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Related Parties
 3 Months Ended
Mar. 31, 2024
Related Party Transactions [Abstract]  
Related Parties
16. Related Parties

Non-Operating Corporate

In September 2018, the Company entered into a 75-month lease for office space which expires in December 2024. As part of the agreement, INNOVATE was able to pay a lower security deposit and lease payments, and received favorable lease terms as consideration for landlord required cross default language in the event of default of the shared space leased by Harbinger Capital Partners, a company controlled by a former CEO of INNOVATE and formerly a related party, in the same building. With the adoption of ASC 842, as of January 1, 2019, this lease was recognized as a right-of-use asset and lease liability on the Condensed Consolidated Balance Sheets.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC, a significant shareholder, in the principal amount of $35.1 million. Refer to Note 11. Debt Obligations and Note 15. Temporary Equity and Equity for additional information.

In December 2023, the Company had entered into a sublease agreement for a special purpose space with PBCIC, a Florida not-for-profit corporation and related party to Avram A. Glazer, the Chairman of INNOVATE's Board of Directors and a significant shareholder, who is also on the board of directors of PBCIC. In March 2024, the Company assigned this lease to an entity controlled by Mr. Glazer. In addition, in March 2024, the Company assigned a lease for office space to an entity controlled by Mr. Glazer. Refer to Note 9. Leases for additional information.

Lancer Capital, an entity controlled by Avram A. Glazer, held $2.0 million of principal amount of the Company's $51.8 million 7.5% 2026 Convertible Notes, as of both March 31, 2024 and December 31, 2023. The $2.0 million in notes are convertible into 468,594 shares of common stock of INNOVATE Corp. Refer to Note 11. Debt Obligations for additional information on the 2026 Convertible Notes. During both the three months ended March 31, 2024 and , 2023, Lancer Capital earned $37.5 thousand in interest relating to these notes.

As detailed in Note 15. Temporary Equity and Equity, during the first quarter of 2024, in connection with the Rights Offering, the Company entered into an Investment Agreement with Lancer Capital, 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 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 $25.0 million to the Company and received 25,000 shares of Series C Preferred Stock. As a result, Lancer Capital'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. Subsequent to quarter end, on April 24, 2024, as a result of the closing of the Rights Offering and Concurrent Private Placement, Lancer Capital purchased approximately 6,286 shares of Series C Preferred Stock, increasing Lancer Capital's beneficial ownership to 52.1%. Refer to Note 15. Temporary Equity and Equity for additional details.

Infrastructure

Banker Steel previously leased two planes from Banker Aviation, LLC, a former related party and entity that is owned by Donald Banker, who was the CEO of Banker Steel until December 2023. Both leases had been terminated by the fourth quarter of 2023. For the three months ended March 31, 2023, DBMG incurred related lease expenses of $0.3 million.

DBMG and Banker Steel, jointly and severally, have a subordinated 4.0% note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25% interest, and jointly and severally also had a subordinated 8.0% note payable to Donald Banker's family trust, the latter of which was fully paid off in December 2023. During the three months ended March 31, 2024, DBMG made $2.5 million in scheduled payments on the 4.0% note. For the three months ended March 31, 2024 and 2023, DBMG incurred aggregate interest expense related to these notes of approximately $25 thousand and $0.5 million, respectively. There was $24 thousand accrued interest as of March 31, 2024, and accrued interest was $0.1 million as of December 31, 2023. The 4.0% note and associated accrued interest matured on March 31, 2024, and was fully redeemed on April 2, 2024.

Life Sciences

As of March 31, 2024 and December 31, 2023, R2 Technologies had $20.7 million and $17.4 million, respectively, in principal amount of 20.0% senior secured promissory notes due to Lancer Capital. For the three months ended March 31, 2024 and 2023, R2 Technologies recognized interest expense of $0.9 million and $0.5 million, respectively, related to the contractual interest coupon on the notes due to Lancer Capital. As part of the agreement, all unpaid accrued interest on the new note is capitalized into the principal balance on a monthly basis. As a result, an additional $0.7 million of unpaid accrued interest incurred subsequent to January 31, 2024, was capitalized into the principal balance during the three months ended March 31, 2024. As of March 31, 2024, all unpaid accrued interest on the new note had been capitalized into the principal balance, and there was no accrued interest payable. As of December 31, 2023, the related accrued interest payable not capitalized into the principal balance was $2.4 million. The accrued exit fee was $2.2 million as of March 31, 2024. Subsequent to quarter end, effective April 30, 2024, the note was extended to May 17, 2024, and the exit fee payable was updated to 10.71% of the principal amount for repayments made after May 1, 2024. Refer to Note 11. Debt Obligations for additional information.
For both the three months ended March 31, 2024 and 2023, R2 Technologies recognized revenues of $0.2 million from sales and profit sharing agreements from a subsidiary of Huadong, a related party of R2 Technologies. As of March 31, 2024 related receivables from this subsidiary of Huadong totaled $0.1 million, and there were no related receivables from this subsidiary of Huadong as of December 31, 2023.

For both the three months ended March 31, 2024 and 2023, R2 Technologies incurred approximately $0.1 million of stock compensation and royalty expenses related to Blossom Innovations, LLC, an investor of R2 Technologies since 2014.

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