QKLS QKL Stores Inc (CE)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934

 

Date of Report (date of earliest event reported): May 15, 2015

 

QKL STORES INC.

(Exact name of registrant as specified in charter)

 

Delaware	033-10893	75-2180652
(State of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

 

4 Nanreyuan Street

Dongfeng Road

Sartu District

163300 Daqing, PRC

 

(Address Of Principal Executive Offices) (Zip Code)

 

(011) 86-459-460-7825

(Registrant’s Telephone Number, Including Area Code)

 

---

(Former Name or Former Address, is Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02

Results of Operations and Financial Condition.

 

On May 15, 2015, QKL Stores Inc. issued a press release regarding its financial results for the three months ended March 31, 2015 and announcing a conference call regarding its financial results for the same period. A copy of the press release is filed herewith as Exhibit 99.1 to this Current Report and is incorporated herein by reference.

 

As provided in General Instruction B.2 of SEC Form 8-K, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or under the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.

 

Item 9.01

Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.		Description
99.1		Press release dated May 15, 2015

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	QKL STORES INC.
	By:	/s/Tsz-Kit Chan
		Name: Tsz-Kit Chan
		Title: Chief Financial Officer

 

Date: May 15, 2015

 

 

Exhibit Index

 

Exhibit No.	Description
99.1	Press release dated May 15, 2015

 

 

 

Exhibit 99.1

 

QKL Stores Inc. Announces First Quarter 2015 Financial Results

 

-- 1Q15 Revenue Decreased by 7.7% to $92.6 million from $86.0 million in 1Q14--

-- 1Q15 Gross Profit Decreased by 4.1% to $15.3 million from $14.7 million in 1Q13 –

 

Daqing, China, May 15, 2015 – QKL Stores Inc. (the “Company”) (Nasdaq: QKLS), a leading regional supermarket chain in Northeastern China and Inner Mongolia, today announced its financial results for the first quarter ended March 31, 2015.

 

Mr. Zhuangyi Wang, Chairman and CEO, said, “We closed two stores in the first quarter, and finished the first quarter operating a total of 47 stores, comprised of 26 supermarkets, 17 hypermarkets and 4 department stores. As our new store opening plan for 2015, the two more new stores are going to open in the second half of the year, we expect our profitability to improve as we benefit from our improving new store sales, increased same store sales at existing stores and reduced store opening and promotional expenses.”

 

“We were also pleased with the improvement of our operating cash flows in the first quarter due to a reduction in inventory after the peak Chinese New Year season and a decrease in other receivables attributable to cash recovery from our vendors after the busy holiday season. We are pleased with our execution in the first quarter and are setting the stage for increased top and bottom line growth in the coming quarters.”

 

First Quarter 2015 Financial Results

Revenue increased $6.6 million, or 7.7%, to $92.6 million for the three months ended March 31, 2015 from $86.0 million for the three months ended March 31, 2014. Same store sales represents sales from stores that were opened for at least one year before the beginning of the comparison period, or by January 1, 2014. Same store (42 stores) sales generated approximately $79.6 million in sales in the first quarter of 2015, a decrease of $0.7 million, or 0.9% compared with $80.3 million in net sales in the first quarter of 2014. New store sales increased, reflecting the opening of five new stores since January 1, 2014. The store generated approximately $10.8 million in sales in the first quarter of 2015.

 

Gross profit, or total revenue minus cost of sales, increased by $0.6million, or 4.1%, to $15.3million, or 16.5% of net sales, in the first quarter of 2015from $14.7 million, or 17.1% of net sales, in the first quarter of 2014. The change in gross profit was primarily attributable to an increase in net sales of $6.6million in the first quarter of 2015compared to the first quarter of 2014.The decrease in gross profit relative to net sales was due to competitions arising from the increasing challenge from the online shopping that have significant pricing pressure on our selling of high margin products.

 

Selling expenses were$16.3million, or 17.6% of net sales, in the first quarter of 2015, and$13.3 million, or 15.4% of net sales, in the first quarter of 2014. The change in selling expenses was mainly due to a increase in expenses in labor costs, promotion expenses, utilities for three months ended March 31, 2015 compared to the same period in 2014. In specific, labor costs increased by $0.8 million or 15.4%, to $6.0 million in the first quarter of 2015 from $5.2 million in the first quarter of 2014. Promotion expenses increased by $0.5 million, or 50.0%, to $1.5 million in the first quarter of 2015 from $1.0 million in the first quarter of 2014. Utilities increased by $0.4 million, or 28.6%, to $1.8 million in the first quarter of 2015 from $1.4 million in the first quarter of 2014.

 

General and administrative expenses decreased by $0.7 million, or 21.9%, to $2.5 million, or 2.7% of net sales, in the first quarter of 2015 from $3.2 million, or 3.8% of net sales, in the first quarter of 2014. The decrease was mainly due to the control of our administrative expenses.

 

Our net loss for the first three months of 2015 was $4.6 million, or $3.01 per diluted share, from $3.1 million, or $2.01 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was 1,522,326 for the first three months of 2015 and 2014.

 

Conference Call

The Company will conduct a conference call to discuss its first quarter 2015 results on Friday, May 15, 2015 at 8:30 am ET. Listeners may access the call by dialing #1-719-325-2455. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10046673.

 

Participant Dial In (Toll Free):	1-877-870-4263
Participant International:	1-412-317-0790
Canadian Dial In (Toll Free):	1-855-669-9657
China (N) Toll Free:	4001-201203
China (S) Toll Free:	4001-201203
Hong Kong Toll Free:	800-905945

 

 

About QKL Stores Inc.:

 

Based in Daqing, China, QKL Stores, Inc. is a leading regional supermarket chain company operating in Northeastern China and Inner Mongolia. QKL Stores sells a broad selection of merchandise, including groceries, fresh food, and non-food items, through its retail supermarkets, hypermarkets and department stores; the company also has its own distribution centers that service its supermarkets. For more information, please access the Company’s website at: www.qklstoresinc.com.

 

Safe Harbor Statement

 

Certain statements in this release and other written or oral statements made by or on behalf of the Company are “forward looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The forward looking statements are subject to a number of risks and uncertainties including market acceptance of the Company’s services and projects and the Company’s continued access to capital and other risks and uncertainties. The actual results the Company achieves may differ materially from those contemplated by any forward-looking statements due to such risks and uncertainties. These statements are based on our current expectations and speak only as of the date of such statements.

 

Contact Information

 

QKL Stores, Inc.

 

In China:

Mike Li, Investor Relations

+86-459-460-7987

 

  

 

 

(Financial Tables on Following Pages)

 

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

		March 31,  2015				December 31, 2014
		(Unaudited)
ASSETS
Cash		$	43,556,481			$	9,013,006
Restricted cash			21,321,692				8,623,748
Accounts receivable			777,226				949,211
Inventories			36,059,844				62,605,754
Other receivables			20,798,536				21,375,611
Prepaid expenses			12,165,117				12,114,028
Advances to suppliers			8,142,582				8,653,037
Deferred income tax assets – current portion			2,830,110				2,839,714
Total current assets			145,651,588				126,174,109
Property, plant and equipment, net			38,315,997				37,843,171
Land use rights, net			679,640				684,375
Deferred income tax assets – non-current portion			61,937				61,681
Other assets			11,954				11,880
Total assets		$	184,721,116			$	164,775,216
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term loans		$	85,449,139			$	60,201,757
Accounts payable			36,109,828				37,206,633
Cash card and coupon liabilities			14,240,625				14,539,728
Customer deposits received			1,990,598				2,005,136
Accrued expenses and other payables			23,413,936				23,147,611
Income taxes payable			119,810				241,189
Total current liabilities			161,323,936				137,342,054
Total liabilities			161,323,936				137,342,054
Shareholders’ equity
Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 shares at March 31, 2015 and December 31, 2014			1,522				1,522
Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 shares at March 31, 2015 and December 31, 2014			5,294				5,294
Additional paid-in capital			93,746,014				93,746,014
Retained earnings – appropriated			8,338,153				8,338,153
Retained earnings			(93,699,363	)			(89,116,190	)
Accumulated other comprehensive income			15,005,560				14,458,369
Total shareholders’ equity			23,397,180				27,433,162
Total liabilities and shareholders’ equity		$	184,721,116			$	164,775,216

  

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

 

		(Unaudited)
		Three Months Ended March 31,
		2015				2014
Net sales		$	92,557,686			$	86,032,676
Cost of sales			77,297,468				71,300,517
Gross profit			15,260,218				14,732,159
Operating expenses:
Selling expenses			16,331,821				13,280,183
General and administrative expenses			2,509,702				3,233,410
Total operating loss			18,841,523				16,513,593
Loss from operations			(3,581,305	)			(1,781,434	)
Non-operating expense:
Interest income			86,441				230,098
Interest expense			(1,080,214	)			(1,499,243	)
Total non-operating loss			(993,773	)			(1,269,145	)
Loss before income taxes			(4,575,078	)			(3,050,579	)
Income taxes			8,095				5,872
Net loss			(4,583,173	)			(3,056,451	)
Comprehensive income statement:
Net loss			(4,583,173	)			(3,056,451	)
Foreign currency translation adjustment			547,191				(753,173	)
Comprehensive loss		$	(4,035,982	)		$	(3,809,624	)
Basic loss per share of common stock		$	(3.01	)		$	(2.01	)
Diluted loss per share		$	(3.01	)		$	(2.01	)
Weighted average shares used in calculating loss per common stock – basic			1,522,326				1,522,326
Weighted average shares used in calculating loss per common stock – diluted			1,522,326				1,522,326

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

 

		(Unaudited)
		Three Months Ended March 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(4,583,173	)		$	(3,056,451	)
Depreciation			1,026,828				1,646,376
Amortization			7,546				7,383
Share-based compensation			-				102,014
Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable			175,243				241,021
Inventories			27,301,888				10,390,643
Other receivables			663,179				2,167,725
Prepaid expenses			(814	)			3,544,791
Advances to suppliers			544,248				2,185,374
Accounts payable			(1,246,364	)			(4,683,343	)
Cash card and coupon liabilities			(358,050	)			4,352,101
Customer deposits received			(22,771	)			(322,039	)
Accrued expenses and other payables			174,517				1,423,767
Income taxes payable			(121,906	)			(25	)
Net cash provided by operating activities			23,560,371				17,999,337
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(1,341,384	)			-
Increase of restricted cash			(12,613,111	)			(81,623	)
Net cash used in investing activities			(13,954,495	)			(81,623	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank borrowings			(35,804,961	)			-
Bank loan borrowing			60,705,683				3,268,054
Net cash used in financing activities			24,900,722				3,268,054
Effect of foreign currency translation			36,877				(228,009	)
Net increase in cash			34,506,598				21,185,768
Cash – beginning of period			9,013,006				9,245,212
Cash – end of period		$	43,556,481			$	30,202,971
Supplemental disclosures of cash flow information:
Interest paid		$	1,080,214			$	1,499,243
Income taxes paid		$	171,121			$	5,847