May 17, 2018
Robert Benya
President
Seven Stars Cloud Group, Inc.
Room 4, Fenghuayuan Drive-in Movie Theater Park
No. 21, Liangmaqiao Road, Chaoyang District
Beijing 10015
People's Republic of China
Re: Seven Stars Cloud Group, Inc.
Registration Statement on Form S-1
Filed April 20, 2018
File No. 333-224382
Dear Mr. Benya:
We have reviewed your registration statement and have the following
comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Form S-1 filed April 20, 2018
Prospectus Summary, page 5
1. Please prominently discuss your management's experience in providing the
Fintech
services you discuss throughout your registration statement. To the
extent your
management's experience is limited, please provide a risk factor to this
effect.
2. We also note that you are trying to establish "business ecosystem" based
on a "7-3-2-1"
approach. Please explain what your "business ecosystem" entails. Please
also revise your
disclosure to describe in plain-English your structural approach. For
example, explain
Robert Benya
FirstName LastNameRobert Benya
Seven Stars Cloud Group, Inc.
Comapany NameSeven Stars Cloud Group, Inc.
May 17, 2018
May 17, 2018 Page 2
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FirstName LastName
what the blockchain-based technology platforms and distribution
networks are and how
you plan to acquire and use them. Revise your registration statement
throughout to
reflect these changes.
3. Please prominently disclose in your Prospectus Summary that you have a
multi-tiered
capital structure that includes preferred stock, some of which is
currently issued and
outstanding. Discuss the disparate rights that preferred shareholders
have as compared to
common shareholders, the control such shareholder may have over
company matters
(including the election of directors, amendment of organizational
documents and approval
of major corporate transactions), the anti-takeover effects and any
current plans to issue
preferred shares. Revise your disclosure on page 62 to reflect any
changes made here.
4. Please include a corporate organization chart that shows all of your
material affiliates.
Within this chart, please clearly indicate where the operations are
located and whether the
relationship is contractual (i.e., through a VIE) or through equity.
We note your
corporation organization chart on page 37.
5. We note that beginning in 2017 that you are aiming to become a "next
generation
Artificial-Intelligent (AI) & Blockchain-Powered, Fintech company."
Please describe in
plain-English what services you plan to provide. Further expand your
disclosure to
discuss what those services will entail and how you plan to provide
them.
Risk Factors, page 9
6. We note that on page 25 you state that you continue to gather
information relating to the
impact of the new 2017 U.S. tax law on your business. Consider
including a risk factor
discussing the uncertain nature of the effect of the new law on your
financial results.
Risk Related to Doing Business in China, page 13
7. Disclose here any potential risks associated with the trade tensions
between the United
States and China.
The market price of our common stock is volatile, leading to the possibility of
its value being
depressed at a time when you may want to..., page 21
8. We note that your company had a dramatic swing in share price in the
fourth quarter of
2017. Please discuss here or where you deem appropriate the causes of
the share price
changes.
Management's Discussion and Analaysis of Financial Condition and Results of
Operations
Overview, page 24
9. Please provide the basis for which you describe DBOT as "a blockchain
based alternative
Trading System fully licensed by the SEC."
Robert Benya
FirstName LastNameRobert Benya
Seven Stars Cloud Group, Inc.
Comapany NameSeven Stars Cloud Group, Inc.
May 17, 2018
May 17, 2018 Page 3
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FirstName LastName
10. Please also provide a plain-English description of a "block chain
based Alternative
Trading System." In this description, please expand on how block chain
is incorporated
or otherwise relevant to the trading system.
Our ability to make our products remain competitive, page 25
11. Please expand your discussion of your consumer electronics e-commerce
and smart
supply chain management operations to include some background
information on revenue
arrangements and sales channels for electronics products and crude
oil. Please make clear
how your customers utilize, or benefit from, your products and
services. We note your
disclosure in the fourth paragraph on page 6.
Revenues, page 27
12. Please disclose the nature of revenue transactions with related
parties amounting to $18.9
million as reported on page 26, including such other information
deemed necessary for an
understanding of the effects of the transactions on the financial
statements.
13. Please describe the growth drivers for your revenues from sales of
electronics and crude
oil products arising from the operation of your Engine 7 " Supply
Chain Finance and
Management for Vertical Products" which you referenced in your
Prospectus
Summary. Refer to Item 303(A)(3)(iii) of Regulation S-K.
Licensed Content, page 32
14. It appears that your Legacy YOD revenues from licensed content have
significantly
decreased from $4.5 million in 2016 to $794,273 in 2017. Please tell
us and disclose your
assessment of the recoverability of the licensed content intangible
asset and indicate what
your major inputs and assumptions were. Additionally, disclose your
basis for amortizing
this asset and advise us.
VIE Structure and Arrangements
Loan Agreement, page 41
15. Please clarify the status of the TOD WFOE loan. In this regard, we
note that in one
instance you state that the loan was eliminated upon a certain capital
contribution. In the
following sentence, however, you discuss the circumstances under which
the loan "can
only be repaid." To avoid possible confusion, please expand your
disclosure here.
Regulations, page 43
16. Please expand your Regulations section to discuss laws and regulations
that will be
applicable to your planned Fintech business. Discuss which government
entities enforce
these laws and regulations.
Robert Benya
FirstName LastNameRobert Benya
Seven Stars Cloud Group, Inc.
Comapany NameSeven Stars Cloud Group, Inc.
May 17, 2018
May 17, 2018 Page 4
Page 4
FirstName LastName
Management
Summary of Qualifications of Current Directors, page 50
17. Please confirm that the disclosures here have been updated as
applicable to account for
your planned Fintech operations.
Revenue Recognition, page F-12
18. Please describe your revenue arrangements for consumer electronics
e-commerce and
smart supply chain management operations and trading platforms in
order that your
investors may better understand how the underlying sales transactions
evolve and how
you earn revenues.
6. Accounts Receivable, page F-22
19. We note your "revenue from related party" on page F-4. Please disclose
the receivable
amounts due from such related party and the manner of settlement.
Refer to paragraphs
50-1(d) and 50-2 of ASC 850-10.
12. Related Party Transactions, page F-27
20. In order that your investors may better understand the significance of
your transactions
with related parties, please summarize the dollar amounts of the
transactions reported
hereunder for each of the periods for which income statements are
presented and the
respective income statement captions. Refer to ASC 850-10-50-1(C).
(e) Assets Disposal to BT, page F-28
21. Please clarify how the disposal of Zhong Hai Shu Xun Media impacted
your Legacy
YOD business. Further, please explain why the licensed content did not
convey with the
disposal transaction.
General
22. We note that you are planning to either change your business focus or
to incorporate what
appears to be a new area of operations. Please clarify throughout your
registration
statement:
what will happen to your current business and whether you plan to
continue offering
your current services;
what portion of your operations will consist of your new line of
business; and
where you plan to offer the services of your planned new operations.
Robert Benya
Seven Stars Cloud Group, Inc.
May 17, 2018
Page 5
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Kathryn Jacobson, Staff Accountant, at 202-551-3365 or
Robert
Littlepage, Accountant Branch Chief, at 202-551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Courtney Lindsay,
Staff Attorney, at 202-551-7237 or Celeste Murphy, Legal Branch Chief, at
202-551-3257 with
any other questions.
FirstName LastNameRobert Benya
Comapany NameSeven Stars Cloud Group, Inc.
Division of
Corporation Finance
May 17, 2018 Page 5 Office of
Telecommunications
FirstName LastName