INNOVATE Corp.

16. Related Parties

During the first quarter of 2024, in connection with the Rights Offering, the Company entered into an Investment Agreement with Lancer Capital, an entity controlled by Avram A. Glazer, pursuant to which Lancer Capital agreed to the Backstop Commitment to purchase up to $19.0 million of Series C Preferred Stock in connection with the Rights Offering and to purchase $16.0 million of Series C Preferred Stock in a private placement transaction ("Concurrent Private Placement"), of which $25.0 million would be purchased before the closing of the Rights Offering if the Rights Offering did not close by March 28, 2024. As a result of the extension of the Rights Offering, on March 28, 2024, Lancer Capital funded the equity advance of $25.0 million to the Company and received 25,000 shares of Series C Preferred Stock. As a result, Mr. Glazer's beneficial ownership increased from 29.1% as of March 5, 2024, immediately prior to the start of the Rights Offering, to 48.8% as of March 31, 2024. On April 24, 2024, as a result of the closing of the Rights Offering and Concurrent Private Placement, Lancer Capital purchased an additional approximately 6,286 shares of Series C Preferred Stock for $6.3 million, increasing Mr. Glazer's beneficial ownership to 52.1%. On June 18, 2024, the Company held its annual shareholder meeting where the Company's shareholders approved the conversion of the Series C Preferred Stock into common stock. As a result, approximately 31,286 Series C Preferred Stock held by Lancer Capital were converted into 4,469,390 shares of INNOVATE's common stock (44,693,895 on a pre Reverse Stock Split basis), and there wereno shares of the Series C Preferred Stock outstanding subsequent to their conversion into the Company's common stock. Refer to Note 15. Equity and Temporary Equity for additional information. As of March 31, 2025, Mr. Glazer's beneficial ownership was 51.1%.

Lancer Capital held $2.0 million of principal amount of the Company's 7.50% 2026 Convertible Notes, as of both March 31, 2025 and December 31, 2024. As of both March 31, 2025 and December 31, 2024, the $2.0 million in 7.50% 2026 Convertible Notes are convertible into 47,265 shares of common stock of INNOVATE. Refer to Note 11. Debt Obligations for additional information on the 7.50% 2026 Convertible Notes. During both the three months ended March 31, 2025 and 2024, Lancer Capital earned $37.5 thousand in interest relating to these notes.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC in the principal amount of $35.1 million. CGIC is a former significant shareholder and is the shareholder of the Series A-3 Preferred Stock and Series A-4 Preferred Stock. As a result of the closing of the Rights Offering and Concurrent Private Placement in April 2024, a mandatory prepayment was required, and INNOVATE redeemed $4.1 million of the CGIC Unsecured Note on April 26, 2024. Refer to Note 11. Debt Obligations for additional information.

DBMG and Banker Steel, jointly and severally, had a subordinated 4.0% note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25% interest. The 4.0% note and associated accrued interest matured on March 31, 2024, and was fully redeemed on April 2, 2024. During the three months ended March 31, 2024, DBMG made $2.5 million in scheduled principal payments on the 4.0% note.

As of March 31, 2025 and December 31, 2024, R2 Technologies had $25.2 million and $24.0 million, respectively, in principal amount of a 20.0% senior secured promissory note due to Lancer Capital. Refer to Note 11. Debt Obligations for additional information on the 20.0% senior secured promissory note due to Lancer Capital.

For the three months ended March 31, 2025 and 2024, R2 Technologies recognized $0.4 million and $0.2 million, respectively, of revenue from sales and profit sharing agreements with a subsidiary of Huadong, a related party of R2 Technologies. There were $0.2 million and $0.1 million of related receivables from this subsidiary of Huadong as of March 31, 2025 and December 31, 2024, respectively.

Share-based compensation and royalty expenses related to Blossom Innovations, LLC, an investor of R2 Technologies since 2014, totaled $0.3 million and $0.1 million, for the three months ended March 31, 2025 and 2024, respectively.

Refer to Note 6. Investments for transactions with equity method investees of the Company.