Mecox Lane Limited Announces Fourth Quarter And Full Year 2010 Results

About Non-GAAP Financial Measures

To supplement Mecox Lane's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Mecox Lane uses in this press release non-GAAP net income, which excludes share-based compensation expenses. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Mecox Lane believes that the non-GAAP financial measure facilitates investors' and management's comparisons to Mecox Lane's historical performance and assists management's financial and operational decision making. A limitation of using the non-GAAP financial measure is that share-based compensation expenses are recurring expenses that will continue to exist in Mecox Lane's business for the foreseeable future. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from the non-GAAP measure. The accompanying table has more details on the reconciliation between the non-GAAP financial measure and its most directly comparable GAAP financial measure.

¹ Gross profit excludes the impact of depreciation and amortization expenses.

² Cost of Goods sold excludes depreciation and amortization expenses.

³ Non-GAAP net income excludes share-based compensation expenses. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections of "About Non-GAAP Financial Measures" and the accompanying table of "Mecox Lane Limited - Consolidated Statement of Operations Information - Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of this press release.

Mecox Lane Limited
Consolidated Balance Sheet Information
	December 31, 2009	December 31,  2010
	$	$
ASSETS
Current assets:
Cash and cash equivalents	18,757,853	86,011,952
Short-term investments	7,322,363	30,199,200
Accounts receivable, net of allowances of $101,878 and $77,338 as of December 31, 2009 and December 31, 2010, respectively	1,925,924	1,487,298
Other receivables	4,118,038	9,662,105
Advances to suppliers and prepaid expenses	1,585,946	1,410,510
Merchandise inventories	19,237,919	35,809,524
Deferred tax assets—current portion	1,586,694	1,672,078
Total current assets	54,534,737	166,252,667
Property and equipment, net	6,661,692	8,696,636
Intangible assets, net	882,953	1,283,370
Deferred tax assets—long term portion	118,088	1,271,691
Other non-current assets	870,813	439,798
TOTAL ASSETS	63,068,283	177,944,162
LIABILITIES, MEZZANINE EQUITY AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable	19,533,202	24,117,767
Advances from customers	5,146,785	5,839,069
Amount due to related parties	175,741	8,529
Accrued expenses	7,779,932	6,553,143
Other current liabilities	3,200,162	4,311,094
Income tax payable	1,920,342	1,429,415
Total current liabilities	37,756,164	42,259,017
Mezzanine equity:
Convertible non-redeemable preference shares
Series B preference shares ($0.0001 par value; 8,600,000 shares authorized; 8,551,400 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)	18,476,503	--
Series C preference shares ($0.0001 par value; 1,450,000 shares authorized; 1,441,024 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)	3,113,535	--
Series D preference shares ($0.0001 par value; 1,750,000 shares authorized; 1,733,832 shares issued and outstanding as of December 31, 2009 and nil as of December 31, 2010)	3,764,188	--
Redeemable noncontrolling interests	25,000	25,000
Equity (deficit):
Ordinary shares ($0.0001 par value; 390,000,000 and 10,000,000,000 shares authorized, 209,230,993 and 405,192,257 shares issued and outstanding as of December 31, 2009 and 2010, respectively)	20,923	40,519
Additional paid-in capital	29,116,169	159,437,097
Accumulated deficit	(30,654,082)	(26,223,473)
Accumulated other comprehensive income	1,349,883	2,292,147
Total Mecox Lane Limited equity	(167,107)	135,546,290
Noncontrolling interests	100,000	113,855
Total equity (deficit)	(67,107)	135,660,145
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY (DEFICIT)	63,068,283	177,944,162

Mecox Lane Limited
Consolidated Statement of Operations Information
	Three-month Periods Ended December 31		Year Ended December 31
	2009	2010	2009	2010
	$	$	$	$
Net revenues:
Online platform	42,448,508	50,073,321	129,362,292	178,768,558
Directly operated stores	13,177,051	8,192,719	37,387,809	30,709,926
Franchised stores	5,071,572	5,906,110	10,939,090	18,062,814
Total net revenues	60,697,131	64,172,150	177,689,191	227,541,298
Cost of goods sold (excluding depreciation and amortization)
Online platform	23,865,039	31,444,457	74,490,208	107,388,996
Directly operated stores	5,821,810	3,525,662	16,055,383	13,521,818
Franchised stores	3,216,029	3,982,763	6,511,990	11,730,807
Total cost of goods sold (excluding depreciation and amortization)	32,902,878	38,952,882	97,057,581	132,641,621
Operating expenses:
Selling, general and administrative expenses	23,244,311	23,541,910	68,504,581	86,244,899
Depreciation and amortization	1,008,198	1,083,752	3,598,498	4,468,527
Other income, net	(73,527)	(500,439)	(254,312)	(774,986)
Total operating expenses	24,178,982	24,125,223	71,848,767	89,938,440
Income from operations	3,615,271	1,094,045	8,782,843	4,961,237
Interest income	91,572	243,750	351,496	440,875
Income before income taxes	3,706,843	1,337,795	9,134,339	5,402,112
Income tax expense	782,349	217,942	1,922,118	957,648
Net income	2,924,494	1,119,853	7,212,221	4,444,464
Earnings per ordinary share:
Basic	0.009	0.003	0.022	0.010
Diluted	0.008	0.003	0.022	0.008
Earnings per ADS
Basic	0.062	0.020	0.153	0.073
Diluted	0.054	0.018	0.152	0.059
Weighted average ordinary shares used in per share calculation
Basic	205,381,732	350,765,485	205,381,732	242,026,404
Diluted	359,301,052	440,576,787	332,293,300	396,873,164
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
Non-GAAP net income (1)	3,709,781	1,997,898	9,853,166	7,790,360
Note (1) We define non-GAAP net income, a non-GAAP financial measure, as net income excluding share-based compensation expenses. We review non-GAAP net income together with net income to obtain a better understanding of our operating performance. We also believe it is useful supplemental information for investors and analysts to assess our operating performance without the effect of non-cash share-based compensation expenses, which have been and will continue to be significant recurring expenses in our business. However, the use of non-GAAP net income has material limitations as an analytical tool. One of the limitations of using non-GAAP net income is that it does not include all items that impact our net income for the period. In addition, because non-GAAP net income is not calculated in the same manner by all companies, it may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP net income in isolation from or as an alternative to net income prepared in accordance with U.S. GAAP.
The following table sets forth the reconciliation of non-GAAP net income, a non-GAAP financial measure, from net income, our most directly comparable financial measure presented in accordance with U.S. GAAP, for the periods indicated.
	Three-month Periods Ended December 31		Year Ended December 31
	2009	2010	2009	2010
	$	$	$	$
Net income	2,924,494	1,119,853	7,212,221	4,444,464
Add back: Share-based compensation expenses	785,287	878,045	2,640,945	3,345,896
Non-GAAP net income	3,709,781	1,997,898	9,853,166	7,790,360

CONTACT: For investor and media inquiries please contact:

         In China:

         Phili Xu
         Mecox Lane Limited
         Tel: [phone] or [phone] Ext. 8161
         Email: [e-mail] 

         Candice Sun
         Ogilvy Financial, Beijing
         Tel: [phone]
         Email: [e-mail]

         In the U.S.:

         Jessica Barist Cohen
         Ogilvy Financial, New York
         Tel: [phone]	
         Email: [e-mail]

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