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Mecox Lane Limited Announces Second Quarter 2012 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 (loss), 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. 

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

2Cost of goods sold excludes depreciation and amortization expenses. 

3Non-GAAP net loss and non-GAAP net income exclude 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
Unaudited Consolidated Balance Sheet Information
     
  December 31, 2011 June 30, 2012
  $ $
ASSETS     
Current assets:     
Cash and cash equivalents  40,097,545  47,242,861
Short-term investments  20,631,910  4,743,150
Accounts receivable, net of allowances of $64,063 and $64,063 as of December 31, 2011  and June 30, 2012, respectively  1,993,962  1,646,969
Amount due from related party  356,090  -- 
Other receivables  6,921,738  4,774,989
Advances to suppliers and prepaid expenses  2,138,815  1,775,575
Merchandise inventories  31,286,353  23,780,998
Deferred tax assets—current portion  323,911  -- 
      
Total current assets   103,750,324  83,964,542
Property and equipment, net  43,236,593  45,210,181
Prepaid land use right  6,234,620  6,149,811
Intangible assets, net  1,450,220  1,488,432
Other non-current assets  833,427  630,562
     
TOTAL ASSETS  155,505,184  137,443,528
     
LIABILITIES, MEZZANINE EQUITY AND EQUITY    
Current liabilities:     
Accounts payable (including accounts payable of the consolidated VIEs without recourse to Mecox Lane Limited of 4,886,576 and 1,220,720 as of December 31, 2011 and June 30, 2012, respectively)  23,867,229  19,046,614
Advances from customers (including advances from customers of the consolidated VIEs without recourse to Mecox Lane Limited of 1,790,998 and 1,276,467 as of December 31, 2011 and June 30, 2012, respectively)  4,723,687  4,602,308
Accrued expenses (including accrued expenses of the consolidated VIEs without recourse to Mecox Lane Limited of 5,378,698 and 269,639 as of December 31, 2011 and June 30, 2012, respectively)  8,725,738  4,804,398
Other current liabilities (including other current liabilities of the consolidated VIEs without recourse to Mecox Lane Limited of 4,142,652 and 2,015,477 as of December 31, 2011 and June 30, 2012, respectively)  5,694,457  4,762,457
Income tax payable (including income tax payable of the consolidated VIEs without recourse to Mecox Lane Limited of 107,032 and 14,876 as of December 31, 2011 and June 30, 2012, respectively)  1,793,016  1,791,920
      
Total current liabilities   44,804,127  35,007,697
     
     
Equity:    
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized,  405,192,227 and 405,250,544 shares issued, and 405,192,227 and 404,061,538 shares  outstanding as of December 31, 2011 and June 30, 2012)  40,519  40,525
Additional paid-in capital   163,806,117  165,177,730
Accumulated deficit  (59,447,134)  (68,640,506)
Accumulated other comprehensive income  6,201,555  5,923,092
Less: 1,189,006 treasury shares, at cost  --   (165,010)
      
Total Mecox Lane Limited equity   110,601,057  102,335,831
Noncontrolling interests  100,000  100,000
      
Total equity  110,701,057  102,435,831
      
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY  155,505,184  137,443,528
 
 
Mecox Lane Limited
Unaudited Consolidated Statement of Comprehensive Income
     
  Three-month Periods Ended June 30
  2011 2012
  $ $
     
Net revenues:    
 Internet platform  32,710,102  19,640,275
 Call center  14,801,775  11,357,889
 Directly operated stores  5,992,221  4,861,486
 Franchised stores  5,227,891  3,165,999
Total net revenues  58,731,989  39,025,649
     
Cost of goods sold (excluding depreciation and amortization)  
 Internet platform  24,313,746  15,968,374
 Call center  6,934,804  4,854,816
 Directly operated stores  2,539,333  2,336,039
 Franchised stores  3,488,433  2,445,535
Total cost of goods sold (excluding depreciation and amortization)  37,276,316  25,604,764
     
Operating expenses:    
 Selling, general and administrative expenses  25,960,589  18,570,423
 Depreciation and amortization  1,042,615  1,040,516
 Other operating income, net  (118,847)  (823,330)
     
Total operating expenses  26,884,357  18,787,609
     
Loss from operations  (5,428,684)  (5,366,724)
Interest income  624,773  622,081
Other income/(expense)  526,219  (204,261)
     
Loss before income taxes and noncontrolling interests  (4,277,692)  (4,948,904)
Income tax benefit/(expense)  881,823  -- 
     
Net loss  (3,395,869)  (4,948,904)
Accretion of noncontrolling interest  --   91,884
Net loss attributable to noncontrolling interests  (58,493)  (91,884)
Net loss attributable to Mecox Lane Limited shareholders  (3,337,376)  (4,948,904)
     
Loss per ordinary share:    
 Basic & Diluted  (0.01)  (0.01)
     
Loss per ADS    
 Basic & Diluted  (0.06)  (0.09)
     
Weighted average ordinary shares used in per share calculation  
 Basic & Diluted  405,192,257  405,074,604
     
Weighted average ADS used in per share calculation    
 Basic & Diluted  57,884,608  57,867,801
     
Other comprehensive income, net of tax    
Change in cumulative foreign currency translation adjustment  1,204,893  (336,189)
Other comprehensive income, net of tax  1,204,893  (336,189)
     
Comprehensive income attributable to Mecox Lane Limited shareholders  (2,132,483)  (5,285,093)
     
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures  
Non-GAAP net loss (1)  (2,508,248)  (4,343,617)
     
Note (1) We define non-GAAP net income (loss), a non-GAAP financial measure, as net income (loss) excluding share-based compensation expenses. We review non-GAAP net income (loss) together with net income (loss) 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 (loss) has material limitations as an analytical tool. One of the limitations of using non-GAAP net income (loss) is that it does not include all items that impact our net income (loss) for the period. In addition, because non-GAAP net income (loss) 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 (loss) in isolation from or as an alternative to net income (loss) prepared in accordance with U.S. GAAP.
     
The following table sets forth the reconciliation of non-GAAP net income (loss), a non-GAAP financial measure, from net income (loss), our most directly comparable financial measure presented in accordance with U.S. GAAP,  for the periods indicated.
     
  Three-month Periods Ended June 30
  2011 2012
  $ $
Net loss  (3,395,869)  (4,948,904)
Add back: Share-based compensation expenses  887,621  605,287
Non-GAAP net loss  (2,508,248)  (4,343,617)
CONTACT:  For investor and media inquiries please contact:

          In China:

          Phili Xu
          Mecox Lane Limited
          Tel: +86-21-6495-0500 or +86-21-5464-9900 Ext. 8161
          Email: ir@m18.com

          Nicholas Manganaro
          Ogilvy Financial, Beijing
          Tel: +86-10-8520-6600
          Email: mcox@ogilvy.com

          In the U.S.:

          Jessica Barist Cohen
          Ogilvy Financial, New York
          Tel: +1-646-460-9989
          Email: mcox@ogilvy.com

Mecox Lane Limited Logo

Stock quotes in this article: MCOX 

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