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Ku6 Media Reports Unaudited Financial Results for the Third Quarter of Fiscal Year 2012

BEIJING, Dec. 7, 2012 /PRNewswire/ --  Ku6 Media Co., Ltd. ("Ku6 Media" or the "Company," NASDAQ: KUTV), a leading internet video company, focused on User Generated Content ("UGC") in China, today announced unaudited financial results for the third quarter of fiscal year 2012, ended September 30, 2012.

Third Quarter 2012 Highlights (1)

  • Total revenues were US$3.06 million (RMB19.21 million) in the third quarter of 2012, representing an increase of 0.9% from US$3.03 million in the second quarter of 2012 and a decrease of 27.7% from US$4.23 million in the third quarter of 2011.
  • GAAP net loss was US$3.25 million (RMB20.43 million), as compared to a net loss of US$1.47 million in the second quarter of 2012 and US$12.98 million in the third quarter of 2011. Non-GAAP net loss, which the Company defines as net loss excluding share-based compensation expenses, was US$3.26 million (RMB20.46 million) in the third quarter of 2012, as compared to non-GAAP net loss of US$1.53 million in the second quarter of 2012 and US$12.52 million in the third quarter of 2011.
  • Basic and diluted loss per ADS was US$0.07 (RMB0.44) in the third quarter of 2012, as compared to US$0.03 in the second quarter of 2012 and US$0.26 in the third quarter of 2011.
  • Cash and cash equivalents were US$12.55 million (RMB78.84 million) as of September 30, 2012.
  • Net cash used in operating activities was US$1.92 million (RMB12.07 million) in the third quarter of 2012, as compared to US$1.41 million in the second quarter of 2012 and US$8.81 million in the third quarter of 2011.
  • In July 2012, the Company paid US$8.07 million (RMB50.73 million) to repurchase and immediately retire an aggregate of 269,409,276 ordinary shares and 79,717 ADSs.

(1)  The reporting currency of the Company is the United States dollar ("U.S. dollar"), but solely for the convenience of the reader, the amounts of Renminbi ("RMB") presented throughout the release were calculated at the rate of US$1.00=RMB6.2848, representing the noon buying rate as of September 28, 2012 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. This convenience translation is not intended to imply that the U.S. dollar amounts could have been, or could be, converted, realized or settled into RMB at that rate on September 28, 2012, or at any other rate.

Mr. Jeff Shi, Chief Executive Officer of Ku6 Media, commented, "I am pleased to announce our third quarter's earnings release. We have been focused on creating an interactive online video community based on our value generating user base and devoted to improving our user experience by improving our community. During the third quarter, we launched user growth system, revamped our major website, optimized the search and recommendation functions, and also enhanced our CDN system. Both the quality and quantity of our value generating users have been growing rapidly."

Third Quarter 2012 Financial Results

Total revenues were US$3.06 million (RMB19.21 million) in the third quarter of 2012, representing an increase of 0.9% from US$3.03 million in the second quarter of 2012 and a decrease of 27.7% from US$4.23 million in the third quarter of 2011.

In the second quarter of 2011, the Company started to generate advertising revenues primarily from performance advertising services using a system called Application Advertisement ("AA"). The performance advertising revenue was realized through an affiliated advertising agent which is under common control of Shanda Interactive Entertainment Limited, the Company's majority shareholder. The Company generated 94.6% of total revenues in the third quarter of 2012 through this affiliated advertising agent, as compared to 94.8% of total revenues in the second quarter of 2012.

Cost of revenues was US$3.66 million (RMB23.02 million) in the third quarter of 2012, remained flat compared to the second quarter of 2012, decreased 33.2% from US$5.48 million in the third quarter of 2011. Gross loss was US$0.61 million (RMB3.81 million) in the third quarter of 2012, as compared to a gross loss of US$0.63 million in the second quarter of 2012 and a gross loss of US$1.25 million in the third quarter of 2011. Non-GAAP gross loss, which is herein defined as a gross loss excluding share-based compensation expenses, was US$0.58 million (RMB3.63 million) in the third quarter of 2012, as compared to a non-GAAP gross loss of US$0.66 million in the second quarter of 2012 and US$1.22 million in the third quarter of 2011.

Operating expenses were US$2.85 million (RMB17.91 million) in the third quarter of 2012, representing an increase of 73.3% from US$1.64 million in the second quarter of 2012 and a decrease of 74.7% from US$11.28 million in the third quarter of 2011. Non-GAAP operating expenses, which is herein defined as operating expenses excluding share-based compensation expenses, were US$2.88 million (RMB18.11 million) in the third quarter of 2012, as compared to non-GAAP operating expenses of US$1.67 million in the second quarter of 2012 and US$10.85 million in the third quarter of 2011. The sequential increase was mainly attributable to (1) a net increase of US$0.61 million (RMB 3.82 million) in litigation expenses due to the second quarter reversal of accrued liabilities related to favorable settlements of copyright infringement and (2) a US$0.47 million (RMB2.95 million) change in bad debt expense due to the decreased collection of accounts receivable previously written down.

Operating loss was US$3.46 million (RMB21.71 million) in the third quarter of 2012, representing an increase of 51.9% from US$2.28 million in the second quarter of 2012 and a decrease of 72.4% from US$12.53 million in the third quarter of 2011. Non-GAAP operating loss, which reflects the exclusion of share-based compensation expenses, was US$3.46 million (RMB21.75 million) in the third quarter of 2012, as compared to the non-GAAP operating loss of US$2.34 million in the second quarter of 2012 and US$12.07 million in the third quarter of 2011.

Net loss was US$3.25 million (RMB20.43 million) in the third quarter of 2012, representing an increase of 120.9% from US$1.47 million in the second quarter of 2012 and a decrease of 75.0% from US$12.98 million in the third quarter of 2011. Non-GAAP net loss, which reflects the exclusion of share-based compensation expenses, was US$3.26 million (RMB20.46 million) in the third quarter of 2012, as compared to US$1.53 million in the second quarter of 2012 and US$12.52 million in the third quarter of 2011. The sequential increase in net loss was primarily attributable to (1) a US$0.73 million (RMB4.59 million) decrease in government subsidy benefits in the third quarter of 2012; (2) the US$0.61 million (RMB3.82 million) net increase in litigation expenses due to the second quarter reversal of accrued liabilities related to favorable settlements of copyright infringement and (3) the US$0.47 million (RMB2.95 million) of changes in bad debt expense. 

Net loss attributable to Ku6 Media was US$3.25 million (RMB20.43 million) in the third quarter of 2012, as compared to US$1.47 million in the second quarter of 2012 and US$12.98 million in the third quarter of 2011. Non-GAAP net loss attributable to Ku6 Media, reflecting the exclusion of share based compensation expenses, was US$3.26 million (RMB20.46 million) in the third quarter of 2012, as compared to the non-GAAP net loss attributable to Ku6 Media of US$1.53 million in the second quarter of 2012 and US$12.52 million in the third quarter of 2011.

Net loss attributable to Ku6 Media per basic and diluted ADS was US$0.07 (RMB0.44) in the third quarter of 2012, as compared to US$0.03 in the second quarter of 2012 and US$0.26 in the third quarter of 2011. Weighted average ADSs used to calculate basic and diluted net loss per ADS were 48.3 million in the third quarter of 2012, 50.2 million in the second quarter of 2012 and 50.2 million in the third quarter of 2011.

Adjusted EBITDA loss, which is herein defined as net loss attributable to Ku6 Media before interest income, interest expenses, income taxes, depreciation and amortization (excluding amortization and write-down of licensed video copyrights), further adjusted for share-based compensation expenses, equity in loss of affiliates and other non-operating items, was US$2.58 million (RMB16.23 million) in the third quarter of 2012, as compared to adjusted EBITDA loss of US$1.48 million in the second quarter of 2012 and US$10.58 million in the third quarter of 2011. The increase was primarily due to the increase in operating expenses.

As of September 30, 2012, the Company had US$12.55 million (RMB78.84 million) in cash and cash equivalents, compared to US$23.28 million as of June 30, 2012. The decrease was primarily due to the cash payment for share repurchase in the amount of US$8.08 million (RMB50.80 million) in the third quarter of 2012.

Recent Business Developments

The Company's Repurchase and Immediate Retirement of Ordinary Shares and ADSs

On July 12 2012, the Company's shareholders approved, at the Annual General Meeting, a repurchase (and retirement thereafter) of certain of the Company's outstanding shares. This repurchase was settled with cash on July 30, 2012. In this transaction, the Company repurchased and immediately retired in the aggregate 269,409,276 ordinary shares formerly held by Mr. Shanyou Li (the original founder and former CEO), Mr. Zhizhong Hao (Former Senior VP), Ms. Xingye Zeng (Former VP of Sales) and Kumella Holdings Limited (an investment entity controlled by Mr. Shanyou Li), at a price of US$ 0.0291 per share, representing a premium to the Company's current per share price (in total, such repurchase amounting to approximately US$7.84 million). The Company also repurchased and immediately retired 79,717 ADSs (each ADS representing 100 ordinary shares) held by Mr. Shanyou Li at a price of US$2.91 per ADS (in total, approximately US$0.23 million), which represented a premium to the then-current share price.

Given the volatile nature of the Company's per-ADS price as an appropriate measure of fair value and the susceptibility of the per-share price to significant changes on small trading volumes, the Company engaged with an independent financial advisor to assist its management in determining the appropriate range indicative of the fair value per ADS. The repurchase price paid fell within an appropriate indicative range of fair value. The Company recorded this transaction via a charge to additional paid in capital for the repurchase amount.

Cooperation with NetEase

In September 2012, the Company entered into an agreement with NetEase, Inc. ("NetEase," NASDAQ: NTES), a well-known internet company in China. Pursuant to the agreement, Ku6 Media will provide technology support for the video related activities on NetEase's microblog platform, including video uploading and video sharing. Meanwhile, NetEase's microblog users will be given access to Ku6 Media video contents via embedded Ku6 Media video players.

Share Repurchase Program of 2011

Pursuant to a share repurchase program announced December 30, 2011, the Company's Board of Directors have authorized the Company to repurchase up to an aggregate of US$3.2 million of its outstanding ADSs from time to time following the date thereof, based on market conditions. As of September 30, 2012, the Company has repurchased 11,100 ADSs from open market under this program.

Conference Call Information

Ku6's management team will be hosting a corresponding conference call at 8:00am EST on Friday, December 7, 2012 (9:00pm Beijing time on the same day).

Dial-in numbers:     


International Dial-in Number:

+65 67239381

United States Toll Free Number:

18665194004

Mainland China Toll Free Number:

4006208038 / 8008190121

Hong Kong Toll Free Number:

800930346

Conference ID:

74736454

A replay will be available from 1:00am December 8, 2012 EST for 7 days.

International Dial-in Number:

+61 2 8199 0299

United States Toll Free Number:

18554525696

Mainland China Toll Free Number:

4001200932

Hong Kong Toll Free Number:

800963117

Conference ID:

74736454

A live and archived webcast of the conference call will also be available at http://www.media-server.com/m/p/z2v9kooi

About Ku6 Media Co., Ltd.

Ku6 Media Co., Ltd. (NASDAQ: KUTV) is a leading internet video company in China, focusing on User Generated Content ("UGC"). Through its premier online brand and online video website, www.ku6.com, Ku6 Media provides online video uploading and sharing service, video reports, information and entertainment in China. For more information about Ku6 Media, please visit http://ir.ku6.com.

Forward-looking Statements

This news release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "believes," "could," "expects," "may," "might," "should," "will," or "would," and by similar statements. Forward-looking statements are not historical facts, but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of its control. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Some of the risks and important factors that could affect the Company's future results and financial condition include: continued competitive pressures in China's internet video portal market; changes in technology and consumer demand in this market; the risk that Ku6 Media may not be able to control its expenses in the future; regulatory changes in China with respect to the operations of internet video portal websites; the success of Ku6 Media's ability to sell advertising and other services on its websites; and other risks outlined in the Company's filings with the Securities and Exchange Commission,including the Company's  annual report on Form 20-F. Ku6 Media does not undertake any obligation to update this forward-looking information, except as required under law.

About Non-GAAP Financial Measures

To supplement Ku6 Media's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Ku6 Media uses the following measures defined as non-GAAP financial measures by the SEC in evaluating its business: non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP product development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP operating loss, non-GAAP net loss, non-GAAP net loss attributable to Ku6 Media and adjusted EBITDA loss.  We define non-GAAP gross profit or loss, non-GAAP operating expenses, non-GAAP product development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss attributable to Ku6 Media as the respective nearest comparable GAAP financial measure excluding share-based compensation expenses. We define adjusted EBITDA loss as net loss attributable to Ku6 Media before interest income, interest expenses, income taxes, depreciation and amortization (excluding amortization and write-down of licensed video copyrights), further adjusted for share-based compensation expenses, equity in loss of affiliates and other non-operating items. We present non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies. A limitation of using non-GAAP financial measures is that non-GAAP measures exclude share-based compensation charges that have been and will continue to be significant recurring expenses in Ku6 Media's business for the foreseeable future.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP financial measures" at the end of this release.

 

Ku6 Media Co., Ltd.

Consolidated Balance Sheets

(Amounts in thousands,

except for number of shares)

December 31, 
2011

US$

September 30, 
2012

US$

(Unaudited)

September 30,

2012

RMB

(Unaudited)

ASSETS




Current assets:




Cash and cash equivalents

26,751

12,545

78,843

Restricted cash

3,600

-

-

Accounts receivable, net

777

11

69

Accounts receivable due from related parties

2,740

3,247

20,407

Prepaid expenses and other current assets

884

738

4,638

Other receivables due from related parties

19,539

10,404

65,387

Total current assets

54,291

26,945

169,344

Non-current assets:




Deposits

307

307

1,929

Property and equipment, net

3,593

3,489

21,928

Acquired intangible assets, net

24,111

22,942

144,186

Investment in equity affiliate

255

-

-

Goodwill

6,233

6,233

39,173

Total non-current assets

34,499

32,971

207,216

TOTAL ASSETS

88,790

59,916

376,560





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Short-term borrowings

3,178

-

-

Accounts payable

6,365

4,748

29,840

Accrued expenses and other current liabilities

10,016

9,959

62,590

Other payables due to related parties

13,552

3,695

23,222

Total current liabilities

33,111

18,402

115,652

Non-current deferred tax liabilities

4,826

4,826

30,330

Total liabilities

37,937

23,228

145,982





Shareholders' equity:




Ordinary shares (US$0.00005 par value; 
       12,000,000,000 shares authorized; 5,019,786,036
       shares and 4,741,295,060 shares issued and
       outstanding as of December 31, 2011 and
       September 30, 2012, respectively)

251

237

1,489

Additional paid-in capital

184,874

177,249

1,113,975

Accumulated deficit

(132,449)

(138,959)

(873,329)

Accumulated other comprehensive loss

(1,823)

(1,839)

(11,557)

Total Ku6 Media Co., Ltd. shareholders' equity

50,853

36,688

230,578

Non-controlling interests

-

-

-

Total shareholders' equity

50,853

36,688

230,578

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

88,790

59,916

376,560


 

Ku6 Media Co., Ltd.

Consolidated Statements of Operations


For the Three Months Ended

For the Nine Months Ended

 

(Amounts in thousands, except for
number of shares and ADS and
per share and per ADS data)

 

September 30, 2011

June 30,

2012

September 30, 2012

September 30, 2012

September 30,

2011

September 30,

2012

September 30, 2012

US$

US$

US$

RMB

US$

US$

RMB

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues:                                                                    








Advertising








Third parties

1,100

158

161

1,012

10,169

1,214

7,630

Related parties

3,129

2,871

2,895

18,194

4,632

9,551

60,026

Total revenues

4,229

3,029

3,056

19,206

14,801

10,765

67,656









Cost of revenues:








Advertising








Third parties

5,482

3,660

3,662

23,015

26,268

10,853

68,209

Related parties

-

-

-

-

380

-

-

Total cost of revenues

5,482

3,660

3,662

23,015

26,648

10,853

68,209









Gross loss

(1,253)

(631)

(606)

(3,809)

(11,847)

(88)

(553)









Operating expenses:








Product development

857

363

468

2,941

2,101

1,410

8,862

Sales and marketing

2,005

240

283

1,778

11,799

892

5,606

General and administrative

8,413

1,041

2,098

13,186

19,637

5,015

31,518

Total operating expenses

11,275

1,644

2,849

17,905

33,537

7,317

45,986









Operating loss

(12,528)

(2,275)

(3,455)

(21,714)

(45,384)

(7,405)

(46,539)









Interest income

49

162

129

810

89

462

2,904

Other income

32

993

256

1,609

730

1,249

7,850

Interest expenses

(330)

(213)

(114)

(716)

(786)

(564)

(3,545)

Equity in loss of affiliates

(201)

(138)

(66)

(415)

(201)

(252)

(1,584)

Loss before income tax expense

(12,978)

(1,471)

(3,250)

(20,426)

(45,552)

(6,510)

(40,914)









Income tax benefit

-

-

-

-

99

-

-









Net loss

(12,978)

(1,471)

(3,250)

(20,426)

(45,453)

(6,510)

(40,914)

Less: Net loss attributable to non-controlling interests

2

-

-

-

47

-

-

Net loss attributable to Ku6 Media Co., Ltd.

(12,976)

(1,471)

(3,250)

(20,426)

(45,406)

(6,510)

(40,914)









Loss per share - basic and diluted








Net loss attributable to Ku6 Media Co., Ltd. ordinary 
    shareholders

(US$0.00)

 

(US$0.00)

 

(US$0.00)

 

(RMB0.00)

 

(US$0.01)

(US$0.00)

(RMB0.00)









Loss per ADS - basic and diluted








Net loss attributable to Ku6 Media Co., Ltd. ordinary
    shareholders

(US$0.26)

 

(US$0.03)

 

(US$0.07)

 

(RMB0.44)

 

(US$1.13)

(US$0.13)

(RMB0.82)









Weighted average shares used in per share
    calculation - basic and diluted

5,019,786,036

 

5,019,786,036

 

 

4,832,763,530

 

 

4,832,763,530

 

 

4,011,011,072

4,956,990,158

4,956,990,158

Weighted average ADSs used in per ADS calculation -
    basic and diluted

50,197,860

 

 

50,197,860

 

 

48,327,635

 

 

48,327,635

 

 

40,110,111

49,569,902

49,569,902













 

Ku6 Media Co., Ltd.

Consolidated Statements of Cash Flows


For the Three Months Ended

For the Nine Months Ended

(Amounts in thousands)

September 30, 2011

June 30,

2012

September 30, 2012

September 30, 2012

September 30, 2011

September 30, 2012

September 30, 2012

US$

US$

US$

RMB

US$

US$

RMB


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cash flows from operating activities:                                                   








Net loss

(12,978)

(1,471)

(3,250)

(20,426)

(45,453)

(6,510)

(40,914)

Adjustments to reconcile net loss to net cash used in operating activities:








Share-based compensation (reversal)

461

(60)

(5)

(31)

1,754

444

2,790

Share-based compensation cost in relation to disposition of Yisheng

522

-

-

-

522

-

-

Depreciation and amortization

1,482

851

877

5,512

4,347

2,553

16,045

Amortization and write-down of licensed video copyrights

611

-

-

-

3,429

1

6

Impairment of intangible assets

-

-

-

-

1,365

-

-

Bad debt provision (reversal)

1,139

(656)

(187)

(1,175)

3,522

(2,202)

(13,839)

Reversal of legal provision

-

(565)

-

-

-

(565)

(3,551)

Exchange loss (gain)

239

(3)

(93)

(584)

317

(101)

(635)

Equity in loss of affiliates

201

138

66

415

201

252

1,584

Loss (gain) on disposal of property and equipments

2,942

(22)

-

-

2,978

(21)

(132)

Changes in assets and liabilities, net of acquisitions and dispositions:








Accounts receivable

1,980

733

188

1,182

2,217

2,969

18,660

Prepaid expenses and other current assets

(3,520)

169

(290)

(1,823)

(1,200)

145

911

Amount due from related parties

(2,723)

999

232

1,458

(3,738)

(603)

(3,790)

Deposits and other non-current assets

33

-

-

-

(285)

-

-

Inventories

-

-

-

-

31

-

-

Accounts payable

(2,540)

(517)

658

4,135

862

(1,381)

(8,679)

Accrued expenses and other current liabilities

3,491

(1,063)

(171)

(1,075)

3,237

508

3,193

Amount due to related parties

(153)

53

54

339

385

107

673

Income tax payable

-

-

-

-

(99)

-

-

Net cash used in operating activities

(8,813)

(1,414)

(1,921)

(12,073)

(25,608)

(4,404)

(27,678)

Cash flows from investing activities:








Purchases of property and equipment

(289)

(28)

(1,092)

(6,863)

(1,220)

(1,272)

(7,994)

Proceeds from disposal of property and equipments

-

23

-

-

-

23

145

Payments for licensed video copyrights

(1,388)

(8)

(88)

(553)

(5,376)

(236)

(1,483)

Cash-out from disposal of subsidiaries, net of cash disposed

(112)

-

-

-

(112)

-

-

Restricted cash for pledge of bank loans

(5,666)

-

3,600

22,625

(5,666)

3,600

22,625

Loans to related parties under common control by Shanda

(7,408)

-

-

-

(14,108)

(470)

(2,954)

Repayment of loans to related parties under common control by Shanda

-

9,700

-

-

-

9,700

60,962

Net cash provided by (used in) investing activities

(14,863)

9,687

2,420

15,209

(26,482)

11,345

71,301

Cash flows from financing activities:








Proceeds from exercise of stock options

-

-

-

-

4

-

-

Proceeds from issuance of common shares to Shanda

-

-

-

-

50,000

-

-

Proceeds from issuance of convertible bonds to Shanda

-

-

-

-

50,000

-

-

Cash paid for redemption of convertible bonds to Shanda

(50,000)

-

-

-

(50,000)

-

-

Repurchase of ordinary shares

-

-

(8,083)

(50,800)

-

(8,083)

(50,800)

Borrowings from bank

2,093

-

-

-

2,093

-

-

Repayment for loans from bank

-

-

(3,148)

(19,785)

-

(3,148)

(19,785)

Borrowings from related parties under common control by Shanda

575

-

-

-

13,336

-

-

Repayment of loans from related parties under common control of Shanda

(12)

(6,768)

-

-

(12)

(9,904)

(62,244)

Net cash provided by (used in) financing activities

(47,344)

(6,768)

(11,231)

(70,585)

65,421

(21,135)

(132,829)

Effect of exchange rate changes on cash and cash equivalents

1,205

(9)

(5)

(31)

1,003

(12)

(76)

Net increase (decrease) in cash and cash equivalents

(69,815)

1,496

(10,737)

(67,480)

14,334

(14,206)

(89,282)

Cash and cash equivalents, beginning of period

111,444

21,786

23,282

146,323

27,295

26,751

168,125

Cash and cash equivalents, end of period

41,629

23,282

12,545

78,843

41,629

12,545

78,843











Reconciliations of Non-GAAP results of operations measures to the nearest comparable GAAP financial measures (*)

(Amounts in thousands of United States dollars ("US$") and Renminbi ("RMB"), unaudited)

1.      Non-GAAP Gross Profit (Loss)



For the Three Months Ended


For the Nine Months Ended




September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,




2011


2012


2012


2012


2011


2012


2012




US$


US$


US$


RMB


US$


US$


RMB


Gross loss                                            


(1,253)


(631)


(606)


(3,809)


(11,847)


(88)


(553)


Add back: share-based compensation


34


(31)


28


176


531


92


578


Non-GAAP gross profit (loss)


(1,219)


(662)


(578)


(3,633)


(11,316)


4


25


2.      Non-GAAP Operating Expenses



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Operating expenses                          


11,275


1,644


2,849


17,905


33,537


7,317


45,986

Deduct: share-based compensation


427


(29)


(33)


(207)


1,223


352


2,212

Non-GAAP operating expenses


10,848


1,673


2,882


18,112


32,314


6,965


43,774

3.      Non-GAAP Product Development Expenses



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Product development expenses                            


857


363


468


2,941


2,101


1,410


8,862

Deduct: share-based compensation


140


(40)


22


138


345


41


258

Non-GAAP product development expenses


717


403


446


2,803


1,756


1,369


8,604

4.      Non-GAAP Sales and Marketing Expenses



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Sales and marketing expenses                             


2,005


240


283


1,778


11,799


892


5,606

Deduct: share-based compensation


(2)


(17)


8


50


444


20


126

Non-GAAP sales and marketing expenses


2,007


257


275


1,728


11,355


872


5,480

5.      Non-GAAP General and Administrative Expenses



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

General and administrative expenses                             


8,413


1,041


2,098


13,186


19,637


5,015


31,518

Deduct: share-based compensation


289


28


(63)


(395)


434


291


1,828

Non-GAAP general and administrative expenses


8,124


1,013


2,161


13,581


19,203


4,724


29,690

6.      Non-GAAP Operating Loss



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Operating loss                                       


(12,528)


(2,275)


(3,455)


(21,714)


(45,384)


(7,405)


(46,539)

Add back: share-based compensation


461


(60)


(5)


(31)


1,754


444


2,790

Non-GAAP operating loss


(12,067)


(2,335)


(3,460)


(21,745)


(43,630)


(6,961)


(43,749)

7.      Non-GAAP Net Loss



For the Three Months Ended


For the Six Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Net loss                                                  


(12,978)


(1,471)


(3,250)


(20,426)


(45,453)


(6,510)


(40,914)

Add back: share-based compensation


461


(60)


(5)


(31)


1,754


444


2,790

Non-GAAP net loss


(12,517)


(1,531)


(3,255)


(20,457)


(43,699)


(6,066)


(38,124)

8.      Non-GAAP Net Loss Attributable to Ku6 Media Co., Ltd.



For the Three Months Ended


For the Nine Months Ended



September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,



2011


2012


2012


2012


2011


2012


2012



US$


US$


US$


RMB


US$


US$


RMB

Net loss attributable to Ku6 Media Co., Ltd.                              


(12,976)


(1,471)


(3,250)


(20,426)


(45,406)


(6,510)


(40,914)

Add back: share-based compensation


461


(60)


(5)


(31)


1,754


444


2,790

Non-GAAP net loss attributable to Ku6 Media Co., Ltd.


(12,515)


(1,531)


(3,255)


(20,457)


(43,652)


(6,066)


(38,124)

9.      Adjusted EBITDA Loss



For the Three Months Ended


For the Nine Months Ended




September 30,


June 30,


September 30,


September 30,


September 30,


September 30,


September 30,




2011


2012


2012


2012


2011


2012


2012




US$


US$


US$


RMB


US$


US$


RMB


Net loss attributable to Ku6 Media Co., Ltd.


(12,976)


(1,471)


(3,250)


(20,426)


(45,406)


(6,510)


(40,914)


Add back (deduct):
















Interest income                                                                    


(49)


(162)


(129)


(810)


(89)


(462)


(2,904)


Interest expenses


330


213


114


716


786


564


3,545


Income tax benefit


-



-

-


-


(99)


-


-


Depreciation and amortization (excluding amortization and
       ite-down of licensed video copyrights)


1,482


851


877


5,512


4,347


2,553


16,045


EBITDA loss


(11,213)


(569)


(2,388)


(15,008)


(40,461)


(3,855)


(24,228)


















Adjustments:
















Share-based compensation


461


(60)


(5)


(31)


1,754


444


2,790


Equity in loss of affiliates


201


138


66


415


201


252


1,584


Other income


(32)


(993)


(256)


(1,609)


(730)


(1,249)


(7,850)


Adjusted EBITDA loss


(10,583)


(1,484)


(2,583)


(16,233)


(39,236)


(4,408)


(27,704)


*  For more information on the Non-GAAP financial measures, please see the section captioned "About Non-GAAP Financial Measures" in the earnings release.

 

SOURCE Ku6 Media Co., Ltd.

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