|SEVEN STARS CLOUD GROUP, INC. filed this Form 10-Q on 11/13/2017|
Professional fees for the three months ended September 30, 2017 were $0.8 million as compared to $0.3 million for the same period in 2016, an increase of approximately $0.5 million. The increase in professional fees was mainly caused by the legal, valuation and auditing service fees incurred for three months ended September 30, 2017 in relation to the acquisitions in January 2017 and increased audit service fees charged by our external auditor for the opening audit due to our auditor change in 2017.
Change in fair value of warrant liabilities
Certain of our warrants are recognized as derivative liabilities and re-measured at the end of every reporting period and upon settlement, with the change in value reported in the statement of operations. We reported a gain of approximately $0.13 million and a gain of approximately $0.06 million for the three months ended September 30, 2017 and 2016, respectively. The changes are primarily due to expiration of all remaining warrant liability in August, 2017.
Income tax expenses
The income tax expense for the three months ended September 30, 2017 is nil because net operating loss carryovers offset current taxable income and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance.
Net loss attributable to non-controlling interest
Hua Cheng previously had a 20% non-controlling interest in Zhong Hai Media and accounting for that interest under the equity method by recording 20% of the operating losses of Zhong Hai Media. For the three months ended September 30, 2016, operating loss attributable to Hua Cheng was approximately $0.1 million. The Company sold Zhong Hai Media on June 30, 2017 and no more such allocation since then.
Dillon Yu has a 49% non-controlling interest in Shanghai Wecast Supply Chain Management Limited (“Wecast SH”) and as such we allocate 49% of the operating loss of Wecast SH to Dillon Yu. During the three months ended September 30, 2017, approximately $0.01 million of our operating loss from Wecast SH was allocated to Dillon Yu, which was nil in the same period in 2016.
Swiss Guorong Limited has a 45% non-controlling interest in Wide Angle and as such we allocate 45% of the operating profit of Wide Angle to Swiss Guorong Limited. During the three months ended September 30, 2017, approximately $0.03 million of our operating income from Wide Angle was allocated to Swiss Guorong Limited, which was nil for the same period in 2016.
Comparison of Nine Months Ended September 30, 2017 and 2016