| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Unaudited Interim Financial Statements The consolidated financial statements of the Company, including the consolidated balance sheet as of September 30, 2023, the consolidated statements of operations, the consolidated statements of comprehensive loss, the consolidated statements of equity, and the consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 30 2023. The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods. Reclassifications Certain prior year amounts have been reclassified for comparative purposes to conform to the current-period financial statement presentation. Discontinued Operations During the nine months ended September 30, 2023, our business components Timios, US Hybrid, Tree Technologies and China met the criteria for classification as discontinued operations and are no longer presented as continuing operations. Assets and liabilities associated with these components are presented in our consolidated balance sheets as Discontinued Operations. The results of operations related to these components are included in the consolidated statements of operations as "Loss from discontinued operations, net of tax." The cash flows of these components are also presented separately in our consolidated statements of cash flows. All corresponding prior year periods presented in our financial statements and related information in the accompanying notes have been reclassified to reflect the Discontinued Operations presentation. On July 25, 2023, we completed the sale of the Timios Operations for cash proceeds of $450,000 (net of $150,000 in transactions costs paid for by the buyer) and the extinguishment of outstanding payables to YA PN II of $2.4 million. There was no material gain or loss on the sale of the Timios operations. On November 7, 2023, the Company received the deposit of $0.5 million from a potential buyer of US Hybrid. As of September 30, 2023, the China business component completed all commercial vehicle resale activities and does not expect to generate material revenues prior to the wind up of the legal entities in China. The following table summarizes the operating results of the discontinued operations for the periods indicated: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Total revenue $ 1,820 $ 16,057 $ 15,043 $ 64,928 Cost of revenue 2,010 16,059 13,200 64,160 Gross profit (190) (2) 1,843 768 Selling and administrative expenses 3,831 6,686 15,918 21,951 Depreciation and amortization 35 619 433 1,827 Asset impairments 1,133 80 10,575 331 Other operating costs 20 21 40 167 Operating loss (5,209) (7,408) (25,123) (23,508) Non-operating income (expense) 2,841 1,789 796 3,088 Income tax benefit — 88 121 183 Loss from discontinued operations, net of tax $ (2,368) $ (5,531) $ (24,206) $ (20,237) The following table summarizes the assets and liabilities of the Discontinued Operations included in the consolidated balance sheets for the periods indicated: September 30, 2023 December 31, 2022 Cash and cash equivalents $ 4,311 $ 18,683 Accounts Receivables, net 897 1,587 Inventory, net 4,160 5,054 Prepaid expenses and other current assets 1,095 7,972 Current assets of discontinued operations $ 10,463 $ 33,296 Property and equipment, net 236 1,227 Intangible assets, net 7 9,147 Operating lease right of use assets 2,465 5,446 Other noncurrent assets 374 3,392 Noncurrent assets of discontinued operations $ 3,082 $ 19,212 Accounts payable and accrued expenses $ 3,066 $ 8,741 Current portion of operating lease liabilities 962 2,051 Other current liabilities 3,471 3,117 Current liabilities of discontinued operations $ 7,499 $ 13,909 Operating lease liabilities – long term 1,532 3,707 Deferred tax liabilities — 489 Other noncurrent liabilities 406 1,014 Noncurrent liabilities of discontinued operations $ 1,938 $ 5,210 Assets Held for Sale During the nine months ended September 30, 2023, our business components Energica, Solectrac and Wave (the “held for sale businesses”) met the criteria for classification as assets held for sale and discontinued operations. However, as the held for sale businesses comprise the substantial majority of assets, liabilities, revenues and operating costs of the company’s continuing operations and the period of time over which the disposal events are expected to occur, we have continued to present these operations as continuing operations. We believe this provides more relevant information in the primary financial statements. While these assets are classified as held for sale as we assess active third-party interest, we do not anticipate the sale of all of these businesses. For those that we do decide to sell, it is expected that the majority of the balances attributable to the held for sale businesses will not be divested until 2024. The following table summarizes the operating results of the held for sale businesses for the periods indicated: Three months ended Nine months ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Total revenue $ 637 $ 8,172 $ 11,477 $ 18,887 Cost of revenue 2,110 8,870 13,893 18,842 Gross profit (1,473) (698) (2,416) 45 Selling and administrative expenses 5,372 9,766 21,488 25,836 Depreciation and amortization 1,380 1,428 4,045 3,389 Asset impairments — (321) 148 12 Other operating costs 531 830 2,089 2,250 Operating loss $ (8,756) $ (12,401) $ (30,186) $ (31,442) The following table summarizes the assets and liabilities of the held for sale businesses included in the consolidated balance sheets for the periods indicated: September 30, 2023 December 31, 2022 Cash and cash equivalents $ 1,498 $ 2,142 Accounts Receivables, net 3,052 4,239 Inventory, net 16,776 23,192 Prepaid expenses and other current assets 8,696 13,973 Current assets of businesses held for sale $ 30,022 $ 43,546 Property and equipment, net $ 8,216 $ 7,063 Intangible assets, net 39,918 43,597 Goodwill 37,254 37,775 Operating lease right of use assets 6,304 7,017 Other noncurrent assets 2,392 2,115 Noncurrent assets of businesses held for sale $ 94,084 $ 97,567 Accounts payable and accrued expenses $ 17,746 $ 18,941 Current portion of operating lease liabilities 1,026 1,213 Other current liabilities 22,486 17,184 Current liabilities of businesses held for sale $ 41,258 $ 37,338 Operating lease liabilities – long term $ 5,546 $ 5,904 Deferred tax liabilities 2,528 2,648 Other noncurrent liabilities 2,790 3,088 Noncurrent liabilities of businesses held for sale $ 10,864 $ 11,640 Balance Sheet View if Excluding the Held for Sale Businesses Noted Above While the sale of the businesses noted above is contingent on the ability to reach a mutually acceptable price with an unrelated arms-length buyer, in the event these business components are divested in the next twelve months, the company will experience a material change in the assets its owns and operates. The following table presents a balance sheet as of September 30, 2023 as if the sale of Energica, Wave Technologies, and Solectrac were complete and such businesses were presented as discontinued operations. In this event, the balance sheet below would reflect the assets and liabilities of the parent company Ideanomics, Inc. and VIA Motors as the sole remaining continuing operations in that hypothetical situation. However, the balance sheet below presents historical financial information and does not include cash or other assets we would receive from the sale of the businesses held for sale, nor does it show any liabilities that may be reduced or discharged with cash received. Additionally, as described above, we may decide not to sell one or more of the businesses held for sale. September 30, 2023 December 31, 2022 Cash and cash equivalents $ 386 $ 1,103 Accounts Receivables, net 14 30 Inventory, net 5 — Prepaid expenses and other current assets 5,267 36,062 Current assets of discontinued operation and businesses held for sale 40,485 76,843 Total current assets 46,157 114,038 Property and equipment, net 2,911 782 Intangible assets, net 62 25 Operating lease right of use assets 4,510 3,516 Other noncurrent assets 477 7,798 Noncurrent assets of discontinued operation and businesses held for sale 97,167 116,780 Total assets $ 151,284 $ 242,939 Accounts payable and accrued expenses $ 45,080 $ 16,037 Current portion of operating lease liabilities 1,802 818 Other current liabilities 13,701 8,764 Current liabilities of discontinued operation and businesses held for sale 48,757 51,247 Total current liabilities 109,340 76,866 Operating lease liabilities – long term 5,699 2,662 Deferred tax liabilities 310 — Noncurrent liabilities of discontinued operation and businesses held for sale 12,802 16,848 Total liabilities 128,151 96,376 Series A 1,262 1,262 Series B 1,863 8,850 Series C 4,825 — Equity: Common stock 1,499 597 Additional paid-in capital 1,071,219 1,004,082 Accumulated deficit (1,049,603) (866,450) Accumulated other comprehensive loss (6,684) (6,104) Total Ideanomics, Inc. shareholder’s equity 16,431 132,125 Non-controlling interest (1,248) 4,326 Total equity 15,183 136,451 Total liabilities, convertible redeemable preferred stock and equity $ 151,284 $ 242,939 Significant Accounting Policies For a detailed discussion of Ideanomics’ significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Ideanomics’ condensed consolidated financial statements included in the Company’s 2022 Form 10-K. Inventory Inventories, which include the costs of material, labor and overhead, are stated at the lower of cost or net realizable value, with cost generally computed on a FIFO basis. Electronic motorcycle inventories are stated on a specific identification method. Estimated losses from obsolete and slow-moving inventories are recorded to reduce inventory values to their estimated net realizable value and are charged to costs of revenue. At the point of loss recognition, a new cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in a recovery in carrying value. The composition of inventory is as follows (in thousands): September 30, 2023 December 31, 2022 Raw materials $ 7,231 $ 5,674 Work in progress 10,584 10,695 Finished goods 6,167 9,291 Inventory Reserve (7,201) (2,468) Total $ 16,781 $ 23,192 As of September 30, 2023 and December 31, 2022, the carrying amount of inventories serving as collateral for short-term borrowing agreements is $3.4 million and $6.1 million, respectively. Revenue The Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. For most of the Company’s customer arrangements, control transfers to customers at a point in time, as that is generally when legal title, physical possession and risk and rewards of goods/services transfer to the customer. In certain arrangements, control transfers over time as the customer simultaneously receives and consumes the benefits as the Company completes the performance obligations. Our contracts with customers may include multiple performance obligations. For such arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on the observable prices charged to customers or adjusted market assessment or using expected cost-plus margin when one is available. Adjusted market assessment price is determined based on overall pricing objectives taking into consideration market conditions and entity specific factors. The Company performs an analysis of the relevant terms of its sales contracts, including whether or not it controls the product prior to sale, whether or not it incurs inventory risk, and other factors in order to determine if revenue should be recorded as a principal or agent. Revenues recognized in a principal capacity are reported gross, while revenues recognized as an agent are reported net. Certain customers may receive discounts or rebates, which are accounted for as variable consideration. Variable consideration is estimated based on the expected amount to be provided to customers, and initially reduces revenues recognized. The Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are refundable. The Company estimates the sales return based on historical return rates, current inventory levels, and current economic conditions. The estimated returns are recorded in “Contract assets” for the inventory value of estimated returns. The estimated refund liability is recorded in “Other current liabilities”. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The Company expenses, as incurred, any commissions or other fees which, if capitalizable, would have an amortization period of less than one year. Product Warranties Certain of the Company’s products are sold subject to standard product warranty terms, which generally include post-sales support and repairs or replacement of a product at no additional charge for a specified period of time. Accruals for estimated expenses related to product warranties are made at the time revenue is recognized and are recorded as a component of costs of revenue. The Company estimates the liability for warranty claims based on standard warranties, the historical frequency of claims and the cost to replace or repair products under warranty. Factors that influence the warranty liability include the number of units sold, the length of warranty term, historical and anticipated rates of warranty claims and the cost per claim. The warranty liability as of September 30, 2023 and December 31, 2022 is $0.7 million and $0.6 million, respectively, and is included in “Other long-term liabilities” within the consolidated balance sheets. VIE Structures and Arrangements VIA was identified as a VIE in consideration of the aggregate funding provided since August 2021 through the acquisition date of January 31, 2023. Prior to entering into the Merger Agreement, on June 7, 2021, the Company and VIA entered into a SAFE for an amount of $7.5 million which is recorded in Long-term investments as a cost method investment for the period ended December 31, 2022. Prior to January 31, 2023, VIA is not consolidated as the Company did not participate in the design of VIA, does not have significant influence over VIA to make management decisions, did not have any representation on the VIA’s board and did not provide more than half of the total equity. Subsequent to the acquisition of VIA on January 31, 2023, the results of operations and financial position of this VIE are included in the consolidated financial statements for period ended September 30, 2023.Refer to Note 4. Liquidity and Going Concern The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with U.S. GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Pursuant to the requirements of the ASC 205, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. (3) The Company breached at least two covenants, including making timely SEC filings and a minimum stock purchase from the Company’s officers or directors, although Yorkville has not asserted either breach and has since extended additional loan amounts to the Company. As of September 30, 2023, the Company had cash and cash equivalents of approximately $6.2 million, with $1.9 million reported in continuing operations and $4.3 million in discontinued operations. Cash held in China is The Company believes that its current level of cash and cash equivalents are not sufficient to fund continuing operations, including VIA, which acquisition was closed by the company on January 31, 2023. The Company will need to bring in new capital to support growth and feels its asset and talent base enables it to do so. However, there can be no assurance that this will occur. The Company has no remaining available and committed equity funding vehicles. As our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, June 30, 2023, and September 30, 2023 were not filed timely, we will not be Form S-3 eligible until November of 2024, which could make fund raising more difficult or more expensive. Management continues to seek to raise additional funds through the issuance of equity, mezzanine or debt securities. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our business and industry. These factors individually and collectively raise doubt about the Company’s ability to continue as a going concern. In addition, our independent auditors have included in their report on our financial statements for the year ended December 31, 2022, a paragraph related to the existence of substantial doubt about our ability to continue as a going concern. The Company has continued to incur net losses and negative cash flows from operating and investing activities in the each of the first three quarters of 2023, consistent with its business plan for ongoing activities. As of the date of the filing of this Form 10-Q, securing additional financing is in progress as management’s actions to preserve an adequate level of liquidity for a period extending twelve months from the date of the filing of this Form 10-Q continue to be insufficient on their own without additional financing to mitigate the conditions raising substantial doubt about the Company’s ability to continue as a going concern. We currently do not have adequate cash to meet our short or long-term needs. In the event additional capital is raised, it may have a dilutive effect on our existing stockholders. The Company’s ability to raise capital is critical. The company has raised approximately $38.3 million, since the beginning of the first quarter 2023, including the sale of preferred shares, issuance of a convertible note, and borrowing from third parties. The company's primary actions to raise capital are currently focused on divestiture of a number of business components (please refer to Note 1 , " Discontinued Operations" for further details). These divestitures, if successful, may take up to twelve months to close and fund. Although management continues to raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing to supplement the Company’s capitalization and liquidity, management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. We believe substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date of issuance of our financial statements. |
