Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document and Entity Information | |
Entity Registrant Name | Mecox Lane Ltd |
Entity Central Index Key | 1501775 |
Document Type | 20-F |
Document Period End Date | 31-Dec-14 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Common Stock, Shares Outstanding | 455,227,428 |
Document Fiscal Year Focus | 2014 |
Document Fiscal Period Focus | FY |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash and cash equivalents | $18,180,733 | $14,261,249 |
Short-term investments | 653,700 | |
Accounts receivable | 1,206,780 | 944,447 |
Amount due from related parties | 224,479 | |
Other receivables | 1,588,285 | 2,366,047 |
Advances to suppliers and prepaid expenses | 806,758 | 754,039 |
Merchandise inventories | 3,075,386 | 4,048,609 |
Held-for-sale assets | 69,365,235 | |
Total current assets | 25,511,642 | 91,964,105 |
Property and equipment, net | 37,249,769 | 4,025,765 |
Prepaid land use right | 5,656,453 | |
Intangible assets, net | 473,419 | 872,529 |
Investment in an affiliate | 5,546,358 | |
Other non-current assets | 257,547 | 240,906 |
TOTAL ASSETS | 69,148,830 | 102,649,663 |
Current liabilities: | ||
Short-term borrowing | 1,640,180 | |
Accounts payable (including accounts payable of the consolidated VIEs without recourse to Mecox Lane Limited of $91,666 and nil as of December 31, 2013 and 2014, respectively) | 6,242,761 | 13,001,974 |
Advances from customers | 2,790,812 | 2,531,312 |
Amount due to related parties | 635,770 | |
Accrued expenses | 3,441,317 | 3,236,435 |
Other current liabilities | 2,570,288 | 4,172,225 |
Income tax payable | 1,751,744 | 1,752,631 |
Held-for-sale liabilities (including held for sale liabilities of the consolidated VIEs without recourse to Mecox Lane Limited of $7,490,383 and nil as of December 31, 2013 and 2014, respectively) | 7,490,383 | |
Total current liabilities | 16,796,922 | 34,460,910 |
Commitments and contingencies (Note 18) | ||
Equity: | ||
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized, 439,876,279 and 455,223,849 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 45,523 | 43,988 |
Additional paid-in capital | 169,817,779 | 168,833,542 |
Accumulated deficit | -125,124,090 | -109,433,074 |
Accumulated other comprehensive income | 7,228,441 | 7,700,798 |
Statutory reserve | 284,255 | 943,499 |
Total Mecox Lane Limited equity | 52,251,908 | 68,088,753 |
Noncontrolling interests | 100,000 | 100,000 |
Total equity | 52,351,908 | 68,188,753 |
TOTAL LIABILITIES AND EQUITY | $69,148,830 | $102,649,663 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Accounts payable | $6,242,761 | $13,001,974 |
Held-for-sale liabilities | 7,490,383 | |
Ordinary shares, par value (in dollars per share) | $0.00 | $0.00 |
Ordinary shares, shares authorized | 10,000,000,000 | 10,000,000,000 |
Ordinary shares, shares issued | 455,223,849 | 439,876,279 |
Ordinary shares, shares outstanding | 455,223,849 | 439,876,279 |
VIEs. | ||
Accounts payable | 0 | 91,666 |
Held-for-sale liabilities | $0 | $7,490,383 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||
Net revenues | $49,609,483 | $42,623,591 | $38,819,954 |
Cost of goods sold (excluding depreciation and amortization) | 17,334,312 | 15,896,128 | 12,958,247 |
Operating expenses: | |||
Selling, general and administrative expenses | 24,880,448 | 24,987,475 | 19,530,250 |
Depreciation and amortization | 1,618,791 | 2,279,191 | 1,204,679 |
Other operating income, net | -1,088,346 | -6,182,764 | -852,888 |
Total operating expenses | 25,410,893 | 21,083,902 | 19,882,041 |
Income from operations | 6,864,278 | 5,643,561 | 5,979,666 |
Interest expense | -15,988 | -341,773 | |
Interest income | 273,984 | 977,104 | 2,143,396 |
Other income (expense), net | -133,818 | 1,039,084 | 120,315 |
Income before income tax, equity in an affiliate and noncontrolling interests | 6,988,456 | 7,317,976 | 8,243,377 |
Income tax expense | -323,911 | ||
Income before equity in an affiliate and noncontrolling interests | 6,988,456 | 7,317,976 | 7,919,466 |
Loss from equity in an affiliate | -4,876,523 | -5,491,484 | |
Gain on disposal of the equity interest of an affiliate | 1,330,165 | ||
Income from continuing operations | 3,442,098 | 1,826,492 | 7,919,466 |
Loss on discontinued operations, net of tax of nil | -19,792,358 | -28,436,783 | -30,351,616 |
Net loss | -16,350,260 | -26,610,291 | -22,432,150 |
Accretion of interest to redeemable noncontrolling interests | 3,836 | 102,958 | 20,416 |
Net loss attributable to redeemable noncontrolling interests | -3,836 | -102,958 | -20,416 |
Net loss attributable to Mecox Lane Limited shareholders | -16,350,260 | -26,610,291 | -22,432,150 |
Other comprehensive income (loss), net of tax of nil: | |||
Change in cumulative foreign currency translation adjustment | -472,357 | 1,408,045 | 91,198 |
Comprehensive loss | -16,822,617 | -25,202,246 | -22,340,952 |
Comprehensive loss attributable to Mecox Lane Limited shareholders | ($16,822,617) | ($25,202,246) | ($22,340,952) |
Net income per share attributable to Mecox Lane-Basic and diluted | |||
Income from continuing operations | $0.01 | $0.01 | $0.02 |
Loss on discontinued operations | ($0.04) | ($0.07) | ($0.08) |
Net loss | ($0.03) | ($0.06) | ($0.06) |
Net income per ADS attributable to Mecox Lane-Basic and diluted | |||
Income from continuing operations | $0.27 | $0.15 | $0.69 |
Loss on discontinued operations | ($1.53) | ($2.38) | ($2.63) |
Net loss | ($1.26) | ($2.23) | ($1.94) |
Weighted average ordinary shares used in per share calculation | |||
Basic (in shares) | 452,758,464 | 418,347,060 | 404,247,016 |
Diluted (in shares) | 452,758,464 | 422,251,663 | 404,387,223 |
Weighted average ADS used in per share calculation | |||
Basic (in shares) | 12,935,956 | 11,952,773 | 11,549,914 |
Diluted (in shares) | 12,935,956 | 12,064,333 | 11,553,921 |
CONSOLIDATED_STATEMENTS_OF_COM1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) (USD $) | 12 Months Ended | ||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Feb. 01, 2013 | Jan. 31, 2013 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||
Tax effect of loss on discontinued operations | $0 | $0 | $0 | ||
Tax effect of other comprehensive income (loss) | $0 | $0 | $0 | ||
American Depositary Shares ("ADSs") to ordinary shares ("Shares") ratio | 0.0286 | 0.1429 |
CONSOLIDATED_STATEMENTS_OF_EQU
CONSOLIDATED STATEMENTS OF EQUITY (USD $) | Ordinary shares | Treasury stock | Additional paid-in capital | Accumulated deficit | Statutory reserve | Accumulated other comprehensive income | Noncontrolling interest | Total |
Balance at Dec. 31, 2011 | $40,519 | $163,806,117 | ($60,415,020) | $967,886 | $6,201,555 | $100,000 | $110,701,057 | |
Balance (in shares) at Dec. 31, 2011 | 405,192,227 | |||||||
Increase (Decrease) In Stockholders' Equity | ||||||||
Net loss attributable to Mecox Lane Limited shareholders | -22,432,150 | -22,432,150 | ||||||
Release of statutory reserve upon disposal of A&A business | 36,147 | -36,147 | ||||||
Repurchase of ordinary shares | -572,168 | -572,168 | ||||||
Repurchase of ordinary shares (in shares) | -4,937,247 | |||||||
Vesting of restricted shares | 348 | -348 | ||||||
Vesting of restricted shares (in shares) | 3,477,129 | |||||||
Exercise of stock options | 6 | 9,325 | 9,331 | |||||
Exercise of stock options (in shares) | 58,317 | |||||||
Share-based compensation | 2,119,171 | 2,119,171 | ||||||
Foreign currency translation adjustments | 91,198 | 91,198 | ||||||
Balance at Dec. 31, 2012 | 40,873 | -572,168 | 165,934,265 | -82,811,023 | 931,739 | 6,292,753 | 100,000 | 89,916,439 |
Balance (in shares) at Dec. 31, 2012 | 408,727,673 | -4,937,247 | ||||||
Increase (Decrease) In Stockholders' Equity | ||||||||
Net loss attributable to Mecox Lane Limited shareholders | -26,610,291 | -26,610,291 | ||||||
Release of statutory reserve upon disposal of A&A business | -11,760 | 11,760 | ||||||
Repurchase of ordinary shares | -701,196 | -701,196 | ||||||
Repurchase of ordinary shares (in shares) | -6,118,658 | |||||||
Retirement of treasury stock | -1,106 | 1,273,364 | -1,272,258 | |||||
Retirement of treasury stock (in shares) | -11,055,905 | 11,055,905 | ||||||
Vesting of restricted shares | 4,221 | -4,221 | ||||||
Vesting of restricted shares (in shares) | 42,204,511 | |||||||
Share-based compensation | 4,175,756 | 4,175,756 | ||||||
Foreign currency translation adjustments | 1,408,045 | 1,408,045 | ||||||
Balance at Dec. 31, 2013 | 43,988 | 168,833,542 | -109,433,074 | 943,499 | 7,700,798 | 100,000 | 68,188,753 | |
Balance (in shares) at Dec. 31, 2013 | 439,876,279 | 439,876,279 | ||||||
Increase (Decrease) In Stockholders' Equity | ||||||||
Net loss attributable to Mecox Lane Limited shareholders | -16,350,260 | -16,350,260 | ||||||
Release of statutory reserve upon disposal of A&A business | 659,244 | -659,244 | ||||||
Vesting of restricted shares | 1,535 | -1,535 | ||||||
Vesting of restricted shares (in shares) | 15,347,570 | |||||||
Share-based compensation | 985,772 | 985,772 | ||||||
Foreign currency translation adjustments | -472,357 | |||||||
Realization of foreign currency translation adjustments upon disposal of A&A business | 734,057 | 734,057 | ||||||
Foreign currency translation adjustments | -1,206,414 | -1,206,414 | ||||||
Balance at Dec. 31, 2014 | $45,523 | $169,817,779 | ($125,124,090) | $284,255 | $7,228,441 | $100,000 | $52,351,908 | |
Balance (in shares) at Dec. 31, 2014 | 455,223,849 | 455,223,849 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | |||
Net loss | ($16,350,260) | ($26,610,291) | ($22,432,150) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Share-based compensation | 985,772 | 4,175,756 | 2,119,171 |
Depreciation and amortization | 3,330,010 | 5,227,083 | 4,216,264 |
Impairment loss | 4,962,756 | 1,684,668 | |
Loss on disposal of property and equipment | 977,737 | 1,205,853 | 951,933 |
Gain on the contribution of intangible assets to an affiliate | -6,000,000 | ||
Equity in loss of an affiliate | 4,876,523 | 5,491,484 | |
Gain from disposal of equity interest in an affiliate | -1,330,165 | ||
Loss on impairment of A&A business | 9,280,050 | ||
Gain from disposal of A&A business | -1,049,254 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | -263,944 | -230,254 | 543,961 |
Amount due from related parties | 224,479 | -224,479 | 356,090 |
Other receivables | 763,988 | 1,125,938 | 1,782,226 |
Advances to suppliers and prepaid expenses | -55,069 | -516,950 | 843,454 |
Merchandise inventories | 952,080 | 3,580,255 | 3,998,614 |
Other non-current assets | -17,394 | -563,774 | 583,524 |
Accounts payable | -5,087,559 | -2,571,157 | -2,492,648 |
Advances from customers | 266,829 | -1,094,995 | -164,059 |
Accrued expenses | 215,113 | -1,668,397 | -3,580,741 |
Amount due to related parties | -635,770 | 88,292 | 547,478 |
Income tax payable | -17,368 | ||
Other current liabilities | 161,174 | -1,467,010 | -254,229 |
Deferred tax | 323,911 | ||
Change in held for sale net assets of A&A business | 8,133,824 | ||
Net cash provided by (used in) operating activities | 5,378,164 | -15,089,890 | -10,989,901 |
Cash flows from investing activities: | |||
Purchase of property and equipment | -7,007,522 | -4,088,108 | -10,166,624 |
Purchase of intangible assets | -109,616 | -640,506 | |
Proceeds from sale of property and equipment | 209,705 | 843,149 | 246,580 |
Purchase of short-term investments | -6,787,405 | -8,032,489 | -20,682,480 |
Proceeds from sale of short-term investments | 6,133,705 | 28,714,969 | 20,631,910 |
Prepayment for the new equity investment | -5,000,000 | ||
Proceeds from disposal of equity interest in an affiliate | 2,000,000 | ||
Proceeds from disposal of A&A business | 6,134,272 | ||
Net cash provided by (used in) investing activities | 682,755 | 17,327,905 | -15,611,120 |
Cash flows from financing activities | |||
Collection of note receivable from option exercise | 9,325 | ||
Proceeds from short-term borrowings | 18,715,385 | ||
Repayment of short-term borrowings | -1,640,180 | -17,075,205 | |
Repurchase of treasury shares | -701,196 | -572,168 | |
Net cash provided by (used in) financing activities | -1,640,180 | 938,984 | -562,843 |
Effect of exchange rate changes | -501,255 | -731,641 | 357,382 |
Net increase (decrease) in cash and cash equivalents | 3,919,484 | 2,445,358 | -26,806,482 |
Cash and cash equivalents at beginning of year | 14,261,249 | 13,291,063 | 40,097,545 |
Cash held in discontinued business as of December 31,2013 | -1,475,172 | ||
Cash and cash equivalents at end of year | 18,180,733 | 14,261,249 | 13,291,063 |
Supplemental disclosure of cash flow information | |||
Income taxes paid | 41,987 | ||
Non-cash investing and financing activities: | |||
Payables for purchase of property and equipment | $232,558 | $4,180,100 | $4,840,689 |
ORGANIZATION_AND_PRINCIPAL_ACT
ORGANIZATION AND PRINCIPAL ACTIVITIES | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | ||||||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | ||||||||||
1.ORGANIZATION AND PRINCIPAL ACTIVITIES | ||||||||||
Mecox Lane Limited (the “Company”) was incorporated in the Cayman Islands on May 28, 1996. Currently, the Company, its subsidiaries and variable interest entities (“VIEs”) (collectively the “Group”) primarily offer health, beauty and lifestyle products. Historically, the Company is engaged in the design and sale of apparel, accessories, health, beauty and lifestyle products through its online platform and stores. | ||||||||||
In September 2014, the Group disposed its apparel and accessories business (or “A&A business”), (see note 10). Following the disposal, the A&A business was reclassified to discontinued operation for the fiscal year ended December 31, 2014 and the comparative figures for the fiscal years ended December 31, 2012 and 2013 were retrospectively reclassified to discontinued operation. | ||||||||||
As of December 31, 2014, the Company’s significant consolidated subsidiaries and VIEs consist of the following: | ||||||||||
Name | Date of incorporation | Place of | Percentage of | Principal activities | ||||||
incorporation | shareholdings | |||||||||
Mecox Lane (Hong Kong) Limited (“Mecox Lane Hong Kong”) | 17-Mar-10 | Hong Kong | 100 | % | Investment holding | |||||
Shanghai Mecox Lane International Mailorder Co., Ltd. (“Mecox Lane Mailorder”) | 8-Jan-96 | China | 100 | % | Telephonic sales of garments, accessories and other products | |||||
eMecoxLane Co., Ltd (“eMecoxLane”) | 13-Dec-00 | Cayman Islands | 100 | % | Investment holding | |||||
eMecoxLane (Hong Kong) Co., Ltd. (“eMecoxlane Hong Kong”) | 16-Mar-10 | Hong Kong | 100 | % | Investment holding | |||||
Mecox Lane Technology (China) Limited | 9-Jul-10 | China | 100 | % | Sale of garments and accessories | |||||
Mai Wang Information Technology (Shanghai) Co., Ltd. | 8-Sep-08 | China | 100 | % | Software development and information | |||||
Mai Wang Trading (Shanghai) Co. Ltd. (“Mai Wang Trading”) | 5-Apr-00 | China | 100 | % | Wholesale of garments | |||||
Shanghai Xian Ni Garment Co., Ltd. (“Xian Ni”) | 27-Dec-93 | China | 96.70 | % | Investment holding | |||||
Mexi-Care Limited (“Mexi-Care”) | April 24,2012 | Cayman Islands | 100 | % | Investment holding | |||||
Mexi-Care Holdings (Hong Kong) Limited (“Mexi-Care Hong Kong”) | May 25,2012 | Hong Kong | 100 | % | Investment holding | |||||
Mexi-Care E-commerce (Shanghai) Co., Ltd. (“Mexi-Care SH”) | January 11,2013 | China | 100 | % | Online Sales | |||||
Rampage China Limited (“Rampage Cayman”) | 18-Feb-09 | Cayman Islands | 80 | % | Investment holding | |||||
Rampage China (Hong Kong) Limited (“Rampage Hong Kong”) | 30-Mar-09 | Hong Kong | 80 | % | Investment holding | |||||
Rampage Trading (Shanghai) Co., Ltd. | 14-May-10 | China | 80 | % | Wholesale of garments | |||||
Mecox Lane E-commerce (Shanghai) Co., Ltd. (“MecoxLane E-commerce”, previously known as Shanghai Mecox Lane Information Technology Co., Ltd.) | 6-Aug-02 | China | 100 | % | Online sales | |||||
Shanghai Shang Xun Information Technology Co., Ltd. (“Shang Xun”, previously known as Shanghai Wangji Marketing Services Co., Ltd.) * | 14-Sep-06 | China | VIE | Software development and information technology support | ||||||
* Shang Xun was closed in January 2015. | ||||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
(a) Basis of presentation | ||||||
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). | ||||||
(b) Principles of consolidation | ||||||
The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and VIEs for which it is deemed the primary beneficiary. All intercompany transactions, balances and unrealized profit and losses have been eliminated on consolidation. All the assets of its consolidated VIEs can be used to only settle their respective obligations. | ||||||
The Group evaluates the need to consolidate certain VIEs of which the Group is the primary beneficiary. In determining whether the Group is the primary beneficiary, the Group considers if the Group (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIEs including Mecox Lane Shopping, Shang Xun, and Rampage Shopping as of December 31, 2014. The Group historically conducted the A&A business through its VIEs including Mecox Lane Shopping and Rampage Shopping. Mecox Lane Shopping was sold along with A&A business. Rampage Shopping was closed in September 2014. | ||||||
Details of certain key agreements between the Group and its VIEs , are as follows: | ||||||
Power of Attorney:The equity owners of the VIEs irrevocably appointed the Company’s officers to vote on their behalf on all matters, including matters related to the transfer of their respective equity interests in the VIEs and appointment of the VIEs’ chief officer. | ||||||
Share Pledge Agreement:The equity owners pledge their respective equity interests in the VIEs as a guarantee for the payment by the VIEs of technical and consulting services fees under the exclusive technical consulting and services agreements. Each of the above pledges has been registered with the relevant local branch of the State Administration for Industry and Commerce in China. | ||||||
Exclusive Technical Consulting and Services Agreement:The Company provides the VIEs with technical consulting and information services. The Company is the exclusive provider of these services. The initial term of these agreements is 10 years. In consideration for those services, the VIEs agree to pay the Company service fees and pledged their equity interests in the VIEs as collateral for payment. | ||||||
Business Loan Agreement:Loans were granted to the equity owners of the VIEs to provide the funds necessary to capitalize the VIEs. The Company has the option to acquire the VIEs for an amount equal to the loans granted when and if the Chinese government lifts its foreign ownership restrictions relative to Internet content provision and physical store development businesses in the PRC. Upon acquisition, the business loan agreements will be cancelled. | ||||||
The Company participated significantly in the design of these VIEs. Based on these series of agreements, the shareholders of the VIEs grant the Company powers of attorney to exercise all their rights as shareholders of the VIEs, including the right to appoint board members and senior management members. Thus the Company has the ability to effectively control the VIEs. The Company is also able to receive the economic benefits of these VIEs, because its ability to effectively determine the services fees payable by the VIEs to the Company under the exclusive business cooperation agreements and exclusive service agreement, which are part of the contractual arrangements. Therefore, Company has determined that it is the primary beneficiary of the aforementioned entities and has consolidated their respective results from the date of initial involvement or date of establishment. As of December 31, 2013 and 2014, total assets and liabilities of the VIEs are shown in the table below. All the assets of the Company’s consolidated VIEs can be used to only settle their respective obligations. | ||||||
Following the disposal of the apparel and accessories business, the Company does not conduct material business through VIEs in 2014. | ||||||
December 31, 2013 | December 31, 2014 | |||||
$ | $ | |||||
Cash and cash equivalents | 640,394 | 59 | ||||
Accounts receivable | 799,713 | — | ||||
Other receivables | 3,872,947 | — | ||||
Merchandise inventory | 13,602,146 | — | ||||
Property and equipment, net | 2,193,980 | — | ||||
Other non-current assets | 629,865 | — | ||||
Total Assets | 21,739,045 | 59 | ||||
Accounts payable | 4,589,259 | — | ||||
Advances from customers | 1,076,283 | — | ||||
Accrued expenses | 393,313 | — | ||||
Other current liabilities | 1,489,649 | — | ||||
Income taxes payable | 33,545 | — | ||||
Total Liabilities | 7,582,049 | — | ||||
(c) Use of estimates | ||||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s financial statements include useful lives of and impairment for long-lived assets, inventory valuation, valuation allowance of deferred tax assets and share-based compensation. | ||||||
(d) Cash and cash equivalents | ||||||
Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. | ||||||
(e) Short-term investments | ||||||
Short-term investments consist of structured time deposits maintained in a bank having maturities within one year when purchased and having restrictions on withdrawal. The structured time deposits are classified as held-to-maturity debt securities and are carried at amortized cost, which is equivalent to their initial acquisition cost. | ||||||
(f)Merchandise inventories | ||||||
Merchandise inventory is stated at the lower of cost or market. Cost of merchandise inventory is determined using the weighted-average cost method. Adjustments are recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise, which is dependent upon factors such as historical trends with similar merchandise, inventory aging, historical and forecasted consumer demand, and promotional environment. Write downs are recorded in cost of goods sold in the consolidated statements of comprehensive loss. | ||||||
The Company recorded $96,814, $305,281 and $258,078 of inventory write-downs in 2012, 2013 and 2014, respectively. | ||||||
(g) Property and equipment, net | ||||||
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives: | ||||||
Leasehold improvements | Lesser of lease term or estimated useful life of 2 years | |||||
Office equipment | 5 years | |||||
Furniture | 5 years | |||||
Vehicles | 5 years | |||||
Buildings | 25 years | |||||
(h) Prepaid land use right | ||||||
Prepaid land use right represents prepayments for the land where the Group’s logistic center is located. The prepayment is amortized over its lease period of 50 years. | ||||||
(i) Acquired intangible assets | ||||||
Acquired intangible assets consist primarily of trademarks, and computer software carried at cost less accumulated amortization. Amortization for trademarks and computer software is computed using the straight- line method over the license period of five years. | ||||||
(j) Investment in an affiliate | ||||||
An affiliated company is an entity over which the Group has significant influence, but which it does not control. The Group generally considers an ownership interest of 20% or higher to represent significant influence. Investments in affiliates are accounted for by the equity method of accounting. Under this method, the Group’s share of the post-acquisition profits or losses of affiliated companies is recognized in the Statement of comprehensive loss and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. Unrealized gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group’s interest in the affiliated companies; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an affiliated company equals or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company. | ||||||
The Group is required to perform an impairment assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable. An impairment loss is recorded when there has been a loss in value of the investment that is other than temporary. The Group has not recorded any impairment losses in any of the periods reported. | ||||||
The Group has sold its entire equity interest of its affiliate for a consideration of US$2.0 million and recognized a gain on disposal of US$1.3 million in 2014. | ||||||
(k)Impairment of long-lived assets | ||||||
The Group evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When these events occur, the Group assesses the recoverability of these long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the future undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment equal to the difference between the carrying amount and fair value of these assets. The Group recorded impairment loss for its long-lived assets in the amount of nil, $3,695,805 and nil in selling, general and administrative expenses in the consolidated statements of comprehensive loss for the years ended December 31, 2012, 2013 and 2014, respectively. See Note 3 and 4, “Fair value” and “Held-for-sale assets”, for additional discussion on the impairment of long-lived assets. | ||||||
(l) Franchise | ||||||
The Group previously entered into franchise agreements with unaffiliated franchisees to operate under the Group’s brand names. Under these agreements, the Group charges its franchisees nominal upfront fees for the use of the Group’s information system, which is amortized ratably over the franchise agreement period. Further, key aspects of the agreements provide that (i) the Group is required to approve the location of the franchisee stores, (ii) the franchisee stores may only sell to end customers and may not make bulk sales or internet sales, (iii) the Group will provide training of the store supervisor, as appointed by the franchisee, and store personnel, (iv) the Group will provide fashion trend updates and training on new products and (v) the franchisee will bear the cost of items (iii) and (iv). The Group is not involved in the daily operations nor does it participate in the decision making process of the franchisees. | ||||||
The Company offers discounts to all of the franchisees at fixed percentage of retail price of the merchandise sold, and requires all of the franchisees to make full payment prior to the delivery of products. | ||||||
The franchise agreements were disposed along with A&A business. | ||||||
(m)Revenue recognition | ||||||
For the sale of health, beauty and lifestyle products, the Group recognizes revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. | ||||||
The Group utilizes delivery service providers. The Group accepts credit card and debit card payments or cash-on-delivery (“COD”) for products ordered through the independent websites and customer service center. Credit and debit card receivables as of December 31, 2013 and 2014 are immaterial. The Group normally collects credit and debit card receivables within three to four days after the sale. Credit and debit card processing fees are recorded in selling, general and administrative expenses and were immaterial for all periods presented. For COD sales, the delivery service providers are responsible for collecting payment from the customer at the point of delivery. The Group estimates and defers revenue and the related product costs for shipments that are in-transit to the customer. Revenue is recognized at the time the customer receives the products delivered. Amounts collected by delivery service providers but not remitted to the Group are classified as accounts receivable on the consolidated balance sheets. Payments received in advance of delivery are classified as advances from customers. The Company pays a fee to the delivery service provider and records such fee in cost of goods sold. | ||||||
The Group allows its customers to return product within certain days of the sale. The Group estimates sales returns for such sales based on its own historical return experience. | ||||||
Before the disposal of the A&A business, the Group recognizes revenue from the sale of both its own and third-party apparel and accessories through a 3rd party online platform and from the sale of merchandise through its stores. The Group recognizes revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. The Group recognizes revenue from its own retail stores at the point of sale. | ||||||
The Group recognizes revenues from sales of apparel and accessories to franchisees on consignment basis upon sale to the ultimate customer as the consignment agreements allows the franchisee to return 100% of unsold merchandise at any given point of time. | ||||||
Sales to franchisees on a non-consignment basis are recognized as revenue upon delivery. These franchisees are permitted to return product within certain windows of time, generally based upon the seasons of the year, ranging from 5% to 10% of the specific order placed. The Group records maximum return allowed as reduction of revenue based on historical return experience. | ||||||
(n)Shipping and handling costs | ||||||
Revenues include fees charged to customers for shipping and handling. Shipping and handling costs incurred for sale of products and recognized as cost of goods sold was $1,613,634, $2,079,746 and $1,695,937 for the years ended December 31, 2012, 2013 and 2014. | ||||||
(o)Discount coupons, membership points and accruals for customer reward program | ||||||
The Group voluntarily provides discount coupons as sales incentives to selected customers. These coupons can only be utilized in conjunction with a subsequent purchase and are recorded as a reduction of revenues at the time of use. | ||||||
The Group has established a customer loyalty program wherein a customer earns 10 points for each Renminbi (“RMB”) spent. The Group regularly prices certain of its products at a combination of price plus points, the combination of which is solely at the Group’s discretion. Points can only be redeemed in connection with a subsequent purchase and only to the extent the points earned in a current transaction are less than the number of points required to acquire the product(s) in such transaction. Such instances have represented a minor portion of the Group’s sales transactions for all periods presented. Further, the points have no defined monetary value which would permit a customer to obtain a calculated discount per point or any form of free product. The Group accrues a liability for the estimated value of the points earned and expected to be redeemed. The loyalty program was discontinued and related liability was reversed entirely in the year of 2012. | ||||||
In 2013, the Group invited its customers to participate in a customer reward program and the membership was free of charge. Members accumulate membership points for their paid products, which can be redeemed for gifts with shipping cost born by the Group. The estimated costs to provide gifts and shipping are accrued and recorded as accruals for customer reward program as members accumulate points and recognized as sales and marketing expenses in the statements of comprehensive loss. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. The Group did not apply redemption rates to the estimation on reward cost due to the limited history of the customer reward program. The Group will apply a historical redemption rate prospectively in estimating the costs of reward points once there is sufficient historical information and accumulated knowledge on reward point redemption and expiration. As of December 31, 2013 and 2014 the accruals for customer reward program amounted to $428,527 and $675,212 respectively, based on the estimated liabilities under the customer reward program. | ||||||
(p)Expense classification | ||||||
The following table illustrates the primary costs classified in each major expense category: | ||||||
Cost of Goods Sold | Selling, General and Administrative Expenses | |||||
Cost of merchandise sold; | Payroll, bonus and benefit costs for retail and corporate associates; | |||||
Merchandise inventory write-down and shortage; And | Occupancy costs for retail, distribution center and corporate facilities; | |||||
Sample development costs | ||||||
Customer shipping and handling costs. | Advertising and marketing costs; | |||||
Legal, finance, information systems and other corporate overhead costs. | ||||||
(q)Advertising expenses | ||||||
The Group expenses advertising costs as incurred. Total advertising expense was $269,595, $194,337 and $505,698 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||
(s)Foreign currency translation | ||||||
The functional currency of the Company and subsidiaries incorporated outside the mainland China are the United States dollar (“US dollar”). The functional currency of all the other subsidiaries and the VIEs is the RMB. Foreign currency denominated monetary assets and liabilities have been translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies have been translated into the functional currency at the applicable rates of exchange prevailing on the date transactions occurred. Transaction gains and losses are recognized in the consolidated statements of comprehensive loss. | ||||||
The financial statements of the subsidiaries and the VIEs have been translated into US dollars for the purposes of consolidation. Assets and liabilities are translated into US dollar based on the rates of exchange existing on the balance sheet date. Equity accounts are translated at historical exchange rates. Their statements of operations are translated using a weighted average rate for the period. Translation adjustments have been reported as a separate component of other comprehensive income. | ||||||
The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China foreign exchange trading system market. The Group’s cash and cash equivalents denominated in RMB amounted to $13,166,618 and $14,810,563 at December 31, 2013 and 2014, respectively. | ||||||
(t)Income taxes | ||||||
Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. | ||||||
As part of the process of preparing financial statements, the Group is required to estimate its income taxes in each of the jurisdictions in which it operates. The Group accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating loss are carried forwards and credited by applying enacted statutory tax rates applicable to future years when the reported amounts of the asset or liability are expected to be recovered or settled, respectively. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities or the expected timing of their use when they do not relate to a specific asset or liability. The Group recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. | ||||||
(u)Value added taxes | ||||||
The Company’s PRC subsidiaries are subject to value added tax at a rate of 17% on proceeds received from customers, and are entitled to a refund for VAT already paid or borne on the goods purchased by it and utilized in the production of goods that have generated the gross sales proceeds. The VAT balance is recorded either in other current liabilities or other current receivables on the face of consolidated balance sheets. | ||||||
(v) Comprehensive income | ||||||
Comprehensive income includes all changes in equity from transactions and other events and circumstances from non-owner sources. Comprehensive income includes net income and foreign currency translation adjustments. The consolidated financial statements have been adjusted for the retrospective application of the authoritative guidance regarding presentation of comprehensive income, which was adopted by the Company on January 1, 2012. | ||||||
(w) Concentration credit risk | ||||||
Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable, other receivables and advances to suppliers. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. Accounts receivable primarily comprise amounts receivable from product delivery service providers. These amounts are collected from customers by the service providers when products are delivered. The Group conducts a credit evaluation of these service providers and generally requires a small amount of security deposit. With respect to advances to product suppliers, the Group performs on-going credit evaluations of the financial condition of its suppliers. The Group establishes an allowance for doubtful accounts based upon estimates, factors surrounding the credit risk of specific customers and other information. The allowance amounts were immaterial for all periods presented. | ||||||
(x) Fair value of financial instruments | ||||||
Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: | ||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | ||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | ||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Group did not have any material financial instruments that were required to be measured at fair value on a recurring basis as of December 31, 2013 and 2014. The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable, short-term investments, other receivables, accounts payable and other payables are recorded at cost which approximates their fair value due to the short-term nature of these instruments. The Group does not use derivative instruments to manage risks. | ||||||
(y)Share-based compensation | ||||||
The Group’s share-based payment transactions are measured based on the grant-date fair value of the award. The fair value of the award, net of estimated forfeitures, is recognized as compensation expense over the period during which the recipient is required to provide services in exchange for the award, which is generally the vesting period. | ||||||
(z)Operating leases | ||||||
Minimum rental expenses are recognized ratably over the lease term. The Group begins recognizing rental expense upon taking possession of the property. When a lease contains a predetermined fixed escalation of the minimum rent, the Group recognizes the related rent expense on a straight-line basis and records the difference between the recognized rental expense and the amounts payable under the lease as a short-term or long-term deferred rent liability. The Group also receives lease incentives upon entering into certain leases which are recorded on a straight-line basis as a reduction to rent expense over the term of the lease. | ||||||
(aa) Earnings per share | ||||||
Basic earnings per share are computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period. | ||||||
Diluted earnings per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share equivalents are excluded from the computation in income (loss) periods should their effects be anti-dilutive. | ||||||
(ab) Recently issued accounting standards | ||||||
In May 2014, the FASB and International Accounting Standards Board (“IASB”) issued their converged standard on revenue recognition. The objective of the revenue standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. For public companies, the revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Group is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||
On August 27, 2014, the FASB issued ASU 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” The ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The ASU shall be applied at the effective date, and the Group is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||
In November 2014, the FASB issued a new pronouncement which provides guidance on determining whether the host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. The new standard requires management to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. The Group is assessing the effect of adoption of this guidance on the Group’s consolidated financial states. | ||||||
FAIR_VALUE
FAIR VALUE | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
FAIR VALUE | ||||||||||
FAIR VALUE | 3.FAIR VALUE | |||||||||
Assets Measured at Fair Value on a Nonrecurring Basis | ||||||||||
Fair value of held-for-sale assets was determined by the price that would be received to sell the asset in an orderly transaction between market participants. | ||||||||||
Fair Value Measurements at December 31, 2013 Using | ||||||||||
Description | Quoted Prices in | Significant | Significant | Total | ||||||
Active Markets for | Other | Unobservable | Losses | |||||||
Identical Instruments | Observable | Inputs | ||||||||
(Level 1) | Inputs | (Level 3) | ||||||||
(Level 2) | ||||||||||
Long-lived assets held for sale | — | 40,707,051 | — | (3,695,805 | ) | |||||
The Company did not have any asset measured at fair value on a nonrecurring basis as of December 31, 2014. In 2013, held-for-sale assets with a carrying amount of $44,402,856 were written down to their fair value less cost to sell of $40,707,051, resulting in an impairment charge of $3,695,805. | ||||||||||
HELDFORSALE_ASSETS
HELD-FOR-SALE ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
HELD-FOR-SALE ASSETS | |
HELD-FOR-SALE ASSETS | 4.HELD-FOR-SALE ASSETS |
The Group’s logistic center and warehouse in Wujiang, Jiangsu Province (or “Logistic Center”) has completed construction and was put into use in 2012. In October 2013, management of the Company approved a plan to sell its Logistics Center including the prepaid land use right and it was reclassified as held-for-sale assets. The assets were written down to $40,707,051, representing the Company’s estimate of fair value less costs to sell as at December 31, 2013. The fair value was determined based on a memorandum of understanding that the Group entered into on October 31, 2013 with a 3rd party buyer (level 2). As a result, an impairment loss of $3,695,805 was recorded in selling, general and administrative expenses in the consolidated statements of comprehensive loss for the year ended December 31, 2013. | |
In July 2014, the Group changed the plan to sell the Logistic Center due to a shift in operating strategy. As such, the carrying amount of the related assets of the Logistic Center were reclassified from held-for-sale assets to property and equipment of $34,730,641 and prepaid land use right of $5,665,957 respectively, which represented the fair value of the Logistic Center upon reclassification. | |
In June 2014, management decided to discontinue the operations of and dispose the A&A business. As of June 30, 2014, the A&A business met all of the criteria of held for sale as set forth in ASC 360-10-45-9 and therefore was recorded as held-for-sale assets and liabilities at the expected selling price less cost to sell and resulted in an impairment loss of $9,280,050. The disposal of the A&A business resulted in a gain of $1,049,254 eventually, which was recorded in loss on discontinued operations together with the aforementioned impairment loss. For the statement of financial position to be comparable, assets and liabilities related to the A&A business as of December 31, 2013 were reclassified as held-for-sale at carrying amount as set forth in ASC 205-20-45-10. | |
PROPERTY_AND_EQUIPMENT_NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET | ||||||
PROPERTY AND EQUIPMENT, NET | 5.PROPERTY AND EQUIPMENT, NET | |||||
As of December 31, | ||||||
2013 | 2014 | |||||
$ | $ | |||||
Leasehold improvements | 3,162,265 | 1,709,615 | ||||
Office equipment | 3,787,262 | 3,174,732 | ||||
Furniture | 3,764,409 | 3,064,944 | ||||
Vehicles | 311,447 | 310,320 | ||||
Buildings | — | 34,112,577 | ||||
Construction in progress | — | 183,930 | ||||
11,025,383 | 42,556,118 | |||||
Less: accumulated depreciation | (6,999,618 | ) | (5,306,349 | ) | ||
4,025,765 | 37,249,769 | |||||
Depreciation expense was $1,019,934, $1,931,792 and $1,351,748 for the years ended December 31, 2012, 2013 and 2014, respectively for continuing business. | ||||||
The Group’s Logistic Center was reclassified from held-for-sale assets to buildings as of December 31, 2014, see Note 4. | ||||||
The Group has incurred continuous net losses for the three years ended December 31, 2014, the Group believes the continuing loss and the change in the business environment are indicators of possible impairment in its long-lived assets and performed an impairment analysis for each of its individual asset groups as of December 31, 2014. The Group recognized an impairment charge of $3,695,805 for the year ended December 31, 2013. The group did not incur any impairment of long-lived assets as of December 31, 2014. | ||||||
INTANGIBLE_ASSETS_NET
INTANGIBLE ASSETS, NET | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
INTANGIBLE ASSETS, NET | ||||||
INTANGIBLE ASSETS, NET | 6.INTANGIBLE ASSETS, NET | |||||
As of December 31, | ||||||
2013 | 2014 | |||||
$ | $ | |||||
Trademarks | 25,000 | — | ||||
Software | 3,791,270 | 2,900,857 | ||||
Less: accumulated amortization | (2,943,741 | ) | (2,427,438 | ) | ||
872,529 | 473,419 | |||||
Amortization expense was $133,342, $239,640 and $219,154 for the years ended December 31, 2012, 2013 and 2014, respectively for continuing business. The estimated amortization expense is $274,711, $140,417, $39,155, $12,876 and $6,260 for the years ending December 31, 2015, 2016, 2017, 2018 and 2019, respectively. | ||||||
INVESTMENT_IN_AN_AFFILIATE
INVESTMENT IN AN AFFILIATE | 12 Months Ended |
Dec. 31, 2014 | |
INVESTMENT IN AN AFFILIATE | |
INVESTMENT IN AN AFFILIATE | 7.INVESTMENT IN AN AFFILIATE |
In November 2012, the Group entered into a subscription and contribution agreement with Giosis Pte. Ltd (“Giosis”) to form a joint venture, Giosis Mecoxlane Ltd. (“Giosis Mecoxlane”), to operate an online marketplace in China on the M18.com website. The capital contributions by Giosis and the Company to Giosis Mecoxlane were $15 million and $5 million in cash, respectively. The Group also contributed certain non-cash assets, including the domain name of M18.com and certain trademarks and intangible assets. Giosis holds 60% and the Company holds 40% of the outstanding equity interests of Giosis Mecoxlane. The Group does not control the board of Giosis Mecoxlane, and does not have the power to direct the entity’s significant operating activities. Therefore, the transaction was accounted for using the equity method. The Group recorded a gain of $6.0 million in connection with the contribution of intangible assets described above to Giosis Mecoxlane for the year ended December 31, 2013. | |
On December 19, 2014, the Company entered into a share purchase agreement with Oak Investment Partners XII, LP, pursuant to which the Company sold its entire equity interest in Giosis Mecoxlane for a consideration of US$2.0 million. A net gain of $1.3 million was recognized from the disposal and the deal was completed on December 22, 2014. | |
The Group has filed Giosis Mecoxlane’s consolidated financial statements that have been audited by the other auditor as indicated in the Group’s annual report on Form 20-F for the year ended December 31, 2014, as the 20% significant subsidiary test was met for the current year in accordance with Rule 3-09 of SEC Regulation S-X. | |
ACCRUED_EXPENSES
ACCRUED EXPENSES | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES | ||||||
ACCRUED EXPENSES | 8.ACCRUED EXPENSES | |||||
As of December 31, | ||||||
2013 | 2014 | |||||
$ | $ | |||||
Accrued advertising expense | — | 15,417 | ||||
Accrued shipping and handling costs | 445,956 | 159,854 | ||||
Accrued payroll | 1,296,969 | 1,229,196 | ||||
Others | 1,493,510 | 2,036,850 | ||||
3,236,435 | 3,441,317 | |||||
REDEEMABLE_NONCONTROLLING_INTE
REDEEMABLE NONCONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2014 | |
REDEEMABLE NONCONTROLLING INTEREST | |
REDEEMABLE NONCONTROLLING INTEREST | 9.REDEEMABLE NONCONTROLLING INTEREST |
The noncontrolling interests in Rampage Cayman contain contingent put options that give the holder the right to redeem the noncontrolling interests upon the occurrence of future events, such as a change of control in the Group, the Group’s successful initial public offering and certain performance targets for which the redemption amount is determined at the time of exercise of the put options based on the Group’s net income for the most recent fiscal year. Upon the Group’s initial public offering, the holder signed an agreement not to exercise the put option until at least October 26, 2011. The Group has accreted changes in the redemption value of the noncontrolling interest over the period from initial public offering date to the earliest redemption date using interest method. As of December 31, 2013 and 2014, the redemption value of the redeemable noncontrolling interests was nil and nil, respectively, because the Group and Rampage Cayman suffered losses in 2013 and 2014, respectively. | |
DISCONTINUED_OPERATION
DISCONTINUED OPERATION | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
DISCONTINUED OPERATION | ||||||||
DISCONTINUED OPERATION | 10.DISCONTINUED OPERATION | |||||||
On August 8, 2014, the Company entered into a share purchase agreement to the sale of Mixblu Limited and its subsidiaries and certain assets to Fast Fashion China Limited, a company controlled by the former chief executive officer of the Group. | ||||||||
Pursuant to the agreement, the adjusted consideration was approximately $6.1 million and the closing date was September 18, 2014. The A&A business shall have been deemed transferred to Fast Fashion China Limited as of July 31, 2014 including without limitation any changes in assets and liabilities and results of operations. | ||||||||
As of December 31, 2014, the Company has received all the consideration. In accordance with ASC 360-10, the result of A&A business have been excluded from continuing operations and reported as discontinued operation for the current and prior periods. | ||||||||
Accordingly, the discontinued operations were retrospectively reflected for all the years presented in the consolidated statements of comprehensive loss. The following shows summarized operating results reported as discontinued operations for the years ended December 31, 2012, 2013 and 2014: | ||||||||
2012 | 2013 | 2014 | ||||||
$ | $ | $ | ||||||
Net Revenues | 112,996,103 | 44,799,542 | 22,060,470 | |||||
Cost of goods sold (excluding depreciation and amortization) | 84,508,624 | 36,797,383 | 17,662,870 | |||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 56,779,270 | 33,792,763 | 14,261,642 | |||||
Depreciation and amortization | 3,012,283 | 2,947,892 | 1,711,219 | |||||
Other operating income, net | (952,458 | ) | (301,713 | ) | — | |||
Total operating expenses | 58,839,095 | 36,438,942 | 15,972,861 | |||||
Other income, net | — | — | 13,699 | |||||
Impairment on the discontinued operation | — | — | (9,280,050 | ) | ||||
Gain on disposal of the discontinued operation | — | — | 1,049,254 | |||||
Net loss from discontinued operation | (30,351,616 | ) | (28,436,783 | ) | (19,792,358 | ) | ||
The following table shows the major classes of assets and liabilities of the discontinued business as of December 31, 2013 and the date of the disposal, respectively: | ||||||||
2013.12.31 | 2014.7.31 | |||||||
$ | $ | |||||||
Cash and cash equivalents | 1,475,172 | 1,051,649 | ||||||
Accounts receivable | 799,713 | 859,542 | ||||||
Other receivables | 1,807,509 | 2,128,646 | ||||||
Advances to suppliers and prepaid expenses | 1,216,689 | 556,720 | ||||||
Merchandise inventories | 20,536,041 | 14,046,603 | ||||||
Property and equipment, net | 2,193,195 | 2,484,505 | ||||||
Intangible assets, net | 44,520 | 30,161 | ||||||
Other non-current assets | 585,345 | — | ||||||
Accounts payable | (4,497,593 | ) | (4,372,876 | ) | ||||
Advances from customers | (1,076,283 | ) | (791,392 | ) | ||||
Accrued expenses | (393,313 | ) | (380,307 | ) | ||||
Other current liabilities | (1,489,649 | ) | (1,215,022 | ) | ||||
Income taxes payable | (33,545 | ) | (33,161 | ) | ||||
Net assets | 21,167,801 | 14,365,068 | ||||||
SHAREBASED_COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
SHARE-BASED COMPENSATION | 11. SHARE-BASED COMPENSATION | ||||||||||
2006 Stock Option Plan | |||||||||||
In December 2006, the Board of Directors of the Group approved the 2006 Incentive Stock Option Plan (the “2006 Plan”). Options under the 2006 Plan may be granted for periods of up to ten years and at prices as determined by the Board of Directors. The vesting period of the options vary from nil to four years from the date of grant. The Board of Directors authorized a total of 63,456,083 ordinary shares for issuance under the 2006 Plan. As of December 31, 2014, no options to purchase ordinary shares were outstanding or available for future grant. | |||||||||||
2008 Stock Option Plan | |||||||||||
In January 2008, the Board of Directors of the Group approved the 2008 Stock Option Plan (the “2008 Plan”). Options under the 2008 Plan may be granted for periods of up to ten years and at prices as determined by the Board of Directors. The Board of directors authorized a total of 57,370,401 of ordinary shares for issuance under the 2008 Plan. As of December 31, 2014, no options to purchase ordinary shares were available for future grant, and no restricted shares and share options were outstanding. | |||||||||||
2011 Share Incentive Plan | |||||||||||
In October 2010, the Board of Directors of the Group approved the 2011 Share Incentive Plan (the “2011 Plan”), under which a maximum of 25,358,047 awards may be issued in the form of restricted shares, options, or share appreciation rights. As of December 31, 2014, no restricted shares and share options were outstanding under the 2011 Plan. | |||||||||||
2012 Share Incentive Plan | |||||||||||
In May 2012, the Board of Directors of the Group approved the 2012 Share Incentive Plan (the “2012 Plan”), under which a maximum of 26,155,837 awards may be issued in the form of restricted shares, options, or share appreciation rights. As of December 31, 2014, no restricted shares, options or share appreciation rights had been granted under the 2012 Plan. | |||||||||||
Option modification | |||||||||||
In December 2011, the Board of Directors approved an option modification to reduce the exercise price of 76,110,625 options to the then fair market value of the Company’s ordinary shares underlying such options. All other terms of the share options granted under the 2006 and 2008 stock option plan remain unchanged. In addition to the exercise price reduction, the modified options granted under the 2011 Plan contain performance conditions which may accelerate vesting if the Company’s Non-GAAP net income, as defined, reaches certain targets. The modification resulted in incremental compensation cost of $1,955,559, of which $194,146, $11,581 and $267,362 were recorded during the years ended December 31, 2012, 2013 and 2014, respectively. | |||||||||||
Share option exchange program | |||||||||||
On January 30, 2013, the Board of Directors approved a share option exchange program (the “Share Option Exchange Program”) that offered the Group’s eligible directors and employees the right to exchange vested outstanding share options under the “2006 Plan”, the “2008 Plan” and the “2011 Plan” for the Group’s restricted shares at certain applicable ratio. These replacement restricted shares are subject to a vesting schedule of one year after the grant date. In 2013, a total of 36 directors and employees tendered an aggregate of 64,850,654 options to exchange for an aggregate of 54,888,589 restricted shares. The modification resulted in incremental compensation cost of $2,937,272, of which $2,495,861 and $441,411 was recorded in the years ended December 31, 2013 and 2014, respectively. | |||||||||||
The fair value of each option grant, as well as the fair value of option immediately before and after the aforementioned modification, is estimated on the date of grant or modification using the Black-Scholes option pricing model using the assumptions noted below. Expected volatilities are based on the average volatility of the Company with the time period commensurate with the expected time period of the options. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the yield of the Chinese Sovereign Bond denominated in US dollar. | |||||||||||
2011 | 2013 | ||||||||||
Average risk-free rate of return | 0.36% – 2.27% | 0.18% – 0.81% | |||||||||
Expected term | 2.70-5.88 years | 0.54-4.75 years | |||||||||
Volatility rate | 51.37% - 63.63% | 85.62% - 112.83% | |||||||||
Expected dividend yield | — | — | |||||||||
There were no options granted for the year ended December 31, 2014. | |||||||||||
A summary of the stock option activity is as follows: | |||||||||||
Weighted- | Weighted- | Aggregate | |||||||||
average | average | intrinsic | |||||||||
exercise | remaining | ||||||||||
Shares | price | contractual life | value | ||||||||
Options outstanding at January 1, 2014 | 2,200,000 | $ | 0.16 | ||||||||
Forfeited | (2,200,000 | ) | $ | 0.16 | |||||||
Options outstanding at December 31, 2014 | — | — | — | — | |||||||
Options vested or expected to vest | — | — | — | — | |||||||
Options exercisable | — | — | — | — | |||||||
There were no options granted during the years ended December 31, 2013 and 2014. | |||||||||||
As of December 31, 2014, there was no unrecognized compensation cost related to non-vested options. | |||||||||||
The total intrinsic value of options exercised for the years ended December 31, 2012, 2013 and 2014 was $1,370, nil and nil, respectively. | |||||||||||
Restricted shares | |||||||||||
On October 4, 2011, the Company granted 11,678,047 restricted shares to employees under the “2011 Plan”. The restricted shares have a vesting period of three years with the first one-third vesting on the first anniversary from grant date and the remaining two-thirds vesting ratably over eight quarters. Vesting may be accelerated if the Company’s Non-GAAP net income, as defined, reaches certain targets for 2012 or 2013. The Group does not believe vesting under the performance condition is probable and has recognized compensation expense over the three year vesting period. The grant date fair value of the restricted shares was $2,012,795. The fair value of restricted shares granted and vested during the years ended December 2012, 2013 and 2014 was $582,651 $325,077 and $278,522, respectively. As of December 31, 2014, no above restricted shares were outstanding. | |||||||||||
On February 2, 2013, a total of 31 directors and employees tendered an aggregate of 42,125,654 options in exchange for an aggregate of 39,299,154 restricted shares according to the Share Option Exchange Program. The grant date fair value of the restricted shares was $2,763,298. The fair value of restricted shares granted and vested during the year ended December 31, 2013 and 2014 was $2,533,023 and $376,781, respectively. As of December 31, 2014, no above shares were outstanding. | |||||||||||
On February 22, 2013, a total of 5 employees tendered an aggregate of 5,725,000 options in exchange for an aggregate of 4,446,000 restricted shares according to the Share Option Exchange Program. However if these employees’ services are terminated, the unvested Restricted Shares shall become 100% vested upon such termination according to the agreements. The grant date fair value of the restricted shares was $425,358. The fair value of restricted shares granted and vested during the year ended December 2013 was $425,358. As of December 31, 2013, all these five employees were terminated, and accordingly all restricted shares were vested in 2013. As of December 31, 2014, no above shares were outstanding. | |||||||||||
On March 1, 2013, the Company granted 630,000 restricted shares to non-executive directors under the 2011 Share Incentive Plan. The restricted shares have a vesting period of three years with the first one-third vesting on the first anniversary from grant date and the remaining two-thirds vesting ratably over eight quarters. The grant date fair value of the restricted shares was $43,029. During 2014, 393,750 shares of above were forfeited due to the resignation of all above directors. The fair value of restricted shares granted and vested during the years ended December 31, 2013 and 2014 was $11,952 and $4,183, respectively. As of December 31, 2014, no above shares were outstanding. | |||||||||||
On May 11, 2013, a director tendered an aggregate of 17,000,000 options in exchange for an aggregate of 11,143,435 restricted shares according to the Share Option Exchange Program. The grant date fair value of the restricted shares was $848,881. The fair value of restricted shares granted and vested during the years ended December 31, 2013 and 2014 was $565,921 and $282,960, respectively. As of December 31, 2014, no above shares were outstanding. | |||||||||||
A summary of the restricted shares is as follows: | |||||||||||
Shares | Weighted- | ||||||||||
average | |||||||||||
fair | |||||||||||
value | |||||||||||
Restricted shares outstanding at January 1, 2014 | 16,211,058 | $ | 0.1 | ||||||||
Granted | — | — | |||||||||
Forfeited | (863,488 | ) | $ | 0.13 | |||||||
Vested | (15,347,570 | ) | $ | 0.1 | |||||||
Restricted shares outstanding at December 31, 2014 | — | — | |||||||||
For the years ended December 31, 2012, 2013 and 2014, the Group recorded share-based compensation expense of $2,119,171, $4,175,756 and $985,772 respectively. | |||||||||||
EMPLOYEE_RETIREMENT_BENEFIT
EMPLOYEE RETIREMENT BENEFIT | 12 Months Ended |
Dec. 31, 2014 | |
EMPLOYEE RETIREMENT BENEFIT | |
EMPLOYEE RETIREMENT BENEFIT | 12. EMPLOYEE RETIREMENT BENEFIT |
Full time employees in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to make contributions based on certain percentages of the employees’ basic salaries. Other than the contribution, there is no further obligation under these plans. The total contribution for such employee benefits was $2,155,356, $2,121,411 and $2,754,151 for the years ended December 31, 2012, 2013 and 2014, respectively. | |
DISTRIBUTION_OF_PROFIT
DISTRIBUTION OF PROFIT | 12 Months Ended |
Dec. 31, 2014 | |
DISTRIBUTION OF PROFIT | |
DISTRIBUTION OF PROFIT | 13. DISTRIBUTION OF PROFIT |
Pursuant to laws applicable to entities incorporated in the PRC, the PRC subsidiaries are prohibited from distributing their statutory capital and are required to appropriate from PRC GAAP profit after tax to other non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. The general reserve fund requires annual appropriation at 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the appropriation reaches 50% of statutory capital; the appropriation to the other funds are at the discretion of the subsidiaries. If the subsidiaries have cumulative losses, the general reserve is not required until the PRC subsidiaries have made up the losses. As of December 31, 2013 and 2014, majority of the Company’s PRC subsidiaries have reserve funds less than 50% of their statutory capital as they have incurred cumulative losses from earlier periods. | |
The general reserve is used to offset future extraordinary losses. A subsidiary may, upon a resolution passed by the shareholders, convert the general reserve into capital. The staff welfare and bonus reserve is used for the collective welfare of the employees of the subsidiary. The enterprise expansion reserve is for the expansion of the subsidiary’s operations and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of the retained earnings determined in accordance with Chinese law, and are not distributable as cash dividends to the Group. | |
Relevant PRC statutory laws and regulations permit payment of dividends by the Company’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. As a result of these PRC laws and regulations, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets either in the form of dividends, loans or advances. The Company’s PRC subsidiaries had total statutory capital of $84,113,331 and $82,483,386 at December 31, 2013 and 2014, respectively. The balance of the general reserve fund at December 31, 2013 and 2014 was $943,499 and $284,255, respectively, and total after-tax profits appropriated for the statutory reserve were $11,760 and nil for the years ended December 31, 2013 and 2014, respectively. The total restricted amount was $85,056,830 and $82,767,641 at December 31, 2013 and 2014, respectively. | |
INCOME_TAX_EXPENSE
INCOME TAX EXPENSE | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAX EXPENSE | ||||||||
INCOME TAX EXPENSE | 14. INCOME TAX EXPENSE | |||||||
Income tax expense is comprised of: | ||||||||
2012 | 2013 | 2014 | ||||||
$ | $ | $ | ||||||
Current tax | — | — | — | |||||
Deferred tax | 323,911 | — | — | |||||
323,911 | — | — | ||||||
Cayman Islands | ||||||||
Under the current laws of the Cayman Islands, Mecox Lane Limited, eMecoxLane, Rampage Cayman and Mexi-Care are not subject to tax on income or capital gains. | ||||||||
Hong Kong | ||||||||
The Group’s Hong Kong subsidiaries, MecoxLane Hong Kong, Rampage Hong Kong, eMecoxLane Hong Kong, and Mexi-Care Hong Kong are subject to a profit tax at the rate of 16.5% on assessable profit determined under relevant Hong Kong tax regulations. | ||||||||
PRC | ||||||||
The income tax rate of 2012 for Mai Wang Information was 12.5% due to the “qualified software company” status and 25% for 2013 and onwards under the Tax Law. | ||||||||
The other subsidiaries and VIEs are subject to the uniform tax rate of 25% for all periods presented. | ||||||||
The Group made its assessment of the level of authority for each tax position (including the potential application of interests and penalties) based on the technical merits, and has measured the unrecognized benefits associated with the tax positions. At December 31, 2013 and 2014, the amount of gross unrecognized tax benefits was nil. The Group does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Group will classify interest and penalties related to income tax matters, if any, in income tax expense. | ||||||||
According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100,000 ($16,400) is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is 10 years. There is no statute of limitations in the case of tax evasion. The Group’s PRC subsidiaries are therefore subject to examination by the PRC tax authorities from 2008 through 2014 on non-transfer pricing matters, and from 2003 through 2014 on transfer pricing matters. | ||||||||
The principal components of deferred tax assets are as follows: | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
$ | $ | |||||||
Deferred tax assets: | ||||||||
Inventory write-downs | 3,565,291 | 26,176 | ||||||
Accrued expenses | 670,989 | 646,923 | ||||||
Others | 52,005 | 47,489 | ||||||
Total current deferred tax assets | 4,288,285 | 720,588 | ||||||
Less: valuation allowance | (4,288,285 | ) | (720,588 | ) | ||||
Net current deferred tax assets | — | — | ||||||
Net operating loss carry-forwards | 11,263,697 | 13,630,512 | ||||||
Basis difference in long-lived assets | 1,020,262 | 566,242 | ||||||
Total non-current deferred tax assets | 12,283,959 | 14,196,754 | ||||||
Less: valuation allowance | (12,283,959 | ) | (14,196,754 | ) | ||||
Net non-current deferred tax assets | — | — | ||||||
Total deferred tax assets | — | — | ||||||
The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry-forward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry-forward periods provided for in the tax law. The Group has considered the following possible sources of taxable income when assessing the realization of deferred tax assets: | ||||||||
· | Tax planning strategies; | |||||||
· | Future reversals of existing taxable temporary differences; | |||||||
· | Further taxable income exclusive of reversing temporary differences and carry-forwards; | |||||||
As of December 31, 2014, the Group’s PRC subsidiaries had net operating loss carry forwards of $13,630,512, of which $42,657, $4,376,012, $3,430,645, $3,136,263 and $2,644,935 will expire in 2015, 2016, 2017, 2018 and 2019, respectively. The Group provided a full valuation allowance as it is not more likely than not that the net operating losses can be utilized before expiration. As a result, the Group has recognized valuation allowance of $16,572,244 and $14,917,342 as of December 31, 2013 and 2014, respectively. | ||||||||
Reconciliation between the income tax expense computed by applying the PRC statutory corporate income tax rate to income before income taxes and the actual income tax expense is as follows: | ||||||||
2012 | 2013 | 2014 | ||||||
PRC corporate income tax | 25.0 | % | 25.0 | % | 25.0 | % | ||
Expense not deductible for tax purposes | (0.8 | )% | (1.3 | )% | (21.9 | )% | ||
Effect of change in valuation allowance | (22.2 | )% | (20.0 | )% | 8.0 | % | ||
Effect of difference in reversal rate | 0.0 | % | 0.6 | % | 0.0 | % | ||
Effect of different tax rate of group entities in other jurisdiction | (4.5 | )% | (4.3 | )% | (11.1 | )% | ||
Effect of prior year true-up | 1.0 | % | 0.0 | % | 0.0 | % | ||
(1.5 | )% | 0.0 | % | 0.0 | % | |||
INCOME_LOSS_PER_SHARE
INCOME (LOSS) PER SHARE | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
INCOME (LOSS) PER SHARE | |||||||||||
INCOME (LOSS) PER SHARE | 15. INCOME (LOSS) PER SHARE | ||||||||||
Basic and diluted net income (loss) attributable to the Company’s ordinary shareholders per share have been calculated for the years ended December 31, 2012, 2013 and 2014 as follows: | |||||||||||
2012 | 2013 | 2014 | |||||||||
Numerator: | |||||||||||
Net income from continuing operations | $ | 7,919,466 | $ | 1,826,492 | $ | 3,442,098 | |||||
Net loss on discontinued operations | $ | (30,351,616 | ) | $ | (28,436,783 | ) | $ | (19,792,358 | ) | ||
Net loss available to Mecox Lane Limited shareholders | $ | (22,432,150 | ) | $ | (26,610,291 | ) | $ | (16,350,260 | ) | ||
Denominator: | |||||||||||
Weighted average ordinary shares—basic | 404,247,016 | 418,347,060 | 452,758,464 | ||||||||
Dilutive effect of share options | 140,207 | 3,904,603 | — | ||||||||
Weighted average ordinary shares-diluted | 404,387,223 | 422,251,663 | 452,758,464 | ||||||||
Net income per share attributable to Mecox Lane-basic | |||||||||||
Income from continuing operations | 0.02 | 0.01 | 0.01 | ||||||||
Loss on discontinued operations | (0.08 | ) | (0.07 | ) | (0.04 | ) | |||||
Net income per share attributable to Mecox Lane-diluted | |||||||||||
Income from continuing operations | 0.02 | 0.01 | 0.01 | ||||||||
Loss on discontinued operations | (0.08 | ) | (0.07 | ) | (0.04 | ) | |||||
For the years ended December 31, 2012, 2013 and 2014, the Group had 72,747,294, 2,200,000 and nil share options, and 6,730,575, 16,211,058 and nil restricted shares, respectively, which could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted loss per share as their effects would have been anti-dilutive. | |||||||||||
SEGMENT_REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2014 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | 16. SEGMENT REPORTING |
The Group’s chief operating decision-maker (“CODM”) has been identified as the Chief Executive Officer, who reviews the operating results of various product distribution channels to make decisions about allocating resources and assessing performance for the entire Group. Prior to the disposal of A&A business in 2014, the Group had four reporting segments, which were e-commerce channel, call center, company-owned stores and franchised stores. Upon the disposal of A&A business, management no longer reviews operating results by channel, therefore, as of December 31, 2014, the Group had only one segment. As the Group’s long-lived assets and revenue are substantially located in and derived from the PRC, no geographical segments are presented. | |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2014 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 17. RELATED PARTY TRANSACTIONS |
Cnshangquan purchased 290,564,842 ordinary shares of the Company from former shareholders, representing approximately 63.7% equity interests in the Company for a total cash consideration of approximately $39.0 million on May 21, 2014. Prior to the completion of the acquisition by Cnshangquan E-Commerce Co., Ltd (“Cnshangquan”) as of May 21, 2014, for the years ended December 31, 2012, 2013 and period ended May 21, 2014, the Group recorded advertising expense of $2,524,824, nil and nil, respectively, for services received from Qihoo 360 Technology Co, Ltd. (“Qihoo”), an affiliate of which Neil Shen, the Group’s former chairman of the board was a director. The amount due to Qihoo was nil and nil as of December 31, 2013 and 2014, respectively. | |
For the years ended December 31, 2012, 2013 and period ended May 21, 2014, the Group recorded sales of goods in revenue of $2,818,196, $11,109,843 and $5,455,781 to VIPShop Holdings Limited (“VIPShop”), with which the Group shared the same major shareholder prior to the completion of the acquisition by Cnshangquan on May 21, 2014. The amount due from VIPShop was nil as of December 31, 2013 and 2014. The amount due to VIPShop was $459,623 and nil as of December 31, 2013 and 2014, which represents advanced payments from VIPShop. All above transactions mentioned were presented in discontinued operations for the years ended December 31, 2012, 2013 and 2014 of the consolidated statements of comprehensive loss. | |
For the years ended December 31, 2013 and 2014, the Group recorded sales commission of $716,504 and $92,283 to Giosis Mecoxlane Limited (“Giosis Mecoxlane”) respectively, of which the Company held 40% of the outstanding equity interests prior to its disposal on December 22, 2014. For the years ended December 31, 2013 and period ended December 22, 2014, the Group recorded $227,052 and $156,650 service revenue from Giosis Mecoxlane, respectively. The amount due from Giosis Mecoxlane was $224,479 and $3,797 as of December 31, 2013 and 2014, respectively. The receivables from Giosis Mecoxlane mainly represent amounts receivable of the goods sold through M18.com, which is operated by Giosis Mecoxlane. The amount due to Giosis Mecoxlane was $176,147 and nil as of December 31, 2013 and 2014, respectively, which represents the other payables to Giosis Mecoxlane. | |
For the year ended December 31, 2014, the Group recorded property management fees of $64,945 paid to Jiangsu Hongtu Property Management Ltd. (or “Hongtu Property”) who began managing the Company’s warehouse since August 2014, and made payment of $174,533 to Hongtu Sanpower Hi-tech Ltd (or “Hongtu Hi-tech”)for equipment purchase. Hongtu Property and Hongtu Hi-tech share the same major shareholder with Cnshangquan, which owns 63.7% of the outstanding equity interests of the Company since May 22, 2014. | |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | |||
Dec. 31, 2014 | ||||
COMMITMENTS AND CONTINGENCIES | ||||
COMMITMENTS AND CONTINGENCIES | 18. COMMITMENTS AND CONTINGENCIES | |||
Lease commitment | ||||
The Group has operating lease agreements for offices. Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2014 are as follows: | ||||
Years ending: | $ | |||
2015 | 1,236,695 | |||
2016 | 1,012,109 | |||
2017 | 916,914 | |||
2018 | 916,914 | |||
2019 | 916,914 | |||
After 2019 | 1,833,828 | |||
6,833,374 | ||||
Capital commitment | ||||
As of December 31, 2014, the Group had contracted for capital expenditures of $823,511. Such amounts are expected to be incurred during the year ending December 31, 2015. | ||||
Contingencies | ||||
The Group is subject to periodic legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on its business or financial condition. | ||||
Additional_InformationFinancia
Additional Information-Financial Statement Schedule 1 | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Additional Information-Financial Statement Schedule 1 | ||||||||
Additional Information-Financial Statement Schedule 1 | Additional Information—Financial Statement Schedule 1 | |||||||
MECOX LANE LIMITED | ||||||||
These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America | ||||||||
Financial Information of Parent Company | ||||||||
BALANCE SHEETS | ||||||||
(In U.S. Dollars except share data) | ||||||||
December 31, | ||||||||
2013 | 2014 | |||||||
$ | $ | |||||||
Assets | ||||||||
Current asset: | ||||||||
Cash and cash equivalents | 967,568 | 3,337,249 | ||||||
Total current assets | 967,568 | 3,337,249 | ||||||
Investments in subsidiaries and affiliates | 67,726,713 | 49,797,651 | ||||||
Total assets | 68,694,281 | 53,134,900 | ||||||
Liabilities and equity | ||||||||
Current liabilities: | ||||||||
Accrued expenses and other current liabilities | 605,528 | 882,992 | ||||||
Equity | ||||||||
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized, 439,876,279 and 455,223,849 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 43,988 | 45,523 | ||||||
Additional paid-in capital | 168,833,542 | 169,817,779 | ||||||
Accumulated deficit | (108,489,575 | ) | (124,839,835 | ) | ||||
Accumulated other comprehensive income | 7,700,798 | 7,228,441 | ||||||
Total equity | 68,088,753 | 52,251,908 | ||||||
Total liabilities and equity | 68,694,281 | 53,134,900 | ||||||
Financial Information of Parent Company | ||||||||
STATEMENTS OF COMPREHENSIVE LOSS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014 | ||||||||
(In U.S. Dollars) | ||||||||
2012 | 2013 | 2014 | ||||||
$ | $ | $ | ||||||
Operating expense: | ||||||||
General and administrative expense | (4,064,063 | ) | (6,050,882 | ) | (3,531,358 | ) | ||
Other operating income, net | — | 6,000,000 | 1,330,165 | |||||
Operating loss | (4,064,063 | ) | (50,882 | ) | (2,201,193 | ) | ||
Interest income | 2,007 | 14 | 17 | |||||
Other income, net | 121,342 | 1,068,187 | (133,190 | ) | ||||
Equity in losses of equity method investees | (18,491,436 | ) | (27,627,610 | ) | (14,015,894 | ) | ||
Net loss | (22,432,150 | ) | (26,610,291 | ) | (16,350,260 | ) | ||
Other comprehensive income: | ||||||||
Change in cumulative foreign currency translation adjustment | 91,198 | 1,408,045 | (472,357 | ) | ||||
Comprehensive loss | (22,340,952 | ) | (25,202,246 | ) | (16,822,617 | ) | ||
Financial Information of Parent Company | ||||||||
STATEMENTS OF CASH FLOWS | ||||||||
FOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014 | ||||||||
(In U.S. Dollars) | ||||||||
2012 | 2013 | 2014 | ||||||
$ | $ | $ | ||||||
Cash flows from operating activities: | ||||||||
Net loss | (22,432,150 | ) | (26,610,291 | ) | (16,350,260 | ) | ||
Adjustments to reconcile net income to net cash provided (used in) by operating activities: | ||||||||
Share-based compensation | 2,119,171 | 4,175,756 | 985,772 | |||||
Gain on contribution of intangible assets to an affiliate | — | (6,000,000 | ) | — | ||||
Gain on disposal of affiliate | — | — | (1,330,165 | ) | ||||
Equity in losses of subsidiaries | 18,491,436 | 22,136,126 | 9,139,370 | |||||
Equity in loss of an affiliate | — | 5,491,484 | 4,876,523 | |||||
Changes in operating assets and liabilities: | ||||||||
Amount due from subsidiaries and an affiliate | — | 1,133,903 | 1,780,975 | |||||
Accrued expenses and other current liabilities | 193,901 | (151,777 | ) | 277,464 | ||||
Net cash provided (used in) by operating activities | (1,627,642 | ) | 175,201 | (620,321 | ) | |||
Cash flows from investing activities: | ||||||||
Investing in Joint Venture | (5,000,000 | ) | — | — | ||||
Proceeds from disposal of affiliate | — | — | 2,000,000 | |||||
Proceeds from disposal of apparel and accessories business | — | — | 990,002 | |||||
Investment in subsidiaries and an affiliate | 6,596,536 | — | — | |||||
Net cash provided by investing activities | 1,596,536 | — | 2,990,002 | |||||
Cash flows from financing activities | ||||||||
Repurchase of treasury stock | (572,168 | ) | (701,196 | ) | — | |||
Net cash provided by (used in) financing activities | (572,168 | ) | (701,196 | ) | — | |||
Net increase (decrease) in cash and cash equivalents | (603,274 | ) | (525,995 | ) | 2,369,681 | |||
Cash and cash equivalents at beginning of year | 2,096,837 | 1,493,563 | 967,568 | |||||
Cash and cash equivalents at end of year | 1,493,563 | 967,568 | 3,337,249 | |||||
NOTE TO SCHEDULE 1 | ||||||||
1)Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e) (3) of Regulation S-X, which require condensed financial information as to financial position, changes in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated and unconsolidated subsidiaries together exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. As of December 31, 2014, $82,767,641 was not available for distribution and, as such, the condensed financial information of the Company as of December 31, 2014 and 2013, and for each of the three years in the period ended December 31, 2014 have been presented. | ||||||||
2)The condensed financial statements of Mecox Lane Limited have been prepared using the same accounting policies as set out in the consolidated financial statements except that the equity method has been used to account for investments in subsidiaries and VIEs. Such investment in subsidiaries and VIEs are presented on the balance sheets as investments in subsidiaries and affiliates and the loss of the subsidiaries and VIEs is presented as equity in losses of equity method investees on the statement of comprehensive loss. | ||||||||
3)As of December 31, 2014 and 2013, there were no material contingencies, significant provisions of long-term obligations of the Company, except for those which have been separately disclosed in the consolidated financial statements. | ||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Basis of presentation | (a) Basis of presentation | |||||
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). | ||||||
Principles of consolidation | (b) Principles of consolidation | |||||
The consolidated financial statements include the financial statements of the Company, its majority-owned subsidiaries and VIEs for which it is deemed the primary beneficiary. All intercompany transactions, balances and unrealized profit and losses have been eliminated on consolidation. All the assets of its consolidated VIEs can be used to only settle their respective obligations. | ||||||
The Group evaluates the need to consolidate certain VIEs of which the Group is the primary beneficiary. In determining whether the Group is the primary beneficiary, the Group considers if the Group (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIEs including Mecox Lane Shopping, Shang Xun, and Rampage Shopping as of December 31, 2014. The Group historically conducted the A&A business through its VIEs including Mecox Lane Shopping and Rampage Shopping. Mecox Lane Shopping was sold along with A&A business. Rampage Shopping was closed in September 2014. | ||||||
Details of certain key agreements between the Group and its VIEs , are as follows: | ||||||
Power of Attorney:The equity owners of the VIEs irrevocably appointed the Company’s officers to vote on their behalf on all matters, including matters related to the transfer of their respective equity interests in the VIEs and appointment of the VIEs’ chief officer. | ||||||
Share Pledge Agreement:The equity owners pledge their respective equity interests in the VIEs as a guarantee for the payment by the VIEs of technical and consulting services fees under the exclusive technical consulting and services agreements. Each of the above pledges has been registered with the relevant local branch of the State Administration for Industry and Commerce in China. | ||||||
Exclusive Technical Consulting and Services Agreement:The Company provides the VIEs with technical consulting and information services. The Company is the exclusive provider of these services. The initial term of these agreements is 10 years. In consideration for those services, the VIEs agree to pay the Company service fees and pledged their equity interests in the VIEs as collateral for payment. | ||||||
Business Loan Agreement:Loans were granted to the equity owners of the VIEs to provide the funds necessary to capitalize the VIEs. The Company has the option to acquire the VIEs for an amount equal to the loans granted when and if the Chinese government lifts its foreign ownership restrictions relative to Internet content provision and physical store development businesses in the PRC. Upon acquisition, the business loan agreements will be cancelled. | ||||||
The Company participated significantly in the design of these VIEs. Based on these series of agreements, the shareholders of the VIEs grant the Company powers of attorney to exercise all their rights as shareholders of the VIEs, including the right to appoint board members and senior management members. Thus the Company has the ability to effectively control the VIEs. The Company is also able to receive the economic benefits of these VIEs, because its ability to effectively determine the services fees payable by the VIEs to the Company under the exclusive business cooperation agreements and exclusive service agreement, which are part of the contractual arrangements. Therefore, Company has determined that it is the primary beneficiary of the aforementioned entities and has consolidated their respective results from the date of initial involvement or date of establishment. As of December 31, 2013 and 2014, total assets and liabilities of the VIEs are shown in the table below. All the assets of the Company’s consolidated VIEs can be used to only settle their respective obligations. | ||||||
Following the disposal of the apparel and accessories business, the Company does not conduct material business through VIEs in 2014. | ||||||
December 31, 2013 | December 31, 2014 | |||||
$ | $ | |||||
Cash and cash equivalents | 640,394 | 59 | ||||
Accounts receivable | 799,713 | — | ||||
Other receivables | 3,872,947 | — | ||||
Merchandise inventory | 13,602,146 | — | ||||
Property and equipment, net | 2,193,980 | — | ||||
Other non-current assets | 629,865 | — | ||||
Total Assets | 21,739,045 | 59 | ||||
Accounts payable | 4,589,259 | — | ||||
Advances from customers | 1,076,283 | — | ||||
Accrued expenses | 393,313 | — | ||||
Other current liabilities | 1,489,649 | — | ||||
Income taxes payable | 33,545 | — | ||||
Total Liabilities | 7,582,049 | — | ||||
Use of estimates | (c) Use of estimates | |||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s financial statements include useful lives of and impairment for long-lived assets, inventory valuation, valuation allowance of deferred tax assets and share-based compensation. | ||||||
Cash and cash equivalents | (d) Cash and cash equivalents | |||||
Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. | ||||||
Short-term investments | (e) Short-term investments | |||||
Short-term investments consist of structured time deposits maintained in a bank having maturities within one year when purchased and having restrictions on withdrawal. The structured time deposits are classified as held-to-maturity debt securities and are carried at amortized cost, which is equivalent to their initial acquisition cost. | ||||||
Merchandise inventories | (f)Merchandise inventories | |||||
Merchandise inventory is stated at the lower of cost or market. Cost of merchandise inventory is determined using the weighted-average cost method. Adjustments are recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise, which is dependent upon factors such as historical trends with similar merchandise, inventory aging, historical and forecasted consumer demand, and promotional environment. Write downs are recorded in cost of goods sold in the consolidated statements of comprehensive loss. | ||||||
The Company recorded $96,814, $305,281 and $258,078 of inventory write-downs in 2012, 2013 and 2014, respectively. | ||||||
Property and equipment, net | (g) Property and equipment, net | |||||
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives: | ||||||
Leasehold improvements | Lesser of lease term or estimated useful life of 2 years | |||||
Office equipment | 5 years | |||||
Furniture | 5 years | |||||
Vehicles | 5 years | |||||
Buildings | 25 years | |||||
Prepaid land use right | (h) Prepaid land use right | |||||
Prepaid land use right represents prepayments for the land where the Group’s logistic center is located. The prepayment is amortized over its lease period of 50 years. | ||||||
Acquired intangible assets | (i) Acquired intangible assets | |||||
Acquired intangible assets consist primarily of trademarks, and computer software carried at cost less accumulated amortization. Amortization for trademarks and computer software is computed using the straight- line method over the license period of five years. | ||||||
Investment in an affiliate | (j) Investment in an affiliate | |||||
An affiliated company is an entity over which the Group has significant influence, but which it does not control. The Group generally considers an ownership interest of 20% or higher to represent significant influence. Investments in affiliates are accounted for by the equity method of accounting. Under this method, the Group’s share of the post-acquisition profits or losses of affiliated companies is recognized in the Statement of comprehensive loss and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. Unrealized gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group’s interest in the affiliated companies; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an affiliated company equals or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company. | ||||||
The Group is required to perform an impairment assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable. An impairment loss is recorded when there has been a loss in value of the investment that is other than temporary. The Group has not recorded any impairment losses in any of the periods reported. | ||||||
The Group has sold its entire equity interest of its affiliate for a consideration of US$2.0 million and recognized a gain on disposal of US$1.3 million in 2014. | ||||||
Impairment of long-lived assets | (k)Impairment of long-lived assets | |||||
The Group evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When these events occur, the Group assesses the recoverability of these long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the future undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment equal to the difference between the carrying amount and fair value of these assets. The Group recorded impairment loss for its long-lived assets in the amount of nil, $3,695,805 and nil in selling, general and administrative expenses in the consolidated statements of comprehensive loss for the years ended December 31, 2012, 2013 and 2014, respectively. See Note 3 and 4, “Fair value” and “Held-for-sale assets”, for additional discussion on the impairment of long-lived assets. | ||||||
Franchise | (l) Franchise | |||||
The Group previously entered into franchise agreements with unaffiliated franchisees to operate under the Group’s brand names. Under these agreements, the Group charges its franchisees nominal upfront fees for the use of the Group’s information system, which is amortized ratably over the franchise agreement period. Further, key aspects of the agreements provide that (i) the Group is required to approve the location of the franchisee stores, (ii) the franchisee stores may only sell to end customers and may not make bulk sales or internet sales, (iii) the Group will provide training of the store supervisor, as appointed by the franchisee, and store personnel, (iv) the Group will provide fashion trend updates and training on new products and (v) the franchisee will bear the cost of items (iii) and (iv). The Group is not involved in the daily operations nor does it participate in the decision making process of the franchisees. | ||||||
The Company offers discounts to all of the franchisees at fixed percentage of retail price of the merchandise sold, and requires all of the franchisees to make full payment prior to the delivery of products. | ||||||
The franchise agreements were disposed along with A&A business. | ||||||
Revenue recognition | (m)Revenue recognition | |||||
For the sale of health, beauty and lifestyle products, the Group recognizes revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. | ||||||
The Group utilizes delivery service providers. The Group accepts credit card and debit card payments or cash-on-delivery (“COD”) for products ordered through the independent websites and customer service center. Credit and debit card receivables as of December 31, 2013 and 2014 are immaterial. The Group normally collects credit and debit card receivables within three to four days after the sale. Credit and debit card processing fees are recorded in selling, general and administrative expenses and were immaterial for all periods presented. For COD sales, the delivery service providers are responsible for collecting payment from the customer at the point of delivery. The Group estimates and defers revenue and the related product costs for shipments that are in-transit to the customer. Revenue is recognized at the time the customer receives the products delivered. Amounts collected by delivery service providers but not remitted to the Group are classified as accounts receivable on the consolidated balance sheets. Payments received in advance of delivery are classified as advances from customers. The Company pays a fee to the delivery service provider and records such fee in cost of goods sold. | ||||||
The Group allows its customers to return product within certain days of the sale. The Group estimates sales returns for such sales based on its own historical return experience. | ||||||
Before the disposal of the A&A business, the Group recognizes revenue from the sale of both its own and third-party apparel and accessories through a 3rd party online platform and from the sale of merchandise through its stores. The Group recognizes revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. The Group recognizes revenue from its own retail stores at the point of sale. | ||||||
The Group recognizes revenues from sales of apparel and accessories to franchisees on consignment basis upon sale to the ultimate customer as the consignment agreements allows the franchisee to return 100% of unsold merchandise at any given point of time. | ||||||
Sales to franchisees on a non-consignment basis are recognized as revenue upon delivery. These franchisees are permitted to return product within certain windows of time, generally based upon the seasons of the year, ranging from 5% to 10% of the specific order placed. The Group records maximum return allowed as reduction of revenue based on historical return experience. | ||||||
Shipping and handling costs | (n)Shipping and handling costs | |||||
Revenues include fees charged to customers for shipping and handling. Shipping and handling costs incurred for sale of products and recognized as cost of goods sold was $1,613,634, $2,079,746 and $1,695,937 for the years ended December 31, 2012, 2013 and 2014. | ||||||
Discount coupons, membership points and accruals for customer reward program | (o)Discount coupons, membership points and accruals for customer reward program | |||||
The Group voluntarily provides discount coupons as sales incentives to selected customers. These coupons can only be utilized in conjunction with a subsequent purchase and are recorded as a reduction of revenues at the time of use. | ||||||
The Group has established a customer loyalty program wherein a customer earns 10 points for each Renminbi (“RMB”) spent. The Group regularly prices certain of its products at a combination of price plus points, the combination of which is solely at the Group’s discretion. Points can only be redeemed in connection with a subsequent purchase and only to the extent the points earned in a current transaction are less than the number of points required to acquire the product(s) in such transaction. Such instances have represented a minor portion of the Group’s sales transactions for all periods presented. Further, the points have no defined monetary value which would permit a customer to obtain a calculated discount per point or any form of free product. The Group accrues a liability for the estimated value of the points earned and expected to be redeemed. The loyalty program was discontinued and related liability was reversed entirely in the year of 2012. | ||||||
In 2013, the Group invited its customers to participate in a customer reward program and the membership was free of charge. Members accumulate membership points for their paid products, which can be redeemed for gifts with shipping cost born by the Group. The estimated costs to provide gifts and shipping are accrued and recorded as accruals for customer reward program as members accumulate points and recognized as sales and marketing expenses in the statements of comprehensive loss. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. The Group did not apply redemption rates to the estimation on reward cost due to the limited history of the customer reward program. The Group will apply a historical redemption rate prospectively in estimating the costs of reward points once there is sufficient historical information and accumulated knowledge on reward point redemption and expiration. As of December 31, 2013 and 2014 the accruals for customer reward program amounted to $428,527 and $675,212 respectively, based on the estimated liabilities under the customer reward program. | ||||||
Expense classification | (p)Expense classification | |||||
The following table illustrates the primary costs classified in each major expense category: | ||||||
Cost of Goods Sold | Selling, General and Administrative Expenses | |||||
Cost of merchandise sold; | Payroll, bonus and benefit costs for retail and corporate associates; | |||||
Merchandise inventory write-down and shortage; And | Occupancy costs for retail, distribution center and corporate facilities; | |||||
Sample development costs | ||||||
Customer shipping and handling costs. | Advertising and marketing costs; | |||||
Legal, finance, information systems and other corporate overhead costs. | ||||||
Advertising expenses | (q)Advertising expenses | |||||
The Group expenses advertising costs as incurred. Total advertising expense was $269,595, $194,337 and $505,698 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||
Foreign currency translation | (s)Foreign currency translation | |||||
The functional currency of the Company and subsidiaries incorporated outside the mainland China are the United States dollar (“US dollar”). The functional currency of all the other subsidiaries and the VIEs is the RMB. Foreign currency denominated monetary assets and liabilities have been translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies have been translated into the functional currency at the applicable rates of exchange prevailing on the date transactions occurred. Transaction gains and losses are recognized in the consolidated statements of comprehensive loss. | ||||||
The financial statements of the subsidiaries and the VIEs have been translated into US dollars for the purposes of consolidation. Assets and liabilities are translated into US dollar based on the rates of exchange existing on the balance sheet date. Equity accounts are translated at historical exchange rates. Their statements of operations are translated using a weighted average rate for the period. Translation adjustments have been reported as a separate component of other comprehensive income. | ||||||
The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China foreign exchange trading system market. The Group’s cash and cash equivalents denominated in RMB amounted to $13,166,618 and $14,810,563 at December 31, 2013 and 2014, respectively. | ||||||
Income taxes | (t)Income taxes | |||||
Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. | ||||||
As part of the process of preparing financial statements, the Group is required to estimate its income taxes in each of the jurisdictions in which it operates. The Group accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating loss are carried forwards and credited by applying enacted statutory tax rates applicable to future years when the reported amounts of the asset or liability are expected to be recovered or settled, respectively. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities or the expected timing of their use when they do not relate to a specific asset or liability. The Group recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. | ||||||
Value added taxes | (u)Value added taxes | |||||
The Company’s PRC subsidiaries are subject to value added tax at a rate of 17% on proceeds received from customers, and are entitled to a refund for VAT already paid or borne on the goods purchased by it and utilized in the production of goods that have generated the gross sales proceeds. The VAT balance is recorded either in other current liabilities or other current receivables on the face of consolidated balance sheets. | ||||||
Comprehensive income | (v) Comprehensive income | |||||
Comprehensive income includes all changes in equity from transactions and other events and circumstances from non-owner sources. Comprehensive income includes net income and foreign currency translation adjustments. The consolidated financial statements have been adjusted for the retrospective application of the authoritative guidance regarding presentation of comprehensive income, which was adopted by the Company on January 1, 2012. | ||||||
Concentration credit risk | (w) Concentration credit risk | |||||
Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable, other receivables and advances to suppliers. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. Accounts receivable primarily comprise amounts receivable from product delivery service providers. These amounts are collected from customers by the service providers when products are delivered. The Group conducts a credit evaluation of these service providers and generally requires a small amount of security deposit. With respect to advances to product suppliers, the Group performs on-going credit evaluations of the financial condition of its suppliers. The Group establishes an allowance for doubtful accounts based upon estimates, factors surrounding the credit risk of specific customers and other information. The allowance amounts were immaterial for all periods presented. | ||||||
Fair value of financial instruments | (x) Fair value of financial instruments | |||||
Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: | ||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | ||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | ||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Group did not have any material financial instruments that were required to be measured at fair value on a recurring basis as of December 31, 2013 and 2014. The carrying values of financial instruments, which consist of cash and cash equivalents, accounts receivable, short-term investments, other receivables, accounts payable and other payables are recorded at cost which approximates their fair value due to the short-term nature of these instruments. The Group does not use derivative instruments to manage risks. | ||||||
Share-based compensation | (y)Share-based compensation | |||||
The Group’s share-based payment transactions are measured based on the grant-date fair value of the award. The fair value of the award, net of estimated forfeitures, is recognized as compensation expense over the period during which the recipient is required to provide services in exchange for the award, which is generally the vesting period. | ||||||
Operating leases | (z)Operating leases | |||||
Minimum rental expenses are recognized ratably over the lease term. The Group begins recognizing rental expense upon taking possession of the property. When a lease contains a predetermined fixed escalation of the minimum rent, the Group recognizes the related rent expense on a straight-line basis and records the difference between the recognized rental expense and the amounts payable under the lease as a short-term or long-term deferred rent liability. The Group also receives lease incentives upon entering into certain leases which are recorded on a straight-line basis as a reduction to rent expense over the term of the lease. | ||||||
Earnings per share | (aa) Earnings per share | |||||
Basic earnings per share are computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period. | ||||||
Diluted earnings per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share equivalents are excluded from the computation in income (loss) periods should their effects be anti-dilutive. | ||||||
Recently issued accounting standards | (ab) Recently issued accounting standards | |||||
In May 2014, the FASB and International Accounting Standards Board (“IASB”) issued their converged standard on revenue recognition. The objective of the revenue standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. For public companies, the revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Group is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||
On August 27, 2014, the FASB issued ASU 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” The ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The ASU shall be applied at the effective date, and the Group is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||
In November 2014, the FASB issued a new pronouncement which provides guidance on determining whether the host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. The new standard requires management to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. The Group is assessing the effect of adoption of this guidance on the Group’s consolidated financial states. | ||||||
ORGANIZATION_AND_PRINCIPAL_ACT1
ORGANIZATION AND PRINCIPAL ACTIVITIES (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
ORGANIZATION AND PRINCIPAL ACTIVITIES | ||||||||||
Schedule of significant consolidated subsidiaries and VIEs | As of December 31, 2014, the Company’s significant consolidated subsidiaries and VIEs consist of the following: | |||||||||
Name | Date of incorporation | Place of | Percentage of | Principal activities | ||||||
incorporation | shareholdings | |||||||||
Mecox Lane (Hong Kong) Limited (“Mecox Lane Hong Kong”) | 17-Mar-10 | Hong Kong | 100 | % | Investment holding | |||||
Shanghai Mecox Lane International Mailorder Co., Ltd. (“Mecox Lane Mailorder”) | 8-Jan-96 | China | 100 | % | Telephonic sales of garments, accessories and other products | |||||
eMecoxLane Co., Ltd (“eMecoxLane”) | 13-Dec-00 | Cayman Islands | 100 | % | Investment holding | |||||
eMecoxLane (Hong Kong) Co., Ltd. (“eMecoxlane Hong Kong”) | 16-Mar-10 | Hong Kong | 100 | % | Investment holding | |||||
Mecox Lane Technology (China) Limited | 9-Jul-10 | China | 100 | % | Sale of garments and accessories | |||||
Mai Wang Information Technology (Shanghai) Co., Ltd. | 8-Sep-08 | China | 100 | % | Software development and information | |||||
Mai Wang Trading (Shanghai) Co. Ltd. (“Mai Wang Trading”) | 5-Apr-00 | China | 100 | % | Wholesale of garments | |||||
Shanghai Xian Ni Garment Co., Ltd. (“Xian Ni”) | 27-Dec-93 | China | 96.70 | % | Investment holding | |||||
Mexi-Care Limited (“Mexi-Care”) | April 24,2012 | Cayman Islands | 100 | % | Investment holding | |||||
Mexi-Care Holdings (Hong Kong) Limited (“Mexi-Care Hong Kong”) | May 25,2012 | Hong Kong | 100 | % | Investment holding | |||||
Mexi-Care E-commerce (Shanghai) Co., Ltd. (“Mexi-Care SH”) | January 11,2013 | China | 100 | % | Online Sales | |||||
Rampage China Limited (“Rampage Cayman”) | 18-Feb-09 | Cayman Islands | 80 | % | Investment holding | |||||
Rampage China (Hong Kong) Limited (“Rampage Hong Kong”) | 30-Mar-09 | Hong Kong | 80 | % | Investment holding | |||||
Rampage Trading (Shanghai) Co., Ltd. | 14-May-10 | China | 80 | % | Wholesale of garments | |||||
Mecox Lane E-commerce (Shanghai) Co., Ltd. (“MecoxLane E-commerce”, previously known as Shanghai Mecox Lane Information Technology Co., Ltd.) | 6-Aug-02 | China | 100 | % | Online sales | |||||
Shanghai Shang Xun Information Technology Co., Ltd. (“Shang Xun”, previously known as Shanghai Wangji Marketing Services Co., Ltd.) * | 14-Sep-06 | China | VIE | Software development and information technology support | ||||||
* Shang Xun was closed in January 2015. | ||||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Schedule of assets and liabilities of the Company's consolidated VIEs | ||||||
December 31, 2013 | December 31, 2014 | |||||
$ | $ | |||||
Cash and cash equivalents | 640,394 | 59 | ||||
Accounts receivable | 799,713 | — | ||||
Other receivables | 3,872,947 | — | ||||
Merchandise inventory | 13,602,146 | — | ||||
Property and equipment, net | 2,193,980 | — | ||||
Other non-current assets | 629,865 | — | ||||
Total Assets | 21,739,045 | 59 | ||||
Accounts payable | 4,589,259 | — | ||||
Advances from customers | 1,076,283 | — | ||||
Accrued expenses | 393,313 | — | ||||
Other current liabilities | 1,489,649 | — | ||||
Income taxes payable | 33,545 | — | ||||
Total Liabilities | 7,582,049 | — | ||||
Schedule of estimated useful lives of property and equipment | ||||||
Leasehold improvements | Lesser of lease term or estimated useful life of 2 years | |||||
Office equipment | 5 years | |||||
Furniture | 5 years | |||||
Vehicles | 5 years | |||||
Buildings | 25 years | |||||
Schedule of classification of primary cost in each major expense category | ||||||
Cost of Goods Sold | Selling, General and Administrative Expenses | |||||
Cost of merchandise sold; | Payroll, bonus and benefit costs for retail and corporate associates; | |||||
Merchandise inventory write-down and shortage; And | Occupancy costs for retail, distribution center and corporate facilities; | |||||
Sample development costs | ||||||
Customer shipping and handling costs. | Advertising and marketing costs; | |||||
Legal, finance, information systems and other corporate overhead costs. | ||||||
FAIR_VALUE_Tables
FAIR VALUE (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
FAIR VALUE | ||||||||||
Schedule of fair value of held-for-sale assets determined by the price | ||||||||||
Fair Value Measurements at December 31, 2013 Using | ||||||||||
Description | Quoted Prices in | Significant | Significant | Total | ||||||
Active Markets for | Other | Unobservable | Losses | |||||||
Identical Instruments | Observable | Inputs | ||||||||
(Level 1) | Inputs | (Level 3) | ||||||||
(Level 2) | ||||||||||
Long-lived assets held for sale | — | 40,707,051 | — | (3,695,805 | ) | |||||
PROPERTY_AND_EQUIPMENT_NET_Tab
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET | ||||||
Schedule of property and equipment, net | As of December 31, | |||||
2013 | 2014 | |||||
$ | $ | |||||
Leasehold improvements | 3,162,265 | 1,709,615 | ||||
Office equipment | 3,787,262 | 3,174,732 | ||||
Furniture | 3,764,409 | 3,064,944 | ||||
Vehicles | 311,447 | 310,320 | ||||
Buildings | — | 34,112,577 | ||||
Construction in progress | — | 183,930 | ||||
11,025,383 | 42,556,118 | |||||
Less: accumulated depreciation | (6,999,618 | ) | (5,306,349 | ) | ||
4,025,765 | 37,249,769 | |||||
INTANGIBLE_ASSETS_NET_Tables
INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
INTANGIBLE ASSETS, NET | ||||||
Schedule of intangible assets | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
$ | $ | |||||
Trademarks | 25,000 | — | ||||
Software | 3,791,270 | 2,900,857 | ||||
Less: accumulated amortization | (2,943,741 | ) | (2,427,438 | ) | ||
872,529 | 473,419 | |||||
ACCRUED_EXPENSES_Tables
ACCRUED EXPENSES (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES | ||||||
Schedule of accrued expenses | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
$ | $ | |||||
Accrued advertising expense | — | 15,417 | ||||
Accrued shipping and handling costs | 445,956 | 159,854 | ||||
Accrued payroll | 1,296,969 | 1,229,196 | ||||
Others | 1,493,510 | 2,036,850 | ||||
3,236,435 | 3,441,317 | |||||
DISCONTINUED_OPERATION_Tables
DISCONTINUED OPERATION (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
DISCONTINUED OPERATION | ||||||||
Schedule of summarized operating results and major classes of assets and liabilities of the discontinued operations | 2012 | 2013 | 2014 | |||||
$ | $ | $ | ||||||
Net Revenues | 112,996,103 | 44,799,542 | 22,060,470 | |||||
Cost of goods sold (excluding depreciation and amortization) | 84,508,624 | 36,797,383 | 17,662,870 | |||||
Operating expenses: | ||||||||
Selling, general and administrative expenses | 56,779,270 | 33,792,763 | 14,261,642 | |||||
Depreciation and amortization | 3,012,283 | 2,947,892 | 1,711,219 | |||||
Other operating income, net | (952,458 | ) | (301,713 | ) | — | |||
Total operating expenses | 58,839,095 | 36,438,942 | 15,972,861 | |||||
Other income, net | — | — | 13,699 | |||||
Impairment on the discontinued operation | — | — | (9,280,050 | ) | ||||
Gain on disposal of the discontinued operation | — | — | 1,049,254 | |||||
Net loss from discontinued operation | (30,351,616 | ) | (28,436,783 | ) | (19,792,358 | ) | ||
2013.12.31 | 2014.7.31 | |||||||
$ | $ | |||||||
Cash and cash equivalents | 1,475,172 | 1,051,649 | ||||||
Accounts receivable | 799,713 | 859,542 | ||||||
Other receivables | 1,807,509 | 2,128,646 | ||||||
Advances to suppliers and prepaid expenses | 1,216,689 | 556,720 | ||||||
Merchandise inventories | 20,536,041 | 14,046,603 | ||||||
Property and equipment, net | 2,193,195 | 2,484,505 | ||||||
Intangible assets, net | 44,520 | 30,161 | ||||||
Other non-current assets | 585,345 | — | ||||||
Accounts payable | (4,497,593 | ) | (4,372,876 | ) | ||||
Advances from customers | (1,076,283 | ) | (791,392 | ) | ||||
Accrued expenses | (393,313 | ) | (380,307 | ) | ||||
Other current liabilities | (1,489,649 | ) | (1,215,022 | ) | ||||
Income taxes payable | (33,545 | ) | (33,161 | ) | ||||
Net assets | 21,167,801 | 14,365,068 | ||||||
SHAREBASED_COMPENSATION_Tables
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Schedule of weighted average assumptions under the Black- Scholes option-pricing model for estimation of fair value of options | 2011 | 2013 | |||||||||
Average risk-free rate of return | 0.36% – 2.27% | 0.18% – 0.81% | |||||||||
Expected term | 2.70-5.88 years | 0.54-4.75 years | |||||||||
Volatility rate | 51.37% - 63.63% | 85.62% - 112.83% | |||||||||
Expected dividend yield | — | — | |||||||||
Summary of stock option activity | |||||||||||
Weighted- | Weighted- | Aggregate | |||||||||
average | average | intrinsic | |||||||||
exercise | remaining | ||||||||||
Shares | price | contractual life | value | ||||||||
Options outstanding at January 1, 2014 | 2,200,000 | $ | 0.16 | ||||||||
Forfeited | (2,200,000 | ) | $ | 0.16 | |||||||
Options outstanding at December 31, 2014 | — | — | — | — | |||||||
Options vested or expected to vest | — | — | — | — | |||||||
Options exercisable | — | — | — | — | |||||||
Summary of restricted stock activity | |||||||||||
Shares | Weighted- | ||||||||||
average | |||||||||||
fair | |||||||||||
value | |||||||||||
Restricted shares outstanding at January 1, 2014 | 16,211,058 | $ | 0.1 | ||||||||
Granted | — | — | |||||||||
Forfeited | (863,488 | ) | $ | 0.13 | |||||||
Vested | (15,347,570 | ) | $ | 0.1 | |||||||
Restricted shares outstanding at December 31, 2014 | — | — | |||||||||
INCOME_TAX_EXPENSE_Tables
INCOME TAX EXPENSE (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAX EXPENSE | ||||||||
Schedule of income tax expense | ||||||||
2012 | 2013 | 2014 | ||||||
$ | $ | $ | ||||||
Current tax | — | — | — | |||||
Deferred tax | 323,911 | — | — | |||||
323,911 | — | — | ||||||
Schedule of principal components of deferred tax assets | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
$ | $ | |||||||
Deferred tax assets: | ||||||||
Inventory write-downs | 3,565,291 | 26,176 | ||||||
Accrued expenses | 670,989 | 646,923 | ||||||
Others | 52,005 | 47,489 | ||||||
Total current deferred tax assets | 4,288,285 | 720,588 | ||||||
Less: valuation allowance | (4,288,285 | ) | (720,588 | ) | ||||
Net current deferred tax assets | — | — | ||||||
Net operating loss carry-forwards | 11,263,697 | 13,630,512 | ||||||
Basis difference in long-lived assets | 1,020,262 | 566,242 | ||||||
Total non-current deferred tax assets | 12,283,959 | 14,196,754 | ||||||
Less: valuation allowance | (12,283,959 | ) | (14,196,754 | ) | ||||
Net non-current deferred tax assets | — | — | ||||||
Total deferred tax assets | — | — | ||||||
Schedule of reconciliation between the income tax expense computed by applying the PRC statutory corporate income tax rate to income before income taxes and the actual income tax expense | 2012 | 2013 | 2014 | |||||
PRC corporate income tax | 25.0 | % | 25.0 | % | 25.0 | % | ||
Expense not deductible for tax purposes | (0.8 | )% | (1.3 | )% | (21.9 | )% | ||
Effect of change in valuation allowance | (22.2 | )% | (20.0 | )% | 8.0 | % | ||
Effect of difference in reversal rate | 0.0 | % | 0.6 | % | 0.0 | % | ||
Effect of different tax rate of group entities in other jurisdiction | (4.5 | )% | (4.3 | )% | (11.1 | )% | ||
Effect of prior year true-up | 1.0 | % | 0.0 | % | 0.0 | % | ||
(1.5 | )% | 0.0 | % | 0.0 | % | |||
INCOME_LOSS_PER_SHARE_Tables
INCOME (LOSS) PER SHARE (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
INCOME (LOSS) PER SHARE | |||||||||||
Schedule for calculation of basic and diluted income (loss) attributable to the company's ordinary shareholders per share | 2012 | 2013 | 2014 | ||||||||
Numerator: | |||||||||||
Net income from continuing operations | $ | 7,919,466 | $ | 1,826,492 | $ | 3,442,098 | |||||
Net loss on discontinued operations | $ | (30,351,616 | ) | $ | (28,436,783 | ) | $ | (19,792,358 | ) | ||
Net loss available to Mecox Lane Limited shareholders | $ | (22,432,150 | ) | $ | (26,610,291 | ) | $ | (16,350,260 | ) | ||
Denominator: | |||||||||||
Weighted average ordinary shares—basic | 404,247,016 | 418,347,060 | 452,758,464 | ||||||||
Dilutive effect of share options | 140,207 | 3,904,603 | — | ||||||||
Weighted average ordinary shares-diluted | 404,387,223 | 422,251,663 | 452,758,464 | ||||||||
Net income per share attributable to Mecox Lane-basic | |||||||||||
Income from continuing operations | 0.02 | 0.01 | 0.01 | ||||||||
Loss on discontinued operations | (0.08 | ) | (0.07 | ) | (0.04 | ) | |||||
Net income per share attributable to Mecox Lane-diluted | |||||||||||
Income from continuing operations | 0.02 | 0.01 | 0.01 | ||||||||
Loss on discontinued operations | (0.08 | ) | (0.07 | ) | (0.04 | ) | |||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | |||
Dec. 31, 2014 | ||||
COMMITMENTS AND CONTINGENCIES | ||||
Schedule of future minimum lease payments under non-cancellable operating lease agreements | Years ending: | $ | ||
2015 | 1,236,695 | |||
2016 | 1,012,109 | |||
2017 | 916,914 | |||
2018 | 916,914 | |||
2019 | 916,914 | |||
After 2019 | 1,833,828 | |||
6,833,374 | ||||
ORGANIZATION_AND_PRINCIPAL_ACT2
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) | Dec. 31, 2014 |
Mecox Lane (Hong Kong) Limited | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mecox Lane Mailorder | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
eMecoxLane | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
eMecoxLane (Hong Kong) Co, Ltd. | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mecox Lane Technology (China) Limited | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mai Wang Information | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mai Wang Trading | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Xian Ni | |
Organization and principal activities | |
Percentage of shareholdings | 96.70% |
Mexi-Care | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mexi-Care HK | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Mexi-Care SH | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
Rampage Cayman | |
Organization and principal activities | |
Percentage of shareholdings | 80.00% |
Rampage China (Hong Kong) Limited | |
Organization and principal activities | |
Percentage of shareholdings | 80.00% |
Rampage Trading (Shanghai) Co., Ltd. | |
Organization and principal activities | |
Percentage of shareholdings | 80.00% |
MecoxLane E-commerce | |
Organization and principal activities | |
Percentage of shareholdings | 100.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Total assets and liabilities of VIEs | ||||
Cash and cash equivalents | $18,180,733 | $14,261,249 | $13,291,063 | $40,097,545 |
Accounts receivable | 1,206,780 | 944,447 | ||
Other receivables | 1,588,285 | 2,366,047 | ||
Merchandise inventory | 3,075,386 | 4,048,609 | ||
Property and equipment, net | 37,249,769 | 4,025,765 | ||
Other non-current assets | 257,547 | 240,906 | ||
Accounts payable | 6,242,761 | 13,001,974 | ||
Advances from customers | 2,790,812 | 2,531,312 | ||
Accrued expenses | 3,441,317 | 3,236,435 | ||
Other current liabilities | 2,570,288 | 4,172,225 | ||
Income taxes payable | 1,751,744 | 1,752,631 | ||
Merchandise inventories | ||||
Inventory write-downs | 258,078 | 305,281 | 96,814 | |
VIEs | ||||
Total assets and liabilities of VIEs | ||||
Initial term of technical consulting and information services agreement | 10 years | |||
Cash and cash equivalents | 59 | 640,394 | ||
Accounts receivable | 799,713 | |||
Other receivables | 3,872,947 | |||
Merchandise inventory | 13,602,146 | |||
Property and equipment, net | 2,193,980 | |||
Other non-current assets | 629,865 | |||
Total Assets | 59 | 21,739,045 | ||
Accounts payable | 4,589,259 | |||
Advances from customers | 1,076,283 | |||
Accrued expenses | 393,313 | |||
Other current liabilities | 1,489,649 | |||
Income taxes payable | 33,545 | |||
Total Liabilities | $7,582,049 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 12 Months Ended |
Dec. 31, 2014 | |
Property and equipment, net | |
Useful life of leasehold improvements | 2 years |
Office equipment | |
Property and equipment, net | |
Useful life | 5 years |
Furniture | |
Property and equipment, net | |
Useful life | 5 years |
Vehicles | |
Property and equipment, net | |
Useful life | 5 years |
Buildings | |
Property and equipment, net | |
Useful life | 25 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
INTANGIBLE ASSETS, NET | |||
Consideration for sale of entire equity interest of its affiliate | $2,000,000 | ||
Gain on disposal of the equity interest of an affiliate | 1,330,165 | ||
Impairment of long-lived assets | |||
Impairment loss for long-lived assets included in selling, general and administrative expenses | 3,695,805 | ||
Selling, General and Administrative Expenses | |||
Impairment of long-lived assets | |||
Impairment loss for long-lived assets included in selling, general and administrative expenses | $0 | $3,695,805 | $0 |
Prepaid Land Use Right | |||
INTANGIBLE ASSETS, NET | |||
Amortization period | 50 years | ||
Trademarks | |||
INTANGIBLE ASSETS, NET | |||
Amortization period | 5 years | ||
Computer software | |||
INTANGIBLE ASSETS, NET | |||
Amortization period | 5 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) | 12 Months Ended |
Dec. 31, 2014 | |
Revenue recognition | |
Unsold merchandise that can be returned by the franchisee under the consignment agreement (as a percent) | 100.00% |
Minimum | |
Revenue recognition | |
Credit and debit card receivables collection term after the sale | 3 days |
Unsold merchandise that can be returned by other franchisee, as a percentage of specific order placed | 5.00% |
Maximum | |
Revenue recognition | |
Credit and debit card receivables collection term after the sale | 4 days |
Unsold merchandise that can be returned by other franchisee, as a percentage of specific order placed | 10.00% |
SUMMARY_OF_SIGNIFICANT_ACCOUNT7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Point | ||||
Shipping and handling costs | ||||
Shipping and handling costs incurred | $1,695,937 | $2,079,746 | $1,613,634 | |
Discount coupons, membership points and accruals for customer reward program | ||||
Number of points earned by customers for each Renminbi spent, under customer loyalty program | 10 | |||
Accruals for Customer Reward Program | ||||
Accrued liability for customer loyalty program | 675,212 | 428,527 | ||
Advertising expenses | ||||
Advertising expenses incurred | 505,698 | 194,337 | 269,595 | |
Foreign currency translation | ||||
Cash and cash equivalents denominated in RMB | 18,180,733 | 14,261,249 | 13,291,063 | 40,097,545 |
Value added taxes | ||||
Value added tax rate applicable to PRC subsidiaries (as a percent) | 17.00% | |||
Denominated in RMB | ||||
Foreign currency translation | ||||
Cash and cash equivalents denominated in RMB | $14,810,563 | $13,166,618 |
FAIR_VALUE_Details
FAIR VALUE (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
FAIR VALUE | |
Impairment charge on assets held for sale | $3,695,805 |
Nonrecurring Basis | |
FAIR VALUE | |
Impairment charge on assets held for sale | 3,695,805 |
Nonrecurring Basis | Carrying value | |
FAIR VALUE | |
Long-lived assets held-for-sale | 44,402,856 |
Nonrecurring Basis | Significant Other Observable Inputs (Level 2) | |
FAIR VALUE | |
Long-lived assets held-for-sale | $40,707,051 |
HELDFORSALE_ASSETS_Details
HELD-FOR-SALE ASSETS (Details) (USD $) | 12 Months Ended | 1 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Jul. 31, 2014 | |
Long Lived Assets Held-for-sale [Line Items] | ||||
Held-for-sale assets | $69,365,235 | |||
Impairment charge on assets held for sale | 3,695,805 | |||
Loss on impairment of A&A business | 9,280,050 | |||
Gain on disposal of the discontinued operation | 1,049,254 | |||
A&A | ||||
Long Lived Assets Held-for-sale [Line Items] | ||||
Loss on impairment of A&A business | 9,280,050 | 9,280,050 | ||
Gain on disposal of the discontinued operation | 1,049,254 | 1,049,254 | ||
Logistic center | ||||
Long Lived Assets Held-for-sale [Line Items] | ||||
Held-for-sale assets | 40,707,051 | |||
Impairment charge on assets held for sale | 3,695,805 | |||
Logistic center | Property and equipment | ||||
Long Lived Assets Held-for-sale [Line Items] | ||||
Amount reclassified from held for sale assets | 34,730,641 | |||
Logistic center | Prepaid land use right | ||||
Long Lived Assets Held-for-sale [Line Items] | ||||
Amount reclassified from held for sale assets | $5,665,957 |
PROPERTY_AND_EQUIPMENT_NET_Det
PROPERTY AND EQUIPMENT, NET (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Property and equipment, net | |||
Property and equipment, gross | $42,556,118 | $11,025,383 | |
Less: accumulated depreciation | -5,306,349 | -6,999,618 | |
Property and equipment, net | 37,249,769 | 4,025,765 | |
Depreciation expense | 1,351,748 | 1,931,792 | 1,019,934 |
Impairment charge on property and equipment | 3,695,805 | ||
Leasehold improvements | |||
Property and equipment, net | |||
Property and equipment, gross | 1,709,615 | 3,162,265 | |
Office equipment | |||
Property and equipment, net | |||
Property and equipment, gross | 3,174,732 | 3,787,262 | |
Furniture | |||
Property and equipment, net | |||
Property and equipment, gross | 3,064,944 | 3,764,409 | |
Vehicles | |||
Property and equipment, net | |||
Property and equipment, gross | 310,320 | 311,447 | |
Buildings | |||
Property and equipment, net | |||
Property and equipment, gross | 34,112,577 | ||
Construction in progress | |||
Property and equipment, net | |||
Property and equipment, gross | $183,930 |
INTANGIBLE_ASSETS_NET_Details
INTANGIBLE ASSETS, NET (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
INTANGIBLE ASSETS, NET | |||
Less: accumulated amortization | ($2,427,438) | ($2,943,741) | |
Intangible assets, net | 473,419 | 872,529 | |
Amortization expenses | 219,154 | 239,640 | 133,342 |
Estimated amortization expense | |||
2015 | 274,711 | ||
2016 | 140,417 | ||
2017 | 39,155 | ||
2018 | 12,876 | ||
2019 | 6,260 | ||
Trademarks | |||
INTANGIBLE ASSETS, NET | |||
Intangible assets, gross | 25,000 | ||
Computer software | |||
INTANGIBLE ASSETS, NET | |||
Intangible assets, gross | $2,900,857 | $3,791,270 |
INVESTMENT_IN_AN_AFFILIATE_Det
INVESTMENT IN AN AFFILIATE (Details) (USD $) | 12 Months Ended | 0 Months Ended | 1 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 22, 2014 | Dec. 19, 2014 | Nov. 30, 2012 | |
Investment in an affiliate | ||||||
Capital contribution in joint venture, Giosis Mecoxlane | $5,000,000 | |||||
Gain on the contribution of intangible assets | 6,000,000 | |||||
Consideration for sale of entire equity interest of its affiliate | 2,000,000 | |||||
Net gain recognized from the disposal | 1,330,165 | |||||
Giosis Mecoxlane | ||||||
Investment in an affiliate | ||||||
Capital contribution in joint venture, Giosis Mecoxlane | 5,000,000 | |||||
Gain on the contribution of intangible assets | 6,000,000 | |||||
Outstanding equity interest held (as a percent) | 40.00% | |||||
Consideration for sale of entire equity interest of its affiliate | 2,000,000 | |||||
Net gain recognized from the disposal | 1,300,000 | |||||
Giosis Mecoxlane | Giosis | ||||||
Investment in an affiliate | ||||||
Capital contribution in joint venture, Giosis Mecoxlane | $15,000,000 | |||||
Outstanding equity interest held (as a percent) | 60.00% |
ACCRUED_EXPENSES_Details
ACCRUED EXPENSES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
ACCRUED EXPENSES | ||
Accrued advertising expense | $15,417 | |
Accrued shipping and handling costs | 159,854 | 445,956 |
Accrued payroll | 1,229,196 | 1,296,969 |
Others | 2,036,850 | 1,493,510 |
Accrued expenses | $3,441,317 | $3,236,435 |
REDEEMABLE_NONCONTROLLING_INTE1
REDEEMABLE NONCONTROLLING INTEREST (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
REDEEMABLE NONCONTROLLING INTEREST | ||
Redemption value of redeemable noncontrolling interests | $0 | $0 |
DISCONTINUED_OPERATION_Details
DISCONTINUED OPERATION (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | |||
Sep. 18, 2014 | Jun. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jul. 31, 2014 | |
Discontinued operation | ||||||
Total consideration | $6,134,272 | |||||
Operating expenses: | ||||||
Impairment on the discontinued operation | -9,280,050 | |||||
Gain on disposal of the discontinued operation | 1,049,254 | |||||
Net loss from discontinued operation | -19,792,358 | -28,436,783 | -30,351,616 | |||
The net assets of the discontinued operation | ||||||
Cash and cash equivalents | 1,475,172 | |||||
A&A | ||||||
Discontinued operation | ||||||
Total consideration | 6,100,000 | |||||
Summarized operating results reported as discontinued operations | ||||||
Net Revenues | 22,060,470 | 44,799,542 | 112,996,103 | |||
Cost of goods sold (excluding depreciation and amortization) | 17,662,870 | 36,797,383 | 84,508,624 | |||
Operating expenses: | ||||||
Selling, general and administrative expenses | 14,261,642 | 33,792,763 | 56,779,270 | |||
Depreciation and amortization | 1,711,219 | 2,947,892 | 3,012,283 | |||
Other operating income, net | -301,713 | -952,458 | ||||
Total operating expenses | 15,972,861 | 36,438,942 | 58,839,095 | |||
Other income, net | 13,699 | |||||
Impairment on the discontinued operation | -9,280,050 | -9,280,050 | ||||
Gain on disposal of the discontinued operation | 1,049,254 | 1,049,254 | ||||
Net loss from discontinued operation | -19,792,358 | -28,436,783 | -30,351,616 | |||
The net assets of the discontinued operation | ||||||
Cash and cash equivalents | 1,475,172 | 1,051,649 | ||||
Accounts receivable | 799,713 | 859,542 | ||||
Other receivables | 1,807,509 | 2,128,646 | ||||
Advances to suppliers and prepaid expenses | 1,216,689 | 556,720 | ||||
Merchandise inventories | 20,536,041 | 14,046,603 | ||||
Property and equipment, net | 2,193,195 | 2,484,505 | ||||
Intangible assets, net | 44,520 | 30,161 | ||||
Other non-current assets | 585,345 | |||||
Accounts payable | -4,497,593 | -4,372,876 | ||||
Advances from customers | -1,076,283 | -791,392 | ||||
Accrued expenses | -393,313 | -380,307 | ||||
Other current liabilities | -1,489,649 | -1,215,022 | ||||
Income taxes payable | -33,545 | -33,161 | ||||
Net assets | $21,167,801 | $14,365,068 |
SHAREBASED_COMPENSATION_Detail
SHARE-BASED COMPENSATION (Details) (USD $) | 12 Months Ended | 1 Months Ended | 0 Months Ended | ||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2011 | Dec. 31, 2006 | Jan. 31, 2008 | Oct. 04, 2011 | Mar. 01, 2013 | Feb. 22, 2013 | 11-May-13 | Feb. 02, 2013 | Jan. 30, 2013 | Oct. 31, 2010 | 31-May-12 | |
Share-Based Compensation | |||||||||||||||
Compensation expense | $985,772 | $4,175,756 | $2,119,171 | ||||||||||||
Options | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Options outstanding (in shares) | 2,200,000 | ||||||||||||||
Number of options granted under the plan (in shares) | 0 | 0 | |||||||||||||
Unrecognized compensation cost (in dollars) | 0 | ||||||||||||||
Options | Minimum | |||||||||||||||
Additional disclosures | |||||||||||||||
Average risk-free rate of return (as a percent) | 0.18% | 0.36% | |||||||||||||
Expected term | 6 months 15 days | 2 years 8 months 12 days | |||||||||||||
Volatility rate (as a percent) | 85.62% | 51.37% | |||||||||||||
Options | Maximum | |||||||||||||||
Additional disclosures | |||||||||||||||
Average risk-free rate of return (as a percent) | 0.81% | 2.27% | |||||||||||||
Expected term | 4 years 9 months | 5 years 10 months 17 days | |||||||||||||
Volatility rate (as a percent) | 112.83% | 63.63% | |||||||||||||
Option Modification | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Compensation expense | 267,362 | 11,581 | 194,146 | ||||||||||||
Number of options under modification plan (in shares) | 76,110,625 | 76,110,625 | |||||||||||||
Incremental compensation cost | 1,955,559 | ||||||||||||||
Restricted shares | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares granted and outstanding under the plan | 16,211,058 | ||||||||||||||
Additional disclosures | |||||||||||||||
Number of shares forfeited under the plan | 863,488 | ||||||||||||||
Restricted shares | Non-executive directors | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Fair value of shares granted and vested | 4,183 | ||||||||||||||
Additional disclosures | |||||||||||||||
Number of shares forfeited under the plan | 393,750 | ||||||||||||||
2006 Plan | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares authorized for issuance under the plan | 63,456,083 | ||||||||||||||
Number of shares available for future grant under the plan | 0 | ||||||||||||||
2006 Plan | Options | Minimum | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Vesting period | 0 years | ||||||||||||||
2006 Plan | Options | Maximum | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Period of options | 10 years | ||||||||||||||
Vesting period | 4 years | ||||||||||||||
2008 Plan | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares authorized for issuance under the plan | 57,370,401 | ||||||||||||||
Number of shares available for future grant under the plan | 0 | ||||||||||||||
2008 Plan | Options | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Options outstanding (in shares) | 0 | ||||||||||||||
2008 Plan | Options | Maximum | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Period of options | 10 years | ||||||||||||||
2008 Plan | Restricted shares | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares granted and outstanding under the plan | 0 | ||||||||||||||
2011 Plan | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares authorized for issuance under the plan | 25,358,047 | ||||||||||||||
2011 Plan | Options | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Options outstanding (in shares) | 0 | ||||||||||||||
2011 Plan | Restricted shares | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares granted and outstanding under the plan | 0 | ||||||||||||||
2011 Plan | Restricted shares | Employees | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Vesting period | 3 years | ||||||||||||||
Fair value of shares granted and vested | 278,522 | 325,077 | 582,651 | ||||||||||||
Number of shares granted under the plan | 11,678,047 | ||||||||||||||
Additional disclosures | |||||||||||||||
Fraction of shares vesting on the first anniversary | 0.33 | ||||||||||||||
Remaining fraction of shares vesting ratably over eight quarters | 0.67 | ||||||||||||||
Remaining vesting period | 2 years | ||||||||||||||
Fair value (in dollars) | 2,012,795 | ||||||||||||||
2011 Plan | Restricted shares | Non-executive directors | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Vesting period | 3 years | ||||||||||||||
Fair value of shares granted and vested | 11,952 | ||||||||||||||
Number of shares granted under the plan | 630,000 | ||||||||||||||
Additional disclosures | |||||||||||||||
Fraction of shares vesting on the first anniversary | 0.33 | ||||||||||||||
Remaining fraction of shares vesting ratably over eight quarters | 0.67 | ||||||||||||||
Remaining vesting period | 2 years | ||||||||||||||
Fair value (in dollars) | 43,029 | ||||||||||||||
2012 Plan | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares authorized for issuance under the plan | 26,155,837 | ||||||||||||||
2012 Plan | Options | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of options granted under the plan (in shares) | 0 | ||||||||||||||
2012 Plan | Restricted shares | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares granted under the plan | 0 | ||||||||||||||
2012 Plan | Share appreciation rights | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of shares granted under the plan | 0 | ||||||||||||||
Share option exchange program | Options | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Aggregate shares converted under exchange program | 64,850,654 | ||||||||||||||
Share option exchange program | Options | Employees | February 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Aggregate shares converted under exchange program | 5,725,000 | ||||||||||||||
Share option exchange program | Options | Director | May 11, 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Aggregate shares converted under exchange program | 17,000,000 | ||||||||||||||
Share option exchange program | Options | Directors and employees | February 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Aggregate shares converted under exchange program | 42,125,654 | ||||||||||||||
Share option exchange program | Restricted shares | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Vesting period | 1 year | ||||||||||||||
Number of directors and employees who tendered award under exchange program | 36 | ||||||||||||||
Aggregate shares issued under exchange program | 54,888,589 | ||||||||||||||
Compensation expense | 441,411 | 2,495,861 | |||||||||||||
Incremental compensation cost | 2,937,272 | ||||||||||||||
Share option exchange program | Restricted shares | Employees | February 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Vesting percentage upon termination | 100.00% | ||||||||||||||
Number of directors and employees who tendered award under exchange program | 5 | ||||||||||||||
Aggregate shares issued under exchange program | 4,446,000 | ||||||||||||||
Fair value of shares granted and vested | 425,358 | ||||||||||||||
Number of employees terminated | 5 | ||||||||||||||
Additional disclosures | |||||||||||||||
Fair value (in dollars) | 425,358 | ||||||||||||||
Share option exchange program | Restricted shares | Director | May 11, 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Aggregate shares issued under exchange program | 11,143,435 | ||||||||||||||
Fair value of shares granted and vested | 282,960 | 565,921 | |||||||||||||
Additional disclosures | |||||||||||||||
Fair value (in dollars) | 848,881 | ||||||||||||||
Share option exchange program | Restricted shares | Directors and employees | February 2013 | |||||||||||||||
Share-Based Compensation | |||||||||||||||
Number of directors and employees who tendered award under exchange program | 31 | ||||||||||||||
Aggregate shares issued under exchange program | 39,299,154 | ||||||||||||||
Fair value of shares granted and vested | 376,781 | 2,533,023 | |||||||||||||
Additional disclosures | |||||||||||||||
Fair value (in dollars) | 2,763,298 |
SHAREBASED_COMPENSATION_Detail1
SHARE-BASED COMPENSATION (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Options | |||
Shares | |||
Options outstanding at the beginning of the period (in shares) | 2,200,000 | ||
Forfeited (in shares) | -2,200,000 | ||
Options outstanding at the end of the period (in shares) | 2,200,000 | ||
Weighted-average exercise price | |||
Options outstanding at the beginning of the period (in dollars per share) | $0.16 | ||
Forfeited (in dollars per share) | $0.16 | ||
Options outstanding at the end of the period (in dollars per share) | $0.16 | ||
Additional disclosures | |||
Options granted or modified | 0 | 0 | |
Unrecognized compensation cost (in dollars) | $0 | ||
Intrinsic value of options exercised (in dollars) | $0 | $0 | $1,370 |
Restricted shares | |||
Shares | |||
Restricted shares outstanding at the beginning of the period (in shares) | 16,211,058 | ||
Forfeited (in shares) | -863,488 | ||
Vested (in shares) | -15,347,570 | ||
Weighted-average fair value | |||
Restricted shares outstanding at the beginning of the period (in dollars per share) | $0.10 | ||
Forfeited (in dollars per share) | $0.13 | ||
Vested (in dollars per share) | $0.10 |
EMPLOYEE_RETIREMENT_BENEFIT_De
EMPLOYEE RETIREMENT BENEFIT (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
EMPLOYEE RETIREMENT BENEFIT | |||
Total contribution for employee benefits | $2,754,151 | $2,121,411 | $2,155,356 |
DISTRIBUTION_OF_PROFIT_Details
DISTRIBUTION OF PROFIT (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Distribution of Profit Disclosure | ||
General reserve fund | $284,255 | $943,499 |
PRC | ||
Distribution of Profit Disclosure | ||
Percentage appropriation to general reserve fund required | 10.00% | |
General reserve as a percentage of registered capital up to which after-tax profit of PRC subsidiaries and VIEs shall be transferred | 50.00% | |
Statutory capital | 82,483,386 | 84,113,331 |
General reserve fund | 284,255 | 943,499 |
Statutory reserve increase (decrease) | 0 | 11,760 |
Restricted amount of net assets of subsidiaries | $82,767,641 | $85,056,830 |
INCOME_TAX_EXPENSE_Details
INCOME TAX EXPENSE (Details) | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
USD ($) | USD ($) | USD ($) | Hong Kong | Hong Kong | Hong Kong | Hong Kong | PRC | PRC | PRC | PRC | PRC | PRC | PRC | PRC | |
Mecox Lane (Hong Kong) Limited | Rampage China (Hong Kong) Limited | eMecoxLane (Hong Kong) Co, Ltd. | Mexi-Care HK | USD ($) | CNY | Mai Wang Information | Mai Wang Information | Mai Wang Information | Other subsidiaries and VIEs | Other subsidiaries and VIEs | Other subsidiaries and VIEs | ||||
INCOME TAX EXPENSE | |||||||||||||||
Deferred tax | $323,911 | ||||||||||||||
Income tax expense | 323,911 | ||||||||||||||
Income Tax Expense | |||||||||||||||
Income tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 16.50% | 16.50% | 16.50% | 16.50% | 25.00% | 25.00% | 25.00% | |||||
Preferential income tax rate for entities registered in Pudong New District, Shanghai (as a percent) | 25.00% | 25.00% | 12.50% | ||||||||||||
Gross unrecognized tax benefits | 0 | 0 | |||||||||||||
Period of statute of limitations, if the underpayment of income taxes is due to computational errors made by the taxpayer | 3 years | 3 years | |||||||||||||
Period of statute of limitations, if the underpayment of income tax liability exceeds the specified amount | 5 years | 5 years | |||||||||||||
Threshold level of underpayment of taxes which indicates statute of limitations may be extended | $16,400 | 100,000 | |||||||||||||
Period of statute of limitations for transfer pricing related adjustment | 10 years | 10 years |
INCOME_TAX_EXPENSE_Details_2
INCOME TAX EXPENSE (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Deferred tax assets: | |||
Inventory write-downs | $26,176 | $3,565,291 | |
Accrued expenses | 646,923 | 670,989 | |
Others | 47,489 | 52,005 | |
Total current deferred tax assets | 720,588 | 4,288,285 | |
Less: valuation allowance | -720,588 | -4,288,285 | |
Net operating loss carry-forwards | 13,630,512 | 11,263,697 | |
Basis difference in long-lived assets | 566,242 | 1,020,262 | |
Total non-current deferred tax assets | 14,196,754 | 12,283,959 | |
Less: valuation allowance | -14,196,754 | -12,283,959 | |
Group recognized valuation allowance | 14,917,342 | 16,572,244 | |
Reconciliation between the income tax expense computed by applying the PRC statutory corporate income tax rate to income before income taxes and the actual income tax expense | |||
PRC corporate income tax (as a percent) | 25.00% | 25.00% | 25.00% |
Expense not deductible for tax purposes (as a percent) | -21.90% | -1.30% | -0.80% |
Effect of change in valuation allowance (as a percent) | 8.00% | -20.00% | -22.20% |
Effect of difference in reversal rate (as a percent) | 0.00% | 0.60% | 0.00% |
Effect of different tax rate of group entities in other jurisdiction (as a percent) | -11.10% | -4.30% | -4.50% |
Effect of prior year true-up (as a percent) | 0.00% | 0.00% | 1.00% |
Effective income tax rate (as a percent) | 0.00% | 0.00% | -1.50% |
Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | 13,630,512 | ||
2015 | Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | 42,657 | ||
2016 | Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | 4,376,012 | ||
2017 | Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | 3,430,645 | ||
2018 | Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | 3,136,263 | ||
2019 | Subsidiaries | PRC | |||
Operating loss carry forwards | |||
Net operating loss carry forwards | $2,644,935 |
INCOME_LOSS_PER_SHARE_Details
INCOME (LOSS) PER SHARE (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Numerator: | |||
Net income from continuing operations | $3,442,098 | $1,826,492 | $7,919,466 |
Net loss on discontinued operations | -19,792,358 | -28,436,783 | -30,351,616 |
Net loss available to Mecox Lane Limited shareholders | ($16,350,260) | ($26,610,291) | ($22,432,150) |
Denominator: | |||
Weighted average ordinary shares-basic | 452,758,464 | 418,347,060 | 404,247,016 |
Dilutive effect of share options (in shares) | 3,904,603 | 140,207 | |
Weighted average ordinary shares-diluted | 452,758,464 | 422,251,663 | 404,387,223 |
Net income per share attributable to Mecox Lane-basic | |||
Income from continuing operations | $0.01 | $0.01 | $0.02 |
Loss on discontinued operations | ($0.04) | ($0.07) | ($0.08) |
Net income per share attributable to Mecox Lane-diluted | |||
Income from continuing operations | $0.01 | $0.01 | $0.02 |
Loss on discontinued operations | ($0.04) | ($0.07) | ($0.08) |
Options | |||
Anti-dilutive shares | |||
Shares excluded from computation of diluted earning/loss per share | 0 | 2,200,000 | 72,747,294 |
Restricted shares | |||
Anti-dilutive shares | |||
Shares excluded from computation of diluted earning/loss per share | 0 | 16,211,058 | 6,730,575 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) | 5 Months Ended | 7 Months Ended |
Dec. 31, 2014 | Jul. 31, 2014 | |
segment | segment | |
SEGMENT REPORTING | ||
Number of reporting segments | 1 | 4 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | 12 Months Ended | 5 Months Ended | 12 Months Ended | 0 Months Ended | 7 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | 21-May-14 | Dec. 22, 2014 | 21-May-14 | Dec. 31, 2014 | |
Related party transactions | |||||||
Advertising expense | $505,698 | $194,337 | $269,595 | ||||
Amount due to related parties | 635,770 | ||||||
Amount due from related party | 224,479 | ||||||
Qihoo | |||||||
Related party transactions | |||||||
Advertising expense | 0 | 2,524,824 | 0 | ||||
Amount due to related parties | 0 | 0 | 0 | ||||
VIPShop | |||||||
Related party transactions | |||||||
Amount due to related parties | 0 | 459,623 | 0 | ||||
Sale of goods or service revenue | 11,109,843 | 2,818,196 | 5,455,781 | ||||
Amount due from related party | 0 | 0 | 0 | ||||
Giosis Mecoxlane | |||||||
Related party transactions | |||||||
Amount due to related parties | 0 | 176,147 | 0 | ||||
Sale of goods or service revenue | 227,052 | 156,650 | |||||
Amount due from related party | 3,797 | 224,479 | 3,797 | ||||
Outstanding equity interest owned (as a percent) | 40.00% | ||||||
Sales commission | 92,283 | 716,504 | |||||
Hongtu Property | |||||||
Related party transactions | |||||||
Property management fees | 64,945 | ||||||
Hongtu Hi-tech | |||||||
Related party transactions | |||||||
Payment made to related party for equipment purchase | 174,533 | ||||||
Cnshangquan | |||||||
Related party transactions | |||||||
Number of shares sold in the share purchase agreement | 290,564,842 | ||||||
Ownership percentage after share purchase agreement | 63.70% | 63.70% | |||||
Total cash consideration | $39,000,000 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Dec. 31, 2014 |
Lease commitment | |
2015 | $1,236,695 |
2016 | 1,012,109 |
2017 | 916,914 |
2018 | 916,914 |
2019 | 916,914 |
After 2019 | 1,833,828 |
Total | 6,833,374 |
Capital Commitment | |
Capital Commitment | |
Capital expenditures contracted | $823,511 |
Additional_InformationFinancia1
Additional Information-Financial Statement Schedule 1 (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Current asset: | ||||
Cash and cash equivalents | $18,180,733 | $14,261,249 | $13,291,063 | $40,097,545 |
Total current assets | 25,511,642 | 91,964,105 | ||
TOTAL ASSETS | 69,148,830 | 102,649,663 | ||
Equity | ||||
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized, 439,876,279 and 455,223,849 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 45,523 | 43,988 | ||
Ordinary shares, par value | $0.00 | $0.00 | ||
Ordinary shares, authorized | 10,000,000,000 | 10,000,000,000 | ||
Ordinary shares, issued | 455,223,849 | 439,876,279 | ||
Ordinary shares, outstanding | 455,223,849 | 439,876,279 | ||
Additional paid-in capital | 169,817,779 | 168,833,542 | ||
Accumulated other comprehensive income | 7,228,441 | 7,700,798 | ||
Total Mecox Lane Limited equity | 52,251,908 | 68,088,753 | ||
TOTAL LIABILITIES AND EQUITY | 69,148,830 | 102,649,663 | ||
MECOX LANE LIMITED | ||||
Current asset: | ||||
Cash and cash equivalents | 3,337,249 | 967,568 | 1,493,563 | 2,096,837 |
Total current assets | 3,337,249 | 967,568 | ||
Investments in subsidiaries and affiliates | 49,797,651 | 67,726,713 | ||
TOTAL ASSETS | 53,134,900 | 68,694,281 | ||
Current liabilities: | ||||
Accrued expenses and other current liabilities | 882,992 | 605,528 | ||
Equity | ||||
Ordinary shares ($0.0001 par value; 10,000,000,000 shares authorized, 439,876,279 and 455,223,849 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 45,523 | 43,988 | ||
Ordinary shares, par value | $0.00 | $0.00 | ||
Ordinary shares, authorized | 10,000,000,000 | 10,000,000,000 | ||
Ordinary shares, issued | 455,223,849 | 439,876,279 | ||
Ordinary shares, outstanding | 455,223,849 | 439,876,279 | ||
Additional paid-in capital | 169,817,779 | 168,833,542 | ||
Accumulated deficit | -124,839,835 | -108,489,575 | ||
Accumulated other comprehensive income | 7,228,441 | 7,700,798 | ||
Total Mecox Lane Limited equity | 52,251,908 | 68,088,753 | ||
TOTAL LIABILITIES AND EQUITY | $53,134,900 | $68,694,281 |
Additional_InformationFinancia2
Additional Information-Financial Statement Schedule 1 (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Operating expense: | |||
Other operating income, net | $1,088,346 | $6,182,764 | $852,888 |
Income from operations | 6,864,278 | 5,643,561 | 5,979,666 |
Interest income | 273,984 | 977,104 | 2,143,396 |
Other income, net | -133,818 | 1,039,084 | 120,315 |
Equity in losses of equity method investees | -4,876,523 | -5,491,484 | |
Net loss attributable to Mecox Lane Limited shareholders | -16,350,260 | -26,610,291 | -22,432,150 |
Other comprehensive income: | |||
Change in cumulative foreign currency translation adjustment | -472,357 | 1,408,045 | 91,198 |
Comprehensive loss attributable to Mecox Lane Limited shareholders | -16,822,617 | -25,202,246 | -22,340,952 |
MECOX LANE LIMITED | |||
Operating expense: | |||
General and administrative expense | -3,531,358 | -6,050,882 | -4,064,063 |
Other operating income, net | 1,330,165 | 6,000,000 | |
Income from operations | -2,201,193 | -50,882 | -4,064,063 |
Interest income | 17 | 14 | 2,007 |
Other income, net | -133,190 | 1,068,187 | 121,342 |
Equity in losses of equity method investees | -14,015,894 | -27,627,610 | -18,491,436 |
Net loss attributable to Mecox Lane Limited shareholders | -16,350,260 | -26,610,291 | -22,432,150 |
Other comprehensive income: | |||
Change in cumulative foreign currency translation adjustment | -472,357 | 1,408,045 | 91,198 |
Comprehensive loss attributable to Mecox Lane Limited shareholders | ($16,822,617) | ($25,202,246) | ($22,340,952) |
Additional_InformationFinancia3
Additional Information-Financial Statement Schedule 1 (Details 3) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | |||
Net loss | ($16,350,260) | ($26,610,291) | ($22,432,150) |
Adjustments to reconcile net income to net cash provided (used in) by operating activities: | |||
Share-based compensation | 985,772 | 4,175,756 | 2,119,171 |
Gain on contribution of intangible assets to an affiliate | -6,000,000 | ||
Gain on disposal of affiliate | -1,330,165 | ||
Changes in operating assets and liabilities: | |||
Amount due from subsidiaries and an affiliate | 224,479 | -224,479 | 356,090 |
Net cash provided by (used in) operating activities | 5,378,164 | -15,089,890 | -10,989,901 |
Cash flows from investing activities: | |||
Investing in Joint Venture | -5,000,000 | ||
Proceeds from disposal of affiliate | 2,000,000 | ||
Proceeds from disposal of apparel and accessories business | 6,134,272 | ||
Net cash provided by (used in) investing activities | 682,755 | 17,327,905 | -15,611,120 |
Cash flows from financing activities | |||
Repurchase of treasury stock | -701,196 | -572,168 | |
Net cash provided by (used in) financing activities | -1,640,180 | 938,984 | -562,843 |
Net increase (decrease) in cash and cash equivalents | 3,919,484 | 2,445,358 | -26,806,482 |
Cash and cash equivalents at beginning of year | 14,261,249 | 13,291,063 | 40,097,545 |
Cash and cash equivalents at end of year | 18,180,733 | 14,261,249 | 13,291,063 |
MECOX LANE LIMITED | |||
Financial Information of Parent Company | |||
Restricted portion of registered capital and general reserve fund unavailable for distribution in the form of dividends, loans or advances | 82,767,641 | ||
Cash flows from operating activities: | |||
Net loss | -16,350,260 | -26,610,291 | -22,432,150 |
Adjustments to reconcile net income to net cash provided (used in) by operating activities: | |||
Share-based compensation | 985,772 | 4,175,756 | 2,119,171 |
Gain on contribution of intangible assets to an affiliate | -6,000,000 | ||
Gain on disposal of affiliate | -1,330,165 | ||
Equity in losses of subsidiaries | 9,139,370 | 22,136,126 | 18,491,436 |
Equity in loss of an affiliate | 4,876,523 | 5,491,484 | |
Changes in operating assets and liabilities: | |||
Amount due from subsidiaries and an affiliate | 1,780,975 | 1,133,903 | |
Accrued expenses and other current liabilities | 277,464 | -151,777 | 193,901 |
Net cash provided by (used in) operating activities | -620,321 | 175,201 | -1,627,642 |
Cash flows from investing activities: | |||
Investing in Joint Venture | -5,000,000 | ||
Proceeds from disposal of affiliate | 2,000,000 | ||
Proceeds from disposal of apparel and accessories business | 990,002 | ||
Investment in subsidiaries and an affiliate | 6,596,536 | ||
Net cash provided by (used in) investing activities | 2,990,002 | 1,596,536 | |
Cash flows from financing activities | |||
Repurchase of treasury stock | -701,196 | -572,168 | |
Net cash provided by (used in) financing activities | -701,196 | -572,168 | |
Net increase (decrease) in cash and cash equivalents | 2,369,681 | -525,995 | -603,274 |
Cash and cash equivalents at beginning of year | 967,568 | 1,493,563 | 2,096,837 |
Cash and cash equivalents at end of year | $3,337,249 | $967,568 | $1,493,563 |