Ideanomics(IDEX) - 2020 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Ideanomics' unaudited condensed consolidated financial statements and management's discussion for H1 2020 Item 1. Financial Statements. Presents Ideanomics' unaudited condensed consolidated financial statements for June 30, 2020, and related notes Unaudited Condensed Consolidated Financial Statements Presents Ideanomics' unaudited condensed consolidated balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheets (Unaudited) (USD in thousands) | ASSETS (USD in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $36,384 | $2,633 | | Accounts receivable, net | 1,242 | 2,405 | | Total current assets | 42,537 | 7,453 | | Total assets | $147,990 | $126,945 | | | | | | LIABILITIES & EQUITY | June 30, 2020 | December 31, 2019 | | Accounts payable | $2,313 | $3,380 | | Total current liabilities | 29,319 | 36,755 | | Total liabilities | 56,117 | 66,946 | | Total IDEX shareholder's equity | 70,042 | 33,559 | | Total equity | 83,351 | 58,737 | Condensed Consolidated Statements of Operations (Unaudited) (USD in thousands) | (USD in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $4,692 | $14,454 | $5,070 | $41,400 | | Gross profit | 255 | 13,738 | 299 | 40,426 | | Income (loss) from operations | (16,269) | 5,714 | (25,705) | 26,610 | | Net income (loss) attributable to IDEX common shareholders | $(26,578) | $5,292 | $(38,928) | $25,219 | | Basic EPS | $(0.15) | $0.05 | $(0.23) | $0.24 | | Diluted EPS | $(0.15) | $0.05 | $(0.23) | $0.22 | Condensed Consolidated Statements of Cash Flows (Unaudited) (USD in thousands) | (USD in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(10,390) | $(5,888) | | Net cash used in investing activities | (1,879) | (2,249) | | Net cash provided by financing activities | 45,737 | 6,087 | | Net increase (decrease) in cash and cash equivalents | 33,751 | (2,046) | | Cash and cash equivalents at end of period | $36,384 | $1,060 | Notes to Unaudited Condensed Consolidated Financial Statements Details significant accounting policies, financial instrument specifics, and other disclosures for the financial statements Note 1. Nature of Operations and Summary of Significant Accounting Policies Ideanomics operates in MEG (EV) and Ideanomics Capital (Fintech), improving liquidity and managing COVID-19 impacts - Ideanomics operates in one segment with two business units: Mobile Energy Group (MEG) focusing on EV and EV battery sales and financing, and Ideanomics Capital focusing on blockchain and AI in Fintech[15][16][17] - The company improved its liquidity position by raising $48.2 million in the six months ended June 30, 2020, and reduced indebtedness by $13.9 million through debt conversion to common stock[21] Liquidity Improvements (Six Months Ended June 30, 2020) | Source | Amount (USD in millions) | | :-------------------------------- | :----------------------- | | Common stock issuance & warrant exercise | $39.1 | | Noncontrolling interest shareholders | $7.1 | | Senior secured convertible notes | $2.0 | | Total Funds Raised | $48.2 | | Debt converted to common stock | $13.9 | | Cash and cash equivalents (June 30, 2020) | $36.4 | - COVID-19 caused significant disruption and operational delays, particularly in China, but the company does not anticipate significant adverse effects on its operations revenue in the near- or mid-term[22][25][202] Note 2. New Accounting Pronouncements The company evaluates new accounting pronouncements, including ASU 2016-13, ASU 2019-12, and ASU 2020-06 - The company will adopt ASU 2016-13, 'Financial Instruments - Credit Losses,' effective January 1, 2023, and is currently evaluating its effect on consolidated financial statements[26] - ASU 2019-12, 'Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes,' will be adopted effective January 1, 2021, with management evaluating its impact[26] - ASU 2020-06, 'Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,' will be adopted effective January 1, 2024, with its effect depending on the composition and terms of financial instruments at adoption[28] Note 3. Notes Receivable Energy Sales issued two notes receivable in May 2020, totaling $1.8 million, one collateralized and one uncollateralized - In May 2020, Energy Sales provided a $1.4 million (10.0 million RMB) note receivable to Mr. Jianya Zhu, collateralized by 50% ownership of Seven Stars Founder Space Industrial Pte. Ltd., which remains unpaid[29] - Energy Sales also provided an uncollateralized $0.4 million (3.0 million RMB) note receivable to Fuzhou Zhengtong Hongxin Investment Management Company Limited in May 2020, due within three months[30] Note 4. Revenue Q2 2020 revenue decreased 68% to $4.7 million, primarily due to the absence of digital asset management services Revenue Disaggregation (USD in thousands) | Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Geographic Markets | | | | | | Malaysia | $5 | $— | $9 | $— | | USA | 105 | 14,454 | 429 | 41,400 | | China | 4,582 | — | 4,632 | — | | Total Revenue | $4,692 | $14,454 | $5,070 | $41,400 | | Product or Service | | | | | | Digital asset management services | $— | $14,100 | $— | $40,700 | | Digital advertising services & other | 105 | 354 | 428 | 700 | | Electric vehicles | 695 | — | 750 | — | | Combustion engine vehicles | 3,892 | — | 3,892 | — | - Revenue from third-parties for the three months ended June 30, 2020, decreased by $9.8 million (68%) to $4.7 million, primarily due to the absence of digital asset management services[7][221] - In Q2 2020, the company recognized $4.6 million revenue from vehicle sales, including $3.9 million from traditional combustion vehicles, as it developed its EV business[223] Note 5. VIE Structure and Arrangements Ideanomics deconsolidated PRC-based VIEs on December 31, 2019, after terminating contractual agreements - Prior to December 31, 2019, Ideanomics consolidated certain PRC-based VIEs due to contractual agreements that granted the company power to direct activities and absorb/receive majority of losses/benefits[33] - These contractual agreements were terminated on December 31, 2019, resulting in the deconsolidation of the VIEs[34] Note 6. Acquisitions and Divestitures No acquisitions or divestitures in H1 2020; 2019 included Tree Technologies acquisition and DBOT stake increase - In the six months ended June 30, 2020, the Company did not acquire any companies nor dispose of any subsidiaries[36] - On December 26, 2019, Ideanomics acquired a 51% interest in Tree Technologies (Malaysian EV market) for $0.9 million cash, 9.5 million common shares, and an earnout of up to $32.0 million over three years[38] - In July 2019, the Company increased its ownership in Delaware Board of Trade Holdings, Inc. (DBOT) to 99.0% through securities purchase agreements, which included a 'True-Up Common Stock' provision for stock price fluctuations[45] - In 2019, Ideanomics divested Red Rock Global Capital LTD for $0.7 million and diluted its ownership in Amer Global Technology Limited from 55.0% to 10.0%, recognizing a disposal gain of $0.5 million[51][52][53] Note 7. Accounts Receivable Net accounts receivable decreased to $1.2 million at June 30, 2020, including $1.1 million from a related party Accounts Receivable (USD in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | Accounts receivable, gross | $1,242 | $2,405 | | Less: allowance for doubtful accounts | — | — | | Accounts receivable, net| $1,242 | $2,405 | - The accounts receivable balance includes $1.1 million (June 30, 2020) and $2.3 million (December 31, 2019) in taxi commission revenue receivables from the related party Guizhou Qianxi Green Environmentally Friendly Taxi Service Co[56] Note 8. Property and Equipment, net Net property and equipment decreased to $177 thousand, with $0.2 million impairment and Fintech Village at $12.6 million Property and Equipment, net (USD in thousands) | Category | June 30, 2020 (Net Balance) | December 31, 2019 (Net Balance) | | :-------------------------- | :-------------------------- | :------------------------------ | | Furniture and office equipment | $300 | $441 | | Vehicle | 120 | 62 | | Leasehold improvements | 173 | 243 | | Total property and equipment | 593 | 746 | | Less: accumulated depreciation | (416) | (368) | | Property and equipment, net | $177 | $378 | | Fintech Village | | | | Land | 3,043 | 3,043 | | Building | 309 | 309 | | Assets retirement obligations – environmental remediation | 6,496 | 6,496 | | Capitalized direct development cost | 2,714 | 2,713 | | Construction in progress (Fintech Village) | 12,562 | 12,561 | | Property and Equipment, net (including Fintech Village) | $12,739 | $12,939 | - The company recorded a $0.2 million impairment loss related to leasehold improvements and other fixed assets after vacating its New York City headquarters at 55 Broadway[59] - Fintech Village, identified as a non-core asset, includes $4.65 million in asset retirement obligations for environmental remediation as of June 30, 2020[60] Note 9. Goodwill and Intangible Assets Goodwill decreased to $10.5 million due to a $12.8 million adjustment; total intangibles were $51.5 million Goodwill Carrying Amount (USD in thousands) | Period | Amount | | :------------------------ | :------- | | Balance as of January 1, 2019 | $705 | | Acquisitions | 22,639 | | Balance as of December 31, 2019 | 23,344 | | Measurement period adjustments* | (12,848) | | Effect of change in foreign currency exchange rates | (36) | | Balance as of June 30, 2020 | $10,460| Intangible Assets, net (USD in thousands) | Category | June 30, 2020 (Net Balance) | December 31, 2019 (Net Balance) | | :-------------------------- | :-------------------------- | :------------------------------ | | Amortizing Intangible Assets | | | | Solid Opinion IP | $3,414 | $3,879 | | Influencer network | 1,617 | 1,716 | | Continuing membership agreement | 7,842 | 8,049 | | Land use rights | 25,979 | 27,079 | | Marketing and distribution agreement | 12,030 | 11,333 | | Total Amortizing Intangible Assets | 51,426 | 52,718 | | Indefinite lived intangible assets | | | | Website name | 25 | 25 | | Patent | 28 | 28 | | Total Intangible Assets, net | $51,479 | $52,771 | Expected Amortization Expense (USD in thousands) | Years ending December 31, | Amortization to be recognized | | :------------------------ | :---------------------------- | | 2020 (excluding six months ended June 30, 2020) | $1,320 | | 2021 | 2,585 | | 2022 | 2,464 | | 2023 | 2,454 | | 2024 | 1,678 | | 2025 and thereafter | 40,925 | | Total | $51,426 | Note 10. Long-term Investments Long-term investments stable at $22.6 million, including equity method investments in BDCG (Intelligenta) and Glory Long-term Investments (USD in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | Non-marketable equity investments | $6,005 | $5,967 | | Equity method investments | 16,639 | 16,654 | | Total | $22,644 | $22,621 | - The company holds a 60% equity ownership in BBD Digital Capital Group Ltd. (BDCG), rebranded as Intelligenta, for blockchain services, accounted for using the equity method due to variable substantive participating rights granted to a noncontrolling party[73] - Ideanomics acquired a 34% interest in Glory Connection Sdn. Bhd (Glory), a Malaysian EV company, for $20.0 million in restricted common shares, accounted for as an equity method investment despite being a VIE where the company is not the primary beneficiary[74][76] Note 11. Leases Recorded $7.2 million in operating right-of-use assets for Qingdao and $5.3 million impairment on NYC headquarters - On May 1, 2020, the company took possession of a 40,000 square meter facility in Qingdao, China, provided free of charge by local governmental entities until November 30, 2034, resulting in recording $7.2 million in operating right-of-use assets and operating lease liabilities[78][79] - As of June 30, 2020, operating lease right-of-use assets were $7.6 million and operating lease liabilities were $13.3 million, with a weighted-average remaining lease term of 10.1 years and a weighted-average discount rate of 5.7%[80] - The company recorded a $5.3 million impairment loss related to the right-of-use assets for its New York City headquarters after vacating the premises and is negotiating lease termination[85] Note 12. Promissory Notes Promissory notes decreased to $15.6 million due to convertible note conversions, increasing interest expense Outstanding Promissory Notes (USD in thousands) | Note Type | Interest Rate | June 30, 2020 (Principal Amount) | December 31, 2019 (Principal Amount) | | :---------------------------------------- | :------------ | :------------------------------- | :------------------------------- | | Convertible Note - Advantech | 8.0% | $12,000 | $12,000 | | Senior Secured Convertible Note - ID Venturas 7 (Feb 2019) | 10.0% | — | 850 | | Senior Secured Convertible Note - ID Venturas 7 (Sep 2019) | 10.0% | — | 3,580 | | Senior Secured Convertible Note - YA II PN | 4.0% | — | 3,000 | | Promissory Note - New Castle County | 6.0% | 3,000 | 3,000 | | Vendor Notes Payable | 0.25%-4% | 135 | — | | Small Business Association Paycheck Protection Program | 1% | 460 | — | | Total Principal Amount | | $15,595 | $26,932 | - Interest expense increased by $8.3 million for the three months ended June 30, 2020, and $10.7 million for the six months ended June 30, 2020, primarily due to the recognition of unamortized beneficial conversion features upon the conversion of convertible notes to common stock[247][248] - Various convertible notes, including those from ID Venturas 7 and YA II PN, were converted into common stock during the six months ended June 30, 2020, often after down-round price adjustments, significantly reducing the principal amount of these debts[100][111][118] Note 13. Stockholders' Equity, Convertible Preferred Stock and Redeemable Non-controlling Interest Common stock outstanding increased to 237.0 million shares, $30.5 million raised via SEDA, and $7.3 million non-controlling interest - As of June 30, 2020, Ideanomics had 237,008,159 shares of common stock issued and outstanding, up from 149,692,953 shares at December 31, 2019[6] - The company entered into a Standby Equity Distribution Agreement (SEDA) with YA II PN, allowing it to issue and sell up to $45.0 million of common stock over 36 months; in Q2 2020, 30.1 million shares were issued for $30.5 million under SEDA[129] Redeemable Non-controlling Interest Activity (Six Months Ended June 30, 2020) (USD in thousands) | Activity | Amount | | :------------------------------------ | :------- | | January 1, 2020 | $— | | Initial investment | 7,047 | | Accretion of dividend | 213 | | Loss attributable to non-controlling interest | (80) | | Adjustment to redemption value | 80 | | June 30, 2020 | $7,260 | - A redeemable non-controlling interest of $7.3 million was recognized for an initial investment in New Energy, which includes a 6% dividend rate and a redemption feature after three years[126][128] Note 14. Related Party Transactions Related party transactions included convertible note conversions, $61.1 million GTB impairment, and reduced borrowings from Dr. Wu - Convertible notes from Mr. Shane McMahon ($3.0 million) and SSSIG ($2.5 million and $1.0 million) were converted into common stock on June 5, 2020, at a reduced conversion price of $0.59 per share, following Audit Committee and Board approval[134][135][136] - In March 2019, the company sold $20.4 million in assets to GTD in exchange for 1.3 million GTBDollar Coins (GTB), recorded at the carrying amount of assets due to indeterminable fair value[138] - An impairment loss of $61.1 million was recorded in Q4 2019 on GTB due to a significant decline in its quoted price from $17.00 to $0.23 and inability to convert it to more liquid currencies[140] - Net borrowings from Dr. Wu and his affiliates decreased by $3.5 million in the six months ended June 30, 2020, with $1.5 million converted to 2.6 million shares of common stock at $0.59 per share[142][144] Note 15. Share-Based Compensation 26.3 million stock options and 1.2 million warrants outstanding, with $5.6 million in share-based compensation - As of June 30, 2020, the company had 26.3 million options, 29,586 restricted shares, and 1.2 million warrants outstanding[151] - Total share-based compensation expense was $5.6 million for the six months ended June 30, 2020, compared to $3.9 million for the same period in 2019[153] Stock Option Activity (Six Months Ended June 30, 2020) | Category | Options Outstanding | | :-------------------------- | :------------------ | | Outstanding at January 1, 2020 | 14,936,726 | | Granted | 13,750,000 | | Exercised | (60,000) | | Expired | (711,583) | | Forfeited | (1,657,917) | | Outstanding at June 30, 2020 | 26,257,226 | - ID Venturas exercised 5.3 million warrants in June 2020, generating $3.1 million in proceeds; YA II PN exercised 1.0 million and 1.7 million warrants, generating $1.0 million and $2.5 million in proceeds, respectively[157][158] Note 16. Earnings (Loss) Per Common Share H1 2020 basic and diluted loss per share was $(0.23), with 168.9 million weighted average common shares Earnings (Loss) Per Common Share (USD in thousands, except per share amounts) | (USD in thousands, except per share amounts) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net earnings (loss) attributable to common stockholders | $(38,928) | $25,219 | | Basic weighted average common shares outstanding | 168,946,960 | 107,029,448 | | Diluted potential common shares | 168,946,960 | 117,605,184 | | Basic EPS | $(0.23) | $0.24 | | Diluted EPS | $(0.23) | $0.22 | - Diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares was anti-dilutive[160] Potential Dilutive Common Shares (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :------------------------------------------- | :------------ | :---------------- | | Warrants | 1,150 | 8,996 | | Options | 26,287 | 14,938 | | Series A Preferred Stock | 933 | 933 | | DBOT True-up shares | 2,810 | 8,501 | | Convertible promissory note and interest | 37,315 | 21,678 | | Total | 68,495 | 55,046 | Note 17. Income Taxes No income tax expense for H1 2020 due to net operating losses and 100% valuation allowance, contrasting with H1 2019 benefit - Income tax expense was nil for the three and six months ended June 30, 2020, due to net operating losses and a 100% valuation allowance against net deferred tax assets[162][254][256] - For the six months ended June 30, 2019, the company recorded a $0.5 million income tax benefit, primarily from offsetting deferred tax liabilities with Grapevine's losses and a $0.4 million reduction in the valuation allowance on Ideanomics' deferred tax assets[164][257] Note 18. Commitments and Contingencies Ideanomics faces multiple shareholder class actions and a derivative action, which it plans to vigorously defend - The company is a defendant in three purported shareholder class actions (Rudani v. Ideanomics, Lundy v. Ideanomics, Kim v. Ideanomics) alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934[166] - A shareholder derivative action (Toorani v. Ideanomics) was filed, naming the company as a nominal defendant and certain former officers/directors as defendants, alleging breach of fiduciary duties, unjust enrichment, and corporate waste[166] - The company believes the class actions are without merit and plans to vigorously defend itself, but cannot currently estimate the possible loss or range of losses[166] Note 19. Concentration, Credit and Other Risks Ideanomics faces regulatory uncertainty in China's EV industry, credit risk, and foreign currency risks from RMB transactions - The EV industry in China is relatively new, and the PRC government has not adopted a clear regulatory framework, leading to uncertainty regarding regulatory requirements[168] - The company faces significant concentration of credit risk in cash held by financial institutions and unsecured accounts receivable, mitigated by regular credit evaluations[169] - A majority of the company's operating transactions, assets, and liabilities are denominated in RMB, which is not freely convertible and subject to PRC government policies and exchange rates, posing foreign currency risks[170] Note 20. Fair Value Measurement Financial instruments at fair value include acquisition true-up ($1.8 million) and earn-out ($15.1 million) liabilities using Level 3 inputs Financial Instruments Measured at Fair Value (USD in thousands) | Financial Instrument | June 30, 2020 (Level III) | Total | | :-------------------------- | :------------------------ | :------ | | Acquisition true-up liability | $1,798 | $1,798 | | Acquisition earn-out liability | 15,104 | 15,104 | - The fair value of the Tree Technology acquisition earn-out liability (Level 3) is valued using a scenario-based method, incorporating estimates such as projected gross revenue, probability estimates, and discount rates[173] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Ideanomics' business transformation, COVID-19 impact, and financial performance for H1 2020 Overview Ideanomics transitioned to fintech and EV, improved liquidity, commenced MEG operations, and managed COVID-19 disruptions - Ideanomics transitioned from premium content VOD services (YOD) to a financial technology (fintech) company, focusing on blockchain and AI, and established its Mobile Energy Global (MEG) business unit for the Chinese Electric Vehicle (EV) industry[179][180] - The company's financial performance is significantly impacted by its ability to transform its business, remain competitive in evolving technology markets, and manage fluctuations from strategic equity investments and joint ventures in the MEG business unit[182][183][184] - In the six months ended June 30, 2020, Ideanomics improved its liquidity by raising $48.2 million and converting $13.9 million of debt to common stock, resulting in $36.4 million in cash and cash equivalents[187] - MEG commenced operations in a 40,000 square meter facility in Qingdao, China, provided free by the government, and generated $4.6 million in Q2 2020 revenue, with $3.9 million from traditional combustion engine vehicles[186][189][200] - COVID-19 caused significant disruption and operational delays, particularly in China, but the company does not anticipate significant adverse effects on its operations revenue compared to its business plan in the near- or mid-term[192][193][196][202] Consolidated Results of Operations H1 2020 revenue and gross profit declined significantly due to absence of digital asset management services and increased operating expenses Consolidated Results of Operations (USD in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (Amount) | Change (%) | | :------------------------------------------- | :------------------------------- | :------------------------------- | :-------------- | :--------- | | Revenue | $4,692 | $14,454 | $(9,762) | (68)% | | Cost of revenue | 4,437 | 716 | 3,721 | 520% | | Gross profit | 255 | 13,738 | (13,483) | (98)% | | Selling, general and administrative expenses | 6,725 | 6,485 | 240 | 4% | | Professional fees | 2,372 | 1,169 | 1,203 | 103% | | Impairment loss | 6,200 | — | 6,200 | n/m | | Acquisition earn-out expense | 746 | — | 746 | n/m | | Depreciation and amortization | 481 | 370 | 111 | 30% | | Total operating expenses | 16,524 | 8,024 | 8,500 | 106% | | Income (Loss) from operations | (16,269) | 5,714 | (21,983) | (385)% | | Interest expense, net | (8,890) | (581) | (8,309) | n/m | | Net income (loss) attributable to IDEX common shareholders | $(26,578) | $5,292 | $(31,870) | n/m | - Revenue for the three months ended June 30, 2020, decreased by $9.8 million (68%) to $4.7 million, primarily due to the absence of digital asset management services revenue present in the prior year[221] - Gross profit for the three months ended June 30, 2020, was $0.3 million (5% ratio), a significant decrease from $13.7 million (95% ratio) in the prior year, mainly due to the shift from high-margin digital asset management services to lower-margin vehicle sales and negative gross margin from the DBOT business[236] - Total operating expenses increased by $8.5 million (106%) for the three months ended June 30, 2020, driven by impairment losses ($6.2 million), increased professional fees ($1.2 million), and higher share-based compensation[218][238][240][243] - Interest expense, net, increased by $8.3 million for the three months ended June 30, 2020, primarily due to the recognition of unamortized beneficial conversion features upon the conversion of convertible notes to common stock[247] Liquidity and Capital Resources Ideanomics held $36.4 million in cash, with increased cash used in operating activities and significant cash provided by financing - As of June 30, 2020, Ideanomics had $36.4 million in cash, with $34.0 million held in Hong Kong, U.S., Malaysia, and Singapore entities, and $2.4 million in PRC entities, which is not available for use outside the PRC[260] Summary of Net Cash Flows (USD in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(10,390) | $(5,888) | | Net cash used in investing activities | (1,879) | (2,249) | | Net cash provided by financing activities | 45,737 | 6,087 | | Effect of exchange rate changes on cash | 283 | 4 | | Net increase/(decrease) in cash and cash equivalents | 33,751 | (2,046) | | Cash and cash equivalents at end of period | $36,384 | $1,060 | - Net cash used in operating activities increased by $4.5 million to $(10.4) million for the six months ended June 30, 2020, primarily due to a decrease in operating results from net income to a net loss[264] - Net cash provided by financing activities significantly increased to $45.7 million for the six months ended June 30, 2020, driven by $39.1 million from warrant exercises and common stock issuance, and $7.1 million from noncontrolling shareholders[266] Outlook MEG is expected to be the largest revenue contributor in 2020, with continued DBOT development and strategic acquisitions - The MEG business unit is expected to be the largest contributor to revenues in 2020, with its growth correlated to the development of financing structures for commercial EVs and the economic recovery in the PRC and Asia post-COVID-19[273] - The company plans to continue deploying its DBOT Alternative Trading System (ATS) for digital securities, tokens, commodities trading, and private placements, but does not anticipate material revenue from DBOT in 2020 due to its developmental stage[274] - Ideanomics will continue to seek acquisitions to accelerate the growth of its MEG and Ideanomics Capital business units[274] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Ideanomics is not required to provide market risk disclosures - Ideanomics is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[278] Item 4. Controls and Procedures Ideanomics' disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control - Management, including the CEO and CFO, concluded that Ideanomics' disclosure controls and procedures were effective as of June 30, 2020[280] - There were no material changes in internal control over financial reporting during the six months ended June 30, 2020, and the company continues to invest resources to upgrade internal controls[281] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings For details on legal proceedings, refer to Note 18, Commitments and Contingencies, in the financial statements - For details on legal proceedings, refer to Note 18, Commitments and Contingencies, in the Condensed Consolidated Financial Statements[282] Item 1A. Risk Factors Investors should carefully consider the risk factors from the 2019 Form 10-K, as they could materially affect the business - Investors should carefully consider the risk factors outlined in Part I, Item 1A. Risk Factors of the 2019 Form 10-K, as well as additional unknown risks, which could materially affect the company's business and financial condition[284] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the fiscal quarter ended June 30, 2020 - No unregistered sales of equity securities occurred during the fiscal quarter ended June 30, 2020[285] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the fiscal quarter ended June 30, 2020 - There were no defaults upon senior securities during the fiscal quarter ended June 30, 2020[285] Item 4. Mine Safety Disclosures This item is not applicable to Ideanomics - This item is not applicable[285] Item 5. Other Information Key personnel changes, amended employment agreements, and a new cooperation agreement replaced a financial advisory agreement - Mr. Steven Fadem resigned from the board of directors, effective August 10, 2020, and entered into a 12-month consulting agreement for $4,000 per month[285] - Employment agreements for Mr. Alfred Poor and Mr. Conor McCarthy were amended, extending their terms to 2 years, increasing base salaries to $500,000 and $350,000 respectively, and including future option grants and performance bonuses[285] - The Financial Advisory Agreement with National Transport Capacity Co., Ltd. was terminated and replaced by a Cooperation Agreement with Shenzhen National Transportation Service Co., Ltd. for new energy vehicle projects, including supply chain finance and ABS[285] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements and required certifications - The exhibits include various agreements such as letter agreements, debenture amendments, subscription agreements, and employment/consulting agreements[287] - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[287] - XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are provided[287] Signatures The report was signed by Conor McCarthy, CFO of Ideanomics, Inc. on August 10, 2020 - The report was signed by Conor McCarthy, Chief Financial Officer (Principal Financial and Accounting Officer) of Ideanomics, Inc. on August 10, 2020[288][289]