Immaterial Corrections of Prior Period Financial Statements

12 Months Ended

Dec. 31, 2023

Accounting Changes and Error Corrections [Abstract]

Immaterial Corrections of Prior Period Financial Statements

The Company has determined that there were immaterial errors in the consolidated financial statements as of and for the year ended December 31, 2022 related to Solectrac's revenue recognition. Previously, revenue was recognized upon dealer financing of e-tractors through Mitsubishi floor plan, resulting in an increase in accounts receivable and a decrease in inventory. The Company has determined that there was an oversight in assessing current information, leading to an underestimation of the high probability of returns and incomplete disclosure of contractual terms in the Dealership Agreements, Funding Agreement and Floor Plan Agreement. As a result, previously recognized revenue is being restated, and going forward, revenue is recognized upon delivery of products to end-customers. Inventory held by the dealer and the finance debt are now recognized on the balance sheet.

The Company assessed the materiality of these errors in accordance with Staff Accounting Bulletin No. 99, Materiality, and the Company determined that, qualitatively, the amounts, individually and in the aggregate, would have no bearing on the decision-making process of a reasonable investor. Accordingly, the Company is correcting the relevant consolidated financial statements and related footnotes as of and for the year ended December 31, 2022 within these consolidated financial statements.

The former management team at Solectrac failed to communicate the high probability of dealers cancelling contracts due to lack of sales and failed to disclose the full nature of the contractual language (Dealership Agreements, Funding Agreement, Floor Plan Agreement). The probability was assumed lower than actually occurred, due to the Ideanomics team only relying upon the Solectrac CEO’s communications and did not take into account the full contractual relationship. Due to the cancellation of contracts, all revenue in relation to the sales to dealers was reversed, and only revenue related to sales to a direct customer, or sales from a dealer to an end customer was recognized.

The Company intends to revise its condensed consolidated financial statements for the periods ended March 31, 2023, June 30, 2023, and September 30, 2023 through subsequent periodic filings.

The following table reflects the impact of the immaterial corrections discussed above on the Company’s previously reported consolidated balance sheet as of December 31, 2022 (in thousands):


	Previously Reported		Adjustments		As Revised
Assets
Accounts receivable, net	$	4,242	$	(2,135)	$	2,107
Inventory	23,192		6,117		29,309
Liabilities
Deferred revenue	1,999		187		2,186
Promissory note due to third parties-short term	5,814		3,764		9,578
Stockholders’ Equity
Accumulated deficit	$	(866,450)	$	32	$	(866,418)

The following table reflects the impact of the immaterial corrections discussed above on the Company’s previously reported consolidated statement of operations for the year ended December 31, 2022 (in thousands, except per share amounts):


	Previously Reported		Adjustments		As Revised
Revenue from sales of products	$	20,839	$	(6,085)	$	14,754
Total revenue	25,100		(6,085)		19,015
Cost of revenue from sales of products	26,374		(6,117)		20,257
Total cost of revenue	28,490		(6,117)		22,373
Gross profit	(3,390)		32		(3,358)
Loss from operations	(212,666)		32		(212,634)
Net loss	$	(282,117)	$	32	$	(282,085)

The following table reflects the impact of the immaterial corrections discussed above on the Company’s previously reported consolidated statement of comprehensive loss for the year ended December 31, 2022 (in thousands, except per share amounts):


	Previously Reported		Adjustments		As Revised
Net loss	$	(282,117)	$	32	$	(282,085)
Comprehensive loss	(289,708)		32		(289,676)
Comprehensive loss attributable to Ideanomics, Inc. shareholders	$	(267,019)	$	32	$	(266,987)

The following table reflects the impact of the immaterial corrections discussed above on the Company’s previously reported consolidated statement of cash flows for the year ended December 31, 2022 (in thousands):


	Previously Reported		Adjustments		As Revised
Net loss	$	(282,117)	$	32	$	(282,085)
Net loss from continuing operations	(213,665)		32		(213,633)
Accounts receivable	(2,182)		2,135		(47)
Inventory	(9,832)		(6,117)		(15,949)
Accrued expenses, salary and other current liabilities	$	(5,113)	$	3,764	$	(1,349)

Ideanomics believes there was an oversight of current information. The high probability of returns was underestimated and the full nature of the contractual language was not fully disclosed. As a result, previously recorded revenue is being restated and current and future revenue is recorded when products reach end-customers.