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SEC Filings

10-Q
SEVEN STARS CLOUD GROUP, INC. filed this Form 10-Q on 11/13/2017
Entire Document
 

 

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 costs for professional fees increased approximately $0.9 million, or 91%, to $1.8 million for the nine months ended September 30, 2017, for the same period in 2016. The increase in professional fees was mainly caused by the legal, valuation and auditing service fees incurred in relation to the acquisitions in January 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 loss of approximately $0.1 million but a gain of approximately $0.2 million for the nine months ended September 30, 2017 and 2016, respectively. The changes are primarily due to fluctuations in our closing stock price.

 

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 nine months ended September 30, 2016, operating loss attributable to Hua Cheng was approximately $0.3 million. The Compnay sold Zhong Hai Media on June 30, 2017 and only $0.03 million operating loss were attributable to Hua Cheng for the same period in 2017.

 

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 nine months ended September 30, 2017, approximately $0.6 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 nine months ended September 30, 2017, approximately $0.003 million of our operating loss from Wide Angle was allocated to Swiss Guorong Limited, which was nil for the same period in 2016.

 

Liquidity and Capital Resources

 

As of September 30, 2017, the Company had cash of approximately $1.7 million and had accumulated deficits of approximately $120.5 million and $115.7 million as of September 30, 2017 and December 31, 2016, respectively, due to recurring losses since our inception. These factors could raise substantial doubt about the Company’s ability to continue as a going concern.

 

We continue to rely on debt and equity financing to pay for ongoing operating expenses and execution of our business plan. On March 28, 2016, we completed a common stock financing for $10.0 million. On July 19, 2016, we completed a stock financing with SSW for $4.0 million. On August 12, 2016, we completed another common stock financing with Harvest Alternative Investment Opportunities SPC for $4.0 million. On November 17, 2016, we completed another common stock financing with SSSHK for $2.0 million. On May 19, 2017, we completed another common stock financing with certain investors, including officers, directors and other affiliates of the Company for $2.0 million.

 

The 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 adjustment that might result from the outcome of this uncertainty.

 

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

 

   Nine  Months Ended 
   September 30,   September 30, 
   2017   2016 
Net cash used in operating activities  $(5,836,575)  $(7,945,349)
Net cash provided by (used in) investing activities   1,403,598    (10,631,956)
Net cash provided by financing activities   2,285,841    17,705,110 
Effect of exchange rate changes on cash   62,078    (57,416)
Net decrease in cash   (2,085,058)   (929,611)
           
Cash at beginning of period   3,761,814    3,768,897 
           
Cash at end of period  $1,676,756   $2,839,286 

 

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