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): November 16, 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 November 16, 2015, QKL Stores Inc. issued a press release regarding its financial results for the nine months ended September 30, 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 November 16, 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: November 17, 2015

 

 

 

Exhibit Index

 

Exhibit No.		Description
99.1		Press release dated November 16, 2015

 

Exhibit 99.1

 

QKL Stores Inc. Announces Third Quarter 2015 Financial Results

 

-- 3Q15 Revenue decreased by 4.1% to $58.6 million from $61.1 million in 3Q14 --
-- 3Q15 Gross Profit decreased by 4.5% to $9.8 million from $10.3 million in 3Q14 --

 

DAQING, China, Nov. 16, 2015 /PRNewswire/ -- 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 third quarter ended September 30, 2015.

 

Mr. Zhuangyi Wang, Chairman and CEO, said, "Our third quarter results generally met our levels of expectation. The variety, value and freshness of our products continue to resonate with our customers driving sales higher. This store growth was also driven by in-store promotional events such as store anniversary celebrations."

 

"The environment of retailing business is still challenging mainly due to the rising costs and the emerging e-commerce channel. However, we are still confident on the domestic needs because of the urbanization of the third and fourth tier cities that we will achieve a fundamental improvement in the consumer purchasing power during the process."

 

"We look forward to the upcoming holiday season as we have a number of exciting marketing initiatives planed. Our balance sheet is healthy with a strong cash position, low level of debt and stable flow of cash from operations. We continue to make progress with our store operations and that can result in greater sales and profits over time."

 

Third Quarter 2015 Financial Results

 

Revenue in 3^rd quarter decreased by $2.5 million, or 4.1%, to $58.6 million for the three months ended September 30, 2015 from $61.1 million for the three months ended September 30, 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 $54.8 million in sales in the third quarter of 2015, a decrease of $4.4 million, or 7.4% compared with $59.2 million in net sales in the third quarter of 2014. New store sales increased, reflecting the opening of 3 new stores since January 1, 2014. These stores generated approximately $3.8 million in sales in the third quarter of 2015. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2015 was 45 versus 47 at September 30, 2014.

 

Gross profit, or total revenue minus cost of sales, decreased by $0.5 million, or 4.5%, to $9.8 million, or 16.7% of net sales, in the third quarter of 2015 from $10.3 million, or 16.8% of net sales, in the third quarter of 2014. The change in gross profit was primarily attributable to a decrease in net sales of $2.5 million and a decrease in cost of sales of $2.0 million in the third quarter of 2015 compared to the third 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 decreased by $2.5 million, or 19.4%, to $10.5 million, or 18.0% of net sales, in the third quarter of 2015, and $13.1 million, or 21.4% of net sales, in the third quarter of 2014. In specific, labor costs decreased by $0.3 million or 5.2%, to $5.5 million in the third quarter of 2015 from $5.8 million in the third quarter of 2014. Promotion expenses decreased by $0.3 million, or 20.0%, to $1.2 million in the third quarter of 2015 from $1.5 million in the third quarter of 2014.  Utilities decreased by $0.2 million, or 11.8%, to $1.5 million in the first quarter of 2015 from $1.7 million in the third quarter of 2014. Preliminary expenses in relation to new store opening was nil and $1.5 million in the third quarter of 2015 and 2014 respectively.

 

General and administrative expenses decreased by $0.1 million, or 4.0%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2015 from $1.9 million, or 3.3% of net sales, in the third quarter of 2014. There is no significant change to our general and administrative expense.

 

For the three months ended September 30, 2014, our net loss for the third quarter of 2015 was $3.8 million, or $2.53 per diluted share, from net loss of $5.5 million, or $3.60 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 third quarter of 2015 and 2014.

 

 

Conference Call

 

The Company will conduct a conference call to discuss its third quarter 2015 results on Monday, November 16, 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

  

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets      

 

		September 30,  2015				December 31, 2014
		(Unaudited)
ASSETS
Cash		$	18,789,468			$	9,013,006
Restricted cash			20,506,868				8,623,748
Accounts receivable			936,843				949,211
Inventories			42,851,508				62,605,754
Other receivables			19,565,180				21,375,611
Prepaid expenses			11,232,673				12,114,028
Advances to suppliers			8,524,899				8,653,037
Deferred income tax assets -- current portion			2,828,440				2,839,714
Total current assets			125,235,879				126,174,109
Property, plant and equipment, net			34,335,416				37,843,171
Land use rights, net			637,764				684,375
Deferred income tax assets -- non-current portion			59,570				61,681
Other assets			11,886				11,880
Total assets		$	160,280,515			$	164,775,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term loans		$	70,712,467			$	60,201,757
Accounts payable			35,689,016				37,206,633
Cash card and coupon liabilities			14,489,950				14,539,728
Customer deposits received			1,968,447				2,005,136
Accrued expenses and other payables			22,665,590				23,147,611
Income taxes payable			32,516				241,189
Total current liabilities			145,557,986				137,342,054
Total liabilities			145,557,986				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 September 30, 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 September 30, 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			(102,088,725	)			(89,116,190	)
Accumulated other comprehensive income			14,720,271				14,458,369
Total shareholders' equity			14,722,529				27,433,162
Total liabilities and shareholders' equity		$	160,280,515			$	164,775,216

  

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

 

		(Unaudited)								(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Net sales		$	58,624,419			$	61,121,016			$	207,615,214			$	198,809,303
Cost of sales			48,825,220				50,855,098				173,493,113				165,124,579
Gross profit			9,799,199				10,265,918				34,122,101				33,684,724
Operating expenses:
Selling expenses			10,523,974				13,062,967				37,361,946				35,800,120
General and administrative expenses			1,940,631				2,022,426				6,492,514				7,219,674
Total operating expenses			12,464,605				15,085,393				43,854,460				43,019,794
Loss from operations			(2,665,406	)			(4,819,475	)			(9,732,359	)			(9,335,070	)
Non-operating expense:
Interest income			250,179				241,800				540,008				726,416
Interest expense			(1,432,582	)			(891,855	)			(3,760,497	)			(3,670,486	)
Total non-operating expense			(1,182,403	)			(650,055	)			(3,220,489	)			(2,944,070	)
Loss before income taxes			(3,847,809	)			(5,469,530	)			(12,952,848	)			(12,279,140	)
Income taxes			656				11,357				19,687				21,096
Net loss		$	(3,848,465	)		$	(5,480,887	)		$	(12,972,535	)		$	(12,300,236	)
Comprehensive income statement:
Net loss		$	(3,848,465	)		$	(5,480,887	)		$	(12,972,535	)		$	(12,300,236	)
Foreign currency translation adjustment			(335,070	)			675,064				261,902				(57,107	)
Comprehensive loss		$	(4,183,535	)		$	(4,805,823	)		$	(12,710,633	)		$	(12,357,343
Weighted average number of shares outstanding:
Basic			1,522,326				1,522,326				1,522,326				1,522,326
Diluted			1,522,326				1,522,326				1,522,326				1,522,326
Losses per share:
Basic		$	(2.53	)		$	(3.60	)		$	(8.52	)		$	(8.08	)
Diluted		$	(2.53	)		$	(3.60	)		$	(8.52	)		$	(8.08	)

  

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

		(Unaudited)
		Nine Months Ended September 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(12,972,535	)		$	(12,300,236	)
Depreciation			3,023,678				5,084,837
Amortization			23,903				24,173
Share-based compensation			-				306,309
Deferred income tax			(88,564	)			(8,770	)
Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable			(20,739	)			233,589
Inventories			18,546,323				16,845,228
Other receivables			1,111,685				2,599,829
Prepaid expenses			481,141				2,916,696
Advances to suppliers			(173,189	)			2,829,497
Accounts payable			(251,754	)			(1,606,320	)
Cash card and coupon liabilities			461,646				(293,403	)
Customer deposits received			32,921				212
Accrued expenses and other payables			319,512				211,765
Income taxes payable			(206,596	)			32,248
Net cash provided by operating activities			10,287,432				16,875,654
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(742,895	)			(3,229,057	)
Increase of restricted cash			(12,553,657	)			-
Net cash used in investing activities			(13,296,552	)			(3,229,057	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank borrowings			(71,758,322	)			(16,259,555	)
Bank loan borrowing			84,716,935				35,771,021
Net cash provided by financing activities			12,958,613				19,511,466
Effect of foreign currency translation			(173,031	)			202,404
Net increase in cash			9,949,493				33,360,467
Cash -- beginning of period			9,013,006				9,245,212
Cash -- end of period		$	18,789,468			$	42,605,679
Supplemental disclosures of cash flow information:
Interest paid		$	3,760,497			$	3,670,486
Income taxes paid		$	228,360			$	65,184

 

SOURCE QKL Stores Inc.