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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-35561

IDEANOMICS, INC.

(Exact name of registrant as specified in its charter)

Nevada

20-1778374

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

55 Broadway, 19th Floor

New York, NY 10006

(Address of principal executive offices)

212-206-1216

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

 

Trading Symbol(s)

 

Name of each exchange on which registered:

Common stock, $0.001 par value per share

 

IDEX

 

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes       No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes       No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer   

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes       No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 237,303,159 shares as of August 7, 2020.

Table of Contents

QUARTERLY REPORT ON FORM 10-Q

OF IDEANOMICS, INC.

FOR THE PERIOD ENDED JUNE 30, 2020

TABLE OF CONTENTS

PART I

-FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

43

Item 3

Quantitative and Qualitative Disclosures About Market Risk

58

Item 4.

Controls and Procedures

58

 

 

 

PART II

-OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

58

Item 1A.

Risk Factors

59

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3.

Defaults Upon Senior Securities

59

Item 4.

Mine Safety Disclosures

59

Item 5.

Other Information

59

Item 6.

Exhibits

60

Signatures

61

Table of Contents

Use of Terms

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” “the Company,” “IDEX,” or “Ideanomics,” are to the business of Ideanomics, Inc. (formerly known as “Seven Star Cloud Group, Inc.,” “SSC” and “Wecast Network, Inc.”), a Nevada corporation, and its consolidated subsidiaries and variable interest entities.

In addition, unless the context otherwise requires and for the purposes of this report only:

“DBOT” refers to the Delaware Board of Trade Holdings, Inc which is holding company for the Company’s FINRA Registered Broker Dealer. The Company owns 99% of the share capital Delaware Board of Trade Holdings, Inc.;
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“EV” refers to electric vehicles, particularly battery operated electric vehicles;
“FINRA” refers to the Financial Industry Regulatory Authority;
“HK SAR” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
“Intelligenta” refers to the BDCG joint venture which was rebranded as Intelligenta. As part of the rebranding, Intelligenta’s strategy will now include AI solutions to enhance corporation services, index services and products, and capital market services and products;
“Legacy YOD” business refers to the premium content and integrated value-added service solutions for the delivery of VOD (defined below) and paid video programing to digital cable providers, Internet Protocol Television (“IPTV”) providers, Over-the-Top (“OTT”) streaming providers, mobile manufacturers, and operators, as well as direct customers;
“MEG” refers to Mobile Energy Global the subsidiary that holds all of the Company’s electric vehicles investments;
“Renminbi” and “RMB” refer to the legal currency of the PRC;
“SEC” refers to the United States Securities and Exchange Commission;
“Securities Act” refers to the Securities Act of 1933, as amended;
“SSF” refers to Tianjin Sevenstarflix Network Technology Limited, a PRC company controlled by YOD Hong Kong through contractual arrangements;
“Sinotop Beijing” refers to Beijing Sino Top Scope Technology Co., Ltd., a PRC company controlled by YOD Hong Kong through contractual arrangements;
“U.S. dollars,” “dollars,” “USD,” “US$,” and “$” refer to the legal currency of the United States;
“U.S. Tax Reform” refers to the Tax Cuts and Jobs Act, enacted by the United States of America on December 22, 2017;
“VIEs” refers to our variable interest entities Sinotop Beijing, and SSF;
“VOD” refers to video on demand, which includes near video on demand (“NVOD”), subscription video on demand (“SVOD”), and transactional video on demand (“TVOD”);
“Wecast SH” refers to Shanghai Wecast Supply Chain Management Limited, a PRC company that is 51% owned by the Company;
“Wide Angle” refers to Wide Angle Group Limited, a Hong Kong company that is 55% owned by the Company;
“YOD Hong Kong” refers to YOU On Demand (Asia) Limited, formerly Sinotop Group Limited, a Hong Kong company, which is wholly- owned by CB Cayman;
“YOD WFOE” refers to YOU On Demand (Beijing) Technology Co., Ltd., a PRC company and a “wholly foreign-owned enterprise,” which is wholly-owned by YOD Hong Kong; and
“SSSIG” refers to Sun Seven Stars Investment Group Limited, a British Virgin Islands corporation, an affiliate of Dr. Wu.
SEDA refers to the Standby Equity Distribution Agreement between the Company and YA II PN Ltd

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

IDEANOMICS, INC.

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Page

Unaudited Condensed Consolidated Balance Sheets

5

Unaudited Condensed  Consolidated Statements of Operations

6

Unaudited Condensed  Consolidated Statements of Comprehensive Income (Loss)

7

Unaudited Condensed  Consolidated Statements of Equity

8

Unaudited Condensed  Consolidated Statements of Cash Flows

10

Notes to Unaudited Condensed  Consolidated Financial Statements

11

Table of Contents

IDEANOMICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD in thousands)

    

June 30, 2020

    

December 31, 2019

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

36,384

$

2,633

Accounts receivable, net (due from related parties were $1,127 and $2,284 as of June 30, 2020 and December 31, 2019, respectively)

 

1,242

 

2,405

Prepayments

 

1,389

 

572

Amount due from related parties

1,328

1,256

Notes receivable

1,931

Other current assets

 

263

 

587

Total current assets

 

42,537

 

7,453

Property and equipment, net

 

177

 

378

Fintech Village

12,562

12,561

Intangible assets, net

 

51,479

 

52,771

Goodwill

 

10,460

 

23,344

Long-term investments

 

22,644

 

22,621

Operating lease right of use assets

 

7,579

 

6,934

Other non-current assets

 

552

 

883

Total assets

$

147,990

$

126,945

LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK, REDEMABLE NON-CONTROLLING INTEREST AND EQUITY

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

2,313

$

3,380

Deferred revenue

 

593

 

477

Accrued salaries

910

923

Amount due to related parties

 

596

 

3,962

Other current liabilities

 

6,045

 

6,466

Current portion of operating lease liabilities

1,618

1,113

Current acquisition earn-out liability

6,474

12,421

Promissory note-short term

3,704

3,000

Convertible promissory note due to third-parties

7,066

1,753

Convertible promissory note due to related parties

 

 

3,260

Total current liabilities

 

29,319

 

36,755

Asset retirement obligations

 

4,653

 

5,094

Convertible promissory note due to third-parties-long term

5,089

Convertible promissory note due to related parties–long term

1,551

Operating lease liability-long term

 

11,717

 

6,222

Non-current acquisition earn-out liability

10,428

12,235

Total liabilities

 

56,117

 

66,946

Commitments and contingencies (Note 18)

 

 

Convertible redeemable preferred stock and Redeemable non-controlling interest:

 

 

Series A - 7,000,000 shares issued and outstanding, liquidation and deemed liquidation preference of $3,500,000 as of June 30, 2020 and December 31, 2019

 

1,262

 

1,262

Redeemable non-controlling interest

7,260

Equity:

 

 

Common stock - $0.001 par value; 1,500,000,000 shares authorized, 237,008,159 shares and 149,692,953 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

 

237

 

150

Additional paid-in capital

 

357,720

 

282,554

Accumulated deficit

 

(287,407)

 

(248,481)

Accumulated other comprehensive loss

 

(508)

 

(664)

Total IDEX shareholder’s equity

 

70,042

 

33,559

Non-controlling interest

 

13,309

 

25,178

Total equity

 

83,351

 

58,737

Total liabilities, convertible redeemable preferred stock, redeemable non-controlling interest and equity

$

147,990

$

126,945

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

Table of Contents

IDEANOMICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD in thousands)

Three Months Ended

 

Six Months Ended

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Revenue from third-parties

$

4,685

$

354

$

5,063

$

700

Revenue from related parties

 

7

 

14,100

 

7

 

40,700

Total revenue

 

4,692

 

14,454

 

5,070

 

41,400

Cost of revenue from third-parties

 

4,435

 

250

 

4,769

 

507

Cost of revenue from related parties

 

2

 

466

 

2

 

467

Gross profit

 

255

 

13,738

 

299

 

40,426

Operating expenses:

 

 

 

 

Selling, general and administrative expenses

 

6,725

 

6,485

 

12,552

 

10,672

Professional fees

 

2,372

 

1,169

 

4,128

 

2,530

Impairment loss

6,200

7,088

Acquisition earn-out/true-up expense, net

746

1,279

Depreciation and amortization

 

481

 

370

 

957

 

614

Total operating expenses

 

16,524

 

8,024

 

26,004

 

13,816

Income (loss) from operations

 

(16,269)

 

5,714

 

(25,705)

 

26,610

Interest and other income (expense):

 

 

 

 

Interest expense, net

 

(8,890)

 

(581)

 

(12,047)

 

(1,316)

Equity in loss of equity method investees

 

(12)

 

(286)

 

(15)

 

(566)

Conversion expense

(2,266)

(2,266)

Other income (expense)

 

1,015

 

2

 

989

 

(56)

Income (loss) before income taxes and non-controlling interest

 

(26,422)

 

4,849

 

(39,044)

 

24,672

Income tax benefit

 

 

428

 

 

514

Net income (loss)

 

(26,422)

 

5,277

 

(39,044)

 

25,186

Deemed dividend related to warrant repricing

(184)

(184)

Net loss attributable to common stockholders

(26,606)

5,277

(39,228)

25,186

Net loss attributable to non-controlling interest

 

28

 

15

 

300

 

33

 

 

Net income (loss) attributable to IDEX common shareholders

$

(26,578)

$

5,292

$

(38,928)

$

25,219

Earnings (loss) per share

 

 

 

 

Basic

$

(0.15)

$

0.05

$

(0.23)

$

0.24

Diluted

(0.15)

0.05

(0.23)

0.22

Weighted average shares outstanding:

 

 

 

 

Basic

 

180,034,278

 

108,694,719

 

168,946,960

 

107,029,448

Diluted

 

180,034,278

 

112,461,401

 

168,946,960

 

117,605,184

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

Table of Contents

IDEANOMICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD in thousands)

Three Months Ended

 

Six Months Ended

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Net income (loss)

$

(26,422)

$

5,277

$

(39,044)

$

25,186

Other comprehensive income (loss), net of nil tax

 

 

 

 

Foreign currency translation adjustments

 

276

 

(68)

 

283

 

79

Comprehensive income (loss)

 

(26,146)

 

5,209

 

(38,761)

 

25,265

Deemed dividend related to warrant repricing

(184)

(184)

Comprehensive loss attributable to non-controlling interest

 

76

 

7

 

(173)

 

50

Comprehensive income (loss) attributable to IDEX common shareholders

$

(26,254)

$

5,216

$

(39,118)

$

25,315

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

Table of Contents

IDEANOMICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) (USD in thousands)

Six Months Ended June 30, 2019

Retained

Accumulated

Additional

Earnings/

Other

Ideanomics

Non-

Common

Par

Paid-in

Accumulated

Comprehensive

Shareholders’

controlling

    

Stock

    

Value

    

Capital

    

(Deficit)

    

Loss

    

equity

    

Interest

    

Total Equity

Balance, January 1, 2019

102,766,006

$

103

$

195,780

$

(149,975)

$

(1,665)

$

44,243

$

(1,031)

$

43,212

Share-based compensation

 

 

 

224

 

 

 

224

 

 

224

Common stock issuance for restricted shares

 

129,840

 

 

 

 

 

 

 

Common stock issuance for assets (SolidOpinion, Inc)

 

4,500,000

 

5

 

7,150

 

 

 

7,155

 

 

7,155

Common stock issuance for convertible debt

1,166,113

1

2,049

2,050

2,050

Net income (loss)

19,927

19,927

(18)

19,909

Foreign currency translation adjustments, net of nil tax

172

172

(25)

147

Balance, March 31, 2019

108,561,959

109

205,203

(130,048)

(1,493)

73,771

(1,074)

72,697

Share-based compensation

3,703

3,703

3,703

Common stock issuance for assets (Fintalk)

2,860,963

3

5,347

5,350

5,350

Common stock issuance for acquisition of non-controlling interest Grapevine

590,671

1

491

492

(492)

Investment from SSSIG

 

575,431

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

5,292

 

 

5,292

 

(15)

 

5,277

Foreign currency translation adjustments, net of nil tax

 

 

 

 

 

(76)

 

(76)

 

8

 

(68)

Balance, June 30, 2019

112,589,024

$

113

$

214,744

$

(124,756)

$

(1,569)

$

88,532

$

(1,573)

$

86,959

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

Table of Contents

Six Months Ended June 30, 2020

Retained

Accumulated

Additional

Earnings/

Other

Ideanomics

Non-

Common

Par

Paid-in

Accumulated

Comprehensive

Shareholders’

controlling

    

Stock

    

Value

    

Capital

    

(Deficit)

    

Loss

    

equity

    

Interest*

    

Total Equity

Balance, January 1, 2020

 

149,692,953

$

150

$

282,554

$

(248,481)

$

(664)

$

33,559

$

25,178

$

58,737

Share-based compensation

 

 

2,202

 

 

 

2,202

 

 

2,202

Common stock issuance for professional fee

 

429,000

 

240

 

 

 

240

 

 

240

Common stock issuance for interest (ID Venturas)

29,766

21

21

21

Common stock issuance for acquisition (DBOT)

10,883,668

11

6,737

6,748

6,748

Common stock issued for warrant exercised (YA II)

1,000,000

1

999

1,000

1,000

Common stock issuance for convertible note (YA II)

1,424,658

1

592

593

593

Tree Technologies measurement period adjustment

(11,454)

(11,454)

Non-controlling shareholder contribution (DBOT)

100

100

Net income (loss)

(12,348)

(12,348)

(378)

(12,726)

Foreign currency translation adjustments, net of nil tax

(16)

(16)

23

7

Balance, March 31, 2020

163,460,045

163

293,345

(260,829)

(680)

31,999

13,469

45,468

Share-based compensation

3,394

3,394

3,394

Common stock issuance for acquisition (DBOT)

459,180

293

293

293

Common stock issuance for convertible note conversion (Mr. McMahon)

5,084,746

5

2,995

3,000

3,000

Common stock issuance for convertible note conversion (SSSIG)

2,656,361