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): April 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 April 15, 2015, QKL Stores Inc. issued a press release regarding its financial results for the fiscal year ended December 31, 2014 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 April 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: April 15, 2015

 

 

Exhibit Index

 

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

 

 

Exhibit 99.1

 

QKL Stores Inc. Announces Fourth Quarter and Full Year 2014 Financial Results

 

Daqing, China, April 15, 2014 – 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 fourth quarter and full year financial results ended December 31, 2014.

 

Mr. Zhuangyi Wang, Chairman and CEO, said, “As QKL expands its market presence in northeast China, we are uniquely positioned against our local competitors through our large product offering, strong supplier relationships, efficient distribution network and state-of-the-art IT system. We are comfortable with our opportunities in 2015 and believe we’ll see an improvement in operating expenses and profit growth in coming quarters.

 

“In 2014, we closed one store and opened five stores. As of December 31, 2014, we operated 26 supermarkets, 18 hypermarkets, 4 department stores and 5 distribution centers situated in Daqing, Harbin Changchun and Jiamusi, respectively.

 

As we advance into 2015, we expect to open two new supermarket or hypermarket stores this year. We maintain confidence in our strategy of strengthening our store presence in Tier 4 and 5 cities in northeastern China as well as in our core region of operation around Daqing where the majority of our older stores are based.”

 

Fourth Quarter 2014 Financial Results

Revenue in the fourth quarter of 2014 increased by 12.3% to $75.8 million from $67.5 million in the fourth quarter of 2013. Comparable stores are stores that were opened for at least one year before the beginning of the comparison period, or by October 1, 2013. Those 43 stores generated approximately $66.8 million in sales in the fourth quarter of 2014, representing a decrease of $0.2 million, or 0.3% compared with $67.0 million in sales in fiscal 2013. New store sales increased, reflecting the opening of five new stores since October 1, 2013. These stores generated approximately $9.0 million in sales in the fiscal 2014.

 

Gross profit increased by 10.4% year over year to $12.7 million, compared to $11.5 million in the prior year period. Gross profit as a percentage of revenue for the fourth quarter of 2014 was 16.8%, compared to 17.0% for the fourth quarter of 2013. The decrease was due to the increasing competition in the online shopping.

 

Operating expenses increased by 42.2% to $24.6 million compared to $17.3 million in the prior year period. This was primarily a result of our significant recognition of the preliminary expenses and related new stores expenses in the fourth quarter of 2014. We did not open any new store in fiscal 2013.

 

We had a net loss of $14.7 million in the fourth quarter of 2014 compared with net loss of $11.6 million in the fourth quarter of 2013.

 

Full Year 2014 Financial Results

Revenue decreased by $8.2 million, or 2.9%, to $274.6 million for fiscal 2014 from $282.8 million for fiscal 2013. The change in net sales was primarily attributable to the following: comparable stores are stores that were opened for at least one year before the beginning of the comparison period, or by January 1, 2013. Those 43 stores generated approximately $252.9 million sales in fiscal 2014, a decrease of $20.1 million, or 7.4% compared with $273.0 million sales in fiscal 2013. New store sales increased, reflecting the opening of five new stores since January 1, 2013. These stores generated approximately $19.0 million in sales in the fiscal 2014.

 

Gross profit, or total revenue minus cost of sales, was decreased by $2.0 million, or4.1%, to $46.4 million, or 16.9% of net sales, in fiscal 2014 from $48.4 million, or 17.1% of net sales, in fiscal 2013. The change in gross profit was primarily attributable to net sales decreased by $8.2 million in fiscal 2014 compared to fiscal 2013.

 

Selling expenses increased by $11.8 million, or 25.2%, to $58.7 million, or 21.4% of net sales, in fiscal 2014 from $46.9 million, or 16.6% of net sales, in fiscal 2013. The change in selling expense was mainly due to the increase in the new stores in 2014. In particular, we incurred $5.5 million of preliminary expense, and $4.4 million of other additional expenses, including salaries, depreciation rental, utility and advertising in fiscal 2014. We did not open any new store in fiscal 2013.

 

We had a net loss of $27.0 million in fiscal 2014 compared with net loss of $14.3 million in fiscal 2013. The number of shares used in the computation of diluted EPS increased by 0.2% to 1,522,326 shares in fiscal 2014 from 1,519,258 shares in fiscal 2013.

 

 

 

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

 

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

		December 31, 2014				December 31, 2013
ASSETS
Cash		$	9,013,006			$	9,245,212
Restricted cash			8,623,748				8,668,882
Accounts receivable			949,211				557,745
Inventories			62,605,754				64,724,923
Other receivables			21,375,611				21,979,152
Prepaid expenses			12,114,028				9,915,479
Advances to suppliers			8,653,037				7,822,660
Income taxes receivables			-				1,739,773
Deferred income tax assets – current portion			2,839,714				2,788,918
Total current assets			126,174,109				127,442,744
Property, plant equipment, net			37,843,171				40,247,576
Land use rights, net			684,375				718,337
Deferred income tax assets – non-current portion			61,681				66,956
Other assets			11,880				17,276
Total assets		$	164,775,216			$	168,492,889
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short term bank loans			60,201,757				40,889,761
Accounts payable			37,206,633				35,840,964
Cash card and coupon liabilities			14,539,728				18,465,030
Customer deposits received			2,005,136				984,308
Accrued expenses and other payables			23,147,611				18,827,472
Income taxes payable			241,189				-
Total current liabilities			137,342,054				115,007,535
Warrant liabilities			-				-
Total liabilities			137,342,054				115,007,535
Commitments and contingencies			-				-
Shareholders’ equity
Common stock, $0.001 par value per share, authorized 100,000,000 shares, issued and outstanding 1,522,326 and 1,522,326 shares at December 31, 2014 and December 31, 2013 respectively			1,522				1,522
Series A convertible preferred stock, par value $0.01, authorized 10,000,000 shares, issued and outstanding 529,412 and 529,412 shares at December 31, 2014 and December 31, 2013			5,294				5,294
Additional paid-in capital			93,746,014				93,337,957
Retained earnings – appropriated			8,338,153				8,329,586
Retained earnings			(89,116,190	)			(62,145,794	)
Accumulated other comprehensive income			14,458,369				13,956,789
Total shareholders’ equity			27,433,162				53,485,354
Total liabilities and shareholders’ equity		$	164,775,216			$	168,492,889

 

 

  

QKL STORES INC. AND SUBSIDIARIES

Consolidated Statements of Operations

 

		Years Ended December 31,
		2014				2013
Net sales		$	274,636,920			$	282,790,433
Cost of sales			228,215,577				234,421,906
Gross profit			46,421,343				48,368,527
Operating expenses:
Selling expenses			58,724,799				46,854,916
General and administrative expenses			8,879,070				10,384,659
Total operating expenses			67,603,869				57,239,575
Loss from operations			(21,182,526	)			(8,871,048	)
Non-operating income(expense):
Interest income			622,988				441,718
Interest expense			(4,436,526	)			(1,386,810	)
Total non-operating income			(3,813,538	)			(945,092	)
Loss before income tax			(24,996,064	)			(9,816,140	)
Income taxes			1,965,765				4,481,672
Net loss		$	(26,961,829	)		$	(14,297,812	)
Comprehensive loss statement:
Net loss			(26,961,829	)			(14,297,812	)
Foreign currency translation adjustment			501,580				1,406,689
Comprehensive loss		$	(26,460,249	)		$	(12,891,123	)
*Basic earnings per share of common stock		$	(17.71	)		$	(9.41	)
*Diluted earnings per share		$	(17.71	)		$	(9.41	)

*Weighted average shares used in calculating net income per ordinary share – basic			1,522,326				1,519,258
*Weighted average shares used in calculating net income per ordinary share – diluted			1,522,326				1,519,258

 

 

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

 

		Years Ended December 31,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(26,961,829	)		$	(14,297,812	)
Depreciation-property, plant and equipment			4,942,830				6,502,288
Amortization			30,223				29,968
Deferred income tax			(60,393	)			3,631,238
Loss on disposal of property, plant and equipment			1,205,657				2,850
Share-based compensation			408,057				816,468
(Reversal)/provision on inventory, other receivables and sales return			(378,576	)			518,453
Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable			(394,389	)			261,888
Inventories			1,761,003				(2,895,295	)
Other receivables			880,698				(3,018,049	)
Prepaid expenses			(2,250,285	)			1,509,946
Advances to suppliers			(871,150	)			1,990,054
Accounts payable			1,552,356				3,865,732
Cash card and coupon liabilities			(3,829,348	)			(743,884	)
Customer deposits received			1,026,003				(301,087	)
Accrued expenses and other payables			5,209,616				(10,898,312	)
Income taxes payable			1,972,000				(1,718,925	)
Net cash used in operating activities			(15,757,527	)			(14,744,479	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(4,230,820	)			(598,043	)
Sales proceeds of fixed assets disposal			277,290				177,346
Increase of restricted cash			-				(8,668,629	)
Net cash used in investing activities			(3,953,530	)			(9,089,326	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank repayment			(40,678,849	)			(16,133,794	)
Bank borrowings			60,204,696				40,334,486
Net cash provided by financing activities			19,525,847				24,200,692
Net (decrease)/increase in cash			(185,210	)			366,887
Effect of foreign currency translation			(46,996	)			398,912
Cash at beginning of period			9,245,212				8,479,413
Cash at end of period		$	9,013,006			$	9,245,212
Supplemental disclosures of cash flow information:
Interest paid			4,436,526				1,386,810
Income taxes (received)/paid		$	(45,196	)		$	999,271