VATE Innovate Corp. - 10-K

ITEM 1A. RISK FACTORS

Summary of Risk Factors

Investing in our common stock involves a high degree of risk. These risks are discussed more fully below and include, but are not limited to, the following, any of which could have a material adverse effect on our financial condition, results of operations and cash flows:

Risks Related to Our Businesses

• The ability of our subsidiaries to make distributions, our principal source of cash

• Substantial doubt about our ability to continue as a going concern

• Our levels of indebtedness, financing arrangements and other obligations

• Restrictive covenants in our debt and preferred stock instruments, including covenants in or associated with certain of our debt instruments that requires us to dispose of material assets or operations to meet our obligations.

• Ability to meet working capital and long term liquidity requirements

• Dependence on key personnel and ability to attract and retain skilled personnel

• Any identified material weaknesses in our internal controls

• Constraints in the labor market and increases in labor costs

• Foreign exchange rate volatility and inflation

• Impact of competition on our business

• Impact of any potential future acquisitions and ability to manage future growth and the incurrence of substantial costs in connection with acquisitions

• Cyber-attacks and other privacy or data security incidents

• Managing growth related to increased operational size

• Ability to fully utilize net operating loss and other tax carryforwards

• Risk of restated financial statements

• Presentation of corporate opportunities by certain current and former directors and officers and the impact of related party transactions

• Our status as a non-investment company

• Impact of potential litigation

• Deterioration of global economic conditions and the impact of operating globally

• Impact of climate change

• Compliance costs related to our acquired businesses

• Ability of our development stage companies to produce revenues or income

• Adverse tax impact of our acquisitions or dispositions

• Lack of sole control in joint venture investments

• Ability to protect our intellectual property

• Potential dilution of our current stockholders

• Effect of future sales of common stock by preferred stockholders

• Common stock price fluctuations

• Prevention of potential takeover due to Delaware law and charter documents

• Activist stockholders

• Adoption of artificial intelligence ("AI") and government regulation

Risks Related to the Infrastructure segment

• Unpredictability in timing of DBMG’s construction contracts and payments thereunder

• Impact of construction contract pricing terms, including fixed-price and cost-plus pricing

• New or increased import tariffs on steel or other materials and the impact of fluctuations in other costs and inflation

• Termination or cancellation of construction projects

• Increased concentration of construction projects in backlog

• Ability to realize revenue value reported in backlog

• Ability to meet contractual schedule or performance requirements

• Modification or termination of government contracts

• Reliability of subcontractors and third-party vendors

• Volatility in the supply and demand for steel and steel components

• Dependability of steel component suppliers and the impact of changes in costs and tariffs

• Intense competition in construction markets

• Ability of customers to receive applicable regulatory and environmental approvals

• Impact of failure to obtain or maintain required licenses

• Impact of bonding and letter of credit capacity

• Variability in liquidity over time

• Exposure to professional liability, product liability, warranty and other claims

• Impact of environmental compliance costs

• Impact of potential litigation

• Union labor disruptions that would interfere with operations

• Ability to maintain safe work environment

Risks related to the Life Sciences segment

• Significant fluctuations in Pansend's operating results

• Indebtedness of R2 Technologies that will mature on August 1, 2026

• High levels of competition in the life sciences space, competition in general and competitive developments in the market

• Reliance on third parties for sales, marketing, manufacturing and/or distribution, including delivery service providers

• Risks associated with potential disruptions in our operations

• Lack of significant current and historical operating revenue and risks associated with the implementation of our growth strategy

• Customer demand, patient satisfaction with procedures, and the impact of general economic conditions

• Impact of a failure to obtain or maintain necessary FDA (or foreign equivalent) clearances and approvals

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

• Inventory management, Pansend's limited manufacturing experience, and our ability to scale, suspend or reduce production based on variations in product demand.

• Competition for skilled technical professional personnel

• Obsolescence of Pansend's products

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

• Impact of third party intellectual property infringement claims

Risks related to the Spectrum segment

• Effectiveness of our operations in a highly competitive market

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

Risk Factors

The following risk factors and the forward-looking statements elsewhere herein should be read carefully in connection with evaluating the business of the Company and its subsidiaries. A wide range of events and circumstances could materially affect our overall performance, the performance of particular businesses and our results of operations, and therefore, an investment in us is subject to risks and uncertainties. In addition to the important factors affecting specific business operations and the financial results of those operations identified elsewhere in this Annual Report on Form 10-K, the following important factors, among others, could adversely affect our operations. While each risk is described separately below, some of these risks are interrelated, and it is possible that certain risks could trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties not presently known to us, or that are currently deemed immaterial, could also potentially impair our overall performance, the performance of particular businesses and our results of operations. These risk factors may be amended, supplemented or superseded from time to time in filings and reports that we file with the SEC in the future.

Risks Related to Our Businesses

INNOVATE is a holding company, and its only material assets are its cash on hand, equity interests in its operating subsidiaries and its other investments. As a result, INNOVATE’s principal source of cash and cash flow is distributions from its subsidiaries, and its subsidiaries may be limited by law and by contract in making distributions to INNOVATE.

As a holding company, INNOVATE's material assets are its cash and cash equivalents, the equity interests in its subsidiaries and other investments. As of December 31, 2025, the Company had $112.1 million of cash and cash equivalents, excluding restricted cash. On a stand-alone basis, as of December 31, 2025, the Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $4.2 million.

INNOVATE’s principal source of cash and cash flow is distributions from its subsidiaries. Thus, its ability to service its debt, including the $360.4 million aggregate principal amount of new 10.50% 2027 Senior Secured Notes, $53.5 million aggregate principal amount of new 9.50% 2027 Convertible Notes, $1.9 million aggregate principal amount remaining of 8.50% 2026 Senior Secured Notes, $0.2 million aggregate principal amount remaining of 7.50% 2026 Convertible Notes, $45.9 million principal amount of the CGIC Note and the $20.0 million secured revolving credit agreement (the “Revolving Credit Agreement”), of which $20.0 million was drawn as of December 31, 2025, and to finance future acquisitions, is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions to INNOVATE. INNOVATE’s subsidiaries are separate legal entities, and although they may be wholly-owned or controlled by INNOVATE, they have no obligation to make any funds available to INNOVATE, whether in the form of loans, dividends, distributions or otherwise. The ability of INNOVATE’s subsidiaries to distribute cash to it is, and will remain subject to, among other things, restrictions that are contained in its subsidiaries’ financing agreements, availability of sufficient funds and applicable state laws and regulatory restrictions. For instance, DBMG is a borrower under credit facilities that restrict their ability to make distributions or loans to INNOVATE. Specifically, DBMG is party to credit agreements that include certain financial covenants that can limit the amount of cash available to make upstream dividend payments to INNOVATE. For additional information, refer to Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources".

Claims of creditors of our subsidiaries generally will have priority as to the assets of such subsidiaries over our claims and claims of our creditors and stockholders. To the extent the ability of INNOVATE’s subsidiaries to distribute dividends or other payments to INNOVATE could be limited in any way, our ability to grow, pursue business opportunities or make acquisitions that could be beneficial to our businesses, or otherwise fund and conduct our business could be materially limited. In addition, if INNOVATE depends on distributions and loans from its subsidiaries to make payments on INNOVATE’s debt, and if such subsidiaries were unable to distribute or loan money to INNOVATE, INNOVATE could default on its debt, which would permit the holders of such debt to accelerate the maturity of the debt which may also accelerate the maturity of other debt of ours with cross-default or cross-acceleration provisions.

To service our indebtedness and other obligations, we will require a significant amount of cash.

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

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

In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness or redeem the preferred stock will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt or financings related to the redemption of our preferred stock could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments or preferred stock may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness or dividend payments on our outstanding shares of preferred stock would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness or otherwise raise capital on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service and other obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations.

Substantial doubt about our ability to continue as a going concern

As of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. The principal conditions leading to this conclusion are the upcoming maturities of our debt obligations. Based on these conditions, the Company may not be able to meet its obligations at maturity and comply with certain cross-default provisions under the 2027 Senior Secured Notes over the next twelve months, or any potential breach of the milestone covenant of our 2027 Senior Secured Notes, which has required the Company to commence a sales process for all or substantially all of DBM Global’s assets or equity interests in accordance with certain dates and deadlines. Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information. The Company plans to alleviate these conditions through various initiatives it is currently exploring, including pursuing asset sales, and potentially refinancing debt and raising additional capital. However, there can be no assurance that the Company will have the ability to be successful in any asset sales, additional capital raises, or the refinancing of its existing debt, on attractive terms or at all, nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with the Company’s debt covenants or other possible events of default. Further, there can be no assurance that the Company will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity dates. There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern. The potential inability to complete any assets sales, refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing or raise sufficient cash to pay the debt at maturity would have a material adverse effect on our financial condition and likely cause the price of the Company’s common stock to decline.

The instruments and agreements governing our indebtedness, and our Third Amended and Restated Certificate of Incorporation contain various covenants that limit our discretion in the operation of our business and/or require us to meet certain covenants. The failure to comply with such covenants could have a material adverse effect on us.

The indentures governing INNOVATE’s 2027 Senior Secured Notes, 2027 Convertible Notes, 2026 Senior Secured Notes, 2026 Convertible Notes, CGIC Subordinated Secured Promissory Note and Revolving Line of Credit, and our Third Amended and Restated Certificate of Incorporation and any future debt agreements may contain various covenants, including those that restrict our ability to, among other things:

• incur liens on our property, assets and revenue;

• borrow money, and guarantee or provide other support for the indebtedness of third parties;

• redeem or repurchase our capital stock;

• make scheduled interest and principal or other payments or prepay, redeem or repurchase, certain of our indebtedness

• enter into certain change of control transactions;

• make investments in entities that we do not control, including joint ventures;

• enter into certain asset sale transactions, including divestiture of certain company assets and divestiture of capital stock of wholly-owned subsidiaries;

• enter into certain transactions with affiliates; and

• enter into secured financing arrangements.

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

The indenture governing INNOVATE’s 2027 Senior Secured Notes required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, such that by September 1, 2025 we needed to have a bona fide bid or term sheet related to a potential sale, a fully executed purchase or equity agreement by November 1, 2025, and an executed transaction with applied proceeds to the 2027 Senior Secured Notes Indenture no later than February 1, 2026, and in the event of the failure to achieve these milestones, the mandatory commencement of a sales process for DBMG. We did not achieve these milestones and accordingly we have commenced a sales process for DBMG. We may not be able to consummate that sale at a price that would be sufficient for us to pay the 2027 Senior Secured Notes in full or on any terms.

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

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

We have significant indebtedness and other financing arrangements and could incur additional indebtedness and other obligations, which could adversely affect our business and financial condition.

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

• increased vulnerability to general adverse economic and industry conditions;

• higher interest expense if interest rates increase on our floating rate borrowings are not effective to mitigate the effects of these increases;

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

• certain assets of our subsidiaries are pledged to secure their indebtedness, and those assets cannot be pledged to secure other financings;

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

• limiting our ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, expansion plans and other investments, which may limit our ability to implement our business strategy;

• limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and

• placing us at a competitive disadvantage compared to our competitors that have less debt and fewer other outstanding obligations.

In addition, it is possible that we may need to incur additional indebtedness or enter into additional financing arrangements in the future in the ordinary course of business. If additional indebtedness is incurred or equity is issued, the risks described above could intensify. In addition, our inability to maintain compliance with our debt covenants could result in acceleration of all or a portion of our debt obligations and could cause us to be in default if we are unable to repay the accelerated obligations.

We have experienced significant historical, and may experience significant future, operating losses and net losses, which may hinder our ability to meet working capital requirements or service our indebtedness, and we cannot assure you that we will generate sufficient cash flows from operations to meet such requirements or service our indebtedness.

We cannot assure you that we will recognize net income or positive cash flows from operations in future periods. If we cannot generate net income or sufficient operating profitability, we may not be able to meet our working capital requirements or service our indebtedness. Our ability to generate sufficient cash for our operations will depend upon, among other things, the future financial and operating performance of our operating businesses, which will be affected by prevailing economic and related industry conditions and financial, business, regulatory and other factors, many of which are beyond our control. We recognized net loss attributable to INNOVATE of $60.6 million in 2025 and net loss attributable to INNOVATE of $34.6 million in 2024, and we have also incurred net losses in other prior periods.

We cannot assure you that our business will generate cash flows from operations in an amount sufficient to fund our liquidity needs. If our cash flows and capital resources are insufficient, we may be forced to reduce or delay capital expenditures, sell assets and/or seek additional capital or financings. Our ability to obtain future financings will depend on the condition of the capital markets and our financial condition at such time. Any financings could be at high interest rates and may require us to comply with covenants in addition to, or more restrictive than, covenants in our current financing documents, which could further restrict our business operations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such disposition may not be adequate to meet our obligations. For the years ended December 31, 2025 and 2024, we recognized cash flows provided by operating activities of $146.6 million and $9.1 million, respectively.

Loss of our key management or other personnel, could adversely impact our business.

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

On July 23, 2023, we announced the unexpected passing of Wayne Barr, our President, Chief Executive Officer ("CEO") and Director. Mr. Barr had served as a director of INNOVATE since January 2014 and as CEO since November 2020. Following Mr. Barr’s death, on July 25, 2023, Paul K. Voigt was named Interim CEO of the Company. Mr. Voigt has served as Senior Managing Director of Investments at Lancer Capital, LLC ("Lancer Capital") since 2019. From 2014 to 2018, Mr. Voigt served as Senior Managing Director of Investments of the Company and was involved with sourcing deals and capital raising for the Company.

The executive management teams that lead our subsidiaries are also highly experienced and possess extensive skills in their relevant industries. The ability to retain key personnel is important to our success and future growth. Competition for these professionals can be intense, and we may not be able to retain and motivate our existing officers and senior employees, and continue to compensate such individuals competitively. The unexpected loss of the services of one or more of these individuals, whether due to competition, distraction caused by personal matters or otherwise, could have a detrimental effect on the financial condition or results of operations of our businesses, and could hinder the ability of such businesses to effectively compete in the various industries in which we operate.

We and our subsidiaries may not be able to attract and/or retain additional skilled personnel.

We may not be able to attract new personnel, including management and technical and sales personnel, necessary for future growth, or replace lost personnel. In particular, the activities of some of our operating subsidiaries require personnel with highly specialized skills. Competition for the best personnel in our businesses can be intense. Our financial condition and results of operations could be materially adversely affected if we are unable to attract and/or retain qualified personnel.

We may identify material weaknesses in our internal control over financial reporting which could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2025 and 2024, management concluded that our internal control over financial reporting was effective.

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

Overall tightening of the labor market increases in labor costs or any possible labor unrest may adversely affect our business and results of operations.

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

Fluctuations in the exchange rate of the U.S. dollar, foreign currencies and inflation may adversely impact our results of operations and financial condition.

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

• re-measurement gains and losses from changes in the value of foreign denominated assets and liabilities;

• translation gains and losses on foreign subsidiary financial results that are translated into U.S. dollars, our functional currency, upon consolidation; and

• planning risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur.

Our businesses are also exposed to, among other things, inflation and fuel price increases. Inflationary pressures can result in increased interest rates, fuel, wages, freight and container expenses and other costs which, if they continue for a prolonged period, may adversely affect our results of operations if we are not able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Our failure to meet the continued listing requirements of NYSE could result in a delisting of our securities, which in turn could adversely affect our financial condition and the market for our common stock.

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

Because we face significant competition for acquisition and business opportunities, including from numerous companies with a business plan similar to ours, it may be difficult for us to fully execute our business strategy. Additionally, our subsidiaries also operate in highly competitive industries, limiting their ability to gain or maintain their positions in their respective industries.

We expect to encounter intense competition for acquisition and business opportunities from both strategic investors and other entities having a business objective similar to ours, such as private investors (which may be individuals or investment partnerships), blank check companies, and other entities, domestic and international, competing for the type of businesses that we may acquire. Many of these competitors possess greater technical, human and other resources, or more local industry knowledge, or greater access to capital, than we do, and our financial resources may be relatively limited when contrasted with those of many of these competitors. These factors may place us at a competitive disadvantage in successfully completing future acquisitions and investments.

In addition, while we believe that there are numerous target businesses that we could potentially acquire or invest in, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. We may need to obtain additional financing in order to consummate future acquisitions and investment opportunities and cannot assure you that any additional financing will be available to us on acceptable terms, or at all, or that the terms of our existing financing arrangements will not limit our ability to do so. This inherent competitive limitation gives others an advantage in pursuing acquisition and investment opportunities.

Furthermore, our subsidiaries also face competition from both traditional and new market entrants that may adversely affect them as well, as discussed below in the risk factors related to our Infrastructure, Life Sciences and Spectrum segments.

Future acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial condition and results of operations.

We are a diversified holding company that owns interests in a number of different businesses. We have in the past, and intend in the future, to acquire businesses or make investments, directly or indirectly through our subsidiaries, that involve unknown risks, some of which will be particular to the industry in which the investment or acquisition targets operate, including risks in industries with which we are not familiar or experienced. There can be no assurance our due diligence investigations will identify every matter that could have a material adverse effect on us or the entities that we may acquire. We may be unable to adequately address the financial, legal and operational risks raised by such investments or acquisitions, especially if we are unfamiliar with the relevant industry, which can lead to significant losses on material investments. The realization of any unknown risks could expose us to unanticipated costs and liabilities and prevent or limit us from realizing the projected benefits of the investments or acquisitions, which could adversely affect our financial condition and liquidity. In addition, our financial condition, results of operations and the ability to service our debt may be adversely impacted depending on the specific risks applicable to any business we invest in or acquire and our ability to address those risks.

We may not be able to successfully integrate acquisitions into our business, or realize the anticipated benefits of these acquisitions.

The integration of acquired businesses into our operations may be a complex and time-consuming process that may not be successful. Even if we successfully integrate these assets into our business and operations, there can be no assurance that we will realize the anticipated benefits and operating synergies. The Company's estimates regarding the earnings, operating cash flow, capital expenditures and liabilities resulting from these acquisitions may prove to be incorrect. For example, with any past or future acquisition, there is the possibility that:

• we may not have implemented company policies, procedures and cultures, in an efficient and effective manner;

• we may not be able to successfully reduce costs, increase advertising revenue or audience share;

• we may fail to retain and integrate employees and key personnel of the acquired business and assets;

• our management may be reassigned from overseeing existing operations by the need to integrate the acquired business;

• we may encounter unforeseen difficulties in extending internal control and financial reporting systems at the newly acquired business;

• we may fail to successfully implement technological integration with the newly acquired business or may exceed the capabilities of our technology infrastructure and applications;

• we may not be able to generate adequate returns;

• we may encounter and fail to address risks or other problems associated with or arising from our reliance on the representations and warranties and related indemnities, if any, provided to us by the sellers of acquired companies and assets;

• we may suffer adverse short-term effects on operating results through increased costs and may incur future impairments of goodwill associated with the acquired business;

• we may be required to increase our leverage and debt service or to assume unexpected liabilities in connection with our acquisitions; and

• we may encounter unforeseen challenges in entering new markets in which we have little or no experience.

The occurrence of any of these events or our inability generally to successfully implement our acquisition and investment strategy would have an adverse effect, which could be material, on our business, financial condition and results of operations.

We rely on information systems to conduct our businesses, and failure to protect these systems against security breaches and otherwise to implement, integrate, upgrade and maintain such systems in working order could have a material adverse effect on our results of operations, cash flows or financial condition.

The efficient operation of our businesses is dependent on computer hardware and software systems. For instance, INNOVATE and its subsidiaries rely on information systems to process customer orders, manage inventory and accounts receivable collections, purchase products, manage accounts payable processes, track costs and operations, maintain client relationships and accumulate financial results. Information technology security threats - from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data - are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. Cybersecurity attacks could also include attacks targeting sensitive data or the security, integrity and/or reliability of the hardware and software installed in products we use. Additionally, the rapid advancement of AI may give rise to additional cybersecurity vulnerabilities. Through generative AI, potential threats may have new tools to automate and refine attacks or evade detection. We treat such cybersecurity risks seriously given these threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.

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

We may increase our operational size in the future, and may experience difficulties in managing growth.

We have adopted a business strategy that contemplates that we will expand our operations, including future acquisitions or other business opportunities, and as a result, we may need to increase our level of corporate functions, which may include hiring additional personnel to perform such functions and enhancing our information technology systems. Any future growth may increase our corporate operating costs and expenses and impose significant added responsibilities on members of our management, including the need to identify, recruit, maintain and integrate additional employees and implement enhanced informational technology systems. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

We may not be able to fully utilize our net operating loss and other tax carryforwards.

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

As of December 31, 2025, the U.S. consolidated group had approximately $176.3 million of federal NOL carryforwards and $240.0 million of interest expense carryforwards under Code Section 163(j) available to offset our future taxable income, with certain NOLs beginning to expire in 2034.

Pursuant to the Code Sections 382 and 383, use of our NOLs and certain other tax attributes may be limited by an “ownership change” within the meaning of Code Section 382 and applicable Treasury Regulations. If a corporation undergoes an “ownership change,” which is generally defined as an increase of more than 50% of the value of a corporation’s stock owned by certain “5-percent shareholders” (as such term is defined in Internal Revenue Code Section 382) over a rolling three-year period, the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change income or taxes may be limited.

We may experience ownership changes in the future as a result of subsequent shifts in our common stock ownership, some of which may be outside of our control. If the Company were to experience an ownership change as defined in Code Section 382, its ability to utilize these tax attributes would be substantially limited.

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

We may be required to restate certain of our financial statements in the future, which may lead to additional risks and uncertainties, including stockholder litigation and loss of investor confidence.

The preparation of financial statements in accordance with GAAP involves making estimates, judgments, interpretations and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and income. These estimates, judgments, interpretations and assumptions are often inherently imprecise or uncertain, and any necessary revisions to prior estimates, judgments, interpretations or assumptions could lead to a restatement of our financial statements. Any such restatement or correction may be highly time consuming, may require substantial attention from management and significant accounting costs, may result in adverse regulatory actions by the SEC or NYSE, may result in stockholder litigation, may cause us to fail to meet our reporting obligations, and may cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

Our officers, directors, stockholders and their respective affiliates may have a pecuniary interest in certain transactions in which we are involved, and may also compete with us.

While we have adopted a code of ethics applicable designed to promote the ethical handling of actual or apparent conflicts of interest, we have not adopted a policy that expressly prohibits our directors, officers, stockholders or affiliates from having an interest in any transaction to which we are a party or in which we have an interest. Additionally, we do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. We have in the past engaged in transactions in which such persons have an interest (for example, the 2021 sale of Continental Insurance Group ("CIG") to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a former director of the Company). Subject to the terms of any applicable covenants in financing arrangements or other agreements, we may from time to time enter into additional transactions in which such persons have an interest. In addition, such parties may have an interest in certain transactions such as strategic partnerships or joint ventures in which we are involved, and may also compete with us.

In the course of their other business activities, certain of our current and future directors and officers may become aware of business and acquisition opportunities that may be appropriate for presentation to us as well as the other entities with which they are affiliated. Such directors and officers are not required to and may therefore not present otherwise attractive business or acquisition opportunities to us.

Certain of our current and future directors and officers may become aware of business and acquisition opportunities which may be appropriate for presentation to us as well as the other entities with which they are or may be affiliated. Due to those directors’ and officers’ affiliations with other entities, they may have obligations to present potential business and acquisition opportunities to those entities, which could cause conflicts of interest. Moreover, as permitted by Delaware law, our certificate of incorporation contains a provision that renounces our expectation to certain corporate opportunities that are presented to our current and future directors that serve in capacities with other entities. Accordingly, our directors and officers may not present otherwise attractive business or acquisition opportunities to us of which they may become aware.

We may suffer adverse consequences if we are deemed an investment company and we may incur significant costs to avoid investment company status.

We believe we are not an investment company as defined by the Investment Company Act of 1940, and have operated our business in accordance with such view. If the SEC or a court were to disagree with us, we could be required to register as an investment company. This would subject us to disclosure and accounting rules geared toward investment, rather than operating, companies; limit our ability to borrow money, issue options, issue multiple classes of stock and debt, and engage in transactions with affiliates; and require us to undertake significant costs and expenses to meet the disclosure and other regulatory requirements to which we would be subject as a registered investment company.

We are subject to litigation in respect of which we are unable to accurately assess our level of exposure and which, if adversely determined, may have a material adverse effect on our financial condition and results of operations.

We are currently, and may become in the future, party to legal proceedings that are considered to be either ordinary or routine litigation incidental to our current or prior businesses or not material to our financial position or results of operations. We also are currently, or may become in the future, party to legal proceedings with the potential to be material to our financial position or results of operations. There can be no assurance that we will prevail in any litigation in which we may become involved, or that our insurance coverage will be adequate to cover any potential losses. To the extent that we sustain losses from any pending litigation which are not reserved or otherwise provided for or insured against, our business, results of operations, cash flows and/or financial condition could be materially adversely affected. Refer to Item 3, " Legal Proceedings ."

Deterioration of global economic conditions could adversely affect our business.

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

The availability, cost and terms of credit also have been and may continue to be adversely affected by illiquid markets and wider credit spreads. Concern about the stability of the markets generally, and the strength of counterparties specifically, has led many lenders and institutional investors to reduce credit to businesses and consumers. These factors have led to a decrease in spending by businesses and consumers over the past several years, and a corresponding slowdown in global infrastructure spending.

Continued uncertainty in the U.S. and international markets and economies and prolonged stagnation in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers, including our ability to access capital markets and obtain capital lease financing to meet liquidity needs.

Climate change and related environmental issues could have a material adverse impact on our business, financial condition and results of operations

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

We are subject to risks associated with our international operations.

We operate in international markets, and may in the future consummate additional investments in or acquisitions of foreign businesses. Our international operations are subject to a number of risks, including:

• political conditions and events, including embargo;

• changing regulatory environments;

• outbreaks of pandemic diseases, or fear of such outbreaks;

• inflationary pressures;

• restrictive actions by U.S. and foreign governments;

• the imposition of withholding or other taxes on foreign income, new or increased tariffs or restrictions on foreign trade and investment;

• adverse tax consequences;

• limitations on repatriation of earnings and cash;

• currency exchange controls and import/export quotas;

• nationalization, expropriation, asset seizure, blockades and blacklisting;

• limitations in the availability, amount or terms of insurance coverage;

• loss of contract rights and inability to adequately enforce contracts;

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

• fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for our services and our profitability;

• potential noncompliance with a wide variety of anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the "FCPA"), and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010 (the "Bribery Act");

• labor strikes and shortages;

• changes in general economic and political conditions;

• adverse changes in foreign laws or regulatory requirements; and

• different liability standards and legal systems that may be less developed and less predictable than those in the United States.

If we are unable to adequately address these risks, we could lose our ability to operate in certain international markets and our business, financial condition or results of operations could be materially adversely affected.

The U.S. Departments of Justice, Commerce, Treasury and other agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against companies for violations of export controls, the FCPA, and other federal statutes, sanctions and regulations, including those established by the Office of Foreign Assets Control ("OFAC") and, increasingly, similar or more restrictive foreign laws, rules and regulations. By virtue of these laws and regulations, and under laws and regulations in other jurisdictions, including the European Union and the United Kingdom, we may be obliged to limit our business activities, we may incur costs for compliance programs and we may be subject to enforcement actions or penalties for noncompliance.

In recent years, U.S. and foreign governments have increased their oversight and enforcement activities with respect to these laws and we expect the relevant agencies to continue to increase these activities. A violation of these laws, sanctions or regulations could materially adversely affect our business, financial condition or results of operations.

The Company has compliance policies in place for its employees with respect to FCPA, OFAC, the Bribery Act and similar laws. Our operating subsidiaries also have relevant compliance policies in place for their employees, which are tailored to their operations. However, there can be no assurance that our employees, consultants or agents, or those of our subsidiaries or investees, will not engage in conduct for which we may be held responsible. Violations of the FCPA, the Bribery Act, the rules and regulations established by OFAC and other laws, sanctions or regulations may result in severe criminal or civil penalties, and we may be subject to other liabilities, which could materially adversely affect our business, financial condition or results of operations.

Additionally, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any negative sentiments towards the United States as a result of such changes, could adversely affect our business. Negative sentiments towards the United States among non-U.S. customers and among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively.

We face certain risks associated with the acquisition or disposition of businesses and lack of control over certain of our investments.

In pursuing our corporate strategy, we may acquire, dispose of or exit businesses or reorganize existing investments. The success of this strategy is dependent upon our ability to identify appropriate opportunities, negotiate transactions on favorable terms and ultimately complete such transactions.

In the ordinary course of our business, we evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives or that no longer fit with our broader strategy, such as the dispositions of our Clean Energy and Insurance segments in 2021 or the acquisition of Banker Steel by our Infrastructure segment in 2021. In addition, we have been required to sell certain assets or businesses to comply with certain of our debt covenants. When we sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic objectives, or we may dispose of a business at a price or on terms which are less than we had anticipated. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such disposition may not be adequate to meet our debt obligations. In addition, there is a risk that we sell a business whose subsequent performance exceeds our expectations, in which case our decision would have potentially sacrificed enterprise value.

In the course of our acquisitions, we may not acquire 100% ownership of certain of our operating subsidiaries, or we may face delays in completing certain acquisitions, including in acquiring full ownership of certain of our operating companies. Once we complete acquisitions or reorganizations there can be no assurance that we will realize the anticipated benefits of any transaction, including revenue growth, operational efficiencies or expected synergies. If we fail to recognize some or all of the strategic benefits and synergies expected from a transaction, goodwill and intangible assets may be impaired in future periods. The negotiations associated with the acquisition and disposition of businesses could also disrupt our ongoing business, distract management and employees or increase our expenses.

If we dispose of or otherwise exit certain businesses, there can be no assurance that we will not incur certain disposition related charges, or that we will be able to reduce overhead related to the divested assets.

We also own minority interests in a number of entities, such as MediBeacon, Triple Ring Technologies, Inc. and Scaled Cell, over which we do not exercise, or have only limited, management control, and we are, therefore, unable to direct or manage the business to realize the anticipated benefits that we can achieve through full integration.

Our development stage companies may never produce revenues or income.

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

We could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or invest in another business.

We anticipate that the investigation of each specific acquisition or business opportunity and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments with respect to such transaction will require substantial management time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision is made not to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific acquisition, investment target or financing, we may fail to consummate the investment or acquisition for any number of reasons, including those beyond our control. Any such event could consume significant management time and result in a loss to us of the related costs incurred, which could adversely affect our financial position and our ability to consummate other acquisitions and investments.

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

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

Our participation in any future joint investment could be adversely affected by our lack of sole decision-making authority, our reliance on a partner’s financial condition and disputes between us and the relevant partners.

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

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

If we and our investees fail to protect our intellectual property rights adequately, including through the improper use of AI by our personnel or business partners, our competitors might gain access to our or our investees' technology, and our business might be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. While we have some U.S. patents and pending U.S. patent applications, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which we operate. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. In addition, some of our operating subsidiaries may use trademarks which have not been registered and may be more difficult to protect.

We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel.

We may issue additional shares of common stock or preferred stock, which could dilute the interests of our stockholders and present other risks.

Our certificate of incorporation, as amended, authorizes the issuance of up to 250,000,000 shares of common stock and 20,000,000 shares of preferred stock.

As of December 31, 2025, INNOVATE has 13,818,904 issued and 13,655,062 outstanding shares of its common stock, and 8,062 shares of Series A-3 and Series A-4 preferred stock issued and outstanding. However, our certificate of incorporation authorizes our board of directors, from time to time, subject to limitations prescribed by law and any consent rights granted to holders of outstanding shares of preferred stock, to issue additional shares of preferred stock having rights that are senior to those afforded to the holders of our common stock. We also have reserved shares of common stock for issuance pursuant to our broad-based equity incentive plans, upon exercise of stock options and other equity-based awards granted thereunder, and pursuant to other equity compensation arrangements.

We may issue shares of common stock or additional shares of preferred stock to raise additional capital for corporate purposes, to complete a business combination or other acquisition, to capitalize new businesses or new or existing businesses of our operating subsidiaries or pursuant to other employee incentive plans, any of which could dilute the interests of our stockholders and present other risks.

The issuance of additional shares of common stock or preferred stock may, among other things:

• significantly dilute the equity interest and voting power of all other stockholders;

• subordinate the rights of holders of our outstanding common stock and/or preferred stock if preferred stock is issued with rights senior to those afforded to holders of our common stock and/or preferred stock;

• trigger an adjustment to the price at which all or a portion of our outstanding preferred stock converts into our common stock, if such stock is issued at a price lower than the then-applicable conversion price;

• entitle our existing holders of preferred stock to purchase a portion of such issuance to maintain their ownership percentage, subject to certain exceptions;

• call for us to make dividend or other payments not available to the holders of our common stock; and

• cause a change in control of our company if a substantial number of shares of our common stock are issued and/or if additional shares of preferred stock having substantial voting rights are issued.

The issuance of additional shares of common stock or preferred stock, or perceptions in the market that such issuances could occur, may also adversely affect the prevailing market price of our outstanding common stock and impair our ability to raise capital through the sale of additional equity securities.

Conversion of the 2027 Convertible Notes and 2026 Convertible Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Convertible Notes, or may otherwise depress the market price of our common stock.

As of December 31, 2025, the holders of our 2027 Convertible Notes and 2026 Convertible Notes (together known as the "Convertible Notes") had rights to convert their notes into 1,263,308 and 3,781, shares of our common stock, respectively. The conversion of some or all of our Convertible Notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the shares of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of our common stock could depress the market price of our common stock.

Future sales of substantial amounts of our common stock by holders of our preferred stock or other significant stockholders may adversely affect the market price of our common stock.

As of December 31, 2025, the holders of our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock had certain rights to convert their preferred stock into an aggregate 364,593 shares of our common stock.

Pursuant to a second amended and restated registration rights agreement, dated January 5, 2015, entered into in connection with the issuance of the preferred stock, we have granted registration rights to the purchasers of our preferred stock and certain of their transferees with respect to INNOVATE common stock held by them and common stock underlying the preferred stock. This registration rights agreement allows these holders, subject to certain conditions, to require us to register the sale of their shares under the federal securities laws. Furthermore, the shares of our common stock held by these holders, as well as other significant stockholders, may be sold into the public market under Rule 144 of the Securities Act of 1933, as amended.

Future sales of substantial amounts of our common stock into the public market whether by holders of the preferred stock, by other holders of substantial amounts of our common stock or by us, or perceptions in the market that such sales could occur, may adversely affect the prevailing market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

Price fluctuations in our common stock could result from general market and economic conditions and a variety of other factors.

The trading price of our common stock may be highly volatile and could be subject to fluctuations in response to a number of factors beyond our control, including:

• actual or anticipated fluctuations in our results of operations and the performance of our competitors;

• reaction of the market to our announcement of any future dispositions, acquisitions or investments;

• the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

• changes in general economic conditions;

• outbreaks of pandemic diseases, or fear of such outbreaks; and

• actions of our equity investors, including sales of our common stock by significant stockholders.

Delaware law and our charter documents contain provisions that could discourage or prevent a potential takeover, even if such a transaction would be beneficial to our stockholders.

Some provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable. These include provisions:

• authorizing a board of directors to issue preferred stock;

• limiting the persons who may call special meetings of stockholders;

• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

Although we believe that these charter and bylaw provisions, and provisions of Delaware law, provide an opportunity for the board to assure that our stockholders realize full value for their investment, they could have the effect of delaying or preventing a change of control, even under circumstances that some stockholders may consider beneficial.

Actions of activist stockholders, including a proxy contest, could be disruptive and potentially costly and the possibility that activist stockholders may contest, or seek changes that conflict with, our strategic direction could cause uncertainty about the strategic direction of our business. Such actions may also trigger a change in control under certain agreements to which the Company is party, which could materially and adversely affect our business.

Under certain circumstances arising out of, or related to, certain actions of activist stockholders, including a proxy contest or consent solicitation, a change in a majority of our board of directors may trigger the requirement that we make an offer to redeem our shares of preferred stock at a price per share of preferred stock, equal to the greater of (i) the accrued value of the preferred stock, plus any accrued and unpaid dividends (to the extent not included in the accrued value of preferred stock), and (ii) the value that would be received if the share of preferred stock were converted into common stock, the occurrence of which could materially and adversely affect our business. In such instance, the Company cannot assure stockholders that it would be able to obtain the financing on commercially reasonable terms (if at all) to fund the offer to redeem all of the preferred stock or if there would be funds legally available funds for such purpose under Delaware law. If any of these risks were to occur, our business, operating results and financial condition could be materially and adversely affected.

Bank failures or other similar events could adversely affect our and our customers' and vendors' liquidity and financial performance.

We maintain domestic cash deposits in Federal Deposit Insurance Corporation ("FDIC") insured banks, in excess of FDIC insurance limits. Bank failures or other similar events could disrupt our access to bank deposits or otherwise adversely impact our liquidity and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government in the event of a failure or liquidity crisis.

Our customers and vendors may suffer similar adverse effects from a bank failure. Any resulting adverse effects to our customers could reduce the demand for our services or affect our allowance for doubtful accounts and collectability of accounts receivable. Adverse effects to our vendors could affect our ability to receive the resources and supplies we need for our business. These factors could materially affect our future financial results.

In addition, instability, liquidity constraints or other distress in the financial markets, including the effects of bank failures or similar adverse developments could impair the ability of one or more of the banks participating in our current credit facilities from honoring their commitments. This could have an adverse effect on our business if we were not able to replace those commitments or to locate other sources of liquidity on acceptable terms.

Increased adoption of artificial intelligence and government regulation could create additional costs .

Failure to keep up with the potential increased use of AI by competitors could have adverse effects on our competitiveness in the markets that we operate, and heightened government scrutiny and regulation surrounding AI, including generative AI, could lead to increased or added compliance and regulatory costs.

Risks Related to the Infrastructure segment

DBMG’s business is dependent upon major construction contracts, the unpredictable timing of which may result in significant fluctuations in its cash flow due to the timing of receipt of payment under such contracts.

DBMG’s cash flow is dependent upon obtaining major construction contracts primarily from general contractors and engineering firms responsible for commercial and industrial construction projects, such as high- and low-rise buildings and office complexes, hotels and casinos, convention centers, sports arenas, shopping malls, hospitals, dams, bridges, mines and power plants. The timing of or failure to obtain contracts, delays in awards of contracts, cancellations of contracts, delays in completion of contracts, or failure to obtain timely payment from DBMG’s customers, could result in significant periodic fluctuations in cash flows from DBMG’s operations. In addition, many of DBMG’s contracts require it to satisfy specific progress or performance milestones in order to receive payment from the customer. As a result, DBMG may incur significant costs for engineering, materials, components, equipment, labor or subcontractors prior to receipt of payment from a customer. Such expenditures could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

The nature of DBMG’s primary contracting terms for its contracts, including fixed-price and cost-plus pricing, could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG’s projects are awarded through a competitive bid process or are obtained through negotiation, but in either case generally using one of two types of contract pricing approaches: fixed-price or cost-plus pricing. Under fixed-price contracts, DBMG performs its services and executes its projects at an established price, subject to adjustment only for change orders approved by the customer, and, as a result, it may benefit from cost savings but be unable to recover any cost overruns. If DBMG does not execute such a contract within cost estimates, it may incur losses or the project may be less profitable than expected. Historically, the majority of DBMG’s contracts have been fixed-price arrangements. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from the original projections due to a variety of factors, including, but not limited to:

• failure to properly estimate costs of materials, including steel and steel components, engineering services, equipment, labor or subcontractors;

• costs incurred in connection with modifications to a contract that may be unapproved by the customer as to scope, schedule, and/or price;

• unanticipated technical problems with the structures, equipment or systems we supply;

• unanticipated costs or claims, including costs for project modifications, customer-caused delays, errors or changes in specifications or designs, or contract termination;

• changes in the costs of materials, engineering services, equipment, labor or subcontractors;

• changes in labor conditions, including the availability and productivity of labor;

• productivity and other delays caused by weather conditions;

• failure to engage necessary suppliers or subcontractors, or failure of such suppliers or subcontractors to perform;

• difficulties in obtaining required governmental permits or approvals;

• changes in laws and regulations; and

• changes in general economic conditions.

Under cost-plus contracts, DBMG receives reimbursement for its direct labor and material cost, plus a specified fee in excess thereof, which is typically a fixed rate per hour, an overall fixed fee, or a percentage of total reimbursable costs, up to a maximum amount, which is an arrangement that may protect DBMG against cost overruns. If DBMG is unable to obtain proper reimbursement for all costs incurred due to improper estimates, performance issues, customer disputes, or any of the additional factors noted above for fixed-price contracts, the project may be less profitable than expected.

Generally, DBMG’s contracts and projects vary in length from 1 to 24 months, depending on the size and complexity of the project, project owner demands and other factors. The foregoing risks are exacerbated for projects with longer-term durations because there is an increased risk that the circumstances upon which DBMG based its original estimates will change in a manner that increases costs. In addition, DBMG sometimes bears the risk of delays caused by unexpected conditions or events. To the extent there are future cost increases that DBMG cannot recover from its customers, suppliers or subcontractors, the outcome could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

Furthermore, revenue and gross profit from DBMG’s contracts can be affected by contract incentives or penalties that may not be known or finalized until the later stages of the contract term. Some of DBMG’s contracts provide for the customer’s review of its accounting and cost control systems to verify the completeness and accuracy of the reimbursable costs invoiced. These reviews could result in reductions in reimbursable costs and labor rates previously billed to the customer.

The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts in progress. Due to the various estimates inherent in DBMG’s contract accounting, actual results could differ from those estimates.

DBMG’s billed and unbilled revenue may be exposed to potential risk if a project is terminated or canceled or if DBMG’s customers encounter financial difficulties.

DBMG’s contracts often require it to satisfy or achieve certain milestones in order to receive payment for the work performed. As a result, under these types of arrangements, DBMG may incur significant costs or perform significant amounts of services prior to receipt of payment. If the ultimate customer does not proceed with the completion of the project or if the customer or contractor under which DBMG is a subcontractor defaults on its payment obligations, DBMG may face difficulties in collecting payment of amounts due to it for the costs previously incurred. If DBMG is unable to collect amounts owed to it, this could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG may be exposed to additional risks as it obtains new significant awards and executes its backlog, including greater backlog concentration in fewer projects, potential cost overruns and increasing requirements for letters of credit, and inability to fully realize the revenue value reported in its backlog, a substantial portion of which is attributable to a relatively small number of large contracts or other commitments, each of which could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

As DBMG obtains new significant project awards, these projects may use larger sums of working capital than other projects, and DBMG’s backlog may become concentrated among a smaller number of customers. At December 31, 2025, DBMG's backlog was $1,723.9 million, consisting of $1,713.1 million under contracts or purchase orders and $10.8 million under letters of intent or notices to proceed. Approximately $1,137.0 million, representing 66.0% of DBMG’s backlog at December 31, 2025, was attributable to five contracts, letters of intent, notices to proceed or purchase orders. If any significant projects such as these currently included in DBMG’s backlog or awarded in the future were to have material cost overruns, or be significantly delayed, modified or canceled, DBMG’s results of operations, cash flows or financial position could be adversely impacted, and backlog could decrease substantially if one or more of these projects terminate or reduce their scope.

Moreover, DBMG may be unable to replace the projects that it executes in its backlog. Additionally, as DBMG converts its significant projects from backlog into active construction, it may face significantly greater requirements for the provision of letters of credit or other forms of credit enhancements which exceed its current credit facilities. We can provide no assurance that DBMG would be able to access such capital and credit as needed or that it would be able to do so on economically attractive terms.

Commitments may be in the form of written contracts, letters of intent, notices to proceed and purchase orders. New awards may also include estimated amounts of work to be performed based on customer communication and historic experience and knowledge of our customers’ intentions. Backlog consists of projects which have either not yet been started or are in progress but are not yet complete. In the latter case, the revenue value reported in backlog is the remaining value associated with work that has not yet been completed, which increases or decreases to reflect modifications in the work to be performed under a given commitment. The revenue projected in DBMG’s backlog may not be realized or, if realized, may not be profitable as a result of poor contract terms or performance.

Due to project terminations, suspensions or changes in project scope and schedule, we cannot predict with certainty when or if DBMG’s backlog will be performed. From time to time, projects are canceled that appeared to have a high certainty of going forward at the time they were recorded as new awards. In the event of a project cancellation, DBMG typically has no contractual right to the total revenue reflected in its backlog. Some of the contracts in DBMG’s backlog provide for cancellation fees or certain reimbursements in the event customers cancel projects. These cancellation fees usually provide for reimbursement of DBMG’s out-of-pocket costs, costs associated with work performed prior to cancellation, and, to varying degrees, a percentage of the profit DBMG would have realized had the contract been completed. Although DBMG may be reimbursed for certain costs, it may be unable to recover all direct costs incurred and may incur additional unrecoverable costs due to the resulting under-utilization of DBMG’s assets.

DBMG’s failure to meet contractual schedule or performance requirements could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

In certain circumstances, DBMG guarantees project completion by a scheduled date or certain performance levels. Failure to meet these schedule or performance requirements could result in a reduction of revenue and additional costs, and these adjustments could exceed projected profit. Project revenue or profit could also be reduced by liquidated damages withheld by customers under contractual penalty provisions, which can be substantial and can accrue on a daily basis. Schedule delays can result in costs exceeding our projections for a particular project. Performance problems for existing and future contracts could cause actual results of operations to differ materially from those previously anticipated and could cause us to suffer damage to our reputation within our industry and our customer base.

DBMG’s government contracts may be subject to modification or termination, which could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG is a provider of services to U.S. government agencies and is therefore exposed to risks associated with government contracting. Government agencies typically can terminate or modify contracts to which DBMG is a party at their convenience, due to budget constraints or various other reasons. As a result, DBMG’s backlog may be reduced or it may incur a loss if a government agency decides to terminate or modify a contract to which DBMG is a party. Any changes in government capital allocations, or any under-staffing of government departments or agencies, including resulting from layoffs within the government, or any government shutdowns impacting our business interaction with affected departments or agencies, could result in delays in project awards, program cancellations, disruptions and/or stop work orders, could limit the government’s ability to effectively progress programs and make timely payments, and could limit our ability to perform on our existing government contracts and successfully compete for new work. DBMG is also subject to audits, including audits of internal control systems, cost reviews and investigations by government contracting oversight agencies. As a result of an audit, the oversight agency may disallow certain costs or withhold a percentage of interim payments. Cost disallowances may result in adjustments to previously reported revenue and may require DBMG to refund a portion of previously collected amounts. In addition, failure to comply with the terms of one or more of our government contracts or government regulations and statutes could result in DBMG being suspended or debarred from future government projects for a significant period of time, possible civil or criminal fines and penalties, the risk of public scrutiny of our performance, and potential harm to DBMG’s reputation, each of which could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition. Other remedies that government agencies may seek for improper activities or performance issues include sanctions such as forfeiture of profit and suspension of payments.

In addition to the risks noted above, legislatures typically appropriate funds on a year-by-year basis, while contract performance may take more than one year. As a result, contracts with government agencies may be only partially funded or may be terminated, and DBMG may not realize all of the potential revenue and profit from those contracts. Appropriations and the timing of payment may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures.

DBMG is exposed to potential risks and uncertainties associated with its reliance on subcontractors and third-party vendors to execute certain projects.

DBMG relies on third-party suppliers, especially suppliers of steel and steel components, and subcontractors to assist in the completion of projects. To the extent these parties cannot execute their portion of the work and are unable to deliver their services, equipment or materials according to the agreed-upon contractual terms, or DBMG cannot engage subcontractors or acquire equipment or materials, DBMG’s ability to complete a project in a timely manner may be impacted. Furthermore, when bidding or negotiating for contracts, DBMG must make estimates of the amounts these third parties will charge for their services, equipment and materials. If the amount DBMG is required to pay for third-party goods and services in an effort to meet its contractual obligations exceeds the amount it has estimated, DBMG could experience project losses or a reduction in estimated profit.

Inflation and economic uncertainty may negatively impact DBMG's business.

Inflation in the United States and worldwide has increased DBMG’s costs and may result in additional cost increases, including of steel and welding wire components and other inputs that are critical to the completion of DBMG’s projects, may cause additional shortages of supplies and components, may increase cost of borrowing, and may continue to reduce DBMG’s purchasing power, all of which would have a negative impact on DBMG’s results of operation. Due to competitive pressure and pressure from DBMG’s customers, DBMG may not be able to offset the impacts of inflation in the price of its products. Additionally, continued inflation and economic uncertainty may result in DBMG’s customers decreasing the scope, canceling, or delaying projects in process.

Any increase in the price of, or change in supply and demand for, the steel and steel components that DBMG utilizes to complete projects could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

The prices of the steel and steel components that DBMG utilizes in the course of completing projects are susceptible to price fluctuations due to supply and demand trends, duties and tariffs, energy costs, transportation costs, government regulations, changes in currency exchange rates, price controls, general economic conditions and other unforeseen circumstances. For example, the recent armed conflicts in Ukraine, the Middle East and Venezuela have resulted in significant uncertainty in the commodities markets. A prolonged conflict and any sanctions or import controls targeting the Russian oil and natural gas industries could lead to sustained increases in energy prices. Although DBMG may attempt to pass on certain of these increased costs to its customers, it may not be able to pass all of these cost increases on to its customers. As a result, DBMG’s margins may be adversely impacted by such cost increases.

In addition, changes to steel import tariffs and counter tariffs could lead to significant increases in the cost of steel. Tariffs on components that we or our suppliers import from certain nations that have, or may in the future have, tariffs may adversely affect our profitability unless we are able to exclude such components from the tariffs or we raise prices for our products, which may result in our services and products becoming less attractive relative to services and products offered by our competitors. To the extent that our sales or profitability are negatively affected by any such tariffs or other trade actions, our business and results of operations may be materially adversely affected.

DBMG’s dependence on suppliers of steel and steel components makes it vulnerable to a disruption in the supply of its products.

DBMG purchases a majority of the steel and steel components utilized in the course of completing projects from several domestic and foreign steel producers and suppliers. DBMG generally does not have long-term contracts with its suppliers. An adverse change in any of the following could have a material adverse effect on DBMG’s results of operations or financial condition:

• its ability to identify and develop relationships with qualified suppliers;

• the terms and conditions upon which it purchases products from its suppliers, including applicable exchange rates, transport costs and other costs, its suppliers’ willingness to extend credit to it to finance its inventory purchases and other factors beyond its control;

• financial condition of its suppliers;

• political instability in the countries in which its suppliers are located;

• its ability to import products;

• its suppliers’ noncompliance with applicable laws, trade restrictions and tariffs, including the imposition of or increase in tariffs,

export controls and other trade restrictions;

• its inability to find replacement suppliers in the event of a deterioration of the relationship with current suppliers; or

• its suppliers’ ability to manufacture and deliver products according to its standards of quality on a timely and efficient basis.

Intense competition in the markets DBMG serves could reduce DBMG’s market share and earnings.

The principal geographic and product markets DBMG serves are highly competitive, and this intense competition is expected to continue. DBMG competes with other contractors for commercial, industrial and specialty projects on a local, regional, or national basis. Continued service within these markets requires substantial resources and capital investment in equipment, technology and skilled personnel, and certain of DBMG’s competitors have financial and operating resources greater than DBMG. Competition also places downward pressure on DBMG’s contract prices and margins. Among the principal competitive factors within the industry are price, timeliness of completion of projects, quality, reputation, and the desire of customers to utilize specific contractors with whom they have favorable relationships and prior experience.

While DBMG believes that it maintains a competitive advantage with respect to these factors, failure to continue to do so or to meet other competitive challenges could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG’s customers’ ability to receive the applicable regulatory and environmental approvals for projects and the timeliness of those approvals could adversely affect DBMG’s business.

The regulatory permitting process for DBMG’s projects requires significant investments of time and money by DBMG’s customers and DBMG. There are no assurances that DBMG’s customers or DBMG will obtain the necessary permits for these projects. Applications for permits may be opposed by governmental entities, individuals or special interest groups, resulting in delays and possible non-issuance of the permits.

DBMG’s failure to obtain or maintain required licenses may adversely affect its business.

DBMG is subject to licensure and holds licenses in each of the states in the United States in which it operates and in certain local jurisdictions within such states. While we believe that DBMG is in material compliance with all contractor licensing requirements in the various jurisdictions in which it operates, the failure to obtain, loss or revocation of any license or the limitation on any of DBMG’s primary services thereunder in any jurisdiction in which it conducts substantial operations could prevent DBMG from conducting further operations in such jurisdiction and have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

Volatility in equity and credit markets could adversely impact DBMG due to its impact on the availability of funding for DBMG’s customers, suppliers and subcontractors.

Some of DBMG’s ultimate customers, suppliers and subcontractors have traditionally accessed commercial financing and capital markets to fund their operations, and the availability of funding from those sources could be adversely impacted by volatile equity or credit markets. The unavailability of financing could lead to the delay or cancellation of projects or the inability of such parties to pay DBMG or provide needed products or services and thereby have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG’s business may be adversely affected by bonding and letter of credit capacity.

Certain of DBMG’s projects require the support of bid and performance surety bonds or letters of credit. A restriction, reduction, or termination of DBMG’s surety bond agreements or letter of credit facilities could limit its ability to bid on new project opportunities, thereby limiting new awards, or to perform under existing awards.

DBMG is vulnerable to significant fluctuations in its liquidity that may vary substantially over time.

DBMG’s operations could require the utilization of large sums of working capital, sometimes on short notice and sometimes without assurance of recovery of the expenditures. Circumstances or events that could create large cash outflows include losses resulting from fixed-price contracts, environmental liabilities, litigation risks, contract initiation or completion delays, customer payment problems, professional and product liability claims and other unexpected costs. There is no guarantee that DBMG’s facilities will be sufficient to meet DBMG’s liquidity needs or that DBMG will be able to maintain such facilities or obtain any other sources of liquidity on attractive terms, or at all.

DBMG’s projects expose it to potential professional liability, product liability, warranty and other claims.

DBMG’s operations are subject to the usual hazards inherent in providing engineering and construction services for the construction of often large commercial industrial facilities, such as the risk of accidents, fires and explosions. These hazards can cause personal injury and loss of life, business interruptions, property damage and pollution and environmental damage. DBMG may be subject to claims as a result of these hazards. In addition, the failure of any of DBMG’s products to conform to customer specifications could result in warranty claims against it for significant replacement or rework costs, which could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

Although DBMG generally does not accept liability for consequential damages in its contracts, should it be determined liable, it may not be covered by insurance or, if covered, the dollar amount of these liabilities may exceed applicable policy limits. Any catastrophic occurrence in excess of insurance limits at project sites involving DBMG’s products and services could result in significant professional liability, product liability, warranty or other claims against DBMG. Any damages not covered by insurance, in excess of insurance limits or, if covered by insurance, subject to a high deductible, could result in a significant loss for DBMG, which may reduce its profits and cash available for operations. These claims could also make it difficult for DBMG to obtain adequate insurance coverage in the future at a reasonable cost. Additionally, customers or subcontractors that have agreed to indemnify DBMG against such losses may refuse or be unable to pay DBMG.

DBMG may experience increased costs and decreased cash flow due to compliance with environmental laws and regulations, liability for contamination of the environment or related personal injuries.

DBMG is subject to environmental laws and regulations, including those concerning emissions into the air, discharge into waterways, generation, storage, handling, treatment and disposal of waste materials and health and safety. DBMG’s fabrication business often involves working around and with volatile, toxic and hazardous substances and other highly regulated pollutants, substances or wastes, for which the improper characterization, handling or disposal could constitute violations of U.S. federal, state or local laws and regulations and laws of other countries, and result in criminal and civil liabilities. Environmental laws and regulations generally impose limitations and standards for certain pollutants or waste materials and require DBMG to obtain permits and comply with various other requirements. Governmental authorities may seek to impose fines and penalties on DBMG, or revoke or deny issuance or renewal of operating permits for failure to comply with applicable laws and regulations. DBMG is also exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes. In connection with the historical operation of our facilities, substances which currently are or might be considered hazardous may have been used or disposed of at some sites in a manner that may require us to make expenditures for remediation.

The environmental, health and safety laws and regulations to which DBMG is subject are constantly changing, and it is impossible to predict the impact of such laws and regulations on DBMG in the future. We cannot ensure that DBMG’s operations will continue to comply with future laws and regulations or that these laws and regulations will not cause DBMG to incur significant costs or adopt more costly methods of operation. Any expenditures in connection with compliance or remediation efforts or significant reductions in demand for DBMG’s services as a result of the adoption of environmental proposals could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

Additionally, the adoption and implementation of any new regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, DBMG’s customers’ equipment and operations could significantly impact demand for DBMG’s services, particularly among its customers for industrial facilities.

DBMG is and will likely continue to be involved in litigation that could have a material adverse effect on DBMG’s results of operations, cash flows or financial condition.

DBMG has been and may be, from time to time, named as a defendant in legal actions claiming damages in connection with fabrication and other products and services DBMG provides and other matters. These are typically claims that arise in the normal course of business, including employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the timely completion of projects or other issues concerning fabrication and other products and services DBMG provides. There can be no assurance that any of DBMG’s pending contractual, employment-related personal injury or property damage claims and disputes will not have a material effect on DBMG’s future results of operations, cash flows or financial condition.

Work stoppages, union negotiations and other labor problems could adversely affect DBMG’s business.

A portion of DBMG’s employees are represented by labor unions, and 23.9% of DBMG’s employees are covered under collective bargaining agreements that expire in less than one year, at which time they will be renegotiated. A lengthy strike or other work stoppage at any of its facilities could have a material adverse effect on DBMG’s business. There is inherent risk that ongoing or future negotiations relating to collective bargaining agreements or union representation may not be favorable to DBMG. From time to time, DBMG also has experienced attempts to unionize its non-union facilities. Such efforts can often disrupt or delay work and present risk of labor unrest.

DBMG’s employees work on projects that are inherently dangerous, and a failure to maintain a safe work site could result in significant losses.

DBMG often works on large-scale and complex projects, frequently in geographically remote locations. Such involvement often places DBMG’s employees and others near large equipment, dangerous processes or highly regulated materials. If DBMG or other parties fail to implement appropriate safety procedures for which they are responsible or if such procedures fail, DBMG’s employees or others may suffer injuries. In addition to being subject to state and federal regulations concerning health and safety, many of DBMG’s customers require that it meet certain safety criteria to be eligible to bid on contracts, and some of DBMG’s contract fees or profits are subject to satisfying safety criteria. Unsafe work conditions also have the potential of increasing employee turnover, project costs and operating costs. The failure to comply with safety policies, customer contracts or applicable regulations could subject DBMG to losses and liability and could result in a variety of administrative, civil and criminal enforcement measures.

Risks Related to the Life Sciences segment

Pansend’s operating results may fluctuate significantly, which makes its future operating results difficult to predict and could cause its operating results to fall below expectations.

Pansend’s quarterly and annual operating results may fluctuate significantly, which makes it difficult for Pansend to predict its future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of Pansend’s control and may be difficult to predict, including:

• the timing and cost of, and level of investment in, research, development, and commercialization activities relating to Pansend’s and its investees' product and product candidates, which may change from time to time;

• the timing of receipt of approvals or clearances for Pansend’s and its investees' product candidates from regulatory authorities in the U.S. or internationally;

• the timing and status of enrollment for Pansend’s and its investees' clinical trials; the timing and success or failure of nonclinical studies and clinical trials for Pansend’s and its investees' product candidates or competing product candidates, or any other change in the competitive landscape of the life sciences industry, including consolidation among Pansend’s and its investees' competitors or partners;

• coverage and reimbursement policies with respect to Pansend’s and its investees' product and product candidates, including the degree to which treatments using its products are covered and receive adequate reimbursement from third-party payors, and potential future drugs or devices that compete with its products, and competition in general and competitive developments in the market;

• the cost of manufacturing Pansend’s and its investees' product, as well as building out its supply chain, which may vary depending on the quantity of production and the terms of Pansend’s agreements with manufacturers;

• expenditures that Pansend and its investees may incur to acquire, develop or commercialize additional product candidates and technologies;

• the level of demand for Pansend’s and its investees' product and any product candidates, if approved or cleared, which may vary significantly over time and may experience seasonal fluctuations in demand;

• litigation, including patent, employment, securities class action, stockholder derivative, general commercial, product liability and other lawsuits or claims;

• changes in geographic, channel or product mix;

• weakness in consumer spending as a result of a slowdown in the global, U.S. or other economies;

• changes in relationships with our customers and distributors, including timing of orders; and

• our inability to scale, suspend or reduce production based on variations in product demand.

To respond to these and other factors, we may make business decisions that adversely affect our operating results such as modifications to our pricing policy, promotions, or operations. Most of our expenses, such as employee compensation, are relatively fixed in the short term. Moreover, expense levels are based, in part, on our expectations regarding future revenue levels. As a result, if our net revenues for a particular period fall below expectations, we may be unable to adjust spending quickly enough to offset any shortfall in net revenues. Due to these and other factors, we believe that quarter-to-quarter comparisons of our operating results may not be meaningful. You should not rely on our results for any one quarter as an indication of future performance.

The failure of R2 Technologies to pay its promissory note due to Lancer on August 1, 2026 or to extend or refinance such debt could have a material adverse effect on us.

On August 4, 2025, R2 Technologies amended and restated the senior secured promissory note payable by R2 Technologies to Lancer Capital, an investment fund led by Avram A. Glazer, the Chairman of the Company’s board of directors. The original principal amount of the amended and restated note was $43.5 million and the amended and rested note has an annual interest rate of 12%, or 14% upon the occurrence and during the continuation of an event of default. Accrued and unpaid interest is capitalized monthly into the principal balance. The entire outstanding principal amount of the amended and restated note, together with all accrued and unpaid interest thereon, is due and payable on the earlier to occur of (i) August 1, 2026, or (ii) the occurrence of (A) a Change of Control (as defined therein) or (B) the sale of all or substantially all of the assets of the R2 Technologies. As security for its obligations under the amended and restated note, R2 Technologies has granted Lancer Capital a first priority lien on all of its assets on the terms and subject to the conditions set forth in that Security Agreement dated as of July 13, 2022 by and between R2 Technologies and Lancer Capital and a lien on its intellectual property on the terms and subject to the conditions set forth in that Intellectual Property Security Agreement dated as of July 13, 2022 by and between R2 Technologies and Lancer Capital.

There can be no assurance that R2 Technologies will be able to pay the amended and restated promissory note when due, that it will be able to extend the maturity thereof on acceptable terms or on any terms or that it will be able to refinance the indebtedness thereunder on acceptable terms or on any terms. If R2 Technologies is unable to pay the amended and restated note when due, extend the maturity thereof or refinance its obligation thereunder, Lancer Capital would be able to exercise its remedies under the security agreements and Article 9 of the Delaware Uniform Commercial Code, including taking possession of all of the assets of R2 Technologies, selling them and applying the proceeds of the sale to satisfy the unpaid indebtedness. Any such sale would likely be a price less than the fair market value of R2 Technologies as a going concern and could materially and adversely affect our business, financial condition and results of operations.

Pansend operates in a highly competitive market, and may face competition from large, well-established medical technology, device and product manufacturers with significant resources, and may not be able to compete effectively.

The medical technology, medical device, biotechnology, and pharmaceutical industries are characterized by intense and dynamic competition to develop new technologies and proprietary therapies. Pansend faces competition from a number of sources, such as pharmaceutical companies, medical device companies, generic drug companies, biotechnology companies, and academic and research institutions. Pansend may find itself in competition with companies that have competitive advantages over us, such as:

• significantly greater name recognition;

• established relations with healthcare professionals, customers, and third-party payers;

• greater efficacy or better safety profiles;

• established distribution networks;

• additional lines of products, and the ability to offer rebates, higher discounts, or incentives to gain a competitive advantage;

• greater experience in obtaining patents and regulatory approvals for product candidates and other resources;

• greater experience in conducting research and development, manufacturing, clinical trials, obtaining regulatory approval for products, and marketing approved products; and

• greater financial and human resources for product development, sales and marketing, and patent litigation.

Pansend may also face increased competition in the future as new companies enter Pansend’s markets and as scientific developments surrounding electro-signaling therapeutics continue to accelerate. While Pansend will seek to expand its technological capabilities to remain competitive, research and development by others may render its technology or product candidates obsolete or noncompetitive or result in treatments or cures superior to any therapy developed by us. In addition, certain of Pansend’s product candidates may compete with other dermatological products, including over the counter ("OTC") treatments, for a share of some patients’ discretionary budgets and for physicians’ attention within their clinical practices. Even if a generic product or an OTC product is less effective than Pansend’s product candidates, a less effective generic or OTC product may be more quickly adopted by physicians and patients than Pansend’s competing product candidates based upon cost or convenience. As a result, Pansend may not be able to compete effectively against current and potential future competitors or their devices and products.

Pansend may rely on third parties for its sales, marketing, manufacturing and/or distribution, including delivery service providers, and these third parties may not perform satisfactorily. A disruption in the operations of our primary freight carrier or higher shipping costs could cause a decline in our net revenues or a reduction in our earnings.

To be able to commercialize Pansend’s planned products, Pansend may elect to internally develop aspects of sales, marketing, large-scale manufacturing, or distribution, or Pansend may elect to utilize third parties with respect to one or more of these items. Pansend’s reliance on these third parties may reduce its control over these activities; however, reliance on third parties does not relieve Pansend of its responsibility to ensure compliance with all required legal, regulatory, and scientific standards. Any failure of these third parties to perform satisfactorily and in compliance with relevant laws and regulations could lead to delays in the development of Pansend’s planned products, including delays in its clinical trials, or failure to obtain regulatory approval for its planned products, or failure to successfully commercialize its planned products or other future products. Some of these events could be the basis for FDA or other regulatory action, including injunction, recall, seizure, or total or partial suspension of production.

R2 Technologies depends heavily on contracted third-party delivery service providers to deliver our products to our providers and customers. Interruptions to or failures in these delivery services could prevent the timely or successful delivery of our products. These interruptions or failures may be due to unforeseen events that are beyond our control or the control of our third-party delivery service providers, such as inclement weather, natural disasters or labor unrest, among others. If our products are not delivered on time or are delivered in a damaged state, providers and customers may refuse to accept our products and have less confidence in our services, which could negatively impact our relationships with our customers and distributors, business, financial condition and results of operations.

We are dependent on commercial freight carriers to deliver our products within the United States. If the operations of these carriers are disrupted for any reason, we may be unable to timely deliver our products to our customers. If we cannot deliver our products on time and cost effectively, our customers may choose competitive offerings causing our net revenues and gross margins to decline. In a rising fuel cost environment, our freight costs will increase. If freight costs materially increase and we are unable to pass that increase along to our customers for any reason or otherwise offset such increases in costs, our gross margin and financial results could be adversely affected.

A disruption in our operations could materially and adversely affect our business.

As a company engaged in distribution, our operations, including those of our third-party suppliers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, supply chain disruptions, macroeconomic issues, environmental events, strikes and other labor disputes, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, changes in laws and regulatory requirements, as well as natural disasters, pandemics (such as the COVID-19 pandemic), border disputes, political crises, and other external factors over which we and our third-party suppliers, brokers and delivery service providers may have no control. Our ability to meet the needs of our consumers depends on the proper operation of our distribution facilities, where most of our inventory that is not in transit is housed. The loss of, or damage to, the manufacturing facilities or distribution centers of our third-party suppliers and delivery service providers could materially and adversely affect our business, financial condition and results of operations. Our insurance coverage may not be sufficient to cover the full extent of any loss or damage to our manufacturing facilities or distribution centers, and any loss, damage of or disruption to those facilities, or loss or damage of the inventory stored there, could materially and adversely affect our business, financial condition and results of operations.

Pansend may never become profitable.

To date, certain Pansend investees have not generated significant revenue and Pansend has historically relied on financing from the sale of equity securities and issuances of additional debt to fund its operations. We expect that Pansend’s future financial results will depend primarily on its success in continuing to launch, sell, and support its therapies and treatments, including R2 Technologies' Glacial systems or other products based on Pansend’s technology. Pansend expects to expend significant resources on hiring of personnel, continued scientific and product research and development, potential product testing and pre-clinical and clinical investigation, intellectual property development and prosecution, marketing and promotion, capital expenditures, working capital, general and administrative expenses, and fees and expenses associated with Pansend’s capital raising efforts. Pansend is expected to incur costs and expenses related to consulting costs, laboratory development costs, hiring of scientists, engineers, sales representatives, and other operational personnel, and the continued development of relationships with potential partners. Pansend is incurring significant operating losses, and is expected to continue to incur additional losses for the foreseeable future, and we cannot assure you that it will generate significant revenue or be profitable in the future. There are no assurances that Pansend’s future products will be cleared or approved or become commercially viable or accepted for use. Even with commercially viable applications of Pansend’s technology, which may include licensing, Pansend may never recover its research and development expenses. Investment in medical technology is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product will fail to demonstrate adequate efficacy or clinical utility. Investors should evaluate an investment in Pansend in light of the uncertainties encountered by developing medical technology companies and life sciences companies in a competitive environment. There can be no assurance that Pansend’s efforts will be successful or that it will ultimately be able to achieve profitability. Even if Pansend achieves profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.

We may not be able to successfully implement our growth strategy and we may be unable to grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

Our future growth, profitability and cash flows depend upon our ability to successfully implement our business strategy, which, in turn, is dependent upon a number of key initiatives, including our ability to: drive demand in the brand; invest in our providers; and improve productivity in our retailers, U.S. medical spa facilities and U.S. spa facilities.

There can be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect. Further, achieving these objectives will require investments that may result in short-term cost increases with net sales materializing on a longer-term horizon and therefore may be dilutive to earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations.

Growing our business will place a strain on our management team, financial and information systems, supply chain and distribution capacity and other resources. To manage growth effectively, we must continue to: enhance our operational, financial and management systems, including warehouse management and inventory control; maintain and improve internal controls, disclosure controls and procedures; maintain and improve information technology systems and procedures; and expand, train and manage our employee base. We may not be able to effectively manage our expansion in any one or more of these areas, and any failure to do so could significantly harm our business, financial condition and results of operations. Growing our business may make it difficult for us to adequately predict the expenditures we will need to make in the future. If we do not make the necessary overhead expenditures to accommodate our future growth, we may be unsuccessful in executing our growth strategy and our results of operations could suffer.

R2 Technologies' success depends upon customer demand and patient satisfaction with its procedures.

R2 Technologies’ procedures are elective aesthetic procedures, the cost of which must be borne by the patient and is generally not covered by or reimbursable through government or private health insurance. In order to generate repeat and referral business, patients must be satisfied with the effectiveness of the procedures conducted using R2’s systems. The decision to undergo one of R2 Technologies’ procedures is, thus, driven by patient demand, which may be influenced by a number of factors, such as:

• the success of R2 Technologies’ sales and marketing programs;

• the extent to which R2 Technologies’ physician customers recommend its procedures to their patients;

• the extent to which R2 Technologies’ procedures satisfy patient expectations;

• R2 Technologies’ ability to properly train its physician customers in the use of its systems so that their patients do not experience excessive discomfort during treatment or adverse side effects;

• the cost, safety, and effectiveness of R2 Technologies’ systems versus other aesthetic treatments;

• consumer sentiment about the benefits and risks of aesthetic procedures generally and R2 Technologies’ systems in particular;

• the success of any direct-to-consumer marketing efforts R2 Technologies may initiate; and

• general consumer confidence, which may be impacted by economic and political conditions outside of R2 Technologies’ control.

R2 Technologies’ financial performance will be negatively impacted in the event it cannot generate significant patient demand for procedures performed with its systems.

Demand for our products may not increase as rapidly as we anticipate due to a variety of factors, including a weakness in general economic conditions and resistance to non-traditional treatment methods.

Consumer spending habits are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, consumer confidence and consumer perception of economic conditions. A general slowdown in the U.S. economy and certain international economies or an uncertain economic outlook could adversely affect consumer spending habits which may, among other things, result in reduced patient traffic in dermatology or internal medicine offices and in medical spa facilities and spa facilities, a reduction in consumer spending on elective, non-urgent or higher value treatments, such as those offered by our providers, or a reduction in the demand for aesthetic services generally, each of which could have a material adverse effect on our sales and operating results. Weakness in the global economy results in a challenging environment for selling aesthetic technologies and doctors or estheticians may postpone investments in capital equipment, such as our Glacial systems. Increased market acceptance of our products and treatments will depend in part upon the recommendations of medical and aesthetics professionals, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics and price compared to competing products and treatment methods.

Pansend’s failure to obtain or maintain necessary FDA or foreign market clearances and approvals, or to maintain continued clearances, or equivalents thereof in the U.S. and relevant foreign markets, could hurt its ability to distribute and market its products.

In both Pansend’s U.S. and foreign markets, Pansend is affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the U.S. and at analogous levels of government in foreign jurisdictions. In addition, the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of Pansend’s products are subject to extensive regulation by various federal agencies, including, but not limited to, the FDA and the FTC, State Attorneys General in the U.S., as well as by various other federal, state, local and international regulatory authorities in the countries in which Pansend’s products are manufactured, distributed or sold. If Pansend or its manufacturers fail to comply with those regulations, Pansend could become subject to significant penalties or claims, which could harm its results of operations or its ability to conduct its business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketing of its products, resulting in significant loss of net sales.

Pansend’s failure to comply with federal or state regulations, or with regulations in foreign markets that cover its product claims and advertising, including direct claims and advertising by us, may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of its products. Each medical device that Pansend wishes to market in the U.S. must first receive either 510(k) clearance or premarket approval ("PMA") from the FDA unless an exemption applies. Either process can be lengthy and expensive. The FDA's 510(k) clearance process may take from three to twelve months, or longer, and may or may not require human clinical data. The PMA process is much more costly and lengthy. It may take from eleven months to three years, or even longer, and will likely require significant supporting human clinical data. Delays in obtaining regulatory clearance or approval could adversely affect Pansend’s revenues and profitability.

R2 Technologies has obtained 510(k) clearances for its Glacial Rx system for various uses, including, but not limited to: the removal of benign lesions of the skin; the use of cooling technologies intended for the temporary reduction of pain; swelling; inflammation; hematoma for minor surgical procedures; general dermabrasion; scar revision; acne scar revision; tattoo removal; and minimization of pain, inflammation and thermal injury during laser and dermatological treatments. However, these approvals and clearances may be subject to revocation if post-marketing data demonstrates safety issues or lack of effectiveness. Many medical devices, such as medical lasers, are also regulated by the FDA as “electronic products.” In general, manufacturers and marketers of “electronic products” are subject to certain FDA regulatory requirements intended to ensure the radiological safety of the products. These requirements include, but are not limited to, filing certain reports with the FDA about the products and defects/safety issues related to the products as well as complying with radiological performance standards.

The medical device industry is now experiencing greater scrutiny and regulation by federal, state and foreign governmental authorities. Companies in the life sciences industry are subject to more frequent and more intensive reviews and investigations, often involving the marketing, business practices, and product quality management. Such reviews and investigations may result in civil and criminal proceedings; the imposition of substantial fines and penalties; the receipt of warning letters, untitled letters, demands for recalls or the seizure of Pansend’s products; the requirement to enter into corporate integrity agreements, stipulated judgments or other administrative remedies, and result in Pansend’s incurring substantial unanticipated costs and the diversion of key personnel and management’s attention from their regular duties, any of which may have an adverse effect on Pansend’s financial condition, results of operations and liquidity, and may result in greater and continuing governmental scrutiny of Pansend’s business in the future.

Additionally, federal, state and foreign governments and entities have enacted laws and issued regulations and other standards requiring increased visibility and transparency of Pansend’s interactions with healthcare providers. For example, the U.S. Physician Payment Sunshine Act, now known as Open Payments, requires Pansend to report to the Centers for Medicare & Medicaid Services, or CMS, payments and other transfers of value to all U.S. physicians and U.S. teaching hospitals, with the reported information made publicly available on a searchable website. Failure to comply with these legal and regulatory requirements could impact Pansend’s business, and it has had and will continue to spend substantial time and financial resources to develop and implement enhanced structures, policies, systems and processes to comply with these legal and regulatory requirements, which may also impact Pansend’s business and which could have a material adverse effect on its business, financial condition, and results of operations.

International regulatory approval processes may take more or less time than the FDA clearance or approval process. If Pansend fails to comply with applicable FDA and comparable non-U.S. regulatory requirements, it may not receive regulatory clearances or approvals or may be subject to FDA or comparable non-U.S. enforcement actions. Pansend may be unable to obtain future regulatory clearance or approval in a timely manner, or at all, especially if existing regulations are changed or new regulations are adopted. For example, the FDA clearance or approval process can take longer than anticipated due to requests for additional clinical data and changes in regulatory requirements. A failure or delay in obtaining necessary regulatory clearances or approvals would materially adversely affect Pansend’s business, financial condition, and results of operations. Further, more stringent regulatory requirements or safety and quality standards may be issued in the future with an adverse effect on Pansend’s business.

Pansend’s customers, or physicians, aestheticians and technicians, as the case may be, may misuse certain of its products, and product liability lawsuits and other damages imposed on Pansend may have a material adverse impact on its business.

Pansend faces an inherent risk of product liability as a result of the marketing and sale of its products. For example, Pansend may be sued if its products cause or are perceived to cause injury or are found to be otherwise unsuitable during manufacturing, marketing or sale. Any such product liability claim may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or breach of warranty. Pansend’s products are highly complex, and some are used to treat delicate skin conditions on and near a patient's face. In addition, the clinical testing, manufacturing, marketing and use of certain of Pansend’s products and procedures may also expose Pansend to product liability, FDA regulatory and/or legal actions, or other claims. If a physician elects to apply an off-label use and the use leads to injury, Pansend may be involved in costly litigation. In addition, the fact that Pansend trains technicians whom it does not supervise in the use of the Glacial Rx system during patient treatment may expose Pansend to third-party claims if it is accused of providing inadequate training. Pansend may also be subject to claims against it even if the apparent injury is due to the actions of others or the pre-existing health of the patient. For example, Pansend relies on physicians in connection with the use of its products on patients. If these physicians are not properly trained or are negligent, the capabilities and safety features of Pansend’s products may be diminished or the patient may suffer critical injury. Pansend may also be subject to claims that are caused by the actions of Pansend’s suppliers, such as those who provide it with components and sub-assemblies. A product liability claim or product recall may result in losses that could result in the FDA taking legal or regulatory enforcement action against Pansend and/or Pansend’s products including recall, and could have a material adverse effect upon Pansend’s business, financial condition and results of operations.

If we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely affected.

Our business requires us to manage inventory effectively. We depend on our forecasts of demand for, and popularity of, various products to make purchase decisions and to manage our inventory of stock-keeping units. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. Demand may be affected by seasonality, rapid changes in product pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products, competitors’ product launches, and other factors, and our consumers may not purchase products in the quantities that we expect. It may be difficult to accurately forecast demand and determine appropriate levels of product or components. If we fail to manage our inventory effectively we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, if we are required to lower sale prices to reduce inventory level or to pay higher prices to our suppliers, our profit margins might be negatively affected. Any of the above may materially and adversely affect our business, financial condition and results of operations.

Pansend has limited experience in manufacturing its products in large-scale commercial quantities and may face manufacturing risks, including an inability to scale, suspend or reduce production based on variations in product demand, that may adversely affect its ability to manufacture products and could reduce its gross margins and negatively affect its business and operating results.

Pansend’s success depends, in part, on its ability to manufacture its current and future products in sufficient quantities and on a timely basis to meet demand, while adhering to product quality standards, complying with regulatory quality system requirements and managing manufacturing costs. For example, R2 Technologies' third-party contract manufacturer has a manufacturing facility located in Sunnyvale, California where they produce, package and warehouse the Glacial Rx, Glacial fx and Glacial Spa systems. R2 Technologies also relies on a global third-party manufacturer for production of some of the components used in the Glacial Rx and Glacial fx/Spa systems. If R2 Technologies' facility, or the facilities of its third-party contract manufacturers, suffer damage, or a force majeure event, this could materially impact R2 Technologies' ability to operate.

Pansend is also subject to other risks relating to its manufacturing capabilities, including:

• quality and reliability of components, sub-assemblies and materials that Pansend sources from third-party suppliers, who are required to meet Pansend’s quality specifications, some of whom are Pansend’s single-source suppliers for the products they supply;

• failure to secure raw materials, components and materials in a timely manner, in sufficient quantities or on commercially reasonable terms;

• inability to secure raw materials, components and materials of sufficient quality to meet the exacting needs of medical device manufacturing;

• failure to maintain compliance with quality system requirements or pass regulatory quality inspections;

• inability to increase, suspend or reduce production capacity or volumes to meet demand; and

• inability to design or modify production processes to enable Pansend to produce future products efficiently or implement changes in current products in response to design or regulatory requirements.

These risks could be exacerbated by Pansend’s limited experience as an entity with large-scale commercial manufacturing. As demand for Pansend’s products increases, Pansend will have to invest additional resources to purchase raw materials and components, sub-assemblies and materials, hire and train employees and enhance Pansend’s manufacturing processes. If Pansend fails to increase Pansend’s production capacity efficiently to meet demand for its products, it may not be able to fill customer orders on a timely basis, its sales may not increase in line with Pansend’s expectations and Pansend’s operating margins could fluctuate or decline. It may not be possible for Pansend to manufacture Pansend’s products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins, all of which could have a material adverse effect on Pansend’s business, financial condition and results of operations.

There is a limited talent pool of experienced professionals in the life sciences industry. If Pansend is not able to retain and recruit personnel with the requisite technical skills, it may be unable to successfully execute Pansend’s business strategy.

The specialized nature of Pansend’s industry results in an inherent scarcity of experienced personnel in the field. Pansend’s future success depends upon Pansend’s ability to attract and retain highly skilled personnel, including scientific, technical, commercial, business, regulatory and administrative personnel, necessary to support Pansend’s anticipated growth, develop Pansend’s business and perform certain contractual obligations. Given the scarcity of professionals with the scientific knowledge that Pansend requires and the competition for qualified personnel among life sciences businesses, Pansend may not succeed in attracting or retaining the personnel Pansend requires to continue and grow its operations.

Rapidly changing technology in life sciences could make the products Pansend is developing obsolete.

The life sciences industries are characterized by rapid and significant technological changes, frequent new product introductions and enhancements, and evolving industry standards. Pansend’s future success will depend on Pansend’s ability to continually develop and then improve the products that Pansend designs and to develop and introduce new products that address the evolving needs of Pansend’s customers on a timely and cost- effective basis. Pansend also will need to pursue new market opportunities that develop as a result of technological and scientific advances. These new market opportunities may be outside the scope of Pansend’s proven expertise or in areas which have unproven market demand. Any new products developed by Pansend may not be accepted in the intended markets. Pansend’s inability to gain market acceptance of new products could harm Pansend’s future operating results.

If Pansend is unable to effectively protect its intellectual property, it may not be able to operate its business, and third parties may be able to use and profit from its technology, both of which would impair Pansend’s ability to be competitive.

Pansend’s success will be heavily dependent on its ability to obtain and maintain meaningful patent protection for Pansend’s technologies and products throughout the world. Patent law relating to the scope of claims in the technology fields in which Pansend will operate is still evolving. The amount of ongoing protection for Pansend’s proprietary rights, therefore, is uncertain. Pansend will rely on patents to protect a significant part of Pansend’s intellectual property and to enhance Pansend’s competitive position. However, Pansend’s pending or future patent applications may be denied, and any patent previously issued to Pansend or Pansend’s subsidiaries may be challenged, invalidated, held unenforceable or circumvented. In particular, R2 Technologies filed a patent application with the U.S. Patent and Trademark Office for a commercial patent that covers the Glacial Rx System, U.S. Patent No. 9522031 through 2029, with additional issued patents or patent applications that, once allowed, will protect coverage through 2042. Furthermore, the patent protections Pansend has been granted may not be broad enough to prevent competitors from producing products similar to Pansend's. In addition, the laws of various foreign countries in which Pansend may compete, such as China, may not protect Pansend’s intellectual property to the same extent as the laws of the United States. If Pansend fails to obtain adequate patent protection for Pansend’s proprietary technology, Pansend’s ability to be commercially competitive will be materially impaired. In the ordinary course of business and as appropriate, Pansend intends to apply for additional patents covering both Pansend’s technologies and products, as it deems appropriate. Pansend’s existing patents and any future patents it obtains may not be sufficiently broad to prevent others from making use of technologies or developing competing products and technologies. In addition, because patent law is evolving in the life sciences industry, the patent positions of companies like ours are uncertain. As a result, the validity and enforceability of Pansend’s patents cannot be predicted with certainty.

If third parties make claims of intellectual property infringement against Pansend, or otherwise seek to establish their intellectual property rights equal or superior to Pansend’s, it may have to spend time and money in response and potentially discontinue certain of Pansend’s operations.

While Pansend currently does not believe it to be the case, third parties may claim that Pansend is employing their proprietary technology without authorization or that Pansend is infringing on their patents. If such claims were made, Pansend could incur substantial costs coupled with diversion of Pansend’s management and key technical personnel in defending against these claims. Furthermore, parties making claims against Pansend may be able to obtain injunctive or other equitable relief which could effectively halt Pansend’s ability to further develop, commercialize and sell products. In the event of a successful claim of infringement, courts may order Pansend to pay damages and obtain one or more licenses from third parties. Pansend may not be able to obtain these licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any of these licenses could prevent Pansend from commercializing available products and have a material negative effect on Pansend’s business.

Therapies targeted by Scaled Cell represent a novel approach toward treatment of certain diseases. Increased regulatory scrutiny or negative perception of certain therapies or treatments could adversely affect our business. Patients receiving CAR-T therapies or other treatment may experience severe adverse events, which may affect clinical development, regulatory approval, and public perception.

Scaled Cell is currently targeting chimeric antigen receptor CAR-T cell therapy which uses immune cells called T cells that are genetically altered in a lab to enable them in locating and destroying cancer cells more effectively. Cellular therapies like CAR-T remain novel, have caused severe side effects, including death, and may not gain widespread acceptance by the public or the medical community. Additionally, adverse events in clinical trials of Scaled Cell candidates or in other companies’ clinical trials could result in a decrease in demand for products developed by Scaled Cell. Advancing CAR-T therapy creates other challenges, including those related to the manufacturing, sourcing, licensing, education, and regulation of such therapies. Additionally, responses by the FDA or other federal and state agencies to negative public perception or ethical concerns could result in increased regulation or legislation of CAR-T therapies.

Certain product candidates of Scaled Cell may have serious and potentially fatal consequences. Developments of similarly designed therapies have experienced events related to neurotoxicity and cytokine release syndrome (CRS). There is a possibility that Scaled Cell could have similarly life threatening or serious adverse side effects.

Risks related to the Spectrum segment

Our broadcasting business operates in highly competitive markets and our ability to maintain market share and generate operating revenues depends on how effectively we compete with existing and new competition.

Spectrum's broadcast stations compete for audiences and advertising revenue with other broadcast stations as well as with other media such as the Internet and radio. Broadcasting also faces competition from (i) local free OTA broadcast television and radio stations; (ii) telecommunication companies; (iii) cable and satellite system operators and cable networks; (iv) print media providers such as newspapers, direct mail and periodicals; (v) internet search engines, internet service providers, websites, and mobile applications; (vi) viewers moving to programming alternatives and alternate media content providers, a process known as "cord cutting"; and (vii) other emerging technologies including mobile television. Some of Broadcasting's current and potential competitors have greater financial and other resources than Broadcasting does and so may be better placed to extend audience reach and expand programming. Many of Broadcasting’s competitors possess greater access to capital, and its financial resources may be relatively limited when contrasted with those of such competitors. If Broadcasting needs to obtain additional funding, Broadcasting may be unable to raise such capital or, if Broadcasting is able to obtain capital it may be on unfavorable terms. If Broadcasting is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing and expansion efforts and, if it continues to experience losses, potentially cease operations.

In addition, broadcast consumers’ desire for control over their viewing experience and the methods by which they consume content continue to evolve rapidly. Consumers are also increasingly using services with time-shifting or advertisement-skipping capability, or with reduced or no advertising at all. These shifts in consumer behavior create challenges with respect to maintaining predictable broadcasting revenue, and substantial adoption of alternative technologies could negatively affect our overall broadcasting business. Also, a slowing adoption of the ATSC 3.0 standards, as well as potential barriers related to an industry shift to next-generation telecommunications technologies, such as 5G and datacasting may lead to an unpredictable landscape for the broadcasting industry.

Cable companies and others have developed national advertising networks in recent years that increase the competition for national advertising. Over the past decade, cable television programming services, other emerging video distribution platforms and the Internet have captured increasing market share. Cable providers, direct broadcast satellite companies and telecommunication companies are developing new technology that allows them to transmit more channels on their existing equipment to highly targeted audiences, reducing the cost of creating channels and potentially leading to the division of the television industry into ever more specialized niche markets. The decreased cost of creating channels may also encourage new competitors to enter Broadcasting's markets and compete with us for advertising revenue. In addition, technologies that allow viewers to digitally record, store and play back television programming may decrease viewership of commercials as recorded by media measurement services and, as a result, lower Spectrum's advertising revenues. Furthermore, technological advancements and the resulting increase in programming alternatives, such as cable television, direct broadcast satellite systems, pay-per-view, home video and entertainment systems, video-on-demand, mobile video and the Internet have also created new types of competition to television broadcast stations and will increase competition for household audiences and advertisers. We cannot provide any assurances that we will remain competitive with these developing technologies and our inability to successfully respond to new and growing sources of competition in the broadcasting industry could have an adverse effect on Broadcasting's business, financial condition and results of operations.

The FCC could implement regulations or the U.S. Congress could adopt legislation that might have a significant impact on the operations of the stations we own and the stations we provide services to or the television broadcasting industry as a whole.

The FCC regulates Broadcasting's broadcasting business. We must often times obtain the FCC’s approval to obtain, renew, assign or modify, a license, purchase a new station, sell an existing station or transfer the control of one of Broadcasting's subsidiaries that hold a license. Broadcasting's FCC licenses are critical to Broadcasting's operations; we cannot operate without them. We cannot be certain that the FCC will renew these licenses in the future or approve new acquisitions in a timely manner, if at all. If licenses are not renewed or acquisitions are not approved, we may lose revenue that we otherwise could have earned and this would have an adverse effect on Broadcasting's business, financial condition and results of operations.

In addition, Congress and the FCC may, in the future, adopt new laws, regulations and policies regarding a wide variety of matters (including, but not limited to, technological changes in spectrum assigned to particular services) that could, directly or indirectly, materially and adversely affect the operation and ownership of Broadcasting's broadcast properties.

Broadcasting Licenses are issued by, and subject to the jurisdiction of the FCC, pursuant to the Communications Act of 1934, as amended (the "Communications Act"). The Communications Act empowers the FCC, among other actions, to issue, renew, revoke and modify broadcasting licenses; determine stations’ frequencies, locations and operating power; regulate some of the equipment used by stations; adopt other regulations to carry out the provisions of the Communications Act and other laws, including requirements affecting the content of broadcasts; and to impose penalties for violation of its regulations, including monetary forfeitures, short-term renewal of licenses and license revocation or denial of license renewals. Any of these actions imposed by the FCC could result in the loss of station licenses or assets.

License Renewals.  Broadcast television licenses are typically granted for standard terms of eight years. Most licenses for commercial and noncommercial TV broadcast stations, Class A TV broadcast stations, television translators and LPTV broadcast stations have expirations between 2028 and 2031; however, the Communications Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity and, with respect to the station, there have been no serious violations by the licensee of either the Communications Act or the FCC’s rules and regulations and there have been no other violations by the licensee of the Communications Act or the FCC’s rules and regulations that, taken together, constitute a pattern of abuse. The Company had no pending renewal applications at the end of 2025, and will have no applications due in 2026. Third parties may oppose license renewals. A station remains authorized to operate while its license renewal application is pending.

License Assignments.  The Communications Act requires prior FCC approval for the assignment or transfer of control of an FCC licensee. Third parties may oppose the Company’s applications to assign, transfer or acquire broadcast licenses.

Full Power and Class A Station Regulations. The Communications Act and FCC rules and regulations limit the ability of individuals and entities to have certain official positions or ownership interests, known as "attributable" interests, above specific levels in full power broadcast stations as well as in other specified mass media entities. Many of these limits do not apply to Class A stations, television translators and LPTV authorizations. In seeking FCC approval for the acquisition of a broadcast television station license, the acquiring person or entity must demonstrate that the acquisition complies with applicable FCC ownership rules or that a waiver of the rules is in the public interest. Additionally, while the Communications Act and FCC regulations have been modified to no longer strictly prohibit ownership of a broadcast station license by any corporation with more than 25 percent of its stock owned or voted by non-U.S. persons, their representatives or any other corporation organized under the laws of a foreign country, foreign ownership above such threshold is determined by the FCC on a case-by-case basis, which analysis is subject to the specific circumstances of each such request. The FCC has also adopted regulations concerning children’s television programming, commercial limits, local issues and programming, political files, sponsorship identification, equal employment opportunity requirements and other requirements for full power and Class A broadcast television stations. The FCC’s rules require operational full-power and Class A stations to file quarterly reports demonstrating compliance with these regulations.

LPTV and TV Translator Authorizations.  LPTV stations and TV Translators have "secondary spectrum priority" to full-service television stations. The secondary status of these authorizations prohibits LPTV and TV Translator stations from causing interference to the reception of existing or future full-service television stations and requires them to accept interference from existing or future full-service television stations and other primary licensees. LPTV and TV Translator licensees are subject to fewer regulatory obligations than full-power and Class A licensees, and there no limit on the number of LPTV stations that may be owned by any one entity.

Obscenity and Indecency Regulations. Federal law and FCC regulations prohibit the broadcast of obscene material on television at any time and the broadcast of indecent material between the hours of 6:00 a.m. and 10:00 p.m. local time. The FCC investigates complaints of broadcasts of prohibited obscene or indecent material and can assess fines of up to $0.35 million per incident for violation of the prohibition against obscene or indecent broadcasts and up to $3.3 million for any continuing violation based on any single act or failure to act. The FCC may also revoke or refuse to renew a broadcast station license based on a serious violation of the agency’s obscenity and indecency rules.

Continued uncertain financial and economic conditions may have an adverse impact on our business, results of operations or financial condition.

Financial and economic conditions continue to be uncertain over the longer term and the continuation or worsening of such conditions could reduce consumer confidence and have an adverse effect on our business, results of operations and/or financial condition. If consumer confidence were to decline, this decline could negatively affect our advertising customers’ businesses and their advertising budgets. In addition, volatile economic conditions could have a negative impact on our industry or the industries of our customers who advertise on our stations, resulting in reduced advertising sales. Furthermore, it may be possible that actions taken by any governmental or regulatory body for the purpose of stabilizing the economy or financial markets will not achieve their intended effect. In addition to any negative direct consequences to our business or results of operations arising from these financial and economic developments, some of these actions may adversely affect financial institutions, capital providers, advertisers or other consumers on whom we rely, including for access to future capital or financing arrangements necessary to support our business. Our inability to extend or obtain financing in amounts and at times necessary could make it more difficult or impossible to meet our obligations or otherwise take actions in our best interests.

Certain stations are also benefiting from our retransmission consent agreements with multichannel video programming distributors ("MVPDs"), and we cannot predict the outcome of potential regulatory changes to the retransmission consent regime.

Certain stations are also benefiting, although in very few instances on a small number of stations, on retransmission consent agreements. Our current retransmission consent agreements expire at various times over the next several years. No assurances can be provided that we will be able to renegotiate all of such agreements on favorable terms, on a timely basis, or at all. The failure to renegotiate such agreements could have no material adverse effect on our business and results of operations.

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 our consolidated annual 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. 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 and Our Operations

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

Cyclical Patterns

Our segments' operations can be highly cyclical. Our volume of business in our Infrastructure segment may be adversely affected by declines or delays in projects, which may vary by geographic region. Project schedules, particularly in connection with large, complex, and longer-term projects can also create fluctuations in the services provided, which may adversely affect us in any given period.

For example, in connection with larger, more complicated projects, the timing of obtaining permits and other approvals may be delayed, and we may need to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on such projects when they move forward.

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

Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

Recent Developments

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

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

Debt Obligations and Financing

During 2025, we refinanced our debt, including at the Corporate and subsidiary level. This financing helped us provide needed capital for our operations and the operations of our subsidiaries, and the refinancing of the debt, which, among other things, extended the maturities of the debt, allows us to continue to pursue our strategic plans.

Infrastructure

On May 20, 2025, DBMG entered into an Amended and Restated Credit agreement (the "DBMG Credit Agreement"), with the lenders which are party thereto from time to time (each a “Lender” and collectively the “Lenders”) and UMB BANK, N.A. ("UMB"). The DBMG Credit Agreement provides DBMG with senior secured debt financing in an amount up to $220.0 million in the aggregate, consisting of (i) a senior secured revolving credit facility (the “DBMG Revolving Facility”) in an aggregate amount of $135.0 million and (ii) a senior secured term loan facility in the amount of $85.0 million. The DBMG Credit Agreement also contains an accordion feature to increase the allowable size of the DBMG Revolving Facility by an additional $50.0 million. The DBMG Revolving Facility and term loan facility will mature on May 20, 2030. DBMG entered into the DBMG Credit Agreement to fully repay DBMG’s existing debt obligations and provide additional working capital capacity. Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

As of December 31, 2025, DBMG had a total outstanding balance of $15.0 million under its new revolving facility and the effective interest rate on DBMG's revolving loans was 6.80%. Interest on the new revolving facility is paid monthly, and the new revolving facility has an unused commitment fee of 0.50% per annum times the average daily unused availability under the line. As of December 31, 2025, the total outstanding balance of DBMG's term loan was $72.6 million. Principal payments and interest on DBMG's term loan are paid monthly, and the effective interest rate was 7.4% as of December 31, 2025.

The indenture governing INNOVATE’s 2027 Senior Secured Notes required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, such that by September 1, 2025 we needed to have a bona fide bid or term sheet related to a potential sale, a fully executed purchase or equity agreement by November 1, 2025, and an executed transaction with applied proceeds to the 2027 Senior Secured Notes Indenture no later than February 1, 2026, and in the event of the failure to achieve these milestones, the mandatory commencement of a sales process for DBMG. We did not achieve these milestones and accordingly we have commenced a sales process for DBMG.

The covenants contained in the DBMG Credit Agreement contain a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of our Infrastructure segment's debt in the future upon certain events, including a sale of DBMG. Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Life Sciences

On August 4, 2025, Lancer Capital, a related party, and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note, which was previously amended multiple times, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The amended note has an interest rate of 12% and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance.

The total new initial principal amount of the amended note on August 4, 2025 was $43.5 million, which incorporated the $20.0 million principal amount of the note as previously amended effective January 31, 2024 (which was comprised of a principal amount of $17.4 million and unpaid accrued interest of $2.6 million), accrued interest of $7.0 million and $16.5 million in accrued exit fees which had been incurred from January 31, 2024 through August 4, 2025. In addition, a new 5% extension fee of $2.2 million was capitalized into the principal amount on August 4, 2025. The amended note had a principal balance of $47.9 million as of December 31, 2025.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on the note and its various amendments.

During the year ended December 31, 2025, Pansend closed on several intercompany convertible 13.0% note instruments with R2 Technologies, and funded a total of $7.5 million to R2 Technologies. The outstanding principal amounts of the notes, together with any interest then accrued and unpaid, is convertible at the option of Pansend into shares of a new Series E Convertible Preferred Stock ("Series E") or new Series F Convertible Preferred Stock ("Series F") in R2 Technologies, as applicable to each note, upon written notice to R2 Technologies and the notes have a maturity date, of the earlier of July 31, 2026, or a change in control of R2 Technologies, as defined in the notes. These notes and related intercompany interest are eliminated on consolidation. Subsequent to year end, in February and March 2026, an additional $0.3 million in intercompany convertible 13.0% notes with R2 Technologies was funded. Refer to Note 16. Equity and Temporary Equity to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on R2 Technologies' convertible preferred stock and convertible notes.

Spectrum

On August 4, 2025, Spectrum entered into a Tenth Omnibus Amendment to Secured Notes and Limited Consent to MSD Secured Note and Intercreditor Agreement with the note holders of Spectrum’s $69.7 million 8.50% and 11.45% Notes (the “Spectrum Notes”) to, among other things, extend the maturity of such notes from August 15, 2025 to September 30, 2026 (the “Spectrum Notes Extension”). Interest is payable upon maturity of the notes. As a result of Spectrum Notes Extension, additional exit fees of $9.9 million were incurred. The total exit fees associated with the notes of $25.8 million is payable on the earlier of maturity or repayment of the principal, and is reflected within Accrued liabilities in the Consolidated Balance Sheet as of December 31, 2025.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on our Spectrum debt.

Non-Operating Corporate

In August 2025, the Company closed on a series of indebtedness refinancing transactions that extended certain of INNOVATE's debt maturities. These refinancing transactions included: (i) the closings of an exchange offer and consent solicitation with respect to the Company’s senior secured notes; (ii) privately negotiated exchanges of certain of the Company’s convertible senior notes; (iii) amendment and extension of the Company’s 2020 Revolving Credit Agreement to September 15, 2026; and (iv) amendment and extension of the Company’s CGIC note to April 30, 2027, as well as the exchange of a portion of the Company’s preferred stock held by CGIC and accrued preferred stock dividends in exchange for increasing the principal amount of that note (the "Preferred Stock Exchange")

The Company issued $360.4 million aggregate principal amount of 10.50% 2027 Senior Secured Notes as consideration for the exchange of $328.1 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes. The new principal amounts also include fees payable to the lenders and amounts in lieu of interest payments in respect of the 8.50% 2026 Senior Secured Notes that were due August 1, 2025. The 10.50% 2027 Senior Secured Notes mature on February 1, 2027 and accrue interest at a rate of 10.50% per year, payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. For the first interest period only, interest has been paid in kind. All subsequent interest payments are payable in cash.

The Company exchanged $48.7 million of aggregate principal amount of the 2026 Convertible Notes for $53.5 million aggregate principal amount of newly issued 9.5% Convertible Senior Secured Notes due 2027 (the “2027 Convertible Notes”). The new principal amounts also include fees payable to the lenders and amounts in lieu of interest payments in respect of the 2026 Convertible Notes that were due on August 1, 2025. The 2027 Convertible Notes mature on March 1, 2027 and interest on the 2027 Convertible Notes is paid semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. For the first interest period only, interest has been paid in kind. All subsequent interest payments are payable in cash.

The amended CGIC Note has a fixed interest rate of 16.0%. Interest on the amended CGIC Note will be paid on a monthly basis and in kind through August 31, 2026. All interest payments thereafter will be payable in cash, in arrears. The additional principal amount incurred under the Preferred Stock Exchange was $9.6 million (reflective of the $9.1 million accrued value of the Series A-4 Preferred Stock and $0.5 million in accrued dividends on the Series A-3 and A-4 Preferred Stock). In addition, an extension fee and accrued interest of $2.4 million on the CGIC Note through July 31, 2025, were capitalized to the new principal amount of the CGIC Note, for a total new aggregate outstanding principal amount of $43.0 million. As of December 31, 2025, the total carrying amount related to the CGIC Note was $46.8 million, inclusive of $45.9 million of principal (including capitalized interest), and a net unamortized premium of $0.9 million.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on our Non-Operating Corporate segment debt.

Equity Method Investments

MediBeacon

On January 17, 2025, MediBeacon received approval from the U.S. Food and Drug Administration ("FDA") for its Transdermal GFR Measurement System ("TGFR"). Pursuant to the terms of MediBeacon's convertible notes, upon the FDA approval, Pansend's convertible notes of $11.4 million and the related accrued interest of $1.5 million, together totaling $12.9 million, were converted into Series 3 Preferred Stock. In addition, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $7.5 million milestone payment from Huadong Medicine Co. Ltd ("Huadong"), a publicly traded company on the Shenzhen Stock Exchange, to MediBeacon for MediBeacon preferred stock was received in the first quarter of 2025. As a result of these transactions, Pansend's ownership in MediBeacon decreased from 45.9% prior to the transactions to 44.7% subsequent to the transactions. On a fully diluted basis, Pansend's ownership in MediBeacon decreased from 40.1% prior to the transactions to 39.7% subsequent to the transactions. Refer to Note 6. Investments, which is incorporated herein by reference, for additional information.

In February 2025, China's National Medical Products Administration (“NMPA”) approved MediBeacon's TGFR Monitor and TGFR Sensor. Full regulatory approval from China's NMPA occurred in October 2025, following its approval for the categorization of the Lumitrace (relmapirazin) injection as a drug in China.

On December 16, 2025, MediBeacon received approval from the FDA for its next generation MediBeacon TGFR System including the latest TGFR Reusable Sensor. The latest TGFR Reusable Sensor has been designed for patient comfort, ease of application, and reusability. It also lowers the cost compared to the single use TGFR Sensor previously approved by the FDA.

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, 2025, as compared to the year ended December 31, 2024.

Results of Operations

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

Year Ended December 31,

Increase / (Decrease)

Revenue

Infrastructure

Life Sciences

Spectrum

Total revenue

Income (loss) from operations

Infrastructure

Life Sciences

Spectrum

Other

Non-Operating Corporate

Total income from operations

Interest expense

Loss from equity investees

Other income, net

Loss from operations before income taxes

Income tax expense

Net loss

Net loss attributable to non-controlling interests and redeemable non-controlling interests

Net loss attributable to INNOVATE Corp.

Less: Preferred stock dividends

Net loss attributable to common stockholders and participating preferred stockholders

Revenue : Revenue for the year ended December 31, 2025, increased $138.9 million to $1,246.0 million from $1,107.1 million for the year ended December 31, 2024. The increase was primarily driven by our Infrastructure segment, and to a lesser extent our Life Sciences segment, which was partially offset by a decrease at our Spectrum segment. The increase at our Infrastructure segment was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable year on certain large commercial construction projects, which was partially offset by timing and size of projects at the industrial maintenance and repair business, Banker Steel and the construction modeling and detailing business, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable year, which also had increased activity in the prior year on certain large commercial construction projects that have since been completed. The increase at our Life Sciences segment was attributable to R2 Technologies, primarily driven by increases in Glacial Spa and Glacial fx unit sales outside North America, as well as an increase in consumable sales in North America, which was partially offset by a decrease in Glacial fx unit sales in North America. The decrease at our Spectrum segment was primarily driven by the termination of certain customers in the current year and a downturn in the direct response advertising market, which was partially offset by the launch of new networks subsequent to the comparable year.

Income from operations : Income from operations for the year ended December 31, 2025, decreased $11.3 million to $28.7 million from $40.0 million for the year ended December 31, 2024. The decrease was primarily due to a net decrease in gross profit of $9.1 million, and a net decrease in other operating income of $9.4 million, partially offset by a net decrease in SG&A expenses of $7.1 million. The net decrease in gross profit, despite an increase in revenue, was primarily driven by our Infrastructure segment due to timing and size of projects in the comparable year that have since been completed, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable year and our Spectrum segment primarily due to the termination of certain customers in the current year and a downturn in the direct response advertising market. The decrease in other operating income was primarily driven by our Infrastructure segment as a result of an unrepeated gain on lease modification and unrepeated gains on the sale of various properties in the comparable year, as well as various losses on the sale of properties and a loss on lease modification in the current year, which was partially offset by our Spectrum segment primarily due to a favorable legal settlement in the current year, and unrepeated lease termination settlement costs incurred in the comparable year. The decrease in SG&A was primarily driven by our Infrastructure segment primarily due to a decrease in compensation-related expenses, and, to a lesser extent, decreases in consulting fees and travel expenses, and a decrease at our Life Sciences segment due to a reduction in compensation-related expenses at Pansend and R2 Technologies. These decreases in SG&A were partially offset by an increase in SG&A at our Non-Operating Corporate segment primarily due to the debt refinancing costs and expenses in the current year related to potential dispositions, which were partially offset by decreases in other legal fees and insurance expense as well as a net decrease in employee-related expenses.

Interest expense : Interest expense for the year ended December 31, 2025, increased $14.5 million to $89.0 million from $74.5 million for the year ended December 31, 2024. The increase in interest expense was primarily driven by our Non-Operating Corporate and Life Sciences segments, and to a lesser extent by our Spectrum segment. The increase at our Non-Operating Corporate segment was due to the indebtedness refinancing transactions completed during the current year, which resulted in increased principal balances due to the capitalization of fees and interest, and certain increases in interest rates, leading to increased interest expense including amortization of fees. Interest at our Life Sciences segment increased due to a higher outstanding principal amount resulting from the capitalization of unpaid interest and exit fees into the principal amount subsequent to the comparable year. The increase at our Spectrum segment was due to the refinancing transactions and increased fees subsequent to the comparable year. These increases in interest expense were slightly offset by a decrease at our Infrastructure segment due to a net decrease in outstanding principal balances. Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on the indebtedness refinancing transactions.

Loss from equity investees: Loss from equity investees for the year ended December 31, 2025, increased $3.6 million to $5.9 million from $2.3 million for the year ended December 31, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the year ended December 31, 2025, as a result of the first quarter equity transactions that occurred upon FDA approval of MediBeacon's TGFR, Pansend's basis in MediBeacon increased by $5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizing $5.9 million of equity method losses that were previously unrecognized. During the year ended December 31, 2024, Pansend's basis in MediBeacon had increased by $2.3 million due to the issuance of additional convertible note investments in the comparable year, resulting in Pansend recognizing $2.3 million of equity method losses that were previously unrecognized. As of both December 31, 2025 and 2024, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment. Refer to Note 6. Investments to the Consolidated Financial Statements of this Annual Report on Form 10-K. which is incorporated herein by reference, for additional information on our equity investments.

Other income, net: Other income, net for the year ended December 31, 2025, increased $1.3 million to $4.7 million from $3.4 million for the year ended December 31, 2024. The increase was primarily driven by the $4.4 million step-up gain following MediBeacon's FDA approval in January 2025, and an increase in fair value gains on marketable securities at our Non-Operating Corporate segment. These increases were partially offset by an increase in foreign currency translation losses from our Infrastructure segment, a decrease in interest income at our Life Sciences and Non-Operating Corporate segments, and a legal settlement expense at our Non-Operating Corporate segment in the current year. Net loss on repurchase or extinguishment of debt remained consistent as compared to the prior year; however, the net loss was comprised of a loss on extinguishment of debt of $0.3 million related to a refinancing at our Infrastructure segment during the year ended December 31, 2025, as compared to a $2.2 million loss on debt extinguishment at R2 Technologies in the comparable year, which was largely offset by a $1.9 million gain on debt repurchase at our Non-Operating Corporate segment related to the partial repurchase of the 2026 Convertible Notes in the comparable year. Refer to Note 21. Supplementary Financial Information to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on other income, net.

Income tax expense : Income tax expense for the year ended December 31, 2025, decreased $3.8 million to $2.5 million from $6.3 million for the year ended December 31, 2024. The decrease was primarily driven by the decrease in pre-tax results, as well as the limitations on the utilization of net operating losses ("NOL") by INNOVATE's U.S. consolidated group in the comparable year. These limitations arose from Internal Revenue Code Section 382 and the Tax Cuts and Jobs Act's 80 percent limitation on NOLs incurred after 2017.

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

On July 4, 2025, the One Big Beautiful Bill Act "OBBBA") was enacted into law, introducing various changes to U.S. federal income tax provisions, including modifications to bonus depreciation, interest expense limitations, and the treatment of research and development expenditures. Under ASC 740, the effects of newly enacted tax legislation must be recognized in the period that includes the enactment date. Management has evaluated the provisions of the OBBBA and their current and potential impact on the financial statements. Based on this evaluation, the Company does not expect the OBBBA to have a material effect on the current or deferred income tax balances, effective tax rate, or overall financial position. The effects of the legislation have been reflected in the Company's income tax provision for the year ended December 31, 2025. The Company will continue to monitor developments and assess the impact of the OBBBA as additional guidance becomes available and as facts and circumstances evolve.

Segment Results of Operations

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

Infrastructure Segment

Year Ended December 31,

Increase / (Decrease)

Revenue

Cost of revenue

Selling, general and administrative

Depreciation and amortization

Other operating loss (income)

Income from operations

Revenue: Revenue for the year ended December 31, 2025, increased $138.7 million to $1,210.3 million from $1,071.6 million for the year ended December 31, 2024. The increase was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business, which had increased activity subsequent to the comparable year on certain large commercial construction projects. The increase was partially offset by the timing and size of projects at the industrial maintenance and repair business, Banker Steel, and, the construction modeling and detailing business, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business in the comparable year, which also had increased activity in the prior year on certain large commercial construction projects that have since been completed.

Cost of revenue : Cost of revenue for the year ended December 31, 2025, increased $145.8 million to $1,026.2 million from $880.4 million for the year ended December 31, 2024. The increase was primarily driven by the increase in revenues at DBMG's commercial structural steel fabrication and erection business due to the increased activity subsequent to the comparable year on certain large commercial construction projects, which was partially offset by decreases as a result of the decrease in revenues at the industrial maintenance and repair business and Banker Steel from the timing of project activity on certain large commercial construction projects and decreases in costs as they were completed in the current year.

Selling, general and administrative: S elling, general and administrative expense for the year ended December 31, 2025, decreased $7.9 million to $115.2 million from $123.1 million for the year ended December 31, 2024. The decrease was primarily driven by a decrease in compensation-related expenses, and, to a lesser extent, decreases in consulting fees and travel expenses.

Other operating loss (income) : Other operating loss (income) for the year ended December 31, 2025, decreased by $11.0 million to a loss of $1.4 million from income of $9.6 million for the year ended December 31, 2024. The decrease was primarily driven by an unrepeated gain on lease modification and unrepeated gains on the sale of various properties in the comparable year, as well as various losses on the sale of properties and a loss on lease modification in the current year.

Life Sciences Segment

Year Ended December 31,

Increase / (Decrease)

Revenue

Cost of revenue

Selling, general and administrative

Depreciation and amortization

Loss from operations

Revenue : Revenue for the year ended December 31, 2025, increased $2.7 million to $12.5 million from $9.8 million for the year ended December 31, 2024. The increase in revenue was attributable to R2 Technologies, primarily driven by increases in Glacial Spa and Glacial fx unit sales outside North America, as well as an increase in consumable sales in North America. The increases were partially offset by a decrease in Glacial fx unit sales in North America.

Cost of revenue : Cost of revenue for the year ended December 31, 2025, increased $2.0 million to $8.4 million from $6.4 million for the year ended December 31, 2024. The increase in cost of revenue was attributable to R2 Technologies, primarily driven by the increase in revenue from the additional unit system and consumables sales noted above and, to a lesser extent, the related increases in warranty expenses, freight costs, and royalty expenses.

Selling, general and administrative : Selling, general and administrative expense for the year ended December 31, 2025, decreased $2.5 million to $14.6 million from $17.1 million for the year ended December 31, 2024. The decrease was primarily driven by a reduction in compensation-related expenses at Pansend and R2 Technologies.

Spectrum Segment

Year Ended December 31,

Increase / (Decrease)

Revenue

Cost of revenue

Selling, general and administrative

Depreciation and amortization

Other operating (income) loss

(Loss) income from operations

Revenue: Revenue for the year ended December 31, 2025, decreased $2.5 million to $23.2 million from $25.7 million for the year ended December 31, 2024. The decrease was primarily driven by the termination of certain customers in the current year and a downturn in the direct response advertising market, which was partially offset by the launch of new networks subsequent to the comparable year.

Cost of revenue: Cost of revenue for the year ended December 31, 2025, increased $0.2 million to $11.7 million from $11.5 million for the year ended December 31, 2024. The majority of our Spectrum segment's costs are relatively fixed in nature and do not fluctuate significantly with changes in revenue.

Other operating (income) loss : Other operating (income) loss for the year ended December 31, 2025, increased $1.4 million to income of $1.0 million from a loss of 0.4 million for year ended December 31, 2024. The increase in income was primarily driven by a favorable legal settlement in the current year and unrepeated lease termination settlement costs incurred in the comparable year.

Non-Operating Corporate

Year Ended December 31,

Increase / (Decrease)

Selling, general and administrative

Depreciation and amortization

Other operating loss

Loss from operations

Selling, general and administrative : Selling, general and administrative expenses for the year ended December 31, 2025 increased 2.9 million to $15.6 million from $12.7 million for the year ended December 31, 2024. The increase was primarily driven by $4.3 million of debt refinancing costs and $0.4 million of expenses in the current year related to potential dispositions, which were partially offset by a decrease in other legal fees due to legal matters settled in or subsequent to the comparable year, as well as a decrease in insurance expense and a net decrease in employee-related expenses.

Loss from Equity Investees

Year Ended December 31,

(Increase) / Decrease

Life Sciences

Loss from equity investees

Life Sciences: Loss from equity investees within our Life Sciences segment for the year ended December 31, 2025, increased $3.6 million to $5.9 million from $2.3 million for the year ended December 31, 2024. The increase in loss was due to an increase in losses recognized from MediBeacon. During the year ended December 31, 2025, as a result of the first quarter equity transactions that occurred upon FDA approval of MediBeacon's TGFR, Pansend's basis in MediBeacon increased by $5.9 million, consisting of a $4.4 million step-up gain and $1.5 million from the conversion of accrued interest on Pansend's convertible notes with MediBeacon, resulting in Pansend recognizing $5.9 million of equity method losses that were previously unrecognized. During the year ended December 31, 2024, Pansend's basis in MediBeacon had increased by $2.3 million due to the issuance of additional convertible note investments in the comparable year, resulting in Pansend recognizing $2.3 million of equity method losses that were previously unrecognized. As of both December 31, 2025 and 2024, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment.

Refer to Note 6. Investments to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on our equity investments.

Non-GAAP Financial Measures and Other Information

Adjusted EBITDA

Adjusted EBITDA is not a measurement recognized under U.S. GAAP. In addition, other companies may define Adjusted EBITDA differently than we do, which could limit its usefulness.

Management believes that Adjusted EBITDA provides investors with meaningful information for gaining an understanding of our results as it is frequently used by the financial community to provide insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation, amortization and the other items listed in the definition of Adjusted EBITDA below can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company’s ability to service debt. While management believes that non-U.S. GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our U.S. GAAP financial results. Using Adjusted EBITDA as a performance measure has inherent limitations as an analytical tool as compared to net income (loss) or other U.S. GAAP financial measures, as this non-U.S. GAAP measure excludes certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA should not be considered in isolation and does not purport to be an alternative to net income (loss) or other U.S. GAAP financial measures as a measure of our operating performance.

The calculation of Adjusted EBITDA, as defined by us, consists of Net income (loss) attributable to INNOVATE Corp., excluding: discontinued operations, if applicable; depreciation and amortization; other operating (income) loss, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, (gains) losses on lease modifications, asset impairment expense; interest expense; other (income) expense, net; income tax expense (benefit); non-controlling interest; share-based compensation expense; realignment and exit costs; debt refinancing costs; and acquisition and disposition costs.

Adjusted EBITDA by segment is summarized as follows:

(in millions):

Year Ended December 31,

Increase / (Decrease)

Infrastructure

Life Sciences

Spectrum

Non-Operating Corporate

Other and Eliminations

Adjusted EBITDA

The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp. to Adjusted EBITDA for the years ended December 31, 2025 and 2024:

(in millions)

Year Ended December 31, 2025

Infrastructure

Life Sciences

Spectrum

Non-Operating Corporate

Other and Eliminations

INNOVATE

Net income (loss) attributable to INNOVATE Corp.

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

Depreciation and amortization

Depreciation and amortization (included in cost of revenue)

Other operating loss (income)

Interest expense

Other (income) expense, net

Income tax expense (benefit)

Non-controlling interest

Share-based compensation expense

Realignment and exit costs

Debt refinancing costs

Acquisition and disposition costs

Adjusted EBITDA

(in millions)

Year Ended December 31, 2024

Infrastructure

Life Sciences

Spectrum

Non-Operating Corporate

Other and Eliminations

INNOVATE

Net income (loss) attributable to INNOVATE Corp.

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

Depreciation and amortization

Depreciation and amortization (included in cost of revenue)

Other operating (income) loss

Interest expense

Other (income) expense, net

Income tax expense (benefit)

Non-controlling interest

Share-based compensation expense

Realignment and exit costs

Acquisition and disposition costs

Adjusted EBITDA

Infrastructure: Net income from our Infrastructure segment for the year ended December 31, 2025, decreased $10.8 million to $29.5 million from $40.3 million for the year ended December 31, 2024. Adjusted EBITDA from our Infrastructure segment for the year ended December 31, 2025, decreased $1.6 million to $87.5 million from $89.1 million for the year ended December 31, 2024. The decrease in Adjusted EBITDA was primarily driven by a decrease in gross profit, despite the increase in revenue, at DBMG's commercial structural steel fabrication and erection business resulting from favorable close-outs of projects in the comparable year. The decrease was also driven by a decrease in revenue and gross profit at Banker Steel, as well as the industrial maintenance and repair business due to timing of certain large construction projects in the comparable year that have since been completed. These decreases were partially offset by a decrease in recurring SG&A expenses, primarily driven by a decrease in compensation-related expenses, and to a lesser extent, decreases in consulting fees and travel expenses.

Life Sciences: Net loss from our Life Sciences segment for the year ended December 31, 2025, increased $2.5 million to $22.2 million from $19.7 million for the year ended December 31, 2024. Adjusted EBITDA loss from our Life Sciences segment for the year ended December 31, 2025, increased $1.6 million to $16.1 million from $14.5 million for the year ended December 31, 2024. The increase in Adjusted EBITDA loss was primarily due to an increase in equity method losses recognized from MediBeacon, as discussed in the Loss from Equity Investees section above. The increase in Adjusted EBITDA loss was partially offset by a decrease in SG&A expenses primarily driven by a reduction in compensation-related expenses at Pansend and R2 Technologies and an increase in gross profit at R2 Technologies, driven by increased revenue (as discussed in the Revenue section above).

Spectrum: Net loss from our Spectrum segment for the year ended December 31, 2025, increased $3.5 million to $23.5 million from $20.0 million for the year ended December 31, 2024. Adjusted EBITDA from our Spectrum segment for the year ended December 31, 2025, decreased $2.7 million to $4.4 million from $7.1 million for the year ended December 31, 2024. The decrease in Adjusted EBITDA was primarily driven by the net decrease in revenue as a result of the termination of certain customers in the current year and a downturn in the direct response advertising market, which was partially offset by the launch of new networks subsequent to the comparable year.

Non-Operating Corporate: Net loss from our Non-Operating Corporate segment for the year ended December 31, 2025, increased $9.0 million to $44.3 million from $35.3 million for the year ended December 31, 2024. Adjusted EBITDA loss from our Non-Operating Corporate segment for the year ended December 31, 2025, decreased $1.9 million to $8.5 million from $10.4 million for the year ended December 31, 2024. The decrease in Adjusted EBITDA loss was primarily driven by a decrease in non-refinancing related legal fees due to legal matters settled in or subsequent to the comparable year, as well as decreases in employee-related expenses and insurance expense.

Backlog

Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on projects in backlog. Projects in backlog consist of awarded contracts, letters of intent, notices to proceed, change orders, and purchase orders obtained. Backlog increases as contract commitments are obtained, decreases as revenues are recognized and increases or decreases to reflect modifications in the work to be performed under the contracts. Backlog is converted to sales in future periods as work is performed or projects are completed. Backlog can be significantly affected by the receipt or loss of individual contracts.

Infrastructure Segment

As of December 31, 2025, DBMG's backlog was $1,723.9 million, consisting of $1,713.1 million under contracts or purchase orders and $10.8 million under letters of intent or notices to proceed. Approximately $1,137.0 million, representing 66.0% of DBMG’s backlog as of December 31, 2025, 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 has included an additional $12.5 million in its backlog that is not included in the remaining unsatisfied performance obligations disclosed in Note 3. Revenue and Contracts in Process. This additional backlog includes commitments under master service agreements that are estimated amounts of work to be performed based on customer communications, historic performance and knowledge of our customers' intentions.

Liquidity and Capital Resources

2025 Debt Refinancing

In August 2025, the Company closed on a series of indebtedness refinancing transactions that extended certain of the Company’s debt maturities. The refinancing transactions included: (i) the closings of an exchange offer and consent solicitation with respect to the Company’s senior secured notes; (ii) privately negotiated exchanges of certain of the Company’s convertible senior notes; (iii) amendment and extension of the Company’s 2020 Revolving Credit Agreement; (iv) amendment and extension of the Company’s CGIC note, as well as the exchange of a portion of the Company’s preferred stock held by CGIC and accrued preferred stock dividends in exchange for increasing the principal amount of that note; (v) amendment and extension of the Spectrum debt; and (vi) amendment and extension of the R2 Technologies debt. In addition, on May 20, 2025, DBMG entered into an Amended and Restated Credit Agreement. Total third-party fees expensed related to the refinancing transactions were $4.6 million for the year ended December 31, 2025, respectively, and total third-party fees capitalized were $0.5 million for the year ended December 31, 2025, respectively. Refer to “ Indebtedness ” below and to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Indebtedness

Non-Operating Corporate

10.50% Senior Secured Notes due 2027

In August 2025, we closed on an exchange offer and consent solicitation to eligible holders of our 8.50% senior secured notes due 2026 ("8.50% 2026 Senior Secured Notes") to exchange such notes for newly issued 10.50% senior secured notes due 2027 (the “10.50% 2027 Senior Secured Notes”). The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “10.50% 2027 Senior Secured Notes Trustee”) and collateral trustee, entered into an indenture (the “10.50% 2027 Senior Secured Notes Indenture”) governing the 10.50% 2027 Senior Secured Notes and we issued $360.4 million aggregate principal amount of 10.50% senior secured notes due 2027 (the "10.50% 2027 Senior Secured Notes") as consideration for the exchange of $328.1 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes. The new principal amount includes fees payable to the lenders and $52.50 principal amount of 10.50% 2027 Senior Secured Notes per $1,000 principal amount of 8.50% 2026 Senior Secured Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 8.50% 2026 Senior Secured Notes that was due on August 1, 2025.

The 10.50% 2027 Senior Secured Notes mature on February 1, 2027 and accrue interest at a rate of 10.50% per year, payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. For the first interest period only, interest has been paid in kind. All subsequent interest payments are payable in cash.

As of December 31, 2025, the total carrying amount related to the note was $345.5 million, inclusive of $360.4 million aggregate principal outstanding, partially offset by a $13.9 million total unamortized discount and $1.0 million of total unamortized deferred financing fees. The effective interest rate on the 10.50% 2027 Senior Secured Notes was 14.4% as of December 31, 2025. Aggregate interest expense for the new 10.50% 2027 Senior Secured Notes, including the contractual interest coupon and amortization of fees was $20.6 million for the year ended December 31, 2025.

Our obligations under the 10.50% 2027 Senior Secured Notes Indenture are irrevocably and unconditionally guaranteed, jointly and severally, by the same guarantors that guarantee the 8.50% 2026 Senior Secured Notes (the “Subsidiary Guarantors”). The 10.50% 2027 Senior Secured Notes and the related guarantees are senior secured obligations of the Company and the Subsidiary Guarantors.

Asset Sale Offer. If we complete certain assets sales, we may be required in certain circumstances to make an offer to purchase the 10.50% 2027 Senior Secured Notes with the net cash proceeds from such an asset sale at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase.

Certain Covenants. The 10.50% 2027 Senior Secured Notes Indenture contains covenants limiting, among other things, our ability, and, in certain cases, our subsidiaries' ability, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025, we needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we have thus been required to commence a sales process for DBMG. The sales process for DBMG has separate milestone requirements, which we have either met or extended as of December 31, 2025. In addition, subsequent to year end, the February 1, 2026 milestone for a final bid or term sheet was extended to March 1, 2026 and was met on this revised date. The March 1, 2026 milestone for a fully executed purchase agreement, has been extended to April 1, 2026. As of the date of this Annual Report on Form 10-K, the Company is in compliance with the milestone covenants.

Any failure to comply with the restrictions or covenants in the indentures governing INNOVATE’s 2027 Senior Secured Notes and 2027 Convertible Notes , or any other agreement governing our existing indebtedness or indebtedness we may incur in the future, may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

8.50% Senior Secured Notes due 2026

The original $330.0 million aggregate principal amount of 8.50% senior secured notes due February 1, 2026 (the "8.50% 2026 Senior Secured Notes") were issued in 2021 at 100% of par. In August 2025, we exchanged $328.1 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes for new 10.50% 2027 Senior Secured Notes, as discussed above. As of December 31, 2025, we had $1.9 million aggregate principal amount of the 8.50% 2026 Senior Secured Notes remaining with an effective interest rate of 9.3%. Subsequent to year end, on February 2, 2026, the Company repaid the remaining principal balance and all accrued interest.

Interest was payable semi-annually in arrears on February 1 st and August 1 st of each year. Aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees was $17.9 million for the year ended December 31, 2025.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

2027 Convertible Notes

On August 4, 2025, we settled the exchanges (collectively, the “Convertible Notes Exchanges”) under our privately negotiated exchange agreements (collectively, the “Exchange Agreements”) with certain holders of our 7.5% Convertible Senior Notes due 2026 ("the 2026 Convertible Notes"). Pursuant to the Exchange Agreements, we exchanged $48.7 million of the then outstanding aggregate principal amount of the 2026 Convertible Notes for $53.5 million aggregate principal amount of newly issued 9.5% Convertible Senior Secured Notes due 2027 (the “2027 Convertible Notes”), which is the total outstanding as of December 31, 2025. The 2027 Convertible Notes mature on March 1, 2027 unless earlier converted, redeemed or purchased. The new principal amount includes fees payable to the lenders and $47.50 principal amount of 2027 Convertible Notes per $1,000 principal amount of 2026 Convertible Notes exchanged, paid to exchanging holders in lieu of the interest payment in respect of the 2026 Convertible Notes that was due on August 1, 2025.

As of December 31, 2025, the total carrying amount related to the notes was $52.5 million, inclusive of $53.5 million aggregate principal outstanding, partially offset by a remaining unamortized net discount of $0.8 million and unamortized deferred financing fees of $0.2 million.

The 2027 Convertible Notes accrue interest at a rate of 9.5% per year. The effective interest rate on the 2027 Convertible Notes is 11.1%. Interest on the 2027 Convertible Notes is paid semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2026. For the first interest period only, interest has been paid in kind. All subsequent interest payments are payable in cash. Aggregate interest expense, including the contractual interest coupon and amortization of the deferred financing fees and net discount was $2.4 million for the year ended December 31, 2025.

The Company, the guarantors party thereto from time to time and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “2027 Convertible Notes Trustee”) and collateral trustee, entered into an indenture (the “2027 Convertible Notes Indenture”), dated as of August 4, 2025, governing the 2027 Convertible Notes.

Certain Covenants. The 2027 Convertible Notes Indenture contains covenants limiting, among other things, our ability, and, in certain cases, our subsidiaries' ability, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. These covenants are subject to a number of important exceptions and qualifications.

Any failure to comply with the restrictions or covenants in the indentures governing INNOVATE’s 2027 Senior Secured Notes and 2027 Convertible Notes , or any other agreement governing our existing indebtedness or indebtedness we may incur in the future, may result in an event of default under those agreements. Such default may allow the creditors to accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other debt.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

2026 Convertible Notes

The original $51.8 million aggregate principal amount of 7.50% convertible notes (the "2026 Convertible Notes") were issued under an indenture dated February 1, 2021, between the Company and U.S. Bank, as trustee. During July 2024, INNOVATE repurchased $2.9 million principal amount of its 2026 Convertible Notes at a market discount for $1.1 million, which was inclusive of accrued interest of $0.1 million. As discussed above, on August 4, 2025, pursuant to the Exchange Agreements, we exchanged $48.7 million aggregate principal amount of the 2026 Convertible Notes for new 2027 Convertible Notes. Subsequent to the exchanges and, as of December 31, 2025, we had $0.2 million aggregate principal remaining of the 2026 Convertible Notes.

The 2026 Convertible Notes mature on August 1, 2026, unless earlier converted, redeemed or purchased. The 2026 Convertible Notes accrue interest at a rate of 7.5% per year, which interest is paid semi-annually in arrears on February 1 st and August 1 st of each year. As of December 31, 2025, the effective interest rate on the 2026 Convertible Notes was 3.0%. Aggregate interest expense recognized relating to both the contractual interest coupon and amortization of discount net of premium and deferred financing costs was $0.9 million for the year ended December 31, 2025.

On August 4, 2025, the Company and U.S. Bank Trust Company, National Association, as trustee (the “2026 Convertible Notes Trustee”) entered into a first supplemental indenture (the “2026 Convertible Notes Supplemental Indenture”) to the indenture, dated as of February 1, 2021, by and among the Company, the guarantors party thereto from time to time and the 2026 Convertible Notes Trustee, governing the 2026 Convertible Notes (the “2026 Convertible Notes Indenture”). The 2026 Convertible Notes Supplemental Indenture amended the 2026 Convertible Notes Indenture and the 2026 Convertible Notes to effectuate certain proposed amendments with respect to the 2026 Convertible Notes pursuant to the solicitation of consents, which amendments included eliminating substantially all of the restrictive covenants, eliminating certain events of default, modifying covenants regarding mergers and consolidations and modifying or eliminating certain other provisions, contained in the 2026 Convertible Notes Indenture and the 2026 Convertible Notes.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Our debt contains customary events of default which could, subject to certain conditions, cause the 2026 Senior Secured Notes and the 2026 Convertible Notes to become immediately due and payable.

Revolving Line of Credit

We have a revolving credit agreement with MSD PCOF Partners IX, LLC ("MSD") which has a maximum commitment of $20.0 million ("Revolving Line of Credit"), of which $20.0 million had been drawn as of December 31, 2025. Interest on loans under the Revolving Line of Credit accrues at SOFR plus 5.75% and is payable quarterly. On August 4, 2025, the Company and MSD entered into an Eighth Amendment to Credit Agreement, which among other things, extended the maturity of the 2020 Revolving Credit Agreement to September 15, 2026 and added a new $0.4 million extension fee that is payable on the earlier of the maturity date or the date of prepayment of the debt.

The Revolving Line of Credit has an interest rate margin applicable to loans borrowed under the Revolving Line of Credit of 5.75%, and the benchmark rates for the interest are SOFR-based rates. As of December 31, 2025, the effective interest rate on the Revolving Line of Credit, as amended, was 10.0%. Interest is paid quarterly in arrears. The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0% calculated based off the actual daily amount of unused availability under the Revolving Line of Credit with MSD, and also includes a requirement for prepayment using the net cash proceeds received from certain asset sales. The affirmative and negative covenants governing the Revolving Line of Credit are substantially consistent with the affirmative and negative covenants contained in the indenture that governs the Company's 10.5% Senior Secured Notes.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

CGIC Promissory Note

On August 4, 2025, we entered into a Subordinated Secured Promissory Note with CGIC to, among other things, extend the maturity of its existing subordinated unsecured promissory note with CGIC (the “CGIC Note”) from February 28, 2026 to April 30, 2027, and secure the amended CGIC Note by a third priority lien on the same collateral securing the 10.50% 2027 Senior Secured Notes and the 2027 Convertible Notes. The amended CGIC Note has an interest rate of 16.0%, and an effective interest rate of 14.6% as of December 31, 2025. Interest on the amended CGIC Note will be paid on a monthly basis and in kind through August 31, 2026. All interest payments thereafter will be payable in cash, in arrears.

As part of the agreement with CGIC, the accrued value of 8,063 shares of Series A-4 Preferred Stock of the Company held by CGIC, and unpaid accrued cash dividends for the A-3 and A-4 Preferred Stock were exchanged for an additional principal amount of the CGIC Note, on a dollar-for-dollar basis (the “Preferred Stock Exchange”). The additional principal amount incurred under the Preferred Stock Exchange was $9.6 million (reflective of the $9.1 million accrued value of the Series A-4 Preferred Stock and $0.5 million in accrued dividends on the Series A-3 and A-4 Preferred Stock). In addition, an extension fee and accrued interest of $2.4 million on the CGIC Note through July 31, 2025, were capitalized to the new principal amount of the CGIC Note, for a total new aggregate outstanding principal amount of $43.0 million. As of December 31, 2025 the total carrying amount related to the note was $46.8 million, inclusive of $45.9 million of principal (including capitalized interest), and a net unamortized premium of $0.9 million. For the year ended December 31, 2025, interest expense recognized relating to the CGIC Note, including the contractual interest coupon and amortization of the deferred financing fees and discounts, was $5.9 million.

Mandatory Prepayment s. After the indefeasible repayment and satisfaction in full in cash of all obligations under the 10.50% 2027 Senior Secured Notes, the 10.50% 2027 Senior Secured Notes Indenture, the 2027 Convertible Notes, the 2027 Convertible Notes Indenture and all other Senior Debt (or, in each case, under any refinancing indebtedness in respect thereof), the Company must prepay the CGIC Note (together with all accrued and unpaid interest and all other amounts payable under the CGIC Note) upon the occurrence of an Asset Sale (as defined in the agreement), in an amount equal to the Net Cash Proceeds (as defined in the agreement) from such Asset Sale, with such prepayment due no later than two (2) Business Days after the receipt of such Net Cash Proceeds by the Company (or its subsidiary, if applicable) from such Asset Sale.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

Infrastructure

As of December 31, 2025, our Infrastructure segment has an aggregate amount of principal outstanding debt, including obligations under finance leases, of $87.7 million.

On May 20, 2025, DBMG entered into an Amended and Restated Credit agreement (the "DBMG Credit Agreement"), with the lenders which are party thereto from time to time (each a “Lender” and collectively the “Lenders”) and UMB BANK, N.A. ("UMB"). The DBMG Credit Agreement provides DBMG with senior secured debt financing in an amount up to $220.0 million in the aggregate, consisting of (i) a senior secured revolving credit facility (the “DBMG Revolving Facility”) in an aggregate amount of $135.0 million and (ii) a senior secured term loan facility in the amount of $85.0 million. The DBMG Credit Agreement also contains an accordion feature to increase the allowable size of the DBMG Revolving Facility by an additional $50.0 million. The DBMG Revolving Facility and the term loan facility will mature on May 20, 2030. DBMG entered into the DBMG Credit Agreement to fully repay DBMG’s existing debt obligations and provide additional working capital capacity.

The term loan and borrowings under the new DBMG Credit Agreement bear interest at a rate per annum equal to a SOFR Rate plus a variable spread based on a Senior Funded Indebtedness to EBITDA Ratio as defined in the agreement with an interest rate floor of 4.25% per annum.

As of December 31, 2025, DBMG had a total outstanding balance of $15.0 million under its Revolving Facility and the effective interest rate on DBMG's revolving loans was 6.80%. Interest on the new revolving facility is paid monthly and the new revolving facility has an unused commitment fee of 0.50% per annum times the average daily unused availability under the line. DBMG had availability for revolving loans of $119.9 million as of December 31, 2025.

As of December 31, 2025, the total outstanding balance of DBMG's term loan was $72.6 million, and the effective interest rate was 7.4%. Principal payments and interest on DBMG's term loan is paid monthly.

The DBMG Credit Agreement contains usual and customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio; and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the DBMG Credit Agreement.

The DBMG Credit Agreement also contains a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of our Infrastructure segment's debt in the future upon certain events, including a sale of DBMG.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Life Sciences

As of December 31, 2025, our Life Sciences segment has aggregate principal outstanding debt of $47.9 million with Lancer, a related party.

On August 4, 2025, Lancer and R2 Technologies entered into an Amended and Restated Senior Secured Promissory Note (the "Lancer Note"), which was previously amended multiple times as further described below, and which, among other things, extended the maturity of the note to the earlier of August 1, 2026, or the occurrence of (i) a Change of Control (as defined in the amended note) or (ii) the sale of all or substantially all of the assets of R2 Technologies. The note can be repaid at any time with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital. The amended note has an interest rate of 12% and removed certain exit and default fees. Accrued and unpaid interest is capitalized monthly into the principal balance. As of December 31, 2025, the effective interest rate on the note, as amended, was 17.0%.

The total new initial principal amount of the amended Lancer Note on August 4, 2025 was $43.5 million, which incorporated the $20.0 million principal amount of the note as previously amended effective January 31, 2024 (which was comprised of a principal amount of $17.4 million and unpaid accrued interest of $2.6 million), accrued interest of $7.0 million and $16.5 million in accrued exit fees which had been incurred from January 31, 2024 through August 4, 2025. In addition, a new 5% extension fee of $2.2 million was capitalized into the principal amount on August 4, 2025.

As of December 31, 2025, the total carrying amount relating to the note, which is included within the Current portion of debt obligations in the Consolidated Balance Sheet, was $46.6 million, inclusive of $47.9 million of principal (which includes capitalized interest and fees), partially offset by $1.3 million of the unamortized OID for the extension fee. Interest expense, including amortization of fees, related to the Lancer Note was $14.7 million for the year ended December 31, 2025.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

During the year ended December 31, 2025, Pansend closed on several intercompany convertible 13.0% note instruments with R2 Technologies, and funded a total of $7.5 million to R2 Technologies. The outstanding principal amounts of the notes, together with any interest then accrued and unpaid, is convertible at the option of Pansend into shares of a new Series E Convertible Preferred Stock ("Series E") or new Series F Convertible Preferred Stock ("Series F") in R2 Technologies, as applicable to each note, upon written notice to R2 Technologies and the notes have a maturity date, of the earlier of July 31, 2026, or a change in control of R2 Technologies, as defined in the notes. These notes and related intercompany interest are eliminated on consolidation. Subsequent to year end, in February and March 2026, an additional $0.3 million in intercompany convertible 13.0% notes with R2 Technologies was funded.

Refer to Note 16. Equity and Temporary Equity to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on R2 Technologies' convertible preferred stock and convertible notes.

Spectrum

On August 4, 2025, Spectrum entered into a Tenth Omnibus Amendment to Secured Notes and Limited Consent to MSD Secured Note and Intercreditor Agreement with the note holders of Spectrum’s $69.7 million 8.50% and 11.45% Notes (the “Spectrum Notes”) to, among other things, extend the maturity of such notes from August 15, 2025 to September 30, 2026 (the “Spectrum Notes Extension”). As a result of the Spectrum Notes Extension, additional exit fees of $9.9 million were incurred, and the total exit fees of $25.8 million are reflected within Accrued liabilities in the Consolidated Balance Sheet as of December 31, 2025. The exit fees are payable on the earlier of maturity or repayment of the principal, were recorded as original issue discount and are being amortized over the remaining life of the notes, which is assumed to be the maturity date.

Interest is payable upon maturity of the notes. As of December 31, 2025 and 2024, the weighted-average effective interest rates on the notes, as amended, were 25.0% and 22.8%, respectively.

In connection with the Spectrum Notes Extension, INNOVATE entered into a related side letter (the "Spectrum Letter") with the lenders, which required us to meet certain milestones with respect to strategic alternatives for the Spectrum segment, such that, if the Spectrum Notes are not repaid in full in cash on or before November 1, 2025, the side letter provides that we are required to commence an alternative strategic process for HC2B which includes a sale of HC2B with the net proceeds to be applied to the Spectrum Notes. The November 1, 2025 milestone was not reached and in accordance with the Spectrum letter, management initiated a strategic process for HC2B. We have met or extended all milestones associated with the sale as of December 31, 2025. Subsequent to year-end, the December 31, 2025 milestone for a confidential information memorandum and bid process letter was met on the revised date of January 8, 2026. The February 1, 2026 milestone for the submission of at least one bona fide indication of interest in an HC2B sale was waived. The March 1, 2026 milestone for an executed letter of intent regarding an HC2B sale was extended to March 27, 2026. As of the date of this Annual Report on Form 10-K, we are in compliance with the milestone covenants.

The Spectrum Letter also requires us to utilize proceeds from a sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of the Spectrum Notes. Assuming there are sufficient proceeds remaining after such repayment, the side letter provides that we are required to purchase the institutional investors' equity interests in HC2B and DTV for an aggregate purchase price of $2.0 million. The lenders hold 20,408 shares of common stock in HC2B 2,222,222 shares of common stock in DTV, and warrants to purchase 145,825 shares of common stock of HC2B which can be exercised at any time until August 31, 2028, at an exercise price of $0.01 per share. These redeemable non-controlling interests totaling $2.6 million are reflected at carrying value as redeemable non-controlling interests in the Consolidated Balance Sheet as of December 31, 2025. As of December 31, 2025, Management has evaluated this redeemable non-controlling interest and determined that redemption is not probable at this time due to the uncertainty of redemption. Therefore, the carrying amount has not been adjusted to redemption value. The Company will continue to monitor for any changes in circumstances.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

Restrictive Covenants

Pursuant to the 8.50% 2026 Senior Secured Notes Supplemental Indenture, substantially all of the restrictive covenants for the 8.50% 2026 Senior Secured Notes were eliminated.

The indenture governing the 2027 Senior Secured Notes dated August 4, 2025, by and among INNOVATE, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (in such capacity, the “10.50% 2027 Senior Secured Notes Trustee”) and collateral trustee (the "10.50% 2027 Senior Secured Notes Indenture"), contains certain affirmative and negative covenants limiting, among other things, the ability of the Company, and, in certain cases, the Company’s subsidiaries, to incur additional indebtedness; create liens; pay dividends or make distributions in respect of capital stock; make certain restricted payments; sell assets; engage in certain transactions with affiliates; or consolidate or merge with, or sell substantially all of its assets to, another person. Additionally, the 10.50% 2027 Senior Secured Notes Indenture required us to meet certain milestones with respect to strategic alternatives for our operating subsidiaries, including asset sales generating at least $150 million in net proceeds, to be applied to the 10.50% 2027 Senior Secured Notes, such that by September 1, 2025, we needed to have a bona fide bid or term sheet related to a potential sale. The September 1, 2025 milestone was not reached, and in accordance with the indenture, we have thus been required to commence a sales process for DBMG. The sales process for DBMG has separate milestone requirements, which we have either met or extended as of December 31, 2025. In addition, subsequent to year end, the February 1, 2026 milestone for a final bid or term sheet was extended to March 1, 2026 and was met on this revised date. The March 1, 2026 milestone for a fully executed purchase agreement, has been extended to April 1, 2026. As of the date of this Annual Report on Form 10-K, the Company is in compliance with the milestone covenants.

In connection with the Spectrum Notes Extension, INNOVATE entered into a related side letter (the "Spectrum Letter") with the lenders, which required us to meet certain milestones with respect to strategic alternatives for the Spectrum segment, such that, if the Spectrum Notes are not repaid in full in cash on or before November 1, 2025, the side letter provides that we are required to commence an alternative strategic process for HC2B which includes a sale of HC2B with the net proceeds to be applied to the Spectrum Notes. The November 1, 2025 milestone was not reached and in accordance with the Spectrum letter, management initiated a strategic process for HC2B. We have met or extended all milestones associated with the sale as of December 31, 2025. Subsequent to year-end, the December 31, 2025 milestone for a confidential information memorandum and bid process letter was met on the revised date of January 8, 2026. The February 1, 2026 milestone for the submission of at least one bona fide indication of interest in an HC2B sale was waived. The March 1, 2026 milestone for an executed letter of intent regarding an HC2B sale was extended to March 27, 2026. As of the date of this Annual Report on Form 10-K, we are in compliance with the milestone covenants.

The instruments governing the Company’s Series A-3 Preferred Stock and Series A-4 Preferred Stock also limit our and our subsidiaries ability to take certain actions, including, among other things, to incur additional indebtedness; issue additional Series A-3 Preferred Stock and Series A-4 Preferred Stock; engage in transactions with affiliates; and make certain restricted payments. These limitations are subject to a number of important exceptions and qualifications.

We have conducted our operations in a manner that has resulted in compliance with the indentures, and as of the date of this Annual Report on Form 10-K we are in compliance with the covenants of our debt agreements. The September 1, 2025 milestone was not reached on our 2027 Senior Secured Notes, the Company has thus initiated a sales process for DBMG, and is in compliance with the milestone covenants requirement. Due to other pending milestones which will require the sale of assets and use of proceeds to pay off our debt, we have classified certain debt instruments with long-term contractual maturities as current. If we fail to meet these pending milestones, and therefore are unable to remain in compliance and do not make alternate arrangements or obtain a waiver, an event of default would occur under our indentures 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 that we will be able to complete any non-operational transaction we may undertake to maintain compliance with covenants or, even if we complete any such transaction, that we will be able to maintain compliance for any subsequent period.

The debt instruments associated with our Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, and a Senior Funded Indebtedness to EBITDA Ratio, both as defined in the agreement. The debt instruments associated with our Infrastructure segment also contain a Change in Control clause, which would constitute an Event of Default, both as defined in the DBMG Credit Agreement, which could accelerate the maturity of the segment's debt in the future upon certain events, including a sale of DBMG. As of December 31, 2025, our Infrastructure segment was in compliance with the covenants of its debt agreement.

Refer to Note 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Short- and Long-Term Liquidity Considerations and Risks

Our Non-Operating Corporate segment's liquidity needs have primarily been for interest payments on our senior secured notes, convertible notes, Revolving Line of Credit, CGIC Note, and dividend payments, out of legally available funds, on our Series A-3 and Series A-4 Preferred Stock and recurring operational expenses. As a result of our recent refinancing as discussed in " Indebtedness " above, certain interest payments for our Corporate debt will be or has been paid in kind and therefore will be incorporated into the respective principal balances to be paid on maturity of the respective debt.

On a consolidated basis, as of December 31, 2025, we had $112.1 million of cash and cash equivalents, excluding restricted cash, compared to $48.8 million as of December 31, 2024. On a stand-alone basis, as of December 31, 2025, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $4.2 million and no marketable securities, as compared to cash and cash equivalents, excluding restricted cash, of $13.8 million and $1.8 million of marketable securities as of December 31, 2024.

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, 2025, we had $687.2 million of principal indebtedness on a consolidated basis compared to $668.3 million as of December 31, 2024, a net increase of $18.9 million, due to an increase in debt at our Non-Operating Corporate and Life Sciences segments, partially offset by a decrease in debt at our Infrastructure segment. The increase at our Non-Operating Corporate segment was due to the August 2025 refinancing and exchanges of our senior secured notes and convertible notes and the capitalization of fees and unpaid accrued interest into the principal amounts of the new notes, the capitalization of extension fees and unpaid accrued interest into the principal amount of our CGIC note, the exchange of the accrued value of 8,063 shares of Series A-4 Preferred Stock of the Company held by CGIC, and unpaid accrued dividends for the A-3 and A-4 Preferred Stock for an additional principal amount of the CGIC Note. The increase at our Life Sciences segment was due to the capitalization of fees and unpaid accrued interest of $23.9 million at R2 Technologies into the outstanding principal balance of their note with Lancer. The increases in debt were partially offset by a $57.0 million decrease in debt at our Infrastructure segment due to their second quarter 2025 refinancing transaction and repayments on their debt.

On a stand-alone basis, our Non-Operating Corporate segment principal indebtedness was $481.9 million and $429.9 million as of December 31, 2025 and 2024, respectively. The December 31, 2025 indebtedness balance consists of the $360.4 million aggregate principal amount of new 10.50% 2027 Senior Secured Notes, $53.5 million aggregate principal amount of new 9.50% 2027 Convertible Notes, $1.9 million aggregate principal amount remaining of 8.50% 2026 Senior Secured Notes, $0.2 million aggregate principal amount remaining of 7.50% 2026 Convertible Notes, $45.9 million principal amount of the CGIC Note and $20.0 million aggregate principal amount drawn on our Revolving Line of Credit.

Our Non-Operating Corporate segment is required to make semi-annual interest payments on the 10.50% 2027 Senior Secured Notes and on the 2027 Convertible Notes, on February 1 st and August 1 st of each year. For the first interest period only, which is the interest period ending on January 31, 2026, interest will be paid in kind. Interest payments on the CGIC Note are required on a monthly basis; however, interest will be paid in kind through August 31, 2026. All remaining interest payments will be paid in cash in arrears. We are also required to make quarterly interest payments on our Revolving Line of Credit and semi-annual interest payments on the 8.50% 2026 Senior Secured Notes and 2026 Convertible Notes on February 1 st and August 1 st of each year.

We are required to make dividend payments, out of legally available funds, on our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock on January 15 th , April 15 th , July 15 th , and October 15 th of each year. The Series A-3 Preferred Stock and Series A-4 Preferred Stock have a maturity date of July 1, 2026. On the maturity date, the holders will be entitled to redeem the Series A-3 Preferred Stock and Series A-4 Preferred Stock at the accrued value per share plus accrued but unpaid dividends (to the extent not included in the accrued value of Series A-3 and Series A-4); however, it is uncertain at this time whether the Company will have legally available funds to complete the redemption. The Series A-3 and Series A-4 Preferred Stock accrue a cumulative quarterly cash dividend at an annualized rate of 7.50%. The accrued values of the Series A-3 and Series A-4 Preferred Stock accrete quarterly at an annualized rate of 4.00% that is reduced to 2.00% or 0.0% if the Company achieves specified rates of growth measured by increases in its net asset value; provided, that the accreting dividend rate will be 7.25% in the event that (A) the daily volume weighted-average price ("VWAP") of the Company's common stock is less than a certain threshold amount, (B) the Company's common stock is not registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, and (C) the Company's common stock is not listed on certain national securities exchanges or the Company is delinquent in the payment of any cash dividends.

During the first quarter of 2025, the Company accrued the 7.5% quarterly dividend of $0.3 million and subsequently paid the dividend in April 2025. During the second, third and fourth quarters of 2025, INNOVATE's Board of Directors (the "Board") did not declare any cash dividends with respect to INNOVATE’s issued and outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock. Aggregate quarterly dividends of $0.7 million, $0.5 million, and $0.4 million for the second, third and fourth quarters of 2025, respectively, included the annual cash dividend of 7.5% per annum which was accrued and also the accreting dividend of 7.25% per annum. In addition, during the second quarter of 2025, the Company recorded accretion and accrual of additional dividends of $1.3 million related to prior years, and $0.2 million related to the first quarter of 2025. On August 4, 2025, $0.5 million in accrued quarterly dividends was exchanged for an additional principal amount of the CGIC note as part of the Preferred Stock Exchange. Refer to Note 11. Debt Obligations and Note 16. Equity and Temporary Equity for additional information.

Our Non-Operating Corporate segment received $16.6 million in net tax sharing payments from our Infrastructure segment for the year ended December 31, 2025. Additionally, our Non-Operating Corporate segment received $17.0 million in dividends from our Infrastructure segment during the year ended December 31, 2025. Subsequent to year end, on February 2, 2026, DBMG declared a $5.0 million cash dividend which was paid on February 24, 2026, of which our Non-Operating Corporate segment received approximately $4.6 million.

We have financed our growth and operations to date, and expect to finance our future growth and operations, through public offerings and private placements of debt and equity securities, credit facilities, vendor financing, finance lease financing and other financing arrangements, as well as cash generated from the operations of our subsidiaries. In the future, we may also choose to sell additional assets or certain investments to generate cash. We are currently exploring other strategic alternatives and it is reasonably possible that within the next twelve months we will generate cash proceeds from an asset sale that will be used to repay certain debt obligations as required.

Going Concern

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern. However, as of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

The principal conditions leading to this conclusion are the upcoming maturities of the Company's outstanding debt obligations. Based on these conditions, we may not be able to meet our obligations at maturity nor comply with certain cross-default provisions under the 2027 Senior Secured Notes over the next twelve months, or any potential breach of the milestone covenant of the 2027 Senior Secured Notes Indenture, which has required the Company to commence a sales process for all or substantially all of DBM Global’s assets or equity interests in accordance with certain dates and deadlines. Refer to 11. Debt Obligations to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Management has evaluated the significance of these conditions in relation to the Company's ability to meet its obligations. The potential inability to refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing, raises substantial doubt about the Company's ability to continue as a going concern.

Management plans to alleviate these conditions through various initiatives it is currently exploring, including pursuing asset sales, and potentially refinancing debt and raising additional capital. However, there can be no assurance that we will have the ability to be successful in any asset sales, additional capital raise, or the refinancing of our existing debt, on attractive terms or at all, nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with our debt covenants or other possible events of default. Further, there can be no assurance that we will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity dates. There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern.

The Consolidated Financial Statements included in this Annual Report on Form 10-K do not include any adjustments to the carrying amounts and classification of assets, liabilities, or expenses that may result if the Company is unable to continue as a going concern.

While we have noted the conditions above regarding our ability to continue as a going concern, it is important to note that our largest subsidiary, DBMG, is operationally profitable, continues to maintain a strong financial position and remains in good standing with its lenders. Under INNOVATE’s Senior Secured Notes Indenture, DBMG is a restricted subsidiary, not a guarantor, and INNOVATE’s equity interests in DBMG are pledged as collateral.

Capital Expenditures

Capital expenditures are set forth in the table below (in millions):

Year Ended December 31,

Infrastructure

Life Sciences

Spectrum

Total

Purchase Commitments

Unrecorded future minimum purchase commitments as of December 31, 2025, were $362.3 million. Refer to Note 13. Commitments and Contingencies to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Summary of Consolidated Cash Flows

The below table summarizes the cash provided by or used in our activities (in millions):

Year Ended December 31,

Change

Cash provided by operating activities

Cash used in investing activities

Cash used in financing activities

Effects of exchange rate changes on cash, cash equivalents and restricted cash

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

Operating Activities

Cash provided by operating activities was $146.6 million for the year ended December 31, 2025, as compared to $9.1 million for the year ended December 31, 2024, an improvement of $137.5 million. Cash flows from operations are primarily influenced by changes in the timing of demand for services and by operating margins, but can also be affect ed by working capital needs associated with our operations. For the year ended December 31, 2025, the improvement in cash flows from operating activities was primarily driven by an increase in cash provided by operating activities at our Infrastructure segment and, to a much lesser extent, a decrease in cash used in operating activities at our Non-Operating Corporate segment. The improvement at our Infrastructure segment was due to an increase in working capital inflows primarily due to normal business fluctuations in contract-related assets and liabilities, accounts payable and other accrued liabilities, partially offset by a decrease in working capital inflows primarily from the fluctuations in accounts receivable, due to the timing of regular billing and collection activities and ordinary project activity. Our Non-Operating Corporate segment's decrease in cash used in operating activities was primarily due to a decrease in cash paid for interest, partially offset by an increase in cash paid for taxes, and an increase in operating expenses primarily due to refinancing costs.

Investing Activities

Cash used in investing activities was $22.6 million for the year ended December 31, 2025, as compared to $13.9 million for the year ended December 31, 2024, an increase in cash used in investing activities of $8.7 million. Capital expenditures totaled $26.1 million, or $24.7 million net of proceeds from disposals, for the year ended December 31, 2025, as compared to $19.0 million, or $8.9 million net proceeds after disposals, for the year ended December 31, 2024, for a net increase in cash used in investing activities of $15.8 million. The increase was primarily driven by our Infrastructure segment, which had more PP&E sales in the comparable year due to a plant closure in 2024, and increased PP&E additions in the current year at our Infrastructure and Spectrum segments. In addition the comparable year included unrepeated proceeds of $0.5 million in other investing activities related to a note receivable at our Life Sciences segment. These increases in cash used in investing activities were partially offset by net proceeds related to purchase and sale of marketable securities investments at our Non-Operating Corporate segment of $2.6 million in the current year, as compared to $2.0 million in net payments for these investments in the prior year. In addition, the prior year cash outflows at our Life Sciences segment included loans to MediBeacon of $2.3 million, and there was a $0.7 million decrease in asset acquisition payments at our Spectrum segment as compared to the prior year.

Financing Activities

Cash used in financing activities was $61.2 million for the year ended December 31, 2025, as compared to $26.5 million for the year ended December 31, 2024, an increase in cash used in financing activities of $34.7 million. The increase in financing cash outflows was primarily driven by our Non-Operating Corporate segment, which received $33.2 million in net proceeds from the Rights Offering and Concurrent Private Placement in 2024. In addition, for the year ended December 31, 2025, net repayments on other debt obligations totaled $27.4 million, as compared to net repayments of $3.0 million in the comparable year, an increase in cash outflows of $24.4 million, driven primarily by term loan activity at our Infrastructure segment, who refinanced their debt in the current year, and had a $29.5 million net increase in other debt obligation outflows, partially offset by our Non-Operating Corporate segment, due to an unrepeated $4.1 million repayment on the CGIC Note in the comparable year and unrepeated $1.0 million payment for partial redemption of our 2026 Convertible Notes in the comparable year. These increases in cash outflows were partially offset by a decrease in net cash outflows from revolving credit facility activity, which totaled $30.9 million for year ended December 31, 2025, as compared to $55.0 million in the prior year, for a decrease in net cash outflows of $24.1 million, which was attributable to our Infrastructure segment. The increase in cash used in financing activities was also driven by a $1.0 million increase in dividends paid primarily due to $1.6 million in dividends declared and paid by DBMG during the year ended December 31, 2025, partially offset by a $0.6 million decrease in cash paid for preferred share dividends at our Non-Operating Corporate Segment, a $0.3 million increase in debt issuance costs paid to third parties and a $0.2 million increase in cash paid for other financing activities. The increase in cash outflows was also partially offset by a $0.3 million decrease in payments to non-controlling interests due to a final distribution made by our Other segment to New Saxons' non-controlling interests in the prior year.

Infrastructure

Cash Flows

Cash flows from operating activities are the principal source of cash used to fund DBMG’s operating expenses, interest payments on debt, and capital expenditures. DBMG's short-term cash needs are primarily for working capital to support operations including receivables, inventories, and other costs incurred in performing on its contracts. DBMG attempts to structure the payment arrangements under its contracts to match costs incurred under the project. To the extent it is able to bill in advance of costs incurred, DBMG generates working capital through billings in excess of costs and recognized earnings on uncompleted contracts. DBMG relies on its credit facilities to meet its working capital needs. DBMG believes that its available funds, cash generated by operating activities and funds available under its bank credit facilities will be adequate to meet all funding requirements for its operating expenses, working capital needs, interest payments on debt and capital expenditures for the foreseeable future. However, DBMG may expand its operations through future acquisitions and may require additional equity or debt financing.

DBMG is required to make monthly interest payments on all of its debt. Based upon the December 31, 2025, debt balance, DBMG anticipates that its interest payments will be approximately $1.4 million for each quarter of 2026.

New Accounting Pronouncements

For information on new accounting pronouncements, refer to Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles under U.S. Generally Accepted Accounting Principles ("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. The following is a review of the more significant assumptions and estimates used in the preparation of our consolidated financial statements. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. Refer to Note 2. Summary of Significant Accounting Policies and Note 3. Revenue and Contracts in Process to the Consolidated Financial Statements of this Annual Report on Form 10-K, which discuss our significant accounting and revenue recognition policies and are incorporated herein by reference.

Revenue Recognition - Estimated Costs to Complete

With respect to our Infrastructure segment (DBMG), 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. DBMG performs its services primarily under fixed-price contracts and recognizes revenue over time using the input method to measure progress for its projects. DBMG transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by DBMG’s performance as we perform, (b) DBMG’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the DBMG's performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date. The Company has determined that one or more of these three criteria are met for such contracts. 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 initial scope and price of any subsequently mutually agreed upon change orders due to a change in scope or other cost factors, the work has commenced, and that realization of revenue is reasonably assured. 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 in which a loss on a contract becomes determinable.

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.

We review our tax positions on a quarterly basis and adjust the related balances as new information becomes available. Deferred tax assets represent amounts available to reduce income taxes payable in future periods and arise primarily from temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards.

The realizability of deferred tax assets is evaluated by assessing the sufficiency 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 must make significant estimates and assumptions about future taxable income and future tax consequences when determining the amount of the valuation allowance. Based on an evaluation of available positive and negative evidence, we concluded that it was more likely than not that the net deferred tax assets of the INNOVATE Corp. U.S. consolidated income tax group and certain separate entity filers will not be realized. Therefore, a full valuation allowance was maintained against the net deferred tax assets as of December 31, 2025. Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not that the deferred tax assets will be realized within the applicable statutory expiration periods. However, deferred tax assets could be reduced in future periods if estimates of taxable income are significantly reduced.

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. 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 are estimates recorded to the extent applicable based on management judgment. 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.

Refer to Note 12. Income Taxes to the Consolidated Financial Statements of this Annual Report on Form 10-K for further information, which is incorporated herein by reference.

Goodwill and Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but, rather, are tested for impairment. We test goodwill and indefinite-lived intangibles for impairment at least annually in the fourth quarter (October 1st) or when factors indicate that the carrying amounts of assets may not be recoverable and that there is a potential impairment in accordance with the provisions of ASC 350, Intangibles - Goodwill and Other ("ASC 350"). The factors that we consider important, and which could trigger an impairment review, include, but are not limited to: a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit; a significant decline in the market value of our common stock or debt securities for a sustained period; a material adverse change in economic, financial market, industry or sector trends; a material failure to achieve operating results relative to historical levels or projected future levels; and significant changes in operations or business strategy. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the impairment provisions of ASC 360, Property, plant, and equipment ("ASC 360").

We elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, and if so, a quantitative test is performed. The quantitative evaluation for impairment of indefinite-lived intangibles consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to the excess, limited to the amount of recognized goodwill.

Under the quantitative test, we estimate the fair value of a reporting unit, which requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates. The assumptions about future cash flows and growth rates are based on our assessment of a number of factors, including the reporting unit’s recent performance against budget, performance in the market that the reporting unit serves, and industry and general economic data from third-party sources. Discount rate assumptions are based on an assessment of the risk inherent in those future cash flows. Changes to the underlying businesses could affect the future cash flows, which in turn could affect the fair value of the reporting unit. Further, we assess the current market capitalization, forecasts and the amount by which the fair values exceeded the carrying values. If the carrying amount of the reporting unit exceeds the fair value, an impairment loss shall be recognized in an amount equal to the excess.

Based on qualitative assessments performed as of October 1, 2025, management determined it was more likely than not that the fair value of its reporting units and the fair value of the indefinite-lived intangible assets exceeded their carrying values, and, as such, no impairment was required.

Intangible assets not subject to amortization (i.e. indefinite-lived intangibles) consist of certain television broadcast licenses. Intangible assets subject to amortization consist of certain trade names, customer contracts and developed technology. These finite-lived intangible assets are amortized based on their estimated useful lives. Such assets are subject to the impairment provisions of ASC 360, wherein impairment is recognized and measured only if there are events and circumstances that indicate that the carrying amount may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset group. An impairment loss is recorded to the extent the carrying amount of the asset or asset group exceeds the fair value and is not recoverable.

Refer to Note 8. Goodwill and Intangibles, Net, to the Consolidated Financial Statements of this Annual Report on Form 10-K for additional information on goodwill and intangible assets, including, if applicable, any intangible impairments recorded during the years presented, which is incorporated herein by reference.

As of December 31, 2025, we had initiated processes to explore strategic alternatives for potential asset sales. Management considered whether these actions represented an indicator of impairment. Based on the information available as of December 31, 2025, management concluded it was not more likely than not that the estimated fair value of the applicable reporting unit(s) was less than its carrying value. Management will continue to monitor events and circumstances related to the sales processes and will perform interim impairment testing if facts and circumstances change that would indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Related Party Transactions

For a discussion of our Related Party Transactions, refer to Note 17. Related Parties to the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Special Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. We have made statements in this Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Annual Report”) that may constitute “forward-looking statements.” 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 future acquisitions and dispositions and the successful integration of acquisitions with INNOVATE or the applicable subsidiary, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes.

Forward-looking statements are not guarantees of performance. You should understand that the following important factors, in addition to those discussed under the section entitled " Risk Factors " in Item 1A of 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:

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

• substantial doubt about our ability to continue operating as a going concern;

• the impact on our business and financial condition of our substantial indebtedness and the significant additional indebtedness and other financing obligations we may incur;

• the impact of covenants in the Indentures governing INNOVATE’s 2027 Senior Secured Notes, 2027 Convertible Notes, 2026 Senior Secured Notes, 2026 Convertible Notes, CGIC Subordinated Secured Promissory Note and Revolving Line of Credit, our Third Amended and Restated Certificate of Incorporation and all other subsidiary debt obligations as summarized in Note 11. Debt Obligations to our Consolidated Financial Statements included in this Annual Report on Form 10-K and any future amendments or other new financing agreements on our ability to operate our business and finance our pursuit of acquisition opportunities;

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

• our dependence on certain key personnel including the passing in 2023 of Mr. Barr, our former CEO, President and Director and the successful transition of his management responsibilities;

• bank failures or other similar events that could adversely affect our and our customers' and vendors' liquidity and financial performance;

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

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

• changes in market conditions, including from political regulatory or market uncertainty, changes in foreign exchange rates, interest rates or inflation, supply chain disruptions, labor shortages and increases in overall price levels, including in transportation costs;

• the uncertain effects of U.S. and foreign government actions affecting international trade and economic policy, including changes in volatility in tariffs and trade policies and retaliatory actions, on credit markets, customers, and customer retention, and demand for our products and services;

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

• limitations on our ability to successfully identify any strategic acquisitions or business opportunities and to compete for these opportunities with others who have greater resources;

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

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

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

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

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

• the effects related to or resulting from ongoing and recent geopolitical events, such as the conflicts in Ukraine, the Middle East, and Venezuela, including the imposition of additional sanctions and export controls, as well as the broader impact to financial markets and the global macroeconomic and geopolitical environment;

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

• potential impacts on our business resulting from climate change, greenhouse gas regulations, and the impact of climate change-related changes on the frequency and severity of weather patterns;

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

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

• our ability to remain in compliance with the listing standards of the NYSE;

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

• our expectations regarding the timing, extent and effectiveness of our cost reduction initiatives and management’s ability to moderate or control discretionary spending;

• management’s plans, goals, forecasts, expectations, guidance, objectives, strategies and timing for future operations, acquisitions, synergies, asset dispositions, fixed asset and goodwill impairment charges, tax and withholding expense, selling, general and administrative expenses, product plans, performance and results;

• management’s assessment of market factors and competitive developments, including pricing actions and regulatory rulings;

• our expectations and timing with respect to any strategic dispositions and sales of our operating subsidiaries, or businesses, that we may make in the future and the effect of any such dispositions or sales on our results of operations;

• the possibility of indemnification claims arising out of divestitures of businesses; and

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

Infrastructure / DBM Global Inc.

Our actual results or other outcomes of DBMG, and, thus, our Infrastructure segment, may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:

• adverse impacts from weather affecting DBMG’s performance and timeliness of completion of projects, which could lead to increased costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;

• cost overruns on fixed-price or similar contracts or failure to receive timely or proper payments on cost-reimbursable contracts, whether as a result of improper estimates, performance, disputes, or otherwise;

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

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

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

• changes in economic conditions, including from the impact of inflationary pressures and changes in interest rates;

• adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the potential effect of such claims or litigation on DBMG’s business, financial condition, results of operations or cash flow;

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

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

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

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

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

• lack of necessary liquidity to provide bid, performance, advance payment and retention bonds, guarantees, or letters of credit securing DBMG’s obligations under bids and contracts, or to finance expenditures prior to the receipt of payment for the performance of contracts.

Life Sciences / Pansend Life Sciences, LLC

Our actual results or other outcomes of Pansend Life Sciences, LLC, and, thus, our Life Sciences segment, may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:

• our Life Sciences segment’s ability to invest in development stage companies;

• Indebtedness of R2 Technologies that will mature on August 1, 2026;

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

• medical advances in healthcare and biotechnology;

• governmental regulation in the healthcare industry; and

• our Life Sciences segment possible inability to raise additional capital when needed or refinance its existing debt, on attractive terms, or at all.

Spectrum / HC2 Broadcasting Holdings Inc.

Our actual results or other outcomes of Broadcasting, and, thus, our Spectrum 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 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;

• our Spectrum segment's possible inability to raise additional capital when needed or refinance its existing debt, on attractive terms, or at all;

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

• FCC regulation of the television broadcasting industry.

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.