Ideanomics(IDEX) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Ideanomics, Inc. and its subsidiaries for the period ended September 30, 2023 Key Financial Statements Included | Statement | Page | | :---------------------------------------------- | :--- | | Unaudited Condensed Consolidated Balance Sheets | 6 | | Unaudited Condensed Consolidated Statements of Operations | 8 |\n| Unaudited Condensed Consolidated Statements of Comprehensive Loss | 9 |\n| Unaudited Condensed Consolidated Statements of Equity | 10 |\n| Unaudited Condensed Consolidated Statements of Cash Flows | 14 | Unaudited Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited) (in thousands) | Metric | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :----------------------------------------- | :----------------------- | :----------- | | ASSETS | | | | Total current assets | $46,160 | $114,038 | | Property and equipment, net | 11,128 | 7,845 | | Intangible assets, net | 39,980 | 43,622 | | Goodwill | 37,254 | 37,775 | | Total assets | $151,284 | $242,801 | | LIABILITIES & EQUITY | | | | Total current liabilities | $109,339 | $76,863 | | Total liabilities | 128,151 | 96,238 | | Total Ideanomics, Inc. stockholders' equity | 16,431 | 132,125 | | Total equity | 15,183 | 136,451 | | Total liabilities, convertible redeemable preferred stock, and equity | $151,284 | $242,801 | - Total assets decreased by approximately $91.5 million from December 31, 2022, to September 30, 2023, primarily driven by a significant reduction in current assets and non-current assets of discontinued operations[15] - Total current liabilities increased by approximately $32.5 million, while total equity decreased substantially by approximately $121.3 million, indicating a deteriorating financial position[15] Unaudited Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $665 | $8,221 | $11,643 | $18,943 | | Total cost of revenue | 2,118 | 8,878 | 13,931 | 18,861 | | Gross (loss) profit | (1,453) | (657) | (2,288) | 82 | | Total operating expenses | 68,689 | 33,804 | 173,547 | 98,603 | | Loss from operations | (70,142) | (34,461) | (175,835) | (98,521) | | Net loss from continuing operations | (62,225) | (33,322) | (163,367) | (86,980) | | Net loss from discontinued operations, net of tax | (2,368) | (5,531) | (24,206) | (20,237) | | Net loss | (64,593) | (38,853) | (187,573) | (107,217) | | Net loss attributable to Ideanomics, Inc. common shareholders | $(63,007) | $(37,414) | $(182,820) | $(103,692) | | Basic and diluted loss per share | $(5.39) | $(9.47) | $(19.68) | $(26.11) | - Total revenue for the three months ended September 30, 2023, significantly decreased by 91.9% to $0.7 million from $8.2 million in the prior year, and for the nine months, it decreased by 38.5% to $11.6 million from $18.9 million[19][204][208] - Net loss attributable to common shareholders increased by 68.4% to $(63.0) million for the three months and by 76.3% to $(182.8) million for the nine months, primarily due to higher operating expenses, particularly asset and goodwill impairments[19][204][206] Unaudited Condensed Consolidated Statements of Comprehensive Loss This statement presents the net loss and other comprehensive income or loss components for the reporting periods Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(64,593) | $(38,853) | $(187,573) | $(107,217) | | Foreign currency translation adjustments | (1,963) | (8,127) | (1,138) | (15,930) | | Comprehensive loss | (66,556) | (46,980) | (188,711) | (123,147) | | Comprehensive loss attributable to Ideanomics, Inc. common shareholders | $(64,506) | $(43,905) | $(183,400) | $(116,391) | - Comprehensive loss attributable to common shareholders increased by 46.9% to $(64.5) million for the three months and by 57.6% to $(183.4) million for the nine months, primarily due to the increased net loss[22] Unaudited Condensed Consolidated Statements of Equity This statement outlines changes in the company's equity accounts, including common stock and accumulated deficit Key Changes in Equity (in thousands) | Metric | Balance, Jan 1, 2023 | Balance, Sep 30, 2023 | | :----------------------------------------- | :------------------- | :-------------------- | | Common Stock (shares) | 4,781,930 | 11,992,765 | | Par Value | $597 | $1,499 | | Additional Paid-in Capital | $1,004,082 | $1,071,219 | | Accumulated Deficit | $(866,450) | $(1,049,603) | | Total Ideanomics Shareholders' equity | $132,125 | $16,431 | | Noncontrolling Interest | $4,326 | $(1,248) | | Total Equity | $136,451 | $15,183 | - Total Ideanomics Shareholders' equity decreased significantly from $132.1 million at January 1, 2023, to $16.4 million at September 30, 2023, primarily due to the accumulated deficit increasing by $183.1 million[29] - Common stock shares outstanding increased from 4.8 million to 12.0 million, reflecting various issuances for acquisitions, professional fees, preferred stock conversions, and SEPA[29] Unaudited Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(44,764) | $(109,287) | | Net cash used in investing activities | $(2,847) | $(90,848) | | Net cash provided by (used in) financing activities | $31,919 | $(42,788) | | Net decrease in cash and cash equivalents | $(15,734) | $(244,678) | | Total cash, beginning of period | $21,929 | $269,863 | | Total cash, end of period | $6,195 | $25,185 | - Net cash used in operating activities significantly decreased from $(109.3) million in 2022 to $(44.8) million in 2023, primarily due to changes in operating assets and liabilities[33][242] - Net cash provided by financing activities turned positive at $31.9 million in 2023, compared to cash used of $(42.8) million in 2022, driven by proceeds from convertible notes, preferred stock, and third-party borrowings[35][244] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1. Summary of Significant Accounting Policies This note outlines the significant accounting policies, including the basis of presentation for unaudited interim financial statements, reclassifications, and the treatment of discontinued operations - Timios, US Hybrid, Tree Technologies, and China business components were classified as discontinued operations during the nine months ended September 30, 2023[41] - Energica, Solectrac, and Wave Technologies are classified as assets held for sale but continue to be presented as continuing operations due to their substantial contribution to assets, liabilities, revenues, and operating costs[46] Operating Results of Discontinued Operations (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $1,820 | $16,057 | $15,043 | $64,928 | | Loss from discontinued operations, net of tax | $(2,368) | $(5,531) | $(24,206) | $(20,237) | - The company faces substantial doubt about its ability to continue as a going concern, citing insufficient cash, ongoing net losses, negative cash flows, and the need for additional capital, which may be difficult to raise due to SEC filing delays[63][65][68][69][71] Note 2. New Accounting Pronouncements This note details the adoption of new accounting pronouncements, specifically ASU No 2016-13 (Credit Losses) and ASU No 2021-08 (Business Combinations) - Adopted ASU No 2016-13 (Credit Losses) on January 1, 2023, resulting in a $0.3 million impact to retained earnings[72][73] - Adopted ASU No 2021-08 (Business Combinations) prospectively on January 1, 2023, with no material impact expected on consolidated financial statements[73][74] Note 3. Revenue Revenue for the three months ended September 30, 2023, decreased significantly by 91.9% to $0.7 million, primarily due to a $4.5 million decrease in EV products revenue (partly from a change in accounting estimate for dealer sales returns) and a $2.8 million decrease in electric motorcycle products and services Revenue by Product or Service (in thousands) | Product or Service | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | EV products | $(1,312) | $3,170 | $2,753 | $8,066 | | Electric motorcycle products and services | 1,415 | 4,249 | 6,300 | 8,779 | | Charging, batteries and powertrain products | 482 | 206 | 1,989 | 583 | | Total revenue | $665 | $8,221 | $11,643 | $18,943 | - Negative revenue in North America's EV products is attributed to a change in accounting estimate related to dealer sales returns in the Solectrac business unit, leading to a $2.8 million debit to sales[78] - Grant revenue for the nine months ended September 30, 2023, increased to $0.5 million from $0.3 million in the prior year[77] Note 4. Acquisitions and Divestitures This note details the company's acquisition and divestiture activities, including the acquisition of VIA Motors in January 2023 and Energica in March 2022 - Acquired VIA Motors on January 31, 2023, for a purchase price of $112.8 million, including common shares, preferred shares, SAFE note, secured convertible note, and contingent consideration[84][86] - VIA acquisition resulted in the recognition of $104.2 million in development technology intangible assets and $13.0 million in goodwill, both of which were subsequently written down to zero in the three months ended September 30, 2023[86][87][88] - Completed the sale of Timios Operations (Fiducia) on July 25, 2023, for $0.45 million cash (net) and extinguishment of $2.4 million in convertible notes owed to YA II PN, recognizing a $1.7 million gain[101] - Incurred $11.7 million in transaction costs related to the VIA acquisition during the nine months ended September 30, 2023[102] Note 5. Restructuring The company is restructuring its China EV resale activities and winding down Tree Technology business, leading to significant reductions in operational scale and employee termination costs - Board authorized a plan to restructure China EV resale activities, aiming for reduced operational scale, simplified legal structure, and a pivot to margin expansion[103] - Recorded $0.9 million in restructuring charges for China and $0.4 million for Tree Technology wind-down as of September 30, 2023, primarily for employee termination costs[104] - China and Tree Technology completed all expected run-off activities and were classified as discontinued operations[106] Note 6. Property and Equipment, net The company's net property and equipment increased to $11.1 million as of September 30, 2023, from $7.8 million at December 31, 2022, primarily due to an increase in construction in progress Property and Equipment, net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------- | :----------- | :----------- | | Total property and equipment | $10,127 | $9,696 | | Less: accumulated depreciation | (3,165) | (1,851) | | Construction in progress | 4,166 | — | | Property and equipment, net | $11,128 | $7,845 | - Depreciation expense for the nine months ended September 30, 2023, increased to $1.8 million from $1.1 million in the prior year[108] Note 7. Goodwill and Intangible Assets Goodwill decreased to $37.3 million as of September 30, 2023, primarily due to a $10.7 million impairment loss related to VIA Motors, partially offset by $13.0 million goodwill acquired from VIA Changes in Goodwill (in thousands) | Metric | Amount | | :----------------------------------------- | :----------- | | Balance as of December 31, 2022 | $37,775 | | Impairment losses | (10,712) | | Goodwill acquired during the year | 13,020 | | Measurement period adjustments | (2,308) | | Effect of change in foreign currency exchange rates | (521) | | Balance as of September 30, 2023 | $37,254 | Intangible Assets, Net (in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------------- | :----------- | :----------- | | Patents, trademarks and brands | $13,322 | $14,074 | | Customer relationships | 12,071 | 13,113 | | Technology | 14,421 | 16,270 | | Total definite lived intangible assets | 39,955 | 43,597 | | Total intangible assets | $39,980 | $43,622 | - Recorded an impairment charge of $104.4 million for VIA Motors' intangible assets in the three and nine months ended September 30, 2023, due to revised production and sales goals[113] - Amortization expense for intangible assets increased to $14.4 million for the nine months ended September 30, 2023, from $2.9 million in the prior year, primarily due to VIA acquisitions[114] Note 8. Debt Total debt increased to $18.1 million as of September 30, 2023, from $13.7 million at December 31, 2022, with a weighted average interest rate of 9.5% Debt Summary (in thousands) | Debt Type | Sep 30, 2023 Carrying Amount | Dec 31, 2022 Carrying Amount | | :---------------------------------------- | :--------------------------- | :--------------------------- | | YA II PN Convertible Debentures | $6,149 | $3,928 | | Tillou promissory note | 2,236 | 2,021 | | Therese promissory note | 1,038 | — | | Other lending agreements | 7,964 | 6,561 | | Total | $18,065 | $13,721 | | Less: Current portion | (16,392) | (11,764) | | Long-term Note, less current portion | $1,673 | $1,957 | - Weighted average interest rate for borrowings increased to 9.5% as of September 30, 2023, from 8.1% at December 31, 2022[116] - The company breached at least two covenants, including timely SEC filings and minimum stock purchase from officers/directors, though Yorkville has not asserted breach and extended additional loans[117] - Entered into multiple amendments to the Secured Debenture Purchase Agreement with YA II PN, purchasing additional debentures totaling $8.1 million in principal amount during the nine months ended September 30, 2023[118][119][120][121][123] Note 9. Convertible Preferred Stock The company authorized and issued Series C Preferred Stock and engaged in significant transactions involving Series B Preferred Stock, including warrant exercises and a settlement agreement with Acuitas - Authorized 2.0 million shares of Preferred Stock Series C, with 1,159,276 shares issued as of September 30, 2023, convertible into 0.16 shares of common stock per preferred share[128][129] - Issued 3.2 million common shares for warrant cashless exercise related to Series B Preferred Stock, and the remaining $1.0 million warrant liabilities were reversed to Additional Paid-in Capital[130] - Settled disputes with Acuitas Capital, LLC regarding the Securities Purchase Agreement and YA II PN agreed to acquire the remaining 6 million shares of Preferred Stock Series B[131] Note 10. Related Party Transactions This note details various transactions with related parties, including Dr Wu, Glory, Tree Technology minority shareholders, Energica management, Tillou, and Therese Lee Carabillo - As of September 30, 2023, the company had $0.2 million in receivables from and $0.7 million in payables to Dr Wu and his affiliates[132] - Energica purchased $0.1 million in materials and services from entities owned by its senior management during the nine months ended September 30, 2023, with $1.4 million outstanding payable[137] - Entered into a $2.0 million promissory note with Tillou (an entity controlled by the Executive Chairman's father) on March 19, 2023, bearing 20% interest[141] - Entered into a $1.0 million secured promissory note with Therese Lee Carabillo on April 6, 2023, with a 20% interest rate and a personal guarantee from the Executive Chairman[143] Note 11. Share-Based Compensation Share-based compensation expense for the nine months ended September 30, 2023, was $6.5 million - Total share-based payments expense for the nine months ended September 30, 2023, was $6.5 million, compared to $7.4 million in the prior year[149] Stock Option Activity (Nine Months Ended Sep 30, 2023) | Metric | Options Outstanding | | :-------------------------------------- | :------------------ | | Outstanding at January 1, 2023 | 268,323 | | Granted | 2,800 | | Expired | (37,896) | | Forfeited | (21,463) | | Outstanding at September 30, 2023 | 211,764 | | Vested as of September 30, 2023 | 183,442 | | Expected to vest as of September 30, 2023 | 28,322 | - As of September 30, 2023, $0.8 million of unrecognized compensation cost related to unvested restricted shares is expected to be recognized over a weighted average period of 1.17 years[155][151] Note 12. Net Loss Per Common Share Basic and diluted loss per share from continuing operations was $(17.07) for the nine months ended September 30, 2023, and total basic and diluted loss per share was $(19.68) Net Loss Per Common Share (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | | :----------------------------------------- | :---------- | :---------- | | Net loss from continuing operations | $(158,614) | $(83,455) | | Net loss from discontinued operations | $(24,206) | $(20,237) | | Net loss attributable to Ideanomics, Inc. common stockholders | $(182,820) | $(103,692) | | Basic and diluted loss per share | $(19.68) | $(26.11) | - Diluted loss per share equals basic loss per share because the effect of securities convertible into common shares (warrants, options, RSUs, preferred stock, convertible notes) was anti-dilutive[157][158] Note 13. Income Taxes The company recognized an income tax benefit of $4.3 million from continuing operations for the nine months ended September 30, 2023, primarily due to a $2.4 million reduction in valuation allowance from the VIA acquisition and $1.8 million from VIA's operations - Recognized a $4.2 million deferred tax liability on the VIA acquisition in January 2023, primarily related to intangible assets[159] - A one-time income tax benefit of approximately $2.4 million resulted from the utilization of deferred tax assets to offset newly acquired deferred tax liabilities from the VIA acquisition[159] - Total income tax benefit from continuing operations for the nine months ended September 30, 2023, was approximately $4.3 million[160] Note 14. Commitments and Contingencies The company is involved in various legal proceedings, including shareholder class actions, merger-related litigation, and an ongoing SEC investigation related to past disclosures and accounting - Shareholder class actions (Lundy v Ideanomics Inc et al, Kim v Ideanomics Inc et al) alleging violations of Section 10(b) and 20(a) of the Exchange Act were dismissed by the Court in February 2023[164] - Subject to an ongoing SEC investigation regarding disclosures, transactions, and accounting from 2017-2019, with a preliminary determination to recommend enforcement action[167] - Settled arbitration with former CFO Conor McCarthy for $0.7 million, with $0.4 million remaining recorded in accrued salaries[168] - A default judgment of approximately $2.8 million was entered against the company in Osirius Group v Ideanomics, with $1.5 million remaining to be paid[172] Note 15. Contingent Consideration Contingent consideration liabilities decreased significantly from $0.9 million at December 31, 2022, to $0.08 million at September 30, 2023 Contingent Consideration (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Tree Technology - Contingent consideration | $78 | $118 | | DBOT - Contingent consideration | — | 649 | | Solectrac - Contingent consideration | — | 100 | | VIA - Contingent consideration | — | — | | Total | $78 | $867 | - The fair value of VIA contingent consideration at acquisition (January 31, 2023) was $73.6 million, but a remeasurement gain of $74.4 million was recorded in the nine months ended September 30, 2023, reducing its value to zero due to changes in EV market projections[183][185] - The company reversed remaining liabilities for DBOT contingent consideration, believing it has no further obligation[175] Note 16. Subsequent Events Subsequent events include the agreement for a $1.3 million Secured Convertible Debenture (Seventh Debenture) with YA II PN, due January 31, 2024, and a $0.5 million earnest payment received for exclusive discussions regarding the sale of US Hybrid - On October 27, 2023, agreed to a $1.3 million Secured Convertible Debenture (Seventh Debenture) with YA II PN, due January 31, 2024, with an 8% interest rate (18% upon default)[186] - On November 7, 2023, received a $0.5 million earnest payment for exclusive discussions on the sale of US Hybrid, though no definitive agreements have been reached[187] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key factors affecting performance, significant transactions, and future outlook - Ideanomics is focused on accelerating commercial EV adoption in local and last-mile delivery vehicles and associated charging products[193] - Significant transactions include the acquisition of VIA Motors in January 2023 and the classification of Timios and China as discontinued operations, with Energica, Solectrac, Wave Technologies, and US Hybrid classified as assets held for sale[194][195][197] - Financial performance is heavily impacted by the company's ability to access equity and debt markets to fund EV operations, which are not yet profitable, and the pace of EV mobility adoption, affected by supply chain constraints and rising interest rates[198][199] OVERVIEW This section provides a high-level summary of the company's business, strategic focus, and significant operational changes - Ideanomics operates in one segment focused on accelerating commercial EV adoption in local and last-mile delivery vehicles and associated charging products[193] - Completed the acquisition of VIA Motors on January 31, 2023[194] - Timios and China business components were classified as discontinued operations during Q2 2023; Energica, Solectrac, Wave Technologies, and US Hybrid were classified as assets held for sale[195][197] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section discusses the key accounting policies and estimates that require significant judgment in financial reporting - The preparation of consolidated financial statements requires significant estimates and assumptions that affect reported amounts, with actual results potentially differing significantly[200] - Information on new accounting pronouncements is included in Note 2 to the consolidated financial statements[202] RESULTS OF OPERATIONS - continuing operations This section analyzes the financial performance of the company's continuing operations, including revenue and expenses Key Financial Performance (Continuing Operations, in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $665 | $8,221 | $11,643 | $18,943 | | Gross (loss) profit | $(1,453) | $(657) | $(2,288) | $82 | | Total operating expenses | 68,689 | 33,804 | 173,547 | 98,603 | | Loss from operations | $(70,142) | $(34,461) | $(175,835) | $(98,521) | | Net loss from continuing operations | $(62,225) | $(33,322) | $(163,367) | $(86,980) | - Revenue decreased by 91.9% for the three months and 38.5% for the nine months, primarily due to reduced EV products and electric motorcycle sales, and a negative adjustment for Solectrac dealer sales returns[209][210] - Gross profit ratio for continuing operations was (218.5)% for the three months and (19.7)% for the nine months ended September 30, 2023, a significant decline from the prior year[217] - Operating expenses increased significantly, driven by $104.3 million in asset impairments and $10.7 million in goodwill impairments related to VIA Motors, and a $61.5 million change in fair value of contingent consideration[204][221][222][223] LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to generate and manage cash, fund operations, and meet its financial obligations Cash Flows Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(44,764) | $(109,287) | | Net cash used in investing activities | $(2,847) | $(90,848) | | Net cash provided by (used in) financing activities | $31,919 | $(42,788) | | Net decrease in cash and cash equivalents | $(15,734) | $(244,678) | | Total cash, end of period | $6,195 | $25,185 | - Cash and cash equivalents totaled $6.2 million as of September 30, 2023, with $1.9 million in continuing operations and $4.3 million in discontinued operations[240] - Cash held in China ($5.6 million) is subject to local foreign exchange regulations and is not considered available for operations outside the PRC[65][240] - The company is focused on raising capital through divestiture of business components and assets, including Timios, Energica, Wave Technologies, Solectrac, and US Hybrid[245] OUTLOOK This section outlines the company's strategic objectives, future plans, and expectations for its business and market position - The company aims to accelerate commercial EV adoption, focusing on local and last-mile delivery vehicles and associated charging products[248] - Management believes the aggregate intrinsic value of its subsidiaries exceeds current public market capitalization and is considering strategic investments or divestments to enhance shareholder value[249] - Plans to invest in continuous technology and product development and manufacturing expansion to support increasing demand, while also exploring growth opportunities in AI related to the Mobility market[250][251] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on its cash and cash equivalents and foreign currency risk due to international operations - Cash and cash equivalents of $1.9 million as of September 30, 2023, are primarily invested in low-risk money market funds, limiting material impact from interest rate changes[254] - A hypothetical 10% change in foreign currency rates could result in an approximate $0.4 million adjustment to the income statement[255] - Foreign currency exchange losses were $0.1 million for the nine months ended September 30, 2023, a significant decrease from $5.1 million in the prior year[256] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of September 30, 2023, in ensuring timely and accurate reporting of material information - Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of September 30, 2023[257] - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023, and the company continues to invest resources to upgrade internal controls[258] PART II - OTHER INFORMATION This section contains non-financial information and other disclosures required for the reporting period Item 1. Legal Proceedings This section refers to Note 14, Commitments and Contingencies, for a detailed description of the company's legal proceedings - Details of legal proceedings are provided in Note 14, Commitments and Contingencies, to the consolidated financial statements[260] Item 1A. Risk Factors The company refers to its Annual Report on Form 10-K for the year ended December 31, 2022, for a description of applicable risk factors - No material changes in risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022[261] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any unregistered sales of equity securities and the use of proceeds during the period - No unregistered sales of equity securities occurred during the period, beyond those previously reported in Form 8-K filings[262] Item 3. Defaults Upon Senior Securities This section reports on any defaults upon senior securities during the period - No defaults upon senior securities occurred during the reporting period[262] Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information This item is not applicable to the company Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, certificates of designation for preferred stock, debt agreements, and certifications - Includes various corporate governance documents (Articles of Incorporation, Bylaws, Certificates of Designation for Preferred Stock Series A, B, C, D, E)[265] - Lists several amendments to the Secured Debenture Purchase Agreement and related debentures[265] - Contains certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Act[265] Signatures This section confirms the official signing and certification of the report by authorized company officers - The report was signed by Scott Morrison, Chief Financial Officer, on November 21, 2023[270]