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Mecox Lane Limited Announces Fourth Quarter And Full Year 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,  December 31, 
  2011 2012
  $ $
ASSETS     
Current assets:     
Cash and cash equivalents  40,097,545  13,291,063
Short-term investments  20,631,910  20,682,480
Accounts receivable, net of allowances of $64,063 and $55,660 as of December 31, 2011 and December 31, 2012, respectively  1,993,962  1,452,864
Amount due from related party  356,090  -- 
Other receivables  6,921,738  5,149,844
Advances to suppliers and prepaid expenses  2,138,815  6,297,463
Merchandise inventories  31,286,353  27,349,540
Deferred tax assets—current portion  323,911  -- 
Total current assets   103,750,324  74,223,254
Property and equipment, net  43,236,593  46,528,057
Prepaid land use right  6,234,620  6,125,104
Intangible assets, net  1,450,220  1,263,644
Other non-current assets  833,427  249,903
TOTAL ASSETS  155,505,184  128,389,962
     
LIABILITIES AND EQUITY    
Current liabilities:     
Accounts payable (including accounts payable of the consolidated VIEs without recourse to Mecox Lane Limited of 4,886,576 and 3,101,935 as of December 31, 2011 and December 31, 2012, respectively)  23,867,229  19,063,827
Advances from customers (including advances from customers of the consolidated VIEs without recourse to Mecox Lane Limited of 1,790,998 and 1,345,714 as of December 31, 2011 and December 31, 2012, respectively)  4,723,687  4,570,595
Amount due to related parties  --   547,478
Accrued expenses (including accrued expenses of the consolidated VIEs without recourse to Mecox Lane Limited of 5,378,698 and 281,152 as of December 31, 2011 and December 31, 2012, respectively)  8,725,738  5,153,056
Other current liabilities (including other current liabilities of the consolidated VIEs without recourse to Mecox Lane Limited of 4,142,652 and 1,955,777 as of December 31, 2011 and December 31, 2012, respectively)  5,694,457  7,358,589
Income tax payable (including income tax payable of the consolidated VIEs without recourse to Mecox Lane Limited of 107,032 and 34,718 as of December 31, 2011 and December 31, 2012, respectively)  1,793,016  1,779,978
Total current liabilities   44,804,127  38,473,523
     
Equity:    
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized, 405,192,227 and 408,727,673 shares issued, and 405,192,227 and 403,790,426 shares outstanding as of December 31, 2011 and December 31, 2012)  40,519  40,873
Additional paid-in capital   163,806,117  165,934,265
Treasury Stock  --   (572,168)
Accumulated deficit  (60,415,020)  (82,811,023)
Accumulated other comprehensive income  6,201,555  6,292,753
Statutory reserve  967,886  931,739
Total Mecox Lane Limited equity   110,601,057  89,816,439
Noncontrolling interests  100,000  100,000
Total equity  110,701,057  89,916,439
TOTAL LIABILITIES AND EQUITY  155,505,184  128,389,962
 
Mecox Lane Limited
Unaudited Consolidated Statement of Operations Information 
         
  Three-month Periods Ended December 31 Year Ended December 31
  2011 2012 2011 2012
  $ $ $ $
         
Net revenues:        
Internet platform  29,433,368  17,929,683  118,502,166  71,830,359
Call center  14,458,773  14,502,806  52,783,982  47,966,846
Directly operated stores 8,099,441 3,653,352 25,770,146 17,343,134
Franchised stores 5,985,982 3,611,972 20,837,544 14,675,718
Total net revenues  57,977,564  39,697,813  217,893,838  151,816,057
         
Cost of goods sold (excluding depreciation and amortization)        
Internet platform  22,259,928  14,757,065  92,686,952  57,679,033
Call center  6,224,730  5,670,933  24,399,891  19,155,224
Directly operated stores 4,664,551 2,429,551 12,914,304 9,894,793
Franchised stores 4,494,833 3,153,879 14,737,394 10,737,821
Total cost of goods sold (excluding depreciation and amortization)  37,644,042  26,011,428  144,738,541  97,466,871
         
Operating expenses:        
Selling, general and administrative expenses  29,594,998  20,525,110  104,534,226  76,309,520
Depreciation and amortization  1,261,236  1,220,484  4,411,298  4,216,962
Other operating income, net  (23,623)  (92,371)  (932,748)  (1,805,346)
         
Total operating expenses  30,832,611  21,653,223  108,012,776  78,721,136
         
Loss from operations  (10,499,089)  (7,966,838)  (34,857,479)  (24,371,950)
Interest income  435,536  417,562  2,231,462  2,143,396
Other income, net  388,345  455,120  2,307,270  120,315
         
Loss before income taxes and noncontrolling interests  (9,675,208)  (7,094,156)  (30,318,747)  (22,108,239)
Income tax expense  (1,834,993)  --   (2,943,769)  (323,911)
         
Net loss  (11,510,201)  (7,094,156)  (33,262,516)  (22,432,150)
Accretion of noncontrolling interest  106,463  --   256,792  20,416
Net income (loss) attributable to noncontrolling interests  (145,318)  121,994  (295,647)  (20,416)
Net loss attributable to Mecox Lane Limited shareholders  (11,471,346)  (7,216,150)  (33,223,661)  (22,432,150)
         
Loss per ordinary share:        
Basic  (0.03)  (0.02)  (0.08)  (0.06)
Diluted  (0.03)  (0.02)  (0.08)  (0.06)
Loss per ADS (1)        
Basic  (0.99)  (0.62)  (2.87)  (1.94)
Diluted  (0.99)  (0.62)  (2.87)  (1.94)
Weighted average ordinary shares used in per share calculation        
Basic  405,192,227  404,183,345  405,192,243  404,247,016
Diluted  405,192,227  404,183,345  405,192,243  404,247,016
Weighted average ADS used in per share calculation (1)        
Basic  11,576,920  11,548,095  11,576,921  11,549,914
Diluted  11,576,920  11,548,095  11,576,921  11,549,914
         
Other comprehensive income, net of tax        
Change in cumulative foreign currency translation adjustment  408,437  449,279  3,909,408  91,198
Other comprehensive income, net of tax  408,437  449,279  3,909,408  91,198
         
Comprehensive income attributable to Mecox Lane Limited shareholders  (11,062,909)  (6,766,871)  (29,314,253)  (22,340,952)
         
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures      
Non-GAAP net loss (2)  (9,425,816)  (6,701,682)  (28,908,909)  (20,312,979)
         
Note (1) ADS amounts adjusted for a change in the ratio of the Company's American Depositary Shares ("ADSs") to ordinary shares ("Shares") from 1:7 to 1:35 ("Ratio Change"), effective as of February 1, 2013.
Note (2) 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 sharebased 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 December 31 Year Ended December 31
  2011 2012 2011 2012
  $ $ $ $
Net loss  (11,510,201)  (7,094,156)  (33,262,516)  (22,432,150)
Add back: Share-based compensation expenses  2,084,385  392,474  4,353,607  2,119,171
Non-GAAP net loss  (9,425,816)  (6,701,682)  (28,908,909)  (20,312,979)
CONTACT: For investor and media inquiries please contact:

         In China:

         Ryan Shi
         Mecox Lane Limited
         Tel: +86-21-6495-0500 or +86-21-5464-9900 Ext. 8161
         Email: ir@mecoxlane.com 

         Nicholas Manganaro
         Ogilvy Financial, Beijing
         Tel: +86-10-8520-3073
         Email: mcox@ogilvy.com

         In the U.S.:

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

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