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SEC Filings

10-Q
SEVEN STARS CLOUD GROUP, INC. filed this Form 10-Q on 08/14/2017
Entire Document
 

 

Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

·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.

 

Accounting standards require the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

 

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.

 

Common stock is valued at closing price reported on the active market on which the individual securities are traded.

 

The fair value of the warrant liabilities at June 30, 2017 were valued using the Black-Scholes Merton method as an estimate for the Monte Carlos Simulation method which was the method used at the year ended December 31, 2016. The following assumptions were incorporated:

 

   Black Scholes   Monte Carlo 
   June 30,   December 31, 
   2017   2016 
Risk-free interest rate   1.03%   0.70%
Expected volatility   55%   55%
Expected term   0.17 year    0.67 year 
Expected dividend yield   0%   0%

 

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, respectively:

 

   June 30, 2017     
   Fair Value Measurements     
   Level 1   Level 2   Level 3   Total Fair Value 
Liabilities                    
Warrant liabilities (see Note 13)  $-   $-   $137,587   $137,587 

 

   December 31, 2016     
   Fair Value Measurements     
   Level 1   Level 2   Level 3   Total Fair Value 
Liabilities                    
Warrant liabilities (see Note 13)  $-   $-   $70,785   $70,785 

 

The table below reflects the components effecting the change in fair value for the six months ended June 30, 2017:

 

   Level 3 Assets and Liabilities     
   For the Six  Months Ended June 30 , 2017     
    January 1,       Change in   June 30, 
   2017   Settlements   Fair Value   2017 
Liabilities:                    
Warrant liabilities (see Note 13)  $70,785   $(177,197)  $243,999   $137,587 

 

The significant unobservable inputs used in the fair value measurement of the Company’s warrant 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.

 

The carrying amount of cash, accounts receivable, notes receivable, accounts payable, accrued other expenses, other current liabilities and convertible promissory note as of June 30, 2017 and December 31, 2016, approximate fair value because of the short maturity of these instruments.

 

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