds otherwise available for other corporate purposes.
The Spectrum Merger may subject us to risks associated with transition services, dis-synergies, stranded assets, and employee retention.
In connection with the Spectrum Merger, we may be required to provide certain transition services to the purchaser, and any issues, delays or complications in completing such services, including the incurrence of unanticipated costs, could adversely affect our business and financial condition. In addition, as a result of the probable sale, we may incur or experience various adverse effects, including but not limited to (i) greater costs or fewer benefits than anticipated under the sale agreement, (ii) operational or commercial difficulties segregating the divested assets from our retained assets, (iii) disputes with the purchasers regarding the nature and sufficiency of the transition services we provide, (iv) higher vendor costs due to reduced economies of scale or other similar dis-synergies, (v) modified, terminated or scaled back relationships with existing customers or difficulty attracting prospective customers, (vi) diversion of management's attention away from the operations of our retained business, (vii) loss or difficulty in retaining employees due to concerns over future job security or responsibilities, or (viii) losses or increased inefficiencies from stranded or underutilized assets. Any of these risks could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Retained liabilities and indemnification obligations in connection with the Spectrum Merger could result in unanticipated costs.
In connection with the Spectrum Merger, we may retain certain pre-closing liabilities and may be subject to indemnification obligations under the applicable sale agreements and related ancillary agreements. These retained liabilities and indemnification obligations could result in unanticipated costs and could have a material adverse effect on our financial condition, results of operations, and cash flows. In addition, we remain liable for claims and expenses that may arise related to our business operations prior to the completion of the sales, and we may be subject to contingent liabilities related to the sales that could have a material adverse effect on our financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Equity Award Share Withholding
Shares of common stock withheld as payment of withholding taxes in connection with the vesting or exercise of equity awards are treated as common stock repurchases. Those withheld shares of common stock are not considered common stock repurchases under an authorized common stock repurchase plan. During the quarter ended June 30, 2026, there were no shares withheld in connection with the vesting of employee equity awards.
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ITEM 5. OTHER INFORMATION
(c) None of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
ITEM 6. EXHIBITS
(a) Exhibits
Please note that the agreements included as exhibits to this Form 10-Q are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about INNOVATE Corp. or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.
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| Exhibit Number | Description | |||||||
| 2.1* | Agreement and Plan of Merger, dated as of May 29, 2026, among CONX Corp., HC2 Merger Sub, LLC, HC2 Broadcasting Holdco, LLC and HC2 Broadcasting Holdings Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.1 | Loan Agreement, dated as of May 29, 2026, by and between, inter alios, HC2 Broadcasting Holdings Inc., as borrower, and HC2 Merger Sub, LLC, as lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.2 | Supplemental Indenture, dated as of May 29, 2026, by and among INNOVATE Corp., the Subsidiary Guarantors named therein, and U.S. Bank Trust Company, National Association, relating to the Company’s 10.500% Senior Secured Notes due 2027 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.3 | Supplemental Indenture, dated as of May 29, 2026, by and among INNOVATE Corp., the Subsidiary Guarantors named therein, and U.S. Bank Trust Company, National Association, relating to the Company’s 9.5% Convertible Senior Secured Notes due 2027 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.4 | Supplemental Indenture, dated as of July 31, 2026, by and among INNOVATE Corp., the Subsidiary Guarantors named therein, and U.S. Bank Trust Company, National Association, relating to the Company’s 10.500% Senior Secured Notes due 2027 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 3, 2026) (File No. 001-35210) | |||||||
| 10.5 | Supplemental Indenture, dated as of July 31, 2026, by and among INNOVATE Corp., the Subsidiary Guarantors named therein, and U.S. Bank Trust Company, National Association, relating to the Company’s 9.5% Convertible Senior Secured Notes due 2027 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on August 3, 2026) (File No. 001-35210) | |||||||
| 10.6 | Amendment of Amended and Restated Promissory Note, dated as of July 31, 2026, by and between R2 Technologies, Inc. and Lancer Capital, LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on August 3, 2026) (File No. 001-35210) | |||||||
| 10.7 | Ninth Amendment to Credit Agreement, dated as of May 29, 2026, by and among INNOVATE Corp., the Guarantors named therein and MSD PCOF Partners IX, LLC, relating to the Company’s MSD Credit Agreement (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.8 | Option Agreement, dated as of May 29, 2026, by and among CONX Corp., HC2 Merger Sub, LLC, HC2 Broadcasting Holdings Inc., HC2 Broadcasting Holdco, LLC and INNOVATE Corp. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 10.9 | Letter Agreement, dated as of May 29, 2026, by and among CONX Corp., the CONX Affiliate and INNOVATE Corp. (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by INNOVATE on June 1, 2026) (File No. 001-35210) | |||||||
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith) | |||||||
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith) | |||||||
| 32.1* | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (furnished herewith) | |||||||
| 101 | The following materials from the registrant’s Quarterly Report on Form 10-Q for the fiscal periods ended June 30, 2026, formatted in extensible business reporting language (XBRL); (i) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2026 and 2025, (iii) Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025, (iv) Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2026 and 2025, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025, and (vi) Notes to Condensed Consolidated Financial Statements (filed herewith). | |||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2026, formatted in Inline XBRL (included as Exhibit 101). | |||||||
| * | These certifications are being "furnished" and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. | ||||
| ^ | Indicates management contract or compensatory plan or arrangement. | ||||
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INNOVATE Corp.
| By: | /S/ MICHAEL J. SENA | |||||||
Michael J. Sena Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) | ||||||||
| Date: | August 6, 2026 | |||||||
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