Table of 1933, as amended; (xiv) “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; (xv) “PRC” and “China” refer to People’s Republic of China; (xvi) “Renminbi” and “RMB” refer to the legal currency of China; (xvii) “U.S. dollar,” “$” and “US$” refer to United States dollars; and (xviii) “VIEs” refers to our current variable interest entities, Sinotop Beijing, and Tianjin Sevenstarflix Network Technology Limited.

PART I —- FINANCIAL INFORMATION

Item 1. Financial Statements.

IDEANOMICS, INC.

~~SEVEN STARS CLOUD GROUP, INC., ITS SUBSIDIARIES AND VARIABLE INTEREST ENTITIES~~

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~FOR THE PERIOD ENDED SEPTEMBER 30, 2017~~

	~~Page~~
	Page
Unaudited Condensed Consolidated Balance Sheets	4 5
Unaudited Condensed Consolidated Statements of Operations	5 6
Unaudited Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)	6 7
Unaudited Condensed Consolidated Statements of Equity	8
Unaudited Condensed Consolidated Statements of Cash Flows	7 10
~~Unaudited Consolidated Statements of Equity~~	8
Notes to Unaudited Condensed Consolidated Financial Statements	9 11

Table of Contents

IDEANOMICS, INC.

~~Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities~~
~~UNAUDITED~~

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD in thousands)

September 30, 2017 December 31, 2016

ASSETS
Current assets:
Cash $ 1,676,756 $ 3,761,814
Accounts receivable, net 42,784,281 9,522,151
Licensed content, current 883,015 124,319
Notes receivable - 1,749,830
Inventory 375,693 203,697
Prepaid expenses 370,041 375,944
Other current assets 2,163,878 3,581,822
Total current assets 48,253,664 19,319,577
Property and equipment, net 119,304 4,963,725
Licensed content, non-current 16,075,134 17,593,528
Intangible assets, net 151,069 453,242
Goodwill - 6,648,911
Long term investments 6,958,411 6,654,664
Other non-current assets - 112,643
Total assets $ 71,557,582 $ 55,746,290
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND EQUITY
Current liabilities:(including amounts of consolidated VIEs without recourse to Seven Stars Cloud Group, Inc. See note 3)
Accounts payable $ 43,128,270 $ 13,341,680
Deferred revenue 207,112 1,350,054
Accrued interest due to a related party 397,852 557,918
Accrued other expenses 118,833 708,987
Accrued salaries 684,739 766,957
Payable for purchase of building - 987,015
Amounts due to related parties 58,567 1,060,817
Other current liabilities 168,316 934,480
Accrued license content fees - 1,236,661
Convertible promissory note due to a related party 3,000,000 3,000,000
Warrant liabilities - 70,785
Total current liabilities 47,763,689 24,015,354
Total liabilities $ 47,763,689 $ 24,015,354
Commitments and contingencies (Note 17)
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, 2017 and December 31, 2016, respectively $ 1,261,995 $ 1,261,995
Equity:
Series E Preferred Stock - $0.001 par value; 16,500,000 shares authorized, Nil and 7,154,997 shares issued and outstanding, liquidation preference of Nil and $12,521,245 as of September 30, 2017 and December 31, 2016, respectively - 7,155
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 62,264,494 and 53,918,523 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 62,264 53,918
Additional paid-in capital 145,791,961 152,755,919
Accumulated deficit (120,521,733 ) (115,669,268 )
Accumulated other comprehensive loss (775,512 ) (1,353,302 )
Total Seven Stars Cloud shareholders’ equity 24,556,980 35,794,422
Non-controlling interest (2,025,082 ) (5,325,481 )
Total equity 22,531,898 30,468,941
Total liabilities, convertible redeemable preferred stock and equity $ 71,557,582 $ 55,746,290


	September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	27,605	$	2,633
Accounts receivable, net (including due from related parties of $586 and $2,284 as of September 30, 2020 and December 31, 2019, respectively)		4,315		2,405
Prepayments		999		572
Amount due from related parties		1,601		1,256
Notes receivable		464		0
Other current assets		581		587
Total current assets		35,565		7,453
Property and equipment, net		165		378
Fintech Village		9,337		12,561
Intangible assets, net		52,398		52,771
Goodwill		10,472		23,344
Long-term investments		22,651		22,621
Operating lease right of use assets		7,357		6,934
Other non-current assets		519		883
Total assets	$	138,464	$	126,945

LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK, REDEMABLE NON-CONTROLLING INTEREST AND EQUITY
Current liabilities
Accounts payable	$	4,738	$	3,380
Deferred revenue		1,178		477
Accrued salaries		906		923
Amount due to related parties		1,333		3,962
Other current liabilities		4,195		6,466
Current portion of operating lease liabilities		520		1,113
Current contingent consideration		4,082		12,421
Promissory note-short term		3,750		3,000
Convertible promissory note due to third-parties		9,033		1,753
Convertible promissory note due to related parties		0		3,260
Total current liabilities		29,735		36,755
Asset retirement obligations		4,653		5,094
Convertible promissory note due to third-parties-long term		0		5,089
Convertible promissory note due to related parties-long term		0		1,551
Other long-term liabilities		514		0
Operating lease liability-long term		6,820		6,222
Non-current contingent consideration		7,608		12,235
Total liabilities		49,330		66,946
Commitments and contingencies (Note 18)
Convertible redeemable preferred stock and Redeemable non-controlling interest:
Series A - 7,000,000 shares issued and outstanding, liquidation and deemed liquidation preference of $3,500,000 as of September 30, 2020 and December 31, 2019		1,262		1,262
Redeemable non-controlling interest		7,370		0
Equity:
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 238,871,366 shares and 149,692,953 shares issued and outstanding as of September 30, 2020 and December 31, 2019 , respectively		239		150
Additional paid-in capital		362,346		282,554
Accumulated deficit		(295,693)		(248,481)
Accumulated other comprehensive income (loss)		290		(664)
Total IDEX shareholders' equity		67,182		33,559
Non-controlling interest		13,320		25,178
Total equity		80,502		58,737
Total liabilities, convertible redeemable preferred stock, redeemable non-controlling interest and equity	$	138,464	$	126,945

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

Table of Contents

IDEANOMICS, INC.

~~Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities~~
~~UNAUDITED~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD in thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016

Revenue $ 30,223,638 $ 1,626,844 $ 106,712,428 $ 4,377,034
Cost of revenue 28,273,862 893,796 100,888,964 2,609,975
Gross profit 1,949,776 733,048 5,823,464 1,767,059

Operating expenses:
Selling, general and administrative expense 3,630,949 2,320,247 7,771,561 6,294,206
Research and development expense 400,040 - 400,040 -
Professional fees 831,039 326,353 1,845,590 964,290
Depreciation and amortization 36,508 123,502 293,661 344,308
Impairment of other intangible assets 152,847 172,064 216,468 172,064
Total operating expense 5,051,383 2,942,166 10,527,320 7,774,868

Loss from operations (3,101,607 ) (2,209,118 ) (4,703,856 ) (6,007,809 )

Interest and other income (expense)
Interest expense, net (27,186 ) (24,971 ) (72,439 ) (225,154 )
Change in fair value of warrant liabilities 131,357 58,220 (112,642 ) 201,826
Equity in loss of equity method investees (23,632 ) 17,487 (100,468 ) (19,862 )
Other (806 ) (3,313 ) (111,448 ) (8,409 )
Loss before income taxes (3,021,874 ) (2,161,695 ) (5,100,853 ) (6,059,408 )

Income tax benefit - 8,612 - 25,836

Net loss (3,021,874 ) (2,153,083 ) (5,100,853 ) (6,033,572 )

Net loss (income) attributable to non-controlling interest (22,723 ) 105,879 608,910 261,809

Net loss attributable to Seven Stars Cloud shareholders $ (3,044,597 ) $ (2,047,204 ) $ (4,491,943 ) $ (5,771,763 )

Basic loss per share $ (0.05 ) $ (0.05 ) $ (0.08 ) $ (0.18 )
Diluted loss per share $ (0.05 ) $ (0.05 ) $ (0.08 ) $ (0.18 )

Weighted average shares outstanding:
Basic 62,146,168 41,184,037 59,594,289 31,640,230
Diluted 62,146,168 41,184,037 59,594,289 31,640,230


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Revenue from third-parties	$	10,618	$	250	$	15,681	$	950
Revenue from related parties		2		2,854		9		43,554
Total revenue		10,620		3,104		15,690		44,504
Cost of revenue from third-parties		9,906		244		14,674		751
Cost of revenue from related parties		0		0		2		467
Gross profit		714		2,860		1,014		43,286

Operating expenses:
Selling, general and administrative expenses		7,636		7,770		20,188		18,443
Research and development		1,318		0		1,318		0
Professional fees		3,968		1,389		8,096		3,918
Impairment loss		3,275		2,299		10,363		2,299
Change in fair value of contingent consideration, net		(4,179)		0		(2,900)		0
Depreciation and amortization		695		806		1,651		1,420
Total operating expenses		12,713		12,264		38,716		26,080

Income (loss) from operations		(11,999)		(9,404)		(37,702)		17,206

Interest and other income (expense):
Interest expense, net		(2,014)		(639)		(14,061)		(1,955)
Equity in income (loss) of equity method investees		7		(40)		(8)		(606)
Gain on disposal of subsidiaries		0		1,057		0		1,057
Loss on remeasurement of DBOT investment		0		(3,179)		0		(3,179)
Conversion expense		0		0		(2,266)		0
Other income (expense)		5,283		(100)		6,272		(156)
Income (loss) before income taxes and non-controlling interest		(8,723)		(12,305)		(47,765)		12,367

Income tax benefit		0		0		0		514

Net income (loss)		(8,723)		(12,305)		(47,765)		12,881

Deemed dividend related to warrant repricing		0		0		(184)		0

Net loss (income) attributable to non-controlling interest		437		(1,408)		737		(1,374)

Net income (loss) attributable to IDEX common shareholders	$	(8,286)	$	(13,713)	$	(47,212)	$	11,507

Earnings (loss) per share
Basic	$	(0.03)	$	(0.11)	$	(0.25)	$	0.10
Diluted		(0.03)		(0.11)		(0.25)		0.10

Weighted average shares outstanding:
Basic		237,535,999		127,609,748		191,976,856		113,964,933
Diluted		237,535,999		127,609,748		191,976,856		118,319,893

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

Table of Contents

IDEANOMICS, INC.

~~Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities~~
~~UNAUDITED~~

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS) (Unaudited) (USD in thousands)

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016

Net loss $ (3,021,874 ) $ (2,153,083 ) $ (5,100,853 ) $ (6,033,572 )

Other comprehensive income (loss), net of nil tax
Foreign currency translation adjustments 60,557 (67,764 ) 760,363 (269,274 )
Comprehensive loss (2,961,317 ) (2,220,847 ) (4,340,490 ) (6,302,846 )

Comprehensive income (loss) attributable to non-controlling interest 17,517 (100,982 ) (647,074 ) (240,350 )
Comprehensive loss attributable to Seven Stars Cloud shareholders $ (2,978,834 ) $ (2,119,865 ) $ (3,693,416 ) $ (6,062,496 )


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net income (loss)	$	(8,723)	$	(12,305)	$	(47,765)	$	12,881
Other comprehensive income (loss), net of NaN tax
Foreign currency translation adjustments		1,356		24		1,639		103
Comprehensive income (loss)		(7,367)		(12,281)		(46,126)		12,984
Deemed dividend related to warrant repricing		—		—		(184)		—
Comprehensive income (loss) attributable to non-controlling interest		122		(1,470)		(51)		(1,420)
Comprehensive income (loss) attributable to IDEX common shareholders	$	(7,245)	$	(13,751)	$	(46,361)	$	11,564

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

Table of Contents

IDEANOMICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) (USD in thousands)


	Nine Months Ended September 30, 2019
						Retained		Accumulated
				Additional		Earnings/		Other		Ideanomics		Non-
	Common	Par		Paid-in		Accumulated		Comprehensive		Shareholders'		controlling		Total
	Stock	Value		Capital		(Deficit)		Loss		equity		Interest		Equity
Balance, January 1, 2019	102,766,006	$	103	$	195,780	$	(149,975)	$	(1,665)	$	44,243	$	(1,031)	$	43,212
Share-based compensation	—		—		224		—		—		224		—		224
Common stock issuance for restricted shares	129,840		—		—		—		—		—		—		—
Common stock issuance for assets (SolidOpinion, Inc)	4,500,000		5		7,150		—		—		7,155		—		7,155
Common stock issuance for convertible debt	1,166,113		1		2,049		—		—		2,050		—		2,050
Net income (loss)	—		—		—		19,927		—		19,927		(18)		19,909
Foreign currency translation adjustments, net of nil tax	—		—		—		—		172		172		(25)		147
Balance, March 31, 2019	108,561,959		109		205,203		(130,048)		(1,493)		73,771		(1,074)		72,697
Share-based compensation	—		—		3,703		—		—		3,703		—		3,703
Common stock issuance for assets (Fintalk)	2,860,963		3		5,347		—		—		5,350		—		5,350
Common stock issuance for acquisition of non-controlling interest Grapevine¹	590,671		1		491		—		—		492		(492)		—
Investment from SSSIG	575,431		—		—		—		—		—		—		—
Net income (loss)	—		—		—		5,292		—		5,292		(15)		5,277
Foreign currency translation adjustments, net of nil tax	—		—		—		—		(76)		(76)		8		(68)
Balance, June 30, 2019	112,589,024		113		214,744		(124,756)		(1,569)		88,532		(1,573)		86,959
Share-based compensation	—		—		2,547		—		—		2,547		—		2,547
Common stock issuance for acquisition of BlackHorse Ventures²	815,217		1		1,499		—		—		1,500		—		1,500
Common stock issuance for acquisition of Glory Connection	12,190,000		12		24,368		—		—		24,380		—		24,380
Common stock issuance for acquisition of DBOT	5,851,830		6		9,708		—		—		9,714		105		9,819
Common stock issuance for releasing Grapevine as collateral	250,000		—		372		—		—		372		—		372
Common stock issuance for releasing Grapevine as collateral Convertible note	1,000,000		1		2,499		—		—		2,500		—		2,500
Deconsolidation of Amer	—		—		—		—		—		—		446		446
Net income (loss)	—		—		—		(13,712)		—		(13,712)		1,407		(12,305)
Foreign currency translation adjustments, net of nil tax	—		—		—		—		11		11		13		24
Balance, September 30, 2019	132,696,071	$	133	$	255,737	$	(138,468)	$	(1,558)	$	115,844	$	398	$	116,242

Notes:

~~Seven Stars Cloud Group, Inc., Its Subsidiaries~~¹ In 2018, the Company entered into a subscription agreement and ~~Variable Interest Entities~~
~~UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS~~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.

Nine Months Ended
September 30, 2017 September 30, 2016

Cash flows from operating activities:
Net loss $ (5,100,853 ) $ (6,033,572 )
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense 202,501 286,577
Provision for doubtful accounts 103,040 366,887
Depreciation and amortization 293,661 344,308
Amortization of debt issuance costs - 122,696
Income tax benefit - (25,836 )
Equity in loss of equity method investees 100,468 19,862
Loss on disposal of assets 683,195 -
Change in fair value of warrant liabilities 112,642 (201,826 )
Impairment of long-lived assets 216,468 172,064
Foreign currency exchange losses - 3,431

Change in assets and liabilities:
Accounts receivable (34,582,490 ) (2,890,663 )
Inventory (159,240 ) -
Licensed content 759,698 (639,225 )
Prepaid expenses and other assets 3,679,359 (799 )
Accounts payable 29,792,542 177,354
Accrued expenses, salary and other current liabilities (798,209 ) 250,856
Deferred revenue (1,139,357 ) (10,359 )
Accrued license content fees - 112,896
Net cash used in operating activities (5,836,575 ) (7,945,349 )

Cash flows from investing activities:
Acquisition of property and equipment (46,260 ) (3,130,862 )
Acquisition of leasehold improvements - (455,723 )
Proceeds from disposal of property and equipment 2,450,044 -
Disposal of subsidiary, net of cash disposed (8,753 ) -
Cash paid for the acquisition of subsidiaries (741,433 ) (650,000 )
Investments in intangibles - (2,811,346 )
Investment in long term investments (250,000 ) (3,584,025 )
Net cash provided by (used in) investing activities 1,403,598 (10,631,956 )

Cash flows from financing activities
Proceeds from private placement 2,529,344 -
Repayment of amounts due to related parties (243,503 ) -
Costs associated with financing activities - (294,890 )
Proceeds from issuance of warrant and shares - 18,000,000
Net cash provided by financing activities 2,285,841 17,705,110
Effect of exchange rate changes on cash 62,078 (57,416 )
Net increase (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

Supplemental Cash Flow Information:

Exchange of Series E Preferred Stock for common stock $ 7,155 $ 100
Issuance of convertible note for licensed content (Note 12) $ - $ 17,717,847
Issuance of shares for the settlement of liability $ - $ 75,000
Issuance of shares upon conversion of convertible note, including accrued interest and debt issuance cost $ - $ 17,733,297
Payment of interest $ 250,000 $ -
Acquisition of long term investment through transfer of Game IP rights $ - $ 2,714,441
Payable for Game IP rights acquired $ - $ 93,828
Payable for workforce acquired $ - $ 121,695

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

Table of Contents


	Nine Months Ended September 30, 2020
						Retained		Accumulated
				Additional		Earnings/		Other		Ideanomics		Non-
	Common	Par		Paid-in		Accumulated		Comprehensive		Shareholders’		controlling
	Stock	Value		Capital		(Deficit)		Loss		equity		Interest*		Total Equity
Balance, January 1, 2020	149,692,953	$	150	$	282,554	$	(248,481)	$	(664)	$	33,559	$	25,178	$	58,737
Share-based compensation	—		—		2,202		—		—		2,202		—		2,202
Common stock issuance for professional fee	429,000		—		240		—		—		240		—		240
Common stock issuance for interest (ID Venturas)	29,766		—		21		—		—		21		—		21
Common stock issuance for acquisition (DBOT)	10,883,668		11		6,737		—		—		6,748		—		6,748
Common stock issued for warrant exercised (YA II)	1,000,000		1		999		—		—		1,000		—		1,000
Common stock issuance for convertible note (YA II)	1,424,658		1		592		—		—		593		—		593
Tree Technologies measurement period adjustment	—		—		—		—		—		—		(11,454)		(11,454)
Non-controlling shareholder contribution (DBOT)	—		—		—		—		—		—		100		100
Net income (loss)	—		—		—		(12,348)		—		(12,348)		(378)		(12,726)
Foreign currency translation adjustments, net of nil tax	—		—		—		—		(16)		(16)		23		7
Balance, March 31, 2020	163,460,045		163		293,345		(260,829)		(680)		31,999		13,469		45,468
Share-based compensation	—		—		3,394		—		—		3,394		—		3,394
Common stock issuance for acquisition (DBOT)	459,180		—		293		—		—		293		—		293
Common stock issuance for convertible note conversion (Mr. McMahon)	5,084,746		5		2,995		—		—		3,000		—		3,000
Common stock issuance for convertible note conversion (SSSIG)	2,656,361		3		1,565		—		—		1,568		—		1,568
Common stock issuance for debt (SSSIG)	2,577,876		3		1,515		—		—		1,518		—		1,518
Common stock issuance for debt	2,000,000		2		795		—		—		797		—		797
Common stock issuance for option exercised	23,223		—		—		—		—		—		—		—
Common stock issuance for professional fee	515,942		1		308		—		—		309		—		309
Common stock issuance for RSU vested	270,634		—		—		—		—		—		—		—
Convertible notes conversion price reset (Mr. McMahon and SSSIG)	—		—		2,265		—		—		2,265		—		2,265
Common stock issuance for warrants exercised (YA II)	1,666,667		2		2,498		—		—		2,500		—		2,500
Common stock issuance for convertible notes conversion (YA II)	9,739,021		10		5,073		—		—		5,083		—		5,083
Common stock issuance for convertible notes conversion (ID Venturas)	8,751,506		9		4,608		—		—		4,617		—		4,617
Common stock issuance for financing (SEDA)	34,473,719		34		32,466		—		—		32,500		—		32,500
Convertible notes conversion price reset (YA II)	—		—		2,661		—		—		2,661		—		2,661
Convertible notes conversion price reset (ID Venturas)	—		—		817		—		—		817		—		817
Common stock issuance for warrants exercised (ID Venturas)	5,329,239		5		3,122		—		—		3,127		—		3,127
Tree Technologies MPA adjustment	—		—		—		—		—		—		(131)		(131)
Net income (loss)**	—		—		—		(26,578)		—		(26,578)		(133)		(26,711)
Foreign currency translation adjustments, net of nil tax	—		—		—		—		172		172		104		276
Balance, June 30, 2020	237,008,159		237		357,720		(287,407)		(508)		70,042		13,309		83,351
Share-based compensation	—		—		3,252		—		—		3,252		—		3,252
Common stock issuance for acquisition (DBOT)	1,613,207		2		1,031		—		—		1,033		—		1,033
Common stock and warrants issuance for professional fee	250,000		—		343		—		—		343		—		343
Net income (loss)	—		—		—		(8,286)		—		(8,286)		(547)		(8,833)
Foreign currency translation adjustments, net of nil tax	—		—		—		—		798		798		558		1,356
Balance, September 30, 2020	238,871,366	$	239	$	362,346	$	(295,693)	$	290	$	67,182	$	13,320	$	80,502

* Excludes accretion of dividend for redeemable non-controlling interest

** Excludes deemed dividend related to warrant repricing

~~Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities~~

~~UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY~~

~~For the Nine Months Ended September 30, 2016~~

Series E
Preferred
Stock Series E
Par
Value Common
Stock Par
Value Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Seven Stars Cloud
Shareholders'
Equity Non-
controlling
Interest Total
Equity
Balance,
January 1, 2016
7,254,997 $ 7,255 24,249,109 $ 24,249 $ 97,512,542 $ (86,457,840 ) $ (414,910 ) $ 10,671,296 $ (2,388,031 ) $ 8,283,265
Share-based compensation - - 25,000 25 286,552 - - 286,577 - 286,577
Common stock issuance - - 9,090,909 9,091 17,268,483 - - 17,277,574 - 17,277,574
Warrants issued in connection with common stock issuance - - - - 722,426 - - 722,426 - 722,426
Issuance cost in connection with the issuance of common stock and warrants - - - - (411,223 ) - - (411,223 ) - (411,223 )
Common stock issued from conversion of convertible note - - 9,208,860 9,209 17,724,088 - - 17,733,297 - 17,733,297
Restricted Shares granted in connection with acquisition - - 121,695 - - 121,695 - 121,695
Common stock issued for settlement of liability - - 41,780 42 74,958 - - 75,000 - 75,000
Common stock issued from series E preferred stock (100,000 ) (100 ) 100,000 100 - - - - - -
Net loss - - - - - (5,771,763 ) - (5,771,763 ) (261,809 ) (6,033,572 )
Foreign currency translation adjustments, net of nil tax - - - - - - (290,733 ) (290,733 ) 21,459 (269,274 )
Balance,
September 30, 2016
7,154,997 $ 7,155 42,715,658 $ 42,716 $ 133,299,521 $ (92,229,603 ) $ (705,643 ) $ 40,414,146 $ (2,628,381 ) $ 37,785,765

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

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IDEANOMICS, INC.

~~Seven Stars Cloud Group, Inc., Its Subsidiaries and Variable Interest Entities~~
~~UNAUDITED~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~EQUITY~~CASH FLOWS (Unaudited) (USD in thousands)

~~For the Nine Months Ended September 30, 2017~~


	Nine Months Ended
	September 30, 2020		September 30, 2019
Cash flows from operating activities:
Net income (loss)	$	(47,765)	$	12,881
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense		8,848		6,474
Depreciation and amortization		1,651		1,420
Allowance for doubtful accounts		585		0
Non-cash interest expense		14,143		2,266
Equity in losses of equity method investees		8		606
Digital tokens received as payment for services		0		(40,700)
Gain on disposal of subsidiaries		0		(1,057)
Loss on remeasurement of DBOT investment		0		3,179
Conversion expense		2,266		0
Impairment loss		4,143		2,299
Impairment of operating lease assets		6,220		0
Settlement of ROU operating lease liabilities		(5,706)		0
Change in fair value of contingent consideration, net		(2,900)		0
Change in assets and liabilities:
Accounts receivable		(2,496)		(2,814)
Prepaid expenses and other assets		(689)		2,447
Accounts payable		1,358		1,024
Deferred revenue		701		150
Amount due to related parties		1,542		(104)
Accrued expenses, salary and other current liabilities		(3,827)		3,217
Net cash used in operating activities		(21,918)		(8,712)

Cash flows from investing activities:
Acquisition of property and equipment		(45)		(1,809)
Proceeds from note receivable repayment		1,469		0
Proceeds from disposal of subsidiaries		0		694
Acquisition of subsidiaries, net of cash acquired		0		247
Payments for long-term investments		0		(870)
Notes receivable		(1,910)		0
Net cash used in investing activities		(486)		(1,738)

Cash flows from financing activities:
Proceeds from issuance of convertible notes		2,000		4,802
Proceeds from exercise of warrants and issuance of common stocks		39,128		2,500
Proceeds from noncontrolling interest shareholder		7,148		0
Borrowings from Small Business Association Paycheck Protection Program		460		0
Proceeds from/(Repayment of) amounts due to related parties		(2,999)		1,765
Net cash provided by financing activities		45,737		9,067
Effect of exchange rate changes on cash		1,639		(37)
Net increase (decrease) in cash and cash equivalents		24,972		(1,420)

Cash and cash equivalents at the beginning of the period		2,633		3,106

Cash and cash equivalents at the end of the period	$	27,605	$	1,686

Supplemental disclosure of cash flow information:
Cash paid for income tax	$	0	$	0
Cash paid for interest		311		0
Issuance of shares for acquisition of DBOT		8,074		0
Issuance of shares for convertible notes conversion		20,069		0
Tree Technologies measurement period adjustment on goodwill, non-controlling interest and intangible assets		12,848		0
Disposal of assets in exchange for GTB tokens		0		20,219
Issuance of shares for acquisition of intangible assets		0		10,005

Series E
Preferred
Stock Series E
Par
Value Common
Stock Par
Value Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Income (Loss) Seven Stars Cloud
Shareholders'
Equity Non-
controlling
Interest Total
Equity
Balance,
January 1, 2017
7,154,997 $ 7,155 53,918,523 $ 53,918 $ 152,755,919 $ (115,669,268 ) $ (1,353,302 ) $ 35,794,422 $ (5,325,481 ) $ 30,468,941
Share-based compensation - - - - 202,501 - - 202,501 - 202,501
Common stock issuance - - 727,273 727 1,999,273 - - 2,000,000 - 2,000,000
Common stock issuance for RSU vested - - 111,465 112 (112 ) - - - - -
Common stock issuance for option exercised - - 41,131 41 39,862 - - 39,903 - 39,903
Common stock issued for warrant exercised - - 311,105 311 681,916 - - 682,227 - 682,227
Common stock issued from conversion of series E preferred stock (7,154,997 ) (7,155 ) 7,154,997 7,155 - - - - - -
Disposal of Zhong Hai Shi Xun - - - - (9,887,398 ) (360,522 ) (220,737 ) (10,468,657 ) 3,947,473 (6,521,184 )
Net loss - - - - - (4,491,943 ) - (4,491,943 ) (608,910 ) (5,100,853 )
Foreign currency translation adjustments, net of nil tax - - - - - - 798,527 798,527 (38,164 ) 760,363
Balance,
September 30, 2017
- $ - 62,264,494 $ 62,264 $ 145,791,961 $ (120,521,733 ) $ (775,512 ) $ 24,556,980 $ (2,025,082 ) $ 22,531,898

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

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IDEANOMICS, INC.

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

~~Organization and Principal Activities~~

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

Nature of Operations

~~Seven Stars Cloud Group,~~Ideanomics, Inc.~~, formerly known as Wecast Network, Inc.,~~ (“Ideanomics” or the “Company”) (Nasdaq: IDEX) is a Nevada corporation that primarily operates in ~~China (“PRC”)~~Asia and the United States through its subsidiaries and ~~consolidated~~ variable interest entities ~~(“VIEs”~~("VIEs"). ~~Seven Stars Cloud Group,~~Unless the context otherwise requires, the use of the terms "we," "us," "our," and the "Company" in these notes to condensed consolidated financial statements refers to Ideanomics, Inc., its consolidated subsidiaries and VIEs.

The Company's chief operating decision maker has been identified as the chief executive officer, who reviews consolidated ~~VIEs are collectively referred to as Seven Stars Cloud (“SSC”, “we”, “us”, or “the Company”).~~

SSC is aiming to become a global leader in providing next-generation Artificial-Intelligent (AI) & Fintech Powered, Supply Chain + Digital Finance Solutions. SSC’s innovative model helps businesses enhanceresults when making decisions about allocating resources and ~~unlock operational and capital value from both~~assessing performance of the supply chain and real assets. In addition, SSC offers a closed trade ecosystem for buyers and sellers designed to eliminate transactional middlemen and create a more direct and margin-expanding path for principals. There are three engines that drive our business platform: 1. Intelligent Supply Chain Management; 2. Asset Based Securitization and Tokenization Issuance and Trading Platform and 3. Digital Index and Financial Derivatives Issuance and Trading Platform; All three engines are supported by “ABCD” Technology & Infrastructure (A: Artificial IntelligenceI, B: Blockchain, C: Cloud Computing, D: Data). SSC is also leveraging its legacy operations as a premium content Video On Demand (“VOD”) service provider in China.

~~On January 30, 2017,~~Company. Therefore, the Company ~~entered into a Securities Purchase Agreement (the “Sun Video SPA”)~~operates in one segment with ~~BT Capital Global Limited, a British Virgin Islands company~~two business units, the Mobile Energy Group ("MEG"), and Ideanomics Capital. As the chief executive officer previously reviewed two operating segments separately for this purpose, the Company has changed its presentation accordingly, from two reportable segments to one reportable segment.

The segment reporting changes were retrospectively applied to all periods presented.

MEG’s mission is to use electronic vehicles (“~~BT”~~EVs”) and ~~affiliate of the Company’s Chairman Bruno Wu,~~EV battery sales and financing to attract commercial fleet operators that will generate large scale demand for energy, energy storage systems, and energy management contracts. MEG operates as an end-to-end solutions provider for the ~~purchase by~~procurement, financing, charging and energy management needs of fleet operators of commercial EVs.

Ideanomics Capital is involved with areas of capital markets such as financial products advisory and creation, with specific focus on the application of blockchain and artificial intelligence in Fintech.

The Company also seeks to identify industries and business processes where blockchain and artificial intelligence (“AI”) technologies can be profitably deployed to disrupt established industries and business processes.

Basis of all of the outstanding capital stock of Sun Video Group Hong Kong Limited. On January 31, 2017, the Company entered into another Securities Purchase Agreement (the “Wide Angle SPA”) with BT and Sun Seven Stars Media Group Limited, one of the Company’s largest shareholders, controlled by Mr. Wu, as guarantor, for the purchase by us of 55% of the outstanding capital stock of Wide Angle Group Limited (“Wide Angle”). Details of these two acquisitions are disclosed in Note 4. After acquiring these two entities, other than the Company’s legacy You On Demand (“YOD”) business, the Company became engaged in consumer electronics and smart supply chain management operations.

On June 30, 2017, the Company entered into another Securities Purchase Agreement (the “BT SPA”) with BT, pursuant to which the issued and outstanding stock that SSC holds in three separate non-core assets were sold to BT in exchange for RMB100 million (approximately $14.75 million at current exchange rates) in a combination of cash and publicly traded stock to be paid to SSC within one year of closing. A minimum of 20% of the total consideration to SSC will be paid in cash (approximately $2.95 million). A portion of the consideration may be paid in the form of publicly traded stock at the discretion of BT, and in that case, the securities will represent a public company affiliated with BT, in an industry related to SSC’s and with an average daily trading value of at least $146,000. The detail of this transaction has been disclosed in Note 11.

Presentation

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments ~~(which include~~of a normal recurring ~~adjustments)~~nature that are necessary ~~to present~~for a fair ~~statement~~presentation of the ~~financial position as of September 30, 2017,~~ results ~~of operations~~ for the ~~three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016, have been made.~~interim periods presented. All significant intercompany transactions and balances are eliminated onin consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results.

The Company uses 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~~GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the ~~Company's~~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, ~~2016~~2019 filed with the Securities and Exchange Commission (“SEC”) on March ~~31, 2017~~16, 2020 (“~~2016 Annual Report”~~2019 Form 10-K.”).

Use of Estimates

~~Going Concern and Management’s Plans~~

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.

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On an ongoing basis, management evaluates the Company's estimates, including those related to the bad debt allowance, variable consideration, 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. The Company bases its 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.

Significant Accounting Policies

For a detailed discussion about Ideanomics’ significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Ideanomics’ consolidated financial statements included in the Company’s 2019 Form 10-K. During the nine months ended September 30, ~~2017~~2020, there were no significant changes made to Ideanomics’ significant accounting policies.

Reclassifications

The Company has renamed captions in its condensed consolidated balance sheet, condensed consolidated statement of operations, and ~~2016,~~its condensed consolidated statement of cash flows. There were no changes to the composition of these accounts, and therefore no change to the condensed consolidated financial accounts aside from the renaming of the captions.

Statement	Previous caption	Current caption
Condensed consolidated balance sheet	Acquisition earn-out liability	Contingent consideration
Condensed consolidated statement of operations	Acquisition earn-out/true up expense, net	Change in fair value of contingent consideration, net
Condensed consolidated statement of cash flows	Acquisition earn-out expense	Change in fair value of contingent consideration, net

Liquidity Improvements

In the nine months ended September 30, 2020, the Company ~~incurred loss~~improved its liquidity position by raising a total of $48.2 million: $39.1 million through the issuance of common stock and exercise of warrants, $7.1 million from ~~operations~~noncontrolling interest shareholders, and $2.0 million through the issuance of ~~approximately $4.7~~senior secured convertible notes. The Company converted senior secured convertible notes of $9.4 million ~~and $6.0~~plus accrued interest of $0.3 million ~~respectively, and incurred net loss of $5.1 million and $6.0 million, respectively, and cash used in operations was approximately $5.8 million and $7.9 million, respectively. Further,~~to common stock. Additionally, the Company ~~had accumulated deficit~~converted $4.6 million of ~~approximately $120.5~~convertible notes payable and accrued interest to related parties and an additional $1.5 million due to related parties to common stock. As a result of these actions, the Company reduced its the principal amount of its indebtedness by $13.9 million, and ~~$115.7 million~~ as of September 30, ~~2017~~2020, had cash and ~~December 31, 2016, respectively, due to recurring losses since the inception~~cash equivalents of ~~its business.~~$27.6 million, $19.0 million of which is held in U. S. financial institutions.

~~The Company must continue to rely on proceeds from debt and equity issuances to pay for ongoing operating expenses in order to execute~~Based upon its business plan. On March 28, 2016, the Company completed a common stock financing for $10.0 million. In addition, the Company completed four separate common stock financings with Seven Star Works Co. Ltd. (“SSW”) for $4.0 million on July 19, 2016, with Harvest Alternative Investment Opportunities SPC (“Harvest”) for $4.0 million on August 12, 2016, with Sun Seven Stars Hong Kong Cultural Development Limited (“SSSHK”) for $2.0 million on November 17, 2016projections and ~~with certain investors, officers & directors~~its cash and ~~affiliates in a private placement for $2.0 million on May 19, 2017, respectively. Although~~cash equivalents balance as of September 30, 2020, the Company believes it has the ability to

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

raise funds by issuing debt or equity instruments, additional 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.

~~These conditions raise substantial doubt about the Company’s ability to~~ continue as a going concern.

Effects of COVID-19

Novel Coronavirus 2019 (“COVID-19”) is an infectious disease cause by severe acute respiratory syndrome coronavirus. The disease was first identified in December 2019 in Wuhan, the capital of China’s Hubei province, and has since spread globally, resulting in the ongoing COVID-19 pandemic. As of October 31, 2020, over 44.7 million cases had been reported across the globe, resulting in 1.2 million deaths.

The spread of COVID-19 has caused significant disruption to society as a whole, including the workplace. The resulting impact to the global supply chain has disrupted most aspects of national and international commerce, with government-mandated social distancing measures imposing stay-at-home and work-from-home orders in almost every country. The effects of social distancing has shut down significant parts of the local, regional, national, and international economies with the exception of government designated essential services.

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In many parts of the world, stay-at-home and work-from-home orders were relaxed during the summer of 2020 as the effects of the Coronavirus appeared to lessen, and economic activity began to recover. However, commencing in the autumn and fall of 2020, the U.S. as well as countries in Europe began to experience an increase in new COVID-19 cases, and in some cases local, state, and national governments began to reinstate restrictive measures to stem the spread of the virus.

Public health experts have expressed concern that the influenza season in the northern hemisphere will coincide with a spread of COVID-19 cases, adding further stress to the affected populations, businesses, governments, and economies. The future effects of the virus are difficult to predict, due to uncertainty about the course of the virus, and the prospects for a vaccine as well as its global implementation.

The Company assesses the recoverability of goodwill and other indefinite-lived intangible assets in the fourth quarter of each year, or more frequently if circumstances warrant. The Company assesses the recoverability of other long-lived assets as circumstances warrant, and in the nine months ended September 30, 2020 did not consider any long-lived assets to be impaired other than certain right of use and fixed assets, including assets comprising a portion of Fintech Village. Many of the Company’s operations are in the development or early stage, have not had significant revenues to date, and the Company does not anticipate significant adverse effects on its operations’ revenue as compared to its business plan in the near- or mid-term, although the future effects of COVID-19 may result in regional restrictive measures which may constrain the Company’s operations.

The Company continues to monitor the overall situation with COVID-19 and its effects on both local, regional and global economies.

Resulting Delay in Documentation

In the three months ended March 31, 2020, the Company commenced the process of formulating and implementing a share-based compensation plan whereby key employees and certain consultants of its MEG business unit and wholly-owned subsidiary would benefit.

As one component of this process, the Company had initially transferred 10,000 common shares of MEG, representing 20.0% of the overall outstanding common shares, to Merry Heart Technology Limited ("MHTL"),who was intended to act as a trustee over these shares, for a nominal amount. It was the Company’s intent that this arrangement would be structured in a manner similar to other trusts used to effect share-based compensation plans, and would qualify as a VIE and consequently be consolidated.

However, the disruption caused by the COVID-19 virus, particularly in China, where many of the Company’s personnel and business advisors are located, initially delayed the Company’s efforts to implement this share-based compensation plan.

The Company has determined not to proceed with the MEG share-based compensation plan described above, and the parties have declared the transfer of the MEG shares, which was not believed to be substantive, to be null and void and they have reverted to the Company.

No share-based awards had been granted to employees or consultants pursuant to this arrangement as originally contemplated.

Note 2. New Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13 (“ASU 2016-13”) "Financial Instruments - Credit Losses” (“ASC 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

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rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” (“ASC 2019-10”), which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company. The Company will adopt ASU 2016-13 effective January 1, 2023. Management is currently evaluating the effect of the adoption of ASU 2016-13 on the consolidated financial ~~statements~~statements. The effect will largely depend on the composition and credit quality of the investment portfolio and the economic conditions at the time of adoption.

In December 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”) “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.” ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions currently provided for in ASC 740, “Income Taxes” (“ASC 740”), and by amending certain other requirements of ASC 740. The changes resulting from ASU 2019-12 will be made on a retrospective or modified retrospective basis, depending on the specific exception or amendment. For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company will adopt ASU 2019-12 effective January 1, 2021. Management does not expect the adoption of ASU 2019-12 to have a material effect on the consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company will adopt ASU 2020-06 effective January 1, 2024. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.

Note 3. Notes Receivable

(a)Zhu Note Receivable

In May 2020, a subsidiary of the Company, Qingdao Chenyang Ainengju New Energy Sales and Service Company Limited ("Energy Sales") provided a note receivable to Mr. Jianya Zhu ("Mr. Zhu") in the amount of 10.0 million RMB ($1.4 million). Mr. Zhu, through his wholly-owned entity Prime Capital Enterprise Pte. Ltd., provided collateral in the form of its 50.0% ownership of Seven Stars Founder Space Industrial Pte. Ltd ("Founder Space.") Founder Space is also 50.0% owned by a related party, Seven Stars Innovative Industries Group Limited, an affiliate of Dr. Bruno Wu (“Dr. Wu”), the Chairman of the Company. Mr. Zhu agreed to repay 10.5 million RMB ($1.5 million) one month from the disbursement date. In September 2020, a third-party satisfied the note receivable and accrued interest in the amount of 10.5 million RMB ($1.5 million) on behalf of Mr. Zhu, and the Company terminated the note and collateral agreement.

(b)Fuzhou Note Receivable

In May 2020, Energy Sales provided a note receivable to Fuzhou Zhengtong Hongxin Investment Management Company Limited ("Zhengtong") in the amount of 3.0 million RMB ($0.4 million). The note receivable is not collateralized. Zhengtong agreed to repay 3.3 million RMB ($0.5 million) within three months of the disbursement date. As of this date,

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this note receivable has not been satisfied; however, the Company believes the note receivable to be collectible based upon discussions that have been ~~prepared assuming that~~held.

Note 4. Revenue

The following table summarizes the ~~Company will continue as~~Company's revenues disaggregated by revenue source, geography (based on the Company's business locations), and timing of revenue recognition (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Geographic Markets
Malaysia	$	33	$	—	$	42	$	—
USA		480		250		908		41,650
China		10,107		2,854		14,740		2,854
Total	$	10,620	$	3,104	$	15,690	$	44,504
Product or Service
Digital asset management services	$	—	$	—	$	—	$	40,700
Digital advertising services and other		480		250		908		950
Electric vehicles*		8,872		2,854		9,622		2,854
Combustion engine vehicles*		1,268		—		5,160		—
Total	$	10,620	$	3,104	$	15,690	$	44,504

Timing of Revenue Recognition
Products transferred at a point in time	$	10,620	$	3,104	$	15,690	$	3,804
Services provided over time		—		—		—		40,700
Total	$	10,620	$	3,104	$	15,690	$	44,504

* The revenues for the three and the nine months ended September 30, 2020 were recorded on either a ~~going concern and, accordingly, do not include any adjustments that might result from~~Principal or Agency basis, depending on the ~~outcome~~terms of ~~this uncertainty.~~

~~VIE Structure and Arrangements~~

~~Sinotop VIE structure and arrangement~~

~~In response to PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides value-added telecommunication services,~~ the ~~Company provides its services through Sinotop Beijing. The Company has~~underlying transaction, including the ability to control ~~Sinotop Beijing through a series of contractual agreements entered into among YOD WFOE, YOD Hong Kong, Sinotop Beijing~~the product and the ~~legal shareholders~~level of ~~Sinotop Beijing.~~inventory risk taken.The combustion engine vehicles for the three and the nine months ended September 30, 2020 were recorded on a Principal basis because the Company has inventory risk in the transaction.

In the three months ended September 30, 2020 the balance of deferred revenue increased primarily due to two factors: 1) the Company sold vehicles with a service warranty, and allocated a portion of the transaction price to this performance obligation and will recognize this revenue over the service period, and 2) the Company was engaged to perform advertising services pursuant to one significant contract, and such services were partially fulfilled in the three months ended September 30, 2020 and the remainder will be fulfilled in the future.

In the three months ended September 30, 2020 the Company sold vehicles whose contractual terms contained a provision which gave rise to variable consideration. The Company has estimated the variable consideration, and will continue to revise this estimate in the future. The liability associated with this estimate is recorded as “Other long-term liabilities.”

Note 5. VIE Structure and Arrangements

Prior to ~~January 2016,~~December 31, 2019, the Company entered into a series of contractual agreements to give it the ability to control Sinotop Beijing with Zhang Yan, the former legal shareholder of Sinotop Beijing (the spouse of its then-CEO). In January 2016, in connection with the appointment of a new CEO and in accordance with its rights under the contractual agreements, (1) the legal ownership of Sinotop Beijing was transferred from Zhang Yan to Bing Wu, the brother of its current Chairman and Yun Zhu, the former Vice President of Beijing Sun Seven Stars Culture Development Limited (“SSS”), (2) the Company terminated the series of contractual arrangements with Zhang Yan, and (3) the Company entered into new contractual agreements with Bing Wu and Yun Zhu (collectively, the “Former Sinotop VIE Agreements”). In October 2016, in accordance with its rights under contractual agreements, (1) the legal ownership of Sinotop Beijing was transferred from Bing Wu to Mei Chen, the former CFO of the Company, (2) the Company terminated the series of contractual arrangements with Bing Wu, and (3) the Company entered into new contractual agreements with Mei Chen (collectively, the “New Sinotop VIE Agreements”). Although the Former Sinotop VIE Agreements and New Sinotop VIE Agreements resulted in changes to the legal shareholders of Sinotop Beijing, there was no changeconsolidated certain VIEs located in the ~~Company’s ability to control Sinotop Beijing or~~People’s Republic of China (“PRC”) in which it held variable interests and was the ~~Company’s rights to 100% of the economic benefits of Sinotop Beijing.~~primary beneficiary through contractual agreements. The Company was the primary beneficiary because it had the power to direct activities that most significantly affected their economic performance and had the obligation to absorb or right to receive the majority of ~~Sinotop Beijing prior to~~their losses or benefits. The results of operations of these VIEs are included in the ~~signing~~consolidated financial statements for the year ended December 31, 2019. A shareholder in one of the ~~Former Sinotop VIE Agreements and New Sinotop VIE Agreements and~~VIEs is the spouse of Dr. Wu.

The contractual agreements, which collectively granted the Company ~~remained~~ the ~~primary beneficiary~~power to direct the VIEs activities that most significantly affected their economic performance, as well to cause the Company to have the obligation to absorb or right

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to receive the ~~signing~~majority of their losses or benefits, were terminated by all parties on December 31, 2019. As a result, the Company deconsolidated the VIEs as of December 31, 2019.

Refer to Note 10 for information on an additional VIE.

Note 6. Acquisitions and Divestitures

2020 Acquisitions and Divestitures

The Company has not acquired any companies nor disposed of any subsidiaries in the nine months ended September 30, 2020, with the exception of the ~~former Sinotop VIE Agreements and the New Sinotop VIE Agreements. Accordingly, the change~~disposition of its remaining 10.0% interest in ~~legal ownership of Sinotop Beijing did not have any impact to the Company’s consolidation of Sinotop Beijing.~~ Amer Global Technology Limited ("Amer") as disclosed in Note 6(e).

The ~~key terms of the New Sinotop VIE Agreements are summarized as follows:~~

~~Equity Pledge Agreement~~

Pursuant to the Equity Pledge Agreement among YOD WFOE, Sinotop Beijing, Mei Chen and Yun Zhu (collectively, the “Nominee Shareholders”), the Nominee Shareholders pledged all of their equity interests in Sinotop Beijing (the “Collateral”) to YOD WFOE as security for the performance of the obligations of Sinotop Beijing to make all the required technical service fee payments pursuant to the Technical Services Agreement and for performance of the Nominee Shareholders’ obligation under the Call Option Agreement. The terms of the Equity Pledge Agreement expire upon satisfaction of all obligations under the Technical Services Agreement and Call Option Agreement.

~~Call Option Agreement~~

Pursuant to the Call Option Agreement among YOD WFOE, Sinotop Beijing and the Nominee Shareholders, the Nominee Shareholders granted an exclusive option to YOD WFOE, or its designee, to purchase, at any time andCompany 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 ~~permitted under PRC law, all~~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.

2019 Acquisitions

(a)Acquisition of Tree Technologies Sdn. Bhd. ("Tree Technologies")

On December 26, 2019, the Company completed the acquisition of a 51.0% interest in Tree Technologies, a Malaysian company engaged in the EV market. The acquisition price was comprised of (1) $0.9 million in cash, (2) 9.5 million shares of Ideanomics common stock, and (3) contingent consideration of up to $32.0 million over three years, to be paid in cash or ~~any portion~~Ideanomics common shares at the election of the ~~Nominee Shareholders’~~Company. The contingent consideration was initially based upon revenue targets over three 12 month periods beginning in the three months ended December 31, 2019; due to financing delays and resulting production delays, these three 12 month periods will commence on July 1, 2020. In the three and nine months ended September 30, 2020, the Company recorded remeasurement gains of $4.2 million and $4.4 million in "Change in fair value of contingent consideration, net" in the condensed consolidated statements of operations. As of September 30, 2020, the recorded balance of this liability was $10.9 million.

The fair value of the Ideanomics stock was based upon the closing price of $0.82 on December 26, 2019, and the fair value of the contingent consideration was estimated to be $15.5 million, and revised to $15.3 million upon finalization of the purchase, and was recorded as a liability on the date of acquisition. The Company estimated the fair value of the contingent consideration using a scenario-based method which incorporates various estimates, including projected gross revenue for the periods, probability estimates, discount rates and other factors. This fair value measurement is based on significant Level 3 inputs. The resulting probability-weighted cash flows were discounted using the Company's estimated weighted average cost of capital of 15.0%.

Tree Technologies holds the land use rights for 250 acres of vacant land zoned for industrial development in the Begeng Industrial Area adjacent to Kuantan Port. Kuantan is the capital city of the state of Pahang on the east coast of Peninsular Malaysia. The Company intends to develop this land and lease it to Tree Manufacturing for the manufacture of EVs. Tree Technologies holds an exclusive right to market and distribute the EVs manufactured by Tree Manufacturing. The goodwill arising from the acquisition consists largely of the synergies expected from the fulfillment of these contracts. None of the goodwill recognized is expected to be deductible for tax purposes.

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 Tree Technologies recognized. The Company has completed the fair value

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analysis of the assets acquired, liabilities assumed, the noncontrolling interest, and the contingent consideration, and therefore the adjustments are incorporated in the table below (in thousands).


Land use rights	$	27,140
Accounts payable		(743)
Noncontrolling interest		(15,452)
Goodwill		468
Marketing and distribution agreement		12,590
	$	24,003

The completion of the fair value analysis resulted in measurement period adjustments of $12.8 million, primarily to the amount initially assigned to the noncontrolling interest, and reduced the amount of goodwill recorded.

The accounts payable above of $0.7 million primarily represents the transfer tax payable for the land use rights for the 250 acres of vacant land, which the Company paid in the three months ended September 30, 2020.

Tree Technologies had not commenced operations as of the acquisition date, therefore pro forma results as if the acquisition had occurred as of January 1, 2019, and related information, are not presented.

(b) Acquisition of Grapevine Logic, Inc. ("Grapevine”)

On September 4, 2018, the Company completed the acquisition of 65.7% share of Grapevine for $2.4 million in cash. Fomalhaut Limited (“Fomalhaut,”) a British Virgin Islands company and an affiliate of Dr. Wu, was the non-controlling equity holder of 34.4% in ~~Sinotop Beijing.~~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 aggregate sale price for the Fomalhaut Interest was the fair market value of the Fomalhaut Interest as of the close of business on the date preceding the date upon which the right to sell the Fomalhaut Interest to the Company is exercised by Fomalhaut. If the option was to be exercised, the sale price for the Fomalhaut Interest was 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.

In May 2019, the Company entered into two amendments to the Option Agreement. The aggregate exercise price for the Option was amended to the greater of: (1) 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 (2) $1.84 per share of the Company’s common stock. It was also agreed that the full amount of the exercise price was to be paid in the form of common stock of the Company.

In June 2019, the Company issued 0.6 million shares in exchange for a 34.3% ownership in Grapevine as a result of the exercise of the Option. At the completion of this transaction the Company owned 100.0% of Grapevine. At the date of the transaction, the carrying amount of the non-controlling interest in Grapevine was $0.5 million. The difference between the value of the consideration exchanged of $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, Consolidation (“ASC 810.”)

In April 2019, the Company entered into a securities purchase agreement to acquire 6.9 million shares in DBOT in exchange for 4.4 million 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 2.2 million shares in DBOT in exchange for 1.4 million shares of the Company’s common stock at $2.11 per share. The two transactions, which increased the Company’s ownership in DBOT to 99.0% as of that date, were completed in July 2019. The securities purchase agreements required the Company to issue contingent consideration in the form of additional shares of the Company’s common stock in the event the stock price of the ~~option shall be determined by YOD WFOE~~common stock falls below $2.11 at ~~its sole discretion, subject~~the close of trading on the date immediately preceding the lock-up date, which was 9 months from the closing date. The Company accounted for the contingent consideration as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity. The Company recorded this liability at fair

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value of $2.2 million on the date of acquisition. As of December 31, 2019, the Company remeasured this liability to ~~any restrictions imposed by PRC law.~~$7.3 million and the remeasurement loss of $5.1 million was recorded in “Change in fair value of contingent consideration, net” in the consolidated statements of operations. In the three and nine months ended September 30, 2020, the Company recorded remeasurement losses of $0 and $1.5 million, respectively, in “Change in fair value of contingent acquisition, net” in the condensed consolidated statements of operations, and partially satisfied the liability with the issuance of 13.1 million shares of common stock. As of September 30, 2020, the recorded balance of this liability was $0.8 million. The ~~term~~contractual period which required periodic remeasurement has expired, and therefore the Company will not remeasure this liability in the future.

Immediately prior to the consummation of the ~~agreement is until all~~transaction, the Company’s investment in DBOT consisted of 37.0% of the ~~equity interest~~common shares outstanding, which had a fair value of $3.1 million, and the Company recorded a loss of $3.2 million to record the investment in ~~Sinotop Beijing held by~~DBOT to its fair value. This loss was recorded in “Loss on remeasurement of DBOT investment” in the ~~Nominee Shareholders are transferred to YOD WFOE, or its designee~~condensed consolidated statements of operations in the three and ~~may not be terminated by any part~~nine months ended September 30, 2019. The fair value of the investment in DBOT immediately prior to the ~~agreement without consent~~consummation of the ~~other parties.~~

~~Power of Attorney~~

~~Pursuant to~~transaction was determined in conjunction with the ~~Power of Attorney agreements among YOD WFOE, Sinotop Beijing and each~~overall fair value determination of the ~~respective Nominee Shareholders, each of the Nominee Shareholders granted YOD WFOE the irrevocable right, for the maximum period permitted by law, all of its voting rights~~DBOT assets acquired and liabilities assumed.

DBOT operates 3 companies: (1) DBOT ATS LLC, an SEC recognized Alternative Trading System (“ATS”); (2) DBOT Issuer Services LLC, focused on setting and maintaining issuer standards, as ~~shareholders of Sinotop Beijing. The Nominee Shareholders may not transfer any of its equity interest in Sinotop Beijing to any~~

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

~~party other than YOD WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in Sinotop Beijing has been transferred to YOD WFOE or its designee.~~

~~Technical Service Agreement~~

Pursuant to the Technical Service Agreement between YOD WFOE and Sinotop Beijing, YOD WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to Sinotop Beijing, and Sinotop Beijing is required to take all commercially reasonable efforts to permit and facilitatewell as the provision of issuer services to DBOT designated issuers; and (3) DBOT Technology Services LLC, focused on the ~~services by YOD WFOE. As compensation~~provision of market data and marketplace connectivity. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and DBOT, as the Company executes its business plan of selling digital tokens and digital assets and other commodities on an approved ATS.

The consolidated statements of operation for ~~providing~~ the ~~services, YOD WFOE~~year ended December 31, 2019 include the results of DBOT from July 2019 to December 31, 2019. For the time period from July 2019 through December 31, 2019, DBOT contributed $15,838 and $1.9 million to the Company’s revenue and net loss, respectively.

The following table summarizes supplemental information on an unaudited pro forma basis, as if the acquisition had been consummated as of January 1, 2019 (in thousands):


	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Revenue	$	3,213	$	44,612
Net income (loss) attributable to IDEX common shareholders		(15,163)		10,582

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, 2019. Actual future results may vary considerably based on a variety of factors beyond the Company’s control.

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 (in thousands):


Cash	$	247
Other financial assets		1,686
Financial liabilities		(4,411)
Noncontrolling interest		(105)
Goodwill		9,324
Intangible asset – continuing membership agreement		8,255
Intangible asset – customer list		59
	$	15,055

The excess of the consideration over the fair value of the net assets acquired has been recorded as goodwill, of which none is ~~entitled~~expected to ~~receive service fees from Sinotop Beijing equivalent~~be deductible for tax purposes. For all intangible assets acquired, continuing membership agreements have useful life of 20 years and the customer list has useful life of 3 years.

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2019 Divestitures

(d) Red Rock Global Capital LTD (“Red Rock”)

In May 2019, the Company determined to ~~YOD WFOE’s cost plus 30%~~sell the Red Rock business and entered into an agreement with Redrock Capital Group Limited, an affiliate of ~~such costs as calculated~~Dr. Wu, to sell its entire interest in Red Rock for consideration of $0.7 million. The Company decided to sell Red Rock primarily because it had incurred operating losses and its business was no longer needed based on ~~accounting policies generally accepted~~the Company’s business plan. The transaction was completed in July 2019 and the Company recorded a disposal gain of $0.6 million recorded in “Gain on disposal of subsidiaries” in the ~~PRC. YOD WFOE~~condensed consolidated statements of operations in the three and ~~Sinotop Beijing agree~~nine months ended September 30, 2019.

(e) Amer Global Technology Limited

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 ~~periodically review~~which Tekang will inject certain assets in the ~~service fee~~robotics and ~~make adjustments~~electronic internet industry and Internet of Things business consisting of manufacturing data, supply chain management and financing, and lease financing of industrial robotics into Amer in exchange for 71.8% 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 71.8% ownership interest to BCC instead of Tekang, (3) issuing 5,500 new shares in Amer or 10.0% ownership interest to MHTL, and (4) the Company is responsible for 20.0% 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 55.0% to 10.0%. The transaction was completed on August 31, 2019.

The Company recognized a disposal gain of $0.5 million as ~~deemed appropriate. The term~~a result of the ~~Technical Services Agreement~~deconsolidating Amer, and such gain was recorded in “Gain on disposal of subsidiaries” in the condensed consolidated statements of operations in the three and nine months ended September 30, 2019. $0.1 million of the gain is ~~perpetual, and may only be terminated upon written consent of both parties.~~

~~Spousal Consent~~

~~Pursuant~~attributable to the ~~Spousal Consent, undersigned by~~10.0% ownership interest retained in Amer. In addition, on the ~~respective spouse~~date Amer was deconsolidated, the Company recorded a bad debt expense of ~~Nominee Shareholders (collectively,~~$0.6 million relating to a receivable due from Amer to a subsidiary of the ~~“Spouses”),~~Company, which was recorded in “Selling, general and administrative expense” in the ~~Spouses unconditionally~~condensed consolidated statements of operations in the three and ~~irrevocably agreed~~nine months ended September 30, 2019.

Pro forma results of operations for the three and nine months ended September 30, 2019 have not been presented because they are not material to the ~~execution~~consolidated results of operations. Amer had no revenue and minimal operating expenses in the ~~Equity Pledge Agreement, Call Option Agreement~~year ended December 31, 2019.

In the three months ended September 30, 2020, the Company sold its remaining 10.0% interest in Amer to Fintalk Media Inc., a related party, for a nominal amount. As the Company had no basis in its remaining interest in Amer, the gain recognized on the sale was de minimis. In light of this disposition, the Company is negotiating the responsibility for the contingent tax obligation disclosed above.

Note 7. Accounts Receivable

The following table summarizes the Company’s accounts receivable (in thousands):


	September 30,		December 31,
	2020		2019
Accounts receivable, gross	$	4,900	$	2,405
Less: allowance for doubtful accounts		(585)		0
Accounts receivable, net	$	4,315	$	2,405

The balance includes the taxi commission revenue receivables of $1.2 million and ~~Power~~$2.3 million from the related party Guizhou Qianxi Green Environmentally Friendly Taxi Service Co, as of ~~Attorney agreement.~~ September 30, 2020 and December 31, 2019, respectively.

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In the three months ended September 30, 2020, the Company increased its allowance for doubtful accounts by $0.6 million for the account receivable mentioned above. There were 0 changes in the allowance for doubtful accounts for the three and nine months ended September 30, 2019.

Note 8. Property and Equipment, net

The ~~Spouses agreed~~following table summarizes the Company’s property and equipment (in thousands):


	September 30,		December 31,
	2020		2019
Furniture and office equipment	$	309	$	441
Vehicle		121		62
Leasehold improvements		176		243
Total property and equipment		606		746
Less: accumulated depreciation		(441)		(368)
Property and equipment, net		165		378
Fintech Village
Land		3,043		3,043
Building		—		309
Assets retirement obligations - environmental remediation		6,294		6,496
Capitalized direct development cost		—		2,713
Construction in progress (Fintech Village)		9,337		12,561
Property and Equipment, net	$	9,502	$	12,939

The Company recorded depreciation expense of $25,170 and $65,862, which is included in its operating expenses, for the three months ended September 30, 2020 and 2019, respectively, and $90,962 and $102,991 for the nine months ended September 30, 2020 and 2019, respectively.

In the three months ended June 30, 2020 the Company ceased to ~~not make any assertions~~use the premises for its New York City headquarters at 55 Broadway, and vacated the premises. As a result, the Company recorded an impairment loss of $0.2 million related to leasehold improvements and other fixed assets at that location.

Global Headquarters for Technology and Innovation in Connecticut (“Fintech Village”)

The Company recorded asset retirement obligations for environmental remediation matters in connection with the ~~equity interest~~acquisition of ~~Sinotop Beijing and to waived consent on further amendment or termination of~~Fintech Village. The following table summarizes the Equity Pledge Agreement, Call Option Agreement and Power of Attorney agreement. The Spouses further pledge to execute all necessary documents and take all necessary actions to ensure appropriate performance under these agreements upon YOD WFOE’s request. In the event the Spouses obtain any equity interests of Sinotop Beijing which are held by the Nominee Shareholders, the Spouses agreed to be bound by the New Sinotop VIE Agreements, including the Technical Services Agreement, and comply with the obligations thereunder, including sign a series of written documents in substantially the same format and content as the New Sinotop VIE Agreements.

~~Letter of Indemnification~~

Pursuant to the Letter of Indemnification among YOD WFOE and Mei Chen and YOD WFOE and Yun Zhu, YOD WFOE agreed to indemnify Nominee Shareholders against any personal, tax or other liabilities incurred in connection with their role in equity transfer to the greatest extent permitted under PRC law. YOD WFOE further waived and released Nominee Shareholders from any claims arising from, or related to, their role as the legal shareholder of Sinotop Beijing, provided that their actions as a nominee shareholder are taken in good faith and are not opposed to YOD WFOE’s best interests. Conversely, the Nominee Shareholders will not be entitled to dividends or other benefits generated therefrom, or receive any compensation in connection with this arrangement. The Letter of Indemnification will remain valid until either Nominee Shareholders or YOD WFOE terminates the agreement by giving the other party hereto 60 days’ prior written notice.

~~In addition to the New Sinotop VIE Agreements, the Management Service Agreement between Sinotop Beijing and YOD Hong Kong continued to remain in effect, the key terms of which are as follows:~~

~~Management Services Agreement~~

Pursuant to a Management Services Agreement, as of March 9, 2010, YOD Hong Kong has the exclusive right to provide to Sinotop Beijing management, financial and other services related to the operation of Sinotop Beijing’s business, and Sinotop Beijing is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by YOD Hong Kong. As compensation for providing the services, YOD Hong Kong is entitled to receive a fee from Sinotop Beijing, upon demand, equal to 100% of the annual net profits as calculated on accounting policies generally acceptedactivity in the ~~PRC of Sinotop Beijing during~~asset retirement obligation for the term of the Management Services Agreement. YOD Hong Kong may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against Sinotop Beijing’s future payment obligations.nine months ended September 30, 2020 (in thousands):


	January 1,		Liabilities		Remediation		Accretion				September 30,
	2020		Incurred		Performed		Expense		Revisions		2020
Asset retirement obligation	$	5,094	$	0	$	(441)	$	0	$	0	$	4,653

The ~~Management Services Agreement also provides YOD Hong Kong, or its designee, with a right~~Company capitalized direct costs incurred on Fintech Village and the capitalized cost is recorded as part of first refusal to acquire all or any portion of the equity of Sinotop Beijing upon any proposal by the sole shareholder of Sinotop Beijing to transfer such equity. In addition, at the sole discretion of YOD Hong Kong, Sinotop Beijing is obligated to transfer to YOD Hong Kong, or its designee, any part or all of the business, personnel, assetsConstruction in progress. Capitalized costs were $0 million and ~~operations of Sinotop Beijing which may be lawfully conducted, employed, owned or operated by YOD Hong Kong, including:~~

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

(a) business opportunities presented to, or available to Sinotop Beijing may be pursued and contracted for in the name of YOD Hong Kong rather than Sinotop Beijing, and at its discretion, YOD Hong Kong may employ the resources of Sinotop Beijing to secure such opportunities;

(b) any tangible or intangible property of Sinotop Beijing, any contractual rights, any personnel, and any other items or things of value held by Sinotop Beijing may be transferred to YOD Hong Kong at book value;

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by YOD Hong Kong by acquisition, lease, license or otherwise, and made available to Sinotop Beijing on terms to be determined by agreement between YOD Hong Kong and Sinotop Beijing;

(d) contracts entered into in the name of Sinotop Beijing may be transferred to YOD Hong Kong, or the work under such contracts may be subcontracted, in whole or in part, to YOD Hong Kong, on terms to be determined by agreement between YOD Hong Kong and Sinotop Beijing; and

(e) any changes to, or any expansion or contraction of, the business may be carried out at the sole discretion of YOD Hong Kong, and in the name of and at the expense of, YOD Hong Kong; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of YOD Hong Kong) or adversely affecting any license, permit or regulatory status of Sinotop Beijing.

~~The term of the Management Services Agreement is 20 years, and may not be terminated by Sinotop Beijing, except with the consent of, or a material breach by, YOD Hong Kong.~~

Pursuant to the above contractual agreements, YOD WFOE can have the assets transferred freely out of Sinotop Beijing without any restrictions. Therefore, YOD WFOE considers that there is no asset of Sinotop Beijing that can be used only to settle obligations of Sinotop Beijing, except for the registered capital of the entity amounting to RMB10.6$2.7 million ~~(approximately $1.6 million)~~ as of September 30, ~~2017. As Sinotop Beijing is incorporated as limited liability company under PRC Company Law, creditors of this entity do not have recourse~~2020 and December 31, 2019, respectively, and are primarily related to ~~the general credit of other entities of the Company.~~

~~Tianjin Sevenstarflix Network Technology Limited (“SSF”) VIE structure and arrangements~~

legal and architect costs.

In ~~response~~the three months ended September 30, 2020, in relation to ~~PRC laws and regulations that prohibit or restrict foreign ownership of companies that provides value-added telecommunication services,~~Fintech Village the Company ~~plans to also provide its services through SSF, which is applying to hold~~recorded an impairment loss of $2.7 million for the ~~licenses~~capitalized architect costs, and ~~approvals to provide digital distribution~~recorded an impairment loss of $0.3 million for the remaining building and ~~Internet content services in~~$0.2 million for the ~~PRC.~~ related asset retirement cost associated with the remaining building.

The Company has ~~the ability to control SSF through~~identified Fintech Village as a ~~series~~non-core asset and is evaluating its strategies for divesting of ~~contractual agreements, as described below, entered into among YOD WFOE, YOD Hong Kong, SSF and the legal shareholders of SSF.~~this asset.

On April 5, 2016, YOD WFOE entered into variable interest entity agreements with SSF and its nominee shareholders pursuant to the Amended Tianjin Agreement dated December 21, 2015 (see Note 12(c)) (the “SSF VIE Agreements”). Lan Yang, holder of 99% equity ownership in SSF and a party to certain of the SSF VIE Agreements, is the spouse of Bruno Zheng Wu, the Company’s Chairman. Yun Zhu, holder of 1% equity ownership in SSF and a party to certain of the SSF VIE Agreements, is the Vice President of SSS.

~~The terms of the SSF VIE Agreements are as follows:~~

~~Equity Pledge Agreement~~

Pursuant to the Equity Pledge Agreement among YOD WFOE, Lan Yang and Yun Zhu (the “Nominee Shareholders”), dated April 5, 2016, the Nominee Shareholders pledged all of their capital contribution rights in SSF to YOD WFOE as security for the performance of the obligations of SSF to make all the required technical service fee payments pursuant to the Technical Services Agreement and for performance of the Nominee Shareholders’ obligation under the Call Option Agreement. The terms of the Equity Pledge Agreement expire upon satisfaction of all obligations under the Technical Services Agreement and Call Option Agreement.

~~Call Option Agreement~~

Pursuant to the Call Option Agreement among YOD WFOE, SSF and the Nominee Shareholders, dated April 5, 2016, the Nominee Shareholders granted an exclusive option to YOD WFOE, or its designee, to purchase, at any time and from time to time, to the extent permitted under PRC law, all or any portion of the Nominee Shareholders’ equity in SSF. The exercise price of the option shall be

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Note 9. Goodwill and Intangible Assets

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

The following table summarizes changes in the carrying amount of goodwill (in thousands):

~~determined by YOD WFOE at its sole discretion, subject to any restrictions imposed by PRC law. The term~~


Balance as of January 1, 2019	$	705
Acquisitions		22,639
Balance as of December 31, 2019		23,344
Measurement period adjustments*		(12,848)
Effect of change in foreign currency exchange rates		(24)
Balance as of September 30, 2020	$	10,472

*During the three months ended December 31, 2019, the Company completed the acquisition of ~~the agreement is until all of the equity~~a 51.0% interest in ~~SSF held by the Nominee Shareholders is transferred to YOD WFOE, or its designee and may not be terminated by any party to the agreement without consent of the other parties.~~

~~Power of Attorney~~

Pursuant to the Power of Attorney agreements among YOD WFOE, SSF and each of the respective Nominee Shareholders, dated April 5, 2016, each of the Nominee Shareholders granted YOD WFOE the irrevocable right, for the maximum period permitted by law, to all of its voting rights as shareholders of SSF. The Nominee Shareholders may not transfer any of their equity interest in SSF to any party other than YOD WFOE. The Power of Attorney agreements may not be terminated except until all of the equity in SSF has been transferred to YOD WFOE or its designee.

~~Technical Service Agreement~~

Pursuant to the Technical Service Agreement, dated April 5, 2016, between YOD WFOE and SSF, YOD WFOE has the exclusive right to provide technical service, marketing and management consulting service, financial support service and human resource support services to SSF, and SSF is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by YOD WFOE. As compensation for providing the services, YOD WFOE is entitled to receive service fees from SSF equivalent to YOD WFOE’s cost plus 20-30% of such costs as calculated on accounting policies generally acceptedTree Technologies, a Malaysian company engaged in the ~~PRC. YOD WFOE and SSF agree to periodically review the service fee and make adjustments as deemed appropriate.~~EV market. The ~~term of the Technical Services Agreement is perpetual, and may only be terminated upon written consent of both parties.~~

~~Spousal Consent~~

Pursuant to the Spousal Consent, dated April 5, 2016, undersigned by the respective spouse of the Nominee Shareholders (collectively, the “Spouses”), the Spouses unconditionally and irrevocably agreed to the execution of the Equity Pledge Agreement, Call Option Agreement and Power of Attorney agreement. The Spouses agreed to not make any assertionsCompany adjusted goodwill balance in connection with the completion of acquisition accounting. Refer to Note 6(a) for additional information.

Intangible Assets

The following table summarizes information regarding amortizing and indefinite lived intangible assets (in thousands):


			September 30, 2020								December 31, 2019
	Weighted
	Average		Gross								Gross
	Remaining		Carrying		Accumulated		Impairment		Net		Carrying		Accumulated		Impairment		Net
	Useful Life		Amount		Amortization		Loss		Balance		Amount		Amortization		Loss		Balance
Amortizing Intangible Assets
Software and licenses		—	$	94	$	(94)	$	0	$	0	$	97	$	(97)	$	0	$	0
Solid Opinion IP (a)		3.4		4,655		(1,474)		0		3,181		4,655		(776)		0		3,879
Fintalk intangible assets (b)		—		635		(635)		0		0		635		(635)		0		0
Influencer network (c)		7.9		1,980		(413)		0		1,567		1,980		(264)		0		1,716
Customer contract (c)		0.9		500		(347)		0		153		500		(222)		0		278
Continuing membership agreement (d)		18.8		8,255		(516)		0		7,739		8,255		(206)		0		8,049
Customer list		1.8		59		(25)		0		34		59		(10)		0		49
Trade name (c)		12.9		110		(15)		0		95		110		(10)		0		100
Technology platform (c)		4.9		290		(86)		0		204		290		(55)		0		235
Land use rights (e)		98.3		27,211		(69)		0		27,142		27,079		0		0		27,079
Marketing and distribution agreement (e)		19.8		12,385		(155)		0		12,230		11,333		0		0		11,333
Total				56,174		(3,829)		0		52,345		54,993		(2,275)		0		52,718
Indefinite lived intangible assets
Website name				25		0		0		25		25		0		0		25
Patent				28		0		0		28		28		0		0		28
Total			$	56,227	$	(3,829)	$	0	$	52,398	$	55,046	$	(2,275)	$	0	$	52,771

(a)

During the three months ended March 31, 2019, the Company completed the acquisition of certain assets from SolidOpinion in exchange for 4.5 million shares of the Company’s common stock with a fair value of $7.2 million. The assets acquired included cash of $2.5 million and intellectual property (“IP”) which is complementary to the IP of Grapevine. The parties agreed that 0.5 million of such shares of common stock (“Escrow Shares”) would be held in escrow until February 19, 2020 in connection with SolidOpinion’s indemnity obligations pursuant to the agreement. SolidOpinion had the rights to vote and receive the dividends paid with respect to the Escrow Shares. The Escrow Shares were scheduled to be released on February 19, 2020, and were released in April 2020.

(b)

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 included the rights, titles, and interest in a secure mobile financial information, social, and messaging platform that had been designed for streamlining financial-based communication for professional and retail users. The initial purchase price for the Fintalk Assets was $7.0 million payable with $1.0 million in cash and shares of the Company’s common stock with a fair

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market value of $6.0 million. The Company paid $1.0 million in October 2018 and recorded this amount in prepaid expenses as of December 31, 2018 because the transaction had not closed. The purchase price was later amended to $6.4 million, payable with $1.0 million in cash and shares of the Company’s common stock with a value of $5.4 million. The Company issued 2.9 million common shares in June 2019 and completed the transaction. In the three months ended December 31, 2019, management determined these assets had no future use and recorded an impairment loss of $5.7 million.

(c)	During the three months ended September 30, 2018, the Company completed the acquisition of 65.7% share of Grapevine. Refer to Note 6(b).

(d)	During the three months ended September 30, 2019, the Company completed the acquisition of additional shares in DBOT, which increased its ownership to 99.0 %. Intangible assets of $8.3 million were recognized on the date of acquisition. Refer to Note 6(c).

(e)

During the three months ended December 31, 2019, the Company completed the acquisition of a 51.0% interest in Tree Technologies, a Malaysian company engaged in the EV market. In connection with the completion of acquisition accounting, the Company revised the estimated useful life of the marketing and distribution agreement from 5 to 20 years. As amortization of this agreement had not commenced, the revision of the estimated useful life had no effect on the condensed consolidated financial statements. Refer to Note 6(a) for additional information.

Amortization expense relating to intangible assets was $0.7 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively, and $1.6 million and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes the expected amortization expense for the following years (in thousands):


		Amortization
		to be
Years ending December 31,		recognized
2020 (excluding the nine months ended September 30, 2020)	$	668
2021		2,615
2022		2,494
2023		2,485
2024		1,709
2025 and thereafter		42,374
Total	$	52,345

Note 10. Long-term Investments

The following table summarizes the Company's long-term investments(in thousands):


	September 30,		December 31,
	2020		2019
Non-marketable equity investments	$	6,005	$	5,967
Equity method investments		16,646		16,654
Total	$	22,651	$	22,621

Non-marketable equity ~~interest of SSF and to waive consent on further amendment~~investments

Non-marketable equity investments are investments in privately held companies without readily determinable fair values are carried at cost minus impairment, if any, plus or ~~termination~~minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the ~~Equity Pledge Agreement, Call Option Agreement~~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 ~~Power~~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 ~~Attorney agreement. The Spouses further pledge~~the equity investment and recognizes in current

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earnings an impairment loss that is equal to ~~execute all necessary documents~~the difference between the fair value of the equity investment and ~~take all necessary actions to ensure appropriate~~its carrying amount. Based on management's analysis of certain investment's performance, ~~under these agreements upon YOD WFOE’s request.~~ 0 impairment losses were recorded in the three and nine months ended September 30, 2020 and 2019.

In the ~~event~~nine months ended September 30, 2019, the ~~Spouses obtain any~~Company sold one non-marketable equity ~~interests~~investment with a carrying amount of ~~SSF~~$3.2 million for GTB and recognized no gain or loss on the sale. Refer to Note 14(b) for additional information.

Equity method investments

The following table summarizes the Company’s investment in companies accounted for using the equity method of accounting (in thousands):


		September 30, 2020
						Income (loss)		Impairment				Foreign currency
		January 1, 2020		Addition		on investment		losses		Disposal		translation adjustments		September 30, 2020
BDCG	(a)	$	9,800	$	0	$	0	$	0	$	—	$	0	$	9,800
Glory	(b)		6,854		0		(8)		0		—		0		6,846
Total		$	16,654	$	0	$	(8)	$	0	$	—	$	0	$	16,646

All the investments above are privately held companies; therefore, quoted market prices are not available. The Company has received no dividends from equity method investees in the three and nine months ended September 30, 2020 and 2019.

(a) BBD Digital Capital Group Ltd. (“BDCG”)

In 2018, the Company signed an investment agreement, with 2 unrelated parties, to establish BDCG, subsequently renamed Intelligenta, located in the United States for providing block chain services for financial or energy industries by utilizing artificial intelligence and big data technology in the United States. On April 24, 2018, the Company acquired 20.0% equity ownership in BDCG from one noncontrolling party for total consideration of $9.8 million which consisted of $2.0 million in cash and $7.8 million paid in the form of the Company’s capital stock (valued at $2.60 per share and equal to 3.0 million shares of the Company’s common stock), increasing the Company’s ownership to 60.0%. The remaining 40.0% of BDCG are held by Seasail Ventures Limited (“Seasail.”) The accounting treatment of the ~~Nominee Shareholders,~~investment is based on the ~~Spouses agreed~~equity method due to variable substantive participating rights (in accordance with ASC 810) granted to Seasail. Intelligenta is currently in the process of developing its operations, although it has been impacted by international trade tentions. Intelligenta has yet to record revenue or earnings or losses, and therefore its statement of operations and balance sheet data are not material.

As of September 30, 2020, the excess of the Company's investment over its proportionate share of Intelligenta's net assets was $9.8 million. The difference represents goodwill and is not being amortized.

(b) Glory Connection Sdn. Bhd (“Glory”)

On July 18, 2019, the Company entered into an acquisition agreement to purchase a 34.0% interest in Glory, a Malaysian company, from its shareholder Beijing Financial Holding Limited, a Hong Kong registered company, for the consideration of 12.2 million restricted common shares of the Company, initially representing $24.4 million at $2.00 per share, the contract price, and subsequently revised to $20.0 million at $1.64 per share, the closing price on the date of acquisition. As part of this transaction, the Company was also granted an option to purchase a 40.0% 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 the Company. Bigfair currently holds a 51.0% ownership stake in Glory. The option is exercisable from July 18, 2020 to July 19, 2021. If the option is exercised, the Company would have 20.4% indirect ownership in Glory in addition to the 34.0% direct ownership it already has.

Upon the initial investment, the Company performed a valuation analysis and allocated $23.0 million and $1.4 million of the consideration transferred to the equity method investment and the call option, respectively, which was subsequently revised to $20.0 million and $0, respectively. Glory is currently in the process of developing its products and its business, and is dependent upon the business of Tree Manufacturing.

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As initially contemplated, Glory, through its subsidiary Tree Manufacturing, would hold a domestic EV manufacturing license in Malaysia, a marketing and distribution agreement for EVs in the ASEAN region, as well as the land use rights for 250 acres of vacant land zoned for industrial development in the Begeng Industrial Area adjacent to Kuantan Port. Kuantan is the capital city of the state of Pahang on the east coast of Peninsular Malaysia, which was to be ~~bound by~~ the ~~SSF VIE Agreements, including~~site of the ~~Technical Services Agreement, and comply with~~manufacturing operations.

In December 2019, the ~~obligations thereunder, including sign~~Company acquired a ~~series of written documents~~51.0% ownership interest in ~~substantially~~Tree Technologies. Tree Technologies had previously been granted the ~~same format and content as the SSF VIE Agreements.~~

~~Letter of Indemnification~~

~~Pursuant~~land use rights to the ~~Letter~~250 acres of ~~Indemnification among YOD WFOE and Lan Yang and YOD WFOE and Yun Zhu, both dated as of April 5, 2016, YOD WFOE agreed~~vacant land mentioned above, which was previously anticipated to ~~indemnify Nominee Shareholders against any personal, tax or other liabilities incurred in connection with their role in equity transfer~~be owned by Glory. As Glory would no longer receive the land use rights to the ~~greatest extent permitted under PRC law. YOD WFOE further waived~~250 acres of vacant land, the Company evaluated its investment in Glory for impairment, and ~~released~~recorded an impairment loss of $13.1 million in “Impairment of and equity in loss of equity method investees” in the ~~Nominee Shareholders from any claims arising from, or related~~consolidated statements of operations in the year ended December 31, 2019.

Tree Technologies has also entered into a product supply arrangement and a product distribution arrangement with a subsidiary of Glory. The Company performed an assessment of these arrangements, and determined that Glory is a VIE, but that the Company is not the primary beneficiary. As of September 30, 2020, the Company accounts for Glory as an equity method investment.

The Company has advanced $0.4 million to ~~their role as~~Glory in order to fund its operations, although it had no obligation to do so. The Company’s maximum exposure to Glory is $7.3 million, the ~~legal shareholder~~sum of ~~SSF,~~its investment and advances.

As of September 30, 2020, the excess of the Company’s investment over its proportionate share of Glory’s net assets was $7.1 million. The difference primarily represents an amortizing intangible asset.

The following table summarizes the income statement information of Glory for the three and nine months ended September 30, 2020 (in thousands):


	Three Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2020
Revenue	$	—	$	5
Gross profit		—		(6)
Net loss from operations		(8)		(56)
Net income (loss)		21		(23)
Net income (loss) attributable to Glory		11		(14)

Note 11. Leases

On May 1, 2020, the Company took possession of premises in Qingdao, China in furtherance of a larger public/private initiative to promote EV business in the region and reduce the reliance on traditional combustion engines. The premises are indirectly and partially owned by local governmental entities, and were provided ~~that their actions as a nominee shareholder are taken~~to the Company at no charge. The Company, pursuant to the underlying lease, has use of the premises until November 30, 2034.

The Company has determined the fair value of the lease and recorded the lease in ~~good faith~~accordance with ASC 842, Leases(“ASC 842,”) ASC 845 Nonmonetary Transactions(“ASC 845,”) and ~~are not opposed to YOD WFOE’s best interests. The Nominee Shareholders will not be entitled to dividends or other benefits generated therefrom, or receive any compensation in~~ASC 958, Not-for-Profit Entities (“ASC 958.”) In connection with this ~~arrangement.~~lease agreement, the Company recorded operating right of use assets of $7.2 million, and an operating lease liability of $7.2 million. The ~~Letter~~fair value of ~~Indemnification will remain valid until either~~ the ~~Nominee Shareholders or YOD WFOE terminates~~annual lease payments is $0.7 million.

As of September 30, 2020, the ~~agreement by giving the other party hereto 60 days’ prior written notice.~~

~~Loan Agreement~~

~~Pursuant to the Loan Agreement among YOD WFOE~~Company's operating lease right of use assets and operating lease liabilities are $7.4 million and $7.3 million, respectively. The weighted-average remaining lease term is 13.8 years and the ~~Nominee Shareholders, dated April 5, 2016, YOD WFOE agrees to lend RMB 19.8 million and RMB 0.2 million, respectively, to the Nominee Shareholders for the purpose~~weighted-average discount rate is 4.4%.

Table of ~~establishing SSF and for development of its business.~~ Contents

As of December 31, ~~2016, RMB 27.6~~2019, the Company's operating right of use assets and operating lease liabilities were $6.9 million ~~(US $4.2 million)~~ and ~~RMB nil have been lent~~$7.3 million, respectively. As of September 30, 2019, the weighted-average remaining lease term was 6.6 years and the weighted-average discount rate was 7.5%.

The following table summarizes the components of lease expense (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Operating lease cost	$	519	$	391	$	1,488	$	1,264
Short-term lease cost		82		78		279		251
Sublease income		(11)		(11)		(74)		(11)
Total	$	590	$	458	$	1,693	$	1,504

The following table summarizes supplemental information related to ~~Lan Yang~~leases (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	115	$	448	$	961	$	968
Right of use assets obtained in exchange for new operating lease liabilities		—		935		—		935

The following table summarizes the maturity of operating lease liabilities (in thousands):


	Leased Property
Years ending December 31	Costs
2020	$	260
2021		721
2022		614
2023		632
2024		645
2025 and thereafter		7,009
Total lease payments		9,881
Less: Interest		(2,541)
Total	$	7,340

In the three months ended March 31, 2020 the Company ceased to use the premises underlying one lease and ~~Yun Zhu, respectively. Lan Yang has contributed all~~vacated the real estate. As a result, the Company recorded an impairment loss related to the right of use asset of $0.9 million. In the three months ended June 30, 2020, the Company completed negotiations with the landlord to settle the remaining operating lease liability of $0.9 million by issuing a promissory note for $0.1 million, bearing an annual interest rate of 4.0%, and which is due and payable on December 31, 2021. The Company recorded a gain of $0.8 million in “Other income (expense)” for the settlement of the ~~RMB 27.6 million (US $4.2 million)~~operating lease liability in the ~~form of capital contribution. The loan can only be repaid by~~three months ended June 30, 2020.

In the three months ended June 30, 2020 the Company ceased to use its New York City headquarters at 55 Broadway, which are subject to two leases, and vacated the real estate. As a ~~transfer by~~result, the ~~Nominee Shareholders of their equity interests in SSF~~Company recorded an impairment loss related to ~~YOD WFOE or YOD WFOE’s designated persons, through (i) YOD WFOE having~~ the right ~~but not~~of use asset of $5.3 million. The Company had an operating use liability of $5.8 million with respect to these leases, excluding $0.6 million in accounts payable. In the ~~obligation~~three months ended September 30, 2020, the Company completed negotiations with the landlord to ~~at any time purchase, or authorize~~settle the remaining amounts due of $6.4 million for a ~~designated person to purchase, all or part~~cash payment of $1.5 million. The Company recorded a gain of $4.9 million in “Other income (expense)” for the settlement of the ~~Nominee Shareholders’ equity interests~~operating lease liability in ~~SSF at such price~~the three months ended September 30, 2020.

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Note 12. Promissory Notes

The following table summarizes the outstanding promissory notes as ~~YOD WFOE shall determine (the “Transfer Price”), (ii) all monies received by~~of September 30, 2020 and December 31, 2019 (dollars in thousands):


			September 30,				December 31,
			2020				2019
	Interest Rate		Principal Amount		Carrying Amount*		Principal Amount		Carrying Amount*
Convertible Note-Mr. McMahon (Note 14 (a))	4.0	%	$	—		—	$	3,000	$	3,260
Convertible Note -SSSIG (Note 14 (a))	4.0	%		—		—		1,252		1,301
Convertible Note-SSSIG (Note 14 (a))	4.0	%		—		—		250		250
Convertible Note-Advantech (a)	8.0	%		12,000		9,033		12,000		3,193
Senior Secured Convertible Note (b)	10.0	%		—		—		850		348
Senior Secured Convertible Note (c)	10.0	%		—		—		3,580		1,896
Senior Secured Convertible Note (d)	4.0	%		—		—		3,000		1,405
Promissory Note (e)	6.0	%		3,000		3,153		3,000		3,000
Vendor Notes Payable (f)	0.25%-4%			135		135		—		0
Small Business Association Paycheck Protection Program (g)	1	%		460		462		—		0
Total			$	15,595		12,783	$	26,932		14,653
Less: Current portion						12,783				8,013
Long-term Note, less current portion					$	—			$	6,640

*Carrying amount includes the ~~Nominee Shareholders through the payment~~accrued interest.

The following table summarizes future maturities of the ~~Transfer Price being used solely to repay YOD WFOE for~~debt and contractual obligations (excluding the ~~loans,~~debt from the Small Business Association Paycheck Protection Program), as well as projected interest expense as of September 30, 2020 (in thousands):


	Principal		Interest		Interest
	Repayment		Payment		Expense
2020	$	3,030	$	180	$	1,997
2021		12,105		2,875		3,878
Total	$	15,135	$	3,055	$	5,875

As of September 30, 2020 and ~~(iii) if~~December 31, 2019, the ~~Transfer Price exceeds~~Company was in compliance with all ratios and covenants.

(a)$12.0 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 $12.0 million (the “Advantech Note.”) The Advantech Note bears interest at a rate of 8.0% and matures on June 28, 2021, and is convertible into the ~~loans,~~shares of the Company’s common stock at a stated conversion price, subject to adjustment if subsequent equity shares have a lower conversion price (“down round provision.”) The stated conversion price was initially $1.82 per share, which was subsequently reset to $1.00 in October 2019, $0.5869 on April 22, 2020, then further reduced to $0.36 on May 20, 2020 due to the down round provision.

The Company received aggregate gross proceeds of $12.0 million, net of $34,133 for the issuance expenses paid by Advantech.

The initial difference between the conversion price and the fair value of the common stock on the commitment date resulted in a beneficial conversion feature (“BCF”) recorded of $1.4 million and increased by $10.6 million due to the down round provision adjustment in October 2019.

NaN additional BCF is recognized because the discount assigned to the BCF is already equal to the proceeds allocated to the convertible instrument.

For the three months ended September 30, 2020 and 2019, total interest expense recognized was $2.0 million and $0.4 million, respectively, and was $5.8 million and $1.1 million for the nine months ended September 30, 2020 and 2019,

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respectively. The agreement also requires the Company to comply with certain covenants, including restrictions on the use of the proceeds and other conditions of the convertible note offering.

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

On February 22, 2019, the Company executed a security purchase agreement with ID Venturas 7, LLC (“IDV”), whereby the Company issued $2.1 million of senior secured convertible note (“February IDV Note.”) The February IDV Note bore interest at a rate of 10.0% per year payable either in cash or in kind at the option of the Company on a quarterly basis and was scheduled to mature on August 22, 2020. In addition, IDV was entitled to the following: (1) the convertible note was senior secured; (2) convertible at an adjusted price per share of Company common stock at the option of IDV, subject to adjustments if subsequent equity shares had a lower conversion price (original $1.84, $1.00 after October 30, 2019 and $0.5869 after April 22, 2020), (3) 1.2 million shares of common stock of the Company; and (4) a warrant exercisable for 1.6 million shares of common stock which the February IDV Note was convertible into at an adjusted exercise price (original $1.84 , $1.00 after October 30, 2019 and $0.5869 after April 22, 2020) per share and initially expired in 7 years, which was extended from 5 years on December 19, 2019.

The Company received aggregate gross proceeds of $2.0 million, net of $50,000 for the issuance expenses paid by IDV. Total funds received were allocated to the February IDV Note, common shares and warrants based on their relative fair values in accordance with ASC 470, Debt (“ASC 470.”) The fair value of the February IDV Note and common shares was based on the closing price of the Company’s common stock 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 fair value of the warrants was recorded as additional paid-in capital and a corresponding discount on the carrying amount of the February IDV Note. The Company recognized a BCF of $0.6 million as an increase in ~~excess~~additional paid-in capital and corresponding discount on the carrying amount of the February IDV Note, which was the fair value of the common shares at the commitment date for the February IDV Note, less the effective conversion price.

Interest on the February IDV Note was payable quarterly starting from April 1, 2019. The February IDV Note was redeemable at the option of the Company in whole at an initial redemption price of the principal amount of the ~~loans being~~February IDV Note plus additional warrants and accrued and unpaid interest to the date of redemption.

The Company was also subject to penalty fee at 8.0% per annum for late payments of interests and compensation for the loss of IDV on failure to timely deliver conversion shares upon conversion.

The security purchase agreement contained customary representations, warranties, and covenants. The February IDV Note was collateralized by the Company’s equity interest in Grapevine and the Company had the right to request the removal of the guarantee and collateral by the issuance of additional 250,000 shares of common stock.

Modification/Extinguishment

On September 27, 2019, the Company issued 250,000 shares of common stock to IDV in exchange for the release of Grapevine as collateral. The issuance of the common shares in exchange for the removal of collateral was treated as a modification of the February IDV Note pursuant to the guidance of ASC 470. The Company concluded that the February IDV Note qualified for debt extinguishment as the 10.0% cash flow test was met. As a result, the carrying amount of $0.8 million of the February IDV Note was written off and the amended note was recorded at its fair value of $1.7 million. The Company recognized a non-cash loss on extinguishment of debt in the amount of $1.2 million and the intrinsic value of reacquisition of BCF is zero as of September 27, 2019.

Down Round Price Adjustment on October 30, 2019

As a result of the additional financing on October 30, 2019, the Company entered into a letter agreement with IDV pursuant to which the Company agreed to reduce the conversion price of the February IDV Note and the exercise price of the warrants from $1.84 to $1.00. The Company recognized $1.4 million of remeasured BCF as an increase in additional paid- in capital and a corresponding discount on the carrying amount of the February IDV Note and $0.2 million of deemed

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dividend on warrant repricing for the difference between the fair value of the unadjusted warrants and adjusted warrants. The fair value of the adjusted warrants was determined using the Black-Scholes option-pricing model based on the following assumptions: expected life of 5 years, expected dividend rate of 0%, volatility of 112.0%, and an interest rate of 2.48%.

Down Round Price Adjustment on April 22, 2020

As a result of the additional financing on April 22, 2020, the conversion price of the February IDV Note and the exercise price of the warrants was reduced from $1.00 to $0.5869. The Company recognized $0.3 million of remeasured BCF as an increase in additional paid- in capital and a corresponding discount on the carrying amount of the February IDV Note and $59,372 of deemed dividend on warrant repricing for the difference between the fair value of the unadjusted warrants and adjusted warrants. The fair value of the adjusted warrants was determined using the Black-Scholes option-pricing model based on the following assumptions: expected life of 7 years, expected dividend rate of 0%, volatility of 122.4%, and an interest rate of 1.84%.

Conversion

As of December 31, 2019, $1.2 million of the February IDV Note, plus accrued and unpaid interest, were converted into 1.2 million shares of common stock of the Company.

During the nine months ended September 30, 2020, the remaining $0.85 million of the February IDV note, plus accrued and unpaid interest, were converted into 1.4 million shares of common stock of the Company.

As a result of the conversions, the Company recognized associated unamortized discount at the date of conversion as interest expense. Total interest expense recognized was $0 and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and was $0.9 million and $0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

(c)$3.58 Million Senior Secured Convertible Debenture due in March 2021 - ID Venturas 7

On September 27, 2019, the Company executed a security purchase agreement with IDV (“IDV September Agreement”), whereby the Company issued $2.5 million of senior secured convertible note in September (“September IDV Note”) and issued an additional $1.1 million of secured convertible notes subsequently based on additional investment rights in the IDV September Agreement. The September IDV Notes bore interest at a rate of 10.0% per year payable either in cash or in kind at the option of the Company on a quarterly basis and was scheduled to mature on March 27, 2021. In addition, IDV was entitled to the following: (1) the convertible note was senior secured; (2) convertible at an adjusted price per share of Company common stock at the option of IDV, subject to adjustments if subsequent equity shares had a lower conversion price (original $1.84, $1.00 after October 30, 2019 and $0.5869 after April 22, 2020), (3) 1.5 million shares of common stock of the Company, and (4) a warrant exercisable for 4.7 million shares of common stock at an adjusted exercise price (original $1.84, $1.00 after October 30, 2019 and $0.5869 after April 22, 2020) per share and will expire in 7 years, which was extended from 5 years.

The Company received net proceeds of $3.5 million (aggregate gross proceeds of $3.6 million, net of $65,000 for the issuance expenses paid to IDV). Total gross proceeds were allocated to the September IDV Note, common shares and warrants based on their relative fair values in accordance with ASC 470. The fair value of the September IDV Note and common shares was based on the ~~loans,~~closing price of the common stock 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 122.44% and ~~to be payable to YOD WFOE~~an average interest rate of 1.66%. The fair value of the warrants was recorded as additional paid-in capital and corresponding discount on the carrying amount of the September IDV Note. The Company recognized a BCF as a discount on September IDV Note at its intrinsic value, which was the fair value of the common shares at the commitment date, less the effective conversion price. The Company recognized $1.3 million of BCF in ~~cash. Otherwise,~~total as an increase in additional paid-in capital and corresponding discount on the carrying amount of the September IDV Note.

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

~~loans shall be deemed to be interest-free.~~ The ~~term~~September IDV Note was redeemable at the option of the ~~Loan Agreement is perpetual, and may only be terminated upon the Nominee Shareholders receiving repayment notice, or upon the occurrence of~~Company in whole at an ~~event of default under the terms~~initial redemption price of the ~~agreement. The loan extended~~principal amount of the September IDV Note plus additional warrants and accrued and unpaid interest to the ~~Nominee Shareholders~~date of redemption.

The security purchase agreement contains customary representations, warranties, and covenants. The September IDV Note was collateralized by the Company’s equity interest in DBOT.

The Company was also subject to penalty fee at 8.0% per annum for late payments of interests and compensation for the loss of IDV on failure to timely deliver conversion shares upon conversion.

Down Round Price Adjustment on October 30, 2019

On October 29, 2019 the Company entered into a letter agreement with IDV pursuant to which the Company agreed to reduce the conversion price of the debentures and the ~~capital~~exercise price of ~~SSF are fully eliminated~~the warrants from $1.84 to $1.00 due to the lower conversion price and exercise price agreed in the ~~consolidated financial statements.~~additional issuance in October, 2019. The Company recognized $0.2 million of remeasured BCF as an increase in additional paid-in capital and corresponding discount on the carrying amount of the September IDV Note and $0.1 million of deemed dividend on warrant repricing for the difference between the fair value of the unadjusted warrants and adjusted warrants.

Additional Issuance for No Additional Consideration - Consent of IDV for Subsequent Financing with YA II PN

On December 19, 2019, the Company executed an additional issuance agreement with IDV, pursuant to which the Company obtained a consent from IDV for subsequent financing with YA II PN in exchange for: (1) 2.0 million shares of the Company’s common stock; (2) the warrant to purchase 1.0 million shares of the Company’s common stock at an exercise price of $1.00 with a 7 year term in the form of prior warrants issued to IDV; and (3) a 2 year extension of the exercise period for all outstanding warrants held by IDV.

The additional issuance above and the exercise period extension in exchange for the consent was treated as a modification of the September IDV Note pursuant to the guidance of ASC 470. The Company concluded that the September IDV Note qualified for debt extinguishment as the 10.0% cash flow test was met. As a result, the carrying amount of $0.4 million of the September IDV Note was written off and the amended note was recorded at its fair value of $2.2 million along with a BCF at intrinsic value of $0.5 million. The Company measured and recognized the intrinsic value of the BCF at its reacquisition price $0.5 million on December 19, 2019 and recognized a non-cash loss on extinguishment of debt in the amount of $2.7 million in accordance with ASC 470. In addition, the Company recognized a deemed dividend of $0.5 million for the extension of exercise period for all applicable warrants issued to IDV.

~~Management Services Agreement~~Down Round Price Adjustment on April 22, 2020

As a result of the additional financing on April 22, 2020, the conversion price of the September IDV Note and the exercise price of the warrants was reduced from $1.00 to $0.5869. The Company recognized $0.3 million of remeasured BCF as an increase in additional paid- in capital and a corresponding discount on the carrying amount of the amended Note and $0.1 million of deemed dividend on warrant repricing for the difference between the fair value of the unadjusted warrants and adjusted warrants. The fair value of the adjusted warrants was determined using the Black-Scholes option-pricing model based on the following assumptions: expected life of 7 years, expected dividend rate of 0%, volatility of 122.4%, and an interest rate of 1.84%.

Down Round Price Adjustment on May 20, 2020

In ~~addition~~order to facilitate the additional financing, the Company entered into an amendment and waiver agreement with IDV pursuant to which the Company agreed to reduce the conversion price of $1.0 million principal amount of debenture to the ~~SSF VIE Agreements,~~lowest price per share sold in the ~~Company’s subsidiary~~financing but not less than $0.36. NaN additional BCF is recognized because the discount assigned to the BCF is already equal to the proceeds allocated to the convertible instrument.

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Conversion

During the nine months ended September 30, 2020, $3.6 million of the amended note, plus accrued and unpaid interest, were converted into 7.3 million shares of common stock of the ~~parent company~~Company.

As a result of ~~YOD WFOE, YOU~~ the conversions, the Company recognized associated unamortized discount at the date of conversion as interest expense. Total interest expense recognized was $0 and $2.1 million for the three and nine months ended September 30, 2020, respectively.

(d) $5.0 Million Senior Secured Convertible Debenture due in December 2020 - YA II PN

On ~~Demand (Asia) Limited,~~December 19, 2019, the Company completed the initial closing with respect to a securities purchase agreement with YA II PN, Ltd, a company incorporated under the laws of ~~Hong Kong~~the Cayman Islands (“~~YOD Hong Kong”~~YA II PN”) ~~entered into a Management Services Agreement with SSF, dated as~~, where YA II PN agreed to purchase from the Company up to $5.0 million (with 4.0% discount) in units consisting of ~~April 6, 2016~~secured convertible debentures (the ~~“Management Services Agreement”~~“YA II PN Note”). Pursuant to a Management Services Agreement, YOD Hong Kong has the exclusive right to provide to SSF management, financial and other services related to the operation of SSF’s business, and SSF is required to take all commercially reasonable efforts to permit and facilitate the provision of the services by YOD Hong Kong. As compensation for providing the services, YOD Hong Kong is entitled to receive a fee from SSF, upon demand, equal to 100% of the annual net profits as calculated on accounting policies generally accepted in the PRC of SSF during the term of the Management Services Agreement. YOD Hong Kong may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against SSF’s future payment obligations.

In addition, at the sole discretion of YOD Hong Kong, SSF is obligated to transfer to YOD Hong Kong, or its designee, any part or all of the business, personnel, assets and operations of SSF which may be lawfully conducted, employed, owned or operated by YOD Hong Kong, including:

(a) business opportunities presented to, or available to SSF may be pursued and contracted for in the name of YOD Hong Kong rather than SSF, and at its discretion, YOD Hong Kong may employ the resources of SSF to secure such opportunities;

(b) any tangible or intangible property of SSF, any contractual rights, any personnel, and any other items or things of value held by SSF may be transferred to YOD Hong Kong at book value;

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by YOD Hong Kong by acquisition, lease, license or otherwise, and made available to SSF on terms to be determined by agreement between YOD Hong Kong and SSF;

(d) contracts entered into in the name of SSF may be transferred to YOD Hong Kong, or the work under such contracts may be subcontracted, in whole or in part, to YOD Hong Kong, on terms to be determined by agreement between YOD Hong Kong and SSF; and

(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of YOD Hong Kong, and in the name of and at the expense of, YOD Hong Kong;

provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of YOD Hong Kong) or adversely affecting any license, permit or regulatory status of SSF.

~~The term of the Management Services Agreement is 20 years, and may not be terminated by SSF, except with the consent of, or a material breach by, YOD Hong Kong.~~

Pursuant to the above contractual agreements, YOD WFOE can have the assets transferred freely out of SSF without any restrictions. Therefore, YOD WFOE considers that there is no asset of SSF that can be used only to settle obligation of YOD WFOE, except for the registered capital of SSF amounting to RMB 50.0 million (approximately $7.5 million), among which RMB 27.6 million (approximately $4.1 million) has been injected as of September 30, 2017. As SSF is incorporated as limited liability company under PRC Company Law, creditors of this entity do not have recourse to the general credit of other entities of the Company.

~~Financial Information~~

~~On June 30, 2017, Company entered into BT SPA, under which Zhong Hai Shi Xun Media,~~ which was ~~formerly 80% owned by Sinotop Beijing, was sold to BT. The details of this transaction are disclosed in Note 11.~~

~~The following financial information of our VIEs, as applicable for the periods presented, affected the Company's consolidated financial statements.~~

~~Table of Contents~~

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

September 30, December 31,
2017 2016
ASSETS
Current assets:
Cash $ 4,063 $ 1,519,125
Accounts receivable, net - 1,260,529
Prepaid expenses 2,156 30,455
Other current assets 1,503 191,427
Intercompany receivables due from the Company's subsidiaries⁽ⁱ⁾ 2,439,391 150,725
Total current assets 2,447,113 3,152,261
Property and equipment, net - 196,677
Intangible assets, net - 2,570
Long term investments 3,649,042 3,654,664
Other non-current assets - 442,782
Total assets $ 6,096,155 $ 7,448,954

LIABILITIES
Current liabilities:
Accounts payable $ - $ 5,817
Deferred revenue - 824,563
Accrued expenses - 268,074
Other current liabilities 40 394,314
Accrued license content fees - 1,236,661
Intercompany payables due to the Company's subsidiaries⁽ⁱ⁾ 3,518,877 14,752,338
Total current liabilities 3,518,917 17,481,767
Total liabilities $ 3,518,917 $ 17,481,767

Nine Months Ended
September 30, September 30,
2017 2016
Revenue $ 794,273 $ 4,377,034
Net loss $ (4,293,469 ) $ (1,182,884 )

Nine Months Ended
September 30, September 30,
2017 2016
Net cash used in operating activities $ (1,661,531 ) $ (3,777,951 )
Net cash used in investing activities $ (43,047 ) $ (3,355,296 )
Net cash provided by financing activities⁽ⁱ⁾ $ 189,515 $ 6,555,377

~~(i)~~

Intercompany receivables and payables are eliminated upon consolidation. The intercompany financing activities include the capital injection of $0.2 million to Sinotop Beijing in the nine months period ended September 30, 2017.

After the disposal of Zhong Hai Shi Xun Media as of June 30, 2017, the total assets consisted of receivables and long term investments. The Company expects that a lower percentage of its total revenue will be generated from its VIEs in the foreseeable future.

~~Acquisition~~

On January 30, 2017, the Company entered into a Securities Purchase Agreement (the “Sun Video SPA”) with BT Capital Global Limited, a British Virgin Islands company (“BT”) which is controlled by Company’s Chairman Bruno Wu, for the purchase by SSC of all of the outstanding capital stock of Sun Video Group Hong Kong Limited, a Hong Kong corporation (“SVG”), for an aggregate purchase price of $800,000 and a $50 million Promissory Note (the “SVG Note”) with the principal and interest thereon convertible into shares of the Company’s common stock at ~~a conversion rate of~~lower of: (1) $1.50 per ~~share. BT has guaranteed that SVG will achieve certain financial goals within 12 months~~share, or (2) 90.0% of the ~~closing. Until receipt of necessary shareholder approvals, the SVG Note is not convertible into~~lowest 10 day volume weighted average price (“VWAP”) with a floor price at $1.00, subject to adjustments if subsequent equity shares ~~of our common stock, but once the necessary shareholder approval is received, the unpaid principal~~had a lower conversion price, and interest thereon will automatically convert. Under the terms of the Sun Video SPA, BT has guaranteed that the business of SVG and its subsidiaries (the “Sun Video Business”) shall achieve revenue of $250 million and $15 million of gross profit (collectively the “Performance Guarantees”) within 12 months of the closing. If the Sun Video Business fails to meet either of the Performance Guarantees within such time, BT shall forfeit back to the Company the shares of the Company’s common ~~stock or the SVG Note, on a pro rata basis based on the Performance Guarantee for which the Sun Video Business achieves the lowest percentage~~stock. The purchase and sale of the ~~respective amount guaranteed.~~units occurred in three closings:

161.

First Closing: $2.0 million of YA II PN Note and 1.4 million shares of common stock closed on December 19, 2019;

Second Closing $1.0 million of YA II PN Note and 0.7 million shares of common stock closed on December 31, 2019 upon filing the registration statement; and

Third Closing: $2.0 million of YA II PN Note and 1.4 million shares of common stock closed on February 13, 2020 when such registration statement was declared effective by the SEC.

~~Table of Contents~~

~~Seven Stars Cloud Group, Inc., Its Subsidiaries~~The YA II PN Note was scheduled to mature in December 2020 and ~~Variable Interest Entities~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~In addition, if the Sun Video Business achieves more than $50~~accrued interest at an 4.0% interest rate. YA II PN also received: (1) a warrant (the “Warrant I”) exercisable for 1.7 million in cumulative net income within 3 years of closing, (the “Net Income Threshold”), the Company shall pay BT 50% of the amount of any cumulative net income above the Net Income Threshold. Profit share payments shall be made on an annual basis, in either cash or stock at the discretion of our Board of Directors. If the Board decides to make the payment in stock, the number of our shares of common stock at $1.50 with an expiration date 60 months from the date of the agreement, and (2) a warrant (the “Warrant II”) exercisable for 1.0 million shares of common stock at $1.00 with an expiration date of 12 months from the date of the agreement.

The Company received aggregate gross proceeds of $2.9 million (net of $0.1 million discount) as of December 31, 2019 and received $2.0 million in February 2020. Total funds received were allocated to ~~be awarded shall be calculated~~the YA II PN Note, common shares and warrants based on their relative fair values in accordance with ASC 470. The fair value of the YA II PN Note and common shares was based on the ~~market~~closing price of ~~such shares.~~the common stock on December 19, 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 (1 year for Warrant II), expected dividend rate of 0%, volatility of 122.44% and an interest rate of 1.66% (1.54% for Warrant II). The fair value of the warrants was recorded as additional paid-in capital and a corresponding discount on the carrying amount of the YA II PN Note. There was no BCF because its intrinsic value is zero since the stock price of the common shares at the commitment date for the YA II PN Note is greater than the effective conversion price.

~~After~~The YA II PN Note was redeemable at the ~~acquisition~~option of ~~SVG,~~ the Company ~~changed its name~~in whole or in part at an initial redemption price of the principal amount of the YA II PN Note plus a redemption premium equal to ~~Wecast Services Group Limited,~~15.0% of the amount being redeemed and ~~is therefore also referred~~accrued and unpaid interest to ~~herein~~the date of redemption. The security purchase agreement contains customary representations, warranties, and covenants.

Down Round Price Adjustment on April 22, 2020

As a result of the additional financing on April 22, 2020, the conversion price of the YA II PN Note was reduced from $1.00 to $0.5869. The Company recognized $2.7 million of remeasured BCF as ~~Wecast Services.~~an increase in additional paid- in capital and a corresponding discount on the carrying amount of the amended Note.

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Down Round Price Adjustment on May 20, 2020

~~On January 31, 2017,~~In order to facilitate the additional financing, the Company entered into ~~a Securities Purchase Agreement (the “Wide Angle SPA”)~~an amendment and waiver agreement with ~~BT and Sun Seven Stars Media Group Limited, a Hong Kong company (“SSS”), one~~YA II PN pursuant to which the Company agreed to reduce the conversion price of $1.0 million principal amount of debenture to the lowest price per share sold in the financing but not less than $0.36. NaN additional BCF is recognized because the discount assigned to the BCF is already equal to the proceeds allocated to the convertible instrument.

Conversion

During the nine months ended September 30, 2020, $5.0 million of the ~~Company’s largest shareholders, controlled by our Chairman Bruno Wu, as guarantor, for~~YA II PN Note, plus accrued and unpaid interest, were converted into 9.7 million shares of common stock of the ~~purchase by~~Company.

As a result of the conversions, the Company recognized associated unamortized discount at the date of ~~55% of the outstanding capital stock of Wide Angle for the sole consideration of the Company adding Wide Angle to the Sun Video Business acquired by the Company under the Sun Video SPA~~conversion as interest expense. Total interest expense recognized was $0 and thereby including 100% of the revenue and gross profit from Wide Angle in the calculation of the SVG Performance Guarantees set forth in the Sun Video SPA considering the Company has consolidated Wide Angle.

Since the Company, Wecast Services and Wide Angle were controlled by our Chairman Bruno Wu since November 10, 2016, as well as both before and after the acquisition, this transaction was accounted for as a business combination between entities under common control by Mr. Wu. Therefore, in accordance with ASC Subtopic 805-50, the consolidated financial statements of the Company include the acquired assets and liabilities of the SVG and Wide Angle at their historical carrying amounts. In addition, the Company’s consolidated financial statements as of December 31, 2016 have been prepared as if the Wecast Services and Wide Angle had been owned by the Company since November 10, 2016 presented and the Company’s consolidated financial statements as of December 31, 2016 has been retrospectively adjusted accordingly.

~~As of September 30, 2017, the Company recorded the $50~~$5.0 million SVG Note as additional paid in capital, as the Company believes that the Performance Guarantees can be met within 12 months of the closing. Considering the proceeds transferred were larger than carrying amounts of the net assets received, such $50 million was then recognized as a reduction to the Company’s additional paid in capital. The Company has not begun accruing any reserves relating to potential Net Income Threshold earnout payments, since the Sun Video Business is currently not close to exceeding this threshold.

~~Accounts Receivable~~

~~Accounts receivable consists of the following:~~

September 30, December 31,
2017 2016
Accounts receivable, gross: $ 42,787,928 $ 12,350,947
Less: allowance for doubtful accounts (3,647 ) (2,828,796 )
Accounts receivable, net $ 42,784,281 $ 9,522,151

~~The movement of the allowance for doubtful accounts is as follows:~~

September 30,
2017 December 31,
2016
Balance at the beginning of the period $ (2,828,796 ) $ (3,672 )
Additions charged to bad debt expense (103,040 ) (2,825,124 )
Write-off of bad debt allowance 47,378 -
Disposal of Zhong Hai Shi Xun 2,880,811 -
Balance at the end of the period $ (3,647 ) $ (2,828,796 )

~~Property and Equipment~~

~~The following is a breakdown of the Company’s property and equipment:~~

~~Table of Contents~~

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

September 30, December 31,
2017 2016
Furniture and office equipment $ 296,161 $ 1,063,481
Vehicle 146,466 267,023
Office Building - 3,948,058
Leasehold improvements - 939,844
Total property and equipment 442,627 6,218,406
Less: accumulated depreciation (323,323 ) (1,254,681 )
Property and Equipment, net $ 119,304 $ 4,963,725

~~The Company recorded depreciation expense of approximately $8,508 and $209,139~~ for the three and nine months ended September 30, ~~2017~~2020, respectively.

(e) $3.0 Million Promissory Note due in November 2020 – New Castle County

On November 25, 2015, DBOT, the subsidiary which the Company acquired in 2019, entered into a promissory note with New Castle County, a political subdivision of the State of Delaware in the aggregate principal amount of $3.0 million (the “New Castle County Notes”). The New Castle County Notes bear interest at a rate of 6.0%, and ~~$33,000~~mature on November 25, 2020. Total interest expense recognized was $45,000 and ~~$101,000~~$135,000 for the three and nine months ended September 30, ~~2016, respectively.~~

~~Intangible Assets~~

~~As of September 30, 2017~~2020, respectively, and ~~December 31, 2016, the Company’s amortizing and indefinite lived intangible assets consisted of the following:~~

September 30, 2017 December 31, 2016
Amortizing Intangible Gross
Carrying Accumulated Impairment Net Gross
Carrying Accumulated Impairment Net
Assets Amount Amortization Loss Balance Amount Amortization Loss Balance

Charter/Cooperation agreements (iii) $ - $ - $ - $ - $ 2,755,821 $ (909,257 ) $ (1,846,564 ) $ -
Software and licenses 211,939 (195,160 ) - 16,779 267,991 (241,932 ) - 26,059
Patent and trademark (iv) 92,965 (39,943 ) (53,022 ) - 92,965 (39,943 ) - 53,022
Website and mobile app development (ii) - - - - 593,193 (421,129 ) (172,064 ) -
Workforce (i) 305,694 (152,847 ) (152,847 ) - 305,694 (76,422 ) - 229,272
Total amortizing intangible assets $ 610,598 $ (387,950 ) $ (205,869 ) $ 16,779 $ 4,015,664 $ (1,688,683 ) $ (2,018,628 ) $ 308,353
Indefinite lived intangible assets
Website name 134,290 - - 134,290 134,290 - - 134,290
Patent (iv) 10,599 - (10,599 ) - 10,599 - - 10,599
Total intangible assets $ 755,487 $ (387,950 ) $ (216,468 ) $ 151,069 $ 4,160,553 $ (1,688,683 ) $ (2,018,628 ) $ 453,242

(i) On April 1, 2016, the Company entered into an agreement with Mr. Changsheng Liu, under which SSC agreed to pay Mr. Changsheng Liu cash consideration of $187,653 and 66,500 shares of restricted shares with a six month restriction period and a fair value of $121,695 in exchange for a workforce of 10 personnel experienced in programing content mobile apps. All 10 personnel entered into three year employment contracts with SSC effective April 1, 2016. The Company also acquired certain laptop and desktop computers with fair value of $3,655. According to the agreement, 30% of the cash consideration is due upon the signing of the agreement, 20% is due 2 months after the signing of the agreement and 50% is due 6 months after the signing of the agreement. All cash consideration has been paid. If any of 3 key staff, as defined, terminated their employment with SSC during the first 12 months of employment, SSC has the right to forfeit the unpaid cash consideration. In addition, Mr. Changsheng Liu would be required to pay a default penalty at minimal of $129,180. SSC has accounted for the transaction as an asset acquisition in which SSC mainly acquired a workforce, which is recognized as an intangible asset at cost. Subsequently, the workforce intangible is amortized over the employment term of three years.

~~The Company recorded amortization expense related to our amortizing intangible assets of approximately $28,000 and $84,522~~$45,000 for the three and nine months ended September 30, ~~2017~~2019. The agreement also requires the Company to comply with certain covenants, including restrictions on new indebtedness offering and ~~$90,000~~liens.

(f)Vendor Notes Payable

On May 13, 2020, DBOT entered into a settlement agreement with a vendor whereby the existing agreement with the vendor was terminated, the vendor ceased to provide services, and ~~$243,000 for the three and nine months ended September 30, 2016 respectively, which included the amortization expense of the workforce acquired as stated above.~~

all outstanding amounts were settled. In ~~September, 2017, after evaluating the cost and benefit, Company decided to terminate the service contract~~connection with this ~~entire team~~agreement, DBOT paid an initial $30,000 and ~~therefore Company recognize impairement~~executed an unsecured promissory note in the amount of ~~$152,847.~~$60,000, bearing interest at 0.25% per annum, and payable in two installments of $30,000. The first installment is due on December 31, 2020 and the remaining payment is due on August 31, 2021.

~~(ii) Considering a new mobile app has been developed to be put into market in October 2016,~~In the three months ended March 31, 2020 the Company ~~determined that~~ceased to use the ~~future cash flows generated from~~premises underlying one lease and vacated the ~~old mobile app was nil.~~real estate. In ~~accordance~~the three months ended June 30, 2020, the Company completed negotiations with ~~ASC 350,~~~~Intangibles – Goodwill~~the landlord to settle the remaining operating lease liability of $0.9 million by issuing a promissory note for $0.1 million, bearing an annual interest rate of 4.0%, and ~~Other, recoverability of assets to be held~~which is due and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. The Company estimated the fair value of this intangible asset to be nil as ofpayable on December 31, ~~2016. Fair value was determined using unobservable (Level 3) inputs. In June, 2017, this intangible asset has been disposed of along with other net assets in Zhong Hai Shi Xun.~~2021.

~~Table of Contents~~

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

(iii) During the fourth quarter of 2016, the Company determined that the Charter/Cooperation agreements will not serve the business or generate future cash flow. As no future cash flows will be generated from the Charter/Cooperation agreements, the Company estimated the fair value of the Charter/Cooperation agreements to be nil as of December 31, 2016. Fair value was determined using unobservable (Level 3) inputs. Impairment loss from Charter/Cooperation agreements of $1,846,000 was recognized in 2016 to write off the entire book value of the Charter/Cooperation agreements. In June, 2017, this intangible asset has been disposed of along with other net assets in Zhong Hai Shi Xun.

(iv) During the second quarter of 2017, the Company determined that one of its subsidiaries in the US will not serve the non-core business or generate future cash flow. As no future cash flows will be generated from using the patent owned by this subsidiary, the Company estimated the fair value of those patent to be nil as of June 30, 2017. Fair value was determined using unobservable (Level 3) inputs. Impairment loss from patent of $63,621 was recognized in 2017 to write off the entire book value of the patent.

~~The following table outlines the amortization expense for the next three years and thereafter:~~

Amortization to be
Years ending December 31, Recognized
2017 (3 months) $ 2,517
2018 10,067
2019 4,195
Total amortization to be recognized $ 16,779

~~Long Term Investments~~

~~Cost method investments~~

~~Cost method investments as of the period ended September 30, 2017 and December 31, 2016 are as follow:~~

September 30, December 31,
2017 2016
Topsgame (i) $ 3,291,600 $ 3,156,985
Frequency (ii) 3,000,000 3,000,000
DBOT (iii) 250,000 -
Total $ 6,541,600 $ 6,156,985

~~(i)~~

~~Investment in Topsgame~~

(g) Small Business Association Paycheck Protection Program

On April ~~13, 2016, SSF~~10, 2020, the Company borrowed $0.3 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan was originally payable in 18 installments of $18,993 commencing on November 10, 2020, with a final payment due on April 10, 2022. With several amendments, the loan is currently payable monthly commencing on September 10, 2021, with a final payment due on April 10, 2025. The Company may apply for forgiveness of this loan in the next twelve months in an amount equal to the sum of the following costs incurred in the eight weeks following the disbursement of the loan: (1) payroll costs, (2) interest on a covered mortgage obligation, (3) payment on a covered rent obligation, and (4) any covered utility payment.

On May 1, 2020 Grapevine borrowed $0.1 million at an annual rate of 1.0% from a commercial bank through the Small Business Association Paycheck Protection Program. The loan is payable in 18 installments of approximately $7,000 commencing on December 1, 2020, with a final payment due on May 1, 2022. The Company may apply for forgiveness of this loan in an amount equal to the sum of the following costs incurred in the eight weeks following the disbursement of the loan: (1) payroll costs, (2) interest on a covered mortgage obligation, (3) payment on a covered rent obligation, and (4) any covered utility payment.

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Note 13. Stockholders’ Equity, Convertible Preferred Stock and Redeemable Non-controlling Interest

Convertible Preferred Stock

The Board of Directors has authorized 50.0 million shares of convertible preferred stock, $0.001 par value, issuable in series. The Series A preferred stock shall be entitled to one vote per common stock on an as-converted basis and is only entitled to receive dividends when and if declared by the Board.

Redeemable Non-controlling Interest

The Company and Qingdao Chengyang Xinyang Investment Company Limited (“Qingdao”) formed an entity named Qingdao Chengyang Mobo New Energy Vehicle Sales Service Company Limited (“New Energy.”) Qingdao entered into a Game Right Assignment Agreement with SSS for the acquisition of certain game IP rights (“Game IP Rights”) for approximately $2.7 million (RMB18 million) in cash. On April 15, 2016, SSF entered into a Capital Increase Agreement with Nanjing Tops Game Co., Ltd. (“Topsgame”) and its shareholders whereby SSF transferred the Game IP Rights acquired from SSS to Topsgame in exchange for 13% of Topsgame’s equity ownership. Topsgame is a PRC company that specializes in the independent development and operation of online, stand-alone and other games as well as the distribution of domestic and overseas games. The Company’s 13% ownership interest does not provide the Company with the right to nor does the Company have representation on the board of directors of Topsgame.

The Company has recognized the cost of the investment in Topsgame, which is a private company with no readily determinable fair value, based on the acquisition cost of Game IP Rights of approximately $2.7 million and accounts for the investment by the cost method.

On September 14, 2016, SSF increased its investment in Topsgame by RMB3,900,000 (approximately $584,000) and maintained its 13% equity ownership of Topsgame. The investment continued to be accounted for using the cost method.

On June 30, 2017, the Company entered into the BT SPA, pursuant to which, Topsgame has been agreed to be sold to BT in the consideration of the fair value of Topsgame which approximates to its carrying book value (appraised by an independent third party). However, considering the payment term is in one year, its collectability is uncertain and required legal transfer process was not completed as of September 30, 2017, Company did not account for this transaction as of September 30, 2017.

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

~~(ii)~~

~~Investment in Frequency~~

In April 2016, the Company and Frequency Networks Inc. (“Frequency”) entered into a Series A Preferred Stock Purchase Agreement (the “SPA”) for the purchase of 8,566,271 shares of Series A Preferred Stock, Frequency (the “Frequency Preferred Stock”)capital subscription agreement for a total ~~purchase price~~ of ~~$3 million.~~RMB 200.0 million ($28.0 million), and made the first capital contribution of RMB 50.0 million in the three months ended March 31, 2020. The 8,566,271 Series A Preferred Stock represent 9% ownership and voting interest on an as converted basis and does not provide the Company with the right to nor does the Company have representation on the boardremaining RMB 150.0 million ($21.0 million) are payable in three installments of ~~directors of Frequency.~~

RMB 50.0 million ($7.0 million) upon New Energy attaining certain revenue or market value benchmarks.

The ~~Frequency Preferred Stock is entitled to non-cumulative~~investment agreement stipulates that New Energy must pay Qingdao dividends at the rate of $0.02548 per share per annum, declared at the discretion of Frequency’s board of directors. The Frequency Preferred Stock is also convertible into shares of Frequency common stock at the Company’s election any time6.0%. After one year, Qingdao may sell its investment to an institutional investor, and after ~~issuance on a 1:1 basis, subject to certain adjustment. Each share of Frequency Preferred Stock also has a liquidation preference of $0.42467 per share, plus any declared but unpaid dividends.~~

~~The Company has recognized the cost of the~~three years may redeem its investment ~~in Frequency, which is a private company with no readily determinable fair value, at its cost of $3 million and accounts~~ for the ~~investment by~~face amount plus 6.0% interest less dividends paid. The redemption feature is neither mandatory nor certain. Due to the ~~cost method.~~

There were no identified events or changes in circumstances that may have had a significant adverse effect on the fair value of our cost method investments, accordingly the fair value of our cost method investments are not estimated.

~~(iii)~~

~~Investment in DBOT~~

In August, 2017, Company made a strategic investment of US$250,000 in the Delaware Board of Trade Holdings, Inc. (“DBOT”) to acquire 187,970 common shares. DBOT is an approved and licensed FINRA- and SEC-regulated electronic trading platform with operations in Delaware. One of our subsidiaries is powered by DBOT’s platform, trading system and technology. The Company accounts for this investment using the cost method, as the Company owns less than 4% of the common shares andredemption feature, the Company has ~~no significant influence over DBOT.~~

~~Equity method investments~~

~~Equity method investment movement for the nine months ended on September 30, 2017 is as follow:~~

September 30, 2017
December 31,
2016 Capital increase Loss on
investment Impairment loss Foreign currency
translation adjustments September 30,
2017
Wecast Internet (i) 132,782 - (77,210 ) - 3,797 59,369
Hua Cheng (ii) 364,897 - (23,258 ) - 15,803 357,442
Shandong Media (iii) - - - - - -
Total $ 497,679 - $ (100,468 ) - $ 19,600 $ 416,811

~~(i)~~

~~Investment in Wecast Internet~~

In October 2016, the Company’s subsidiary, YOU On Demand (Asia) Ltd., invested RMB1,000,000 (approximately $149,750) in Wecast Internet Limited (“Wecast Internet”) and held its 50% equity ownership.

~~(ii)~~

~~Investment in Hua Cheng~~

~~As of the period ended September 30, 2017 and December 31, 2016, the Company held 39% equity ownership in Hua Cheng, and accounted for~~classified the investment ~~by the equity method.~~

~~(iii)~~

~~Investment in Shandong Media~~

Asoutside of the period ended September 30, 2017 and December 31, 2016, the Company held 30% equity ownership in Shandong Media, and accounts for the investment by the equity method. The investment was fully impaired as of September 30, 2017 and December 31, 2016.

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

~~Stockholders’ Equity~~

On July 6, 2016, the Company entered into a Common Stock Purchase Agreement (the “SSW SPA”) with Seven Stars Works Co., Ltd., a Korea company (“SSW”) and an affiliate of SSS. Pursuant to the terms of the SSW SPA, the Company has agreed to sell and issue 2,272,727 shares of the Company’s common stock for $1.76 per share, or a total purchase price of $4.0 million to SSW. A total of $4.0 million was received and 2,272,727 shares were issued on July 19, 2016.

On August 11, 2016, the Company entered into Common Stock Purchase Agreement (the “Harvest SPA”) with Harvest Alternative Investment Opportunities SPC (“Harvest”), a Cayman Islands company. Pursuant to the terms of the Harvest SPA, the Company has agreed to sell and issue 2,272,727 shares of the Company’s common stock, for $1.76 per share, or a total purchase price of $4.0 million to Harvest. A total of $4.0 million was received and 2,272,727 shares were issued on August 12, 2016.

On November 11, 2016, the Company entered into Common Stock Purchase Agreement (the “SSSHKCD SPA”) with Sun Seven Stars Hong Kong Cultural Development Limited, a Hong Kong company (“SSSHKCD”) and an affiliate of SSS. Pursuant to the terms of the SSSHKCD SPA, the Company has agreed to sell and issue 1,136,365 shares of the Company’s common stock for $1.76 per share, or a total purchase price of $2.0 million to SSSHKCD. A total of $2.0 million was received and 1,136,365 shares were issued on November 17, 2016.

As described in Note 12, the Company and SSS entered into a series of agreements, including an agreement pursuant to which the Company agreed to sell and issue 4,545,455 shares of the Company's common stock and warrants to acquire an additional 1,818,182 shares (at an exercise price of $2.75 per share) for an aggregate purchase price of $10 million to SSS.

On May 19, 2017, the Company entered into a subscription agreement with certain investors, including officers, directors and other affiliates of the Company, pursuant to which the Company issued and sold to such investors, in a private placement, an aggregate of 727,273 shares of the common stock of the Company, for $2.75 per share, or a total purchase price of $2.0 million. Investors in the private placement included Lan Yang, the wife of the Company’s Chairman Bruno Wu, and China Telenet Ventures Limited, an entity owned and controlled by Sean Wang, a member of the Company’s Board of Directors. As of July 18, 2017, all subscription amounts have been received by the Company.

~~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.

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 was valued using Monte Carlo Simulation method at the year ended December 31, 2016. All the remaining warrant liabilities have been expired as of August 30, 2017. The following assumptions were incorporated:

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

	~~Monte Carlo~~
	~~December 31,~~
	~~2016~~
~~Risk-free interest rate~~		~~0.70~~	%
~~Expected volatility~~		55	%
~~Expected term~~		~~0.67 year~~
~~Expected dividend yield~~		0	%

permanent equity.

The following ~~tables present~~table summarizes activity for the ~~fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:~~

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~~redeemable non-controlling interest for the nine months ended September 30, ~~2017:~~2020 (in thousands):

Level 3 Assets and Liabilities
For the Nine Months Ended September 30 , 2017
January 1, Change in September 30,
2017 Settlements Fair Value 2017
Liabilities:
Warrant liabilities (see Note 13) $ 70,785 $ (183,427 ) $ 112,642 $ -


January 1, 2020	$	0
Initial investment		7,047
Accretion of dividend		323
Loss attributable to non-controlling interest		(79)
Adjustment to redemption value		79
September 30, 2020	$	7,370

Standby Equity Distribution Agreement (“SEDA”)

The ~~significant unobservable inputs used in~~Company entered into a SEDA with YA II PN on April 3, 2020 and amended the ~~fair value measurement~~SEDA to reduce the aggregate amount of facility from $50.0 million to $45.0 million on June 9, 2020. The SEDA establishes what is sometimes termed an equity line of credit or an equity draw-down facility. The Company has the right to issue and sell to YA II PN up to $45.0 million of the Company’s ~~warrant includes~~common stock over 36 months following the ~~risk free interest rate, expected volatility, expected term and expected dividend yield. Significant increases or decreases~~date of the agreement entered on April 3, 2020 in ~~any~~installments, the maximum amount of ~~those inputs~~each of which is limited to $1.0 million. For each share of common stock purchased under the SEDA, YA II PN will pay 90% of the lowest VWAP of the Company’s shares during the five trading days following the Company’s advance notice to YA II PN. In general, the VWAP represents the sum of the value of all the sales of the Company’s common stock for a given day (the total shares sold in ~~isolation~~each trade times the sales price per share of the common stock for that trade), divided by the total number of shares sold on that day.

YA II PN’s obligation under the SEDA is subject to certain conditions, including the Company maintaining the effectiveness of a registration statement for the securities sold under the SEDA. In addition, the Company may not request advances if the common shares to be issued would result in ~~a significantly different fair value measurement.~~

YA II PN owning more than 4.99% of the Company’s outstanding common stock, with any such request being automatically modified to reduce the advance amount.

The ~~carrying amount of cash, accounts receivable, notes receivable, accounts payable, accrued other expenses, other current liabilities~~SEDA contains customary representations, warranties and ~~convertible promissory note as of September 30, 2017 and December 31, 2016, approximate fair value because~~agreements of the Company and YA II PN, indemnification rights and other obligations of the parties. YA II PN has covenanted not to cause or engage in any direct or indirect short ~~maturity~~selling or hedging of ~~these instruments.~~the Company’s shares of common stock.

In connection with the SEDA, the Company issued 1.0 million shares of the Company’s common stock as a commitment fee (the “Commitment Shares”) to a subsidiary of the YA II PN on April 3, 2020. The Company recognized such

~~11.~~

~~Related Party Transactions~~

~~(a)~~

~~$3.0 Million Convertible Note~~

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Commitment Shares as deferred offering costs and additional paid-in capital for a total of $0.9 million and fully charged against the gross proceeds received from SEDA in the three months ended June 30, 2020 because SEDA was terminated.

During the three months ended June 30, 2020 under the SEDA, the Company issued 34.5 million shares of common stock for a total of $32.5 million.

Common Stock

The Board of Directors has authorized 1,500 million shares of common stock, $0.001 par value.

2020 Equity Transactions

Refer to Note 12 for information related to issuance of common stock resulting from the conversion of convertible notes, Note 14 for information related to the issuance of common stock resulting from the conversion of convertible notes with related parties, Note 15 for information related to the issuance to common stock for warrant exercise, and Note 6(c) for the information related to the issuance of common stock for DBOT contingent consideration.

2019 Equity Transactions

Refer to Note 9 for information related to the issuance of common stock for assets and Note 12 for information related to the issuance of common stock in connection with convertible notes, and Note 6 for information related to the issuance of common stock for acquisitions.

On March 5, 2019, the Company entered into an agreement to acquire a company based in Malaysia, and placed 25.5 million common shares into an escrow account. The agreement was terminated in July 2019 and the common shares removed from escrow.

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, the ~~Executive~~Company’s Vice Chairman, ~~and Principal Executive Officer, Mr. Shane McMahon,~~ made a loan to the Company in the amount of ~~$3,000,000.~~$3.0 million. In consideration for the loan, the Company issued a convertible note to Mr. McMahon in the aggregate principal amount of ~~$3,000,000~~$3.0 million (the “Note”) at a 4%4.0% interest rate computed on the basis of a ~~365 day~~365-day year. ~~Upon issuance,~~The Company had previously entered several amendments with respect to the effective conversion price ~~of the Note was equal~~(changed from $1.75 to ~~the price per share paid for securities by investors in the most recent financing (as of the date of conversion) of equity or equity-linked securities of the Company.~~

~~Effective on January 31, 2014, the Company and Mr. McMahon entered into Amendment No. 4 to the Note pursuant to which the Note is at Mr. McMahon’s option, payable on demand or~~$1.50), convertible ~~on demand into shares~~stocks (changed from of Series E Preferred Stock to Common Stock). The last amendment was made on May 9, 2020, and extended the maturity date to December 31, 2022.

On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of conversion price to $0.59, contingent upon the immediate conversion of the Note. On June 5, 2020, the Note was converted into 5.1 million shares of common stock. The Company ~~(the “Series E Preferred Stock”)~~paid the accumulated interest $0.3 million in cash right before the conversion. For the three months ended September 30, 2020 and 2019, the Company recorded interest expense of $0 and $30,000 related to the Note, and $50,959 and $90,000 for the nine months ended September 30, 2020 and 2019,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 $2.5 million. The convertible promissory note bore interest at a rate of 4.0%, was scheduled to mature on February 8, 2020, and was convertible into shares of the Company’s common stock at a conversion price of ~~$1.75, until December 31, 2015. As a result, in 2014,~~$1.83 per share anytime at the option of SSSIG. The Company received $1.3 million from SSSIG.

On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of the conversion price to $0.59, contingent upon the immediate conversion of the convertible promissory note. On June 5, 2020, the convertible promissory note including accumulated interest was converted into 2.2 million shares of common stock.

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For the three months ended September 30, 2020 and 2019, the Company ~~recognized a beneficial conversion feature discount calculated as~~recorded interest expense of $0 and $13,000, respectively, related to the ~~difference between the Series E Preferred Stock at its intrinsic value, which was the fair value of the common stock at the commitment date~~Note, and $21,546 and $36,000 for the ~~Series E Preferred Stock investment~~nine months ended September 30, 2020 and the effective conversion price. As such, we recognized a beneficial conversion feature of approximately $2,126,000 in 2014 which was reflected as interest expense and additional paid-in capital since the note was payable upon demand.2019, respectively.

$1.0 Million Convertible Promissory Note with SSSIG

~~Effective December 30, 2014,~~On November 25, 2019, the Company ~~and Mr. McMahon~~ entered into ~~Amendment No. 5 pursuant to which~~a convertible promissory note agreement with SSSIG, an affiliate of Dr. Wu, in the ~~maturity date~~aggregate principal amount of ~~the Note~~$1.0 million. The convertible promissory note bore interest at a rate of 4.0%, matures on November 25, 2021, and was ~~extended to December 31, 2016. The Note remains payable on demand or~~ convertible ~~on demand~~ into shares of ~~Series E Preferred Stock~~the Company's common stock at a conversion price of ~~$1.75~~$1.25 per share anytime at ~~Mr. McMahon’s option.~~the option of SSSIG. The Company received $0.25 million from SSSIG. On June 5, 2020, the Audit Committee and the Board of Directors approved the reduction of conversion price to $0.59, contingent upon the immediate conversion of the convertible promissory note. On June 5, 2020, the convertible promissory note, including accumulated interest, was converted into 0.4 million shares of common stock. For the three months and nine months ended September 30, 2020, the Company recorded interest expense of $0 and $4,301, respectively.

(b)Transactions with GTD

Disposal of Assets in exchange of GTBDollar Coins (“GTB”)

In March 2019, the Company completed the sale of the following assets (with total carrying amount of $20.4 million) to GTD, a minority shareholder based in Singapore, in exchange for 1.3 million GTB. The Company considered the arrangement as a nonmonetary transaction and the fair values of GTB were not reasonably determinable due to the reasons described below. Therefore, GTB received were recorded at the carrying amount of the assets exchanged and the Company did not recognize any gain or loss based on ASC 845, Nonmonetary Transactions ("ASC 845.")

●

License content (net carrying amount $17.0 million)

●

13.0% ownership interest in Nanjing Shengyi Network Technology Co., Ltd (“Topsgame”) (carrying amount of $3.2 million which was included in long-term investment as a non-marketable equity investment)

●

Animation copy right (net carrying amount $0.2 million which was included in intangible assets.)

Digital asset management services

The Company recognized 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, Revenue from Contracts with Customers, at contract inception, the Company considered the following factors to estimate the value of GTB (noncash consideration): 1) it only traded in one exchange, which had been in operation less than one year; 2) its historical volatility was high; and 3) the Company's intention at the time to hold the majority of GTB, as part of its digital asset management services; and 4) associated risks related to holding GTB. Therefore, the value of 7.1 million GTB using Level 2 measurement was $40.7 million with a 76.0% discount to the fixed contract price agreed upon by both parties when signing the contract. The Company considered similar assets exchanges in Singapore and considered the volatility of the quoted prices and determined a discount of 76.0%. The estimated value of GTB was calculated using the Black-Scholes valuation model using the following assumptions: expected terms 3.0 years; volatility 155.0%; dividend yield: 0 and risk-free interest rate 2.25%. As of December 31, 2019, all performance obligations associated with the development of the master plan for GTD's assets had been satisfied. Accordingly, the Company recognized revenue of $40.7 million in the year ended December 31, 2019.

Impairment loss

On October 29, 2019, GTB had an unexpected significant decline in quoted price, from $17.00 to $1.84. This decline continued through December 31, ~~2016,~~2019, and on December 31, 2019 the quoted price was $0.23. As a result of this decline in quoted price, and its inability to convert GTB into other digital currencies which were more liquid, or fiat currency, the Company performed an impairment analysis in the three months ended December 31, 2019 and ~~Mr. McMahon entered into~~recorded an ~~amendment pursuant~~impairment loss of $61.1 million.

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(c)Severance payments

On February 20, 2019, the Company accepted the resignation of its former Chief Executive Officer, former Chief Investment Officer and former Chief Strategy Officer and agreed to ~~which~~pay $0.8 million in total for salary, severance and expenses. The Company paid $0.6 million in the ~~Note will be at Mr. McMahon’s option, payable~~three months ended March 31, 2019 and recorded $0.2 million in “Other current liabilities” on ~~demand or convertible on demand into shares~~its consolidated balance sheet as of December 31, 2019. The $0.8 million severance expenses were recorded in “Selling, general and administrative expenses" in the condensed consolidated statements of operations.

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

In the nine months ended September 30, 2020, the Company’s ~~Series E Preferred Stock, provided that~~net borrowings from Dr. Wu and his affiliates decreased by $3.5 million mainly due to repayments and conversion of certain amounts to common stock. The Company recorded these borrowings in “Amount due to related parties” in its condensed consolidated balance sheet as of September 30, 2020. These borrowings bear no interest.

On June 5, 2020, the ~~Note will no longer be convertible into Series E Preferred Stock upon~~Audit Committee and the Board of Directors approved the conversion of ~~the Series E Preferred stock owned by C~~

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

~~Media into the Company’s Common Stock (pursuant to which all Series E Preferred Stock will be automatically converted) but then convertible only into Common Stock~~some borrowings at a conversion price of ~~$1.50, until~~$0.59 per common share, contingent upon the immediate conversion of these amounts. On June 5, 2020, the borrowings of $1.5 million, including the $0.4 million transferred from Beijing Financial Holding Limited, were converted into 2.6 million shares of common stock.

(e)Long-Term Investment to Qianxi

In November 2019, the Company entered into a share transfer agreement with Sichuan Shenma Zhixing Technology Co. (“Shenma”) to acquire its 1.72% ownership in Qianxi with the consideration of $4.9 million, which will be paid in six installments. Shenma needs to complete the share transfer registration prior to May 31, 2020, otherwise the Company can request Shenma to return the investment payment. The Company has recorded the first installment $0.5 million on the “Other Non-Current Assets” since the share transfer registration is not completed yet.

(f)Borrowing from Beijing Financial Holdings Limited

The borrowings from Beijing Financial Holding Limited were zero in the condensed consolidated balance sheet as of September 30, 2020, and $0.7 million in “Other current liabilities” in the consolidated balance sheet as of December 31, ~~2018.~~2019. Effective January 1, 2020, Beijing Financial Holding limited is considered a related party because MHTL was intended to act as a trustee over 10,000 common shares of MEG to effect a share-based compensation plan and has the same owner as Beijing Financial Holding Limited. The Company has determined not to proceed with the MEG share-based plan. Refer to Note 1 for additional information.

~~For~~In the three months ended June 30, 2020, the borrowing of $0.4 million from Beijing Financial Holding Limited was transferred to Dr. Wu, and it was subsequently converted to shares at a conversion price of $0.59 per common share on June 5, 2020.

(g)Zhu Note Receivable

Refer to Note 3 for this note collateralized by equity in a company partially-owned by a related party.

(h) Disposal of the ownership in Amer

Refer to Note 6(e) for the disposal of 10.0% ownership in Amer to a related party.

(i) Service agreement with SSSIG

The Company entered a service agreement with SSSIG for the period from July 1 2020 through June 30 2021 for $1.4 million in exchange for consulting services from SSSIG, the services include but are not limited to human resources, finance and legal advice. The Company recorded the service charges of $0.4 million in "Selling, general and administrative

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expenses" for the three and nine months ended September 30 ~~2017,~~2020, and $0.3 million in in "Amount due to related parties" as of September 30 2020.

(j) Amounts due from and due to Glory

The Company has made payments on behalf of Glory for some of its operational expenses. The balance of $0.2 million due from Glory as result of these payments is recorded in "Amount due from related parties" as of September 30 2020. Glory has made partial payment of $0.5 million on behalf of the Company to acquire the land use rights and the Company recorded ~~interest expense~~it in "Amount due to related parties."

(k) Research and development contract with a related party

The Company has entered a research and development contract with an entity with the total amount of ~~$30,247~~$2.8 million for EV design and $89,753, respectively, related to the Note; For the three and nine months ended September 30, 2016, the Company recorded interest expense of $30,000 and $90,000, respectively, related to the Note. In August, 2017,technology development. The Company has paid ~~$250,000 interest related to the Note.~~

~~(b)~~

~~Cost of Revenue~~

~~Hua Cheng,~~$1.3 million in ~~which the Company holds 39% of the equity shares, charged the Company licensed content fees of approximately Nil and $55,000 for~~ the three months ended September 30 ~~2017~~2020 and ~~2016,~~recorded this amount in "Research and ~~approximately Nil and $148,000 for~~development expense." One of the ~~nine~~shareholders of this entity holds a senior position in several of Dr. Wu’s affiliated entities.

(l) Borrowing from DBOT

During the three months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~

~~(c)~~

~~Purchase of Game IP Rights~~

On April 13, 2016, SSF entered into a Game Right Assignment Agreement with SSS for the acquisition of certain Game IP Rights for cash of $2.7 million (RMB 18 million), which was paid in full in 2016. The Game IP Rights was recorded at cost and then subsequently transferred in exchange for the investment in Topsgame as disclosed in Note 8 above.

~~(d)~~

~~Deposit for Investment in MYP~~

~~On September 19, 2016,~~2019, the Company ~~signed a non-binding term sheet with Sun Video Group HK Limited ("SVG")~~obtained several borrowings, $550,000 in ~~purchase for its 51% ownership of M.Y. Products, LLC ("MYP"), a video commerce~~total, from DBOT, and ~~supply chain management operator,~~recorded these borrowings in ~~exchange for $50 million worth of Wecast Network common stock and $800,000 cash.~~

In accordance with the Term Sheet, the Company wired $800,000 (or its RMB equivalent) to MYP upon signing the term sheet as Good Faith Deposit. The transaction has already been closed, and all of the deposit paid to MYP has been transferred into liabilityamount due to ~~BT, which is~~related parties on the ~~former shareholder of SVG, and as of September 30, 2017, Company still owed to BT in the amount of $58,567.~~

~~(e)~~

~~Assets Disposal to BT~~

On June 30, 2017, the Company entered into a Securities Purchase Agreement (the BT SPA) with BT, pursuant to which the issued and outstanding stock that SSC holds in three separate non-core assets were sold to BT in exchange for RMB100 million (approximately $14.75 million at current exchange rate) in a combination of cash and publicly traded stock to be paid to SSC within one year of closing. A minimum of 20% of the total consideration to SSC will be paid in cash (approximately $2.95 million). A portion of the consideration may be paid in the form of publicly traded stock at the discretion of BT, and in that case the securities will represent a public company affiliated with BT, in an industry related to SSC’s and with an average daily trading value of at least $146,000.

These three separate non-core assets that sold to BT included 80% equity interest in Zhong Hai Shi Xun Media for zero, 13% equity interest in Nanjing Tops Game and 25% share capital investment right in Pantaflix JV in consideration of RMB100 million. As Zhong Hai Shi Xun Media is the Company’s subsidiary, sale of a subsidiary to a related party under common control would cause the Company to derecognize the net assets transferred at its carrying amounts and recognize no gains or losses. The difference between proceeds received and the carrying amount of the net assets transferred is recognized in additional paid in capital. At the same time, the Goodwill in the amount of $6.6 million has been pushed down to Zhong Hai Shi Xun Media along with the disposal.

Meanwhile, considering the payment term is one year, there is uncertainty with respect to collectability and required legal transfer process of Nanjing Tops Game was not completed, Company did not account for the transaction of disposal of 13% equity interest in Nanjing Tops Game and 25% share capital investment right in Pantaflix JV as of September 30, 2017 until the collectability is reasonably assured.

~~12.~~

~~SSS Agreements~~

On November 23, 2015, the Company entered into a series of agreements for a strategic investment by SSS, a PRC company in the media and entertainment industry that is controlled by the Company’s Chairman, Bruno Wu. The strategic investment by SSS included a private placement of equity securities of the Company, a content licensing agreement, and the potential for Tianjin Enternet Network Technology Limited (“Tianjin Enternet”), an affiliate of SSS, to earn additional shares of the Company’s common stock contingent on

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

the performance of SSF. SSF intends to provide a branded pay content service, consumer payments and behavior data analysis service, customer management and data-based service and mobile social TV-based customer management service.

On December 21, 2015, the Company entered into an Amended and Restated Securities Purchase Agreement (the “Amended SSS Purchase Agreement”) and a Revised Content License Agreement (the “Revised Content Agreement”) with SSS which amended certain terms of the original agreements dated November 23, 2015. In addition, the Company also entered into an Amended and Restated Share Purchase Agreement (the “Amended Tianjin Agreement”) with Tianjin Enternet.

On July 6, 2016, the Company entered into a Common Stock Purchase Agreement with Seven Stars Works Co., Ltd., a Korea company (“SSW”) and an affiliate of SSS for the purchase by SSW of 2,272,727 shares of the Company’s common stock, for $1.76 per share, or a total purchase price of $4.0 million.

On November 11, 2016, the Company entered into a Common Stock Purchase Agreement with Sun Seven Stars Hong Kong Cultural Development Limited, a Hong Kong company (“SSSHKCD”) and an affiliate of SSS. Pursuant to the terms of the SPA, the Company has agreed to sell and issue 1,136,365 shares of the Company’s common stock, for $1.76 per share, or a total purchase price of $2.0 million to SSSHKCD.

~~(a)~~

~~Amended SSS Purchase Agreement~~

On March 28, 2016, pursuant to the Amended SSS Purchase Agreement, the Company sold, and SSS purchased, 4,545,455 shares of the Company’s common stock for a purchase price of $2.20 per share, or an aggregate of $10.0 million. In addition, SSS received a two-year warrant to acquire an additional 1,818,182 shares of the Company’s common stock at an exercise price of $2.75 per share (the “SSS Warrant”). Until receipt of necessary shareholder approvals, the SSS Warrant may not be exercised to the extent that such exercise would result in SSS and its affiliates beneficially owning more than 19.99% of the Company’s outstanding common stock. On June 27, 2016, shareholder approval was obtained.

Since the SSS Warrant does not embody any future obligation for the Company to repurchase its own shares, is indexed to the Company’s own stock, may only be settled by the physical delivery of shares, and no conditions exist in which net cash settlement could be forced upon the Company by SSS in any other circumstances, the SSS Warrant is considered an equity classified instrument. The proceeds of $10.0 million, net of issuance cost of approximately $411,000, was allocated to common stock and SSS Warrant based on their relative fair value as of March 28, 2016 of approximately $8,227,000 and $673,000, respectively. Accordingly, the Company recorded approximately $725,000 in additional paid-in capital for the SSS Warrant.

~~(b)~~

~~Revised Content Agreement~~

On March 28, 2016, pursuant to the Amended and Restated SSS Purchase Agreement, SSS granted the Company non-exclusive royalty-free distribution rights for certain video content value in exchange for a convertible promissory note (the “SSS Note”). The SSS Note has a stated principal amount of approximately $17,718,000, was originally due to mature on May 21, 2016. On May 12, 2016, the Company and SSS entered into an amendment agreement to extend the maturity date of the SSS Note to July 31, 2016. The SSS Note beard an interest at the rate of 0.56% per annum. Immediately upon the receipt of the required shareholder approval to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock, which was obtained on June 27, 2016, the SSS Note was converted into 9,208,860 shares of the Company’s common stock.

In connection with the issuance of the SSS Note, the Company recorded debt issuance costs of approximately $131,000 which was to be amortized over the period of the SSS Note’s maturity date, of which approximately $123,000 was recognized during the year ended December 31, 2016.

The Company measured the effective conversion price of the SSS Note using its carrying value on March 28, 2016 and compared it to the fair value of the Company’s common stock on that date. As the effective conversion price of the SSS Note of $1.91 exceeded the fair value of the Company’s common stock of $1.81, no beneficial conversion feature was recognized.

~~The carrying value of the SSS Note~~condensed consolidated balance sheet as of June 27, 2016, which included the unamortized issuance costs of $8,000 and, pursuant to the terms of SSS Note, accrued interest expense of $25,000 has been recorded into the common shares issued on June 27, 2016.

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

~~(c)~~

~~Amended Tianjin Agreement~~

Pursuant to the Amended Tianjin Agreement dated December 21, 2015, Tianjin Enternet was to contribute 100% of the equity ownership of SSF, a newly-formed subsidiary of Tianjin Enternet to the Company. Contingent on the performance of SSF, Tianjin Enternet was to receive shares of the Company’s common stock over three years, with the exact number not exceeding 5.0 million per year, provided the earn-out provisions for each of the 2016, 2017 and 2018 annual periods (the “Earn-Out Share Award”) was achieved.30, 2019. These borrowings bear 0 interest. The earn-out provision for 2016, 2017 and 2018 are either 50.0 million homes/users passed or $4.0 million net income, 100.0 million homes/users passed or $6.0 million net income and 150.0 million homes/users passed or $8.0 million net income, respectively. In the event that the Company has ~~not obtained the required vote from shareholders~~repaid $300,000 in July 2019.

(m) Acquisition of Fintalk Assets

Refer to ~~issue the earn-out shares~~Note 9 for additional information regarding this 2019 asset acquisition.

(n) Red Rock Global Capital LTD (“Red Rock”)

Refer to ~~Tianjin Enternet, the Company was required~~Note 6(d) for additional information regarding this 2019 divestiture.

(o) Acquisition of Grapevine Logic. (“Grapevine”)

Refer to ~~issue a promissory note with a principal amount equal~~Note 6(b) for additional information regarding this 2019 acquisition.

(p) Amer Global Technology Limited (“Amer”)

Refer to ~~the quotient by multiplying 5.0 million by the applicable stock price defined in the agreement.~~Note 6(e) for additional information regarding this 2019 divestiture.

On April 5, 2016, in lieu of Tianjin Enternet contributing 100% of the equity ownership of SSF to the Company, YOD WFOE entered into VIE agreements with SSF and its legal shareholders in order to comply with PRC regulatory requirements on certain industries. SSF is 99% owned by Lan Yang, the spouse of Bruno Zheng Wu, the Company’s Chairman, and 1% owned by Yun Zhu, a Vice President of Wecast Network. By virtue of these VIE agreements; YOD WFOE obtained financial controlling interest in SSF, including the power to direct the activities of SSF, and therefore is the primary beneficiary of SSF. As the control of SSF was transferred to YOD WFOE through both the VIE agreements and physical handover of company documents on April 5, 2016, the transaction was determined to be completed on that date.

At the time YOD WFOE obtained control over SSF, SSF had no assets, liabilities, employees or operating activities, nor did it hold any licenses, trade names or other intellectual properties. The Company also did not receive any assets, employees, contracts, sales or distribution systems or intellectual property from Tianjin Enternet in connection with the transaction. Since the acquisition of SSF did not include any input or processes, as defined under ASC 805-10-20, the transaction was not considered a business combination under ASC 805.

The earn-out provision was originally based on either the number of home/user pass or the net income of SSF. While the net income was to be measured based on the operations of SSF, the number of home/user pass is measured based on number of home/user pass of SSF’s distributors. Such earn-out provision is based on an index that is not calculated solely by reference to the operations of SSF, which is not considered indexed to the Company’s own shares. Also the earn-out provisions permit cash settlement if the Company cannot issue the earn-out shares. Therefore, the earn-out provision is classified as a liability and measured initially and subsequently at fair value with changes in fair value recognized in earnings at each reporting periods.

On June 27, 2016, the Company held its 2016 annual meeting of stockholders and received approval from its stockholders to allow SSS to beneficially own more than 19.99% of the Company’s outstanding common stock. Accordingly, the Earn-Out Share Award became issuable at the time when the earn-out provisions are considered to have been met pursuant to the Amended Tianjin Agreement.

On November 10, 2016, the Board of Directors (the “Board”) of SSC held a special meeting. At the recommendation of the Company’s audit committee, the Board determined that it is in the best interests of the Company and the Company’s shareholders to amend the terms of the Earn-Out Share Award to (1) reduce the total Earn-Out Share Award from 15,000,000 shares of Common Stock to 10,000,000 shares of Common Stock and (2) measure the achievement of the earn-out provisions based on the Companywide achievement of homes passed in lieu of the measurement being measured by SFF’s stand-alone achievement of homes passed. Based on evidence provided to the Board, the requisite thresholds necessary to trigger issuance of all shares of Common Stock subject to the Earn-Out Share Award have been achieved. Accordingly, on November 10, 2016, the Board approved the issuance of 10,000,000 shares of its common stock, par value $0.001 per share (“Common Stock to SSS”) and the shares were issued on November 11, 2016.

The Company recognized the fair value of the Common Stock to SSS of approximately $13,700,000, based on the market price of the Company’s Common Stock, as Earn-out share award expense in the consolidated statement of operations for the year ended December 31, 2016.

~~13.~~

~~Warrant Liabilities~~

In connection with our August 30, 2012 private financing, the Company issued 977,063 warrants to investors and the broker. In accordance with ASC 815-40, Contracts in Entity’s Own Equity, the warrants have been accounted as derivative liabilities to be re- measured at the end of every reporting period with the change in fair value reported in the consolidated statement of operations. On August 30, 2012, such warrants were valued at $1,525,000 utilizing a valuation model and were initially recorded as a liability. The fair value of the warrants is remeasured at each reporting period based on the Monte Carlo valuation.

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

~~As of December 31, 2016, the warrant liability was revalued as disclosed in~~ Note ~~10, and recorded at its fair value of approximately $70,785.~~

~~In 2017, there were 182,534 warrants exercised during nine months ended September 30, 2017, all the remaining 353,716 warrants were expired as of August 30, 2017.~~

~~14.~~

~~Share-Based Payments~~

15. Share-Based Compensation

As of September 30, ~~2017,~~2020, the Company had ~~1,845,010~~26.3 million options, ~~422,085~~29,586 restricted shares and ~~3,118,181~~1.7 million warrants ~~outstanding (including the 1,818,182 warrants issued to SSS as disclosed in Note 12 (a) to purchase shares of our common stock.~~

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.

~~Total share-based payments expense recorded by the Company during the three months and nine months ended September 30, 2017 and 2016 is as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
Employees and directors share-based payments $ 54,846 $ 75,000 $ 202,501 $ 287,000

Effective as of December 3, 2010 ~~our~~and amended on August 3, 2018, the Company’s Board of Directors approved the ~~SSC~~ 2010 Stock Incentive Plan (“the 2010 Plan”) pursuant to which options or other similar securities may be granted. The maximum aggregate number of shares of ~~our~~ common stock that may be issued under the 2010 Plan ~~is 4,000,000~~increased from 4.0 million shares to 31.5 million shares. On October 22, 2020, the Company’s shareholders approved the amendment and restatement of the 2010 Plan. The maximum aggregate number of shares of common stock that may be issued under the 2010 Plan increased

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from 31.5 million shares to 56.8 million shares. As of September 30, ~~2017,~~2020, options available for issuance are ~~1,415,003~~0.5 million shares.

For the three months ended September 30, 2020 and 2019, total share-based compensation expense was $3.3 million and $2.5 million, respectively, and $8.8 million and $6.5 million for the nine months ended September 30, 2020 and 2019, respectively.

(a)

~~(a)~~

Stock Options

~~Stock~~The following table summarizes stock option activity for the nine months ended September 30, ~~2017 is summarized as follows:~~2020:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregated
	Options	Exercise		Contractual	Intrinsic
	Outstanding	Price		Life (Years)	Value
Outstanding at January 1, 2020	14,936,726	$	2.13	8.48	$	0
Granted	13,750,000		0.53	9.45		5,225,000
Exercised	(60,000)		1.83	—		0
Expired	(1,144,326)		2.59	—		0
Forfeited	(1,153,333)		1.70	—		0
Outstanding at September 30, 2020	26,329,067		1.29	8.75		5,141,400
Vested as of September 30, 2020	13,684,070		1.74	8.17		1,258,592
Expected to vest at September 30, 2020	12,644,997		0.81	9.38		3,882,808

Weighted Average
Remaining Aggregated
Options Weighted Average Contractual Life Intrinsic
Outstanding Exercise Price (Years) Value
Outstanding at January 1, 2017 2,101,425 $ 2.42 4.59 $ -
Granted 170,000 1.57
Exercised (78,211 ) 1.63
Expired (45,662 ) 2.90
Forfeited (302,542 ) 1.50
Outstanding at September 30, 2017 1,845,010 2.67 4.46 0.39
Vested and expected to vest as of September 30, 2017 1,845,010 2.67 4.46 0.39
Options exercisable at September 30, 2017 (vested) 1,609,196 2.82 3.80 0.36

On January 4, March 1 and March 16, 2017, 90,000, 45,000 and 35,000 shares stock options, respectively, were issued to certain employees for services provided to us. The fair value of the stock options granted were valued using the Black-Scholes Merton method on the grant date, amounting to $61,200, $45,443 and $36,750, respectively.

As of September 30, ~~2017, approximately $220,777~~2020, $7.3 million of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of ~~approximately 1.98~~1.2 years. The total fair value of shares vested ~~during~~in the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 was ~~approximately $56,765~~$8.8 million and ~~$12,000,~~$6.0 million, respectively. NaN cash was received from options exercised.

(b)

Warrants

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

~~(b) Warrants~~

In connection with certain of 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.

~~As of September 30, 2017, the~~ The warrants issued to Warner Brother expired without exercise on January 31, 2019. The Company issued warrants to IDV and YA II PN, Ltd. in connection with senior secured convertible notes. The weighted average exercise price ~~of the~~for all warrants was ~~$2.33~~$1.65 and the weighted average remaining life was ~~0.81~~4.3 years. Refer to Note 12 for additional information on promissory notes.


	September 30, 2020	December 31, 2019
	Number of	Number of
	Warrants	Warrants
	Outstanding and	Outstanding and	Exercise		Expiration
Warrants Outstanding	Exercisable	Exercisable	Price		Date
$2.05 million IDV**	0	1,671,196	$	1.00	2/22/2026
$3.58 million IDV**	1,000,000	4,658,043		0.5869	9/27/2026
$5.0 million YA II PN*	0	1,666,667		1.50	12/13/2024
$5.0 million YA II PN*	0	1,000,000		1.00
Service providers	200,000	0		5.00	7/1/2022
Service providers	450,000	0		2.50	2/28/2022 - 7/1/2022
Total	1,650,000	8,995,906

* YA II PN exercised 1.0 million and 1.7 million warrants on March 31, 2020 and June 22, 2020 and the Company received $1.0 million and $2.5 million proceeds, respectively.

** ID Venturas exercised 5.3 million warrants in June 2020. The Company received $3.1 million proceeds.

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Note 16. Earnings (Loss) Per Common Share

The following table ~~outlines~~summarizes the ~~warrants outstanding and exercisable as of September 30, 2017 and December 31, 2016:~~Company’s earnings (loss) per share (USD in thousands, except per share amounts):

September 30, December 31,
2017 2016
Number of Number of
Warrants Warrants
Warrants Outstanding Outstanding and
Exercisable Outstanding and
Exercisable Exercise
Price Expiration
Date

2012 August Financing Warrants (i) - 536,250 $ 1.50 08/30/17
2013 Broker Warrants (Series D Financing) 100,000 228,571 1.75 07/05/18
2013 Broker Warrants (Convertible Note) 114,285 114,285 1.75 11/04/18
2014 Broker Warrants (Series E Financing) 1,085,714 1,085,714 1.75 01/31/19
2016 Warrants to SSS (Note 12) 1,818,182 1,818,182 $ 2.75 03/28/18
3,118,181 3,783,002


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019
Net earnings (loss) attributable to common stockholders	$	(8,286)	$	(13,713)	$	(47,212)	$	11,507
Interest expense attributable to convertible promissory note		0		0		0		125
Net earnings (loss) assuming dilution	$	(8,286)	$	(13,713)	$	(47,212)	$	11,632
Basic weighted average common shares outstanding		237,535,999		127,609,748		191,976,856		113,964,933
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		237,535,999		127,609,748		191,976,856		118,319,893
Earnings (loss) per share:
Basic	$	(0.03)	$	(0.11)	$	(0.25)	$	0.10
Diluted	$	(0.03)	$	(0.11)	$	(0.25)	$	0.10

~~(i)~~

~~The warrants are classified as derivative liabilities as disclosed in Note 13.~~

~~(c) Restricted Shares~~

In January, 2017, the Company granted 35,000 restricted shares to one employee under the “2010 Plan”. The restricted shares have a vesting period of four years with the first one-fourth vesting on the first anniversary from grant date and the remaining three-fourth vesting ratably over twelve quarters. The grant date fair value of the restricted shares was $43,750. As this employee left the Company in February, no expense was recorded.

In March and April, 2017, the Company granted 365,000 restricted shares to certain employees under the “2010 Plan”. The restricted shares have a vesting period of four years with the first one-fourth vesting on the first anniversary from grant date and the remaining three-fourth vesting ratably over twelve quarters. The grant date fair value of the restricted shares was $778,200.

~~A summary of the restricted shares is as follows:~~

Shares Weighted-average
fair value
Restricted shares outstanding at January 1, 2017 228,550 $ 1.75
Granted 400,000 2.05
Forfeited (95,000 ) 1.65
Vested (111,465 ) 1.73
Restricted shares outstanding at September 30, 2017 422,085 $ 2.07

~~15.~~

~~Loss Per Common Share~~

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
Net loss attributable to common stockholders $ (3,044,597 ) $ (2,047,204 ) $ (4,491,943 ) $ (5,771,763 )
Basic
Basic weighted average shares outstanding 62,146,168 41,184,037 59,594,289 31,640,230

Diluted
Diluted weighted average common shares outstanding 62,146,168 41,184,037 59,594,289 31,640,230

Net loss per share:
Basic $ (0.05 ) $ (0.05 ) $ (0.08 ) $ (0.18 )
Diluted $ (0.05 ) $ (0.05 ) $ (0.08 ) $ (0.18 )

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

Basic ~~loss~~earnings (loss) per common share attributable to ~~Seven Stars Cloud~~the Company’s shareholders is calculated by dividing the net ~~loss~~earnings (loss) attributable to ~~Seven Stars Cloud~~the Company’s shareholders by the weighted average number of outstanding common shares during the ~~applicable~~ period.

Diluted ~~loss~~earnings (loss) per share is calculated by taking net ~~loss,~~earnings (loss) attributable to the Company’s shareholders, divided by the diluted weighted average common shares outstanding. Diluted net loss per share ~~for the three and nine months ended September 30, 2017 and 2016 both equal to~~equals basic net loss per share ~~for respective periods~~ because the effect of securities convertible into common shares is anti-dilutive.

The following table includes the number of shares that may be dilutive potential common shares in the future. ~~These~~The holders of these shares do not have a contractual obligation to share in the Company’s losses and thus these shares were not included in the computation of diluted loss per share because the effect was ~~either antidilutive or~~antidilutive. (in thousands):


	Three Months Ended		Nine Months Ended
	September 30,	September 30,	September 30,	September 30,
	2020	2019	2020	2019
Warrants	1,650	3,709	1,650	3,709
Options and RSU	26,359	14,971	26,359	14,966
Series A Preferred Stock	933	933	933	—
DBOT contingent consideration	1,197	2,323	1,197	2,323
Convertible promissory note and interest	38,650	12,418	37,315	9,325
Total	68,789	34,354	67,454	30,323

Note 17. Income Taxes

During the ~~performance condition was not met.~~

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
Warrants 3,118,181 3,783,002 3,118,181 3,783,002
Options 2,267,095 2,151,428 2,267,095 2,151,428
Series A Preferred Stock 933,333 933,333 933,333 933,333
Series E Preferred Stock - 7,154,997 - 7,154,997
Convertible promissory note and interest 35,598,447 2,015,812 35,598,447 2,015,812
Total 41,917,056 16,038,572 41,917,056 16,038,572

~~16.~~

~~Income Taxes~~

~~As of September 30, 2017, the Company had approximately $34.4 million of the U.S domestic cumulative tax loss carryforwards~~three and approximately $15.0 million of the foreign cumulative tax loss carryforwards, which may be available to reduce future income tax liabilities in certain jurisdictions. These U.S. and foreign tax loss carryforwards will expire beginning in 2028 through 2036, and 2018 to 2022, respectively.

~~The income tax expense for the~~ nine months ended September 30, ~~2017~~2020 income tax expense is ~~nil~~NaN because of net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a ~~valuations~~valuation allowance. The Company had established a 100% valuation allowance against its net deferred tax assets due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized. ~~The valuation allowance was increased approximately $1.0 million during~~

During the nine months ended September 30, ~~2017.~~2019, the Company recorded an income tax benefit of $0.5 million, $0.2 million resulting from losses of Grapevine which offset deferred tax liabilities that were recognized on its acquisition and

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a $0.4 million reduction of the valuation allowance on Ideanomics’ deferred tax assets in excess of those reversed to offset Ideanomics’ income. The reduction in valuation allowance resulted from Ideanomics’ acquisition of additional ownership interests in Grapevine which caused Grapevine to be included in a consolidated tax return with Ideanomics beginning June 30, 2019. This meant that $0.4 million of Ideanomics’ deferred tax assets could be utilized to offset Grapevine’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.

AsThere was 0 identified unrecognized tax benefit as of September 30, ~~2017, there are no unrecorded tax benefits which would impact our financial position or our results of operations.~~2020 and December 31, 2019.

~~17.~~

~~Contingencies and Commitments~~

~~(a)~~

~~Operating Lease Commitment~~

~~The Company is committed to paying leased property costs related to our offices as follows:~~Note 18. Commitments and Contingencies

Leased Property
Years ending December 31, Costs
2017(3 months) $ 19,711
2018 70,211
2019 36,269
2020 37,147
Thereafter 18,575
Total $ 181,913

~~(b)~~

Lawsuits and Legal Proceedings

From time to time, wethe Company 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~~the business. ~~As of September 30, 2017, there are no such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.~~

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

~~18.~~

~~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 Zhong Hai Media, which the Company controls as a result of a series of contractual arrangements entered among YOD WFOE, Sinotop Beijing as the parent company of Zhong Hai Media, SSF and the respective legal shareholders of Sinotop Beijing and SSF. 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, YOD WFOE or YOD HK 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 YOD WFOE had direct ownership of Sinotop Beijing and SSF, it would be able to exercise its rights as a shareholder to effect changes in the board of directors of Sinotop Beijing or SSF, which in turn could effect 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.

Vendor Settlement

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~~

~~Legacy YOD business~~

The Company has agreements with distribution partners, including digital cable operators, IPTV operators, OTT streaming operators and mobile smartphone manufacturers and operator. A distribution partner that individually generates more than 10% of the Company’s revenue is considered a major customer.

Pursuant to ASC Subtopic 926-605, Entertainment-Films - Revenue Recognition, for certain contracts that involve sub-licensing content within the specified license period, revenue is recognized upon delivery of films when the arrangement includes a nonrefundable minimum guarantee, delivery is complete and there are no substantive future obligations to provide future additional services.

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

According to the Yanhua Agreement, the total price of the Existing Contents to be transferred is RMB13,000,000. The payment is agreed to be paid in two installments, the first half of RMB6,500,000 was received on December 30, 2016. The remaining RMB6,500,000 will be paid under the scenario that the license content fees due to Studios for the existing legacy Hollywood paid contents will be settled. Due to the fact that the second installment will depend upon some future events and is contingent in nature, we deem this portion of the fee is not fixed or determinable and therefore, this portion of the revenue did not meet the revenue recognition criteria to be recognized accordingly.

~~Pursuant to the Yanhua Agreement, RMB6,500,000 was recognized as revenue in the first~~ three ~~months ended March 31, 2017 based on the relative fair value of licensed content delivered to Yanhua.~~

In terms of the additional revenue-sharing fee over the above-mentioned RMB13,000,000 fee specified, considering that this part of arrangement fee is not fixed or determinable at the time point as of September 30, 2017, it has not met the criteria for revenue recognition, management will recognize it once it becomes determinable and meet the other revenue recognition criteria in the future.

~~For the nine~~ months ended September 30, ~~2016,~~2020, Ideanomics preliminarily settled a payable of $1.7 million with one vendor for $1.3 million. The settlement is conditioned upon factors which do not expire until three ~~customers individually accounted~~months from the date of the settlement; therefore, should these factors expire without coming to fruition, the Company will recognize the contingent gain in the three months ended December 31, 2020.

Shareholder Class Action

On July 19, 2019, a purported class action, now captioned Rudani v. Ideanomics, et al. Inc., was filed in the United States District Court for ~~31%~~the Southern District of New York against the Company and certain of its current and former officers and directors. The Amended Complaint alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. Among other things, the Amended Complaint alleges purported misstatements made by the Company in 2017 and 2018.

On June 28, 2020, a purported securities class action, captioned Lundy v. Ideanomics et al. Inc., ~~16%~~was filed in the United State District Court for the Southern District of New York against the Company and ~~13%~~certain current officers and directors of the Company. Additionally, on July 7, 2020, a purported securities class action captioned Kim v. Ideanomics, et al, was filed in the Southern District of New York against the Company and certain current officers and directors of the Company. Both cases allege violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 arising from certain purported misstatements by the Company beginning in March 2020 regarding its MEG division. On November 4, 2020, the Lundy and Kim actions were consolidated.

On July 10, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Toorani v. Ideanomics, et al., 1:20-cv-05333. The Complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and corporate waste and seeks monetary damages and other relief on behalf of the Company. Additionally, on September 11, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Elleisy, Jr. v. Ideanomics, et al, 20-cv-5333, alleging violations and allegations similar to the Toorani litigation. On October 10, 2020, the Court in the Elleisy and Toorani, consolidated these two actions. Additionally, on October 27, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the District of Nevada, captioned Zare v. Ideanomics, et al, 20-cv-608, alleging violations and allegations similar to the Toorani and Elleisy litigations.

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On March 20, 2020, the Company received a formal demand letter to the Board of Directors ascertain allegations similar to those alleged in the Rudani Complaint and demanding that the Board pursue causes of action on behalf of the Company against certain of the Company’s ~~revenue. Three customers individually accounted~~former and current directors and officers. In response to this stockholder demand letter, the Board established a demand review committee to review the demand and make a recommendation to the Board of Directors regarding a response to the demand. The demand review committee has not yet completed its review.

On July 10, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for ~~33%~~the Southern District of New York, captioned Toorani v. Ideanomics, et al., ~~14%~~1:20-cv-05333. The Complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and ~~12%~~corporate waste and seeks monetary damages and other relief on behalf of the Company. Additionally, on September 11, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Elleisy, Jr. v. Ideanomics, et al, 20-cv-5333, alleging violations and allegations similar to the Toorani litigation. On October 10, 2020, the Court in the Elleisy and Toorani, consolidated these two actions. Additionally, on October 27, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the District of Nevada, captioned Zare v. Ideanomics, et al, 20-cv-608, alleging violations and allegations similar to the Toorani and Elleisy litigations.

While the Company believes that the above litigations are 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.

SEC Investigation

The Company is subject to an investigation by the SEC. The information requests from the SEC are focused primarily in relation to the Company’s overseas operations, including historical transactions and revenues associated with those operations. The Company is fully cooperating with the SEC’s requests, and cannot predict the outcome of this investigation.

Note 19. Concentration, Credit and Other Risks

(a)	PRC Regulations

The EV industry is relatively new in China, and the PRC government has not adopted a clear regulatory framework to regulate the industry. Therefore, there is some degree of uncertainty regarding the regulatory requirements of the PRC government in the EV industry. If the PRC government enacts new laws and regulations, or adopts new interpretations or policies with respect to the current laws and regulations, that require licenses or permits for the operation of the Company’s ~~net accounts receivables as of September 30, 2016.~~

~~Wecast Services~~

~~The holdings and~~existing or future businesses, ~~from Company’s two acquisitions~~the Company cannot ensure that it has all the permits or licenses required for its EV business or that the Company will be able to obtain or maintain permits or licenses in January 2017 (Note 4) now reside under “Wecast Services”, our wholly-owned subsidiary Wecast Services Group Limited. Wecast Services (which resides under the Product Sales Cloud) is currently primarily engaged with consumer electronics and smart supply chain management operations. The Company’s ending customers include British Telecom, Micromax and about 15 to 20 other corporations across the world.

For the nine months ended September 30, 2017, three customers individually accounted for more than 10% of the Company’s revenue. Three customers individually accounted for more than 10% of the Company’s net accounts receivables as of September 30, 2017, respectively.

~~(c) Major Suppliers~~

~~Legacy YOD business~~

~~The Company relies on agreements with studio content partners to acquire video contents. A content partner that accounts for more than 10% of the Company’s cost of revenues is considered~~ a ~~major supplier.~~

~~As of December 31, 2016, all licensed contents have been recognized as cost of revenues other than the ones that acquired from SSS in the amount of $17.7 million (note 12).~~

For the nine months ended September 30, 2016, four suppliers individually accounted for more than 10% of the Company’s cost of revenues. Two suppliers individually accounted for 10% of the Company’s accounts payable as of September 30, 2016.

~~Wecast Services~~

~~The Company relies on agreements with consumer electronics manufacturers to provide integrated circuit, printed circuit board assembly and other necessary assembly.~~

For the nine months ended September 30, 2017, five suppliers individually accounted for more than 10% of the Company’s cost of revenues. Three suppliers individually accounted for more than 10% of the Company’s accounts payable as of September 30, 2017.

timely manner.

(b)

~~(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, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company’s cash was held by financial institutions ~~located~~(located in the PRC, Hong Kong, ~~and~~ the United States, Malaysia and Singapore) that management believes have acceptable credit. Accounts receivable are typically ~~unsecured and are mainly derived from revenues from the Company’s VOD content distribution partners, and smart sales products to~~

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

~~customers.~~unsecured. 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~~

A majority of the ~~Company’s~~Company's operating transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities 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

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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.

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

withdrawal and which includes $0.2 million which was received in advance of a future investment.

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.

Note 20. Fair Value Measurement

~~Cash and time deposits maintained~~The following table summarizes information about the Company’s financial instruments measured at ~~banks consist~~fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the input to fair value is observable (in thousands):


		September 30, 2020
	Level I		Level II		Level III		Total
Contingent consideration¹	$	0	$	0	$	777	$	777
Contingent consideration²		0		0		10,913		10,913

Note

¹ This represents the liability incurred in connection with the acquisition of ~~the following:~~

September 30, December 31,
2017 2016
RMB denominated bank deposits with financial institutions in the PRC $ 1,431,601 1,566,107
US dollar denominated bank deposits with financial institutions in the PRC $ 19,227 670,951
HKD denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”) $ 47,723 14,151
US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”) $ 117,528 1,402,842
US dollar denominated bank deposits with financial institutions in The United States of America (“USA”) $ 56,975 95,030

As of September 30, 2017 and December 31, 2016 deposits of $407,903 and $384,545 were insured, respectively. 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 and Cayman with acceptable credit rating.

~~19.~~

~~Defined Contribution Plan~~

~~For our U.S. employees,~~DBOT shares during 2011, the Company began sponsoring a 401(k) defined contribution plan ("401(k) Plan") that provides for a 100% employer matching contribution of the first 3% and a 50% employer matching contribution of each additional percent contributed by an employee up to 4% of each employee’s pay. Employees become fully vested in employer matching contributions after six months of employment. Company 401(k) matching contributions were approximately approximately $3,980 and $6,526 for the three ~~and nine~~ months ended September 30, ~~2017 respectively~~2019 and ~~$1,000~~as remeasured as of April 17, 2020 as disclosed in Note 6(c). The contractual period which required periodic remeasurement has expired, and ~~$3,000 for~~therefore the Company will not remeasure this liability in the future. The Company issued 1.6 million shares in the three ~~and nine~~ months ended September 30, ~~2016 respectively.~~2020 and partially satisfied this liability.

² This represents the liability incurred in connection with the acquisition of Tree Technology shares during the three months ended December 31, 2019 and as subsequently remeasured as of September 30, 2020 as disclosed in Note 6(a).

The fair value of the DBOT contingent consideration as of December 31, 2019 and March 31, 2020 was valued using the Black-Scholes Merton model.

~~Full time employees~~The following table summarizes the significant inputs and assumptions used in the ~~PRC participate~~Black-Scholes Merton model:


	March 31, 2020		December 31, 2019
Risk-free interest rate	0.1	%	1.6	%
Expected volatility	30	%	30	%
Expected term	0.08 years		0.25 years
Expected dividend yield	0	%	0	%

Significant increases or decreases in any of those inputs in isolation would result in a ~~government-mandated defined contribution plan pursuant to~~significantly different fair value measurement.

The fair value of the Tree Technology contingent consideration as of September 30, 2020 and December 31, 2019 was valued using a scenario-based method which ~~certain pension benefits, medical care, unemployment insurance, employee housing fund~~incorporates various estimates, including projected gross revenue for the periods, probability estimates, discount rates 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 $274,049 and $387,560 for the nine months ended September 30, 2017 and 2016, respectively.factors.

~~20.~~

~~Segment Reporting~~

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. In fiscal year 2016, the Company operated and reported its performance in one segment. However, starting from fiscal year 2017, since Company has acquired Wecast Services Limited and Wide Angle Group Limited in January (see note 4), the Company has operated two segments based on different clouds that major business resides in, including Legacy YOD segment and Wecast Service segment. Therefore, there are two reportable segments for the nine months ended September 30, 2017. The two reportable segments are:

~~Legacy YOD~~ - Provides premium content and integrated value-added service solutions for the delivery of VOD and paid video programming to digital cable providers, Internet Protocol Television (“IPTV”) providers. The core revenues are being generated from

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

~~both minimum guarantee payments and revenue sharing arrangements with distribution partners as well as subscription or transactional fees from subscribers.~~

~~Wecast Services~~ ~~- Wecast Services (which resides under the Product Sales Cloud) is currently primarily engaged with consumer electronics and smart supply chain management operations.~~

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. The following ~~tables summarized~~table summarizes the ~~Company’s revenue~~significant inputs and ~~cost generated from different revenue streams.~~assumptions used in the scenario-based method:

Nine Months Ended
September 30, September 30,
2017 2016
NET SALES TO EXTERNAL CUSTOMERS
-Legacy YOD $ 794,273 $ 4,377,034
-Wecast Services 105,918,155 -
Net sales 106,712,428 4,377,034
GROSS PROFIT
-Legacy YOD 31,659 1,767,059
-Wecast Services 5,791,805 -
Gross profit 5,823,464 1,767,059

September 30, December 31,
2017 2016
TOTAL ASSETS
-Legacy YOD $ 26,377,184 $ 36,975,911
-Wecast Services 46,125,371 14,448,702
-Unallocated assets 4,036,369 4,321,677
-Intersegment elimination (4,981,342 ) -
Total 71,557,582 55,746,290

	~~21.~~	~~Subsequent Event~~
		December 31, 2019
Weighted-average cost of capital		15.0	%

Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

The following table summarizes the reconciliation of Level 3 fair value measurements (in thousands):


	Contingent
	Consideration
January 1, 2020	$	24,656
Measurement period adjustment		(1,990)
Settlement		(8,076)
Remeasurement (loss)/gain recognized in the income statement		(2,900)
September 30, 2020	$	11,690

Note 21. Subsequent Events

Acquisition of Solectract, Inc. (“Solectract”) common shares

On October ~~17, 2017, Wecast Services Group Limited (“Wecast”), a wholly owned subsidiary~~22, 2020, the Company acquired 1.4 million common shares, representing 15.0% of the ~~Company, entered into~~total common shares outstanding, of Solectrac for a Technical License Agreement with Guangxi Dragon Coin Network Technology Co., Ltd. (“Guangxi”), pursuant to which Wecast has agreed to provide Guangxi with a non-exclusive agreement to license the technology platform from Wecast’s Red Coin Chain. Pursuant to the terms of the License Agreement, Guangxi, a subsidiary of Courage Investment Group Limited (1145.HK) (“Courage Investment Group”), will be granted a non-exclusive license from Wecast and the Red Coin Chain (“Red Coin”), to use Red Coin’s technology platform specifically and exclusively for real estate based securitization. In exchange and in consideration for, the non-exclusive rights to the technology, the Company will receive 17.9% of the existing total equity of Courage Investment Group, which is Guangxi’s Hong Kong listed parent company.

On October 23, 2017, the Company entered into a Securities Purchase Agreement with Hong Kong Guo Yuan Group Capital Holdings Limited. Pursuant to the terms of the agreement, the Company has agreed to sell and issue 5,494,505 shares of the Company’s common stock to the Hong Kong Guo Yuan Group Capital Holdings Limited for $1.82 per share, or a total purchase price of ~~$10.0~~$0.91 per share, for total consideration of $1.3 million.

Solectrac develops, assembles and distributes 100% battery-powered electric tractors-an alternative to diesel tractors-for agriculture and utility operations. Solectrac tractors provide an opportunity for farmers around the world to power their tractors by using the sun, wind, and other clean renewable sources of energy.

~~On November 9, 2017,~~With this investment in Solectrac, Ideanomics expands its global footprint in the EV industry, specifically in the category of specialty commercial vehicles. This investment marks its first in an existing US-based original equipment manufacturer, and Ideanomics will assume a seat on Solectrac's Board of Directors approved Amendment No. 7 to $3.0 million Convertible Promissory Notes (“Note”) issued to Mr. Shane McMahon, our Vice Chairman, pursuant to which the maturity date of the Note was extended to December 31, 2019. The Note remains payable on demand or convertible on demand into Common Stock at a conversion price of $1.50.Directors.

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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~~the Company’s future expectations, contain projections of ~~our~~the Company’s future results of operations or financial condition or state other "forward-looking" information. ~~We believe~~The Company believes that it is important to communicate ~~our~~its future expectations to ~~our~~its investors. ~~These~~However, these forward-looking statements are not ~~however,~~ 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~~the Company’s products, and the ~~product–development~~product-development and marketing efforts of ~~our~~its competitors. Examples of these events are more fully described in the Company’s ~~2016 Annual Report~~2019 Form 10-K 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. ~~Readers~~However, readers should carefully review the reports and documents the Company files from time to time with the ~~SEC,~~Securities and Exchange Commission ("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.

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

The following management’s discussion and analysis is presented in four sections as below and should be read in conjunction with ~~our~~the condensed consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this ~~report.~~report on Form 10-Q. 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.

●

Overview

●

Results of Operations

●

Liquidity and Capital Resources

●

Outlook

OVERVIEW

Ideanomics, Inc. (“Ideanomics” or the “Company”) (Nasdaq: IDEX) was incorporated in the State of Nevada on October 19, 2004. From 2010 through 2017, the Company’s primary business activities were providing premium content video on demand (“VOD”) services, with primary operations in the People’s Republic of China (“PRC,”) through its subsidiaries and variable interest entities (“VIEs”) under the brand name You-on-Demand (“YOD”). The Company closed the YOD business during 2019.

~~Overview~~

~~Seven Stars Cloud Group, Inc. (NASDAQ: SSC) is aiming~~Starting in early 2017, the Company transitioned its business model to become a ~~global leader in providing~~ next-generation ~~Artificial-Intelligent (AI) & Fintech Powered, Supply Chain + Digital Finance Solutions. SSC’s innovative model helps~~financial technology (“fintech”) company. The Company built a network of businesses, enhance and unlock operational and capital value from both the supply chain and real assets. In addition, SSC offers a closed trade ecosystem for buyers and sellers designed to eliminate transactional middlemen and create a more direct and margin-expanding path for principals. There are three engines that drive our business platform: 1. Intelligent Supply Chain Management; 2. Asset Based Securitization and Tokenization Issuance and Trading Platform and 3. Digital Index and Financial Derivatives Issuance and Trading Platform; All three engines are supported by “ABCD” Technology & Infrastructure (A: Artificial IntelligenceI, B: Blockchain, C: Cloud Computing, D: Data).

SSC launched its legacy VOD service through the acquisition of YOD Hong Kong (formerly Sinotop Group Limited) on July 30, 2010, through its subsidiary China CB Cayman. Through a series of contractual arrangements, YOD WFOE, the subsidiary of YOD Hong Kong, controls Sinotop Beijing, a corporation establishedoperating principally in the ~~PRC. Sinotop Beijing was the 80% owner~~trading of ~~Zhong Hai Media until June 30, 2017, through which we provided: 1) integrated value–added business–to–business (“B2B”) service solutions for the delivery of VOD~~petroleum products and enhanced premium content for digital cable; 2) integrated value–added business–to–business–to–customer (“B2B2C”) service solutions for the delivery of VOD and enhanced premium content for IPTV and OTT providers and; 3) a direct to user, or B2C, mobile video service app. The detail of the disposal of Zhong Hai Media has been disclosed in Note 11.

On October 8, 2016, the Company signed an agreement to form a partnership with Zhejiang Yanhua ("Yanhua Agreement"), where Yanhua will act as the exclusive distribution operator (within the territory of the PRC) of the Company's licensed library of major studio films. According to the Yanhua Agreement, the existing legacy Hollywood pay-per-view contents as well as other IP contents specified in the agreement, along with the corresponding authorized rights letterelectronic components that the Company ~~is entitled~~believed had significant potential to ~~will be transferred to Yanhua as a whole package~~recognize benefits from blockchain and artificial intelligence (“AI”) technologies including, for ~~a minimum guarantee fee of RMB 13,000,000. In addition to~~example, enhancing operations, addressing cost inefficiencies, improving documentation and standardization, unlocking asset value and improving customer engagement. During 2018 the ~~minimal guarantee fee of RMB 13,000,000, a provision~~Company ceased operations in the ~~Yanhua Agreement states~~petroleum products and electronic components trading businesses and disposed of the businesses during 2019. Fintech continues to be a priority for us as we look to invest in and develop businesses that ~~revenue recognized~~can improve the financial services industry, particularly as it relates to deploying blockchain and AI technologies. As the Company looked to deploy fintech solutions in late 2018 and into 2019, management found an opportunity in the Chinese Electric Vehicle (“EV”) industry to facilitate large scale conversion of fleet vehicles from ~~the existing content transferred from~~internal combustion engines to EV. This led the Company to ~~Yanhua in excess~~establish its Mobile Energy Global (“MEG”) business unit.

Principal Factors Affecting the Company’s Financial Performance

The business is expected to be impacted by both macroeconomic and Ideanomics-specific factors. The following factors have been part of ~~RMB 13,000,000, will be shared with~~the transformation of the Company ~~from~~which affected the ~~date when this revenue threshold is reached based on a certain revenue-sharing mechanism stipulated~~results of its operations in ~~the Yanhua Agreement.~~2020 and 2019:

33●

The Company’s ability to transform the business and to meet internal or external expectations of future performance. In connection with this transformation, the Company is in the process of considerable changes, which include assembling a new management team in the United States and overseas, reconfiguring its business structure, continuing to further enhance the controls, procedures, and oversight during this transformation, and expanding the Company’s mission and business lines for continued growth. It is uncertain whether these efforts will prove beneficial or whether the Company will be able to develop the necessary business models, infrastructure and systems to support the businesses. To succeed, among other things, the Company will need to have or hire the right talent to execute the business strategy. Market acceptance of new product and service offerings will be dependent in part on management’s ability to include functionality and usability that address customer requirements, and optimally price the products and services to meet customer demand and cover costs.

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The Company’s ability to remain competitive. The Company will continue to face intense competition: these new technologies are constantly evolving, and the Company’s competitors may introduce new platforms and solutions that are superior. In addition, the Company’s 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 the Company can. The Company may never establish and maintain a competitive position in the hybrid financing and logistics management businesses.

●

The fluctuation in earnings from the deployment of the Mobile Energy Group Services business unit through acquisitions, strategic equity investments, the formation of joint ventures and investments, and in-licenses of technology. The Company’s results of operations may fluctuate from period to period based on the entry into new transactions to expand the business. In addition, while management intends to contribute cash and other assets to the Company’s joint ventures and investments, the Company does not intend for its holding company to conduct significant research and development activities. The Company intends research and development activities to be conducted by its technology partners and licensors. These fluctuations in growth or costs and in the joint ventures, investments, and partnerships may contribute to significant fluctuations in the results of the Company’s operations.

Business Update and Liquidity Improvements

In the third quarter the Company recorded revenues of $10.6 million, of which $10.1 million were generated by the Company’s MEG business unit; this represents the largest revenues earned by MEG since the Company commenced business.

In the nine months ended September 30, 2020, the Company improved its liquidity position by raising a total of $48.2 million: $39.1 million through the issuance of common stock and exercise of warrants, $7.1 million from noncontrolling interest shareholders, and $2.0 million through the issuance of senior secured convertible notes. The Company converted senior secured convertible notes of $9.4 million plus accrued interest of $0.3 million to common stock. Additionally, the Company converted $4.6 million of convertible notes payable and accrued interest to related parties and an additional $1.5 million due to related parties to common stock. As a result of these actions, the Company reduced its principal amount of its indebtedness by $13.9 million, and as of September 30, 2020, had cash and cash equivalents of $27.6 million, $19.0 million of which is held in U. S. financial institutions.

Based upon its business projections and its cash and cash equivalents balance as of September 30, 2020, the Company believes it has the ability to continue as a going concern.

On ~~January~~May 1, 2020, the Company’s MEG business unit commenced operations in a 40,000 square meter facility in the city of Qingdao. The facilities are provided free of charge to Ideanomics through November 30, ~~2017,~~2034 by the ~~Company entered into~~government with the objective of establishing a ~~Securities Purchase Agreement (the “Sun Video SPA”) with BT Capital Global Limited which has been controlled by Company’s chairman Bruno Wu,~~regional hub for the purchase by us of all of the outstanding capital stock of Sun Video Group Hong Kong Limited. On January 31, 2017, the Company entered into another Securities Purchase Agreement (the “Wide Angle SPA”) with BT and Sun Seven Stars Media Group Limited, one of the Company’s largest shareholders, controlled by Mr. Wu, as guarantor,sale EVs. An additional 60,000 square meters are available for the purchase by us of 55% of the outstanding capital stock of Wide Angle. After acquiring these two entities, other than our legacy YOD business, we are also engaged with consumer electronics and smart hand held device design and supply chain management business.

On June 30, 2017, Company entered into another Securities Purchase Agreement (the “BT SPA”) with BT, pursuant to which the issued and outstanding stock that SSC holds in three separate non-core assets were sold to BT in exchange for RMB100 million (approximately $14.75 million at current exchange rate) in a combination of cash and publicly traded stock to be paid to SSC within one year of closing. A minimum of 20% of the total consideration to SSC will be paid in cash (approximately $2.95 million). A portion of the consideration may be paid in the form of publicly traded stock at the discretion of BT, and in that case the securities will represent a public company affiliated with BT, in an industry related to SSC’s and with an average daily trading value of at least $146,000.

~~Principal Factors Affecting Our Financial Performance~~

~~The Company~~future expansion. MEG is in the process of ~~transforming~~building its sales force to facilitate the sale of new and used EVs, both to fleets and individuals.

In July 2020 the Company’s Tree Technologies subsidiary completed the acquisition of a long term lease of 250 acres of vacant land zoned for industrial development in the Begeng Industrial Area adjacent to Kuantan Port. Kuantan is the capital city of the state of Pahang on the east coast of Peninsular Malaysia. The Company intends to develop this land and lease it to Tree Manufacturing for the manufacture of EVs

In April 2020 management re-evaluated the opportunities in the Over-the-counter (“OTC”) equity market and determined that the Delaware Board of Trade (“DBOT”) business ~~model~~as structured was unlikely to achieve profitability in the short to medium term without significant additional investment. The OTC equities business was closed in April, however the firm remains a FINRA registered Broker Dealer and ~~aims~~the Company continues to ~~be be~~develop its plan to use DBOT for sale of digital securities and brokering of commodity products subject to obtaining the required regulatory approvals.

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The Company continues to review its cost base and as part of this process has reevaluated its real estate needs. The Company has vacated the office space previously used by DBOT in Wilmington, Delaware, and recorded an impairment charge of $0.9 million in the three months ended March 31, 2020, and a ~~leading Intelligent Industrial Internet (3I) platform, creating~~gain on the settlement of the lease liability of $0.8 million in the three months ended June 30, 2020. In the three months ended June 30, 2020, the Company determined that, with its New York workforce under a ~~fintech-powered,~~stay-at-home and work-from-home mandate, the square footage provided in the leases for its New York headquarters was excessive. The Company has vacated its New York office space, and recorded an impairment charge of $5.3 million. The Company had an operating lease liability of $5.8 million with respect to these leases, excluding $0.6 million in accounts payable. In the three months ended September 30, 2020, the Company completed negotiations with the landlord to settle the remaining amounts due of $6.4 million for a cash payment of $1.5 million. The Company recorded a gain of $4.9 million in the three months ended September 30, 2020. In October, 2020 the Company signed leases for the use of office and meeting space in midtown Manhattan.

The third quarter the Company sold its loss making EKAR ETF for a de minimis amount, this sale eliminated approximately $0.4 million of annual operating expense.

Effects of COVID-19

Novel Coronavirus 2019 (“COVID-19”) is an infectious disease caused by severe acute respiratory syndrome coronavirus. The disease was first identified in December 2019 in Wuhan, the capital of China’s Hubei province, and has since spread globally, resulting in the ongoing COVID-19 pandemic. As of October 31, 2020, over 44.7 million cases had been reported across the globe, resulting in 1.2 million deaths.

The spread of COVID-19 has caused significant disruption to society as a whole, including the workplace. The resulting impact to the global supply chain ~~solution simplified for commercial enterprises. There~~has disrupted most aspects of national and international commerce, with government-mandated social distancing measures imposing stay-at-home and work-from-home orders in almost every country. The effects of social distancing have shut down significant parts of the local, regional, national, and international economies with the exception of government designated essential services.

In many parts of the world, stay-at-home and work-from-home orders were relaxed during the summer of 2020 as the effects of the Coronavirus appeared to lessen, and economic activity began to recover. However, commencing in the autumn and fall of 2020, the U. S. as well as countries in Europe began to experience an increase in new COVID-19 cases, and in some cases local, state, and national governments began to reinstate restrictive measures to stem the spread of the virus.

The Company’s operations, including certain key personnel and business advisors and partners, are ~~two engines that drive its business platform; (1) VPaaS + TPaaS - Supply Chain Management for key industry sectors and leaders including but not limited~~largely based in China, a country which was subject to Big Commodities, Cross-Border Trade, Consumer Electronics & Energy; and (2) Digital Finance Solutions - Supply Chain Finance underwritten by its Global Cornerstone Funds and ABS, Tokenization and Exchange Platforms, which include FINRA and SEC-regulated: Index Exchanges, Initial Coin Offering / Tokenization, ETFs and Derivatives. Both Engines and their various arms will run on 'BASE' technology and infrastructure (Blockchain, Artificial Intelligence, Supply Chain & Exchanges) to power a ~~closed trade ecosystem for buyers and sellers~~wide-ranging government shutdown as a result of the spread of COVID-19 in January 2020. Consequently, the country was effectively shuttered in the first quarter of 2020, resulting in China introducing a series of significant economic stimulus packages upon the easing of shutdown measures. The economic stimulus was designed to ~~eliminate transactional middlemen~~rebuild China’s economic infrastructure, which rebounded in the second quarter of 2020, and ~~create~~which is expected to continue in the near- to medium term.

The Company had experienced delays in the preparation and execution of certain key documents due to stay-at-home and work-from home measures which limited the Company’s abilities in these areas. As disclosed in Note 1 to the Condensed Consolidated Financial Statements, the Company had commenced the process of formulating and implementing a ~~more direct~~share-based compensation plan whereby key employees and ~~margin-expanding path for principals. In connection with this transformation,~~certain consultants of its MEG business unit and wholly-owned subsidiary would benefit, but travel and other limitations prevented the Company from executing the formation and operation of the stock-based compensation plan.

Subsequently, the Company has ~~recently assembled~~determined not to proceed with the MEG share-based compensation plan described above, and the parties have declared the transfer of the MEG shares, which was not believed to be substantive, to be null and void and the shares have reverted to the Company.

No share-based awards had been granted to employees or consultants pursuant to this arrangement as initially contemplated.

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As a ~~new experienced management team, stabilized~~result of the ~~foundation, capitalized~~overall economic condition in China in the first quarter of 2020, minimal sales of EV’s occurred during that time frame. During the second quarter, China relaxed its stay-at-home and work-at-home orders, and the Company was able to open its Qingdao Sales Center on May 1, 2020, which was subsequently rebranded the MEG center. Ideanomics’ recorded total sales in China of $10.6 million in the third quarter. The Company’s expectation is that its sales would increase as China’s economy continues to improve, although the Company ~~reconfigured~~is a recent entrant in the ~~business structure, expanded the Company’s mission~~EV market in China and ~~business lines, made several key investments~~can provide no assurances on future sales.

The Company expects to continue to raise both equity and finally, injected several privately held and revenue producing assets into the corporation. It is uncertain whether these efforts will prove beneficial or whether we will be able to develop the necessary business models, infrastructure and systemsdebt finance to support the ~~business. This includes having or hiring~~Company’s investment plans and operations, and has been active with investors and is in ongoing discussions with both active and potential investors through the ~~right talent to execute our business strategy. Market acceptance~~first nine months of ~~new product~~2020, and ~~service offerings~~this activity continues. In the three months ended June 30, 2020, the Company raised $39.1 million through the issuance of common stock and exercise of warrants . The Company does not anticipate that the COVID-19 pandemic will ~~be dependent in part on our~~adversely affect its ability to ~~include functionality~~raise funds in the near-term, although no assurances can be provided on this matter.

The Company assesses the recoverability of goodwill and ~~usability~~other indefinite-lived intangible assets in the fourth quarter of each year, or more frequently if circumstances warrant. The Company assesses the recoverability of other long-lived assets as circumstances warrant, and in the nine months ended September 30, 2020 did not consider any long-lived assets to be impaired, other than certain right of use and fixed assets, including assets comprising a portion of Fintech Village. Many of the Company’s operations are in the development or early stage, have not had significant revenues to date, and the Company does not anticipate significant adverse effects on its operations revenue as compared to its business plan in the near- or mid-term, although the future effects of COVID-19 may result in regional restrictive measures which may constrain the Company’s operations.

Public health experts have expressed concern that ~~address customer requirements,~~the influenza season in the northern hemisphere will coincide with a spread of COVID-19 cases, adding further stress to the affected populations, businesses, governments, and ~~optimally price our products~~economies. The future effects of the virus are difficult to predict, due to uncertainty about the course of the virus, and ~~services~~the prospects for a vaccine as well as its global implementation. The impact on the Company cannot be predicted at this time, although the impact would be more adverse if any resurgence of COVID-19 were to ~~meet customer demand~~be concentrated in Asia as compared to other parts of the world.

Information about segments

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 ~~cover our costs.~~assessing performance of the Company. Therefore, the Company operates in one segment with two business units: MEG and Ideanomics Capital. As the chief executive officer previously reviewed two operating segments separately for this purpose, the Company has changed its presentation accordingly, from two reportable segments to one reportable segment.

~~Taxation~~

The segment reporting changes were retrospectively applied to all periods presented.

The Company’s Unconsolidated Equity Investments

The investments where the Company exercises significant influence, but not control, 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 its share of undistributed earnings or losses of the investee. Investment losses are recognized until the investment is written down to nil, provided that the Company does not guarantee the investee’s obligations or is committed to provide additional funding. Refer to Note 10 of the notes to unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

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Taxation

United States

~~Seven Stars Cloud Group,~~Ideanomics, Inc. ~~and M. Y.~~, M.Y. Products, LLC, Grapevine Logic, Inc., Delaware Board of Trade Holdings, Inc., Fintech Village, LLC and Red Rock Global Capital Ltd. are United States companies subject to ~~United States tax.~~the provisions of the Internal Revenue Code. No provision for income taxes ~~in the United States~~ has been ~~made~~provided as ~~neither company~~none of the companies had taxable profit since inception. At the acquisition of Grapevine Logic, Inc. in 2018, deferred tax liabilities were recorded relating to intangible assets recorded for financial reporting purposes but not recognized for income tax purposes. The intangible assets consequently could not provide deductible amortization expense for income tax purposes. The deferred tax liabilities were recorded on the acquisition to the extent that they could not be offset by usable net operating loss carryforwards acquired in the ~~United States since inception.~~acquisition. These deferred tax liabilities were reduced, providing an income tax benefit, to the extent that the intangible assets were reduced by amortization expense and additional net operating loss carry forwards were created to offset the liabilities. These benefits amounted to $0.1 million for the three months ended June 30, 2019. Ideanomics, Inc. increased its ownership in Grapevine Logic, Inc. such that beginning with the third quarter of 2019, the result of which was that Grapevine Logic, Inc. activities would be included in the consolidated tax return of Ideanomics, Inc. As a result, the valuation allowance provided against Ideanomics, Inc.’s deferred tax assets were reduced by $0.4 million, the amount of Grapevine Logic, Inc.’s remaining deferred tax liabilities as that portion of Ideanomics Inc.’s net operating loss carryovers could now be utilized to offset these liabilities. As a result, there was no income tax or benefit for Grapevine for the three months ended September 30, 2020 and consequently U.S. income tax expense or benefit for the Company as a whole.

The Tax Cut and Jobs Act (“TCJA”) of 2017 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.

Based on the results of operations for the nine months ended September 30, 2020, the Company has determined that there is no GILTI nor BEAT tax liability.

In addition, the TCJA now entitles U.S. companies that own 10.0% or more of a foreign corporation a 100.0% dividends-received deduction for the foreign-source portion of dividends paid by such foreign corporation. Also, net operating losses (“NOLs”) arising after December 31, 2017 are deductible only to the extent of 80.0% 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, ~~we are~~the Company is not subject to tax on ~~our~~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

~~Our~~The Company’s subsidiaries incorporated in Hong Kong are ~~under~~subject to progressive Profits Tax rate up to 16.5%. $0.1 million tax expense was recorded in 2019 relating to the ~~current laws of~~income on one Hong Kong ~~are subject~~subsidiary relating to ~~Profits Tax~~a gain recorded on the sale of ~~16.5%. No provision for~~VIE related assets. All other Hong Kong ~~Profits Tax has been made as net operating~~subsidiaries had losses for 2019 and the resulting deferred tax assets relating to the loss carryovers were fully offset ~~current taxable income.~~

by a valuation allowance.

The People’s Republic of China ~~(“PRC”)~~

Under the PRC’s Enterprise Income Tax Law ~~our~~(“EIT”), the company’s Chinese subsidiaries and VIEs are subject to an ~~earned income tax~~EIT of 25.0%.

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~~Our~~The Company’s future effective income tax rate depends on various factors, such as tax legislation, ~~the~~ geographic composition of ~~our~~its pre-tax income and non-tax deductible expenses incurred. ~~Our~~The Company’s management ~~carefully~~regularly monitors these legislative developments to determine if there ~~will be any change~~are changes in the statutory income tax rate.

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~~Consolidated Results of Operations~~

~~Comparison of Three Months Ended September 30, 2017 and 2016~~

Three Months Ended
September 30, 2017 September 30, 2016 Amount Change % Change
Revenue $ 30,223,638 $ 1,626,844 $ 28,596,794 1758 %
Cost of revenue 28,273,862 893,796 27,380,066 3063 %
Gross profit 1,949,776 733,048 1,216,728 166 %

Operating expense:
Selling, general and administrative expenses expenses 3,630,949 2,320,247 1,310,702 56 %
Research and development expenses 400,040 - 400,040 100 %
Professional fees 831,039 326,353 504,686 155 %
Impairment of other intangible assets 152,847 172,064 (19,217 ) (11 %)
Depreciation and amortization 36,508 123,502 (86,994 ) (70 %)

Total operating expense 5,051,383 2,942,166 2,109,217 72 %

Loss from operations (3,101,607 ) (2,209,118 ) (892,489 ) 40 %
Interest expense, net (27,186 ) (24,971 ) (2,215 ) 9 %
Change in fair value of warrant liabilities 131,357 58,220 73,137 126 %
Equity in loss of equity method investees (23,632 ) 17,487 (41,119 ) (235 %)
Others (806 ) (3,313 ) 2,507 (76 %)

Loss before income taxes (3,021,874 ) (2,161,695 ) (860,179 ) 40 %

Income tax benefit - 8,612 (8,612 ) (100 %)

Net loss (3,021,874 ) (2,153,083 ) (868,791 ) 40 %

Net loss (income) attributable to non-controlling interest (22,723 ) 105,879 (128,602 ) (121 %)

Net loss attributable to Seven Stars Cloud Group, Inc. shareholders $ (3,044,597 ) $ (2,047,204 ) $ (997,393 ) 49 %

~~Revenues~~

~~OTT, Mobile App, IPTV and Digital Cable VOD Businesses (Legacy YOD)~~

~~Provides premium content and integrated value-added service solutions for~~During the delivery of VOD and paid video programming to digital cable providers, Internet Protocol Television (“IPTV”) providers. The core revenues are being generated from both minimum guarantee payments and revenue sharing arrangements with distribution partners as well as subscription or transactional fees from subscribers.

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~~Wecast Services~~

On January 30, 2017, the Company completed the acquisition of Sun Video Group HK Limited ("SVG"), which has a 51% ownership stake in Shanghai Wecast Supply Chain Management Limited ("Wecast SH"). On January 31, 2017, the Company acquired 55% of the outstanding capital stock of Wide Angle Group Limited (“Wide Angle”). The holdings and businesses from both these acquisitions now reside under “Wecast Services”, our wholly-owned subsidiary Wecast Services Limited. Wecast Services (which resides under the Product Sales Cloud) business unit, is currently primarily engaged with consumer electronics and smart supply chain management operations. Our end customers include British Telecom, Micromax and about 15 to 20 other corporations across the world.

　 2017Q3 2016Q3 Difference
　 USD USD USD %
Legacy YOD - 1,626,844 (1,626,844 ) (100 %)
Wecast Services 30,223,638 - 30,223,638 100 %
Total 30,223,638 1,626,844 28,596,794 1758 %

~~Revenue for the three~~nine months ended September 30, ~~2017 was $30.2 million as compared to $1.6 million for~~2020, one of the ~~same period in 2016, an increase of approximately $28.6 million, or 1,758%. The increase was mainly due to our new business line acquired in January 2017. This increase was partially offset by~~Company’s PRC subsidiaries incurred a ~~decrease of our legacy YOD business~~taxable income in the amount of ~~$1.6~~$2.6 million asby providing the ~~legacy YOD business shifts~~service to a new exclusive distribution agreement with Zhejiang Yanhua Culture Media Co., Ltd. ("Yanhua ") which was announced in Q4 2016. As revenue generated by Yanhua did not exceed the revenue sharing threshold, no additional revenue was recorded in the quarter ended September 30, 2017.

~~Cost of revenues~~

2017Q3 2016Q3 Difference
USD USD USD %
Legacy YOD - 893,796 (893,796 ) (100 %)
Wecast Services 28,273,862 - 28,273,862 100 %
Total 28,273,862 893,796 27,380,066 3063 %

Cost of revenues was approximately $28.3 million for the three months ended September 30, 2017, as compared to $0.9 million for the three months ended September 30, 2016. Our cost of revenues increased by $27.4 million which is in line with our increase in revenues. Our cost of revenues is primarily comprised of cost to purchase electronics products from suppliers.

~~Gross profit~~

2017 Q3 2016Q3 Difference
USD USD USD %
Legacy YOD - 733,048 (733,048 ) (100 %)
Wecast Services 1,949,776 - 1,949,776 100 %
Total 1,949,776 733,048 1,216,728 166 %

Gross profit ratio for the three months ended September 30, 2017 decreased by 38.61% from 45.06% to 6.45%, as the Wecast Services business, which currently is engaged mostly in lower margin electronics, is still in its relative infancy and the business service offerings as well as profit-sharing arrangements with a growing range of suppliers are in transition.

~~Selling, general and administrative expenses~~

Selling, general and administrative expense for the three months ended September 30, 2017 was $3.6 million as compared to $2.3 million for the same period in 2016, an increase of approximately $1.3 million or 56%. The majorityanother one of the increase was due to 1) the increase of our sales and marketing expense to introduce and promote our business models to various potential investors and business partners, as well as promote Wecast Services, which was acquired in January, 2017; and 2) financial advisory expenses that were paid to independent professional financial advisory companies to assist us being able to contact and negotiate with more business partners.Company’s PRC subsidiaries. The ~~Company is also continuing to focus on more cost saving activities to reduce daily operating expenses.~~

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~~Professional fees~~

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 of 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 in prior periods. The valuations allowance was reversed as a result of this subsidiary taxable income in the amount of $0.7 million creating a deferred tax benefit offsetting the income tax expense that would otherwise have been incurred. Other PRC entities had losses that created additional operating loss carryovers, where the related deferred tax assets were offset by a valuation allowance.

Consolidated Results of Operations

~~Net loss attributable to non-controlling interest~~Comparison of Three and Nine Months Ended September 30, 2020 and 2019 (USD in thousands)


	Three Months Ended								Nine Months Ended
	September 30,		September 30,		Amount		%		September 30,		September 30,		Amount		%
	2020		2019		Change		Change		2020		2019		Change		Change

Revenue	$	10,620	$	3,104	$	7,516	n/m		$	15,690	$	44,504	$	(28,814)	(65)	%
Cost of revenue		9,906		244		9,662	n/m			14,676		1,218		13,458	n/m
Gross profit		714		2,860		(2,146)	(75)	%		1,014		43,286		(42,272)	(98)

Operating expenses:
Selling, general and administrative expenses		7,636		7,770		(134)	(2)			20,188		18,443		1,745	9
Research and development expenses		1,318		—		1,318	n/m			1,318		—		1,318	n/m
Professional fees		3,968		1,389		2,579	n/m			8,096		3,918		4,178	n/m
Impairment loss		3,275		2,299		976	42			10,363		2,299		8,064	n/m
Change in fair value of contingent consideration, net		(4,179)		—		(4,179)	n/m			(2,900)		-		(2,900)	n/m
Depreciation and amortization		695		806		(111)	(14)			1,651		1,420		231	16
Total operating expenses		12,713		12,264		449	4			38,716		26,080		12,636	48

Income (Loss) from operations		(11,999)		(9,404)		(2,595)	28			(37,702)		17,206		(54,908)	n/m
Interest and other income (expense):
Interest expense, net		(2,014)		(639)		(1,375)	n/m			(14,061)		(1,955)		(12,106)	n/m
Equity in income (loss) of equity method investees		7		(40)		47	n/m			(8)		(606)		598	(99)
Gain on disposal of subsidiaries		—		1,057		(1,057)	n/m			—		1,057		(1,057)	n/m
Loss on remeasure of DBOT investment		—		(3,179)		3,179	n/m			—		(3,179)		3,179	n/m
Conversion expense		—		—		—				(2,266)		-		(2,266)	n/m
Other income (expense)		5,283		(100)		5,383	n/m			6,272		(156)		6,428	n/m
Income (Loss) before income taxes and non-controlling interest		(8,723)		(12,305)		3,582	(29)			(47,765)		12,367		(60,132)	n/m
Income tax benefit		—		—		—	n/m			—		514		(514)	n/m

Net income (loss)		(8,723)		(12,305)		3,582	(29)			(47,765)		12,881		(60,646)	n/m
Deemed dividend related to warrant repricing				—						(184)		—		(184)	n/m
Net (income) loss attributable to non-controlling interest		437		(1,408)		1,845	n/m			737		(1,374)		2,111	n/m

Net income (loss) attributable to IDEX common shareholders	$	(8,286)	$	(13,713)	$	5,427	(40)	%	$	(47,212)	$	11,507	$	(58,719)	n/m

~~Hua Cheng previously had a 20% non-controlling interest~~Revenues (USD in ~~Zhong Hai Media and accounting for that interest under the equity method by recording 20%~~thousands)


	Three Months Ended								Nine Months Ended
	September 30,		September 30,		Amount		%		September 30,		September 30,		Amount		%
	2020		2019		Change		Change		2020		2019		Change		Change
Electric Vehicles	$	8,872	$	2,854	$	6,018	n/m		$	9,622	$	2,854	$	6,768	n/m
Combustion engine vehicles		1,268		—		1,268	n/m			5,160		—		5,160	n/m
Digital asset management services		—		—		—	n/m			—		40,700		(40,700)	n/m
Other		480		250		230	92	%		908		950		(42)	n/m
Total	$	10,620	$	3,104	$	7,516	n/m		$	15,690	$	44,504	$	(28,814)	(65)	%

n/m = Not Meaningful

Table of ~~the operating losses of Zhong Hai Media. For~~Contents

Three months ended September 30, 2020 as compared to 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.~~2019

~~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~~Revenue for the three months ended September 30, ~~2017, approximately $0.01~~2020 was $10.6 million ~~of our operating loss from Wecast SH was allocated~~as compared 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$3.1 million ~~of our operating income from Wide Angle was allocated to Swiss Guorong Limited, which was nil~~ for the same period in ~~2016.~~2019, an increase of $7.5 million. The increase was principally due to the increase in revenue from the sales of vehicles.

In the third quarter of 2020, the Company continued to develop its EV business and recognized $10.6 million revenue from the sales of vehicles, which included revenue of $1.3 million from the sale of traditional combustion engine vehicles. In the third quarter of 2020 the Company acted in both a Principal and Agent capacity in relation to vehicle sales. For those contracts in which it acted in a Principal capacity revenues were recorded on a Gross basis and for those contracts where it acted in an Agent capacity the revenues were recorded on a Net basis.

~~Comparison of~~ Nine ~~Months Ended~~months ended September 30, ~~2017 and 2016~~

Nine Months Ended
September 30, 2017 September 30, 2016 Amount Change % Change
Revenue $ 106,712,428 $ 4,377,034 $ 102,335,394 2338 %
Cost of revenue 100,888,964 2,609,975 98,278,989 3766 %
Gross profit 5,823,464 1,767,059 4,056,405 230 %

Operating expense:
Selling, general and administrative expenses expenses 7,771,561 6,294,206 1,477,355 23 %
Research and development expenses 400,040 - 400,040 100 %
Professional fees 1,845,590 964,290 881,300 91 %
Impairment of other intangible assets 216,468 172,064 44,404 26 %
Depreciation and amortization 293,661 344,308 (50,647 ) (15 %)

Total operating expense 10,527,320 7,774,868 2,752,452 35 %

Loss from operations (4,703,856 ) (6,007,809 ) 1,303,953 (22 %)
Interest expense, net (72,439 ) (225,154 ) 152,715 (68 %)
Change in fair value of warrant liabilities (112,642 ) 201,826 (314,468 ) (156 %)
Equity in loss of equity method investees (100,468 ) (19,862 ) (80,606 ) 406 %
Others (111,448 ) (8,409 ) (103,039 ) 1225 %

Loss before income taxes (5,100,853 ) (6,059,408 ) 958,555 (16 %)

Income tax benefit - 25,836 (25,836 ) (100 %)

Net loss (5,100,853 ) (6,033,572 ) 932,719 (15 %)

Net loss attributable to non-controlling interest 608,910 261,809 347,101 133 %

Net loss attributable to Seven Stars Cloud Group, Inc. shareholders $ (4,491,943 ) $ (5,771,763 ) $ 1,279,820 (22 %)
38
~~Table of Contents~~
~~Revenues~~2020 as compared to the nine months ended September 30, 2019
　 YTD 2017Q3 YTD 2016Q3 Difference
　 USD USD USD %
Legacy YOD 794,273 4,377,034 (3,582,761 ) (82 %)
Wecast Services 105,918,155 - 105,918,155 100 %
Total 106,712,428 4,377,034 102,335,394 2338 %
Revenue for the nine months ended September 30, ~~2017~~2020 was ~~approximately $106.7~~$15.7 million as compared to ~~$4.4~~$44.5 million for the same period in ~~2016.~~2019, a decrease of $28.8 million The decrease was due to the lack of revenues from digital asset management services in the nine months ended September 30, 2020.
In March 2019, the Company entered into an agreement with GTD, one of the Company’s minority shareholders and strategic investors, whereby the Company provided digital asset management services to GTD. The revenue was recognized based on the progress of completion of services. The Company recognized revenue of $40.7 million in the nine months ended September 30, 2019. The Company recognized no revenue from the provision of digital asset management services in the nine months ended September 30, 2020 and does not anticipate earning revenue from provision of digital asset management services in the foreseeable future.
In the nine months ended September 30, 2020, the Company continued to develop its EVs business and recognized $14.8 million revenue from the sales of vehicles, which included revenue of $5.2 million from the sale of traditional combustion vehicles. In the nine months ended September 30, 2020 the Company acted in both a Principal and Agent capacity in relation to vehicle sales. For those contracts in which it acted in a Principal capacity revenues were recorded on a Gross basis and for those contracts where it acted in an Agent capacity the revenues were recorded on a Net basis.
Cost of revenues (USD in thousands)

Three Months Ended

Nine Months Ended


September 30,

September 30,

Amount

%

September 30,

September 30,

Amount

%


2020

2019

Change

Change

2020

2019

Change

Change

Electric vehicles

$
8,226

$
—

$
8,226

n/m

$
8,658

$
—

$
8,658

n/m

Combustion engine vehicles

1,229

—

1,229

n/m

5,121

—

5,121

n/m

Digital asset management services

—

—

—

n/m

—

467

(467)

n/m

Other

451

244

207

85
%

897

751

146

19
%
Total

$
9,906

$
244

$
9,662

n/m

$
14,676

$
1,218

$
13,458

n/m

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019
Cost of revenues was $9.9 million for the three months ended September 30, 2020, as compared to $0.2 million for the three months ended September 30, 2019 an increase of $9.7 million. The increase in ~~revenue~~the cost of ~~approximately $102.3~~revenues was principally due to increased revenues from the sales of vehicles.
In the third quarter of 2020, the Company continued to develop its EV business and recognized $9.5 million ~~was attributable~~in cost of revenues from the sales of vehicles.

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Nine months ended September 30, 2020 as compared to the ~~new consumer electronics business line acquired~~nine months ended September 30, 2019

Cost of revenues was $14.7 million for the nine months ended September 30, 2020, as compared to $1.2 million for the nine months ended September 30, 2019 an increase of $13.5 million. The increase in ~~January 2017, and~~the cost of revenues was due to the change in the mix of revenues. Revenues recognized in the nine months ended September 30, 2020 arose from the sale of vehicles which have a ~~lesser extent, one-time consulting~~significantly lower margin than the digital asset management services ~~that we provided~~revenues recognized in the corresponding period of the prior year.

The majority of the cost associated with digital asset management services had already been incurred in 2018. In 2018, due to ~~certain customers. These revenues~~the uncertainty associated with the future economic benefits when such costs were ~~partially offset by~~incurred, the ~~decrease of our legacy YOD business, which is~~Company expensed those costs during 2018.

Gross profit (USD in ~~line with our business strategy transition.~~thousands)

Three Months Ended

Nine Months Ended


September 30,

September 30,

Amount

%

September 30,

September 30,

Amount

%


2020

2019

Change

Change

2020

2019

Change

Change

Electric vehicles

$
646

$
2,854

$
(2,208)

(77)
%
$
964

$
2,854

$
(1,890)

(66)
%
Combustion engine vehicles

39

—

39

n/m

39

—

39

n/m

Digital asset management services

—

—

—

n/m

—

40,233

(40,233)

n/m

Other

29

6

23

n/m

11

199

(188)

(94)

Total

$
714

$
2,860

$
(2,146)

(75)
%
$
1,014

$
43,286

$
(42,272)

(98)
%

Gross profit ratio

Three Months Ended

Nine Months Ended


September 30,

September 30,

September 30,

September 30,


2020

2019

2020

2019

Electric vehicles

7
%
100
%
10
%
100
%
Combustion engine vehicles

3
%
—

1
%
—

Digital asset management services

—

—

—

99

Other

6
%
2
%
1
%
21
%
Total

7
%
92
%
6
%
97
%

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019
Gross profit for the three months ended September 30, 2020 was $0.7 million, as compared to gross profit in the amount of $2.9 million during the same period in 2019. The gross profit ratio for the three months ended September 30, 2020 was 7%, while in 2019, it was 92%. The decrease was mainly due to digital asset management service revenue recognized in 2019 having higher gross margins than the gross margin in vehicles.
Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019
　 2017 1-9 2016 1-9 Diff
　 USD USD USD %
Legacy YOD 31,659 1,767,059 (1,735,400 ) (98 %)
Wecast Services 5,791,805 - 5,791,805 100 %
Total 5,823,464 1,767,059 4,056,405 230 %
~~Our gross~~Gross profit for the nine months ended September 30, ~~2017~~2020 was ~~approximately $5.8~~$1.0 million, as compared to ~~$1.8~~$43.3 million during the same period in ~~2016. Gross~~2019. The gross profit ratio for the ~~six~~nine months ended September 30, ~~2017~~2020 was ~~5.5%~~6%, while in 2019, it was 97%. The decrease was mainly due to the digital asset management service revenue recognized in 2019 having a ~~decrease from 40.4%, as~~higher gross margin than the ~~Wecast Services business, which currently is engaged mostly in lower~~gross margin ~~electronics, is still in its relative infancy and the business service offerings as well as profit-sharing arrangements with a growing range~~on vehicles.

Table of ~~suppliers are in transition.~~Contents

Selling, general and administrative expenses

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

Selling, general and administrative expense for the three months ended September 30, 2020 was $7.6 million as compared to $7.8 million for the same period in 2019, a decrease of $0.1 million or 2.6%. The decrease was mainly due to

●

A decrease of $1.6 million in general operations expense (including reduced travel and entertainment expense due to Covid-19), partially offset by

●

An increase of $0.7 million in share-based compensation expense due to the new option grants; and

●

An increase of $0.9 million in salary and employee benefit expense due to the increase in number of sales staff employed in the the MEG business and increased headcount in the New York head office.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

~~Our selling,~~Selling, general and administrative expenses for the nine months ended September 30, ~~2017 increased approximately $1.5~~2020 was $20.2 million as compared to $18.4 million for the same period in 2019, an increase of $1.7 million or ~~23%, as compared with the amount for the nine months ended September 30, 2016.~~

9%. The majority of the increase was due to 1)

●

An increase of $2.6 million in share-based compensation expense due to the new option grants;

●

An increase of $1.5 million in salary and employee benefit expense due to the increase in number of sales staff employed in the MEG business and increased headcount in the New York head office; and

●

A decrease of $2.3 million in general operations expense (including less travel and entertainment expense due to Covid-19),

Professional fees

Three months ended September 30, 2020 as compared to the increase of our sales and marketing expense to introduce and promote of our business models to various potential investors and business partners, as well as to promote Wecast Services business; and 2) financial advisory expenses that were paid to independent professional companies to assist us in being able to contact and negotiate with more business partners.

~~Table of Contents~~

~~Professional fees~~three months ended September 30, 2019

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~~Professional fees for ~~professional~~the three months ended September 30, 2020 were $4.0 million as compared to $1.4 million for the same period in 2019, an increase of $2.6 million. The increase was related to an increase in investor relations expense of $1.0 million, legal fees ~~increased approximately~~of $0.9 million ~~or 91%,~~including $0.5 million incurred responding to ~~$1.8~~the Class Action lawsuits and related matters, consulting expenses of $0.7 million including $0.4 million related to a shared services agreement with SSSIG, a related party.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

Professional fees for the nine months ended September 30, 2020 were $8.1 million as compared to $3.9 million for the same period in 2019, an increase of $4.2 million. The increase was related to an increase in investor relation expense of $1.4 million, legal fees of $1.4 million including $0.9 million incurred responding to the Class Action lawsuit, $0.5 million related to regulatory matters and $0.6 million related to general corporate advice reflecting the companies increased level of activity.

Research and Development Expense

Research and development expense for the three and nine months ended September 30, 2020 represents the fee paid for the EV technical development and design.

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Impairment loss

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

In the third quarter of 2020, the Company recorded an impairment loss of $3.2 million related to Fintech Village assets after performing an impairment analysis. In the third quarter of 2019, $2.3 million of the impairment loss was related to four of the five existing buildings in Fintech Village which were expected to be demolished.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

For the nine months ended September 30, 2020, the Company recorded an impairment loss of $3.2 million related to Fintech Village assets because the Company decided not to continue the development of Fintech Village, an impairment loss of $1.0 million related to the DBOT right of use assets and $5.9 million related to the New York headquarters’ right of use assets, leasehold improvement and fixed assets because the Company decided to cease use the office and vacated the space subsequently. The Company also recorded an impairment loss of $0.3 million related to another current asset. In the third quarter of 2019, $2.3 million of the impairment loss related to four of the five existing buildings in Fintech Village which were expected to be demolished.

Change in fair value of contingent consideration, net

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

The change in fair value of contingent consideration, net of $4.2 million represents the remeasurement of the contingent consideration payable to Tree Technology shareholders.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

The change in fair value of contingent consideration, net of $2.9 million represents the remeasurement loss of $1.5 million of the contingent consideration payable to the former DBOT shareholder and remeasurement gain of $4.4 million of the contingent consideration payable to the Tree Technology shareholders.

Depreciation and amortization

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

Depreciation and amortization for the three months ended September 30, 2020 was $0.7 million as compared to $0.8 million for the same period in 2019, a decrease of $0.1 million. The decrease was due to the decrease of amortization expense $0.3 million from the intangible assets that were impaired at 2019 year end, partially offset by the increase in amortization expense $0.2 million from intangible assets acquired in the fourth quarter of year 2019.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

Depreciation and amortization for the nine months ended September 30, 2020 was $1.7 million as compared to $1.4 million for the same period in 2019, an increase of $0.2 million. The increase was mainly due to the increase in amortization expense $0.4 million from intangible assets acquired in the second half year of year 2019, partially offset by the decrease of amortization expense $0.2 million from the intangible assets impaired at 2019 year end.

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Interest expense, net

The following table summarizes the breakdown of the interest expense (USD in thousands):

Three Months Ended

Nine Months Ended


September 30,

September 30,

September 30,

September 30,

2020

2019

2020

2019

Interest, net

$
289

$
347

$
887

$
982

Amortization of debt discounts

1,725

292

13,174

973

Total

$
2,014

$
639

$
14,061

$
1,955

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019
Interest expense increased $1.4 million to $2.0 million for the three months ended September 30, 2020, from $0.6 million during the same period of 2019. The interest expense increase during 2020 was primarily due to the increased amortization of beneficial conversion features resulting from the down round financing provision adjustment in October 2019.
Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019
Interest expense increased $12.1 million to $14.0 million for the nine months ended September 30, ~~2017, for~~2020, from $2.0 million during the same period ~~in 2016.~~of 2019. The interest expense increase ~~in professional fees~~during 2020 was ~~mainly caused by the legal, valuation and auditing service fees incurred in relation~~primarily due to the ~~acquisitions in January 2017.~~
~~Change in fair value of warrant liabilities~~
~~Certain of our warrants are~~remaining unamortized beneficial conversion features recognized as ~~derivative liabilities~~interest expense immediately upon conversion of convertible notes to common stock, and ~~re-measured at~~ the ~~end~~increased amortization of ~~every reporting~~beneficial conversion features resulting from the down round provision adjustment in October 2019.
Equity in income (loss) of equity method investees
Three months ended September 30, 2020 as compared to the three months ended September 30, 2019
Equity in income (loss) of equity method investees decreased $47,463 for the three months ended September 30, 2020 in comparison to the same period ~~and upon settlement, with~~of 2019 as one of the ~~change~~entities had a slight foreign exchange gain.

Table of Contents

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

Equity in ~~value reported in the statement~~income (loss) of ~~operations. We reported a loss of approximately $0.1 million but a gain of approximately $0.2~~equity method investees decreased $0.6 million for the nine months ended September 30, ~~2017 and 2016, respectively. The changes are primarily due~~2020 in comparison 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 same period of 2019 as DBOT was an equity method ~~by recording 20%~~investment until July 2019, at which date the Company increased its ownership and consolidated DBOT.

Conversion expense

Conversion expense for the three and nine months ended September 30, 2020 represents the expense recognized as a result of the ~~operating losses~~reduction of ~~Zhong Hai Media. For~~conversion price to induce the conversion of the convertible notes from the related parties.

Other income (expense)

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

Other income (expense) increased $5.4 million for the three months ended September 30, 2020 in comparison to the same period of 2019 mainly because the Company has reached agreement with landlord to terminate its New York City headquarters lease at 55 Broadway and recorded a gain of $4.9 million, and sublease income $0.2 million

Nine months ended September 30, 2020 as compared to the nine months ended September 30, ~~2016, operating loss attributable~~2019

Other income (expense) increased $6.4 million for the nine months ended September 30, 2020 in comparison 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.~~of 2019 mainly because of a gain of $4.9 million from the lease settlement of its New York City headquarters at 55 Broadway with landlord, a gain of $0.8 million from the DBOT lease settlement with landlord and sublease income $0.3 million.

Income tax expense

~~Dillon Yu has a 49% non-controlling interest in Shanghai Wecast Supply Chain Management Limited (“Wecast SH”) and~~Three months ended September 30, 2020 as ~~such we allocate 49%~~compared to the three months ended September 30, 2019

During the three months ended September 30, 2020 income tax expense is nil because of ~~the~~net operating loss and deferred tax assets related to the net operating loss carryovers utilized had been offset by a valuation allowance. The Company had established a 100.0% valuation allowance against its net deferred tax assets due to its history of ~~Wecast SH~~pre-tax losses and the likelihood that the deferred tax assets will not be realized.

Nine months ended September 30, 2020 as compared to ~~Dillon Yu.~~ the nine months ended September 30, 2019

During the nine months ended September 30, ~~2017, approximately $0.6 million~~2020 income tax expense is nil because of ~~our~~net operating loss ~~from Wecast SH was allocated~~and deferred tax assets related to ~~Dillon Yu, which was nil in~~ the ~~same period in 2016.~~net operating loss carryovers utilized had been offset by a valuation allowance. The Company had established a 100.0% valuation allowance against its net deferred tax assets due to its history of pre-tax losses and the likelihood that the deferred tax assets will not be realized.

~~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~~2019, the Company recorded an income tax benefit of $0.5 million, $0.2 million resulting from losses of ~~our operating~~Grapevine Logic, Inc. offsetting deferred tax liabilities that were recognized on the acquisition of Grapevine and a $0.4 million reduction of the valuation allowance on Ideanomics’ deferred tax assets in excess of those reversed to offset Ideanomics’ income as discussed above.

Net loss attributable to non-controlling interest

Three months ended September 30, 2020 as compared to the three months ended September 30, 2019

Net loss attributable to non-controlling interests was $0.4 million for the three months ended September 30, 2020 compared to net income of $1.4 million in 2019. The loss for the three months ended September 30 2020 is primarily due to net loss from ~~Wide Angle was allocated to Swiss Guorong Limited, which was nil~~our investments in entities formed and acquired in late 2019. The income for the ~~same period~~three months ended September 30

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2019 is primarily due to the taxis commission revenue recognized in ~~2016.~~an entity we have 51% ownership during the third quarter of 2019.

Nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019

Net loss attributable to non-controlling interests was $0.7 million for the nine months ended September 30, 2020 compared to net income of $1.4 million in 2019. The loss for the nine months ended September 30 2020 is primarily due to net loss from our investments in entities formed and acquired in late 2019. for the three months ended September 30 2020 is primarily due to the taxis commission revenue recognized in an entity we have 51% ownership during the third quarter of 2019.

Liquidity and Capital Resources

As of September 30, ~~2017,~~2020, the Company had cash of ~~approximately $1.7~~$27.6 million. On that date, $20.4 million was held in the Company’s Hong Kong, U.S. Malaysia, and Singapore entities and $7.2 million which includes $0.2 million which was received in advance of a future investment, was held in the Company’s PRC entities. The Company does not consider cash balances held in the PRC to be available for use outside of the PRC. The Company’s operations outside of the PRC will continue to be dependent upon access to debt and equity funding raised outside of the PRC. There is no guarantee that debt and equity funds will be available to the Company when they are required.

A majority of the Company’s operating transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are 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 law 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.

As a broker-dealer, DBOT has minimum capital requirements. DBOT had ~~accumulated deficits~~cash of ~~approximately $120.5 million and $115.7~~$0.2 million as of September 30, ~~2017 and December 31, 2016, respectively, due~~2020, which was necessary for DBOT to ~~recurring losses since our inception. These factors could raise substantial doubt about~~meet its minimum capital requirements. The Company consolidates a 51.0% owned investment in an entity which is based in Singapore. This entity venture had cash of $0.6 million as of September 30, 2020. The agreement of 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~~partner 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~~entity is required prior to disbursement of this ~~uncertainty.~~

entity’s funds for certain defined expenditures.

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

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

Nine Months Ended

September 30,

September 30,

2020

2019

Net cash used in operating activities

$
(21,918)

$
(8,712)

Net cash used in investing activities

(486)

(1,738)

Net cash provided by financing activities

45,737

9,067

Effect of exchange rate changes on cash

1,639

(37)

Net increase/(decrease) in cash and cash equivalents

24,972

(1,420)

Cash and cash equivalents at beginning of period

2,633

3,106

Cash and cash equivalents at end of period

$
27,605

$
1,686

40
~~Table of Contents~~

Operating Activities
Cash used in operating activities ~~decreased~~increased by $13.2 million for the nine months ended September 30, ~~2017~~2020 compared to ~~2016,~~the same period in 2019, primarily due to: (1) an decrease in operating results from net income of $12.9 million in the third quarter of 2019 to a ~~decrease in our~~net loss ~~from operation from $6.0~~of $47.8 million, (2) total non-cash adjustments increase (decrease) to ~~$5.1 million.~~
~~Financing Activities~~
~~During~~net income (loss) was $29.3 million and $(25.5) million for the nine months ended on September 30, ~~2017, we entered~~2020 and 2019, respectively; and

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(3) total changes in operating assets and liabilities resulted in an (decrease)increase of $(3.4) million and of $3.9 million in cash used in operating activities for the nine months ended September 30, 2020 and 2019, respectively.

Investing Activities

Cash used in investing activities was $0.5 million for the nine months ended September 30, 2020, which is primarily due to the Company entering into two notes receivable of $1.9 million and receipt one of the note repayments of $1.5 million for the nine months ended September 30, 2020. Cash used in investing activities was $1.7 million for the nine months ended September 30, 2019, which is primarily due to the payment of $1.8 million for Fintech Village, $0.9 million of long term investment payment, partially offset by the proceeds of $0.7 million from the disposal of the subsidiary.

Financing Activities

The Company received $39.1 million from the exercise of warrants and the issuance of common stock, $7.1 million from noncontrolling shareholders contribution, and $2.0 million from the issuance of convertible notes, and made repayment of $3.0 million to related parties for the nine months ended September 30, 2020. While in the same period in 2019, the Company received $4.8 million from the issuance of convertible notes, $2.5 million in proceeds in a ~~subscription agreement with~~private placement from the issuance of restricted shares and increased $1.8 million borrowings from the related party for the nine months ended September 30, 2019, to certain investors, including officers, directors and other ~~affiliates, pursuant~~affiliates.

The Company expects to ~~which we issued~~continue to raise both equity and ~~sold~~debt finance, if possible, to ~~such investors, in a private placement, an aggregate of 727,273 shares of~~support the ~~common stock of the Company, for $2.75 per share, or a total purchase price of $2.0 million. While in the same period in 2016, we received $10 million~~Company’s investment ~~proceeds from the sales of 4,545,455 shares of our common stock~~plans and ~~issuance of a two-year warrant to acquire an additional 1,818,182 shares of our common stock at an exercise price of $2.75 per share to SSS.~~operations.

Effects of Inflation

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

~~Off Balance~~Off-Balance Sheet Arrangements

Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements, or other contractual arrangements.

~~We do~~The Company does not have ~~any off balance~~other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on ~~our~~the Company’s 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~~its securities.

~~Seasonality~~

~~Our operating results~~Contractual Obligations and operating cash flows historically for our legacy YOD business have not been subject to seasonal variations. However, we expect a disproportionate amount of our revenues generated from Wecast Services quarter over quarter due to the customers’ seasonal demand, as normally holiday demand or new model of product introduction would increase our revenue. This pattern may change, however, as a result of new market opportunities or new product introductions.

~~Critical Accounting Policies~~

Commitments

The ~~preparation~~tabular presentation of ~~financial statements in conformity with accounting principles generally accepted~~contractual obligations is not required for Smaller Reporting Companies.

Seasonality

The Company’s MEG division operates 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~~market for fleet sales of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.

~~Variable Interest Entities~~

We account for entities qualifying as variable interest entities (“VIEs”) in accordance with Financial Accounting Standards Boards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810,~~Consolidation~~~~. For our consolidated VIEs, management has made evaluations of the relationships between our VIEs~~commercial EVs and the ~~economic benefit flow of contractual arrangement with VIEs. In connection with such evaluation, management also took into account the fact~~Company expects that ~~as a result of such contractual arrangements, we control the legal shareholders’ voting interests~~orders and have power of attorney in the VIEs, and therefore we are able to direct all business activities of the VIEs. As a result of such evaluation, management concluded that we are the primary beneficiary of our consolidated VIEs.

We have concluded that we can control our PRC VIEs after consulting with our in-house PRC legal counsel. Enforecement of PRC laws and regulations that affect our ability to control our PRC VIEs may preclude us from consolidating these companies in the future.

~~Table of Contents~~

~~Revenue Recognition~~

~~When persuasive evidence of an arrangement exists, the~~ sales price is fixed or determinable and collectability is reasonably assured, we recognize revenue as services are performed. For certain contracts that involve sub-licensing content within the specified license period, revenue is recognized in accordance with ASC Subtopic 926-605, Entertainment-Films - Revenue Recognition, whereby revenue is recognized upon delivery of films when the arrangement includes a nonrefundable minimum guarantee, delivery is complete and we have no substantive future obligations to provide future additional services. Payments received from customers for the performance of future services are recognized as deferred revenue, and subsequently recognized as revenue in the period that the service obligations are completed.

In accordance with ASC 605-25, Revenue Recognition - Multiple Element Arrangements, contracts with multiple element deliverables are separated into individual units for accounting purposes when the unit determined to have standalone value to the customer. Since the contract price is for all deliverables, we allocated the arrangement consideration to all deliverables at the inception of the arrangement based on their relative selling price. We use (a) vendor-specific objective evidence of selling price, if it exists, or, (b) the management’s best estimate of the selling price for that deliverable to determine the relative selling price of each individual unit.

We also generate revenue from sales of goods. Sales orders are confirmed after negotiation on price between customers and us. Purchase orders are confirmed after careful selection of suppliers and negotiation on price. We purchase finished goods from suppliers in accordance with sales orders from customers. Our suppliers then deliver goods to our customers directly. We are required to bear the direct risk of damage to the goods that the direct default risk that cannotwill be delivered to the customer. When the delivery is completed, we recognize revenue and the related cost at the same time. According to purchase orders with suppliers, we, as the owner of the goods, become the first responsible party for the goods.

In accordance with ASC 605-45, Revenue Recognition – Principal Agent Consideration, we account for revenue from sales of goods on a gross basis. We are the primary obligor in the arrangements, as we have the ability to establish prices, and have discretion in selecting the independent suppliers and other third-party that will perform the delivery service, we are responsible for the defective products and we bear credit risk with customer payments. Accordingly, all such revenue billed to customers is classified as revenue and all corresponding payments to suppliers are classified as cost of revenues.

~~The recognition of revenue involves certain judgments and changes in our assumptions, judgments or estimations may have a material impact on~~influenced by the amount and timing of ~~our revenue recognition.~~

~~Licensed Content~~

~~We obtain content through content licensing agreements~~budgeted expenditure by its customers, changes in government subsidy programs promoting the conversion to EV and government regulations relating to vehicle emission standards. Typically, the Company would expect to see higher sales at the start of the year when companies start executing on their capital programs and at the end of the year when companies are spending any surplus or uncommitted budget before the new budget cycle commences. The Company’s MEG business unit is building out its network and has not generated sufficient orders to allow it to establish with ~~studios and distributors. We recognize licensed content when~~any degree of certainty an expected pattern of seasonality. Additionally, as the ~~license fee and~~PRC is the specified content titles are known or reasonably determinable. Prepaid license fees are classified as an asset on the consolidated balance sheets as licensed content and accrued license content fees payable are classified as a liability on the consolidated balance sheets.

~~We amortize licensed content in cost~~Company’s principal source of revenues ~~over~~we anticipate that revernues in the ~~contents contractual window of availability based on the expected revenue derived from the licensed content, beginning with the month of~~ first ~~availability, such that our revenues bear a representative amount~~and fourth quarters of the cost of the licensed content. We review factors that impact the amortization of licensed content on a regular basis, including factors that may bear direct impact on expected revenue from specific content titles. We estimate expected revenue by reviewing relevant factors, including marketing considerations, programming efforts, relationship with our channel partners, expected customer renewals and content offered by other distributors on the same platform. Changes in our expected revenue from licensed content could have a significant impact on our amortization pattern.

~~Intangible Assets and Goodwill~~

~~We account for intangible assets and goodwill, in accordance with ASC 350,~~~~Intangibles – Goodwill and Other~~. ASC 350 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be evaluated for impairment at least annually. ASC 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives and reviewed for impairment whenever events indicate the carrying amount may not be recoverable. In accordance with ASC 350, goodwill is allocated to reporting units, which are either the operating segment or one reporting level below the operating segment. On an annual basis, we review goodwill for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances makes it more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, goodwill is further tested for impairment by comparing the carrying value to the estimated fair value of its reporting units, determined using externally quoted prices (if available) or a discounted cash flow model and, when deemed necessary, a market approach.

~~Table of Contents~~

Application of goodwill impairment tests requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and goodwill to reporting units and determination of fair value of each reporting unit. Judgment applied when performing the qualitative analysis includes consideration of macroeconomic, industry and market conditions, overall financial performance of the reporting unit, composition, personnel or strategy changes affecting the reporting unit and recoverability of asset groups within a reporting unit. Judgments applied when performing the quantitative analysis includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these judgments, estimates and assumptions could materially affect the determination of fair value for each reporting unit.

~~Standards Issued and Not Yet Implemented~~

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The standard will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard requires a modified retrospective transition approach for existing leases, whereby the new rulesyear will be ~~applied to~~impacted by the ~~earliest year presented. We do not expect the new lease standard to have a material effect on our financial position, results of operations or cash flows.~~

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, a standard that will supersede virtually all of the existing revenue recognition guidance in U.S. GAAP. The standard establishes a five-step model that will apply to revenue earned from a contract with a customer. Extensive disclosures will be required, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgments and estimates. The FASB has issued several amendments to the standard, including clarification on accounting for licenses of intellectual property and identifying performance obligations.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We currently anticipate adopting the standard using the modified retrospective method. The new standard will be effective for us beginning January 1, 2018.

We are undertaking a comprehensive approach to assess the impact of the guidance on our business by reviewing our current accounting policies and practices to identify any potential differences that may result from applying the new requirements to our consolidated financial statements. We do not anticipate that this standard will have a material impact to revenue recognition in both of our legacy YOD business and Wecast Service business. Especially for Wecast Service business, we will continue to recognize revenue as principal for these contracts at the point in time when the products are delivered. The new standard requires to disclose more information about revenue activities and related transactions including quantitative and qualitative information about performance obligations, significant judgements and estimates, contract assets and liabilities and disaggregation of revenue, which we are continuing to assessChinese New Year celebrations in the first quarter of ~~2018. We are also identifying~~the year and ~~implementing changes to~~ the ~~Company’s business processes, systems and controls to support adoption~~annual National Day holidays in fourth quarter of the ~~new standard~~year.

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OUTLOOK

The Company anticipates that its MEG business unit will be the largest contributor to revenues in ~~2018. We~~2020. The rate at which the MEG business unit grows is highly correlated with the development of financing structures for fleet purchases of commercial EVs, which is not assured, and the speed at which business in the PRC and the rest of Asia returns to pre COVID-19 levels.

The Company will continue to ~~make significant progress on our review of the standard. Our initial assessment may change~~seek ways to deploy its DBOT Alternative Trading System (“ATS”) as ~~we continue to refine these assumptions.~~

In May 2016, the FASB issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only the narrow aspects of Topic 606. The areas improved include: (1) Assessing the Collectability Criterion in Paragraph 606-10-25-1(e) and Accounting for Contracts That Do Not Meet the Criteria for Step 1; (2) Presentation of Sales Taxes and Other Similar Taxes Collected from Customers; (3) Noncash Consideration; (4) Contract Modifications at Transition; (5) Completed Contracts at Transition; and (6) Technical Correction. The effective date and transition requirementsa platform for the ~~amendments in this Update are the same as the effective date~~issuance of digital securities and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). We are planning to adopt the above standards on January 1, 2018. We may use either a full retrospective or a modified retrospective approach to adopt this standard. We are currently evaluating this standardtokens, trading of commodities and ~~the related updates, including which transition approach to use as well as the impact~~origination and distribution of ~~adoption on policies, practices and systems.~~private placements. The standard also requires us to evaluate whether our businesses promise to transfer services to the customer itself (as a principal) or to arrange for services to be provided by another party (as an agent). To make that determination, the standard uses a control model rather than the risks-and-rewards model in current U.S. GAAP. At this stage in the evaluation, we doCompany does not anticipate that DBOT will generate material amounts of revenue in 2020 while the ~~new guidance~~Company continues to develop its plan to use DBOT for sale of digital securities and brokering of commodity products subject to obtaining the required regulatory approvals.

The Company continues to look for acquisitions that will ~~have a material impact on our revenue recognition policies, practices or systems. We are currently evaluating~~accelerate the ~~impact~~growth of ~~this standard~~its MEG and Ideanomics Capital business units.

Environmental Matters

The Company is subject to ~~its consolidated financial statements upon adoption.~~

~~In June 2016,~~various federal, state, and local laws and regulations governing, among other things, hazardous materials, environmental contamination, and the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)”. The pronouncement changes the impairment model for most financial assets, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basisprotection of the ~~financial asset, resulting in a net presentation of the amount expected~~environment. The Company has made, and expects to be collected on the financial asset. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. We do not expect a material impact to its consolidated financial statement upon adoption of this ASU.

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In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance will be effectivemake in the ~~first quarter~~future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. The Company may also incur fines and penalties from time to time associated with noncompliance with such laws and regulations. In 2018, ~~and early adoption~~the Company accrued $8.0 million for asset retirement obligations, which are related to the legal contractual obligation in connection with the acquisition of Fintech Village.

New Accounting Pronouncements

Information regarding new accounting pronouncements is ~~permitted. Management is still evaluating~~included in Note 2 to the ~~effect that this guidance will have on the consolidated financial statements and related disclosures.~~Condensed Consolidated Financial Statements.

In January 2017, FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The update affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The update is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update provides a more robust framework to use in determining when a set of assets and activities is a business, and also provides more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. For public companies, the update is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The guidance should be applied prospectively upon its effective date. The effect of ASU 2017-01 on the consolidated financial statements will be dependent on any future acquisitions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~We are~~The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and ~~are~~is 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, ~~2017.~~2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that ~~as of September 30, 2017, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed,~~ our disclosure controls and procedures were ~~not~~ effective ~~to satisfy~~as of the ~~objectives for which they are intended, as a result~~end of ~~one material weakness described below.~~the period covered by this report.

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Changes in Internal Control Over Financial Reporting

On February 4, 2017, Ms. Mei Chen resigned from her position as Chief Financial Officer of the Company and was replaced by Mr. Simon Wang, as the Chief Financial Officer and principal financial officer and principal accounting officer.

~~Table of Contents~~

~~In 2016, a material weakness identified~~There were no changes in ~~the~~our internal control ofover financial reporting related to the design, documentation and implementation of effective internal controls over the review of the cash flow forecasts used in the accounting for licensed content recoverability. Specifically, the Company did not design and maintain effective internal controls related to management’s review of the data inputs and assumptions used in its cash flow forecasts for licensed content recoverability.

~~Other than the changes stated above, there have been no other significant changes in internal control for~~that occurred during the nine months ended September 30, ~~2017,~~2020, 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
~~There are no material pending~~For a description of the Company’s legal proceedings, see Note 18, Commitments and Contingencies, to ~~which we are a party or to which any~~the Condensed Consolidated Financial Statements of ~~our property is subject. To the best of our knowledge, no such actions against us are contemplated or threatened.~~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 2016 Annual Report~~the 2019 Form 10-K which could materially affect ~~our~~the Company’s business, financial condition, or future results. The risks described in ~~our Annual Report on~~the 2019 Form 10-K are not the only risks facing ~~our~~the Company. Additional risks and uncertainties not currently known to usmanagement or that wemanagement currently ~~deem~~deems to be immaterial also may materially adversely affect ~~our~~the Company’s business, financial condition, or future results. ~~Other than as noted below, there have been no material changes in the risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016.~~

~~The Company is in the process of transforming its business model and this transformation may not be successful.~~
The Company is in the process of transforming its business model and is aiming to become a global leader in providing next-generation Artificial-Intelligent (AI) & Fintech Powered, Supply Chain + Digital Finance Solutions. SSC’s innovative model helps businesses enhance and unlock operational and capital value from both the supply chain and real assets. In addition, SSC offers a closed trade ecosystem for buyers and sellers designed to eliminate transactional middlemen and create a more direct and margin-expanding path for principals. There are three engines that drive our business platform: 1. Intelligent Supply Chain Management; 2. Asset Based Securitization and Tokenization Issuance and Trading Platform and 3. Digital Index and Financial Derivatives Issuance and Trading Platform; All three engines are supported by “ABCD” Technology & Infrastructure (A: Artificial IntelligenceI, B: Blockchain, C: Cloud Computing, D: Data). In connection with this transformation, the Company has recently assembled a new experienced management team, stabilized the foundation, capitalized and rebranded the Company, reconfigured the business structure, expanded the Company’s mission and business lines, made several key investments and finally, injected several privately held and revenue producing assets into the corporation. 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 the business. This includes having or hiring 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.
Any failure to implement this plan in accordance with our expectations could have a material adverse effect on our financial results. Even if the anticipated benefits and savings are substantially realized, there may be consequences, internal control issues, or business impacts that were not expected. Additionally, as a result of our restructuring efforts in connection with our business transformation plan, we may experience a loss of continuity, loss of accumulated knowledge or loss of efficiency during transitional periods. Reorganization and restructuring can require a significant amount of management and other employees' time and focus, which may divert attention from operating activities and growing our business. If we fail to achieve some or all of the expected benefits of these activities, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
~~The Company experiences significant competitive pressure, which may negatively impact its results~~.
The market for the Company’s products and services is very competitive and subject to rapid technological advances, new market entrants, non-traditional competitors, changes in industry standards and changes in customer needs and consumption models. Not only does the Company compete with global distributors, it also competes for customers with regional distributors and some of the Company’s own suppliers that maintain direct sales efforts. In addition, as the Company expands its offerings and geographies, the Company may encounter increased competition from current or new competitors. The Company’s failure to maintain and enhance its competitive position could adversely affect its business and prospects. Furthermore, the Company’s efforts to compete in the marketplace could cause deterioration of gross profit margins and, thus, overall profitability.
The size of the Company’s competitors varies across market sectors, as do the resources the Company has allocated to the sectors and geographic areas in which it does business. Therefore, some competitors may have greater resources or a more extensive customer or supplier base than the Company has in one or more of its market sectors and geographic areas, which may result in the Company not being
46
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~~able to effectively compete in certain markets which could impact the Company’s profitability and prospects.~~
~~Our International Operations Expose Us to a Number of Risks~~
Our international activities are significant to our revenues and profits, and we plan to further expand internationally. In certain international market segments, we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations and platforms, and promote our brand internationally.
~~Our international sales and operations are subject to a number of risks, including:~~
~~local economic and political conditions;~~
government regulation of e-commerce and other services, electronic devices, and competition, and restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), nationalization, and restrictions on foreign ownership;
restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights;
~~limitations on the repatriation and investment of funds and foreign currency exchange restrictions;~~
~~limited technology infrastructure;~~
~~shorter payable and longer receivable cycles and the resultant negative impact on cash flow;~~
~~laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and restrictions on pricing or discounts;~~
~~geopolitical events, including war and terrorism.~~
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, ~~2017, other than those that were previously reported in our Current Reports on Form 8-K.~~2020.

Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the fiscal quarter ended September 30, ~~2017.~~2020.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information

On May 10, 2012, at the request of Seven Stars Cloud Group, Inc. (the “Company’), Mr. Shane McMahon 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 principal amount of $3,000,000, as amended on May 18, 2012, October 19, 2012, May 10, 2013, January 31, 2014, December 30, 2014 and December 31, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “McMahon Note”).
Effective on November 9, 2017, the Company and Mr. McMahon entered into Amendment No. 7 to the McMahon Note pursuant to which the McMahon Note will be, at Mr. McMahon’s option, payable on demand or convertible on demand into Common Stock at a conversion price of $1.50, until December 31, 2019.
The foregoing description of Amendment No. 7 to the McMahon Note is qualified in its entirety by reference to the actual Amendment No. 7 to the McMahon Note, a copy of which is filed as Exhibit 10.4 hereto and incorporated herein by reference.
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Item 6. Exhibits

Exhibit
~~No.~~ ~~Description~~
~~10.1~~ Form of Stockholder Proxy and Lock-Up Agreement, by and between Seven Stars Cloud Group, Inc., Bruno Wu and certain stockholders.*
~~10.2~~ License Agreement, dated October 17, 2017, by and between Wecast Services Group Limited and Guangxi Dragon Coin Network Technology Co., Ltd*
~~10.3~~ Securities Purchase Agreement, dated October 23, 2017, by and between Seven Stars Cloud Group, Inc., and Hong Kong Guo Yuan Capital Holdings Limited.*
~~10.4~~
No.
Amendement No. 7 to the Convertible Promissory Note in $3,000,000 principal amount issued to Shane McMahon, dated November 9, 2017.*
Description
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
**Furnished herewith

48
59

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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 November ~~13, 2017.~~9, 2020.
IDEANOMICS, INC.
~~Seven Stars Cloud Group, Inc.~~

~~By:~~
~~/s/ Simon Wang~~
By:
/s/ Conor McCarthy
~~Name: Simon Wang~~
~~Title:~~
Conor McCarthy
Chief Financial Officer
(Principal Financial ~~Officer~~ and ~~an Authorized Officer)~~Accounting Officer)

~~Nevada~~		~~20-1778374~~
Nevada		20-1778374
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



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


Large accelerated filer¨☐	Accelerated filer¨	☒
Non-accelerated filer ¨☐	Smaller reporting companyx	☒
Emerging growth company ¨☐

~~PART I~~	~~-FINANCIAL INFORMATION~~
PART I	-FINANCIAL INFORMATION
~~Item 1.~~	~~Financial Statements~~	3
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33 44
Item 3	Quantitative and Qualitative Disclosures About Market Risk	44 58
Item 4.	Controls and Procedures	44 58

PART II	-OTHER INFORMATION

Item 1.	Legal Proceedings	46 59
Item 1A.	Risk Factors	46 59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47 59
Item 3.	Defaults Upon Senior Securities	47 59
Item 4.	Mine Safety Disclosures	47 59
Item 5.	Other Information	47 59
Item 6.	Exhibits	48 59
Signatures		49 60

	September 30, 2017			December 31, 2016

ASSETS
Current assets:
Cash	$	1,676,756		$	3,761,814
Accounts receivable, net		42,784,281			9,522,151
Licensed content, current		883,015			124,319
Notes receivable		-			1,749,830
Inventory		375,693			203,697
Prepaid expenses		370,041			375,944
Other current assets		2,163,878			3,581,822
Total current assets		48,253,664			19,319,577
Property and equipment, net		119,304			4,963,725
Licensed content, non-current		16,075,134			17,593,528
Intangible assets, net		151,069			453,242
Goodwill		-			6,648,911
Long term investments		6,958,411			6,654,664
Other non-current assets		-			112,643
Total assets	$	71,557,582		$	55,746,290
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND EQUITY
Current liabilities:(including amounts of consolidated VIEs without recourse to Seven Stars Cloud Group, Inc. See note 3)
Accounts payable	$	43,128,270		$	13,341,680
Deferred revenue		207,112			1,350,054
Accrued interest due to a related party		397,852			557,918
Accrued other expenses		118,833			708,987
Accrued salaries		684,739			766,957
Payable for purchase of building		-			987,015
Amounts due to related parties		58,567			1,060,817
Other current liabilities		168,316			934,480
Accrued license content fees		-			1,236,661
Convertible promissory note due to a related party		3,000,000			3,000,000
Warrant liabilities		-			70,785
Total current liabilities		47,763,689			24,015,354
Total liabilities	$	47,763,689		$	24,015,354
Commitments and contingencies (Note 17)
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, 2017 and December 31, 2016, respectively	$	1,261,995		$	1,261,995
Equity:
Series E Preferred Stock - $0.001 par value; 16,500,000 shares authorized, Nil and 7,154,997 shares issued and outstanding, liquidation preference of Nil and $12,521,245 as of September 30, 2017 and December 31, 2016, respectively		-			7,155
Common stock - $0.001 par value; 1,500,000,000 shares authorized, 62,264,494 and 53,918,523 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		62,264			53,918
Additional paid-in capital		145,791,961			152,755,919
Accumulated deficit		(120,521,733	)		(115,669,268	)
Accumulated other comprehensive loss		(775,512	)		(1,353,302	)
Total Seven Stars Cloud shareholders’ equity		24,556,980			35,794,422
Non-controlling interest		(2,025,082	)		(5,325,481	)
Total equity		22,531,898			30,468,941
Total liabilities, convertible redeemable preferred stock and equity	$	71,557,582		$	55,746,290

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2017			2016			2017			2016

Revenue	$	30,223,638		$	1,626,844		$	106,712,428		$	4,377,034
Cost of revenue		28,273,862			893,796			100,888,964			2,609,975
Gross profit		1,949,776			733,048			5,823,464			1,767,059

Operating expenses:
Selling, general and administrative expense		3,630,949			2,320,247			7,771,561			6,294,206
Research and development expense		400,040			-			400,040			-
Professional fees		831,039			326,353			1,845,590			964,290
Depreciation and amortization		36,508			123,502			293,661			344,308
Impairment of other intangible assets		152,847			172,064			216,468			172,064
Total operating expense		5,051,383			2,942,166			10,527,320			7,774,868

Loss from operations		(3,101,607	)		(2,209,118	)		(4,703,856	)		(6,007,809	)

Interest and other income (expense)
Interest expense, net		(27,186	)		(24,971	)		(72,439	)		(225,154	)
Change in fair value of warrant liabilities		131,357			58,220			(112,642	)		201,826
Equity in loss of equity method investees		(23,632	)		17,487			(100,468	)		(19,862	)
Other		(806	)		(3,313	)		(111,448	)		(8,409	)
Loss before income taxes		(3,021,874	)		(2,161,695	)		(5,100,853	)		(6,059,408	)

Income tax benefit		-			8,612			-			25,836

Net loss		(3,021,874	)		(2,153,083	)		(5,100,853	)		(6,033,572	)

Net loss (income) attributable to non-controlling interest		(22,723	)		105,879			608,910			261,809

Net loss attributable to Seven Stars Cloud shareholders	$	(3,044,597	)	$	(2,047,204	)	$	(4,491,943	)	$	(5,771,763	)

Basic loss per share	$	(0.05	)	$	(0.05	)	$	(0.08	)	$	(0.18	)
Diluted loss per share	$	(0.05	)	$	(0.05	)	$	(0.08	)	$	(0.18	)

Weighted average shares outstanding:
Basic		62,146,168			41,184,037			59,594,289			31,640,230
Diluted		62,146,168			41,184,037			59,594,289			31,640,230

	Nine Months Ended
	September 30, 2017			September 30, 2016

Cash flows from operating activities:
Net loss	$	(5,100,853	)	$	(6,033,572	)
Adjustments to reconcile net loss to net cash used in operating activities
Share-based compensation expense		202,501			286,577
Provision for doubtful accounts		103,040			366,887
Depreciation and amortization		293,661			344,308
Amortization of debt issuance costs		-			122,696
Income tax benefit		-			(25,836	)
Equity in loss of equity method investees		100,468			19,862
Loss on disposal of assets		683,195			-
Change in fair value of warrant liabilities		112,642			(201,826	)
Impairment of long-lived assets		216,468			172,064
Foreign currency exchange losses		-			3,431

Change in assets and liabilities:
Accounts receivable		(34,582,490	)		(2,890,663	)
Inventory		(159,240	)		-
Licensed content		759,698			(639,225	)
Prepaid expenses and other assets		3,679,359			(799	)
Accounts payable		29,792,542			177,354
Accrued expenses, salary and other current liabilities		(798,209	)		250,856
Deferred revenue		(1,139,357	)		(10,359	)
Accrued license content fees		-			112,896
Net cash used in operating activities		(5,836,575	)		(7,945,349	)

Cash flows from investing activities:
Acquisition of property and equipment		(46,260	)		(3,130,862	)
Acquisition of leasehold improvements		-			(455,723	)
Proceeds from disposal of property and equipment		2,450,044			-
Disposal of subsidiary, net of cash disposed		(8,753	)		-
Cash paid for the acquisition of subsidiaries		(741,433	)		(650,000	)
Investments in intangibles		-			(2,811,346	)
Investment in long term investments		(250,000	)		(3,584,025	)
Net cash provided by (used in) investing activities		1,403,598			(10,631,956	)

Cash flows from financing activities
Proceeds from private placement		2,529,344			-
Repayment of amounts due to related parties		(243,503	)		-
Costs associated with financing activities		-			(294,890	)
Proceeds from issuance of warrant and shares		-			18,000,000
Net cash provided by financing activities		2,285,841			17,705,110
Effect of exchange rate changes on cash		62,078			(57,416	)
Net increase (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
Supplemental Cash Flow Information:

Exchange of Series E Preferred Stock for common stock	$	7,155		$	100
Issuance of convertible note for licensed content (Note 12)	$	-		$	17,717,847
Issuance of shares for the settlement of liability	$	-		$	75,000
Issuance of shares upon conversion of convertible note, including accrued interest and debt issuance cost	$	-		$	17,733,297
Payment of interest	$	250,000		$	-
Acquisition of long term investment through transfer of Game IP rights	$	-		$	2,714,441
Payable for Game IP rights acquired	$	-		$	93,828
Payable for workforce acquired	$	-		$	121,695

	Series E Preferred Stock			Series E Par Value			Common Stock		Par Value		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Seven Stars Cloud Shareholders' Equity			Non- controlling Interest			Total Equity
Balance, January 1, 2016		7,254,997		$	7,255			24,249,109	$	24,249	$	97,512,542		$	(86,457,840	)	$	(414,910	)	$	10,671,296		$	(2,388,031	)	$	8,283,265
Share-based compensation		-			-			25,000		25		286,552			-			-			286,577			-			286,577
Common stock issuance		-			-			9,090,909		9,091		17,268,483			-			-			17,277,574			-			17,277,574
Warrants issued in connection with common stock issuance		-			-			-		-		722,426			-			-			722,426			-			722,426
Issuance cost in connection with the issuance of common stock and warrants		-			-			-		-		(411,223	)		-			-			(411,223	)		-			(411,223	)
Common stock issued from conversion of convertible note		-			-			9,208,860		9,209		17,724,088			-			-			17,733,297			-			17,733,297
Restricted Shares granted in connection with acquisition		-			-							121,695			-			-			121,695			-			121,695
Common stock issued for settlement of liability		-			-			41,780		42		74,958			-			-			75,000			-			75,000
Common stock issued from series E preferred stock		(100,000	)		(100	)		100,000		100		-			-			-			-			-			-
Net loss		-			-			-		-		-			(5,771,763	)		-			(5,771,763	)		(261,809	)		(6,033,572	)
Foreign currency translation adjustments, net of nil tax		-			-			-		-		-			-			(290,733	)		(290,733	)		21,459			(269,274	)
Balance, September 30, 2016		7,154,997		$	7,155			42,715,658	$	42,716	$	133,299,521		$	(92,229,603	)	$	(705,643	)	$	40,414,146		$	(2,628,381	)	$	37,785,765

	Series E Preferred Stock			Series E Par Value			Common Stock		Par Value		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Seven Stars Cloud Shareholders' Equity			Non- controlling Interest			Total Equity
Balance, January 1, 2017		7,154,997		$	7,155			53,918,523	$	53,918	$	152,755,919		$	(115,669,268	)	$	(1,353,302	)	$	35,794,422		$	(5,325,481	)	$	30,468,941
Share-based compensation		-			-			-		-		202,501			-			-			202,501			-			202,501
Common stock issuance		-			-			727,273		727		1,999,273			-			-			2,000,000			-			2,000,000
Common stock issuance for RSU vested		-			-			111,465		112		(112	)		-			-			-			-			-
Common stock issuance for option exercised		-			-			41,131		41		39,862			-			-			39,903			-			39,903
Common stock issued for warrant exercised		-			-			311,105		311		681,916			-			-			682,227			-			682,227
Common stock issued from conversion of series E preferred stock		(7,154,997	)		(7,155	)		7,154,997		7,155		-			-			-			-			-			-
Disposal of Zhong Hai Shi Xun		-			-			-		-		(9,887,398	)		(360,522	)		(220,737	)		(10,468,657	)		3,947,473			(6,521,184	)
Net loss		-			-			-		-		-			(4,491,943	)		-			(4,491,943	)		(608,910	)		(5,100,853	)
Foreign currency translation adjustments, net of nil tax		-			-			-		-		-			-			798,527			798,527			(38,164	)		760,363
Balance, September 30, 2017		-		$	-			62,264,494	$	62,264	$	145,791,961		$	(120,521,733	)	$	(775,512	)	$	24,556,980		$	(2,025,082	)	$	22,531,898

	September 30,		December 31,
	2017		2016
ASSETS
Current assets:
Cash	$	4,063	$	1,519,125
Accounts receivable, net		-		1,260,529
Prepaid expenses		2,156		30,455
Other current assets		1,503		191,427
Intercompany receivables due from the Company's subsidiaries⁽ⁱ⁾		2,439,391		150,725
Total current assets		2,447,113		3,152,261
Property and equipment, net		-		196,677
Intangible assets, net		-		2,570
Long term investments		3,649,042		3,654,664
Other non-current assets		-		442,782
Total assets	$	6,096,155	$	7,448,954

LIABILITIES
Current liabilities:
Accounts payable	$	-	$	5,817
Deferred revenue		-		824,563
Accrued expenses		-		268,074
Other current liabilities		40		394,314
Accrued license content fees		-		1,236,661
Intercompany payables due to the Company's subsidiaries⁽ⁱ⁾		3,518,877		14,752,338
Total current liabilities		3,518,917		17,481,767
Total liabilities	$	3,518,917	$	17,481,767

	September 30, 2017			December 31, 2016
Balance at the beginning of the period	$	(2,828,796	)	$	(3,672	)
Additions charged to bad debt expense		(103,040	)		(2,825,124	)
Write-off of bad debt allowance		47,378			-
Disposal of Zhong Hai Shi Xun		2,880,811			-
Balance at the end of the period	$	(3,647	)	$	(2,828,796	)

	September 30, 2017										December 31, 2016
Amortizing Intangible	Gross Carrying		Accumulated			Impairment			Net		Gross Carrying		Accumulated			Impairment			Net
Assets	Amount		Amortization			Loss			Balance		Amount		Amortization			Loss			Balance

Charter/Cooperation agreements (iii)	$	-	$	-		$	-		$	-	$	2,755,821	$	(909,257	)	$	(1,846,564	)	$	-
Software and licenses		211,939		(195,160	)		-			16,779		267,991		(241,932	)		-			26,059
Patent and trademark (iv)		92,965		(39,943	)		(53,022	)		-		92,965		(39,943	)		-			53,022
Website and mobile app development (ii)		-		-			-			-		593,193		(421,129	)		(172,064	)		-
Workforce (i)		305,694		(152,847	)		(152,847	)		-		305,694		(76,422	)		-			229,272
Total amortizing intangible assets	$	610,598	$	(387,950	)	$	(205,869	)	$	16,779	$	4,015,664	$	(1,688,683	)	$	(2,018,628	)	$	308,353
Indefinite lived intangible assets
Website name		134,290		-			-			134,290		134,290		-			-			134,290
Patent (iv)		10,599		-			(10,599	)		-		10,599		-			-			10,599
Total intangible assets	$	755,487	$	(387,950	)	$	(216,468	)	$	151,069	$	4,160,553	$	(1,688,683	)	$	(2,018,628	)	$	453,242

	Amortization to be
Years ending December 31,	Recognized
2017 (3 months)	$	2,517
2018		10,067
2019		4,195
Total amortization to be recognized	$	16,779

		September 30, 2017
		December 31, 2016		Capital increase		Loss on investment			Impairment loss		Foreign currency translation adjustments		September 30, 2017
Wecast Internet	(i)		132,782		-		(77,210	)		-		3,797		59,369
Hua Cheng	(ii)		364,897		-		(23,258	)		-		15,803		357,442
Shandong Media	(iii)		-		-		-			-		-		-
Total		$	497,679		-	$	(100,468	)		-	$	19,600	$	416,811

	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

	Level 3 Assets and Liabilities
	For the Nine Months Ended September 30 , 2017
	January 1,					Change in		September 30,
	2017		Settlements			Fair Value		2017
Liabilities:
Warrant liabilities (see Note 13)	$	70,785	$	(183,427	)	$	112,642	$	-

						Weighted Average
						Remaining		Aggregated
	Options			Weighted Average		Contractual Life		Intrinsic
	Outstanding			Exercise Price		(Years)		Value
Outstanding at January 1, 2017		2,101,425		$	2.42		4.59	$	-
Granted		170,000			1.57
Exercised		(78,211	)		1.63
Expired		(45,662	)		2.90
Forfeited		(302,542	)		1.50
Outstanding at September 30, 2017		1,845,010			2.67		4.46		0.39
Vested and expected to vest as of September 30, 2017		1,845,010			2.67		4.46		0.39
Options exercisable at September 30, 2017 (vested)		1,609,196			2.82		3.80		0.36

	Shares			Weighted-average fair value
Restricted shares outstanding at January 1, 2017		228,550		$	1.75
Granted		400,000			2.05
Forfeited		(95,000	)		1.65
Vested		(111,465	)		1.73
Restricted shares outstanding at September 30, 2017		422,085		$	2.07

	Leased Property
Years ending December 31,	Costs
2017(3 months)	$	19,711
2018		70,211
2019		36,269
2020		37,147
Thereafter		18,575
Total	$	181,913

	September 30,		December 31,
	2017		2016
RMB denominated bank deposits with financial institutions in the PRC	$	1,431,601		1,566,107
US dollar denominated bank deposits with financial institutions in the PRC	$	19,227		670,951
HKD denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”)	$	47,723		14,151
US dollar denominated bank deposits with financial institutions in Hong Kong Special Administrative Region (“HK SAR”)	$	117,528		1,402,842
US dollar denominated bank deposits with financial institutions in The United States of America (“USA”)	$	56,975		95,030

	2017Q3		2016Q3		Difference
	USD		USD		USD			%
Legacy YOD		-		1,626,844		(1,626,844	)		(100	%)
Wecast Services		30,223,638		-		30,223,638			100	%
Total		30,223,638		1,626,844		28,596,794			1758	%

	2017 Q3	2016Q3	Difference
	USD	USD	USD		%
Legacy YOD	-	733,048	(733,048	)	(100	%)
Wecast Services	1,949,776	-	1,949,776		100	%
Total	1,949,776	733,048	1,216,728		166	%

	YTD 2017Q3		YTD 2016Q3		Difference
	USD		USD		USD			%
Legacy YOD		794,273		4,377,034		(3,582,761	)		(82	%)
Wecast Services		105,918,155		-		105,918,155			100	%
Total		106,712,428		4,377,034		102,335,394			2338	%

	2017 1-9		2016 1-9		Diff
	USD		USD		USD			%
Legacy YOD		31,659		1,767,059		(1,735,400	)		(98	%)
Wecast Services		5,791,805		-		5,791,805			100	%
Total		5,823,464		1,767,059		4,056,405			230	%

Exhibit
~~No.~~		~~Description~~

~~10.1~~		Form of Stockholder Proxy and Lock-Up Agreement, by and between Seven Stars Cloud Group, Inc., Bruno Wu and certain stockholders.*
~~10.2~~		License Agreement, dated October 17, 2017, by and between Wecast Services Group Limited and Guangxi Dragon Coin Network Technology Co., Ltd*
~~10.3~~		Securities Purchase Agreement, dated October 23, 2017, by and between Seven Stars Cloud Group, Inc., and Hong Kong Guo Yuan Capital Holdings Limited.*
~~10.4~~ No.		Amendement No. 7 to the Convertible Promissory Note in $3,000,000 principal amount issued to Shane McMahon, dated November 9, 2017.* Description
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

~~By:~~	~~/s/ Simon Wang~~
By:	/s/ Conor McCarthy
~~Name: Simon Wang~~
~~Title:~~	Conor McCarthy
	Chief Financial Officer
	(Principal Financial ~~Officer~~ and ~~an Authorized Officer)~~Accounting Officer)