VATE US Equity☆

ITEM 7. 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 information in our consolidated annual audited financial statements and the notes thereto, each of which are contained in Item 8. entitled "Financial Statements and Supplementary Data," and other financial information included herein. 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 as well as 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 Annual Report on Form 10-K, "INNOVATE" means INNOVATE Corp. (formerly known as HC2 Holdings, Inc.) and the "Company," "we" and "our" mean INNOVATE together with its consolidated subsidiaries. "U.S. GAAP" means accounting principles accepted in the United States of America.

Our Business

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

Certain previous year amounts have been reclassified to conform with current year presentations, including:

•The recast of Beyond6, ICS, and CIG's results to discontinued operations. Further, the reclassification of prior period assets and liabilities have been classified as held for sale. See Note 3. Discontinued Operations for further information;

•As a result of the sale of ICS, and in accordance with ASC 280, the Company no longer considers the results of operations and Balance Sheets of ICS as a separate segment. Formerly the Telecommunications segment, this entity has been reclassified to the Other segment. See Note 17. Operating Segment and Related Information for further information;

•As a result of the sale of Beyond6, and in accordance with ASC 280, the Company no longer considers the results of operations and Balance Sheets of Beyond6 as a separate segment. Formerly the Clean Energy segment, this entity has been reclassified to the Other segment. See Note 17. Operating Segment and Related Information for further information;

•As a result of the sale of CIG, and in accordance with ASC 280, the Company no longer considers the results of operations and Balance Sheets of CIG as a separate segment. Formerly the Insurance segment, this entity has been reclassified to the Other segment. See Note 17. Operating Segment and Related Information for further information; and

•The recast of prior year earnings per share as a result of the discontinued operations noted above. This includes presenting EPS for Net (loss) income from continuing operations, Net (loss) income from discontinuing operations, and Net (loss) income. See Note 18. Basic and Diluted Income (Loss) Per Common Share for further details.

Our Operations

Refer to Note 1. Organization and Business to our Consolidated Financial Statementsfor additional information.

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 a 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, financial condition of our customers and their access to capital; margins of projects performed during any particular period; economic, and 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.

46

Recent Developments

COVID-19 Impact on our Business

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus ("COVID-19") as a pandemic, and on March 13, 2020, the United States declared the pandemic to be a national emergency. As COVID-19 spread throughout the country, the situation has continued to evolve, including, more recently, the increasing adoption of the COVID-19 vaccine and the reopening of state economies, although increasing rates of infection with recently identified variants of COVID-19, including the "Delta" and "Omicron" variants, have prompted some authorities to reintroduce mask mandates and other restrictions.

The Company’s top priority has been to protect its employees and their families, and those of the Company’s customers. The Company continues to take precautionary measures as directed by health authorities and local governments, including changing operational procedures as necessary, providing additional protective gear and cleaning to protect personnel and customers, which has resulted and may continue to result in disruptions to and increased costs of the Company’s operations. We may take further action as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our operations. As the vaccine rollout has commenced, certain employees have begun to return to the office, either full-time or part-time. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, including any new strains of the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.

The extent of the impact of COVID-19 on our operational and financial performance will depend on future developments, including, but not limited to, the duration and spread of the outbreak, the effectiveness of the vaccine program, the outbreak of any new strains of the coronavirus, and related travel advisories and restrictions, and its impact to the U.S. and global financial markets, all of which are highly uncertain and cannot be predicted. Preventing the effects from and responding to this market disruption if any other public health threat, related or otherwise, may further increase costs of our business and may have a material adverse effect on our business, financial condition, and results of operations.

COVID-19 has caused supply chain challenges related to labor shortages and supply chain disruptions, which may create significant delays in our ability to complete projects or deliver products. The receipt of material from impacted areas has been slowed or disrupted and our suppliers are expected to face similar challenges in fulfilling orders. In addition, reductions in the number of ocean carrier voyages, ocean freight capacity issues, congestion at major international gateways and other economic factors continue to persist worldwide due to COVID-19 and worldwide supply impacts as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container. In addition, in the United States, trucking costs have risen dramatically due to driver shortages and increased labor costs, as well as new federal and state safety, environmental and labor regulations. These changes, as well as COVID-19 related state and local restrictions on domestic trucking and the operation of distribution centers, may disrupt our supply chain, which may result in a delay in the completion of our projects and cause us to incur significant additional costs. Although we may attempt to pass on certain of these increased costs to our customers, we may not be able to pass all of these cost increases on to our customers. As a result, our margins may be adversely impacted by such cost increases. These supply chain disruptions and transportation challenges could have a material adverse effect on our results of operations or financial condition.

We continue to monitor the evolving situation and guidance from authorities, including federal, state and local public health departments, and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plans. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impact of COVID-19 on our results of operations, financial condition, or cash flows in the future, but it could have a material adverse impact on our future revenue growth as well as our overall profitability and may lead to revised payment terms with certain of our customers.

During the year ended December 31, 2021, the effects of COVID-19 and the related actions undertaken in the U.S. to attempt to control its spread, specifically impacted certain of our segments as follows:

Infrastructure

DBMG is dependent on its workforce to carry out its services. Developments resulting from governmental responses to COVID-19 such as social distancing and shelter-in-place directives have impacted, and could continue to impact, DBMG’s ability to deploy its workforce in its facilities and project sites efficiently. The nature of DBMG’s business does not permit alternative workforce arrangements in its facilities and project sites such as remote work schemes to be implemented effectively, and as a result of potential workforce disruptions, DBMG may continue to experience delays or suspensions of projects. DBMG has incurred significant costs related to additional procedures to maintain COVID-19 related safety measures. During the year ended December 31, 2021 and 2020, $8.6 million and $19.4 million of COVID-19 related expenses were incurred, respectively. The majority of these expenses related to payroll costs for safety and cleaning procedures in DBMG's shops and in the field, and personal protective equipment for employees. DBMG may also experience disruptions in the supply chain depending on the spread of COVID-19 and related governmental orders. These delays, suspensions, and impacts to supply chain, may negatively impact DBMG’s results of operations, cash flows or financial condition. This could cause the timing of revenue to be delayed and possibly impact earnings and backlog. Persistent delays, suspensions or cancellations of projects under contract may occur while governments implement policies designed to respond to the COVID-19 pandemic. Any such continued loss or suspension of projects under contract may negatively impact DBMG’s results of operations, cash flows or financial condition.

47

Spectrum

As a result of COVID-19, our Spectrum segment previously experienced adverse effects on its advertising business because of weakness in the advertising market as advertisers sought to reduce their own costs in response to the pandemic’s impact on their businesses. While we are not able to predict when or whether advertising budgets and the advertising market generally will return or be comparable to historical levels, our Spectrum segment's advertising business appears to have begun to stabilize as the vaccination program within the U.S. progresses and additional businesses begin to reopen.

In addition, COVID-19 could impact our Spectrum segment’s business, financial condition and results of operations in a number of other ways, including, but not limited to:

•negative impact on our broadcast station revenue, as many of our customers also rely on advertising revenues and might be negatively affected by COVID-19;

•negative impact on our network distribution revenues, as consumers may seek to reduce discretionary spending by cutting back or foregoing subscriptions to cable television or other multichannel video programming distributors;

•negative impact on our financial condition or our ability to fund operations or future investment opportunities due to an increase in the cost or difficulty in obtaining debt or equity financing, or refinancing our debt in the future, or our ability to comply with our covenants;

•impairments of our programming inventory, goodwill and other indefinite-lived intangible assets, and other long-lived assets; and

•increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online activity.

The magnitude of the impact on our Spectrum segment will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in response to the pandemic and such governmental actions, and the economic and operating conditions that we may face in the aftermath of COVID-19. Even after COVID-19 has subsided, we may experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's liquidity and capital resources, see "Part I-Item 1A-Risk Factors."

Acquisitions and Dispositions

Infrastructure

Banker Steel Acquisition

On March 15, 2021, the Company announced that DBMG entered into an agreement to acquire 100% of Banker Steel Holdco LLC ("Banker Steel") for $145.0 million, which closed on May 27, 2021. The acquisition was financed with $64.1 million from a partial draw on the new $110.0 million revolving credit facility, $49.6 million of sellers' notes, $6.3 million of assumed debt of Banker Steel, and $25.0 million in cash received from INNOVATE in the settlement of certain intercompany balances.

Banker Steel provides full-service fabricated structural steel and erection services primarily for the East Coast and Southeast commercial and industrial construction market, in addition to full design-assist services. Banker Steel consists of six operating companies: Banker Steel Co., LLC; NYC Constructors, LLC; Memco LLC; Derr & Isbell Construction LLC; Innovative detailing and Engineering Solutions; and Lynchburg Freight and Specialty LLC.

Insurance

Sale of CIG

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of December 31, 2021, a beneficial owner of approximately 6.6% of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020. The Insurance segment, which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $544.0 million, inclusive of $344.0 million of Accumulated other comprehensive income ("AOCI"). The carrying value of the Insurance segment at the time of sale excluded cash of $62.5 million and investments of $26.7 million which were distributed to the Company through an extraordinary dividend immediately prior to the sale. The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale. The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While several factors impacted the fair value of the Insurance segment at the end of 2019, following discussions with our domestic regulator, changes in the asset management fee arrangement and expectations of future dividends primarily and ultimately resulted in the full impairment of the goodwill associated with the Insurance segment during the year ended December 31, 2019. While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

48

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

Other

Sale of Beyond6

On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware Corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders. The sale closed on January 15, 2021. During the first quarter of 2021, the Company recognized a $39.2 million gain on the sale. During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $0.5 million gain on the sale.

Debt Obligations

Non-Operating Corporate

On February 1, 2021, the Company repaid its 11.50% senior secured notes due 2021 (the "2021 Senior Secured Notes"), and issued $330.0 million aggregate principal amount of 8.50% senior secured notes due 2026 (the "2026 Senior Secured Notes"). In addition, the Company entered into exchange agreements with certain holders of approximately $51.8 million aggregate principal amount of its existing $55.0 million 7.50% convertible senior notes due 2022 (the "2022 Convertible Notes"), pursuant to which the Company exchanged such holders' 2022 Convertible Notes for newly issued convertible notes due 2026 (the "2026 Convertible Notes"). The 2026 Senior Secured Notes were issued in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

On February 23, 2021, the Company entered into a third amendment for the line of credit with MSD PCOF Partners IX, LLC ("Revolving Credit Agreement"), increasing the aggregate principal amount to $20.0 million and extending the maturity to February 23, 2024. In May 2021, the Company drew $5.0 million under the Revolving Credit Agreement. The Company used the proceeds to fund the redemption of the Company's Series A and A-2 Preferred Stock.

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

Spectrum

On August 30, 2021, HC2 Broadcasting Holdings Inc. (“Broadcasting”) repurchased $1.0 million of DTV America Corporation's ("DTV") outstanding notes payable to certain institutional investors, of which the debt is now eliminated in consolidation. Also on August 30, 2021, DTV extended its remaining outstanding notes by 60 days.

On October 21, 2021, Broadcasting entered into the Fifth Omnibus Amendment to Secured Notes, Consent and Second Amendment to Asset Sale Under Secured Notes and Intercreditor Agreement (the “Amendment”), which, among other things, extended $52.2 million of its Senior Secured Notes, due October 21, 2021, through November 30, 2022. In addition, Broadcasting completed the last of a series of repurchases of all the outstanding secured and convertible promissory notes, inclusive of accrued interest, of DTV using a combination of cash on hand and proceeds from the sales on non-core assets.

Other

On February 3, 2021, the Company announced that R2 received $10.0 million in funding from Huadong Medicine Company Limited (“Huadong”), a leading publicly traded Chinese pharmaceutical company. Huadong’s investment will be used to fund the launch of R2 Technologies’ first-to-market innovations, Glacial Rx and Glacial Spa. As part of its equity investment in R2, Huadong receives exclusive distribution rights for R2’s products in the China and selected Asia-Pacific markets.

On July 21, 2021, the Company provided an additional $15.0 million in Series C funding to R2 at a post-money valuation of $150.0 million. The investment was made through the Company’s Life Sciences subsidiary, Pansend Life Sciences, LLC.

Stockholders' Rights Agreement

On August 30, 2021, the Company entered into a Tax Benefits Preservation Plan (the "Plan"). The Plan is intended to help protect the Company's ability to use its tax net operating losses and other certain tax assets ("Tax Benefits") by deterring an "ownership change," as defined under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder (the "Code"), by a person or group of affiliated or associated persons from acquiring beneficial ownership of 4.9% or more of the outstanding common shares. See Note 15. Equity for further information.

49

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 year ended December 31, 2021 as compared to the year ended December 31, 2020.

Results of Operations

The following table summarizes our results of operations and a comparison of the change between the periods (in millions):

Years Ended December 31,

Revenue

Life Sciences 3.5 — 3.5

Income (loss) from operations

Non-operating Corporate (23.1) (27.0) 3.9

Loss on early extinguishment or restructuring of debt (12.5) (9.4) (3.1)

Loss from equity investees (2.8) (3.4) 0.6

Loss from continuing operations (80.7) (46.7) (34.0)

Income tax expense (5.6) (7.0) 1.4

Loss from continuing operations (86.3) (53.7) (32.6)

Net loss attributable to INNOVATE Corp. (227.5) (92.0) (135.5)

Less: Preferred dividends, deemed dividends, and repurchase gains 2.2 3.6 (1.4)

Revenue: Revenue for the year ended December 31, 2021 increased $488.3 million to $1,205.2 million from $716.9 million for the year ended December 31, 2020. The increase in revenue was primarily due to the Infrastructure segment, which acquired Banker Steel in the second quarter of 2021, and increases in Infrastructure market demand along with larger projects entering the market.

Income (loss) from operations: Loss from operations for the year ended December 31, 2021 decreased $17.7 million to $10.6 million from a loss of $28.3 million for the year ended December 31, 2020. The decrease in loss from operations was attributable to the Infrastructure segment as a result of the contribution from Banker Steel, which was acquired in the second quarter of 2021 and Non-operating Corporate, driven by non-recurring costs related to the 2020 proxy contest along with additional cost saving measures, and from the Spectrum segment, driven by lower impairments, cost savings and revenue increases. The decrease was partially offset by our Life Sciences segment driven by R2, which increased spending during 2021 to support commercialization efforts, further develop its product platform and build out its sales team.

Interest expense: Interest expense for the year ended December 31, 2021 decreased $15.7 million to $59.1 million from $74.8 million for the year ended December 31, 2020. The decrease was primarily attributable to Non-Corporate's refinancing of the 2021 Senior Secured Notes in the first quarter of 2021 and Spectrum's reduction in debt during the fourth quarter of 2020, which decreased interest expense in 2021.

50

Loss on early extinguishment or restructuring of debt: Loss on early extinguishment or restructuring of debt for the year ended December 31, 2021 increased $3.1 million to $12.5 million from $9.4 million for the year ended December 31, 2020. This was driven by the write-off of deferred financing costs and original issuance discount related to the refinancing of the 2021 Senior Secured Notes and the 2022 Convertible Notes in the first quarter of 2021 along with the refinancing of Infrastructure debt in conjunction with the Banker Steel acquisition in the second quarter of 2021, and was partially offset by the partial pay down of the 2021 Senior Secured Notes in 2020.

Loss from equity investees: Loss from equity investees for the year ended December 31, 2021 decreased $0.6 million to $2.8 million from $3.4 million for the year ended December 31, 2020. The decrease in loss was driven by increase in the equity income in HMN Technologies Co., Ltd. ("HMN"), which produced higher profits in 2021 as compared to 2020, which was generally attributable to the timing of turnkey project work. This was partially offset by increases in losses recorded from our investment in MediBeacon due to the timing of clinical trials and due to the reduction in ownership in the HMN investment from 49% to 19% in the second quarter of 2020.

Other income: Other income for the year ended December 31, 2021 decreased $64.9 million to $4.3 million from $69.2 million for the year ended December 31, 2020. The decrease was predominantly driven by the gain on the sale of a portion of HMN in the comparable period, which closed during the second quarter of 2020.

Income tax expense: Income tax expense was an expense of $5.6 million and $7.0 million for the years ended December 31, 2021 and 2020, respectively. The income tax expense recorded for the year ended December 31, 2021 primarily relates to the tax expense as calculated under ASC 740 for taxpaying entities. The income tax expense for the year ended December 31, 2020 primarily relates to tax expense incurred in China from the partial sale of HMN and the tax expense as calculated under ASC 740 for taxpaying entities which was mostly offset by a tax benefit from the carryback of net operating losses at the Insurance segment as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act.

Segment Results of Operations

In the Company's Consolidated Financial Statements, other operating (income) expense includes (i) (gain) loss on sale or disposal of assets, (ii) lease termination costs, (iii) asset impairment expense, (iv) accretion of asset retirement obligations, and (v) FCC reimbursements. Each table summarizes the results of operations of our operating segments and compares the amount of the change between the periods presented (in millions).

Infrastructure Segment

Years Ended December 31,

Selling, general and administrative 103.5 79.1 24.4

Depreciation and amortization 19.1 10.7 8.4

Other operating expense 0.3 0.1 0.2

Revenue: Revenue from our Infrastructure segment for the year ended December 31, 2021 increased $483.1 million to $1,159.7 million from $676.6 million for the year ended December 31, 2020. The increase was primarily driven by DBMG’s acquisition of Banker Steel, which was acquired in the second quarter of 2021 and contributed an incremental $265.9 million of revenue as well as an increase from all legacy businesses, in each case driven by timing of project work under execution and changes in backlog mix.

Cost of revenue: Cost of revenue from our Infrastructure segment for the year ended December 31, 2021 increased $435.4 million to $1,001.6 million from $566.2 million for the year ended December 31, 2020. The increase was primarily driven by DBMG’s acquisition of Banker Steel, which was acquired in the second quarter of 2021 and contributed an incremental cost of revenue of $220.8 million for the year ended December 31, 2021, as well as increases in market demand, larger projects entering the market which was offset in part by market pressure on point-of-sale project margins across all business lines, and most significantly in our industrials business.

Selling, general and administrative: Selling, general and administrative expense from our Infrastructure segment for the year ended December 31, 2021 increased $24.4 million to $103.5 million from $79.1 million for the year ended December 31, 2020. The increases were primarily driven by the acquisition of Banker Steel, which was acquired in the second quarter of 2021 and contributed an incremental $20.2 million of selling, general and administrative expenses, as well as increases in professional fees, consulting fees, travel, and meals and entertainment.

Depreciation and amortization: Depreciation and amortization from our Infrastructure segment for the year ended December 31, 2021 increased $8.4 million to $19.1 million from $10.7 million for the year ended December 31, 2020. The increase was largely due to the additional amortization and depreciation of assets obtained in the acquisition of Banker Steel in the second quarter of 2021, which contributed an additional $9.1 million of depreciation and amortization expense in 2021. The increase was partially offset by reductions in depreciation and amortization as a result of fully depreciating certain assets in 2020.

51

Life Sciences Segment

Years Ended December 31,

Revenue $ 3.5 $ — $ 3.5

Cost of revenue 2.5 — 2.5

Selling, general and administrative 20.7 16.7 4.0

Depreciation and amortization 0.2 0.1 0.1

Other operating expense — 0.1 (0.1)

Loss from operations $ (19.9) $ (16.9) $ (3.0)

Revenue: Revenue from our Life Sciences segment for the year ended December 31, 2021 increased $3.5 million to $3.5 million from zero for the year ended December 31, 2020. The increase in revenue was attributable to R2, which began the sale of its Glacial Rx products in 2021.

Cost of revenue: Cost of revenue from our Life Sciences segment for the year ended December 31, 2021 increased $2.5 million to $2.5 million from zero for the year ended December 31, 2020. The increase in cost of revenue was attributable to R2, which began the sale of its Glacial Rx products in 2021.

Selling, general and administrative: Selling, general and administrative expenses from our Life Sciences segment for the year ended December 31, 2021 increased $4.0 million to $20.7 million from $16.7 million for the year ended December 31, 2020. The increase was driven by higher expenses at R2, which increased spending from the comparable period as a result of increased headcount across the organization, mainly to build out its sales team.

Spectrum Segment

Years Ended December 31,

Selling, general and administrative 19.1 20.1 (1.0)

Depreciation and amortization 6.0 6.8 (0.8)

Other operating expense (income) 0.3 (6.7) 7.0

Loss from operations $ (0.8) $ (2.2) $ 1.4

Revenue: Revenue from our Spectrum segment for the year ended December 31, 2021 increased $1.7 million to $42.0 million from $40.3 million for the year ended December 31, 2020. The increase was primarily driven by higher station revenues, which can be attributed to the net expansion in our market coverage with new and existing customers and the greater number of OTA stations in operation. This was partially offset by a decrease in revenue from the sale of non-core stations and a decrease in retransmission revenues.

Cost of revenue: Cost of revenue from our Spectrum segment for the year ended December 31, 2021 decreased $4.9 million to $17.4 million from $22.3 million for the year ended December 31, 2020. The overall decrease was primarily driven by targeted cost reductions at Network as a result of a decrease in audience measurement and programming costs as well as a reduction in operating expenses for certain non-core stations that were sold in the second half of 2020 and 2021.

Selling, general and administrative: Selling, general and administrative expense from our Spectrum segment for the year ended December 31, 2021 decreased $1.0 million to $19.1 million from $20.1 million for the year ended December 31, 2020. The overall decrease was primarily driven by decreased salary and benefits, office expenses, consulting fees and no terminated deal costs in the current year. This was partially offset by severance expense incurred during the year and bonus expense in 2020 related to prior year.

Depreciation and amortization: Depreciation and amortization from our Spectrum segment for the year ended December 31, 2021 decreased $0.8 million to $6.0 million from $6.8 million for the year ended December 31, 2020. The decrease in depreciation and amortization was primarily related to recent sales of non-core station assets.

Other operating expense (income): Other operating expense (income) from our Spectrum segment for the year ended December 31, 2021 decreased $7.0 million to expense of $0.3 million from income of $6.7 million for the year ended December 31, 2020. The decrease in other operating expense (income) was primarily related to gains recognized on the sale of stations in 2020 and a reduction in FCC reimbursements during 2021. This was partially offset by fewer asset impairments during 2021.

52

Non-operating Corporate

Years Ended December 31,

Selling, general and administrative $ 23.0 $ 26.9 $ (3.9)

Depreciation and amortization 0.1 0.1 —

Loss from operations $ (23.1) $ (27.0) $ 3.9

Selling, general and administrative: Selling, general and administrative expenses from our Non-operating Corporate segment for the year ended December 31, 2021 decreased $3.9 million to $23.0 million from $26.9 million for the year ended December 31, 2020. The decrease was driven by non-recurring costs related to the proxy contest in 2020 as well as decreases in stock compensation expense, rent expense and various consulting expenses in 2021, partially offset by additional expenses incurred in relation to the settlement with the Company's former CEO, increased discretionary bonus, and legal expenses.

(Loss) Income from Equity Investees

Years Ended December 31,

Life Sciences $ (8.1) $ (6.0) $ (2.1)

Loss from equity investees $ (2.8) $ (3.4) $ 0.6

Life Sciences: Loss from equity investees within our Life Sciences segment for the year ended December 31, 2021 increased $2.1 million to $8.1 million from $6.0 million for the year ended December 31, 2020. The increase in loss was largely due to higher equity method losses recorded from our investment in MediBeacon as they prepare for their pivotal study.

Other: Income from equity investees within our Other segment for the year ended December 31, 2021 increased $2.7 million to $5.3 million from $2.6 million for the year ended December 31, 2020. The increase was driven by the equity investment in HMN, which produced higher income 2021 as compared to 2020, which is generally attributable to the timing of project work, partially offset by a reduction in ownership from 49% to 19% as a result of the partial sale of INNOVATE's investment in the second quarter of 2020.

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-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. Adjusted EBITDA excludes the results of operations and any consolidating eliminations of our Insurance segment.

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) as adjusted for discontinued operations; depreciation and amortization; Other operating (income) expense, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, asset impairment expense and FCC reimbursements; interest expense; other (income) expense, net; loss on early extinguishment or restructuring of debt; income tax (benefit) expense; noncontrolling interest; bonus to be settled in equity; share-based compensation expense; non-recurring items; costs associated with the COVID-19 pandemic; and acquisition and disposition costs.

53

(in millions) Year ended December 31, 2021

Net (loss) attributable to INNOVATE Corp. $ (227.5)

Less: Discontinued operations (149.9)

Adjustments to reconcile net income (loss) to Adjusted EBITDA:

Depreciation and amortization (included in cost of revenue) 12.2 — — — — 12.2

Other operating expenses 0.4 — 0.2 — — 0.6

Other (income) expense, net (4.0) — 3.9 (4.2) — (4.3)

Loss on early extinguishment or restructuring of debt 1.5 — 1.0 10.0 — 12.5

Noncontrolling interest 1.8 (8.2) (2.3) — — (8.7)

Share-based compensation expense — 0.2 0.6 1.6 — 2.4

Nonrecurring items 0.5 — — 0.5 — 1.0

Acquisition and disposition costs 2.4 — 0.9 2.9 0.9 7.1

(in millions) Year ended December 31, 2020

Net (loss) attributable to INNOVATE Corp. $ (92.0)

Less: Discontinued operations (48.4)

Adjustments to reconcile net income (loss) to Adjusted EBITDA:

Depreciation and amortization (included in cost of revenue) 9.1 — — — — 9.1

Other operating (income) expenses 0.1 0.1 (6.6) — — (6.4)

Loss on early extinguishment or restructuring of debt — — — 9.4 — 9.4

Bonus to be settled in equity — — — (0.5) — (0.5)

Share-based compensation expense — 0.2 0.3 2.4 — 2.9

Nonrecurring items 2.7 — — 5.4 — 8.1

Acquisition and disposition costs 0.6 — 0.5 3.9 1.8 6.8

Infrastructure: Net income from our Infrastructure segment for the year ended December 31, 2021 increased $10.1 million to $16.9 million from $6.8 million for the year ended December 31, 2020. Adjusted EBITDA from our Infrastructure segment for the year ended December 31, 2021 increased $15.2 million to $78.4 million from $63.2 million for the year ended December 31, 2020. The increase in Adjusted EBITDA can be attributed to the contribution from Banker Steel, which was acquired in the second quarter of 2021. The increase was partially offset by market pressure on point-of-sale project margins, primarily in the industrials business.

Life Sciences: Net loss from our Life Sciences segment for the year ended December 31, 2021 increased $5.4 million to $19.8 million from $14.4 million for the year ended December 31, 2020. Adjusted EBITDA loss from our Life Sciences segment for the year ended December 31, 2021 increased $5.1 million to $27.6 million from $22.5 million for the year ended December 31, 2020. The increase in Adjusted EBITDA loss was primarily driven by higher expenses at R2, which ramped-up operations to support the commercial launch of its Glacial Rx products, including notable increases in salaries and benefits from headcount additions, including increased commissions for product sales, as well as higher equity method losses recorded from our investment in MediBeacon as they prepare for their pivotal study.

54

Spectrum: Net loss from our Spectrum segment for the year ended December 31, 2021 decreased $0.9 million to $12.9 million from $13.8 million for the year ended December 31, 2020. Adjusted EBITDA from our Spectrum segment for the year ended December 31, 2021 increased $8.1 million to income of $6.9 million from an Adjusted EBITDA loss of $1.2 million for the year ended December 31, 2020. The overall increase in Adjusted EBITDA to income was primarily driven by higher station revenues as Station Group grew the number of operating stations and launched new customers across its broadcast platform, Network cost reductions, a decrease in compensation, rent, consulting and overhead expenses. This was partially offset by severance expense incurred during the year and bonus expense in 2020 related to prior year.

Non-operating Corporate: Net loss from our Non-operating Corporate segment for the year ended December 31, 2021 decreased $26.0 million to $64.2 million from $90.2 million for the year ended December 31, 2020. Adjusted EBITDA loss from our Non-operating Corporate segment for the year ended December 31, 2021 increased $2.4 million to $18.0 million from $15.6 million for the year ended December 31, 2020. The increase in Adjusted EBITDA loss was driven by the settlement with the Company's former CEO, discretionary bonus, increases in severance, and legal fees resulting from an increase in activity in 2021. The Company's remaining selling, general and administrative costs decreased due to lower salary and benefits, professional fees, travel and entertainment expenses, and rent expense.

Other and Eliminations: Net income from our Other and Eliminations segment for the year ended December 31, 2021 decreased $65.6 million to $2.4 million from $68.0 million for the year ended December 31, 2020. Adjusted EBITDA from our Other segment for the year ended December 31, 2021 increased $2.6 million to $4.2 million from $1.6 million for the year ended December 31, 2020. The increase in Adjusted EBITDA for our Other and Eliminations segment was driven by the equity investment in HMN, as it produced higher income than in the comparable period, which is generally attributable to the timing of project work, partially offset by a reduction in ownership from 49% to 19% as a result of the partial sale of INNOVATE's investment in the second quarter of 2020.

(in millions): Year ended December 31,

Non-Operating Corporate (18.0) (15.6) (2.4)

Other and Eliminations 4.2 1.6 2.6

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.

InfrastructureSegment

At December 31, 2021, DBMG's backlog was $1,580.9 million, consisting of $1,439.0 million under contracts or purchase orders and $141.9 million under letters of intent or notices to proceed. Approximately $868.6 million, representing 54.9% of DBMG’s backlog at December 31, 2021, 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 at December 31, 2020 was $394.5 million, consisting of $334.9 million under contracts or purchase orders and $59.6 million under letters of intent or notices to proceeds.

55

Liquidity and Capital Resources

Short- and Long-Term Liquidity Considerations and Risks

Our Non-Operating Corporate segment consists of holding companies, and its liquidity needs are primarily for interest payments on its 2026 Senior Secured Notes, 2022 Convertible Notes and 2026 Convertible Notes, Revolving Credit Agreement, dividend payments on its Preferred Stock and recurring operational expenses.

As of December 31, 2021, the Company had $45.5 million of cash and cash equivalents compared to $43.8 million as of December 31, 2020. On a stand-alone basis, as of December 31, 2021, the Non-Operating Corporate segment had cash and cash equivalents of $22.0 million compared to $27.5 million at December 31, 2020.

Our subsidiaries' principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of steel construction equipment, OTA broadcast station equipment, development of back-office systems, operating costs and expenses, and income taxes.

As of December 31, 2021, the Company had $630.8 million of indebtedness on a consolidated basis compared to $576.6 million as of December 31, 2020. On a stand-alone basis, as of December 31, 2021 and December 31, 2020, INNOVATE had indebtedness of $390.0 million and $410.4 million, respectively.

INNOVATE's stand-alone debt consists of the $330.0 million aggregate principal amount of 2026 Senior Secured Notes, $3.2 million aggregate principal amount of 2022 Convertible Notes, and $51.8 million aggregate principal amount of 2026 Convertible Notes. INNOVATE is required to make semi-annual interest payments on its 2026 Senior Secured Notes, 2022 Convertible Notes and 2026 Convertible Notes, and quarterly interest payments on its 2024 Revolving Credit Agreement.

INNOVATE received $4.5 million in dividends from its Infrastructure segment during the year ended December 31, 2021. Under a tax sharing agreement, the Infrastructure segment reimburses INNOVATE for use of its net operating losses. During the year ended December 31, 2021, INNOVATE received $5.8 million from its Infrastructure segment under this tax sharing agreement.

INNOVATE received $2.1 million in net management fees from Continental Insurance Group prior to its sale during the year ended December 31, 2021.

On May 29, 2021, pursuant to the Certificate of Designation, certain holders of the Series A and A-2 Preferred Stock caused the Company to redeem the Series A and A-2 Preferred Stock at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Series A and A-2 Preferred Stock), of which $10.4 million was paid in cash to holders of the Series A and A-2 Preferred Stock. Each share of Series A and A-2 Preferred Stock that was not so redeemed was automatically converted into shares of common stock at the conversion price then in effect, of which 50,410 shares of the Company's common stock were issued in lieu of cash to holders of the Series A Preferred Stock.

In connection with the Stock Purchase Agreement, CGI, formerly a wholly owned subsidiary of the Company, entered into a letter agreement with Continental General Holdings, LLC to not redeem at maturity or seek redemption of the $16.1 million Preferred Stock. On July 1, 2021, CGI exchanged their Series A and Series A-2 Preferred Stock for new classes of Series A-3 and Series A-4 Preferred Stock with an extended maturity of July 1, 2026, with other terms substantially unchanged from the terms of the Series A and Series A-2 Preferred Stock.

INNOVATE is required to make dividend payments on its outstanding Preferred Stock on January 15th, April 15th, July 15th, and October 15th of each year.

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, capital lease financing and other financing arrangements, as well as cash generated from the operations of our subsidiaries. In the future, we may also choose to sell assets or certain investments to generate cash.

56

At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations (such as debt service and operating leases) and other cash needs for our operations for at least the next twelve months from the issuance of the Consolidated Financial Statements through a combination of available cash and distributions from our subsidiaries. The ability of INNOVATE’s subsidiaries to make distributions to INNOVATE is subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, regulatory requirements, availability of sufficient funds at each subsidiary and the approval of such payment by each subsidiary’s board of directors, which must consider various factors, including general economic and business conditions, tax considerations, strategic plans, financial results and condition, expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends, and such other factors each subsidiary’s board of directors considers relevant. Although the Company believes, to the extent needed, that it will be able to raise additional equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds on hand or expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company, if at all. Such financing options, if pursued, may also ultimately have the effect of negatively impacting our liquidity profile and prospects over the long-term. Our ability to sell assets and certain of our investments to meet our existing financing needs may also be limited by our existing financing instruments. In addition, the sale of assets or the Company’s investments may also make the Company less attractive to potential investors or future financing partners.

In September 2018, the Company entered into a 75-month lease for office space. As part of the agreement, INNOVATE was able to pay a lower security deposit and lease payments, and received favorable lease terms as consideration for landlord required cross default language in the event of default of the shared space leased by Harbinger Capital Partners, formerly a related party, in the same building. With the adoption of ASC 842, as of January 1, 2019, this lease was recognized as a right of use asset and lease liability on the Consolidated Balance Sheets.

In November 2021, the Company entered into a ten-year lease agreement for a special purpose space in West Palm Beach, Florida. The new lease has not yet commenced, but will require future monthly lease payments of approximately $0.2 million over the entire lease term and yearly common area maintenance charges of $0.6 million, both of which are subject to a 3% annual upward adjustments, with total square footage of 20,950. The new lease also provides for the Company to receive an allowance, from the Landlord, of $2.1 million to be used toward costs to design, engineer, install, supply and to construct improvements which is payable at the end of the lease. The future lease payments and the allowance are not yet recorded on our consolidated balance sheet. We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin no later than November 2023.

Also in November 2021, the Company entered into a three-year lease agreement for office space in West Palm Beach, Florida. The lease commencement date was November 15, 2021, and requires monthly lease payments of approximately $12.5 thousand over the entire lease term, subject to a 3% annual upward adjustment, with total square footage of 2,723. The future lease payments and corresponding right of use asset of $0.4 million were recorded on our consolidated balance sheet as a lease liability.

In December 2021, the Company entered into a five-year lease agreement with an option to extend the lease for another five years for office space in West Palm Beach, Florida. The new lease has not commenced yet, but will require future monthly lease payments of approximately $0.14 million over the entire lease term, subject to a 3% annual upward adjustment, with total square footage of 15,786. The future lease payments are not yet recorded on our consolidated balance sheet, as the building is still under construction. We expect the accounting lease commencement date for this initial portion of the lease for financial reporting purposes to begin in the fourth quarter of 2023.

DBMG’s off-balance sheet arrangements at December 31, 2021 included letters of credit of $13.5 million under Credit and Security Agreements and performance bonds of $900.8 million. DBMG’s contract arrangements with customers sometimes require DBMG to provide performance bonds to partially secure its obligations under its contracts. Bonding requirements typically arise in connection with private contracts and sometimes with respect to certain public work projects. DBMG’s performance bonds are obtained through surety companies and typically cover the entire project price.

COVID-19 Expenditures

We have seen significant cost increases, primarily at our Infrastructure segment, driven by expenses associated with maintaining a safe work environment, and while executing on its projects. During the years ended December 31, 2021 and 2020, $8.6 million and $19.4 million of COVID-19 costs were incurred. Although the COVID-19 pandemic did not have a material impact on INNOVATE’s liquidity for the year ended December 31, 2021, management believes the continuation of the pandemic and its related effect on the U.S. and global economies could introduce added pressure on the Company’s liquidity position and financial performance. Our sources of liquidity are primarily from the dividends and tax sharing agreement with DBMG, cash proceeds from completed and anticipated monetization’s and other arrangements.

57

Capital Expenditures

Capital expenditures for the periods ended December 31, 2021 and 2020 are set forth in the table below (in millions):

Years Ended December 31,

Infrastructure $ 18.3 $ 5.7

Life Sciences 0.5 0.1

Non-operating Corporate — 0.2

Indebtedness

Non-Operating Corporate

2026 Senior Secured Notes Terms and Conditions

Maturity. The 2026 Senior Secured Notes mature on February 1, 2026.

Interest. The 2026 Senior Secured Notes accrue interest at a rate of 8.50% per year. Interest on the 2026 Senior Secured Notes is paid semi-annually on February 1 and August 1 of each year.

Issue Price. The issue price of the 2026 Senior Secured Notes was 100% of par.

Ranking. The notes and the note guarantees are the Company’s and certain of its direct and indirect domestic subsidiaries’ (the "Subsidiary Guarantors") general senior secured obligations. The notes and the note guarantees will rank: (i) senior in right of payment to all of the Company’s and the Subsidiary Guarantors’ future subordinated debt; (ii) equal in right of payment, subject to the priority of any First-Out Obligations (as defined in the Secured Indenture), with all of the Company’s and the Subsidiary Guarantors’ existing and future senior debt and effectively senior to all of its and the Subsidiary Guarantor’s unsecured debt to the extent of the value of the collateral; and (iii) effectively subordinated to all liabilities of its non-guarantor subsidiaries. The notes and the note guarantees are secured on a first-priority basis by substantially all of the Company’s assets and the assets of the Subsidiary Guarantors, subject to certain exceptions and permitted liens.

Collateral. The 2026 Senior Secured Notes are secured by a first priority lien on substantially all of the Company’s assets (except for certain "Excluded Assets," and subject to certain "Permitted Liens," each as defined in the Secured Indenture), including, without limitation:

•all equity interests owned by the Company or a Subsidiary Guarantor (which, in the case of any equity interest in a foreign subsidiary, will be limited to 100% of the non-voting stock (if any) and 65% of the voting stock of such foreign subsidiary) and the related rights and privileges associated therewith (but excluding Equity Interests of Insurance Subsidiaries (as defined in the Secured Indenture), to the extent the pledge thereof is deemed a "change of control" under applicable insurance regulations);

•all equipment, goods and inventory owned by the Company or a Subsidiary Guarantor;

•all cash and investment securities owned by the Company or a Subsidiary Guarantor;

•all documents, books and records, instruments and chattel paper owned by the Company or a Subsidiary Guarantor;

•all general intangibles owned by the Company or a Subsidiary Guarantor; and

•any proceeds and supporting obligations thereof.

The Secured Indenture permits the Company, under specified circumstances, to incur additional debt in the future that could equally and ratably share in the collateral. The amount of such debt is limited by the covenants contained in the Secured Indenture.

Events of Default. The Secured Indenture contains customary events of default which could, subject to certain conditions, cause the 2026 Senior Secured Notes to become immediately due and payable.

58

2022 Convertible Notes Terms and Conditions

Maturity. The 2022 Convertible Notes mature on June 1, 2022 unless earlier converted, redeemed or purchased.

Interest. The 2022 Convertible Notes accrue interest at a rate of 7.5% per year. Interest on the 2022 Convertible Notes is paid semi-annually on December 1 and June 1 of each year.

Issue Price. The issue price of the Convertible Notes was 100% of par.

Ranking. The notes are the Company’s general unsecured and unsubordinated obligations and will rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness, and senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the notes. The notes will be effectively subordinated to all of the Company’s existing and future secured indebtedness, including the Company’s Secured Notes, to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries, including trade credit.

Optional Redemption. The Company could not redeem the notes prior to June 1, 2020. From or after June 1, 2020, the Company may redeem for cash all of the notes if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (which need not be consecutive trading days) during any 30 consecutive trading-day period ending within five trading days prior to the date on which the Company provides notice of redemption. The redemption price will equal 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

Conversion Rights. The 2022 Convertible Notes are convertible into shares of the Company’s common stock based on a conversion rate of 234.2971 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $4.27 per share of the Company’s common stock), at any time prior to the close of business on the business day immediately preceding the maturity date, in principal amounts of $1,000 or an integral multiple of $1,000 in excess thereof. In addition, following a Make-Whole Fundamental Change (as defined in the indenture governing the 2022 Convertible Notes) or the Company’s delivery of a notice of redemption for the 2022 Convertible Notes, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with (i) such Make-Whole Fundamental Change or (ii) such notice of redemption. However, to comply with certain listing standards of The New York Stock Exchange, the Company will settle in cash its obligation to increase the conversion rate in connection with a Make-Whole Fundamental Change or redemption until it has obtained the requisite stockholder approval.

Events of Default. The indenture governing the 2022 Convertible Notes contains customary events of default which could, subject to certain conditions, cause the 2022 Convertible Notes to become immediately due and payable.

2026 Convertible Notes Terms and Conditions

Maturity. The 2026 Convertible Notes mature on August 1, 2026 unless earlier converted, redeemed or purchased.

Interest. The 2026 Convertible Notes accrue interest at a rate of 7.5% per year. Interest on the 2026 Convertible Notes is paid semi-annually on February 1 and August 1 of each year.

Issue Price. The issue price of the 2026 Convertible Notes was 100% of par.

Ranking. The notes are the Company’s general unsecured and unsubordinated obligations and will rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness, and senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the notes. The notes will be effectively subordinated to all of the Company’s existing and future secured indebtedness, including the Company’s 2026 Senior Secured Notes, to the extent of the value of the collateral securing that indebtedness, and structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries, including trade credit.

Optional Redemption. The Company may not redeem the notes prior to August 1, 2023. On or after August 1, 2023, the Company may redeem for cash all of the notes if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (which need not be consecutive trading days) during any 30 consecutive trading-day period ending within five trading days prior to the date on which the Company provides notice of redemption. The redemption price will equal 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date.

59

Conversion Rights. The 2026 Convertible Notes are convertible into shares of the Company’s common stock based on an initial conversion rate of 234.2971 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $4.27 per share of the Company’s common stock), at any time prior to the close of business on the business day immediately preceding the maturity date, in principal amounts of $1,000 or an integral multiple of $1,000 in excess thereof. In addition, following a Make-Whole Fundamental Change (as defined in the Convertible Indenture) or the Company’s delivery of a notice of redemption for the 2026 Convertible Notes, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2026 Convertible Notes in connection with (i) such Make-Whole Fundamental Change or (ii) such notice of redemption. However, to comply with certain listing standards of The New York Stock Exchange, the Company will settle in cash its obligation to increase the conversion rate in connection with a Make-Whole Fundamental Change or redemption until it has obtained the requisite stockholder approval.

Events of Default. The Convertible Indenture contains customary events of default which could, subject to certain conditions, cause the Convertible Notes to become immediately due and payable.

Revolving Credit Agreement

Lender. MSD PCOF Partners IX, LLC (“MSD”)

Maturity: The Revolving Credit Agreement has a maturity date of February 23, 2024.

Ranking. Obligations under the Revolving Credit Agreement constitute a First-Out Debt, as defined in the Secured Indenture, and are secured on a pari passu basis with the 2026 Senior Secured Notes.

Collateral: As provided under a Collateral Trust Joinder, the lender was added as a secured party to the Collateral Trust Agreement, and accordingly the pari passu obligations and commitments under the Revolving Credit Agreement are secured equally and ratably by the collateral of the Secured Notes.

Infrastructure

The UMB Term Loan and UMB Revolving Line associated with our Infrastructure segment contains customary restrictive and financial covenants related to debt levels and performance. As of December 31, 2021, DBMG was in compliance with all of the financial covenants to its debt agreements.

See Note 9. Debt Obligations to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional details regarding the Company's indebtedness.

Restrictive Covenants

The indenture governing the 2026 Senior Secured Notes dated February 1, 2021, by and among INNOVATE, the guarantors party thereto and U.S. Bank National Association, a national banking association, as trustee (the "Secured 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; engage in sale-leaseback transactions; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in 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 Company is also required to comply with certain financial maintenance covenants, which are similarly subject to a number of important exceptions and qualifications. These covenants include maintenance of (1) liquidity and (2) collateral coverage.

The maintenance of liquidity covenant provides that the Company will not permit the aggregate amount of (i) all unrestricted cash and Cash Equivalents of the Company and the Subsidiary Guarantors, (ii) amounts available for drawing under revolving credit facilities and undrawn letters of credit of the Company and the Subsidiary Guarantors and (iii) dividends, distributions or payments that are immediately available to be paid to the Company by any of its Restricted Subsidiaries to be less than the Company’s obligation to pay interest on the 2026 Senior Secured Notes and all other Debt, including Convertible Preferred Stock mandatory cash dividends or any other mandatory cash pay Preferred Stock but excluding any obligation to pay interest on Convertible Preferred Stock or any other mandatory cash pay Preferred Stock which, in each case, may be paid by accretion or in-kind in accordance with its terms of the Company and its Subsidiary Guarantors for the next six months. As of December 31, 2021, the Company was in compliance with this covenant.

The maintenance of collateral coverage provides that the certain subsidiaries' Collateral Coverage Ratio (as defined in the Secured Indenture as the ratio of (i) the Loan Collateral to (ii) Consolidated Secured Debt (each as defined therein)) calculated on a pro forma basis as of the last day of each fiscal quarter may not be less than 1.50 to 1.00. As of December 31, 2021, the Company was in compliance with this covenant.

The instruments governing the Company’s Preferred Stock also limit the Company’s and its subsidiaries ability to take certain actions, including, among other things, to incur additional indebtedness; issue additional Preferred Stock; engage in transactions with affiliates; and make certain restricted payments. These limitations are subject to a number of important exceptions and qualifications.

60

The Company conducted its operations in a manner that resulted in compliance with the Secured Indenture; however, compliance with certain financial covenants for future periods may depend on the Company or one or more of the Company’s subsidiaries undertaking one or more non-operational transactions, such as the management of operating cash outflows, a monetization of assets, a debt incurrence or refinancing, the raising of equity capital, or similar transactions. If the Company is unable to remain in compliance and does not make alternate arrangements, an event of default would occur under the Company’s Secured Indenture which, among other remedies, could result in the outstanding obligations under the indenture becoming immediately due and payable and permitting the exercise of remedies with respect to the collateral. There is no assurance the Company will be able to complete any non-operational transaction it may undertake to maintain compliance with covenants under the Secured Indenture or, even if the Company completes any such transaction, that it will be able to maintain compliance for any subsequent period.

Summary of Consolidated Cash Flows

The below table summarizes the cash provided or used in our activities and the amount of the respective changes between the periods (in millions):

Years Ended December 31, Increase / (Decrease)

Cash used in continuing operating activities $ (6.5) $ (55.2) $ 48.7

Cash provided by discontinued operating activities 33.5 96.3 (62.8)

Cash provided by operating activities 27.0 41.1 (14.1)

Cash (used in) provided by continuing investing activities (1.9) 261.9 (263.8)

Cash used in discontinued investing activities (221.3) (99.8) (121.5)

Cash (used in) provided by investing activities (223.2) 162.1 (385.3)

Cash provided by (used in) continuing financing activities 11.9 (182.5) 194.4

Cash used in discontinued financing activities (7.6) (22.0) 14.4

Cash provided by (used in) financing activities 4.3 (204.5) 208.8

Effect of exchange rate changes on cash and cash equivalents (1.3) 1.1 (2.4)

Net change in cash, cash equivalents and restricted cash $ 2.2 $ 20.6 $ (18.4)

Operating Activities

Cash used in operating activities was $6.5 million for the year ended December 31, 2021 as compared to cash used in operating activities of $55.2 million for the year ended December 31, 2020. The $48.7 million change was primarily related to driven by favorable working capital movements in Non-Operating Corporate due to the change in timing of our interest payments on our Senior Secured Notes and 2026 Convertible Notes, the settlement of the DBMG class action suit in 2020, and lower operating expenses at Non-Operating Corporate. Additionally, Infrastructure had higher operating profits, which were partially offset by negative working capital movements, as well as R2, which had a decrease in working capital driven by a ramp up of expenses related to its product launch.

Investing Activities

Cash used by investing activities was $1.9 million for the year ended December 31, 2021 as compared to cash provided by investing activities of $261.9 million for the year ended December 31, 2020. The $263.8 million change was due to the acquisition of Banker Steel at our Infrastructure segment in the second quarter of 2021 and less proceeds from the sale of subsidiaries. Beyond6 was sold in first quarter of 2021 for net proceeds of $70.0 million and the cash portion of our Insurance segment was sold in the third quarter for $64.7 million compared to GMSL sold in the prior year for net proceeds of $144.0 million and the partial sale of the HMN joint venture in the prior year.

Financing Activities

Cash provided by financing activities was $11.9 million for the year ended December 31, 2021 as compared to cash used in financing activities of $182.5 million for the year ended December 31, 2020. The $194.4 million change was primarily due to an increase at Infrastructure to purchase Banker Steel in the second quarter of 2021 and higher debt repayments in 2020, mostly from proceeds received from asset sales and non-controlling interest distributions attributable to prior year asset sales.

61

Discontinued Operations

Cash used by discontinued operations was $195.4 million for the year ended December 31, 2021 as compared to cash used by discontinued operations of $20.5 million for the year ended December 31, 2020. The $169.9 million decrease was largely due to a decline in net investment purchases at our Insurance segment compared to the prior year.

Reclassifications

Certain 2021 statement of cash flow items have been reclassified to conform to the current financial statement presentation. These reclassifications have no effect on previously reported net income.

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 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 existing borrowing availability together with cash from operations will be adequate to meet all funding requirements for its operating expenses, interest payments on debt and capital expenditures for the foreseeable future.

DBMG is required to make monthly or quarterly interest payments on all of its debt. Based upon the December 31, 2021 debt balance, DBMG anticipates that its interest payments will be approximately $1.8 million each quarter of 2022.

DBMG believes that its available funds, cash generated by operating activities and funds available under its bank credit facilities will be sufficient to fund its capital expenditures and its working capital needs. However, DBMG may expand its operations through future acquisitions and may require additional equity or debt financing.

Discontinued Operations

We have reclassified several entities as discontinued operations for the years ended December 31, 2021 and 2020. Accordingly, revenue, costs, and expenses of the discontinued operations have been excluded from continuing operations. The entities reported in discontinued operations are as follows:

•The sale of GMSL closed on February 28, 2020. At the time of the sale, the Company recorded a $39.3 million loss on the sale and recognized $31.3 million Accumulated other comprehensive loss. During the fourth quarter of 2020, the Company recognized a gain of $2.4 million as a result of bonding releases related to projects which existed prior to sale. During the first quarter of 2021, the Company recognized a gain of $1.2 million as a result of indemnity release.

•The sale of ICS and its subsidiary, Go2 Tel, Inc., closed on October 31, 2020. The Company recorded a $0.9 million gain on the sale and recognized $8.2 million of Accumulated other comprehensive loss related to the foreign currency translation of PTGi International Carrier Services Ltd., which was essentially liquidated in conjunction with the sale. The proceeds were used for general corporate purposes.

•On December 31, 2020, the Company signed the Merger Agreement to sell Beyond6. The sale closed on January 15, 2021. During the first quarter of 2021, the Company recognized a $39.2 million gain on the sale. During the third quarter of 2021, as a result of releases of related escrows and holdbacks, the Company recognized an additional $0.5 million gain on the sale.

•The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of December 31, 2021, a beneficial owner of approximately 6.6% of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020. The Company recorded a $200.8 million loss on the sale.

Cash flows from discontinued operations are reported in the Statement of Cash Flows as a separate line item within the Operations, Investing and Financing activities sections for each year presented.

In the absence of cash flows from the discontinued operations, the Company does not expect there to be an impact on liquidity at the Company.

62

New Accounting Pronouncements

For a discussion of our New Accounting Pronouncements, refer to Note 2. Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. GAAP requires the use of estimates and assumptions that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental disclosures including information about contingencies, risk and financial condition.

Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and potentially yield materially different results under different assumptions or conditions. Given current facts and circumstances, we believe that our estimates and assumptions are reasonable, adhere to GAAP and are consistently applied. Our selection and disclosure of our critical accounting policies and estimates has been reviewed with our Audit Committee. Following is a review of the more significant assumptions and estimates and the accounting policies and methods used in the preparation of our consolidated financial statements. For all of these estimates, we caution that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment. Refer to Note 2. Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K which discusses the significant accounting policies that we have adopted.

Revenue Recognition - Estimated Costs to Complete

With respect to our Infrastructure segment (DBM Global Inc.), we recognize a significant portion of our revenue over time using the input method to measure the progress of costs incurred for our service and construction contracts. DBM Global Inc. performs its services primarily under fixed-price contracts and recognizes revenue over time using the input method to measure progress for its projects. The nature of the projects does not provide measurable value to the customer over time and control does not transfer to the customer at discrete points in time. The customer receives value over the term of the project based on the amount of work that has been completed towards the delivery of the completed project. The most reliable measure of progress is the cost incurred towards delivery of the completed project. Therefore, the input method provides the most reliable method to measure progress. Revenue recognition begins when work has commenced. Costs include all direct material and labor costs related to contract performance, subcontractor costs, indirect labor, and fabrication plant overhead costs, which are charged to contract costs as incurred. Revenues relating to changes in the scope of a contract are recognized when we and a customer or general contractor have agreed on both the scope and price of changes, the work has commenced, it is probable that the costs of the changes will be recovered and that realization of revenue exceeding the costs is assured beyond a reasonable doubt. Revisions in estimates during the course of contract work are reflected in the accounting period in which the facts requiring the revision become known. Provisions for estimated losses on uncompleted contracts are made in the period a loss on a contract becomes determinable.

Convertible Instruments

We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities. Applicable U.S. Generally Accepted Accounting Principals ("GAAP") requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. We account for convertible instruments, when it has been determined that the embedded conversion options should not be bifurcated from their host instruments, as follows: we record, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. We account for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

Share-Based Compensation

We account for share-based compensation issued to employees in accordance with the provisions of ASC 718 and to non-employees pursuant to ASC 505-50, Equity-based payments to non-employees. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for using a fair-value based method. We record share-based compensation expense for all new and unvested stock options that are ultimately expected to vest as the requisite service is rendered. We issue new shares of common stock upon the exercise of stock options.

63

We use a Black-Scholes option valuation model to determine the grant date fair value of share-based compensation under ASC 718. The Black-Scholes model incorporates various assumptions including the expected term of awards, volatility of stock price, risk-free rates of return and dividend yield. The expected term of an award is no less than the option vesting period and is based on our historical experience. Expected volatility is based upon the historical volatility of our stock price. The risk-free interest rate is approximated using rates available on U.S. Treasury securities with a remaining term similar to the option’s expected life. We use a dividend yield of zero in the Black-Scholes option valuation model as it does not anticipate paying cash dividends in the foreseeable future. Share-based compensation is recorded net of actual forfeitures.

Income Taxes

Our annual tax rate is based on our income, statutory tax rates, exchange rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties under ASC No. 740, “Income Taxes” (“ASC 740”).

We review our tax positions quarterly and adjust the balances as new information becomes available. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. To provide insight, we use our historical experience and our short and long-range business forecasts. We believe it is more likely than not that a portion of the deferred income tax assets may expire unused and have established a valuation allowance against them. Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not the deferred tax assets will be fully recoverable within the applicable statutory expiration periods. However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced.

We recognize deferred tax assets and liabilities for the expected future tax consequences of transactions and events. Under this method, deferred tax assets and liabilities are determined based on the difference between the book basis and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. If necessary, deferred tax assets are reduced by a valuation allowance to an amount that is determined to be more likely than not recoverable. We must make significant estimates and assumptions about future taxable income and future tax consequences when determining the amount of the valuation allowance. The additional guidance provided by ASC 740, clarifies the accounting for uncertainty in income taxes recognized in the financial statements. Expected outcomes of current or anticipated tax examinations, refund claims and tax-related litigation and estimates regarding additional tax liability (including interest and penalties thereon) or refunds resulting therefrom will be recorded based on the guidance provided by ASC 740 to the extent applicable.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. These assessments of uncertain tax positions contain judgments related to the interpretation of tax regulations in the jurisdictions in which we transact business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, expiration of statutes of limitations, as well as changes to, or further interpretations of, tax laws and regulations.

In relation to tax effects for accumulated OCI, our policy is to release the tax effects of amounts reclassified from accumulated OCI to pre-tax income (loss) from continuing operations. Any remaining tax effect in accumulated OCI is released following a portfolio approach.

See Note 12. Income Taxes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.

Goodwill and Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized but, rather, are tested at least annually for impairment, or more often if events or changes in circumstances indicate that more likely than not the carrying amount of the asset may not be recoverable. Goodwill is tested for impairment at the reporting unit level. A reporting unit represents an operating segment or a component of an operating segment. Goodwill is tested for impairment by either performing a qualitative evaluation or a two-step quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

We may elect not to perform the qualitative assessment for some or all reporting units and perform a two-step quantitative impairment test. Fair value is determined based on discounted cash flow analyses. The discounted estimates of future cash flows include significant management assumptions such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired. The amount of the impairment is the difference between the carrying value of the goodwill and the "implied" fair value, which is calculated as if the reporting unit had just been acquired and accounted for as a business combination.

The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions, and cost of capital. Inherent in estimating the future cash flows are

64

uncertainties beyond our control, such as capital markets. The actual cash flows could differ materially from management's estimates due to changes in business conditions, operating performance, and economic conditions.

Refer to Note 8. Goodwill and Intangibles, net, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on goodwill and intangible assets.

Refer to Note 2. Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on New Accounting Pronouncements to be Adopted Subsequent to December 31, 2021.

Related Party Transactions

For a discussion of our Related Party Transactions, refer to Note 16. Related Partiesto our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K 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 the integration of financial reporting of acquired or target businesses with INNOVATE or the applicable subsidiary of INNOVATE, completing future acquisitions and dispositions, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes.

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

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 this Annual Report on Form 10-K 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:

•the effect of the novel coronavirus (“COVID-19”) pandemic and related governmental responses on our business, financial condition and results of operations;

•the impact of recent supply chain disruptions, labor shortages and increases in transportation costs;

•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 possible inability to generate sufficient liquidity, margins, earnings per share, cash flow and working capital from our operating segments;

•the impact of catastrophic events, including natural disasters, pandemic illness and the outbreak of war or acts of terrorism;

•our dependence on distributions from our subsidiaries to fund our operations and payments on our obligations;

•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 Indenture governing INNOVATE’s new notes, the Certificates of Designation governing INNOVATE’s Preferred Stock and all other subsidiary debt obligations as summarized in Note 9. Debt Obligations and future financing agreements on our ability to operate our business and finance our pursuit of acquisition opportunities;

•our dependence on certain key personnel;

•uncertain global economic conditions in the markets in which our operating segments conduct their businesses;

65

•the ability of our operating segments to attract and retain customers;

•increased competition in the markets in which our operating segments conduct their businesses;

•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;

•the impact of additional material charges associated with our oversight of acquired or target businesses and the integration of our financial reporting;

•the impact of expending significant resources in considering acquisition targets or business opportunities that are not consummated;

•our expectations and timing with respect to our ordinary course acquisition activity and whether such acquisitions are accretive or dilutive to stockholders;

•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;

•tax consequences associated with our acquisition, holding and disposition of target companies and assets;

•the effect any interests our officers, directors, stockholders and their respective affiliates may have in certain transactions in which we are involved;

•our ability to effectively increase the size of our organization, if needed, and manage our growth;

•the potential for, and our ability to, remediate future material weaknesses in our internal controls over financial reporting;

•our possible inability to raise additional capital when needed or refinance our existing debt, on attractive terms, or at all; and

•our possible inability to hire and retain qualified executive management, sales, technical and other personnel.

Infrastructure / DBM Global Inc.

Our actual results or other outcomes of DBM Global, Inc. and its wholly-owned subsidiaries ("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:

•our ability to maintain efficient staffing and productivity as well as delays and cancellations as a result of the COVID-19 pandemic;

•its ability to realize cost savings from expected performance of contracts, whether as a result of improper estimates, performance, or otherwise;

•potential impediments and limitations on our ability to complete ordinary course acquisitions in anticipated time frames or at all;

•uncertain timing and funding of new contract awards, as well as project cancellations;

•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;

•risks associated with labor productivity, including performance of subcontractors that DBMG hires to complete projects;

•its ability to settle or negotiate unapproved change orders and claims;

•changes in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;

•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;

•fluctuating revenue resulting from a number of factors, including the cyclical nature of the individual markets in which our customers operate;

•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; 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;

•our Life Sciences segment’s ability to develop products and treatments related to its portfolio companies;

•medical advances in healthcare and biotechnology; and

•governmental regulation in the healthcare industry.

66

Spectrum / HC2 Broadcasting Holdings Inc.

Our actual results or other outcomes of Broadcasting, and, thus, our Spectrum 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 ability to attract advertisers during the COVID-19 pandemic;

•our Spectrum segment’s ability to operate in highly competitive markets and maintain market share;

•our Spectrum segment’s ability to effectively implement its business strategy or be successful in the operation of its business;

•new and growing sources of competition in the broadcasting industry; and

•FCC regulation of the television broadcasting industry.

Other

Our actual results or other outcomes of our Other 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:

•risks associated with our equity method investment that operates in China (i.e., HMN International Co., Ltd F/K/A Huawei Marine Systems Co. Limited, a Hong Kong holding company with a Chinese operating subsidiary), including the exercisability of New Saxon 2019 Ltd.'s put option pertaining to its 19% interest in HMN starting on the second year anniversary of the closing date of the First HMN Close.

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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The report of the independent registered public accounting firm and financial statements listed in the accompanying index are included in Item 15 of this report. See Index to the consolidated financial statements on page F-1 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our 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 Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, 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.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of its financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting described below was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

67

As permitted by SEC guidance, management excluded from its assessment the operations of the Banker Steel acquisition made during 2021, which is described in Note 5. Acquisitions, Dispositions, and Deconsolidations to our Consolidated Financial Statements included in this Annual Report. Banker Steel constituted 26.6% and 270.1% of total assets and net assets, respectively, as of December 31, 2021, and 22.4% and 6.1% of revenues and net income (loss), respectively, for the year ended December 31, 2021. As of December 31, 2021, we were in the process of integrating Banker Steel's operations, including internal controls over financial reporting. Such exclusion was in accordance with the SEC guidance that an assessment of a recently acquired business may be omitted in management’s report on internal controls over financial reporting, providing the acquisition took place within twelve months of management’s evaluation.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. This assessment was based on updated criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission Internal Control-Integrated Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.

Auditor Attestation Report

Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting, which is on page F-5 of this report.

Changes in Internal Control over Financial Reporting

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

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III

The information required by Part III will be provided in our definitive proxy statement for our 2022 annual meeting of stockholders ("2022 Proxy Statement"), which is incorporated herein by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding this item will be set forth in our 2022 Proxy Statement and is incorporated herein by reference.

Code of Conduct

We have adopted a Code of Conduct applicable to all directors, officers and employees, including the Chief Executive Officer, senior financial officers and other persons performing similar functions. The Code of Conduct is a statement of business practices and principles of behavior that support our commitment to conducting business in accordance with the highest standards of business conduct and ethics. Our Code of Conduct covers, among other things, compliance resources, conflicts of interest, compliance with laws, rules and regulations, internal reporting of violations and accountability for adherence to the Code of Conduct. A copy of the Code of Conduct is available under the "Investor Relations-Corporate Governance" section of our website at www.innovatecorp.com. Any amendment of the Code of Conduct or any waiver of its provisions for a director or executive officer must be approved by the Board or a duly authorized committee thereof. We intend to post on our website all disclosures that are required by law or the rules of the NYSE concerning any amendments to, or waivers from, any provision of the Code of Conduct.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding this item will be set forth in our 2022 Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding this item will be set forth in our 2022 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information regarding this item will be set forth in our 2022 Proxy Statement and is incorporated herein by reference.

68

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services will be set forth in our 2022 Proxy Statement and is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of Documents Filed

1) Financial Statements and Schedules

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

(b) Exhibit Index

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

ExhibitNumber Description

69

70

71

10.35^ 2019 INNOVATE Corp. Executive Bonus Plan (filed herewith).

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

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

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

21.1 Subsidiaries of INNOVATE (filed herewith).

72

^ Indicates management contract or compensatory plan or arrangement.

ITEM 16. FORM 10-K SUMMARY

None.

73

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/ WAYNE BARR, JR.

POWER OF ATTORNEY

Each of the officers and directors of INNOVATE Corp., whose signature appears below, in so signing, also makes, constitutes and appoints each of Wayne Barr, Jr. and Michael J. Sena, and each of them, his true and lawful attorneys-in-fact, with full power and substitution, for him in any and all capacities, to execute and cause to be filed with the SEC any and all amendments to this Annual Report on Form 10-K, with exhibits thereto and other documents connected therewith and to perform any acts necessary to be done in order to file such documents, and hereby ratifies and confirms all that said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

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

Signature Title Date

Wayne Barr, Jr.

Michael J. Sena

/S/ KENNETH S. COURTIS Director March 9, 2022

Kenneth S. Courtis

/S/ WARREN H. GFELLER Director March 9, 2022

Warren H. Gfeller

/S/ AVRAM A. GLAZER Director March 9, 2022

Avram A. Glazer

/S/ MICHAEL GORZYNSKI Director March 9, 2022

Michael Gorzynski

/S/ SHELLY LOMBARD Director March 9, 2022

Shelly Lombard

74

INNOVATE CORP.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-9

Notes to Consolidated Financial Statements F-12

(1) Organization and Business F-12

(2) Summary of Significant Accounting Policies F-13

(3) Discontinued Operations F-22

(4) Revenue F-24

(5) Acquisitions, Dispositions, and Deconsolidations F-29

(6) Accounts Receivable, net F-33

(7) Property, Plant and Equipment, net F-33

(8) Goodwill and Intangible Assets F-33

(9) Debt Obligations F-36

(10) Supplementary Financial Information F-41

(12) Income Taxes F-46

(13) Commitments and Contingencies F-46

(14) Share-based Compensation F-51

(16) Related Parties F-58

(17) Operating Segment and Related Information F-58

(18) Basic and Diluted Income (Loss) Per Common Share F-60

(19) Subsequent Events F-61

F-1

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

INNOVATE Corp.

New York, NY

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of INNOVATE Corp. (the “Company”) and subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 9, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition - Estimated Costs to Complete

As described in Note 4 to the consolidated financial statements, with respect to the Company's Infrastructure segment (DBM Global Inc.), the Company recognizes a significant portion of its revenue over time using the input method to measure the progress of costs incurred for its service and construction contracts. The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, engineers and financial professionals. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition.

F-2

We identified estimated costs to complete on specific revenue contracts as a critical audit matter. The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. Total estimated costs to complete projects include various costs such as direct material, labor, subcontract costs, indirect labor, and fabrication plant overhead costs. Changes in these estimates can have a significant impact on the revenue recognized each period. Auditing these elements involved especially challenging auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.

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

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

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

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

Valuation of Investment in Securities

With respect to the sale of the Company's Insurance segment, Continental Insurance Group Ltd (“CIG”) disclosed in Note 3 to the consolidated financial statements, the carrying value of the deconsolidated entity included Level 3 fixed maturity securities and equity securities at the sale closing date, a portion of which were valued based on non-binding broker quotes, as disclosed in Note 2 to the consolidated financial statements. The lack of visibility into assumptions used in non-binding broker quotes are significant unobservable inputs, which create greater subjectivity when determining the fair values.

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

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

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

•Comparing the Company’s fair value estimates of Level 3 fixed maturity securities and equity securities at the sale closing date to a range of fair value estimates independently calculated utilizing valuation specialists. We evaluated information that corroborated or contradicted the Company’s fair value estimates, including observable yields, transaction data for similar securities, and historical collateral performance data.

Accounting for Issuance of Preferred Stock

As described in Note 15 to the consolidated financial statements, on July 1, 2021 and as a part of the sale of CIG which resulted in the deconsolidation of the entity, the Company entered into an agreement to exchange the remaining shares of the Series A and Series A-2 Convertible Participating Preferred Stock held by the now deconsolidated CGIC for an equivalent number of Series A-3 and Series A-4 Convertible Participating Preferred Stock and issued DBMGi Series A Preferred Stock to the now deconsolidated CGIC. The terms of the Series A-3 and Series A-4 remained substantially the same, except that the Series A-3 and Series A-4 will mature on July 1, 2026. The Series A-3 and Series A-4 Preferred Stock were classified as temporary equity as of December 31, 2021. The DBMGi Series A Preferred Stock is redeemable at any time, in whole or in part, at the option of the Company, or at any time or by the holder prior to July 2026. The DBMGi Series A Preferred Stock was classified as temporary equity as of December 31, 2021.

F-3

We identified the accounting for issuance of preferred stock as a critical audit matter. Significant judgments and highly complex technical accounting guidance are required in the determination of the scope of the applicable accounting guidance and appropriate balance sheet classification, including the identification and evaluation of embedded features potentially requiring bifurcation as derivatives as well as the determination of initial and subsequent recognition and measurement, and the determination of any resulting adjustments to earnings per share. Auditing these elements involved especially challenging and complex auditor judgment due to extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed.

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

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

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

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

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

Accounting for Exchange of Convertible Notes

As described in Notes 2 and 9 to the consolidated financial statements, on February 1, 2021, the Company entered into exchange agreements by which the Company exchanged the 2022 Convertible Notes for newly issued 7.50% convertible notes due 2026. The Company accounted for this exchange under the debt extinguishment model and the embedded conversion feature contained in the 2026 Convertible Notes was recorded as a premium on the 2026 Convertible Notes.

We identified accounting for the exchange of convertible notes as a critical audit matter. Significant judgments and highly complex technical accounting guidance are required in the determination of (i) whether the exchange of convertible notes was a modification or extinguishment of debt; (ii) whether the conversion feature should be bifurcated and accounted for as a derivative and the substantial premium model should be applied, and (iii) whether the convertible notes should be recorded as a liability in its entirety. Auditing these elements involved especially challenging and complex auditor judgment due to the nature and extent of audit effort required to evaluate management’s application of highly complex technical accounting guidance to these elements, including the extent of specialized skills or knowledge needed.

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

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

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

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

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

/s/ BDO USA, LLP

New York, NY

March 9, 2022

F-4

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

INNOVATE Corp.

New York, NY

Opinion on Internal Control over Financial Reporting

We have audited INNOVATE Corp. and subsidiaries’ (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

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

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Banker Steel Holdco LLC, which was acquired on May 27, 2021, and which is included in the consolidated balance sheets of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for the year then ended. Banker Steel Holdco constituted 26.6% and 270.1% of total assets and net assets, respectively, as of December 31, 2021, and 22.4% and 6.1% of revenues and net income (loss), respectively, for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of Banker Steel Holdco LLC because of the timing of the acquisition which was completed on May 27, 2021. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Banker Steel Holdco, LLC.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

F-5

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

New York, NY

March 9, 2022

F-6

INNOVATE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Years Ended December 31,

Operating expenses:

Selling, general and administrative 168.3 145.5

Depreciation and amortization 25.4 17.7

Other operating loss (gain) 0.6 (6.5)

Loss from operations (10.6) (28.3)

Other (expense) income:

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

Loss from equity investees (2.8) (3.4)

Loss from continuing operations before income taxes (80.7) (46.7)

Income tax expense (5.6) (7.0)

Loss from continuing operations (86.3) (53.7)

Net loss attributable to INNOVATE Corp. (227.5) (92.0)

Less: Preferred dividends and deemed dividends from conversions 2.2 3.6

Loss per common share - continuing operations

Loss per common share - discontinued operations

Weighted average common shares outstanding:

See notes to Consolidated Financial Statements

F-7

INNOVATE CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in millions)

Years Ended December 31,

Other comprehensive (loss) income

Foreign currency translation adjustment, net of tax 2.1 7.9

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

Other comprehensive (loss) income (389.6) 229.8

Comprehensive (loss) income (625.8) 127.7

Comprehensive (loss) income attributable to INNOVATE Corp. $ (633.6) $ 119.5

See notes to Consolidated Financial Statements