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The9 Limited Reports First and Second Quarter 2010 Unaudited Financial Results

Date : 08/24/2010 @ 5:00PM
Source : PR Newswire (US)
Stock : The9 Limited ADS Representing One Ordinary Share (MM) (NCTY)
Quote : 2.1  -0.07 (-3.23%) @ 5:10PM
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The9 Limited Reports First and Second Quarter 2010 Unaudited Financial Results

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SHANGHAI, China, Aug. 24 /PRNewswire-Asia-FirstCall/ -- The9 Limited (Nasdaq: NCTY) ("The9"), an online game operator and developer in China, announced today its unaudited financial results for the quarters ended March 31 and June 30, 2010.

    Financial Highlights:

    First Quarter 2010
    -- Net revenues for the first quarter of 2010 increased by 6% quarter-
       over-quarter but decreased by 95% year-over-year to RMB22.1 million
       (US$3.3 million).
    -- Net loss for the first quarter of 2010 decreased by 63% quarter-over-
       quarter but increased by 62% year-over-year to RMB75.8 million (US$11.2
       million).

    Second Quarter 2010
    -- Net revenues for the second quarter of 2010 increased by 15% quarter-
       over-quarter but decreased by 91% year-over-year to RMB25.4 million
       (US$3.7 million).
    -- Net loss for the second quarter of 2010 decreased by 13% quarter-over-
       quarter and decreased by 17% year-over-year to RMB65.8 million (US$9.7
       million).

The decrease in year-over-year net revenues in both quarters was mainly due to the decrease in revenue from World of Warcraft ("WoW"), for which the license agreement expired on June 7, 2009.

Business Highlights:

In January 2010, The9 launched its first proprietary 2D MMORPG, World of Fighter, which has been well received by China domestic game players and licensed to Hong Kong, Macau, Taiwan, Korea, Vietnam and Thailand.

In April 2010, The9 acquired a majority interest in Red 5 Studios, Inc., an online game studio based in Los Angeles.

In June 2010, The9 set up The9 Interactive, Inc., a wholly owned subsidiary based in San Jose, to focus on operating our proprietary games in the U.S. and searching for overseas business opportunity.

In June 2010, The9 and Sony Online Entertainment entered into an agreement pursuant to which The9 obtained an exclusive license to operate Free Realms, a 3D cartoon fairy massively multiplayer online role-playing game in mainland China.

In July 2010, The9 made a strategic minority equity investment in Aurora Feint Inc, a San Francisco-based company that develops mobile games and operates OpenFeint, a leading mobile social platform for iphones and smart phones. Thousands of mobile game developers use OpenFeint and there are more than 28 million registered users and 2,200 games live in the Apple App Store.

Management Comments:

Commenting on the first half 2010 results, Jun Zhu, Chairman and Chief Executive Officer of The9 said, "The first half 2010 has been a meaningful and important period to The9. We took this opportunity to restructure and reposition The9. We now have a very clear direction to our future business model in the global internet market. Our global strategy includes three core tactics. First of all, we view our internet business from a global perspective, for example, by investing in US-based companies to enter into the global market; secondly, regarding the domestic online game market, we will further expand by various means including proprietary development, cooperation, licensing etc.; thirdly, we will step into different sections in the global internet market in respondent to new changes in the market, including mobile internet. Although today The9 is still making a loss, we firmly believe that as long as we implement our global internet strategy and be innovative to changes in internet market, we will pass through the transition period and our financial results will be improved."

Discussion of The9's Unaudited First and Second Quarter 2010 Results

Revenues

For the first quarter of 2010, The9 reported total net revenues were RMB22.1 million (US$3.3 million), which increased by 6% compared to RMB20.9 million (US$3.1 million) in the fourth quarter of 2009 and decreased by 95% compared to RMB426.2 million (US$62.8 million) in the first quarter of 2009. The quarter-over-quarter increase in revenues was mainly due to the commercialization of World of Fighter in January 2010. The year-over-year decrease was mainly due to the expiration of WoW license in June 2009.

For the second quarter of 2010, The9 reported total net revenues were RMB25.4 million (US$3.7 million), which increased by 15% compared to RMB22.1 million (US$3.3 million) in the first quarter of 2010 but decreased by 91% compared to RMB287.9 million (US$42.5 million) in the second quarter of 2009. The quarter-over-quarter increase was primarily due to the revenue generated from Kingdom Heroes Online 2 which was commercialized in May 2010. The year-over-year decrease was mainly due to the expiration of WoW license in June 2009.

Gross Profit (Loss)

Gross profit for the first quarter of 2010 was RMB1.7 million (US$0.3 million) compared to gross loss of RMB76.0 million (US$11.2 million) in the fourth quarter of 2009 and gross profit of RMB67.9 million (US$10.0 million) in the first quarter of 2009. Gross loss in the fourth quarter of 2009 was mainly due to the impairment of prepaid royalties and withholding tax of certain games amounting to RMB61.3 million (US$9.0 million) in the fourth quarter of 2009 while no such cost occurred in the first quarter of 2010. The year-over-year decrease was mainly due to the expiration of WoW license in June 2009.

Gross loss for the second quarter of 2010 was RMB4.6 million (US$0.7 million) compared to gross profit of RMB1.7 million (US$0.3 million) in the first quarter of 2010 and gross profit of RMB64.3 million (US$9.5 million) in the second quarter of 2009. The gross loss for the second quarter was mainly due to the impairment of prepaid royalties of a game.

Operating Expenses

For the first quarter of 2010, operating expenses were RMB80.7 million (US$11.9 million), a 44% decrease from RMB144.2 million (US$21.3 million) in the fourth quarter of 2009 and a 36% decrease from RMB125.1 million (US$18.4 million) in the first quarter of 2009. The quarter-over-quarter decrease was primarily the result of decrease in staff cost and recognition of impairment on servers and upfront license fees for certain games made in the fourth quarter of 2009, while there was no such impairment in the first quarter of 2010. The year-over-year decrease was primarily due to decrease in staff cost and WoW-related operating expenses.

For the first quarter of 2010, share-based compensation was RMB11.9 million (US$1.7 million), compared to RMB13.9 million (US$2.0 million) in the fourth quarter of 2009 and RMB15.7 million (US$2.3 million) in the first quarter of 2009.

For the second quarter of 2010, operating expenses were RMB75.0 million (US$11.1 million), representing a 7% decrease from RMB80.7 million (US$11.9 million) in the first quarter of 2010 a 51% decrease from RMB152.5 million (US$22.5 million) in the second quarter of 2009. The quarter-over-quarter decrease was primarily the net result of decrease in marketing expenses due to the net effect of decrease of World of Fighter's marketing expenses which was partly offset by the marketing expenses for Kingdom Heroes 2 Online during the second quarter; decrease in staff cost and increase in research and development expenses caused by consolidation of Red5 Studios Inc. The year-over-year decrease was primarily the net result of decrease in marketing expenses of WoW and EA SPORTS(TM) FIFA Online 2 and decrease in staff cost; which was partly offset by increase in research and development expenses caused by consolidation of Red5' Studios Inc.

For the second quarter of 2010, share-based compensation was RMB7.7 million (US$1.1 million), compared to RMB11.9 million (US$1.7 million) in the first quarter of 2010 and to RMB15.0 million (US$2.2 million) in the second quarter of 2009.

Interest Income

Interest income for the first quarter of 2010 was RMB6.4 million (US$0.9 million), compared to RMB7.4 million (US$1.1 million) in the fourth quarter of 2009 and RMB9.0 million (US$1.3 million) in the first quarter of 2009. The decrease of interest income was primarily due to decrease of cash balance.

Interest income for the second quarter of 2010 was RMB5.4 million (US$0.8 million), compared to RMB6.4 million (US$0.9 million) in the first quarter of 2010 and RMB6.9 million (US$1.0 million) in the second quarter of 2009. The decrease of interest income was primarily due to decrease of cash balance.

Other (Expenses) Income, net

Other expenses for the first quarter of 2010 was RMB2.2 million (US$0.3 million), compared to other income of RMB6.1 million (US$0.9 million) in the fourth quarter of 2009 and other expenses of RMB0.4 million (US$0.1 million) in the first quarter of 2009. The quarter-over-quarter difference was primarily due to there was a government subsidy in the fourth quarter of 2009 while none such subsidy was received in the first quarter of 2010. The year-over-year increase of other expenses was primarily due to the increase of foreign exchange loss.

Other expenses for the second quarter of 2010 was RMB1.0 million (US$0.2 million), compared to other expenses of RMB2.2 million (US$0.3 million) in the first quarter of 2010 and other income of RMB0.1 million (US$0.01 million) in the second quarter of 2009. The difference was primarily due to the change in foreign exchange loss.

Net Income (Loss)

For the first quarter of 2010, net loss was RMB75.8 million (US$11.2 million), which decreased by 63% from net loss of RMB205.5 million (US$30.3 million) in the fourth quarter of 2009 and compared with a net loss of RMB46.8 million (US$6.9 million) in the first quarter of 2009.

Fully diluted loss per share and per ADS for the first quarter of 2010 was RMB3.02 (US$0.44), compared with RMB8.18 (US$1.21) in the fourth quarter of 2009 and RMB1.78 (US$0.26) in the first quarter of 2009.

For the first quarter of 2010, non-GAAP adjusted net loss was RMB52.7 million (US$7.8 million) compared with non-GAAP adjusted net loss of RMB188.3 million (US$27.8 million) for the previous quarter and non-GAAP adjusted net income of RMB48.3 million (US$7.1 million) for the same period of last year. Fully diluted non-GAAP adjusted net loss per share was RMB2.10 (US$0.31), compared with non-GAAP adjusted net loss per share of RMB7.5 (US$1.11) for the fourth quarter of 2009 and non-GAAP adjusted net income per share of RMB1.84 (US$0.27) in the first quarter of 2009.

For the second quarter of 2010, net loss was RMB65.8 million (US$9.7 million), which decreased by 13% from net loss of RMB75.8 million (US$11.2 million) in the first quarter of 2010 and compared with net loss of RMB79.2 million (US$11.7 million) in the second quarter of 2009.

Fully diluted loss per share and per ADS for the second quarter of 2010 was RMB2.62 (US$0.39), compared with RMB3.02 (US$0.44) in the first quarter of 2010 and RMB3.15 (US$0.46) in the second quarter of 2009.

For the second quarter of 2010, non-GAAP adjusted net loss was RMB48.8 million (US$7.2 million) compared with non-GAAP net loss of RMB52.7 million (US$7.8 million) for the previous quarter and non-GAAP adjusted net income of RMB3.1 million (US$0.5 million) for the same period of last year. Fully diluted non-GAAP adjusted net loss per share was RMB1.94 (US$0.29), compared with fully diluted non-GAAP adjusted net loss of RMB2.10 (US$0.31) for the first quarter of 2010 and fully diluted non-GAAP adjusted net income of RMB0.12 (US$0.02) in the second quarter of 2009.

Currency Convenience Translation

The conversion of Renminbi (RMB) into US dollars (US$) in this press release is based on the noon buying rate in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York as of June 30, 2010, which was RMB6.7815 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts.

Use of Non-GAAP Measure

To supplement the consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), The9 uses the non-GAAP measure of non-GAAP adjusted net income, which is adjusted from the most directly comparable financial measures calculated and presented in accordance with GAAP to exclude certain expenses. The non-GAAP financial measure is provided to enhance investors' overall understanding of the Company's operating performance.

Non-GAAP adjusted net income is defined as earnings before depreciation of property, equipment and software, amortization of land use right and intangibles, share-based compensation, foreign exchange loss and income tax expenses/benefits, as applicable. The use of non-GAAP adjusted net income has certain limitations. Depreciation of property, equipment and software, amortization of land use right and intangibles and income tax expenses/benefits have been and will be incurred and are not reflected in the presentation of non-GAAP adjusted net income. Each of these items should also be considered in the overall evaluation of our results. Non-GAAP adjusted net income should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, and income tax expenses/benefits in our reconciliations to the GAAP financial measure, share-based compensation and income tax expenses/benefits in our reconciliations to the GAAP financial measure, which should be considered when evaluating our performance. Non-GAAP adjusted net income is not defined under GAAP, and our non-GAAP adjusted net income is not a measure of net income, operating income, or any operating performance measure that is calculated in accordance with GAAP. In addition, our non-GAAP adjusted net income may not be comparable to similarly titled measures utilized by other companies since such other companies may not calculate non-GAAP adjusted net income in the same manner as we do. For more information on this non-GAAP financial measure, please see the tables captioned "Reconciliation of GAAP to non-GAAP results" set forth at the end of this release.

Form 20-F

On April 16, 2010, The9 filed its annual report on Form 20-F for the year ended December 31, 2009 with the United States Securities and Exchange Commission (SEC). The report may be accessed in the Investor Relations section of the Company's website at http://www.corp.the9.com. Upon request, The9 will provide a hard copy of its annual report on Form 20-F for the year ended December 31, 2009, which contains its audited consolidated financial statements, free of charge, to its shareholders. Requests should be made to The9 Limited, No. 3 Building, No. 690, Bibo Road, Pu Dong New Area, Shanghai 201203, People's Republic of China.

Conference Call / Webcast Information

The9's management team will host a conference call on Tuesday, August 24, 2010 at 9:00 PM, U.S. Eastern Time, corresponding to Wednesday, August 25, 2010 at 9:00 AM, Beijing Time, to present an overview of The9's financial performance and business operations.

Investors, analysts and other interested parties will be able to access the live conference by calling +1-857-350-1676, password "37936166". In the U.S., members of the financial community may also participate in the call by dialing toll-free number +1-866-788-0538, password "37936166". A replay of the call will be available through September 1, 2010. The dial-in details for the replay: U.S. toll free number +1-888-286-8010, International dial-in number +1-617-801-6888; Password "46865322".

The9 will also provide a live webcast of the earnings call. Participants in the webcast should log onto the Company's Investor Relations website http://www.corp.the9.com 15 minutes prior to the call, then click on the icon for "The9 Limited 1Q & 2Q 2010 Earnings Conference Call" and follow the instructions.

About The9 Limited

The9 Limited is an online game operator and developer in China. The9's business is primarily focused on developing and operating high-quality games for online game market. The9 directly, or through affiliates, operates licensed MMORPGs and advanced casual games including Soul of The Ultimate Nation(TM), Granado Espada, EA SPORTS(TM) FIFA Online 2, Atlantica and Kingdom Heroes 2 Online, as well as its proprietary games World of Fighter, Jiu Zhou Zhan Ji and Winning Goal, in mainland China. It has also obtained exclusive licenses to operate other games in mainland China, including Free Realms, Audition 2 and others. In addition, The9 is developing various proprietary games, including Shen Xian Zhuan and other MMORPGs and advanced causal games.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this press release contain forward-looking statements. The9 may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about The9's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, The9's limited operating history as an online game operator, political and economic policies of the Chinese government, the laws and regulations governing the online game industry, information disseminated over the Internet and Internet content providers in China, intensified government regulation of Internet cafes, The9's ability to retain existing players and attract new players, license, develop or acquire additional online games that are appealing to users, anticipate and adapt to changing consumer preferences and respond to competitive market conditions, and other risks and uncertainties outlined in The9's filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 20-F. The9 does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

    For further information, please contact:

     Ms. Phyllis Sai
     Manager, Investor Relations
     The9 Limited
     Tel:   +86-21-5172-9990
     Email: IR@corp.the9.com
     Web:   http://www.corp.the9.com/


                             -- Tables Follow --


                                 THE9 LIMITED
           UNAUDITED CONSOLIDATED STATEMENTS OF INCOME INFORMATION
    (Expressed in Renminbi - RMB and US Dollars - US$, except share data)

                                                 Quarter Ended
                                       March 31,      June 30,    December 31,
                                          2009          2009          2009
                                           RMB           RMB           RMB

     Revenues:
       Online game services           447,528,110   301,491,378    20,712,264
       Game operating support,
        website solutions and
        advertisement                     185,924       247,267        58,201
       Other revenues                   2,091,582     2,135,763     1,277,179
                                      449,805,616   303,874,408    22,047,644

     Sales Taxes                      (23,605,792)  (15,946,899)   (1,150,060)

     Net Revenues                     426,199,824   287,927,509    20,897,584

     Cost of Services                (358,312,923) (223,644,279)  (96,909,129)

     Gross Profit                      67,886,901    64,283,230   (76,011,545)

     Operating Expenses:
       Product development            (26,529,747)  (31,125,521)  (30,496,768)
       Sales and marketing            (35,386,080)  (37,883,112)  (18,539,240)
       General and administrative     (63,164,627)  (53,257,372)  (46,454,604)
       Impairment of equipment,
        intangible assets and
        goodwill                               --   (30,199,751)  (48,671,892)

     Total operating expenses:       (125,080,454) (152,465,756) (144,162,504)

     Loss from operations             (57,193,553)  (88,182,526) (220,174,049)
     Interest income                    9,004,747     6,905,505     7,402,843
     Other (expenses) income , net       (363,129)      112,605     6,122,924

     Loss before income tax expense,
      gain on investment disposal,
      impairment loss on investment
      and share of gain (loss) in
      equity investments              (48,551,935)  (81,164,416) (206,648,282)
     Income tax (expense) benefit        (697,925)           --    11,092,063
     Loss before gain on investment
      disposal, impairment loss
      on investment and share of
      gain (loss) in equity
      investments                     (49,249,860)  (81,164,416) (195,556,219)
     Gain on investment disposal               --            --            --
     Impairment loss on investment             --            --   (10,251,500)
     Share of gain (loss) in equity
      investments, net of taxes           141,128      (589,547)   (1,429,471)

     Net loss                         (49,108,732)  (81,753,963) (207,237,190)
     Less: Net loss attributable to
      non-controlling interests        (2,310,703)   (2,560,155)   (1,714,026)

     Net loss attributable to
      holders of ordinary shares      (46,798,029)  (79,193,808) (205,523,164)

     Loss attributable to holders of
      ordinary shares per share
       - Basic                              (1.78)        (3.15)        (8.18)
       - Diluted                            (1.78)        (3.15)        (8.18)

     Weighted average number of
      shares outstanding
       - Basic                         26,248,436    25,125,385    25,119,580
       - Diluted                       26,248,436    25,125,385    25,119,580

     Amount attributable to holders
      of ordinary shares              (46,798,029)  (79,193,808) (205,523,164)


                                            Quarter Ended
                            March 31,   June 30,      March 31,     June 30,
                              2010         2010          2010         2010
                               RMB          RMB           US$          US$

     Revenues:
       Online game
        services            22,257,214   25,927,886    3,282,049    3,823,326
       Game operating
        support, website
        solutions and
        advertisement           72,842      212,756       10,741       31,373
       Other revenues        1,001,408      634,601      147,668       93,578
                            23,331,464   26,775,243    3,440,458    3,948,277

     Sales Taxes            (1,214,374)  (1,407,912)    (179,072)    (207,611)

     Net Revenues           22,117,090   25,367,331    3,261,386    3,740,666

     Cost of Services      (20,374,564) (29,944,864)  (3,004,433)  (4,415,670)

     Gross Profit            1,742,526   (4,577,533)     256,953     (675,004)

     Operating Expenses:
       Product development (27,965,714) (39,089,303)  (4,123,824)  (5,764,109)
       Sales and marketing (18,293,758) (11,486,818)  (2,697,598)  (1,693,846)
       General and
        administrative     (34,417,006) (24,434,288)  (5,075,132)  (3,603,080)
       Impairment of
        equipment,
        intangible assets
        and goodwill                --           --           --           --

     Total operating
      expenses:            (80,676,478) (75,010,409) (11,896,554) (11,061,035)

     Loss from operations  (78,933,952) (79,587,942) (11,639,601) (11,736,039)
     Interest income         6,420,997    5,381,655      946,840      793,579
     Other (expenses)
      income , net          (2,186,512)  (1,036,375)    (322,423)    (152,824)

     Loss before income
      tax expense, gain on
      investment disposal,
      impairment loss on
      investment and share
      of gain (loss) in
      equity investments   (74,699,467) (75,242,662) (11,015,184) (11,095,284)
     Income tax (expense)
      benefit                     (186)      (3,074)         (27)        (453)
     Loss before gain on
      investment disposal,

      impairment loss
      on investment and
      share of gain
      (loss) in equity
      investments          (74,699,653) (75,245,736) (11,015,211) (11,095,737)
     Gain on investment
      disposal                      --    6,827,900           --    1,006,842
     Impairment loss on
      investment                    --           --           --           --
     Share of gain (loss)
      in equity
      investments, net
      of taxes              (4,400,847)  (1,933,730)    (648,949)    (285,148)

     Net loss              (79,100,500) (70,351,566) (11,664,160) (10,374,043)
     Less: Net loss
      attributable to
      non-controlling
      interests             (3,297,940)  (4,533,331)    (486,314)    (668,485)

     Net loss attributable
      to holders of
      ordinary shares      (75,802,560) (65,818,235) (11,177,846)  (9,705,558)

     Loss attributable to
      holders of ordinary
      shares per share
       - Basic                   (3.02)       (2.62)       (0.44)       (0.39)
       - Diluted                 (3.02)       (2.62)       (0.44)       (0.39)

     Weighted average
      number of shares
      outstanding
       - Basic              25,121,645   25,121,645   25,121,645   25,121,645
       - Diluted            25,121,645   25,121,645   25,121,645   25,121,645

     Amount attributable
      to holders of
      ordinary shares      (75,802,560) (65,818,235) (11,177,846)  (9,705,558)



                                 THE9 LIMITED
                   CONSOLIDATED BALANCE SHEETS INFORMATION
              (Expressed in Renminbi - RMB and US Dollars - US$)


                                                     As at
                                   December 31,    March 31,      June 30,
                                      2009           2010           2010
                                       RMB            RMB            RMB
                                    (audited)     (unaudited)    (unaudited)

    Assets
    Current Assets
      Cash and cash equivalents   1,675,081,345  1,593,394,831  1,546,286,233
      Accounts receivable               920,214      3,444,115      6,565,038
      Due from related parties        1,110,424      1,190,827      1,638,483
      Advances to suppliers          44,132,089     45,887,841     46,305,066
      Prepayments and other
       current assets                77,896,385     68,874,882     44,528,651
      Deferred costs                  1,516,601        382,731      1,524,202
      Deferred tax assets,
       current                        2,139,896      2,139,896      2,139,896
    Total current assets          1,802,796,954  1,715,315,123  1,648,987,569
    Investments in equity
     investees                      308,806,125    304,405,279    302,471,549
    Property, equipment and
     software                        75,977,200     73,280,955     73,397,619
    Goodwill                                 --             --     92,210,971
    Intangible assets                51,628,286     49,719,693    254,009,369
    Land use right                   79,877,847     79,397,618     78,917,391
    Other long-term assets              603,910     19,992,590     23,181,949
    Deferred tax assets, non-
     current                          5,267,185      5,267,185      5,267,185
    Total Assets                  2,324,957,507  2,247,378,443  2,478,443,602

    Liabilities and Shareholders'
     Equity
    Current Liabilities
      Accounts payable               35,013,675     39,561,710     59,132,971
      Income tax payable                 29,947         30,117        (49,156)
      Other taxes payable             6,270,518      4,016,648      7,932,670
      Advances from customers        11,154,437      8,287,165      7,274,723
      Deferred revenue, current      10,933,464     12,727,576     15,920,115
      Refund of game points         196,401,440    196,377,615    196,366,637
      Other payables and accruals    51,704,425     40,083,773     37,242,776
    Total current liabilities       311,507,906    301,084,604    323,820,736
    Deferred revenue, non-current            --             --    167,503,050
    Deferred tax liabilities,
     non-current                             --             --     81,757,764
    Total Liabilities               311,507,906    301,084,604    573,081,550

    Equity
      Common shares (US$0.01 par
       value; 25,121,645 shares
       issued and outstanding
       as of December 31, 2009,
       March 31, 2010 and
       June 30, 2010)                 2,051,712      2,051,712      2,051,712
      Additional paid-in capital  2,069,616,975  2,081,349,451  2,085,665,452
      Statutory reserves             28,071,982     28,071,982     28,071,982
      Accumulated other
       comprehensive income                  --             --       (681,640)
      Retained deficit              (88,364,685)  (164,167,245)  (229,985,480)
    Total The9 Limited
     shareholders' equity         2,011,375,984  1,947,305,900  1,885,122,026
    Non-controlling interests         2,073,617     (1,012,061)    20,240,026
    Total equity                  2,013,449,601  1,946,293,839  1,905,362,052
    Total liabilities and equity  2,324,957,507  2,247,378,443  2,478,443,602


                                                           As at
                                              March 31, 2010    June 30, 2010
                                                   US$               US$
                                               (unaudited)       (unaudited)

    Assets
    Current Assets
      Cash and cash equivalents                234,962,003       228,015,370
      Accounts receivable                          507,869           968,081
      Due from related parties                     175,599           241,611
      Advances to suppliers                      6,766,621         6,828,145
      Prepayments and other current
       assets                                   10,156,290         6,566,195
      Deferred costs                                56,438           224,759
      Deferred tax assets, current                 315,549           315,549
    Total current assets                       252,940,369       243,159,710
    Investments in equity investees             44,887,603        44,602,455
    Property, equipment and software            10,806,010        10,823,213
    Goodwill                                            --        13,597,430
    Intangible assets                            7,331,666        37,456,222
    Land use right                              11,707,973        11,637,159
    Other long-term assets                       2,948,107         3,418,410
    Deferred tax assets, non-current               776,699           776,699
    Total Assets                               331,398,427       365,471,298

    Liabilities and Shareholders' Equity
    Current Liabilities
      Accounts payable                           5,833,770         8,719,748
      Income tax payable                             4,441            (7,249)
      Other taxes payable                          592,295         1,169,752
      Advances from customers                    1,222,025         1,072,731
      Deferred revenue, current                  1,876,808         2,347,580
      Refund of game points                     28,957,843        28,956,225
      Other payables and accruals                5,910,753         5,491,820
    Total current liabilities                   44,397,935        47,750,607
    Deferred revenue, non-current                       --        24,700,000
    Deferred tax liabilities, non-current               --        12,056,000
    Total Liabilities                           44,397,935        84,506,607

    Equity
      Common shares (US$0.01 par value;
       25,121,645 shares issued and
       outstanding as of December 31,
       2009, March 31, 2010 and
       June 30, 2010)                              302,545           302,545
      Additional paid-in capital               306,915,793       307,552,231
      Statutory reserves                         4,139,495         4,139,495
      Accumulated other comprehensive
       income                                           --          (100,515)
      Retained deficit                         (24,208,102)      (33,913,659)
    Total The9 Limited shareholders'
     equity                                    287,149,731       277,980,097
    Non-controlling interests                     (149,239)        2,984,594
    Total equity                               287,000,492       280,964,691
    Total liabilities and equity               331,398,427       365,471,298



                                 THE9 LIMITED
                  RECONCILIATION OF GAAP TO NON-GAAP RESULTS
    (Expressed in Renminbi - RMB and US Dollars - US$, except share data)

                                                  Quarter Ended
                                        March 31,     June 30,    December 31,
                                           2009         2009         2009
                                            RMB          RMB          RMB
                                       (unaudited)  (unaudited)  (unaudited)

    GAAP net income (loss)             (46,798,029) (79,193,808) (205,523,164)
    Depreciation of property,
     equipment                          54,278,555   48,379,270    11,749,761
    Amortization of land use right and
     intangible assets                  24,050,296   19,046,925     2,626,562
    Share based compensation            15,668,139   15,016,684    13,855,861
    Foreign exchange loss (gain)           388,210     (114,679)      102,801
    Income tax expense                     697,925           --   (11,092,063)
    Non-GAAP net income (loss)          48,285,096    3,134,392  (188,280,242)

    GAAP earnings (loss) per share
       - Basic                               (1.78)       (3.15)        (8.18)
       - Diluted                             (1.78)       (3.15)        (8.18)

    Non-GAAP net income (loss) per
     share
       - Basic                                1.84         0.12         (7.50)
       - Diluted                              1.84         0.12         (7.50)

    Weighted average shares
     outstanding
       - Basic                          26,248,436   25,125,385    25,119,580
       - Diluted                        26,248,436   25,125,385    25,119,580


                                              Quarter Ended
                             March 31,     June 30,     March 31,   June 30,
                                2010         2010         2010        2010
                                 RMB          RMB          US$         US$
                            (unaudited)  (unaudited)  (unaudited)  (unaudited)

    GAAP net income (loss)  (75,802,560) (65,818,235) (11,177,846) (9,705,557)
    Depreciation of
     property, equipment      5,800,844    5,639,745      855,392     831,637
    Amortization of land
     use right and
     intangible assets        2,388,821    3,163,302      352,256     466,461
    Share based
     compensation            11,857,238    7,650,882    1,748,468   1,128,199
    Foreign exchange loss
     (gain)                   3,019,687      601,233      445,283      88,658
    Income tax expense              186        3,074           27         453
    Non-GAAP net income
     (loss)                 (52,735,784) (48,759,999)  (7,776,420) (7,190,149)

    GAAP earnings (loss)
     per share
       - Basic                    (3.02)       (2.62)       (0.44)      (0.39)
       - Diluted                  (3.02)       (2.62)       (0.44)      (0.39)

    Non-GAAP net income
     (loss) per share
       - Basic                    (2.10)       (1.94)       (0.31)      (0.29)
       - Diluted                  (2.10)       (1.94)       (0.31)      (0.29)

    Weighted average shares
     outstanding
       - Basic               25,121,645   25,121,645   25,121,645  25,121,645
       - Diluted             25,121,645   25,121,645   25,121,645  25,121,645

SOURCE The9 Limited

Copyright . 24 PR Newswire



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