Ideanomics Inc.

02/14/2020 | Press release | Distributed by Public on 02/14/2020 16:40

SEC Filing - 10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended September 30, 2019

¨ 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 x 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 x Smaller reporting company x

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 x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 133,871,256 shares as of November 11, 2019.

EXPLANATORY NOTE

The following Form 10-Q/A for the quarter ended September 30, 2019 is being filed to conform to the disclosure contained in the Form S-1/A filed with the Securities and Exchange Commission on February 13, 2020; specifically, to adjust the number of contingently issuable shares disclosed in Note 16 to the financial statements contained herein and to adjust the disclosure related to GTDollar Coins ('GTB') as it related to GTB being denominated in Bitcoin and Ethereum.

QUARTERLY REPORT ON FORM 10-Q

OF IDEANOMICS, INC.

FOR THE PERIOD ENDED SEPTEMBER 30, 2019

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 31
Item 3 Quantitative and Qualitative Disclosures About Market Risk 43
Item 4. Controls and Procedures 43
PART II OTHER INFORMATION
Item 1. Legal Proceedings 44
Item 1A. Risk Factors 44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
Item 3. Defaults Upon Senior Securities 46
Item 4. Mine Safety Disclosures 46
Item 5. Other Information 46
Item 6. Exhibits 46
Signatures 47

References

Except as otherwise indicated by the context, references in this report to the following:

(i) the 'Company,' 'Ideanomics,', 'IDEX', 'we,' 'us,' and 'our' are to Ideanomics, Inc. a Nevada corporation, and its consolidated subsidiaries and variable interest entities;
(ii) 'CB Cayman' refers to our wholly-owned subsidiary China Broadband, Ltd., a Cayman Islands company;
(iii) 'Exchange Act' refers to the Securities Exchange Act of 1934, as amended;
(iv) 'GTD' refers to our minority shareholder, GT Dollar Pte. Ltd., a Singapore based information technology solution company;
(v) 'GTB' refers to cryptocurrency received from GTD for digital asset management service and disposal of certain assets;
(vi) 'Hua Cheng' refers to Hua Cheng Hu Dong (Beijing) Film and Television Communication Co., Ltd., a PRC company 39% owned by Sinotop Beijing and 20% owner of Zhong Hai Media;
(vii) 'PRC' and 'China' refer to People's Republic of China;
(viii) 'Renminbi' and 'RMB' refer to the legal currency of China;
(ix) 'SEC' refers to the United States Securities and Exchange Commission;
(x) 'Securities Act' refers to Securities Act of 1933, as amended;
(xi) 'Sinotop Beijing' or 'Sinotop' refers to Beijing Sino Top Scope Technology Co., Ltd, a PRC company controlled by YOD Hong Kong through contractual arrangements;
(xii) 'SSF' refers to Tianjin Sevenstarflix Network Technology Limited, a PRC company controlled by YOD Hong Kong through contractual arrangements;
(xiii) 'U.S. dollar,' '$' and 'US$' refer to United States dollars;
(xiv) 'VIEs' refers to our current variable interest entities, Sinotop Beijing, and Tianjin Sevenstarflix Network Technology Limited;
(xv) 'Wecast Services' refers to our wholly-owned subsidiary Wecast Services Group Limited (formerly known as Sun Video Group Hong Kong Limited,) a Hong Kong company;
(xvi) 'Wecast SH' refers to Shanghai Wecast Supply Chain Management Limited, a PRC company 51% owned by the Company;
(xvii) 'Wide Angle' refers to Wide Angle Group Limited, a Hong Kong company 55% owned by the Company;
(xviii) 'Zhong Hai Media' refers to Zhong Hai Shi Xun Media Co., Ltd., a PRC company 80% owned by Sinotop Beijing until June 30, 2017;
(xix) 'SSSIG' refers to Sun Seven Stars Investment Group Limited, a British Virgin Islands corporation, an affiliate of Dr. Wu.
2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

IDEANOMICS, INC.

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Page
Unaudited Consolidated Balance Sheets 4
Unaudited Consolidated Statements of Operations 5
Unaudited Consolidated Statements of Comprehensive Income (Loss) 6
Unaudited Consolidated Statements of Equity 7
Unaudited Consolidated Statements of Cash Flows 9
Notes to Unaudited Consolidated Financial Statements 10
3

IDEANOMICS, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2019 December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 1,686,596 $ 3,106,244
Accounts receivable, net 2,941,245 19,370,665
Licensed content, current - 16,958,149
Prepayments 1,013,384 2,042,041
Other current assets 2,371,913 3,594,942
Total current assets

8,013,138

45,072,041
Property and equipment, net 14,504,993 15,029,427
Intangible assets, net 81,960,331 3,036,352
Goodwill 10,028,073 704,884
Long-term investments 42,159,313 26,408,609
Operating lease right of use assets 6,845,031 -
Other non-current assets 1,252,797 3,983,799
Total assets $

164,763,676

$ 94,235,112
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND EQUITY
Current liabilities: (including amounts of the consolidated VIEs without recourse to Ideanomics, Inc. See Note 4)
Accounts payable $ 1,543,291 $ 19,265,094
Deferred revenue 458,894 405,929
Amount due to related parties 2,565,812 800,822
Other current liabilities 9,141,870 5,321,697
Current portion of operating lease liabilities 912,271 -
Convertible promissory note due to related parties 1,288,032 4,140,055
Total current liabilities 15,910,170 29,933,597
Deferred tax liabilities - 513,935
Asset retirement obligations 6,392,500 8,000,000
Convertible promissory note due to related parties - long term

3,000,000

-
Convertible note - long term 12,627,531 11,313,770
Promissory note - long term 3,000,000 -
Operating lease liability-long term 6,329,533 -
Total liabilities 47,259,734 49,761,302
Commitments and contingencies (Note 18)
Convertible redeemable preferred stock:
Series A - 7,000,000 shares issued and outstanding, liquidation and deemed liquidation preference of $3,500,000 as of September 30, 2019 and December 31, 2018 1,261,995 1,261,995
Equity:
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 132,696,071 shares and 102,766,006 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively 132,696 102,765
Additional paid-in capital 255,737,318 195,779,576
Accumulated deficit

(138,468,441

) (149,975,302 )
Accumulated other comprehensive loss (1,557,346 ) (1,664,598 )
Total IDEX shareholder's equity

115,844,227

44,242,441
Non-controlling interest

397,720

(1,030,626 )
Total equity

116,241,947

43,211,815
Total liabilities, convertible redeemable preferred stock and equity $

164,763,676

$ 94,235,112

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

4

IDEANOMICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
Revenue from third parties $ 249,512 $ 43,707,937 $ 949,384 $ 362,628,296
Revenue from related party

2,854,178

- 43,554,178 -
Total revenue 3,103,690 43,707,937 44,503,562 362,628,296
Cost of revenue from third parties 243,360 42,844,876 750,290 115,729,433
Cost of revenue from related parties - - 466,894 244,110,132
Gross profit 2,860,330 863,061 43,286,378 2,788,731
Operating expenses:
Selling, general and administrative expense 7,769,503 4,333,259 18,442,280 16,861,425
Research and development expense - 667,416 - 1,393,025
Professional fees 1,388,842 1,927,431 3,918,461 3,280,729
Impairment of property and equipment

2,298,887

-

2,298,887

-
Depreciation and amortization 806,481 291,512 1,420,480 314,737
Total operating expense 12,263,713 7,219,618 26,080,108 21,849,916
Income (loss) from operations (9,403,383 ) (6,356,557 ) 17,206,270 (19,061,185 )
Interest and other income (expense)
Interest expense, net (639,395 ) (145,610 ) (1,955,476 ) (201,782 )
Equity in loss of equity method investees (40,369 ) (13,882 ) (606,390 ) (44,316 )
Gain on disposal of subsidiaries 1,057,363 - 1,057,363 -
Loss on remeasurement of DBOT investment (3,178,702 ) - (3,178,702 ) -
Other (99,997 ) (925,771 ) (155,946 ) (558,271 )
Income (loss) before income taxes and non-controlling interest (12,304,483 ) (7,441,820 ) 12,367,119 (19,865,554 )
Income tax benefit - - 513,935 -
Net income (loss) (12,304,483 ) (7,441,820 ) 12,881,054 (19,865,554 )
Net (income) loss attributable to non-controlling interest (1,407,384 ) 254,973 (1,374,193 ) 637,314
Net income (loss) attributable to IDEX common shareholders $ (13,711,867 ) $ (7,186,847 ) $ 11,506,861 $ (19,228,240 )
Earnings (loss) per share
Basic $ (0.11 ) $ (0.10 ) $ 0.10 $ (0.27 )
Diluted $ (0.11 ) $ (0.10 ) $ 0.10 $ (0.27 )
Weighted average shares outstanding:
Basic 127,609,748 74,063,495 113,964,933 71,574,303
Diluted 127,609,748 74,063,495 118,319,893 71,574,303

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

5

IDEANOMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
Net income (loss) $ (12,304,483 ) $ (7,441,820 ) $ 12,881,054 $ (19,865,554 )
Other comprehensive income (loss), net of nil tax
Foreign currency translation adjustments 23,502 708,140 102,481 565,315
Comprehensive income (loss) (12,280,981 ) (6,733,680 ) 12,983,535 (19,300,239 )
Comprehensive loss attributable to non-controlling interest (1,470,410 ) 243,078 (1,419,916 ) 614,298
Comprehensive income (loss) attributable to IDEX common shareholders $ (13,751,391 ) $ (6,490,602 ) $ 11,563,619 $ (18,685,941 )

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

6

IDEANOMICS, INC.

CONSOLIDATED STATEMENT OF EQUITY (Unaudited)

Nine Months Ended September 30, 2018
Common
Stock
Par
Value
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)

Ideanomics

Shareholders'
equity

Non-
controlling
Interest
Total
Equity
Balance, January 1, 2018 68,509,090 $ 68,509 $ 158,449,544 $ (126,693,022 ) $ (782,074 ) $ 31,042,957 $ (1,289,367 ) $ 29,753,590
Share-based compensation - - 121,190 - - 121,190 - 121,190
Common stock issuance for RSU vested 13,464 13 (13 ) - - - - -
Common stock issuance for option exercised 42,501 43 2,589 - - 2,632 - 2,632
Common stock issued for warrant exercised 300,000 300 524,700 - - 525,000 - 525,000
Net loss - - - (3,721,369 ) - (3,721,369 ) (91,444 ) (3,812,813 )
Foreign currency translation adjustments, net of nil tax - - - - (32,481 ) (32,481 ) (9,148 ) (41,629 )
Balance, March 31, 2018 (restated) 68,865,055 $ 68,865 $ 159,098,010 $ (130,414,391 ) $ (814,555 ) $ 27,937,929 $ (1,389,959 ) $ 26,547,970
Share-based compensation - - 3,239,727 - - 3,239,727 - 3,239,727
Investment from GTD and SSS - - 5,900,000 - - 5,900,000 - 5,900,000
Common stock issuance for RSU vested 1,227,244 1,227 (1,227 ) - - - - -
Common stock issuance for acquisition of BDCG 3,000,000 3,000 7,797,000 - - 7,800,000 - 7,800,000
Net loss - - - (8,320,024 ) - (8,320,024 ) (290,897 ) (8,610,921 )
Foreign currency translation adjustments, net of nil tax - - - - (121,465 ) (121,465 ) 20,269 (101,196 )
Balance, June 30, 2018 73,092,299 $ 73,092 $ 176,033,510 $ (138,734,415 ) $ (936,020 ) $ 36,436,167 $ (1,660,587 ) $ 34,775,580
Share-based compensation - - 11,530 - - 11,530 - 11,530
Investment from GTD and SSS - - 5,288,502 - - 5,288,502 - 5,288,502
Common stock issued for warrant exercised 343,714 344 601,156 - - 601,500 - 601,500
Common stock issuance for option exercised 40,295 40 (40 ) - - - -
Common stock issuance for Star Thrive Group Limited 3,770,493 3,770 6,869,138 - - 6,872,908 - 6,872,908
Conversion feature of convertible note - - 1,384,614 - - 1,384,614 - 1,384,614
Acquisition of Grapevine - - - - - 1,154,419 1,154,419
Net loss - - - (7,186,847 ) - (7,186,847 ) (254,973 ) (7,441,820 )
Foreign currency translation adjustments, net of nil tax - - - - 696,245 696,245 11,895 708,140
Balance, September 30, 2018 77,246,801 77,246 190,188,410 (145,921,262 ) (239,775 ) 44,104,619 (749,246 ) 43,355,373

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

7

IDEANOMICS, INC.

CONSOLIDATED STATEMENT OF EQUITY (Unaudited)

Nine Months Ended September 30, 2019

Common

Stock

Par

Value

Additional

Paid-in

Capital

Retained

Earnings/

Accumulated (Deficit)

Accumulated

Other

Comprehensive

Income (Loss)

Ideanomics

Shareholders'

equity

Non-

controlling

Interest

Total Equity
Balance, January 1, 2019 102,766,006 $ 102,765 $ 195,779,576 $ (149,975,302 ) $ (1,664,598 ) $ 44,242,441 $ (1,030,626 ) $ 43,211,815
Share-based compensation - - 224,484 - - 224,484 - 224,484
Common stock issuance for restricted shares 129,840 130 (130 ) - - - - -
Common Stock issuance for acquisition-SolidOpinion (Note 5(a)) 4,500,000 4,500 7,150,500 - - 7,155,000 - 7,155,000
Common stock issuance for convertible debt (Note 12(b)) 1,166,113 1,166 2,048,834 - - 2,050,000 - 2,050,000
Net income (loss) - - - 19,926,515 - 19,926,515 (17,761 ) 19,908,754
Foreign currency translation adjustments, net of nil tax - - - - 172,133 172,133 (25,295 ) 146,838
Balance, March 31, 2019 108,561,959 $ 108,561 $ 205,203,264 $ (130,048,787 ) $ (1,492,465 ) $ 73,770,573 $ (1,073,682 ) $ 72,696,891
Share-based compensation - - 3,702,636 - - 3,702,636 - 3,702,636
Common stock issuance for asset acquisition-Fintalk (Note 5(b)) 2,860,963 2,861 5,347,139 - - 5,350,000 - 5,350,000
Common stock issuance for acquisition of non-controlling interest Grapevine (Note 5(c)) 590,671 591 491,027 - - 491,618 (491,618 ) -
Investment from SSSIG1 575,431 576 (576 ) - - - - -
Net income (loss) - - - 5,292,213 - 5,292,213 (15,430 ) 5,276,783
Foreign currency translation adjustments, net of nil tax - - - - (75,851 ) (75,851 ) 7,992 (67,859 )
Balance, June 30, 2019 112,589,024 $ 112,589 $ 214,743,490 $ (124,756,574 ) $ (1,568,316 ) $ 88,531,189 $ (1,572,738 ) $ 86,958,451
Share-based compensation - - 2,547,107 - - 2,547,107 - 2,547,107
Common stock issuance for acquisition of BlackHorse Ventures2 815,217 815 1,499,475 - - 1,500,290 - 1,500,290
Common stock issuance for acquisition of Glory Connection (Note 5(e)) 12,190,000 12,190 24,367,810 - - 24,380,000 - 24,380,000
Common stock issuance for acquisition of DBOT (Note 5(f)) 5,851,830 5,852 9,708,186 - - 9,714,038 104,648 9,818,686
Common stock issuance for releasing Grapevine as collateral 250,000 250 372,250 - - 372,500 - 372,500
Common stock issuance for Convertible note (Note 12(c)) 1,000,000 1,000 2,499,000 - - 2,500,000 - 2,500,000
Deconsolidation of Amer (Note 5(h)) - - - - - 445,894 445,894
Net income (loss) - - - (13,711,867 ) - (13,711,867 ) 1,407,384 (12,304,483 )
Foreign curency translation adjustments, net of nil tax - - - - 10,970 10,970 12,532 23,502
Balance, September 30, 2019 132,696,071 132,696 255,737,318 (138,468,441 ) (1,557,346 ) 115,844,227 397,720 116,241,947

Notes:

1 In 2018, the Company entered into a subscription agreement and amended agreements with SSSIG to purchase $1.1 million of Common Stock at the then market price. The Company has received $1.1 million in total in 2018 and issued 575,431 shares of common stock in June 2019.

2 On July 16, 2019, the Company entered into a share subscription agreement to subscribe 1,186 Pre-A preferred shares of BlackHorse Ventures, a Cayman Islands company, for a consideration of $1,500,290 paid in the form of common shares of the Company. The subscription shares represent 10% of the share capital of BlackHorse Ventures on a fully diluted basis.

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

8

IDEANOMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended
September 30,2019 September 30, 2018
Cash flows from operating activities:
Net income (loss) $ 12,881,054 $ (19,865,554 )
Adjustments to reconcile net income (loss) to net cash used in operating activities
Share-based compensation expense 6,474,227 3,372,447
Depreciation and amortization 1,420,480 314,737
Non-cash interest expense 2,265,921 -
Equity in losses of equity method investees 606,390 44,316
Digital currency received as payment for services (40,700,000 ) -
Gain on disposal of subsidiaries (1,057,363 ) -
Impairment of property and equipment

2,298,887

Loss on remeasurement of DBOT investment 3,178,702 -
Change in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable (2,814,198 ) (78,572,438 )
Prepaid expenses and other assets 2,446,822 (3,332,696 )
Accounts payable 1,024,370 6,560,434
Deferred revenue 149,723 366,474
Amount due to related parties (104,323 ) 71,939,834
Accrued expenses, salary and other current liabilities 3,217,279 1,530,544
Net cash used in operating activities (8,712,029 ) (17,641,902 )
Cash flows from investing activities:
Acquisition of property and equipment (1,809,092 ) (167,891 )
Proceeds from disposal of subsidiaries 694,282 -
Acquisition of subsidiaries, net of cash acquired 246,929 (2,840,219 )
Payments for long term investments (870,000 ) (2,035,190 )
Net cash used in investing activities (1,737,881 ) (5,043,300 )
Cash flows from financing activities:
Proceeds from issuance of convertible note 4,802,300 12,000,000
Proceeds from issuance of shares and warrant 2,500,000 19,186,771
Borrowings from related parties 1,764,992 -
Net cash provided by financing activities 9,067,292 31,186,771
Effect of exchange rate changes on cash (37,030 ) (48,638 )
Net (decrease)/increase in cash and restricted cash (1,419,648 ) 8,452,931
Cash and cash equivalents at the beginning of the period 3,106,244 7,577,317
Cash and cash equivalents at the end of the period $ 1,686,596 $ 16,030,248
Supplemental disclosure of cash flow information:
Disposal of assets in exchange of GTB $ 20,218,920 $ -
Service Revenue received in GTB $ 40,700,000 $ -
Issuance of shares for acquisition of intangible assets $ 10,005,000 $ -

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

9

IDEANOMICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Ideanomics, Inc. (Nasdaq: IDEX) is a Nevada corporation that primarily operates in the United States and Asia. The Company is comprised of two operating segments (i) our Legacy YOD business with primary operations in the PRC which has been winding down operations over the last 12 months and (ii) our Mobile Energy Group (MEG) (formally known as our Wecast Service) business, which is transitioning to focus on the commercial fleet market for electric vehicles in addition to the Company's existing fintech advisory business. Our MEG business operates as an end-to-end solutions provider for the procurement, financing, charging and energy management needs for fleet operators of commercial Electronic Vehicles (EV). MEG operates through a series of joint ventures with the leading companies in the commercial EV space, principally in China, and earns fees for every transaction completed based on the spread for group buying of vehicles and fees derived from the arrangement of financing and energy management such as commercial purchasing of pre-paid electricity credits. MEG focuses on commercial EV rather than passenger EV, as commercial EV is on an accelerated adoption path when compared to consumer EV adoption - which is expected to take between ten to fifteen years. We focus on four distinct commercial vehicles types with supporting income streams: 1) Closed-area heavy commercial, in areas such as Mining, Airports, and Sea Ports; 2) Last-mile delivery light commercial; 3) Buses and Coaches; 4) Taxis. The purchase and financing of vehicles provides for one-time fees and the charging and energy management provides for recurring revenue streams. In July 2019 the company invested in Glory Connection Snd. Bhd, (Glory) a vehicle manufacturer based in Malaysia. Glory holds the only license granted so far for the manufacture of electric vehicles in Malaysia and is in the process of setting up its manufacturing and assembly capabilities.

We continue to develop our FinTech services which principally consist of our ownership of the Delaware Board of Trade (DBOT) ATS, Intelligenta for marketing AI solutions to the Financial Services industry and FinTech Village, a 58 acre development site in West Hartford, Connecticut.

The fintech business intends to offer customized services based on best-in-class blockchain, AI and other technologies to mature and emerging businesses across various industries. To do so, we are building a financial technology ecosystem through license agreements, joint ventures and strategic investments, which we refer to as our 'Fintech Ecosystem'.

Basis of Presentation

In this Form 10-Q, unless the context otherwise requires, the use of the terms 'we,' 'us', 'our' and the 'Company' refers to Ideanomics, Inc, its consolidated subsidiaries and variable interest entities ('VIEs').

On April 24, 2018, the Company completed the acquisition of a 100% equity ownership in Shanghai Guang Ming Investment Management ('Guang Ming'), a PRC limited liability company. One of the two selling shareholders is a related party, an affiliate of Bruno Wu ('Dr. Wu'). Guang Ming holds a special fund management license. The acquisition will help the Company develop a fund management platform. Under Accounting Standard Codification ('ASC') 805-50-05-5 and ASC 805-50-30-5, the transaction was accounted for as a reorganization of entities under common control, in a manner similar to a pooling of interest, using historical costs. As a result of the reorganization, the net assets of Guang Ming were transferred to the Company, and the accompanying consolidated financial statements as of and for the three and nine months ended September 30, 2018 have been prepared as if the current corporate structure had been in place at the beginning of the periods presented in which the common control existed.

In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated on consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results.

We use the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ('U.S. GAAP') have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on April 1, 2019 ('2018 Annual Report').

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

On an ongoing basis, we evaluate our estimates, including those related to the bad debt allowance, variable considerations, fair values of financial instruments, intangible assets (including digital currencies) and goodwill, useful lives of intangible assets and property and equipment, asset retirement obligations, income taxes, and contingent liabilities, among others. We base our estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

10

Fair Value Measurements

Accounting standards require the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are described as follows:

Level 1 - Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.
Level 2 - Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.
Level 3 - Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company reviews the valuation techniques used to determine if the fair value measurements are still appropriate on an annual basis and evaluate and adjust the unobservable inputs used in the fair value measurements based on current market conditions and third party information.

Our financial assets and liabilities that are measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities and convertible notes. The fair values of these assets approximate carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy.

Our financial assets that are measured at fair value on a nonrecurring basis include goodwill and other intangible assets, asset retirement obligations, and adjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used. There were no material impairments and no material adjustments to equity securities using the measurement alternative for the three and nine months ended September 30, 2019 and 2018.

Digital Currency

Digital currency consists of GTDollar Coins ('GTB').

GTB is received in connection with the services agreement and assets purchase agreement with GT Dollar Pte. Ltd. ('GTD'), our minority shareholder at the time of the transaction (Note 3 and 14 (b)). As of September 30, 2019, GTD has disposed of its investment in the Company and is no longer a minority shareholder.

GTB is a type of digital asset that is not a fiat currency and is not backed by hard assets or other financial instruments, and does not represent an investment in GTD or a right to access GTD's platform. As a result, the value of GTB is determined by the value that various market participants place on GTB through their transactions. GTB holders make or lose money from buying and selling GTB. To date, the Asia EDX exchange has not permitted holders of GTB to exchange digital currencies held in accounts at the exchange for fiat. The company is unable to predict when our cryptocurrency holdings will be convertible into fiat and consequently does not consider them to be part of the company's liquid resources.

Given that there is limited precedent regarding the classification and measurement of cryptocurrencies and other digital currencies under current GAAP, the Company has determined to account for these currencies as indefinite-lived intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other until further guidance is issued by the FASB.

Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If, at the time of an impairment test, the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to the excess is recognized. The fair value of GTB currency was a Level 2 measurement (see Note 3) based upon the consideration agreed by GTD and the Company with a discount considering volatility, risk and limitations at contract inception.

Assets and Liabilities Held for Sale

The Company classifies assets and liabilities (disposal group) to be sold as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the disposal groups; the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal group; an active program to locate a buyer and other actions required to complete the plan to sell the disposal group have been initiated; the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify as a completed sale within one year, except if events or circumstances beyond the Company's control extend the period of time required to sell the disposal group beyond one year; the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Gains are not recognized on the sale of a disposal group until the date of sale. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held for sale and reports any subsequent losses as an adjustment to the carrying value of the disposal group.

Reclassifications of a General Nature

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. Note 2 provides information about our adoption of new accounting standards for leases.

Note 2. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

We adopted Financial Accounting Standards Board (FASB) issued Accounting Standards Update ('ASU') No. 2016-02, Leases (Topic 842), as of January 1, 2019, using a modified retrospective transition method and as a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC Topic 840, Leases, or ASC 840. For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

The lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our incremental borrowing rate at the effective date of January 1, 2019, using the original lease term as the tenor. As permitted under the transition guidance, we elected several practical expedients that permit us to not reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability. Adoption of the new standard resulted in the recording of operating right of use assets and the related lease liabilities of approximately $3.6 million and $3.7 million, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities was immaterial. The standard did not materially impact our consolidated operating results and had no impact on cash flows. Please see Note 10.

11

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which largely aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees. The ASU also clarifies that any share-based payment issued to a customer should be evaluated under ASC 606, Revenue from Contracts with Customers . The ASU requires a modified retrospective transition approach. We adopted ASU 2018-07 as of January 1, 2019 and there is no impact to our consolidated financial statement because we did not have such payments in 2019.

In July 2017, the FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The new standard applies to issuers of financial instruments with down-round features. A down-round provision is a term in an equity-linked financial instrument (i.e. a freestanding warrant contract or an equity conversion feature embedded within a host debt or equity contract) that triggers a downward adjustment to the instrument's strike price (or conversion price) if equity shares are issued at a lower price (or equity-linked financial instruments are issued at a lower strike price) than the instrument's then-current strike price. The purpose of the feature is typically to protect the instrument's counterparty from future issuances of equity shares at a more favorable price. The ASU amends (1) the classification of such instruments as liabilities or equity by revising the certain guidance relative to evaluating if they must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of freestanding equity-classified instruments. For the Company, this ASU was effective January 1, 2019. Please see Note 12.

Standards Issued and Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) 'Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments' which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. We will adopt ASU 2016-13 effective January 1, 2020. We are currently evaluating the effect of the adoption of ASU 2016-13 on our consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption.

Note 3. 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.

All of the Company's revenue is derived from Mobile Energy Group (formerly Wecast Services). The following table presents our revenues disaggregated by revenue source, geography (based on our business locations) and timing of revenue recognition.

Three Months Ended Nine Months Ended
September 30,
2019
September 30,
2018
September 30,
2019
September 30,
2018
Geographic Markets
Singapore $ - $ - $ - $ 260,034,401
USA 249,512 200,660 41,649,384 200,660
Hong Kong/PRC 2,854,178 43,507,277 2,854,178 102,393,235
Total $ 3,103,690 $ 43,707,937 $ 44,503,562 $ 362,628,296
Services Lines
Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ - $ - $ 260,034,401
Consumer electronics - 43,432,556 - 102,081,176
Digital asset management services - - 40,700,000 -
Electric Vehicles ('EV') 2,854,178 - 2,854,178 -
Digital advertising services and other 249,512 275,381 949,384 512,719
Total $ 3,103,690 $ 43,707,937 $ 44,503,562 $ 362,628,296
Timing of Revenue Recognition
Products and services transferred at a point in time $ 3,103,690 $ 43,707,937 $ 3,803,562 $ 362,628,296
Services provided over time - - 40,700,000 -
Total $ 3,103,690 $ 43,707,937 $ 44,503,562 $ 362,628,296
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Mobile Energy Group revenue (formerly Wecast Services)

Mobile Energy Group is engaged in the sourcing, procurement, financing and management of commercial fleets of electronic vehicles. Historically, the Mobile Energy Group were mainly engaged in the logistics management, including sales of crude oil, consumer electronics, and digital consulting services such as assets management and marketing services. As of September 30, 2019, we no longer have control over Amer, the subsidiary that engaged in consumer electronics business, as disclosed in Note 5(h).

Logistics management revenue:

Revenue from the sales of crude oil and consumer electronics is recognized when the customer obtains control of the Company's crude oil and consumer electronics, which occurs at a point in time, usually upon shipment or upon acceptance. The contracts are generally short-term contracts where the time between order confirmation and satisfaction of all performance obligations is less than one year.

The most significant judgment is determining whether we are the principal or agent for the sales of crude oil and consumer electronics. We report revenues from these transactions on a gross basis where we are the principal considering the following principal versus agent indicators:

(a) We are primarily responsible for fulfilling the promise to provide the goods to the customer. The Company enters into contracts with customers with specific quality requirements and the suppliers separately. The Company is obliged to provide the goods if the supplier fails to transfer the goods to the customer and responsible for the acceptability of the goods.
(b) The Company has certain inventory risk. Although the Company has the title to the goods only momentarily before passing title on to the customer, the Company is responsible to arrange and issue bill of lading to the customer so that the customer can have the right to obtain the required oil product. In addition, the customer can seek remedies and submit the claim against the Company regarding the quality or quantity of the products delivered.
(c) The Company has discretion in establishing prices. Upon delivery of the crude oil and consumer electronics to the customer, the terms of the contract between the Company and the supplier require the Company to pay the supplier the agreed-upon price. The Company and the customer negotiate the selling price, and the Company invoices the customer for the agreed-upon selling price. The Company's profit is based on the difference between the sales price negotiated with the customer and the price charged by the supplier. The sales price for crude oil is based on the daily benchmark price of spot product plus any premium determined by the Company.

During the fourth quarter of 2018, we began experiencing market demand for non-logistics management revenue -generating opportunities and have begun focusing our efforts on these new market fintech services opportunities, while phasing out of the oil trading and electronics trading businesses.

Digital asset management service with GTD:

On March 14, 2019, the Company entered into a service agreement with GTD, one of our minority shareholders, to provide digital asset management services including consulting, advisory and management services which will be delivered in two phases. There are two performance obligations: (1) the development of a master plan for GTD's assets for 7,083,333 GTB agreed by both parties; and (2) exclusive marketing and business development management services for a fee as percentage (0.25%) of the total market value of GTB ; based on a 10-day average of the 10 business days leading up to the end of a respective calendar month, and paid on the first day of each new calendar month. No marketing and business development management services were delivered by the Company during the current quarter and, furthermore, the company does not anticipate providing these services in the fourth quarter.

The Company recognizes revenue for the master plan development services over the contract period based on the progress of the services provided towards completed satisfaction. Based on ASC 606-10-32, at contract inception, the Company considered the following factors to estimate the value of GTB (noncash consideration): a) it only trades in one exchange, which operations have been less than one year; b) its historical volatility is high; c) the Company's intention to hold the majority of GTB, as part of our digital asset management services; and d) associated risks discussed in Note 19 (f). Therefore, the value of 7,083,333 GTB using Level 2 measurement was approximately $40.7 million with a 76% discount to the fixed contract price agreed upon by both parties when signing the contract. We considered similar assets exchanges in Singapore and considered the volatility of the quoted prices and determined a discount of 76%. The estimated value of GTB is calculated using the Black-Scholes valuation model using the following assumptions: expected terms 3.0 years; volatility 155%; dividend yield: zero and risk free interest rate 2.25%.

The Company considers the payments for marketing and business development management services as performance based consideration, in accordance with ASC 606 on constraining estimates of variable consideration, including the following factors:

The susceptibility of the consideration amount to factors outside the Company's influence.
The uncertainty associated with the consideration amount is not expected to be resolved for a long period of time.
The Company's experience with similar types of contracts.
Whether the Company expects to offer price concessions or change the payment terms.
The range of possible consideration amounts.

As of September 30, 2019, all performance obligations associated with the development of the master plan for GTD's assets have been satisfied. Accordingly, the Company recognized revenue of $0 and $40.7 million, for the three months and nine months ended September 30, 2019, respectively. No marketing and business development management services were delivered by the Company during the current quarter and, furthermore, the company does not anticipate providing these services in the fourth quarter.

Taxis Commission Revenue:

During Q2 2019, the Company signed an agreement with iUnicorn (also known as Shenma Zhuanche) to form a strategic joint venture ('JV') that will focus on green finance and integrated marketing services for new energy taxi vehicles as part of Ideanomics' Mobile Energy Group ('MEG'). The Company agreed to contribute advisory and sales resources which include arranging ABS-based auto financing with its bank partners, and will have 50.01% ownership interest in the JV and will have control of the board. iUnicorn, which will own 49.99% of the JV, agreed to contribute its vehicles sales orders in Sichuan province. The JV will generate revenues from commissions on vehicle sales order and ABS fees related to the financing, which will vary accordingly to manufacturer and vehicle model.

During Q3 2019, the JV took over an order of 4,172 EV taxis from a third-party and helped facilitate the completion of the order in Q3 2019. As part of the transaction, Qianxi agreed to pay a commission of $2.9 million to the JV for facilitating the completion of this order. There is no other remaining performance obligation relating to this commission. In addition, the commission revenue is considered revenue from related party as the minority shareholder of the JV is an affiliate of our customer, Qianxi.

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Legacy YOD revenue

Since 2017, we have run our legacy YOD segment with limited resources. No revenue was recognized for the nine months ended September 30, 2019 and 2018. As of September 30, 2019, we have ceased operations in the YOD segment.

Arrangements with multiple performance obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices 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.

Variable consideration

Certain customers may receive discounts, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. Our revenue reserves, consisting of various discounts and allowances, which are components of variable consideration as discussed above, are considered an area of significant judgment. Additionally, our digital asset management service revenue, as discussed above, is calculated as a percentage (0.25%) of the total market value of GTB. For these areas of significant judgment, actual amounts may ultimately differ from our estimates and are adjusted in the period in which they become known.

Deferred revenues

We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable.

Our payment terms vary by the type and location of our customer and the products or services offered. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

Practical expedients and exemptions

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Note 4. VIE Structure and Arrangements

We consolidate VIEs in which we hold a variable interest and are the primary beneficiary through contractual agreements. We are the primary beneficiary because we have the power to direct activities that most significantly affect their economic performance and have the obligation to absorb the majority of their losses or benefits. The results of operations and financial position of these VIEs are included in our consolidated financial statements.

For these consolidated VIEs, their assets are not available to us and their creditors do not have recourse to us. As of September 30, 2019 and December 31, 2018, assets (mainly long-term investments) that can only be used to settle obligations of these VIEs were approximately $0.2 million and $3.5 million, respectively, and the Company is the major creditor for the VIEs.

In order to operate our Legacy YOD business in PRC and to comply with PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides value-added telecommunication services, the Company entered into a series of contractual agreements with two VIEs: Beijing Sinotop Scope Technology Co., Ltd ('Sinotop Beijing') and Tianjin Sevenstarflix Network Technology Limited ('SSF'). These contractual agreements will expire in March 2030 and April 2036, respectively and may not be terminated by the VIEs, except with the consent of the Company , or , in event of a material breach of the agreement by the Company. Currently, the Company is still evaluating the overall operating strategy for YOD legacy business and does not have plan to provide any funding to these two VIEs. Please refer to Note 19(a) for associated regulatory risks.

Based on the contracts we entered with VIEs' shareholders, we consider that there is no asset of the VIEs that can be used only to settle obligation of the Company, except for the registered capital of VIEs amounting to RMB 38.2 million (approximately $5.7 million).

14
Note 5. Acquisitions and Divestitures

Acquisitions

(a) Assets Acquisition of SolidOpinion, Inc ('SolidOpinion')

On February 19, 2019, the Company completed the acquisition of certain assets from SolidOpinion in exchange for 4,500,000 shares of the Company's common stock. The assets include cash ($2.5 million) and intellectual property ('IP') which is complementary to the IP of Grapevine. The parties agreed that 450,000 of such shares of common stock ('Escrow Shares') will be held in escrow until February 19, 2020 in connection with SolidOpinion's indemnity obligations pursuant to the agreement. SolidOpinion have the rights to vote and receive the dividends paid with respect to the Escrow Shares.

(b)Assets Acquisition of Fintalk Assets ('Fintalk')

In September 2018, the Company entered into an agreement to purchase Fintalk Assets from Sun Seven Star International Limited, a Hong Kong company and an affiliate of Dr. Wu. FinTalk Assets include the rights, titles and interest in a secure mobile financial information, social, and messaging platform that has been designed for streamlining financial-based communication for professional and retail users. The purchase price for Fintalk Assets was $7.0 million payable with $1.0 million in cash and shares of the Company's common stock with a fair market value of $6.0 million. The Company paid $1.0 million in October 2018 and recorded in prepaid expense as of December 31, 2018 because the transaction had not closed.

In June 2019, the Company entered into an amendment to the agreement which amended the purchase price for Fintalk Assets to $6.35 million payable with $1.0 million in cash and shares of the Company's common stock with a fair market value of $5.35 million. The Company issued 2,860,963 shares ($1.87 per share) in June 2019 and completed the transaction. In addition, upon completion of transaction the $1.0 million cash paid in 2018 was reclassified from prepaid expense to intangible assets.

(c)Acquisition of Grapevine Logic, Inc. ('Grapevine')

In September 2018, the Company completed the acquisition of a 65.65% share of Grapevine for $2.4 million in cash. Fomalhaut Limited ('Fomalhaut'), a British Virgin Islands company and an affiliate of Dr. Wu, the Chairman of the Company, is the non-controlling equity holder of 34.35% in Grapevine (the 'Fomalhaut Interest'). Fomalhaut entered into an option agreement, effective as of August 31, 2018 (the 'Option Agreement'), with the Company pursuant to which the Company provided Fomalhaut with the option to sell the Fomalhaut Interest to the Company (the 'Option'). The aggregate exercise price for the Option is the fair market value of the Fomalhaut Interest as of the close of business on the date preceding the date upon which the Option is exercised, and is payable in a combination of 1/3 in cash and 2/3 in the Company's shares of common stock at the then market value on the exercise date. The Option Agreement will expire on August 31, 2021.

In May 2019, the Company entered into two amendments to the Option Agreement, The aggregate exercise price for the Option is amended to the greater of (i) fair market value of the Fomalhaut Interest in Grapevine as of the close of business on the date preceding the date upon which the option is exercised; and (ii) $1.84 per share of the Company's common stock. It was also agreed that the full amount of the exercise price shall be paid in the form of common stock of the Company.

In June 2019, the Company issued 590,671 shares in exchange for a 34.35% ownership in Grapevine as a result of the exercise of the Option, at the completion of this transaction the Company owned 100% of Grapevine. At the completion date of the transaction, the carrying amount of the non-controlling interest in Grapevine was approximately $0.5 million. The difference between the value of the consideration exchanged of approximately $1.1 million and the carrying amount of the non-controlling interest in Grapevine is recorded as a debit to Additional Paid in Capital based on ASC 810-10-45-23.

(d)Termination of agreements with Tree Motion Sdn. Bhd. ('Tree Motion')

Effective July 18, 2019, Ideanomics, Inc. (the 'Company') terminated its Acquisition Agreement with Tree Motion Sdn. Bhd., a Malaysian company ('Tree Motion'), pursuant to which the Company was to acquire 51% of Tree Motion in exchange for 25,500,000 shares of the Company's common stock at $2.00 per share. Further, the Company terminated its Acquisition Agreement to acquire 11.22% of Tree Motion's parent company, Tree Manufacturing Sdn. Bhd. (the 'Parent Company') for 12,190,000 shares of the Company's common stock; provided, however, that the Company has acquired 250 acres in Malaysia-China Kuantan Industrial Park (MCKIP), the 1st Malaysia National Industrial Park joint developed by both Malaysia and China for $620,000.

15

(e)Acquisition of Glory Connection Sdn. Bhd ('Glory')

On July 18, 2019, Ideanomics, Inc. (the 'Company') entered into an Acquisition Agreement ('Glory Agreement') to purchase a 34% interest in Glory Connection Sdn. Bhd. a Malaysian Company, from its shareholder Beijing Financial Holding Limited, a Hong Kong registered company, for the consideration of 12,190,000 restricted common shares of Ideanomics (IDEX), representing $24.4 million at $2.00 per share. As part of this transaction, the Company was also granted an option to purchase a 40% interest in Bigfair Holdings Limited ('Bigfair') from its shareholder Beijing Financial Holding Limited for an exercise price of $13.2 million in the form of common shares of Ideanomics. Bigfair currently holds a 51% ownership stake in Glory. The option is exercisable from July 18, 2020 to July 19, 2021. If the option was exercised, the Company would have 20.4% indirect ownership in Glory in addition to the 34% direct ownership it already has. As of September 30, 2019, the Company does not have control of Glory and has accounted for Glory as an equity method investment.

The Company has performed a valuation analysis and allocated $23,000,000 and $1,380,000 of the consideration transferred to the equity method investment and the call option, respectively. The call option is accounted for as an equity security without readily determinable fair value. Pro forma results of operations for Glory have not been presented because they are not material to the consolidated results of operations. Glory is currently in the process of ramping up its operations.

The following table summarizes the income statement information of Glory as of September 30, 2019:

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019

Revenue $ 2,041 $ 3,936
Gross Profit 1,379 769
Net loss from operations 173,465 354,502
Net loss 171,719 352,606
Net loss attributable to Glory $ 95,477 $ 195,121

(f) Acquisition of Delaware Board of Trade Holdings, Inc. ('DBOT')

In April 2019, the Company entered into a securities purchase agreement to acquire 6,918,547 shares in DBOT in exchange for 4,427,870 shares of the Company's common stock at $2.11 per share. In July 2019, the Company entered into another securities purchase agreement to acquire an additional 2,224,937 shares in DBOT in exchange for 1,423,960 shares of the Company's common stock at $2.11 per share. The two transactions, which increased the Company's ownership in DBOT to 99.04%, were completed in July 2019. The securities purchase agreements required the Company to issue additional shares of the Company's common stock ('True-Up Common Stock') in the event the stock price of the common stock fall below $2.11 at the close of trading on the date immediately preceding the lock-up date, which is 9 months from the closing date. The Company accounted for the additional True-Up Common Stock consideration as a liability in accordance with ASC 480. We recorded this liability at fair value of $2,217,034 on the date of acquisition. As of September 30, 2019, we remeasured this liability to $2,327,919 and the remeasurement loss of $(110,885) was recorded in the other income/(expense) of the income statement.

DBOT operates three companies: (i) DBOT ATS LLC, an SEC recognized Alternative Trading System; (ii) DBOT Issuer Services LLC, focused on setting and maintaining issuer standards, as well as the provision of issuer services to DBOT designated issuers; and (iii) DBOT Technology Services LLC, focused on the provision of market data and marketplace connectivity.

The consolidated statements of operation for the three months ended September 30, 2019 include the results of DBOT. Supplemental information on an unaudited pro forma basis, as if the acquisition had been consummated as of January 1, 2018 is as follows:

Three Months Ended
September 30, 2018

Nine Months Ended
September 30, 2019

Nine Months Ended
September 30, 2018

Revenue $ 43,798,865 $

44,612,471

$ 363,004,917
Net Income (loss) attributable to IDEX common shareholders $ (7,818,047 ) $

10,582,474

$ (21,387,162 )

The unaudited pro forma results of operations do not purport to represent what the Company's results of operations would actually have been had the acquisition occurred on January 1, 2018. Actual future results may vary considerably based on a variety of factors beyond the Company's control.

For all intangible assets acquired, continuing membership agreements have useful life of 20 years and the customer list has useful life of 3 years.

The following table summarizes the acquisition-date fair value of assets acquired and liabilities assumed, as well as the fair value of the non-controlling interest in DBOT recognized:

Cash $ 246,929
Other financial assets 1,686,464
Financial liabilities (4,411,140 )
Noncontrolling interest (104,649 )
Goodwill 9,323,189
Intangible asset - continuing membership agreement 8,255,440
Intangible asset - customer list 58,830
$ 15,055,063

Divestitures

The Company may divest certain businesses from time to time based upon review of the Company's portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

(g)Red Rock Global Capital LTD ('Red Rock')

In May 2019, the Company determined to sell the Red Rock business and entered into an agreement with Redrock Capital Group Limited, an affiliate of Dr. Wu, to sell its entire interest in Red Rock for a consideration of $700,000. The Company decided to sell Red Rock primarily because it has incurred operating losses and its business is no longer needed based on our strategic plan. The transaction was completed in July 2019 and the company recorded a disposal gain of $552,215.

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(h) Amer Global Technology Limited ('Amer')

On June 30, 2019, the Company entered into an agreement with BCC Technology Company Limited ('BCC') and Tekang Holdings Technology Co., Ltd ('Tekang ') pursuant to which Tekang will inject certain assets in the robotics and electronic internet industry and IOT business consisting of manufacturing data, supply chain management & financing, and lease financing of industrial robotics into Amer in exchange for 71.81% of ownership interest in Amer. The parties subsequently entered into several amendments including (1) changing the name of Amer to Logistorm Technology Limited, (2) issuing 39,500 new shares in Amer or 71.81% ownership interest to BCC instead of Tekang, (3) issuing 5,500 new shares in Amer or 10% ownership interest to Merry Heart Technology Limited ('MHT') and (4) the Company is responsible for 20% of any potential tax obligation associated with Amer, if Amer fails to be publicly listed in 36 months from the closing date of this transaction. The Company concluded that it's not probable that this contingent liability would be incurred. As a result of this transaction, the Company's ownership interest in Amer was diluted from 55% to 10%. The transaction was completed on August 31, 2019.

The Company recognized a disposal gain of $505,148 as a result of the deconsolidating Amer. $95,104 of the gain is attributable to the 10% ownership interest retained in Amer. In addition, on the date Amer was deconsolidated, the Company recorded a bad debt expense of $622,286 relating to a receivable due from Amer to a subsidiary of the Company.

The following table summarizes the Consolidated Statement of Operations for the three months and nine months ended September 30, 2018, on an unaudited pro forma basis, as if the dilution of the Company's interest in Amer had been consummated as of January 1, 2018:

Three Months Ended

September 30, 2018

Nine Months Ended

September 30, 2018

Revenue $ 275,380 $ 260,547,120
Net loss from operations (6,305,340 ) (18,548,258 )
Net loss (7,390,597 ) (19,351,526 )
Net loss attributable to IDEX common shareholders $ (7,158,674 ) $ (18,945,524 )

Pro forma results of operations for the period ended September 30, 2019 have not been presented because they are not material to the consolidated results of operations. Amer has no revenue and minimal operating expense in 2019.

Note 6. Accounts Receivable

Accounts receivable is mainly from our Mobile Energy Group (formerly Wecast Services) business and consisted of the following:

September 30, December 31,
2019 2018
Accounts receivable, gross $

2,941,348

$ 19,370,665
Less: allowance for doubtful accounts (103 ) -
Accounts receivable, net $

2,941,245

$ 19,370,665

The following table outlines the aging of the accounts receivable:

September 30,

2019

December 31,

2018

Within 90 days $

2,941,245

$ 1,219,526
91-180 days - 633
181-365 days - 12,385,193
More than 1 year - 5,765,313
Total $

2,941,245

$ 19,370,665

The decrease in balance is mainly due to the deconsolidation of Amer as of September 30, 2019 as disclosed in Note 5(h). Our payment term is usually within 180 days upon the receipts of the goods. The Company has reviewed the outstanding balance by customers and concluded that the outstanding balances are collectible.

Note 7. Property and Equipment, net

The following is a breakdown of property and equipment:

September 30, December 31,
2019 2018
Furnitures and office equipment 602,548 357,064
Vehicle 60,951 63,135
Leasehold improvements 239,781 200,435
Total property and equipment 903,280 620,634
Less: accumulated depreciation (482,548 ) (186,514 )
Land 3,042,777 3,042,777

Building1

308,779

2,607,666
Assets Retirement Obligations - Environmental Remediation 8,000,000 8,000,000
Capitalized direct development cost 2,732,705 944,864
Construction in progress (Fintech Village)

14,084,261

14,595,307
Property and Equipment, net $

14,504,993

$ 15,029,427

Note

1 The $2.3 million decrease from the prior year represents the impairment charge recorded in connection with four of the five existing buildings on Fintech Village which are expected to be demolished.

The Company recorded depreciation expense, which is included in its operating expense, of $65,862 and $14,820 for the three months ended September 30, 2019 and 2018 and $102,991 and $32,941 for the nine months ended September 30, 2019 and 2018, respectively.

The Company recorded $8.0 million of Asset Retirement Obligations which are related to our legal contractual obligations in connection with the acquisition of Fintech Village. The Capitalized direct development costs mainly represent the architectural costs.

17
Note8. Goodwill and Intangible Assets

Goodwill

Changes in the carrying value of goodwill consist of following:

Nine months ended
September 30, 2019

Year Ended

December 31, 2018

At the beginning of the year 704,884 -
Goodwill Acquired1 9,323,189 704,884
At the end of the period 10,028,073 704,884

Note

1 The change in carrying amount of goodwill in the current year was the result of the acquisition of DBOT as disclosed in Note 5(f).

Intangible Assets

Information regarding amortizing and indefinite lived intangible assets consisted of the following:

September 30, 2019 December 31, 2018
Weighted
Average
Remaining
Gross
Carry
Accumulated Accumulated
Impairment
Net Gross
Carry
Accumulated Accumulated
Impairment
Net
Useful Life Amount Amortization Loss Balance Amount Amortization Loss Balance
Amortizing Intangible Assets
Animation Copyright (Note 14 (b)) - $ - $ - $ - $ - $ 301,495 $ (64,606 ) $ - $ 236,889
Software and licenses - 97,308 (97,308 ) - - 97,308 (93,251 ) - 4,057
SolidOpinion IP (Note 5 (a)) 4.4 4,655,000 (543,084 ) - 4,111,916 - - - -
Fintalk intangible assets (Note 5 (b)) 4.8 6,350,000 (317,500 ) - 6,032,500 - - - -
Influencer network 8.9 1,980,000 (214,500 ) - 1,765,500 1,980,000 (66,000 ) - 1,914,000
Customer contract1 2.0 558,830 (185,458 ) - 373,372 500,000 (55,556 ) - 444,444
Continuing Membership Agreement1 19.8 8,255,440 (103,193 ) - 8,152,247 - - - -
Trade name 13.9 110,000 (7,944 ) - 102,056 110,000 (2,444 ) - 107,556
Technology platform 5.9 290,000 (44,881 ) - 245,119 290,000 (13,808 ) - 276,192
Total amortizing intangible assets $ 22,296,578 $ (1,513,868 ) $ - $ 20,782,710 $ 3,278,803 $ (295,665 ) $ - $ 2,983,138
Indefinite lived intangible assets
Website name 159,504 - (134,290 ) 25,214 159,504 - (134,290 ) 25,214
Patent 28,000 - - 28,000 28,000 - - 28,000
GTB (Note 14 (b)) 61,124,407 - - 61,124,407 - - - -
Total intangible assets $ 83,608,489 $ (1,513,868 ) $ (134,290 ) $ 81,960,331 $ 3,466,307 $ (295,665 ) $ (134,290 ) $ 3,036,352

Note

1 During the third quarter of 2019, the Company completed the acquisition of additional shares in DBOT which increased its ownership in DBOT to 99.04%. $8,314,270 of intangible assets were recognized on the date of acquisition as disclosed in Note 5(f).

Amortization expense relating to intangible assets was $764,010 and $276,692 for the three months ended September 30, 2019 and 2018 and $1,317,419 and $281,796 for the nine months ended September 30, 2019 and 2018, respectively.

The following table outlines the expected amortization expense for the following years:

Amortization

to be

Years ending December 31, recognized
2019 (excluding the nine months ended September 30, 2019) $ 761,702
2020 3,046,811
2021 2,991,255
2022 2,870,339
2023 2,860,534
2024 and thereafter 8,252,069
Total amortization to be recognized $ 20,782,710
18
Note9. Long-term Investments

Long-term investmentsconsisted of Non-marketable Equity Investment and Equity Method Investment as below:

September 30, December 31,
2019 2018
Non-marketable Equity Investment $ 9,147,170 $ 9,452,103
Equity Method Investment 33,012,143 16,956,506
Total $ 42,159,313 $ 26,408,609

Non-marketable equity investment

Our non-marketable equity investments are investments in privately held companies without readily determinable fair values. These investments are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee's cash position, earnings and revenue outlook, liquidity and management ownership, among other factors, in its review. If management's assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. There is no impairment for the nine months ended September 30, 2019.

Equity method investments

The Company's investment in companies accounted for using the equity method of accounting consist of the following:

September 30, 2019
Foreign
currency
December 31, Loss on Reclassification translation September 30,
2018 Addition investment to subsidiaries adjustments 2019
Wecast Internet (i) $ 4,114 $ - $ (5 ) $ - $ 1,930 $ 6,039
Hua Cheng (ii) 308,666 - (32,890 ) - (37,210 ) 238,566
Shandong Media (iii) - - - - - -
BDCG (iv) 9,800,000 - - - - 9,800,000
DBOT (v) 6,843,726 - (3,719,735 ) (3,123,991 ) - -
Glory (vi)

-

23,000,000 (32,462 )

-

-

22,967,538
Total $ 16,956,506 $ 23,000,000 $ (3,785,092 ) $ (3,123,991 ) $ (35,280 ) $ 33,012,143

All the investments above are privately held companies; therefore, quoted market prices are not available. We have not received any dividends since initial investments.

(i) Wecast Internet

Starting from October 2016, we have 50% interest in Wecast Internet Limited ('Wecast Internet') and initial investment was invested RMB 1,000,000 (approximately $149,750). Wecast Internet is in the process of liquidation and the remaining carrying value is immaterial.

(ii) Hua Cheng Hu Dong (Beijing) Film and Television Communication Co., Ltd.('Hua Cheng')

The Company held 39% equity ownership in Hua Cheng, a company established to provide integrated value-added service solutions for the delivery of VOD and enhanced content for cable providers.

(iii) Shandong Lushi Media Co., Ltd ('Shandong Media')

The Company held 30% equity ownership in Shandong Media, a print based media business, for Legacy YOD business. The accumulated operating loss of Shandong Media reduced the Company's investment in Shandong Media to zero. The Company has no obligation to fund future operating losses.

(iv) BBD Digital Capital Group Ltd. ('BDCG')

In 2018, we signed a joint venture agreement with two unrelated parties, to establish BDCG located in the United States for providing block chain services for financial or energy industries by utilizing AI and big data technology in the United States. The Company received 40% equity ownership in BDCG from the initial joint venture agreement. On April 24, 2018, the Company acquired 20% equity ownership in BDCG from one noncontrolling party for a total consideration of $9.8 million which consists of $2 million in cash and $7.8 million paid in the form of the Company's common stock (valued at $2.60 per share and equal to 3 million shares of the Company's common stock), increasing the Company's ownership to 60% in BDCG. The remaining 40% of BDCG are held by Seasail ventures limited ('Seasail'). The accounting treatment of the joint venture is based on the equity method due to variable substantive participating rights (in accordance with ASC 810-10-25-11) granted to Seasail. The new entity is currently in the process of ramping up its operations. In April 2019, the company rebranded the name of the BDCG joint venture to Intelligenta. As part of the rebranding, Intelligenta's strategy will now include credit services, corporation services, index services and products, and capital market services and products.

(v) Delaware Board of Trade Holdings, Inc. ('DBOT')

Refer to Note 5(f).

(vi) Glory Connection Sdn. Bhd ('Glory')

Refer to Note 5(e).

19
Note 10. Leases

We lease certain office space and equipment from third parties. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, at the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed. We account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the nonlease components (e.g.,common-area maintenance costs).

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one year or more. The exercise of lease renewal options is at our sole discretion. Our leases do not include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Certain of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. All our leases are operating lease. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases and initial direct costs on our right-of-use asset and lease liability was not material.

As of September 30, 2019, our operating lease right of use assets and operating lease liability are approximately $6.8 million and $7.2 million, respectively. The weighted-average remaining lease term is 6.6 years and the weighted-average discount rate is 7.5%.

For the three and nine months ended September 30, 2019, the components of lease expense were as follows:

Three Months Ended

September 30, 2019

Nine Months Ended

September 30, 2019

Operating Lease Cost $ 390,577 $ 1,264,049
Short-Term Lease Cost 78,076 250,924
Sublease Income (10,605 ) (10,605 )
Total Lease Cost $ 458,048 $ 1,504,368

Supplemental information related to leases was as follows:

Nine Months Ended

September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 967,565
Right-of-use assets obtained in exchange for new operating lease liabilities $ 935,242

Maturity of operating lease liability is as follows:

Maturity of Lease Liability Operating Lease
2019 (excluding the nine months ended September 30, 2019) $ 332,549
2020 1,307,783
2021 1,328,160
2022 1,422,965
2023 1,474,391
2024 and thereafter 3,377,653
Total lease payments 9,243,501
Less: Interest (2,001,696 )
Total $ 7,241,805
Note 11. Supplemental Financial Statement Information

Other Current Assets

'Other current assets' were approximately $2.4 million and $3.6 million as of September 30, 2019 and December 31, 2018, respectively. Components of 'Other current assets' that were more than 5 percent of total current assets: (1) other receivable due from third parties in our subsidiaries located in PRC and Hong Kong in the amount of $1.7 million and $3.3 million for the period ended September 30, 2019 and December 31, 2018 and (2) $0.6 million receivable due from ID Venturas 7 relating to the convertible debenture executed on September 27, 2019. As disclosed in Note 12(c), we have received the $0.6 million in October.

Other Current Liabilities

'Other current liabilities' were approximately $9.1 million and $5.3 million as of September 30, 2019 and December 31, 2018, respectively. Components of 'Other current liabilities' that were more than 5 percent of total current liabilities: (1) $2.3 million liability relating to additional True-Up Common Stock consideration from the DBOT acquisition as disclosed in Note 5 (f) and (2) other payable due to third parties in the amount of $5.1 million and $4.6 million for the period ended September 30, 2019 and December 31, 2018, respectively.

20
Note 12. Convertible Note

The following is the summary of outstanding convertible notes as of September 30, 2019 and December 31, 2018:

September 30, December 31,
2019 2018
Convertible Note-Mr. McMahon(Note 14 (a)) $ 3,229,808 $ 3,140,055
Convertible Note-SSSIG (Note 14 (a)) 1,288,032 1,000,000
Convertible Note-Advantech 12,382,806 11,313,770
$2.05 million Senior Secured Convertible Note - ID Venturas 7 626,387 -
$2.5 million Senior Secured Convertible Note - ID Venturas 7 14,917 -
Total $ 17,541,950 $ 15,453,825
Short-term Note 1,914,419 4,140,055
Long-term Note 15,627,531 11,313,770

(a) $12 million Convertible Note - Advantech

On June 28, 2018, the Company entered into a convertible note purchase agreement with Advantech Capital Investment II Limited ('Advantech') in the aggregate principal amount of $12,000,000 (the Notes). The Notes bear interest at a rate of 8%, mature on June 28, 2021, and are convertible into approximately 6,593,406 shares of the Company's common stock at a conversion price of $ 1.82 per share. The difference between the conversion price and the fair market value of the common stock on the commitment date (transaction date) resulted in a beneficial conversion feature recorded of approximately $1.4 million. For the three months ended September 30, 2019 and 2018, total interest expense recognized relating to the beneficial conversion feature was $117,000 and $112,000, respectively. For the nine months ended September 30, 2019 and 2018, total interest expense recognized relating to the beneficial conversion feature was $347,000 and $112,000, respectively. The agreement also requires the Company to comply with certain covenants, including restrictions on the use of the proceeds and other convertible note offering. As of September 30, 2019, the Company was in compliance with all ratios and covenants.

(b) $2.05 million Senior Secured Convertible Debenture due in August 2020 - ID Ventura 7

On February 22, 2019, the Company executed a security purchase agreement with ID Venturas 7, LLC ('IDV'), whereby the Company issued $2,050,000 of senior secured convertible note. The note bears interest at a rate of 10% per year payable either in cash or in kind at the option of the Company on a quarterly basis and matures on August 22, 2020. In addition, IDV is entitled to the following: (i) the convertible note is senior secured; (ii) convertible at $1.84 per share of Company common stock at the option of IDV (approximately 1,114,130 shares), subject to adjustments if subsequent equity shares have a lower conversion price, (ii) 1,166,113 shares of common stock of the Company and (iii) a warrant exercisable for 150% of the number of shares of common stock which the note is convertible into (approximately 1,671,196 shares) at an exercise price of $1.84 per share and will expire 5 years after issuance. On October 29, 2019 the Company entered into a letter agreement (the 'Agreement') with ID Venturas pursuant to which the Company agreed to reduce the conversion price of the Debentures and the exercise price of the Warrants to $1.00,

The Company received aggregate gross proceeds of $2 million, net of $50,000 for the issuance expenses paid by IDV. Total funds received were allocated to convertible note, common stocks and warrants based on their relative fair values in accordance with ASC 470-20-30. The value of the convertible note and common stocks was based on the closing price on February 22, 2019. The fair value of the warrants was determined using the Black-Scholes option-pricing model, with the following assumptions: expected life of 5 years, expected dividend rate of 0%, volatility of 111.83% and an interest rate of 2.48%. The relative fair value of the warrants was recorded as additional paid-in capital and reduced the carrying amount of the convertible note. The Company recognized a beneficial conversion feature discount on convertible note at its intrinsic value, which was the fair value of the common stock at the commitment date for convertible note, less the effective conversion price. The Company recognized approximately $600,000 of beneficial conversion feature as an increase in additional paid in capital and reduced (discount on) the carrying amount of the convertible note in the accompanying consolidated balance sheet.

The discounts on the convertible note for the warrants and beneficial conversion feature are being amortized to interest expense, using the effective interest method over the term of the convertible note. As of September 30, 2019, the unamortized discount on the convertible note is approximately $1,424,000. Total interest expense recognized relating to the discount was approximately $175,000 and $626,000 for the three and nine months ended September 30, 2019, respectively.

Interest on the convertible note is payable quarterly starting from April 1, 2019. The convertible note is redeemable at the option of the Company in whole at an initial redemption price of the principal amount of the convertible note plus additional warrants and accrued and unpaid interest to the date of redemption.

The security purchase agreement contains customary representations, warranties and covenants. The convertible note is collateralized by the Company's equity interest in Grapevine, which had a carrying amount of $2.4 million as of September 30, 2019. The Company has the right to request for the removal of the guarantee and collateral by issuance of additional 250,000 shares of common stock. On September 27, 2019, the Company issued 250,000 shares of common stock to IDV in exchange for the release of Grapevine as collateral.

IDV has registration rights that require the Company to file and register the common stock issued or issuable upon conversion of the convertible note or the exercise of the warrants, within 180 days following the closing of the transaction.

The Company is also subject to penalty fee at 8% per annum for late payments of interests and compensation for the loss of IDV on failure to timely deliver conversion shares upon conversion.

21

(c) $2.5 million Senior Secured Convertible Debenture due in March 2021 - ID Ventura 7

On September 27, 2019, the Company executed a security purchase agreement with ID Venturas 7, LLC ('IDV'), whereby the Company issued $2,500,000 of senior secured convertible note. The note bears interest at a rate of 10% per year payable either in cash or in kind at the option of the Company on a quarterly basis and matures on March 27, 2021. In addition, IDV is entitled to the following: (i) the convertible note is senior secured; (ii) convertible at $1.84 per share of Company common stock at the option of IDV (approximately 1,358,696 shares), subject to adjustments if subsequent equity shares have a lower conversion price, (ii) 1,000,000 shares of common stock of the Company and (iii) a warrant exercisable for 150% of the number of shares of common stock which the note is convertible into (approximately 2,038,043 shares) at an exercise price of $1.84 per share and will expire 5 years after issuance. On October 29, 2019 the Company entered into a letter agreement (the 'Agreement') with ID Venturas pursuant to which the Company agreed to reduce the conversion price of the Debentures and the exercise price of the Warrants to $1.00,

The Company will receive aggregate gross proceeds of $2.5 million, net of $66,195 for the issuance expenses paid by IDV. The Company received $1.8 million proceed in September and the remaining $633,805 was received in October. Total gross proceeds were allocated to convertible note, common stocks and warrants based on their relative fair values in accordance with ASC 470-20-30. The value of the convertible note and common stocks was based on the closing price on September 27, 2019. The fair value of the warrants was determined using the Black-Scholes option-pricing model, with the following assumptions: expected life of 5 years, expected dividend rate of 0%, volatility of 110.36% and an interest rate of 1.55%. The relative fair value of the warrants was recorded as additional paid-in capital and reduced the carrying amount of the convertible note. The Company recognized a beneficial conversion feature discount on convertible note at its intrinsic value, which was the fair value of the common stock at the commitment date for convertible note, less the effective conversion price. The Company recognized approximately $989,000 of beneficial conversion feature as an increase in additional paid in capital and reduced (discount on) the carrying amount of the convertible note in the accompanying consolidated balance sheet.

The discounts on the convertible note for the warrants and beneficial conversion feature are being amortized to interest expense, using the effective interest method over the term of the convertible note. As of September 30, 2019, the unamortized discount on the convertible note is approximately $2,488,000. Total interest expense recognized relating to the discount was approximately $12,000 and $12,000 for the three and nine months ended September 30, 2019, respectively.

Interest on the convertible note is payable quarterly starting from October 1, 2019. The convertible note is redeemable at the option of the Company in whole at an initial redemption price of the principal amount of the convertible note plus additional warrants and accrued and unpaid interest to the date of redemption.

The security purchase agreement contains customary representations, warranties and covenants. The convertible note is collateralized by the Company's equity interest in DBOT, which had a carrying amount of $14.3 million as of September 30, 2019.

IDV has registration rights that require the Company to file and register the common stock issued or issuable upon conversion of the convertible note or the exercise of the warrants, within 120 days following the closing of the transaction.

The Company is also subject to penalty fee at 8% per annum for late payments of interests and compensation for the loss of IDV on failure to timely deliver conversion shares upon conversion.

Note13. Stockholders' Equity

Convertible Preferred Stock

Our board of directors has authorized 50 million shares of convertible preferred stock, $0.001 par value, issuable in series.

As of September 30, 2019 and December 31, 2018, 7,000,000 shares of Series A preferred stock were issued and outstanding and is convertible, at any time at the option of the holder, into 933,333 shares of common stock (subject to customary adjustments). The Series A preferred stock shall be entitled to ten vote per common stock on an as-converted basis and only entitled to receive dividends when and if declared by the board. On liquidation, both series of preferred stock are entitled to a liquidation preference of $0.50 per share. The shares are not redeemable except on liquidation or if there is a change in control of the Company or a sale of all or substantially all of the assets of the Company. The conversion price of the Series A may only be adjusted for standard anti-dilution, such as stock splits and similar events. The Series A preferred stocks are considered to be equity instruments and therefore the embedded conversion options have not been separated. Because the preferred stocks have conditions for their redemption that may be outside the control of the Company, they have been classified outside of Shareholders' Equity, in the mezzanine section of our balance sheet.

Common Stock

Our board of directors has authorized 1,500 million shares of common stock, $0.001 par value.

Note 14. Related Party Transactions

(a) Convertible Notes

$3.0 Million Convertible Note with Mr. Shane McMahon ('Mr. McMahon')

On May 10, 2012, Mr. McMahon, our Vice Chairman, made a loan to the Company in the amount of $3,000,000. In consideration for the loan, the Company issued a convertible note to Mr. McMahon in the aggregate principal amount of $3,000,000 (the 'Note') at a 4% interest rate computed on the basis of a 365-day year. We entered several amendments with respect to the effective conversion price (changed from $1.75 to $1.5), convertible stocks (changed from of Series E Preferred Stock to Common Stock) and extension of the maturity date to December 31, 2020.

For the three and nine months ended September 30, 2019, the Company recorded interest expense of approximately $30,000 and $90,000, respectively, related to the Note. For the three and nine months ended September 30, 2018, the Company also recorded interest expense of approximately $30,000 and $90,000, respectively, related to the Note. Interest payable was $229,808 and $140,055 as of September 30, 2019 and December 31, 2018, respectively.

$2.5 Million Convertible Promissory Note with SSSIG

On February 8, 2019, the Company entered into a convertible promissory note agreement with SSSIG, an affiliate of Dr. Wu, in the aggregate principal amount of $2,500,000. The convertible promissory note bears interest at a rate of 4%, matures on February 8, 2020, and is convertible into the shares of the Company's common stock at a conversion price of $1.83 per share anytime at the option of SSSIG.

As of September 30, 2019, the Company received $1.3 million from SSSIG. The Company has not received the remaining $1.2 million as of the date of this report. For the three and nine months ended September 30, 2019, the Company recorded interest expense of approximately $13,000 and $36,000, respectively, related to the Note.

22

(b) Transactions with GTD

Disposal of Assets in exchange of GTB

In March 2019, the Company completed the sale of the following assets (with total carrying amount of approximately $20.4 million) to GTD, a minority shareholder based in Singapore, in exchange for 1,250,000 GTB. The Company considers the arrangement as a nonmonetary transaction and the fair values of GTB are not reasonably determinable due to the reasons described in Note 3. Therefore, GTB received are recorded at the carrying amount of the assets exchanged and the Company did not recognize any gain or loss based on ASC 845-10-30.

· License content (net carrying amount approximately $17.0 million)
· Approximately 13% ownership interest in Nanjing Shengyi Network Technology Co., Ltd ('Topsgame') (carrying amount approximately $3.2 million which was included in long-term investment-Non-marketable Equity Investment)
· Animation copy right (net carrying amount approximately $0.2 million which was included in intangible asset.)

Digital asset management services

Please refer to Note 3.

(c) Crude Oil Trading

For the nine months ended September 30, 2018, we purchased crude oil in the amount of approximately $244.1 million from three suppliers that a minority shareholder of the Company has significant influence upon because this minority shareholder has significant influence on both our Singapore joint venture and these three suppliers. The Company has recorded the purchase on a separate line item referenced as 'Cost of revenue from related parties' in its financial statements. There is no outstanding balance due (in Accounts Payable) as of September 30, 2019. No such related party transactions occurred for the same period in 2019.

(d) Severance payments

On February 20, 2019, the Company accepted the resignation of former Chief Executive Officer, former Chief Investment Officer and former Chief Strategy Officer and agreed to pay approximately $837,000 in total for salary, severance and expenses. The Company paid $637,000 in the first quarter of year 2019 and recorded $200,000 in other current liabilities on our consolidated balance sheet as of September 30, 2019. The $837,000 severance expenses were recorded in the Selling, general and administrative expenses of the income statement.

(e) Borrowing from Dr. Wu. and his affiliates

During the third quarter of 2019, the Company's net borrowings from Dr. Wu and his affiliates increased by $1.0 million. We recorded these borrowings in amount due to related parties on our consolidated balance sheet as of September 30, 2019. These borrowings bear no interest.

(f) Acquisition of Fintalk Assets

Please refer to Note 5(b).

(g) Asset for Sale-Red Rock Global Capital LTD ('Red Rock')

Please refer to Note 5(g).

(h) Acquisition of Grapevine Logic. ('Grapevine')

Please refer to Note 5(c).

(i) Amer Global Technology Limited ('Amer')

Please refer to Note 5(h).

(j) Taxis commission revenue from Guizhou Qianxi Green Environmentally Friendly Taxi Service Co. ('Qianxi')

Please refer to Note 3.

Note15. Share-Based Payments

As of September 30, 2019, the Company had 14,971,431 options, 55,586 restricted shares and 3,709,240 warrants outstanding.

The Company awards common stock and stock options to employees and directors as compensation for their services, and accounts for its stock option awards to employees and directors pursuant to the provisions of ASC 718, Stock Compensation. The fair value of each option award is estimated on the date of grant using the Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period.

Effective as of December 3, 2010 and amended on August 3, 2018, our Board of Directors approved the 2010 Stock Incentive Plan ('the 2010 Plan') pursuant to which options or other similar securities may be granted. As of September 30, 2019, the maximum aggregate number of shares of our common stock that may be issued under the 2010 Plan is 31,500,000 shares. As of September 30, 2019, options and restricted shares available for issuance are 14,160,326 shares.

The company recorded share-based payments expense of $2,547,107 and $11,530 for the three months ended September 30, 2019 and 2018 and $6,474,227 and $3,372,447 for the nine months ended September 30, 2019 and 2018, respectively.

23

(a)Stock Options

Stock option activity for the nine months ended September 30, 2019 is summarized as follows:

Weighted
Weighted Average
Average Remaining Aggregated
Options Exercise Contractual Intrinsic
Outstanding Price Life (Years) Value
Outstanding at January 1, 2019 1,706,431 $ 3.28 4.08 $ -
Granted 14,325,000 1.98 8.75 -
Exercised - - - -
Expired (83,333 ) 1.98 - -
Forfeited (976,667 ) 1.98 - -
Outstanding at September 30, 2019 14,971,431 $ 2.13 8.72 $ -
Vested and expected to be vested as of September 30, 2019 14,971,431 $ 2.13 8.72 $ -
Options exercisable at September 30, 2019 (vested) 5,529,977 $ 2.38 7.55 $ -

As of September 30, 2019, approximately $14,255,266 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of approximately 1.4 years. The total fair value of shares vested for the nine months ended September 30, 2019 and 2018 was $6,010,085 and $319,001, respectively. Cash received from options exercised during the nine months ended September 30, 2019 and 2018 was approximately $0 and $2,632, respectively.

(b)Warrants

In connection with the Company's financings, the Warner Brother Agreement and the service agreements, the Company issued warrants to service providers to purchase common stock of the Company. The warrants issued to Warner Brother were expired without exercise on January 31, 2019. The Company issued warrants to IDV in connection with senior secured convertible notes (See Note 12) and the weighted average exercise price was $1.84 and the weighted average remaining life was approximately 4.73 years.

September 30, 2019 December 31, 2018
Number of Number of
Warrants Warrants
Outstanding and Outstanding and Exercise Expiration
Warrants Outstanding Exercisable Exercisable Price Date
2014 Broker Warrants (Series E Financing) - 60,000 $ 1.75 1/31/19
$2.05 million IDV Senior Secured Convertible Debenture 1,671,196 - $ 1.84 2/22/2024
$2.5 million IDV Senior Secured Convertible Debenture 2,038,044 - 1.84 9/27/2024
3,709,240 60,000

On September 24, 2018, the Company entered into employment agreements with three executives. As part of their employment agreements, they are entitled to warrants for an aggregate of 8,000,000 shares at an exercise price of $5.375 per share (the 'Exercise Price'), which is a 25% premium to the $4.30 per share closing market price of the Company's common stock on September 7, 2018, the date upon which the terms of the employment agreements were mutually agreed. In February 2019, the rights to receive warrants were terminated due to the resignation of three executives.

(c)Restricted Shares

In January 2019, the Company granted 129,840 restricted shares to the two independent directors under the '2010 Plan' which was approved as part of the 2018 independent board compensation plan by the Board of Directors. The restricted shares were all vested immediately since commencement date. The aggregated grant date fair value of all those restricted shares was $161,001.

A summary of the unvested restricted shares is as follows:

Weighted-average
Shares fair value
Non-vested restricted shares outstanding at January 1, 2019 87,586 $ 2.46
Granted 129,840 $ 1.24
Forfeited (3,000 ) $ 2.60
Vested (158,840 ) $ 1.49
Non-vested restricted shares outstanding at September 30, 2019 55,586 $ 2.37

As of September 30, 2019, there was $33,800 of unrecognized compensation cost related to unvested restricted shares. This amount is expected to be recognized over a weighted-average period of 0.51 years.

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Note 16. Earnings (Loss) Per Common Share

Basic earnings (loss) per common share attributable to our shareholders is calculated by dividing the net earnings (loss) attributable to our shareholders by the weighted average number of outstanding common shares during the period.

Diluted earnings (loss) per share is calculated by taking net earnings (loss), divided by the diluted weighted average common shares outstanding. The calculations of basic and diluted earnings (loss) per share for the three months and nine months ended, 2019 and 2018 are as follows:

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
Net earnings (loss) attributable to common stockholders $

(13,711,867

) $ (7,186,847 ) $

11,506,861

$ (19,228,240 )
Interest expense attributable to convertible promissory note - - 125,485 -
Net earnings (loss) assuming dilution

(13,711,867

) (7,186,847 )

11,632,346

(19,228,240 )
Basic
Basic weighted average common shares outstanding 127,609,748 74,063,495 113,964,933 71,574,303
Effect of dilutive securities

-

-

-

-

Convertible preferred shares- Series A

-

-

933,333

-

Conversion of restricted shares and employee stock options

-

-

22,823

-

Convertible promissory notes

-

-

2,777,687

-

Contingently issuable shares

-

-

621,117

-

Diluted potential common shares 127,609,748 74,063,495 118,319,893 71,574,303
Net earnings (loss) per share:
Basic $ (0.11 ) $ (0.10 ) $ 0.10 $ (0.27 )
Diluted $ (0.11 ) $ (0.10 ) $ 0.10 $ (0.27 )

In 2018, diluted net loss per share equals basic net loss per share because the effect of securities convertible into common shares was anti-dilutive. The following table includes the number of shares that may be dilutive potential common shares in the future. The holders of these shares do not have a contractual obligation to share in our earnings (losses) and thus these shares were not included in the computation of diluted earnings (loss) per share because the effect was antidilutive.

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2019 2018 2019 2018
Warrants 3,709,240 60,000 3,709,240 60,000
Options 14,971,431 1,797,017 14,965,598 1,797,017
Series A Preferred Stock 933,333 933,333 - 933,333
Convertible promissory note and interest 12,417,909 10,227,507 9,324,911 10,227,507
Contingently issuable shares 2,322,808 - - -
Total

34,354,721

13,017,857 27,999,749 13,017,857
Note 17. Income Taxes

During the nine months ended September 30, 2019, the Company recorded an income tax benefit of $513,935, $152,876 resulting from losses of Grapevine Logic, Inc. offsetting deferred tax liabilities that were recognized on the acquisition of Grapevine Logic, Inc. and a $361,059 reduction of the valuation allowance on Ideanomics, Inc. deferred tax assets in excess of those reversed to offset Ideanomics, Inc.'s income. The reduction in valuation allowance resulted from Ideanomics, Inc.'s acquisition of additional ownership interests in Grapevine Logic, Inc. which caused Grapevine Logic, Inc. to be included in a consolidated tax return with Ideanomics, Inc. beginning June 30, 2019. This meant that $361,059 of Ideanomics, Inc.'s deferred tax assets could be utilized to offset Grapevine Logic Inc.'s remaining deferred tax liabilities. This resulted in an effective tax rate of (4.43%). The effective tax rate for the nine months ended September 30, 2019 differs from the U.S. statutory tax rate primarily due to the effect of taxes on foreign earnings, non-deductible expenses and the reduction in the beginning of the year deferred tax valuation allowance.

As of September 30, 2019, the Company had approximately $9.9 million of the U.S domestic cumulative tax loss carryforwards and approximately $30.9 million of the foreign cumulative tax loss carryforwards which may be available to reduce future income tax liabilities in certain jurisdictions. The remaining 2018 U.S. tax loss is not subject to expiration under the new Tax Law. The foreign tax loss carryforwards will expire beginning year 2019 through 2023.

There was no identified unrecognized tax benefit as of September 30, 2019. We are not aware of any unrecorded tax liabilities which would impact our financial position or our results of operations.

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Note 18. Contingencies and Commitments

Lawsuits and Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

Shareholder Class Action

On July 19, 2019, a purported class action, captioned Jose Pinto Claro Da Fonseca Miranda v. Ideanomics, Inc., was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers. While the Company believes that the Class Action is without merit and plans to vigorously defend itself against these claims, there can be no assurance that the Company will prevail in the lawsuits. The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with these litigations.

Note 19. Concentration, Credit and Other Risks

(a)PRC Regulations

The PRC market in which the Company operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the Company to conduct wireless telecommunication services through contractual arrangements in the PRC since the industry remains highly regulated. The Company conducts legacy YOD business in China through a series of contractual arrangements (See Note 4). The Company believes that these contractual arrangements are in compliance with PRC law and are legally enforceable. If Sinotop Beijing, SSF or their respective legal shareholders fail to perform the obligations under the contractual arrangements or any dispute relating to these contracts remains unresolved, we can enforce its rights under the VIE contracts through PRC law and courts. However, uncertainties in the PRC legal system could limit the Company's ability to enforce these contractual arrangements. In particular, the interpretation and enforcement of these laws, rules and regulations involve uncertainties. If we had direct ownership of Sinotop Beijing and SSF, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Sinotop Beijing or SSF, which in turn could affect changes at the management level, subject to any applicable fiduciary obligations. However, under the current contractual arrangements, the Company relies on Sinotop Beijing, SSF and their respective legal shareholders to perform their contractual obligations to exercise effective control. The Company also gives no assurance that PRC government authorities will not take a view in the future that is contrary to the opinion of the Company. If the current ownership structure of the Company and its contractual arrangements with the VIEs and their equity holders were found to be in violation of any existing or future PRC laws or regulations, the Company's ability to conduct its business could be affected and the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changes in the PRC laws which may result in deconsolidation of the VIEs.

From time to time the PRC government imposes regulations that limit the amount and timing of foreign payments from companies operating in the PRC. Our ability to repatriate cash held in the PRC, or obtain funding from sources in the PRC, may be restricted by such regulations.

26

In addition, the telecommunications, information and media industries remain highly regulated. Restrictions are currently in place and are unclear with respect to which segments of these industries foreign owned entities, like YOD WFOE, may operate. The PRC government may issue from time to time new laws or new interpretations on existing laws to regulate areas such as telecommunications, information and media, some of which are not published on a timely basis or may have retroactive effect. For example, there is substantial uncertainty regarding the Draft Foreign Investment Law, including, among others, what the actual content of the law will be as well as the adoption and effective date of the final form of the law. Administrative and court proceedings in China may also be protracted, resulting in substantial costs and diversion of resources and management attention. While such uncertainty exists, the Company cannot assure that the new laws, when it is adopted and becomes effective, and potential related administrative proceedings will not have a material and adverse effect on the Company's ability to control the affiliated entities through the contractual arrangements. Regulatory risk also encompasses the interpretation by the tax authorities of current tax laws, and the Company's legal structure and scope of operations in the PRC, which could be subject to further restrictions resulting in limitations on the Company's ability to conduct business in the PRC.

(b)Major Customers

For the nine months ended September 30, 2018, one customer individually accounted for more than 10% of the Company's revenue from third parties. One customer individually accounted for more than 10% of the Company's net accounts receivables as of September 30, 2018, respectively.

For the nine months ended September 30, 2019, one customer individually accounted for more than 10% of the Company's revenue. One customer individually accounted for more than 10% of the Company's net accounts receivables as of September 30, 2019, respectively.

(c)Major Suppliers

For the nine months ended September 30, 2018, two suppliers individually accounted for more than 10% of the Company's cost of revenues. Two suppliers individually accounted for more than 10% of the Company's accounts payable and amount due to related parties as of September 30, 2018.

For the nine months ended September 30, 2019, one supplier individually accounted for more than 10% of the Company's accounts payable as of September 30, 2019.

(d)Concentration of Credit Risks

Financial instruments that potentially subject the Company to significant concentration of credit risk primarily consist of cash and accounts receivable. As of September 30, 2019 and December 31, 2018, the Company's cash was held by financial institutions (located in the PRC, Hong Kong, the United States and Singapore) that management believes have acceptable credit. Accounts receivable are typically unsecured and are mainly derived from revenues from Mobile Energy Group (formerly Wecast Services). The risk with respect to accounts receivable is mitigated by regular credit evaluations that the Company performs on its distribution partners and its ongoing monitoring of outstanding balances.

(e)Foreign Currency Risks

We have certain operating transactions that are denominated in RMB and a portion of the Company's assets and liabilities that is denominated in RMB. RMB is not freely convertible into foreign currencies. The value of the RMB is subject to changes in the central government policies and to international economic and political developments. In the PRC, certain foreign exchange transactions are required by laws to be transacted only by authorized financial institutions at exchange rates set by the People's Bank of China ('PBOC'). Remittances in currencies other than RMB by the Company in China must be processed through PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to complete the remittance.

27

Cash consist of cash on hand and demand deposits at banks, which are unrestricted as to withdrawal.

Time deposits, which mature within one year as of the balance sheet date, represent interest-bearing certificates of deposit with an initial term of greater than three months when purchased. Time deposits which mature over one year as of the balance sheet date are included in non-current assets.

Cash and time deposits maintained at banks consist of the following:

September 30, December 31,
2019 2018
RMB denominated bank deposits with financial institutions in the PRC $ 110,005 $ 1,523,622
US dollar denominated bank deposits with financial institutions in the PRC $ 30,666 $ 133,053
HKD denominated bank deposits with financial institutions in Hong Kong Special Administrative Region ('HK SAR') $ 17,985 $ 13,133
US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region ('HK SAR') $ 13,708 $ 44,182
US dollar denominated bank deposits with financial institutions in Singapore ('Singapore') $ 569,707 $ 697,099
SGD denominated bank deposits with financial institutions in Singapore $ 70,432 -
US dollar denominated bank deposits with financial institutions in The United States of America ('USA') $ 874,093 $ 695,155
Total $ 1,686,596 $ 3,106,244

As of September 30, 2019 and December 31, 2018, deposits of $855,915 and $0 were insured. To limit exposure to credit risk relating to bank deposits, the Company primarily places bank deposits only with large financial institutions in the PRC, HK SAR, USA, Singapore and Cayman with acceptable credit rating.

(f)Digital Currency Risks

As of September 30, 2019, the Company holds 8,333,333 GTB. The risks related to our holdings of GTB include:

· Digital currency is highly volatile due to the limited trading history, and singular currency exchange platform;
· Under the circumstances where governments prohibit or effectively prohibit the trading of digital currency, this will significantly impact the financial statements of the Company since the digital currency market is currently largely unregulated; and
· To date the company has not been able to convert any of its crypto currency holdings to fiat. The Asia EDX exchange has indicated that it continues work towards providing exchangeability for coins held on the exchange into fiat. Management is unable to give any assurance as to when, if ever, the Asia EDX exchange will permit conversion of the company's crypto currency holdings into fiat.
Note 20. Defined Contribution Plan

For our U.S. employees, during 2019, the Company introduced a new 401(k) defined contribution plan which provides 100% employer matching up to 4% of each employee's pay. Employee is eligible to participate after six months of employment. Company 401(k) matching contributions were approximately $8,700 and $487 for the three months ended September 30, 2019 and 2018 and $8,700 and $3,242 for the nine months ended September 30, 2019 and 2018, respectively.

Full time employees in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Company to make contributions based on certain percentages of the employees' basic salaries. Other than such contributions, there is no further obligation under these plans. The total contribution for such PRC employee benefits was $113,654 and $235,811 for the three months ended September 30, 2019 and 2018 and $267,868 and $607,872 for the nine months ended September 30, 2019 and 2018, respectively.

28
Note 21. Segments and Geographic Areas

The Company's chief operating decision maker has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company.

We operate our business in two operating segments: Legacy YOD and Mobile Energy Group (formerly Wecast Services). Segment disclosures are on a performance basis consistent with internal management reporting. The Company does not allocate expenses below segment gross profit since these segments share the same executive team, office space, occupancy expenses, information technology infrastructures, human resources and finance department.

Information about segments during the periods presented were as follows:

Nine Months Ended
September 30,
2019
September 30,
2018
Revenue
-Legacy YOD $ - $ -
-Mobile Energy Group (formerly Wecast Services) 44,503,562 362,628,296
Total revenue 44,503,562 362,628,296
Cost of revenue
-Legacy YOD - -
-Mobile Energy Group (formerly Wecast Services) 1,217,184 359,839,565
Gross profit $ 43,286,378 $ 2,788,731
September 30,
2019

December 31,

2018

TOTAL ASSETS
-Legacy YOD $ 635,128 $ 26,442,810
-Mobile Energy Group (formerly Wecast Services) 164,128,548 51,592,929
-Unallocated assets - 16,199,373
Total $ 164,763,676 $ 94,235,112
Note 22. Going Concern and Management's Plans

As of September 30, 2019, the Company had cash and cash equivalents of approximately $1.7 million and the Company has incurred losses since its inception and must continue to rely on proceeds from debt and equity issuances to pay for ongoing operating expenses in order to execute its business plan.

Management has taken several actions below to ensure that the Company will continue as a going concern through November 30, 2020, including the cessation of YOD legacy segment related expenses and discretionary expenditures.

· As discussed in Note 12, the Company executed a security purchase agreement with ID Venturas 7, LLC ('IDV'), whereby the Company issued $2,500,000 of senior secured convertible note during the third quarter.
· As discussed in Note 5, the Company has received $0.7 million proceeds from the sale of Redrock.

The Company's operating businesses are in the development and ramp up phase and are not yet cash generative as they generate minimal revenues and require investment to support their business plans. The Company intends to raise both debt and equity capital to cover its short and medium term capital needs.

Although the Company may attempt to raise funds by issuing debt or equity instruments, future financing may not be available to the Company on terms acceptable to the Company or at all or such resources may not be received in a timely manner. If the Company is unable to raise additional capital when required or on acceptable terms, the Company may be required to scale back or to discontinue certain operations, scale back or discontinue the development of new business lines, reduce headcount, sell assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. If the Company is in fact unable to continue as a going concern, the shareholders may lose their entire investment in the Company.

Note 23. Fair Value Measurements

The following table presents information about our financial instruments measured at fair value on a recurring basis, grouped into level 1 to 3 based on the degree to which the fair value is observable:

September 30, 2019
Level I Level II Level III Total
Contingent Consideration Liability1 - - 2,327,919 2,327,919

Note

1 This represents the liability incurred in connection with the acquisition of DBOT shares during Q3 2019 as disclosed in Note 5(f).

29

The fair value of the contingent consideration liability at September 30, 2019 was valued using the Black-Scholes Merton method. The following table presents the significant inputs and assumptions used in the model:

September
30, 2019
Risk-free interest rate 1.8 %
Expected volatility 30 %
Expected term 0.5 year
Expected dividend yield 0 %

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liability includes the risk-free interest rate, expected volatility, expected term and expected dividend yield. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

Reconciliation of level 3 fair value measurements:

Contingent
Consideration
Liability
January 1, 2019 $ -
Addition (2,217,034 )
Remeasurement (loss)/gain recognized in the income statement (110,885 )
September 30, 2019 $ (2,327,919 )
Note 24. Subsequent Events

Senior Secured Convertible Debentures - ID Ventura 7

On October 29, 2019, the Company entered into an Additional Issuance Agreement (the 'Purchase Agreement'), with ID Venturas 7, LLC. ('ID Venturas') an exempted company incorporated and existing under the laws of the Delaware, pursuant to which ID Venturas invested $400,000 of the up to $2,500,000 of additional investment rights granted to ID Venturas in the September SPA (as defined below) and received (i) a promissory note (the 'Convertible Note') which is senior secured and convertible at $1.00 per share of Company common stock, subject to anti-dilution adjustments and (ii) a warrant (the 'Warrant') exercisable for 150% of the number of shares of common stock which the Note is convertible into. The Convertible Note is convertible into common stock, par value $0.001 per share (the 'Common Stock'), at a conversion price of $1.00, subject to anti-dilution adjustments. The Convertible Note matures on March 27, 2021, and accrues at a 10% interest rate.

In connection with the above transaction, the Company also entered into a registration rights agreement with ID Venturas (the 'Registration Rights Agreement') which grants ID Venturas demand registration rights.

As disclosed in Note 12, the Company entered into Securities Purchase Agreements, dated February 22, 2019 ('The Purchase Agreement') and dated September 27, 2019 ('Convertible Note Agreement') with ID Venturas pursuant to which ID Venturas purchased 10% Senior Secured Convertible Debentures (the 'Debentures') and common stock purchase warrants (the 'Warrants') and were granted additional investments rights to purchase up to an additional $2,500,000 of Debentures and Warrants ('Additional Investment Rights'). On October 29, 2019 Ideanomics, Inc. (the 'Company') entered into a letter agreement (the 'Agreement') with ID Venturas pursuant to which the Company agreed to reduce the conversion price of the Debentures and the exercise price of the Warrants to $1.00, subject to adjustment thereunder. The Agreement also reduced the conversion price of Debentures and the exercise price of the Warrants issuable pursuant to the Additional Investment Rights.

GTB Impairment review

On October 29, 2019, our digital currency, GTB tokens (see Note 1), had a one-time unexpected significant decline in quoted price from $17 to $1.84. The Company's management is currently evaluating the risks and potential impacts of this incident and plans to perform its annual impairment test as of December 31, 2019. The Company is not able to make a meaningful estimate of the amount or range of potential impairment resulting from the subsequent decline in quoted price.

30

Cautionary Note Regarding Forward Looking Statements

This Form 10-Q contains 'forward-looking' statements that involve risks and uncertainties. You can identify these statements by the use of forward-looking words such as 'may', 'will', 'expect', 'anticipate', 'estimate', 'believe', 'continue', or other similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or financial condition or state other 'forward-looking' information. We believe that it is important to communicate our future expectations to our investors. However, these forward-looking statements are not guarantees of future performance and actual results may differ materially from the expectations that are expressed, implied or forecasted in any such forward-looking statements. There may be events in the future that we are unable to accurately predict or control, including weather conditions and other natural disasters which may affect demand for our products, and the product-development and marketing efforts of our competitors. Examples of these events are more fully described in the Company's 2018 Annual Report under Part I. Item 1A. Risk Factors.

Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and all amendments to those reports.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following management's discussion and analysis ('MD&A') should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See 'Cautionary Note Regarding Forward Looking Statements' above for certain information concerning those forward-looking statements.

The MD&A is organized in the following sections:

·

Overview

·

Results of Operations - three months and nine months ended September 30, 2019

·

Liquidity and Capital Resources

·

Outlook

· Critical Accounting Policies and Estimates

Overview

Ideanomics, Inc. (Nasdaq: IDEX) is a Nevada corporation that primarily operates in the United States and Asia. The Company is comprised of two operating segments (i) our Legacy YOD business with primary operations in the PRC which has been winding down operations over the last 12 months and (ii) our Mobile Energy Group (MEG) (formally known as our Wecast Service) business, which is transitioning to focus on the commercial fleet market for electric vehicles in addition to the Company's existing fintech advisory business. Our MEG business operates as an end-to-end solutions provider for the procurement, financing, charging and energy management needs for fleet operators of commercial Electric Vehicles (EV). MEG operates through a series of joint ventures with the leading companies in the commercial EV space, principally in China, and earns fees for every transaction completed based on the spread for group buying of vehicles and fees derived from the arrangement of financing and energy management such as commercial purchasing of pre-paid electricity credits. MEG focuses on commercial EV rather than passenger EV, as commercial EV is on an accelerated adoption path when compared to consumer EV adoption - which is expected to take between ten to fifteen years. We focus on four distinct commercial vehicles types with supporting income streams: 1) Closed-area heavy commercial, in areas such as Mining, Airports, and Sea Ports; 2) Last-mile delivery light commercial; 3) Buses and Coaches; 4) Taxis. The purchase and financing of vehicles provides for one-time fees and the charging and energy management provides for recurring revenue streams. In July 2019 the company invested in Glory Connection Snd. Bhd, (Glory) a vehicle manufacturer based in Malaysia. Glory holds the only license granted so far for the manufacture of electric vehicles in Malaysia and is in the process of setting up its manufacturing and assembly capabilities.

We continue to develop our FinTech services which principally consist of our ownership of the Delaware Board of Trade (DBOT) ATS, Intelligenta for marketing AI solutions to the Financial Services industry and FinTech Village, a 58 acre development site in West Hartford, Connecticut.

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Principal Factors Affecting Our Financial Performance

Our business is expected to be impacted by both macroeconomic and Ideanomics-specific factors. The following factors have been part of the transformation of the Company which affected the results of our operations for the three months and nine months ended September 30, 2019:

· Our business strategy may affect the comparability of financial results
Our business strategy and the primary goal for entering certain industries, such as logistics management for crude oil trading and electronics, was to learn about the needs of buyers and sellers in industries and to promote the use, development and advancement of blockchain and AI-based technologies.
In parallel, and for strategic reasons, after the fourth quarter of 2018, we also chose to focus our resources and efforts on other non-logistics management revenue generating opportunities that we identified in the market. These new market opportunities also involve the use of our technologies in our FinTech Ecosystem and their application across Industry Ventures. We intend to continue to capitalize on our efforts and learning from overall logistics management business, but it is not intended to be our core business. Therefore, for comparability purposes, the financial results may not be comparable as we phase out of the logistics management business going forward.
· Our ability to transform our business and to meet internal or external expectations of future performance.
In connection with this transformation, we are in the process of considerable changes, which include assembling a new management team in the United States and overseas, reconfiguring our business structure to reflect our focus on the commercial fleet market for electric vehicles and blockchain-based fintech strategy, continuing to further enhance our controls, procedures, and oversight during this transformation, and expanding our mission and business lines for continued growth. It is uncertain whether these efforts will prove beneficial or whether we will be able to develop the necessary business models, infrastructure and systems to support our businesses. To succeed, among other things, we will need to have or hire the right talent to execute our business strategy. Market acceptance of new product and service offerings will be dependent in part on our ability to include functionality and usability that address customer requirements, and optimally price our products and services to meet customer demand and cover our costs.
· Our ability to remain competitive.
As we enter the commercial fleet market for electric vehicles and develop our AI- and blockchain-enabled capabilities, we will continue to face intense competition: these new technologies are constantly evolving, and our competitors may introduce new platforms and solutions that are superior to ours. In addition, our competitors may be able to adapt more quickly to new technologies or may be able to devote greater resources to the development, marketing and sale of their products than we can.
·

The fluctuation in earnings from the continuing development of the Mobile Energy Group (formerly Wecast Services) segment through acquisitions, strategic equity investments, the formation of joint ventures, and in-licenses of technology.

Our results of operations may fluctuate from period to period based on our entry into new transactions to expand commercial fleet market for commercial vehicles and develop our Fintech Ecosystem and Industry Ventures. In addition, while we intend to contribute cash and other assets to our joint ventures, we do not intend for our company to conduct significant research and development activities. We intend research and development activities to be conducted by our technology partners and licensors. These fluctuations in growth or costs and in our joint ventures and partnerships may contribute to significant fluctuations in the results of our operations.

· Longer periods for development and implementation of our technology.
The Company has moved into a fintech advisory services and Platform-as-a-Service model. Our technology in this area of our ecosystem is new and constantly evolving and thus it has taken longer than anticipated to implement these technologies. Innovation is an integral part of our ecosystem and, while we strive to be first to market, it is also important to be best in class.
32

Information about segments

Mobile Energy Group (formerly Wecast Services) Segment

Within the Mobile Energy Group (formerly Wecast Services) segment, we are engaged in providing an end-to-end solution for the purchase, financing, charging and energy management for fleets of commercial Electric Vehicles (EV). We operate through a series of joint ventures with the leading companies in the commercial EV space, principally in China, and earn a fee for every transaction completed using the marketplace. MEG focuses on commercial EV rather than passenger EV, as commercial EV is on an accelerated adoption path when compared to consumer EV adoption - which is expected to take between ten to fifteen years. We focus on four distinct commercial vehicles types with supporting income streams: 1) Closed-area heavy commercial, in areas such as Mining, Airports, and Sea Ports; 2) Last-mile delivery light commercial; 3) Buses and Coaches; 4) Taxis. The purchase and financing of vehicles provide a one time fee and the charging and energy management provide recurring revenue streams. In July 2019 the company invested in Glory Connection Snd. Bhd, (Glory) a vehicle manufacturer based in Malaysia. Glory holds the only license granted so far for the manufacture of electric vehicles in Malaysia and the is in the process of setting up its manufacturing capability.

We continue to develop our FinTech services which principally consist of our ownership of the Delaware Board of Trade (DBOT) ATS, Intelligenta for marketing AI solutions to the Financial Services industry and FinTech Village, a 58 acre development site in West Hartford, Connecticut.

Legacy YOD Segment

Since 2017, we run our legacy YOD segment with limited resources. As of September 30, 2019, we have ceased our operation of YOD Segment.

Our Unconsolidated Equity Investments

For the investments where we may exercise significant influence, but not control, they are classified as long-term equity investments and accounted for using the equity method. Under the equity method, the investment is initially recorded at cost and adjusted for our share of undistributed earnings or losses of the investee. Investment losses are recognized until the investment is written down to nil, provided that we do not guarantee the investee's obligations or commit to provide additional funding. Please refer to Note 9 of the notes to unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Taxation

United States

Ideanomics, Inc., M.Y. Products, LLC, Grapevine Logic, Inc., DBOT, and Red Rock Global Capital Ltd. are United States companies subject to the provisions of the Internal Revenue Code. Taxes that otherwise would have been due on the income of Ideanomics, Inc. were completely offset by net operating loss carryovers from prior years. Deferred tax assets related to those net operating loss carryovers had previously been entirely offset by valuation allowances. In July 2019, the Company completed the disposal of its interest in Red Rock Global Capital Ltd. A $513,935 income tax benefit was recorded, $152,876 resulting from losses of Grapevine Logic, Inc. offsetting deferred tax liabilities that were recognized on the acquisition of Grapevine Logic, Inc. and a $361,059 reduction of the valuation allowance on Ideanomics, Inc. deferred tax assets in excess of those reversed to offset Ideanomics, Inc.'s income. The reduction in valuation allowance resulted from Ideanomics, Inc.'s acquisition of additional ownership interests in Grapevine Logic, Inc. which caused Grapevine Logic, Inc. to be included in a consolidated tax return with Ideanomics, Inc. beginning June 30, 2019. This meant that $361,059 of Ideanomics, Inc.'s deferred tax assets could be utilized to offset Grapevine Logic Inc.'s remaining deferred tax liabilities. No provision for income taxes has been provided for M.Y. Products, LLC, DBOT or Red Rock Global Capital Ltd. as neither of the companies had taxable profit since inception.

The Tax Cut and Jobs Act (TCJA) of 2018 includes provision for Global Intangible Low-Taxed Income (GILTI) under which taxes on foreign income are imposed on the excess of a deemed return on tangible assets of certain foreign subsidiaries. TCJA also enacted the Base Erosion and Anti-Abuse Tax (BEAT) under which taxes are imposed on certain base eroding payments to related foreign companies, subject to certain requirements.

There are substantial uncertainties in the interpretation of BEAT and GILTI and while certain formal guidance has been issued by the U.S. tax authorities, there are still aspects of the TCJA that remain unclear and additional clarification is expected in 2019. Future guidance may result in changes to the interpretations and assumptions the company made and actions it may have to take, which may impact amounts recorded with respect to international provisions of the TCJA.

Based on current year financial results, the company has determined that there is no GILTI nor BEAT tax liability.

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In addition, the TCJA now entitles US companies that own 10% or more of a foreign corporation a 100% dividends-received deduction for the foreign-source portion of dividends paid by such foreign corporation. Also, net operating losses (NOLs) arising after December 31, 2018 are deductible only to the extent of 80% of the taxpayer's taxable income, and may be carried forward indefinitely but generally not allowed to be carried back.

Cayman Islands and the British Virgin Islands

Under current laws of the Cayman Islands and the British Virgin Islands, the company is not subject to tax on its income or capital gains. In addition, dividend payments are not subject to withholding tax in the Cayman Islands or British Virgin Islands.

Hong Kong

The company's subsidiaries incorporated in Hong Kong are subject to Profits Tax of 16.5%. No provision for Hong Kong Profits Tax has been made as NOL carryovers offset current taxable income.

The People's Republic of China

Under the PRC's Enterprise Income Tax Law ('EIT'), the company's Chinese subsidiaries and VIEs are subject to an EIT of 25.0%.

The company's future effective income tax rate depends on various factors, such as tax legislation, geographic composition of its pre-tax income and non-tax deductible expenses incurred. The company's management regularly monitors these legislative developments to determine if there are changes in the statutory income tax rate.

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Consolidated Results of Operations

Comparison of Three Months Ended September 30, 2019 and 2018

Three Months Ended
September 30, September 30, Amount
2019 2018 Change % Change
Revenue $ 3,103,690 $ 43,707,937 (40,604,247 ) (93 )
Cost of revenue 243,360 42,844,876 (42,601,516 ) (99 )
Gross profit 2,860,330 863,061 1,997,269 231
Operating expenses:
Selling, general and administrative expenses 7,769,503 4,333,259 3,436,244 79
Research and development expense - 667,416 (667,416 ) (100 )
Professional fees 1,388,842 1,927,431 (538,589 ) (28 )
Impairment of property and equipment 2,298,887 - 2,298,887 100
Depreciation and amortization 806,481 291,512 514,969 177
Total operating expenses 12,263,713 7,219,618 5,044,095 70
Loss from operations (9,403,383 ) (6,356,557 ) (3,046,826 ) 48
Interest and other income (expense):
Interest expense, net (639,395 ) (145,610 ) (493,785 ) 339
Equity in loss of equity method investees (40,369 ) (13,882 ) (26,487 ) 191
Gain on disposal of subsidiaries 1,057,363 - 1,057,363 100
Loss on remeasurement of DBOT investment (3,178,702 ) - (3,178,702 ) 100
Others (99,997 ) (925,771 ) 825,774 (89 )
Income (Loss) before income taxes and non-controlling interest (12,304,483 ) (7,441,820 ) (4,862,663 ) 65
Income tax benefit - -
Net income (loss) (12,304,483 ) (7,441,820 ) (4,862,663 ) 65
Net (income) loss attributable to non-controlling interest (1,407,384 ) 254,973 (1,662,357 ) (652 )
Net income (loss) attributable to IDEX common shareholders $ (13,711,867 ) $ (7,186,847 ) (6,525,020 ) 91
Earnings (loss) per share
Basic $ (0.11 ) $ (0.10 )
Diluted $ (0.11 ) $ (0.10 )

Revenues

Three Months Ended
September 30,
2019
September 30,
2018
Amount
Change
% Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ - $ - -
Consumer electronics - 43,432,556 (43,432,556 ) (100 )
Digital asset management services - - - -
Electric Vehicles ('EV') 2,854,178 - 2,854,178 100
Other 249,512 275,381 (25,869 ) (9 )
Total $ 3,103,690 $ 43,707,937 $ (40,604,247 ) (93 )

Revenue for the three months ended September 30, 2019 was $3.1 million as compared to $43.7 million for the same period in 2018, a decrease of approximately $40.6 million, or 93%. The decrease was mainly due to a change to our business focus from logistics management to digital business consulting services and electric vehicle businesses. Our business strategy and the primary goal for entering the crude oil and electronic trading businesses was to learn about the needs of buyers and sellers in these industries that rely heavily on the shipment of goods. Our activities in the crude oil trading and electronic trading business have been successful in various aspects in 2018, and for strategic reasons we have now phased out of our crude oil trading business and electronics trading business so that we can work towards enabling the application of our Fintech Ecosystem for other useful cases that we have identified.

We did not generate any revenue from YOD Legacy business in 2018 and for the three months ended September 30, 2019 since our new fintech services business strategy limits the support of the Legacy YOD business.

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Cost of revenues

Three Months Ended
September 30,
2019
September 30,
2018
Amount
Change
% Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ - $ - -
Consumer electronics - 42,658,775 (42,658,775 ) (100 )
Digital asset management services - - - -
Electric Vehicles ('EV') - - - -
Other 243,360 186,101 57,259 31
Total $ 243,360 $ 42,844,876 $ (42,601,516 ) (99 )

Cost of revenues was approximately $0.2 million for the three months ended September 30, 2019, as compared to $42.8 million for the three months ended September 30, 2019, a decrease of approximately $42.6 million, or 99%. From a comparability perspective, the cost of revenue during 2018 is not necessarily indicative of the digital business consulting services and electric vehicle businesses in 2019. The cost of revenue during 2018 was primarily associated with the logistics management business (oil trading and electronics trading), which traditionally has a very high cost of revenue and low gross margin, while the cost of revenue during the third quarter of 2019 is primarily associated with subsidiaries including Grapevine and DBOT.

Gross profit

Three Months Ended
For the Period ended September 30,
2019
September 30,
2018
Amount
Change
% Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ - $ - -
Consumer electronics - 773,781 (773,781 ) (100 )
Digital asset management services - - - -
Electric Vehicles ('EV') 2,854,178 - 2,854,178 100
Other 6,152 89,280 (83,128 ) (93 )
Total $ 2,860,330 $ 863,061 $ 1,997,269 231

Gross profit ratio

Three Months Ended
September 30,
2019
September 30,
2018
- Mobile Energy Group (formerly Wecast Services)
Crude oil 0 % 0 %
Consumer electronics 0 % 2 %
Digital asset management services 0 % 0 %
Electric Vehicles ('EV') 100 % 0 %
Other 2 % 32 %
Total 92 % 2 %

Our gross profit for the three months ended September 30, 2019 was approximately $2.9 million, as compared to $0.9 million during the same period in 2018, representing an increase of 231%. The gross profit ratio for the three months ended September 30, 2019 was 92%, as compared to 2% during the same period in 2018.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2019 was $7.8 million as compared to $4.3 million for the same period in 2018, an increase of approximately $3.5 million or 79%. Majority of the increase was due to:

· an increase of $2.6 million in share-based compensation expense primarily related to the stock options granted to employees and directors during Q1 2019;
· an increase of $0.3 million in office related expenses; and
· an increase of $0.3 million in insurance expenses

Research and development expense

Research and development expense decreased to zero for the three months ended September 30, 2019 from $0.7 million in the same period in 2018. Majority of the expense in 2018 was related to the early stage technology development.

Professional fees

Professional fees are generally related to public company reporting and governance expenses as well as legal fees related to business transition and expansion. Our professional fees for the three months ended September 30, 2019 was $1.4 million as compared to $1.9 million for the same period in 2018, a decrease of approximately $0.5 million. The decrease was related to a decrease in legal, valuation, audit and tax as well as fees associated with continuing to build out our technology ecosystem and establishing strategic partnerships and M&A activity as part of this technology ecosystem.

Impairment of property and equipment

Impairment of property and equipment increased $2.3 million for the three months ended September 30, 2019 as compared to the same period in 2018. The increase was due to the impairment charge recorded in connection with four of the five existing buildings on Fintech Village which are expected to be demolished.

Depreciation and amortization

Depreciation and amortization for the three months ended September 30, 2019 was $0.8 million as compared to $0.3 million for the same period in 2018, an increase of approximately $0.5 million. The increase was mainly due to the increase in amortization expense from intangible assets acquired during 2019.

Interest expense, net

Our interest expense increased $0.5 million to $0.6 million for the three months ended September 30, 2019, from $0.1 million during the same period of 2018. The increase in interest expense was primarily because of the accretion of interest expense and amortization of beneficiary conversion features associated with the convertible note issued in February 2019.

Equity in loss of equity method investees

Loss of equity method investees increased $0.03 million for the three months ended September 30, 2019 comparing to the same period in 2018 was primarily due to the net loss incurred in Glory (see Note 9 to the Consolidated Financial Statements).

Gain on disposal of subsidiaries

Gain on disposal of subsidiaries increased $1.1 million for the three months ended September 30, 2019 comparing to the same period in 2018 was due to the disposal of Redrock and the dilution of the Company's equity interest in Amer from 55% to 10% (see Note 5 to the Consolidated Financial Statements).

Loss on remeasurement of DBOT investment

Loss on remeasurement of DBOT investment increased $3.2 million for the three months ended September 30, 2019 comparing to the same period in 2018 was due to the acquisition of controlling equity interest in DBOT which resulted in the remeasurement of the Company's previously held equity interest in DBOT at the acquisition-date fair value.

Net (income) loss attributable to non-controlling interest

Net income attributable to non-controlling interests was approximately $1.4 million for the three months ended September 30, 2019, as compared to a net loss of $0.3 million during the same period in 2018. The change is primarily due to the $1.4 million net income attributable to the noncontrolling interest of the Mobile Energy Group ('MEG') in relation to the taxis commission revenue recognized during the quarter.

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Consolidated Results of Operations

Comparison of Nine Months Ended September 30, 2019 and 2018

Nine Months Ended
September 30,
2019
September 30,
2018
Amount
Change
% Change
Revenue $ 44,503,562 $ 362,628,296 (318,124,734 ) (88 )
Cost of revenue 1,217,184 359,839,565 (358,622,381 ) (100 )
Gross profit 43,286,378 2,788,731 40,497,647 1,452
Operating expenses:
Selling, general and administrative expenses 18,442,280 16,861,425 1,580,855 9
Research and development expense - 1,393,025 (1,393,025 ) (100 )
Professional fees 3,918,461 3,280,729 637,732 19
Impairment of property and equipment 2,298,887 - 2,298,887 100
Depreciation and amortization 1,420,480 314,737 1,105,743 351
Total operating expenses 26,080,108 21,849,916 4,230,192 19
Income (Loss) from operations 17,206,270 (19,061,185 ) 36,267,455 (190 )
Interest and other income (expense):
Interest expense, net (1,955,476 ) (201,782 ) (1,753,694 ) 869
Equity in loss of equity method investees (606,390 ) (44,316 ) (562,074 ) 1268
Gain on disposal of subsidiaries 1,057,363 - 1,057,363 100
Loss on remeasurement of DBOT investment (3,178,702 ) - (3,178,702 ) 100
Others (155,946 ) (558,271 ) 402,325 (72 )
Income (Loss) before income taxes and non-controlling interest 12,367,119 (19,865,554 ) 32,232,673 (162 )
Income tax benefit 513,935 - 513,935 100
Net income (loss) 12,881,054 (19,865,554 ) 32,746,608 (165 )
Net (income) loss attributable to non-controlling interest (1,374,193 ) 637,314 (2,011,507 ) (316 )
Net income (loss) attributable to IDEX common shareholders $ 11,506,861 $ (19,228,240 ) 30,735,101 (160 )
Earnings (loss) per share
Basic $ 0.10 $ (0.27 )
Diluted $ 0.10 $ (0.27 )

Revenues

Nine Months Ended

September 30,

2019

September 30,

2018

Amount

Change

% Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ 260,034,401 $ (260,034,401 ) (100 )
Consumer electronics - 102,081,176 (102,081,176 ) (100 )
Digital asset management services 40,700,000 - 40,700,000 100
Electric Vehicles ('EV') 2,854,178 - 2,854,178 100
Other 949,384 512,719 436,665 85
Total $ 44,503,562 $ 362,628,296 $ (318,124,734 ) (88 )

Revenue for the nine months ended September 30, 2019 was $44.5 million as compared to $362.6 million for the same period in 2018, a decrease of approximately $318.1 million, or 88%. The decrease was mainly due to a change to our business focus from logistics management to digital business consulting services and electric vehicle businesses. Our business strategy and the primary goal for entering the crude oil and electronic trading businesses was to learn about the needs of buyers and sellers in these industries that rely heavily on the shipment of goods. Our activities in the crude oil trading and electronic trading business have been successful in various aspects in 2018, and for strategic reasons we have now phased out of our crude oil trading business and electronics trading business so that we can work towards enabling the application of our Fintech Ecosystem for other useful cases that we have identified.

Please see Note 3 to the unaudited consolidated financial statements included in this report.

We did not generate any revenue from YOD Legacy business in 2018 and for the nine months ended September 30, 2019 since our new fintech services business strategy limits the support of the Legacy YOD business.

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Cost of revenues

Nine Months Ended
September 30,
2019
September 30,
2018
Amount
Change
% Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ 260,006,382 $ (260,006,382 ) (100 )
Consumer electronics - 99,568,729 (99,568,729 ) (100 )
Digital asset management services 466,894 - 466,894 100
Electric Vehicles ('EV') - - - -
Other 750,290 264,454 485,836 184
Total $ 1,217,184 $ 359,839,565 $ (358,622,381 ) (100 )

Cost of revenues was approximately $1.2 million for the nine months ended September 30, 2019, as compared to $359.8 million for the same period in 2018, a decrease of approximately $358.6 million, or 100%. From a comparability perspective, the cost of revenue during 2018 is not necessarily indicative of the new FinTech business in 2019. The cost of revenue during 2018 was primarily associated with the logistics management business (oil trading and electronics trading), which traditionally has a very high cost of revenue and low gross margin, while the cost of revenue during the first 9 months of 2019 primarily include the personnel cost associated with our digital asset management services and creator payments from the Grapevine business. Majority of the cost associated with the development of the master plan services have already been incurred in 2018. In 2018, due to the uncertainty associated with the future economic benefits when such costs were incurred, the Company expensed those costs during 2018.

Gross profit

Nine Months Ended
For the Period ended September 30,
2019
September 30,
2018
Amount Change % Change
- Mobile Energy Group (formerly Wecast Services)
Crude oil $ - $ 28,019 $ (28,019 ) (100 )
Consumer electronics - 2,512,447 (2,512,447 ) (100 )
Digital asset management services 40,233,106 - 40,233,106 100
Electric Vehicles ('EV') 2,854,178 - 2,854,178 100
Other 199,094 248,265 (49,171 ) (20 )
Total $ 43,286,378 $ 2,788,731 $ 40,497,647 1,452

Gross profit ratio

Nine Months Ended
September 30,
2019
September 30,
2018
- Mobile Energy Group (formerly Wecast Services)
Crude oil 0 % 0 %
Consumer electronics 0 % 2 %
Digital asset management services 99 % 0 %
Electric Vehicles ('EV') 100 % 0 %
Other 21 % 48 %
Total 97 % 1 %

Our gross profit for the nine months ended September 30, 2019 was approximately $43.3 million, as compared to $2.8 million during the same period in 2018. The gross profit ratio for the nine months ended September 30, 2019 was 97%, while it was 1% during the same period in 2018. The increase was mainly due to: 1) the Company recorded service revenue from digital asset management services in 2019 and 2) the low cost of revenue with our digital asset management services, which resulted in higher gross profit margin in 2019 compared to the low gross profit margin of the logistics management business in 2018.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the nine months ended September 30, 2019 was $18.4 million, as compared to $16.9 million for the same period in 2018, an increase of approximately $1.6 million or 9%. Majority of the increase was due to:

· an increase of $2.9 million in share-based compensation expense primarily related to the stock options granted to employees and directors during Q1 2019;
· an increase of $0.8 million in severance payments to the former Chief Executive Officer, former Chief Investment Officer and former Chief Strategy Officer; partially offset by
· a decrease of $2.3 million in salary and employee benefits expenses

Research and development expense

Research and development expense decreased to zero for the nine months ended September 30, 2019 from $1.4 million in the same period in 2018. Majority of the expense in 2018 was related to the early stage technology development.

Professional fees

Professional fees for the nine months ended September 30, 2019 was $3.9 million as compared to $3.3 million for the same period in 2018, an increase of approximately $0.6 million. The increase was related to an increase in legal, valuation, audit and tax as well as fees associated with continuing to build out our technology ecosystem and establishing strategic partnerships and M&A activity as part of this technology ecosystem.

Impairment of property and equipment

Impairment of property and equipment increased $2.3 million for the nine months ended September 30, 2019 as compared to the same period in 2018. The increase was due to the impairment charge recorded in connection with four of the five existing buildings on Fintech Village which are expected to be demolished.

Depreciation and amortization

Depreciation and amortization for the nine months ended September 30, 2019 was $1.4 million as compared to $0.3 million for the same period in 2018, an increase of approximately $1.1 million. The increase was mainly due to the increase in amortization expense from intangible assets acquired during 2019.

Interest expense, net

Our interest expense increased $1.8 million to $2.0 million for the nine months ended September 30, 2019, from $0.2 million during the same period of 2018. The increase in interest expense was primarily because of the accretion of interest expense and amortization of beneficiary conversion features associated with convertible notes issued in June 2018 and February 2019.

Equity in loss of equity method investees

Loss of equity method investees increased $0.6 million for the nine months ended September 30, 2019 comparing to the same period of 2018 was due to net loss incurred in DBOT for the first half of the year (see Note 9 to the Consolidated Financial Statements).

Gain on disposal of subsidiaries

Gain on disposal of subsidiaries increased $1.1 million for the nine months ended September 30, 2019 comparing to the same period in 2018 was due to the disposal of Redrock and the dilution of the Company's equity interest in Amer from 55% to 10% (see Note 5 to the Consolidated Financial Statements).

Loss on remeasurement of DBOT investment

Loss on remeasurement of DBOT investment increased $3.2 million for the nine months ended September 30, 2019 comparing to the same period in 2018 was due to the acquisition of controlling equity interest in DBOT which resulted in the remeasurement of the Company's previously held equity interest in DBOT at the acquisition-date fair value.

Income tax expenses

During the nine months ended September 30, 2019, the Company recorded an income tax benefit of $513,935, $152,876 resulting from losses of Grapevine Logic, Inc. offsetting deferred tax liabilities that were recognized on the acquisition of Grapevine Logic, Inc. and a $361,059 reduction of the valuation allowance on Ideanomics, Inc. deferred tax assets in excess of those reversed to offset Ideanomics, Inc.'s income. The reduction in valuation allowance resulted from Ideanomics, Inc.'s acquisition of additional ownership interests in Grapevine Logic, Inc. which caused Grapevine Logic, Inc. to be included in a consolidated tax return with Ideanomics, Inc. beginning June 30, 2019. This meant that $361,059 of Ideanomics, Inc.'s deferred tax assets could be utilized to offset Grapevine Logic Inc.'s remaining deferred tax liabilities.

Net (income) loss attributable to non-controlling interest

Net income attributable to non-controlling interests was approximately $1.4 million for the nine months ended September 30, 2019, as compared to a net loss of $0.6 million during the same period in 2018. The change is primarily due to (1) the $1.4 million net income attributable to the noncontrolling interest of the Mobile Energy Group ('MEG') in relation to the taxis commission revenue recognized during the third quarter and (2) the decrease in net loss from Grapevine and Amer.

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Liquidity and Capital Resources

As of September 30, 2019, we had cash of approximately $1.7 million. Approximately $1.6 million was held in our Hong Kong, US and Singapore entities and $0.1 million was held in our PRC entities.

The following table provides a summary of our net cash flows from operating, investing and financing activities (unaudited).

Nine Months Ended

September 30,
2019

September 30,
2018

Net cash used in operating activities $ (8,712,029 ) $ (17,641,902 )
Net cash used in investing activities (1,737,881 ) (5,043,300 )
Net cash provided by financing activities 9,067,292 31,186,771
Effect of exchange rate changes on cash (37,030 ) (48,638 )
Net decrease in cash (1,419,648 ) 8,452,931
Total cash at beginning of period 3,106,244 7,577,317
Cash at end of period $ 1,686,596 $ 16,030,248

Operating Activities

Cash used in operating activities decreased by $8.9 million for the nine months ended September 30, 2019 compared to the same period in 2018, primarily due to (1) an increase in operating results from net loss of $19.9 million for the nine months ended September 30, 2018 to net income of $12.9 million in the same period in 2019, (2) total non-cash adjustments increase (decrease) to net income (loss) was $(25.5) million and $3.8 million for the nine months ended September 30, 2019 and 2018, respectively, and (3) total changes in operating assets and liabilities resulted in an increase of $3.9 million and of $(1.5) million in cash used in operations activities for the nine months ended September 30, 2019 and 2018, respectively.

Investing Activities

Cash used in investing activities decreased by $3.3 million, primarily due to the $2.8 million cash consideration paid for the acquisition of Grapevine in 2018.

Financing Activities

We received $4.8 million from the issuance of convertible notes and $2.5 million in proceeds in a private placement from the issuance of restricted shares for the nine months ended September 30, 2019, to certain investors, including officers, directors and other affiliates. While in the same period in 2018, we received $31.2 million. In addition, the borrowings from related parties increased by $1.8 million for the nine month ended September 30, 2019 from the same period in 2018.

Currently, our primary source of liquidity is cash on hand and we have relied on debt and equity financings to fund our operations to date. We believe that our cash balance and our expected cash flow, including additional debt & equity issuances will be sufficient to meet all of our financial obligations for the twelve months from the date of this report.

In the future, we will need additional capital to fund our operations and growth initiatives, which we expect to raise through a combination of equity offerings, debt financings, related party or third-party funding.

The Company's operating strategy is to enter into joint ventures (JVs) with partners who bring special capabilities in a particular market sector, Because we operate through joint ventures we may be restricted by the operating agreement governing a particular JV from accessing any cash balances in the JV for use in other Company activities outside of the JV.

We have historically incurred significant losses which could raise substantial doubt about our ability to continue as a going concern. The unaudited consolidated financial statements included in this report have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.

The Company's independent registered public accounting firm's report of the financial statements for year ended December 31, 2018, contained an explanatory paragraph regarding the Company's ability to continue as a going concern.

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Effects of Inflation

Inflation and changing prices have had an effect on our business and we expect that inflation or changing prices could materially affect our business in the foreseeable future. Our management will closely monitor the price change and make efforts to maintain effective cost control in operations.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. The Company holds variable interests in joint ventures accounted for under the equity method of accounting. The Company is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note 9 to the Consolidated Financial Statements).

We do not have other off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Contractual Obligations and Commitments

As of the date of this report, other than changes related to adoption of the new lease accounting standard as described in Note 2 to the unaudited consolidated financial statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since April 1, 2019 as reported in our 2018 Form 10-K.

OUTLOOK

The Company believes that the fleet market for commercial Electronic Vehicles (EV) provides a significant revenue and profit opportunity. It is our intention to develop this market initially in China and the ASEAN countries with potential in the future to expand into other regions.

The most immediate revenue opportunity is in the Taxi sector where the company has orders for 11,000 taxis of which we anticipate delivering 5,000 in the fourth quarter 2019 and the remaining 6,000 in the first quarter of 2020 with a potential for another 82,000 taxis to be delivered in 2020.

The Company is well advanced in its plans to develop finance and buy-back programs for the batteries used in closed-area heavy vehicles, last mile delivery light commercial vehicles and buses and coaches. We anticipate having these financing and buy-back programs in place by the end of the first quarter 2020 and anticipate the first revenues from these activities in the second quarter of 2020.

The company acquired a non-controlling interest in Glory Connection Sdn. Bhd. (Glory), a Malaysian entity, in July 2019. Glory holds the only license granted so far for the manufacture of electric vehicles in Malaysia and is in the process of setting up its manufacturing and assembly capabilities.

We converted our DBOT business to a new trading infrastructure that went live in November. We have commenced a marketing program to grow revenues by increasing the number of financial institutions trading on the DBOT platform.

Remediation work continues on the Company's 58 acre campus located in West Hartford, Connecticut, this is the intended site of our FinTech Village. We anticipate that the remediation work will be completed in the second half of 2020.

Grapevine our business focused on connecting nano-influencers with established brands continues to develop its platform. In November 2019 we launched Grapevine Village, an ecommerce platform driven by social media content. We continue to look for ways to grow our market share in the influencer and social media space.

We have recorded no revenues from Digital Asset Management services in the current quarter and we do not anticipate recording any revenues in the fourth quarter of 2019.

Environmental Matters

We are subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, environmental contamination and the protection of the environment. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. We may also incur fines and penalties from time to time associated with noncompliance with such laws and regulations. Starting from year 2018, we had $8 million accrued for Asset Retirement Obligations which is related to our legal contractual obligation in connection with the acquisition of Fintech Village.

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CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial condition and results of operation are based upon our unaudited consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 2 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Since December 31, 2018, besides new accounting policy adopted (see Note 2 to the Consolidated Financial Statements), there have been no material changes in the Company's accounting policies that are impacted by judgments, assumptions and estimates. Management bases its estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Periodically, we review our critical accounting estimates with the Audit Committee of our Board of Directors.

See the discussion in this section for information regarding the Company's accounting policy with respect to digital currency.

Digital Currency

Digital Currency consists of GTB received in connection with the services agreement and asset purchase agreement with GTD. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies and other digital currency under current GAAP, the Company has determined to account for these tokens as indefinite-lived intangible assets in accordance with ASC 350, Intangibles-Goodwill and Other until further guidance is issued by the FASB.

Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If, at the time of an impairment test, the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to the excess is recognized. The fair value of our digital currency, GTB, was a Level 2 measurement based upon the consideration agreed by GTD and the Company with a discount considering volatility, risk and limitations at contract inception.

New Accounting Pronouncements

Refer to Note 2 to the Consolidated Financial Statements for a description of accounting standards adopted related to leases. We do not expect any other recently issued accounting pronouncements will have a material effect on our financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the nine months ended September 30, 2019, which have materially affected or would likely materially affect our internal control over financial reporting. The Company continues to invest resources in order to upgrade internal controls.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For a description of our legal proceedings, see Note 18, Contingencies and Commitments, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, 'Item 1A. Risk Factors' in our 2018 Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K is not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results.

We are subject to risks related to holding cryptocurrencies and accepting cryptocurrencies as a form of payment.

We have formed strategic partnerships with third parties and entered into service agreements that provided us with cryptocurrencies as compensation for our services. Cryptocurrencies are not considered legal tender or backed by any government and have experienced price volatility, technological glitches and various law enforcement and regulatory interventions. The use of cryptocurrency such as GTB has been prohibited or effectively prohibited in some countries. If we fail to comply with prohibitions applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

As part of our strategy of forming strategic alliances with other companies in the blockchain and FinTech services industry, we may receive cryptocurrency or tokens as compensation for services. For instance, as part of our digital asset management services agreement with GTD, our compensation was paid in GTB. The prices of cryptocurrency such as GTB are typically highly volatile and subject to exchange rate risks, as well as the risk that regulatory or other developments may adversely affect their value. However, our cryptocurrency will be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. As a result, fluctuations in the market value of cryptocurrency could cause us to record an impairment charge on the value of our cryptocurrency, which would directly impact our balance sheet and statements of operations.

In particular, our GTB may experience periods of extreme volatility due to (i) GTB having a very limited trading history, (ii) a lack of adoption of GTB by cryptocurrency holders, including a lack of adoption of cryptocurrencies generally due to the expense of mining cryptocurrencies in the current cryptocurrency price environment and (iii) GTB trading on one cryptocurrency exchange which has limited operating histories. Speculators and investors who seek to profit from trading and holding GTB currently account for a significant portion of GTB demand. Such speculation regarding the potential future appreciation in the value of GTB may artificially inflate their price. Fluctuations in the value of our GTB or any other cryptocurrencies that we hold may also lead to fluctuations in the value of our common stock. In addition, because of converting our holdings to fiat currency would likely take an extended period of time. If the exchange where GTB trades was to cease operations or no longer quote GTB, there would be no trading platform for GTB and it would likely be impossible to convert GTB into fiat currency.

In addition, there is substantial uncertainty regarding the future legal and regulatory requirements relating to cryptocurrency or transactions utilizing cryptocurrency. For instance, governments may in the near future curtail or outlaw the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. These uncertainties, as well as future accounting and tax developments, or other requirements relating to cryptocurrency, could have a material adverse effect on our business.

We may not be able to convert our holdings of cryptocurrencies into fiat

To date the Asia EDX exchange has not permitted us to convert any part of our holdings of GTB to fiat. We are in regular contact with the exchange regarding the ability to convert some or all of our holdings to fiat, we have been informed that the exchange plans to introduce a capability to allow convertibility into fiat. It is possible that the Asia EDX Exchange may never allow GTB held at the exchange to be converted into fiat.

The cryptocurrency exchange on which our GTB trade has limited operating histories and, in most cases, is largely unregulated and, therefore, may be more exposed to fraud and failure than established, regulated exchanges for traditional securities and other products. To the extent that such exchange involved in fraud or experience security failures or other operational issues, it may result in negative impact to our financial results, or the loss or destruction of, our GTB.

The cryptocurrency exchange on which the GTB trade has limited operating histories and, in most cases, are largely unregulated. Furthermore, the cryptocurrency exchange does not provide the public with significant information regarding their ownership structure, management team, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in or may experience problems relating to such exchange. Cryptocurrency exchanges may impose daily, weekly, monthly or customer-specific transaction or distribution limits, or they may suspend withdrawals entirely, rendering the exchange of GTB for other digital assets or for fiat currency difficult or impossible.

Over the past few years, a number of cryptocurrency exchanges have been closed due to fraud, failure or security breaches. In many of these instances, the customers of such exchanges were not compensated or made whole for the partial or complete losses of their account balances in such exchanges. The AsiaEDX, which is the principal exchange for the GTB, launched in 2018 and is less likely to have the infrastructure and capitalization that make larger cryptocurrency exchanges more stable. As a result, the AsiaEDX may be at risk for cybersecurity attacks or may suffer from a greater exposure to technical failure.

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A lack of stability in the AsiaEDX or the other exchanges upon which GTB trade and their closure or temporary shutdown due to fraud, business failure, hackers or malware, or government-mandated regulation could result in us losing all or a portion of our GTB or may reduce confidence in the GTB and result in greater volatility in their pricing. If the GTB are delisted from the AsiaEDX or any other cryptocurrency exchange, or if any of the cryptocurrency exchanges that list GTB shut down or cease to continue operations, there may cease to be a liquid market for GTB. These potential consequences could also have a material adverse impact on our financial results. Moreover, the exchanges that list GTB operate outside of the United States. Accordingly, in the event of fraud, we may have difficulty successfully pursuing claims against these exchanges in the courts of the countries in which they are organized.

Currently, there are no regulated trading markets for our GTB or the other digital currencies that we hold, and therefore our ability to sell such tokens may be limited.

As of the date of this report, the online trading platforms on which the tokens we hold trade, including, with respect to our GTB, the AsiaEDX, currently does not qualify as registered exchanges within the meaning of federal securities laws or regulated alternative trading systems. To the extent the tokens trading on these platforms meet the definition of a security under federal securities laws, the platform is generally required to register with the SEC as a national securities exchange or be exempt from such registration requirements. The failure of these platforms to register as national securities exchanges or properly comply with registration exemptions could result in the SEC bringing an enforcement action seeking to prohibit, suspend or limit their operations. In such event, the tokens we hold may be tradable on a very limited range of venues, or not at all, and there may be periods where trading activity in tokens that we hold is minimal or non-existent. These potential consequences could have a material adverse impact on the trading price of the tokens that we hold and could render the exchange of our tokens for other digital assets or fiat currency difficult or impossible.

GTB and other cryptocurrencies that we hold may be subject to loss, theft or restriction on access.

There is a risk that some or all of our cryptocurrencies could be lost or stolen. Access to our coins could also be restricted by cybercrime. We currently hold all of our GTB in cold storage. Cold storage refers to any cryptocurrency wallet that is not connected to the internet. Cold storage is generally more secure but is not ideal for quick or regular transactions. We expect to continue to hold the majority of our cryptocurrencies in cold storage to reduce the risk of malfeasance, but this risk cannot be eliminated.

Hackers or malicious actors may launch attacks to steal, compromise or secure cryptocurrencies, such as by attacking the cryptocurrency network source code, exchange servers, third party platforms, cold and hot storage locations or software, or by other means. We are in control and possession of one of the more substantial holdings of GTB, and we may in the future hold substantial positions in other cryptocurrencies. As we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats. Any of these events may adversely affect our operations and, consequently, our investments and profitability. The loss or destruction of a private key required to access our digital wallets may be irreversible and we may be denied access for all time to our cryptocurrency holdings or the holdings of others. Our loss of access to our private keys or our experience of a data loss relating to our digital wallets could adversely affect our investments and assets.

Cryptocurrencies are controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet's public key or address is reflected in the network's public blockchain. We will publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed or otherwise compromised, we will be unable to access our cryptocurrency coins and such private keys may not be capable of being restored by any network. Any loss of private keys relating to digital wallets used to store our cryptocurrencies could have a material adverse effect on our business, prospects or operations and the value of any GTB or other cryptocurrencies we hold for our own account.

Because there has been limited precedent set for financial accounting of cryptocurrencies and other digital assets, the determination that we have made for how to account for our GTB and any other digital assets we may acquire may be subject to change.

Because there has been limited precedent set for the accounting classification and measurement of cryptocurrency and other digital tokens and related revenue recognition, it is unclear how companies may in the future be required to account for digital asset transactions and assets and related revenue recognition. We are currently accounting for our GTB as indefinite-lived intangible assets in accordance with Accounting Standard Codification No. 350: Intangibles-Goodwill and Other. Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. However, a change in regulatory or financial accounting standards could result in the necessity to change our accounting methods and restate our financial statements. Such a restatement could adversely affect the accounting for our GTB or other cryptocurrencies that we may acquire and may more generally negatively impact our business, prospects, financial condition and results of operation.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities during the fiscal quarter ended September 30, 2019, other than those that were previously reported in our Current Reports on Form 8-K.

Item 3. Defaults Upon Senior Securities

There were no defaults upon senior securities during the fiscal quarter ended September 30, 2019.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit
No. Description
10.1 Convertible Note Purchase Agreement, dated September 27, 2019, by and between the Company and ID Venturas 7, LLC [incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
10.2 Convertible Note, dated September 27, 2019, by and between the Company and ID Venturas 7, LLC [incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
10.3 Warrant, dated September 27, 2019, by and between the Company and ID Venturas 7, LLC [incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
10.4 Registration Rights Agreement, dated September 27, 2019, by and between the Company and ID Venturas, LLC [incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
10.5 Employment Agreement, dated September 5, 2019, by and between the Company and Mr. Conor McCarthy [incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
10.6 Share transfer agreement, dated July 18, 2019, by and between Ideanomics Inc. and Beijing Financial Holdings Limited [[incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q (File No. 001-35561) filed on November 14, 2019]
31.1 Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2 Certifications of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS XBRL Instance Document
101.SCH Taxonomy Extension Schema Document
101.CAL Taxonomy Extension Calculation Linkbase Document
101.DEF Taxonomy Extension Definition Linkbase Document
101.LAB Taxonomy Extension Label Linkbase Document
101.PRE Taxonomy Extension Presentation Linkbase Document

*Filed herewith

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on February 14, 2020.

IDEANOMICS, INC.

By: /s/Conor McCarthy
Chief Financial Officer
(Principal Financial and Accounting Officer)
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