Ideanomics(IDEX) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's unaudited condensed consolidated financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements The unaudited condensed consolidated financial statements for the period ended September 30, 2022, show decreased cash and assets, an increased accumulated deficit, and a significant net loss, leading to a going concern warning Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2022, reflects a significant reduction in cash and total assets, alongside a widened accumulated deficit Condensed Consolidated Balance Sheet Highlights (USD in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $25,186 | $269,863 | | Total current assets | $170,028 | $362,507 | | Total assets | $370,319 | $473,437 | | Total current liabilities | $61,959 | $91,117 | | Total liabilities | $86,421 | $106,807 | | Accumulated deficit | ($709,451) | ($605,758) | | Total equity | $282,636 | $365,368 | Condensed Consolidated Statements of Operations The statements of operations show a net loss of $107.2 million for the nine-month period ended September 30, 2022, a significant increase from the prior year Operating Results (USD in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $24,278 | $26,581 | $83,871 | $86,647 | | Gross Profit (Loss) | ($659) | $3,951 | $850 | $23,698 | | Loss from Operations | ($41,869) | ($51,912) | ($122,029) | ($74,941) | | Net Loss | ($38,853) | ($51,998) | ($107,217) | ($65,445) | | Net Loss Attributable to Ideanomics | ($37,414) | ($51,811) | ($103,692) | ($64,986) | | EPS (Basic & Diluted) | ($0.08) | ($0.11) | ($0.21) | ($0.15) | Condensed Consolidated Statements of Cash Flows Cash flow statements for the nine months ended September 30, 2022, indicate a substantial increase in cash used in operations and a significant net decrease in overall cash Cash Flow Summary (Nine Months Ended Sep 30, USD in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($109,286) | ($42,601) | | Net cash used in investing activities | ($90,848) | ($191,787) | | Net cash (used in) provided by financing activities | ($42,788) | $325,291 | | Net (decrease) increase in cash | ($244,677) | $91,165 | Notes to Financial Statements The notes detail the company's operations, accounting policies, and significant events, notably expressing substantial doubt about its ability to continue as a going concern - The company operates in one segment with two business units: Ideanomics Mobility (focused on EV adoption) and Ideanomics Capital (fintech)[33] - On September 12, 2022, the Board authorized a plan to restructure operations in China, which generated $36.2 million in revenue in the first nine months of 2022[36] - Management has concluded that substantial doubt exists about the Company's ability to continue as a going concern for the next twelve months, as it does not have adequate cash to meet its short or long-term needs without additional financing[66][67] - Subsequent to the quarter end, on October 25, 2022, the company entered into a Secured Debenture Purchase Agreement with YA II PN for $6.5 million in principal, receiving net proceeds of $4.875 million, which includes a commitment to spin out its ownership of Timios and Justly within twelve months[275][277] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, noting a revenue decrease, a significant drop in gross profit, increased operating expenses, and reiterating going concern doubts Revenue by Product/Service (Nine Months Ended Sep 30, USD in thousands) | Product / Service | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Electric vehicles products | $52,913 | $17,041 | $35,872 | | Title and escrow services | $26,971 | $62,428 | ($35,457) | | Charging, batteries and powertrains products | $2,244 | $4,108 | ($1,864) | | Total Revenue | $83,871 | $86,647 | ($2,776) | Gross Profit (Loss) by Product/Service (Nine Months Ended Sep 30, USD in thousands) | Product / Service | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Title and escrow services | $4,089 | $22,632 | ($18,543) | | Charging, batteries and powertrains | ($4,116) | $504 | ($4,620) | | Electric vehicles products | $308 | $200 | $108 | | Total Gross Profit | $850 | $23,698 | ($22,848) | - Selling, general and administrative expenses increased by $39.2 million to $113.6 million for the nine months ended Sep 30, 2022, due to increased staff, a full year of costs from 2021 acquisitions, and higher professional fees related to regulatory filings and transactions[321] - The company's cash position is critical, with only $25.2 million as of September 30, 2022, of which $16.2 million is held outside the U.S (primarily PRC) and $2.8 million is restricted for regulatory purposes, severely limiting available liquidity[342][343] Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate, inflation, and foreign currency as primary market risks, with foreign currency fluctuations potentially impacting the income statement by $7.4 million - The company is exposed to foreign currency risk from its international operations, where a hypothetical 10% change in currency rates could result in an income statement adjustment of approximately $7.4 million[362] - Inflation is identified as a risk that may adversely affect business through increased material costs (e.g., semiconductor chips) and overhead[361] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2022, due to previously identified material weaknesses - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were not effective[364] - The ineffectiveness is due to previously identified material weaknesses, and remediation is not expected to be complete by the end of fiscal year 2022[368] PART II - OTHER INFORMATION This section provides details on legal proceedings, updated risk factors, equity sales, and other miscellaneous information and exhibits Legal Proceedings This section refers to Note 19 of the financial statements for a detailed description of the company's legal proceedings, including an ongoing SEC investigation - For details on legal proceedings, the report refers to Note 19 in the financial statements[370] Risk Factors The company highlights new and updated risk factors, including the potential adverse effects of inflation and the restructuring of operations in China - A new risk factor is the potential adverse effect of inflation, stagflation, or economic recession on the company's liquidity, costs, and product demand[372] - The plan to restructure operations in China is identified as a risk that may negatively impact revenue, net loss, and the market price of the company's common stock[373] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period, except as previously disclosed - No unregistered sales of equity securities were made during the quarter, except as previously reported on Form 8-K[373] Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period covered by this report - There were no defaults upon senior securities during the quarter[374] Mine Safety Disclosures This item is not applicable to the company - Not applicable[374] Other Information This item is not applicable to the company - Not applicable[374] Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to agreements and various officer certifications - Lists exhibits filed with the report, including amendments to the VIA Motors merger agreement and financing agreements with YA II PN, LTD[376][377]