Ku6 Media Reports Unaudited Financial Results for Third Quarter of Fiscal Year 2011

Ku6 Media Reports Unaudited Financial Results for Third Quarter of Fiscal Year 2011

BEIJING, Nov. 14, 2011 /PRNewswire-Asia/ -- Ku6 Media Co., Ltd., ("Ku6 Media" or the "Company", Nasdaq: KUTV) a leading internet television company in China, today announced its unaudited financial results for the third quarter ended September 30 of fiscal year 2011.

Background

In 2010, Ku6 Media (formerly known as Hurray!) completed a series of transactions including acquisition of Ku6 in January 2010 and disposal of its WVAS and music businesses to Shanda Interactive Entertainment Limited ("Shanda") as well as acquisition of online audio business from Shanda in August 2010, and became a company focusing on online advertising business on its online video platform of www.Ku6.com. As a result, the operating results of WVAS and recorded music were presented as "Operating Results of Discontinued Operations" in the income statements.

Third Quarter 2011 Highlights

-- Total revenues from continuing operations were $4.2 million, up 5.0%
from $4.0 million in the second quarter of 2011, and down 2.3% from $4.3
million in the third quarter of 2010. Performance advertising revenue
increased continuously and accounted for 72.3% of total revenue in the
quarter, as compared to 19.9% in the second quarter of 2011.
-- Net loss from continuing operations was $13.0 million, down 39.8% from a
loss of $21.6 million in the second quarter of 2011, and up 2.4% from a
loss of $12.7 million in the third quarter of 2010.

Business results

Total revenues from continuing operations, representing advertising revenue from online video portal and online audio operation, were $4.2 million in the third quarter of 2011, representing an increase of 5.0% from $4.0 million in the second quarter of 2011 and a decrease of 2.3% from $4.3 million in the third quarter of 2010. In the second quarter of 2011, the company started to generate revenue from performance advertising using a system called Application Advertisement ("AA"). The performance advertising revenue was realized through an agent which is a related party within Shanda. 72.3% of total revenue in the third quarter was from this source, as compared to 19.9% of total revenue in the second quarter of 2011.

Gross loss from continuing operations was $1.3 million in the third quarter of 2011, down 84.1% from $8.2 million in the second quarter of 2011 and down 75.5% from $5.3 million in the third quarter of 2010.

Operating expenses from continuing operations were $11.3 million in the third quarter of 2011, including provisions for accounts receivable of $1.0 million, an accrual for annual bonus of $0.8 million, a loss from disposal of network equipments of $2.4 million due to technological upgraded, and a provision of $1.6 million for possible copyright lawsuits after examining content previously shown on our website. This represents a decrease of 14.4% from $13.2 million in the second quarter of 2011 and an increase of 52.7% from $7.4 million in the third quarter of 2010.

Operating loss from continuing operations was $12.5 million in the third quarter of 2011, a decrease of 41.6% from $21.4 million in the second quarter of 2011 and a decrease of 1.6% from $12.7 million in the third quarter of 2010.

Net loss from continuing operations was $13.0 million in the third quarter of 2011, a decrease of 39.8% from the loss of $21.6 million in the second quarter of 2011 and an increase of 2.4% from the loss of $12.7 million in the third quarter of 2010.

Net loss from discontinued operations (WVAS and recorded music businesses) was nil in the second and third quarter of 2011 since the WVAS and recorded music businesses were sold in August 2010, as compared to $0.4 million of net loss in the third quarter of 2010.

Net loss attributable to Ku6 Media was $13.0 million in the third quarter of 2011, as compared to $21.6 million in the second quarter of 2011 and $12.8 million in the third quarter of 2010.

Net loss attributable to Ku6 Media per basic and diluted ADS was $0.26 in the third quarter of 2011, compared to $0.61 in the second quarter of 2011 and $0.40 in the third quarter of 2010. Weighted average ADS used to calculate diluted net loss per ADS was 50.2 million ADS in the third quarter of 2011, 35.2 million ADS in the second quarter of 2011 and 31.9 million ADS in the third quarter of 2010.

Loss before interest expense and interest income, income taxes, depreciation, and amortization ("EBITDA", a non-GAAP measure) was $11.2 million in the third quarter of 2011, compared to $19.9 million in the second quarter of 2011 and $11.4 million in the third quarter of 2010. Reconciliation between net loss attributable to Ku6 Media under U.S. Generally Accepted Accounting Principles (GAAP) and EBITDA is presented at the end of this news release.

As of September 30, 2011, the Company had $41.6 million in cash and cash equivalents, compared to $111.4 million as of June 30, 2011. The significant decrease in cash and cash equivalents was attributed to the redemption of senior convertible bonds of US$50 million from Shanda.

Mr. Jeff Shi, Chief Executive Officer of Ku6 Media, commented, "Ku6 Media has made a successful strategic transition and our business has improved in this quarter. We have become more technology focused while improving user experience. We believe our Web 2.0 strategy will help us build a solid foundation for further execution and continuous improvement of operating results in the next few quarters."

Recent Business Activities

In September, the Company announced the termination of the variable interest entity arrangement with respect to Shanghai Yisheng Network Technology Co., Ltd. ("Yisheng"), its online audio business operating entity, and the completion of certain transfers and issuances of shares in Yisheng. Following these transactions, the Company holds a 20% economic interest, down from 100%, in Yisheng and has ceased to control Yisheng as a consolidated variable interest entity. All local government registrations relating to the above changes in the registered capital and shareholding of Yisheng were completed on August 11, 2011.

On September 30, 2011, Ku6 Media agreed to redeem senior convertible bonds of US$50,000,000 from Shanda. The senior convertible bonds were issued to Shanda at face value on June 29, 2011. The bonds were to mature in three years after issuance and would bear an interest of 3% per annum, payable semi-annually. Based on the working capital position of the Company, Ku6 Media redeemed the bonds on September 30, 2011 at its issue price with the approval of the board of directors and a special committee comprised of three independent directors.

Note to the financial information

The unaudited financial information disclosed above is preliminary. The results for the nine months ended September 30, 2011 are not necessarily indicative of the results expected for the full year or for any future period. Adjustments to the financial statements may be made when audit work is completed, which could result in significant differences between the audited financial statements and the preliminary unaudited financial information contained in this press release.

Conference call

Ku6 Media's management team will host a conference call on Monday, November 14, 2011 at 7:30 a.m. EDT, which is Monday, November 14, 2011 at 8:30 p.m. in Beijing and Hong Kong, to present an overview of the company's financial performance and business operations.

Dial-in numbers:

+17183541231/18665194004
U.S.A.: (Toll free)
International: +6567239381
Conference ID: 25141697

A replay will be available from November 14, 2011 for 7 days.

U.S.A.: 18662145335
International: +61 2 8235 5000
Conference ID: 25141697

A live and archived webcast of the conference call will also be available at

http://www.media-server.com/m/p/hhkrah5d.

About Ku6 Media Co., Ltd.

Ku6 Media Co., Ltd. (Nasdaq: KUTV) is a leading internet television company in China. Through its premier online brand and online video website, www.ku6.com, Ku6 Media provides video information services and entertainment in China.

As a leading online video portal, www.ku6.com provides a video platform for sharing and watching user-generated content. It also provides online video reports and other interactive entertainment programs for its users. For more information about Ku6 Media, please visit http://ir.ku6.com.

Forward-looking Statements

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

Ku6 Media Co., Ltd.
Unaudited Condensed Consolidated Balance Sheets

As of As of
September December
30, 31,
2011 2010
U.S. dollars in
thousands

Assets
Current assets:
Cash and cash
equivalents $41,629 $27,295
Restricted cash 5,666 -
Accounts receivable,
net of allowance for
doubtful accounts 2,314 8,135
Accounts receivable
due from related
party 2,604 326
Prepaid expenses and
other current assets 565 3,487
Other receivable due
from related parties 17,781 5,532
Inventories - 31
Total current assets 70,559 44,806
Deposits 284 -
Property and
equipment, net 2,910 8,004
Acquired intangible
assets, net 24,501 27,264
Investment in equity
affiliate 321 -
Goodwill 6,233 6,896
Total assets $104,808 $86,970

Liabilities and
shareholders' equity
Current liabilities:
Short-term borrowings $2,066 -
Accounts payable 14,993 15,503
Accounts payable due
to related party 12 1,665
Accrued expenses and
other current
liabilities 12,633 11,462
Other payable due to
related parties 16,641 7,777
Total current
liabilities 46,345 36,407
Non-current deferred
tax liabilities 4,826 4,925
Total liabilities 51,171 41,332

Shareholders' equity:
Ordinary shares 251 174
Additional paid-in
capital 183,677 130,100
Accumulated deficit (128,511) (83,105)
Accumulated other
comprehensive income
(loss) (1,780) (1,423)
Total Ku6 Media Co.,
Ltd. shareholders'
equity 53,637 45,746
Non-controlling
interests - (108)
Total shareholders'
equity 53,637 45,638
Total liabilities and
shareholders' equity $104,808 $86,970

Ku6 Media Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations

For the three months
ended
September September
30, 30,
2011 2010
(in
thousands
of U.S.
dollars,
except
share and
per share
data)
Revenues:
Advertising
Third
parties 1,100 4,113
Related
parties 3,129 159
Total
revenues 4,229 4,272

Cost of
revenues:
Advertising
Third
parties 5,482 9,475
Related
parties - 73
Total cost
of revenues 5,482 9,548

Gross loss (1,253) (5,276)

Operating
expenses:
Product
development 857 -
Selling and
marketing 2,005 4,294
General and
administrative 5,613 3,147
Other
general
expenses 2,800 -
Total
operating
expenses 11,275 7,441

Operating
loss from
continuing
operations (12,528) (12,717)

Interest
income 49 23
Other income 32 -
Interest
expense (330) (19)
Equity in
loss of
affiliates (201) -
Loss before
income tax
expense (12,978) (12,713)

Income tax
benefit - 10

Net loss
from
continuing
operations (12,978) (12,703)

Discontinued
operations:
Net loss
from
discontinued
operations,
net of tax - (407)
Gain from
disposal of
discontinued
operations,
net of tax - -
Net income
(loss) from
discontinued
operations,
net of tax - (407)
Net loss (12,978) (13,110)
Less: Net
loss
attributable
to the non-
controlling
interest 2 271
Net loss
attributable
to Ku6
Media Co.,
Ltd. (12,976) (12,839)

Loss per
share-
basic and
diluted
Loss from
continuing
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.00) ($0.00)
Income
(loss) from
discontinued
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders $0.00 ($0.00)
Net loss
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.00) ($0.00)

Loss per
ADS-basic
and diluted
Loss from
continuing
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.26) ($0.39)
Income
(loss) from
discontinued
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders $0.00 ($0.01)
Net loss
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.26) ($0.40)

Weighted
average
shares used
in per
share
calculation-
basic and
diluted 5,019,786,036 3,194,781,254
Weighted
average
ADSs used
in per ADS
calculation-
basic and
diluted 50,197,860 31,947,813

For the nine months
ended
September September
30, 30,
2011 2010
(in
thousands
of U.S.
dollars,
except
share and
per share
data)
Revenues:
Advertising
Third
parties 10,169 9,275
Related
parties 4,632 514
Total
revenues 14,801 9,789

Cost of
revenues:
Advertising
Third
parties 26,268 27,747
Related
parties 380 249
Total cost
of revenues 26,648 27,996

Gross loss (11,847) (18,207)

Operating
expenses:
Product
development 2,101 -
Selling and
marketing 11,799 10,214
General and
administrative 16,837 9,722
Other
general
expenses 2,800 -
Total
operating
expenses 33,537 19,936

Operating
loss from
continuing
operations (45,384) (38,143)

Interest
income 89 50
Other income 730 -
Interest
expense (786) (31)
Equity in
loss of
affiliates (201) -
Loss before
income tax
expense (45,552) (38,124)

Income tax
benefit 99 31

Net loss
from
continuing
operations (45,453) (38,093)

Discontinued
operations:
Net loss
from
discontinued
operations,
net of tax - (3,139)
Gain from
disposal of
discontinued
operations,
net of tax - 4,487
Net income
(loss) from
discontinued
operations,
net of tax - 1,348
Net loss (45,453) (36,745)
Less: Net
loss
attributable
to the non-
controlling
interest 47 658
Net loss
attributable
to Ku6
Media Co.,
Ltd. (45,406) (36,087)

Loss per
share-
basic and
diluted
Loss from
continuing
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.01) ($0.01)
Income
(loss) from
discontinued
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders $0.00 $0.00)
Net loss
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($0.01) ($0.01)

Loss per
ADS-basic
and diluted
Loss from
continuing
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($1.13) ($1.26)
Income
(loss) from
discontinued
operations
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders $0.00 $0.04
Net loss
attributable
to Ku6
Media Co.,
Ltd.
ordinary
shareholders ($1.13) ($1.22)

Weighted
average
shares used
in per
share
calculation-
basic and
diluted 4,011,011,072 2,967,456,124
Weighted
average
ADSs used
in per ADS
calculation-
basic and
diluted 40,110,111 29,674,561

The use of non-GAAP financial measures:

To supplement its consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP") in the United States, Ku6 Media uses a non-GAAP measure EBITDA, which is adjusted based on results prepared in accordance with GAAP excluding certain expenses. Ku6 Media's management believes the use of this non-GAAP financial measure provides useful information to both management and investors by excluding certain expenses. This non-GAAP financial measure also facilitates management's internal comparisons to the Company's historical performance and our competitors' operating results. Ku6 Media believes this non-GAAP financial measure is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Please see below financial table for a reconciliation of EBITDA.

Reconciliation of Net loss attributable to Ku6 Media under GAAP to EBITDA for the following periods:

For the three months For the nine months
ended ended
September September September September
30, 30, 30, 30,
2011 2010 2011 2010
(in thousands of U.S. dollars, except share
and per share data)
Net loss
attributable to
Ku6 Media Co.,
Ltd. (12,976) (12,839) (45,406) (36,087)
Add (deduct):
Interest expense 330 5 786 25
Income tax expense
(benefit) - (30) (99) (56)
Depreciation and
amortization 1,495 1,496 4,360 3,732
Interest income (49) (18) (89) (87)
EBITDA (11,200) (11,386) (40,448) (32,473)

SOURCE Ku6 Media Co., Ltd.

Ku6 Media Co., Ltd.

CONTACT: Ms. Cheng Yu, Associate Finance Director and Acting Investor Relations Manager of Ku6 Media Co., Ltd. at Telephone +86 10 5758 6802 in Beijing or Email: ir@ku6.com

Web Site: http://ir.ku6.com

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