Ideanomics(IDEX) - 2021 Q4 - Annual Report

Part I Business Ideanomics focuses on commercial EV adoption via its Mobility unit and fintech development through its Capital unit, significantly expanding in 2021 - Ideanomics operates through two business units: Ideanomics Mobility, focused on accelerating commercial EV adoption, and Ideanomics Capital, a fintech unit supporting the financial services industry[19] - In 2021, Ideanomics expanded its Mobility unit by acquiring several companies: WAVE (wireless charging), Solectrac (electric tractors), and US Hybrid (hydrogen fuel cells and power electronics)[25][26][28][30] - The company has a definitive agreement to acquire VIA Motors, a commercial electric vehicle company, for a total consideration of up to $630 million, with the deal anticipated to close in Q4 2022[37][38] - The Ideanomics Capital unit includes Timios, a nationwide title and escrow services provider acquired in 2021, and JUSTLY (formerly DBOT), a FINRA-registered broker-dealer focused on ESG and thematic investments[43][45][48] - The company faces significant supply chain constraints and price increases for raw materials like aluminum, copper, and steel, which has limited its ability to manufacture and deliver products in 2021 and is expected to continue into 2022[57][58] - As of December 31, 2021, the company had 559 employees, with the majority (476) located in the United States[118] Risk Factors The company faces significant operational, financial, and regulatory risks, including going concern doubts, an SEC investigation, and material internal control weaknesses - The company's auditor's report for the year ended December 31, 2021, includes an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern due to significant recurring losses and limited working capital[173] - The company has identified multiple material weaknesses in its internal control over financial reporting and concluded its disclosure controls were not effective as of December 31, 2021[132][195] - The company is subject to an ongoing investigation by the SEC and has responded to various information requests and subpoenas[167][169] - The company's Timios business previously experienced a cybersecurity incident that resulted in a material reduction in orders and revenue, and the company remains subject to risks from malicious cyber-attacks[46][187] - Due to untimely filings, the company has lost its eligibility to use the Form S-3 registration statement, which may make it more difficult and costly to raise capital until eligibility is regained, not expected before August 2023[202] - The company faces significant risks related to its operations in the People's Republic of China (PRC), including potential government intervention, regulatory uncertainties, restrictions on currency exchange, and the inability of the PCAOB to inspect auditors, which could lead to delisting under the Holding Foreign Companies Accountable Act (HFCA Act)[217][228][246] Unresolved Staff Comments The company reports that it has no unresolved comments from the SEC staff - The Company has no unresolved Staff Comments[258] Properties The company leases office and showroom facilities in Beijing, New York, New Jersey, and Malaysia, which management considers sufficient - The Company leases office space in Beijing, a limited amount of space in New York, and a showroom facility in New Jersey[259] - The Tree Technologies subsidiary has office space in Kuala Lumpur and a long-term lease on 250 acres of industrial land in Kuantan, Malaysia[259] Legal Proceedings The company is involved in various legal matters, including shareholder class actions, derivative suits, an ongoing SEC investigation, and a $16.4 million judgment against Silk EV - The company is subject to an ongoing investigation by the SEC's Division of Enforcement regarding transactions and disclosures dating back to 2017[821] - The Rudani v. Ideanomics shareholder class action lawsuit was settled for $5.0 million, with the court granting final approval in January 2022[817] - The company obtained a judgment of $16.4 million against Silk EV Cayman LP for non-payment of a convertible promissory note, which has not yet been paid[823][824] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[261] Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, with no cash dividends paid or anticipated, and no share repurchases in 2021 Common Stock Price Range ($) | Quarter (2021) | High ($) | Low ($) | | :--- | :--- | :--- | | 1st Quarter | 5.43 | 2.06 | | 2nd Quarter | 3.38 | 2.35 | | 3rd Quarter | 2.78 | 1.91 | | 4th Quarter | 2.11 | 1.16 | - The company has never declared or paid a cash dividend and does not intend to pay any in the foreseeable future[267] - No repurchases of the Company's common stock were made in the year ended December 31, 2021[270] [Reserved]](index=58&type=section&id=ITEM%206.%20%5BReserved%5D) This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In 2021, revenue grew to $114.1 million from acquisitions, but net loss widened to $256.7 million due to impairments, raising substantial doubt about the company's going concern ability Consolidated Results of Operations (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $114.1M | $26.8M | | Gross Profit | $23.2M | $2.1M | | Loss from Operations | ($259.6M) | ($95.6M) | | Net Loss | ($256.7M) | ($111.6M) | | Net Loss per Share | ($0.57) | ($0.47) | - The significant increase in 2021 revenue was mainly due to the acquisition of Timios, which generated $72.7 million in title and escrow services revenue[320] - The company recorded asset and goodwill impairment charges of $71.1 million and $101.5 million, respectively, in 2021, primarily related to its recent acquisitions (Timios, WAVE, US Hybrid, Solectrac)[314][339][340] - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern due to recurring losses, an accumulated deficit, and insufficient cash to fund operations and planned acquisitions[280][287][495] - As of December 31, 2021, the Company had cash and cash equivalents of $269.9 million; net cash used in operating activities was $75.5 million, while net cash used in investing activities was $220.1 million, primarily for acquisitions; net cash provided by financing activities was $399.3 million[370][375] Quantitative and Qualitative Disclosures About Market Risk The company faces limited interest rate risk from fixed-rate convertible debt, but is exposed to market risk from equity investments and foreign currency risk from RMB operations - Interest rate risk is limited as the company's $57.8 million of convertible debt outstanding as of December 31, 2021, has a fixed 4.0% interest rate[422] - The company has market risk exposure through its investments in equity securities, which had a carrying amount of $35.6 million as of December 31, 2021, including publicly traded shares of Energica[423] - Foreign currency risk is primarily from operations denominated in RMB, but the company does not consider this risk to be material to its results of operations currently[426] Financial Statements and Supplementary Data This section presents consolidated financial statements and auditor reports, including a going concern doubt and adverse opinion on internal controls for 2021, with detailed notes Consolidated Balance Sheet Data (in thousands) | (In thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $473,437 | $233,869 | | Total Liabilities | $106,807 | $37,688 | | Total Equity | $365,368 | $187,434 | | Cash and cash equivalents | $269,863 | $165,764 | - The auditor's report for 2021 expresses substantial doubt about the Company's ability to continue as a going concern due to recurring losses and insufficient cash[433] - The auditor issued an adverse opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2021, due to the existence of multiple material weaknesses[432][448] - In 2021, the company acquired Timios, WAVE, US Hybrid, and Solectrac; the total purchase consideration for these acquisitions was approximately $181.6 million, leading to the recognition of $117.4 million in goodwill before impairments[606][630] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The information required for this item was previously reported by the company - The information required by this item was previously reported[858] Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2021, due to multiple material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2021[859] - Multiple material weaknesses were identified in internal control over financial reporting, including a lack of sufficient experienced accounting personnel, inadequate controls over non-routine transactions, and lack of controls designed to address the risk of material misstatement[865][866] - Additional material weaknesses noted include a lack of segregation of duties, ineffective IT general controls, and ineffective oversight from the Company's Audit Committee[867][868] - Management's assessment of internal controls excluded the 2021 acquisitions of Timios, WAVE, Solectrac, and US Hybrid, as permitted by SEC guidance[863] Other Information There is no information reported under this item - None[874] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable - Not applicable[874] Part III Directors, Executive Officers and Corporate Governance This section provides biographical information for directors and executive officers, detailing the Board's composition, committees, and risk oversight role - The company's key executive officers include Shane McMahon (Executive Chairman), Alfred P. Poor (CEO), and Conor McCarthy (CFO)[876][877][878] - The Board of Directors has five members, with James S. Cassano, Jerry Fan, and Harry Edelson serving as independent directors alongside Shane McMahon[887][893] - The Board has established Audit, Compensation, and Nominating and Governance committees, all composed entirely of independent directors[887] Executive Compensation This section details 2021 and 2020 compensation for named executive officers, including CEO Alfred P. Poor's $6.7 million and CFO Conor McCarthy's $2.3 million total compensation Summary Compensation Table (in thousands) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards () | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Alfred P. Poor (CEO) | 2021 | 645,833 | 500,000 | 5,535,000 | 2,000,000 | 6,680,833 | | | 2020 | 291,666 | 350,000 | 0 | 1,500,000 | 641,666 | | Conor McCarthy (CFO) | 2021 | 422,915 | 350,000 | 1,537,500 | 750,000 | 2,310,415 | | | 2020 | 364,755 | 350,000 | 3,075,000 | 500,000 | 3,789,755 | - Effective July 23, 2021, CEO Alfred P. Poor's annual base salary was increased to $800,000, and CFO Conor McCarthy's was increased to $525,000[917][918] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of common stock, including Bruno Wu's 6.1% combined voting power and the 3.4% held by all executive officers and directors - As of August 29, 2022, all executive officers and directors as a group beneficially owned 16,814,925 shares, representing 3.4% of the common stock[927] - Bruno Wu is listed as a greater than 5% beneficial owner, holding 20,999,416 shares of common stock (4.3%) and 7,000,000 shares of Series A Preferred Stock (100%), for a combined voting power of 6.1%[928] - As of December 31, 2021, there were 17,350,746 securities remaining available for future issuance under the company's equity compensation plans[934] Certain Relationships and Related Transactions, and Director Independence The company's Audit Committee reviews related party transactions, including a $1.4 million service agreement with SSSIG, an affiliate of the former Executive Chairman - The Audit Committee is responsible for reviewing and approving all related party transactions involving directors, officers, and their immediate family members[936] - A service agreement was entered into with SSSIG, an affiliate of former Chairman Dr. Wu, in June 2020 for consulting services valued at $1.4 million[939] Principal Accountant Fees and Services This section details principal accountant fees, with total audit fees increasing to $2.8 million in 2021 from $0.85 million in 2020, all pre-approved Audit Fees (in thousands) | Fees (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees (BF Borgers) | $1,365 | $850 | | Audit Fees (Grassi) | $1,439 | $0 | | Total Audit Fees | $2,804 | $850 | Part IV Exhibits, Financial Statement Schedules This section lists financial statements from Item 8 and provides an index of all exhibits filed with the Form 10-K, including merger agreements and corporate governance documents - This section contains the index of exhibits filed with the Form 10-K, including merger agreements for WAVE, US Hybrid, Solectrac, and VIA Motors[945][946] Form 10-K Summary This item is not applicable and contains no information - None[945]