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 14, 2014

 

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 14, 2014, QKL Stores Inc. issued a press release regarding its financial results for the nine months ended September 30, 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 November 14, 2014

 

 

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 14, 2014

 

 

Exhibit Index

 

Exhibit No.	Description
99.1	Press release dated November 14, 2014

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

QKL Stores Inc. Announces Third Quarter 2014

 

Financial Results

 

-- 3Q14 Revenue increased by 3.2% to $61.1 million from $59.2 million in 3Q13--

-- 3Q14 Gross Profit increased by 1.4% to $10.3 million from $10.1 million in 3Q13 –

 

Daqing, China, November 14, 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 third quarter ended September 30, 2014.

 

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.

 

“We plan to open two stores before year end. The new stores we will open in the future will be located in Daqing City where we have stronger relationships with local vendors and the cost of goods is slightly lower than the other cities in which we operate.”

 

“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 2013 Financial Results

 

Revenue in the third quarter of 2014 increased by $1.9 million, or 3.2%, to $61.1 million for the three months ended September 30, 2014 from $59.2 million for the three months ended September 30, 2013 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, 2013. Same store (44 stores) sales generated approximately $56.2 million in sales in the third quarter of 2014, a decrease of $1.5 million, or 2.6% compared with $57.7 million in net sales in the third quarter of 2013. New store sales increased, reflecting the opening of three new stores since January 1, 2013. These stores generated approximately $4.3 million in sales in the third quarter of 2014. The number of stores including supermarkets/hypermarkets and department stores at September 30, 2014 was 47 versus 45 at September 30, 2013.

 

 

Gross profit increased by $0.1 million, or 1.4%, to $10.3 million, or 16.8% of net sales, in the third quarter of 2014 from $10.1 million, or 17.1% of net sales, in the third quarter of 2013. The change in gross profit was primarily attributable to an increase in net sales of $1.9 million and an increase in cost of sales of $1.7 million in the third quarter of 2014 compared to the third quarter of 2013.

 

Selling Expenses –Selling expenses increased by $3.0million, or 30.2%, to$13.1million, or 21.4% of net sales, in the third quarter of 2014, from$10.0 million, or 16.9% of net sales, in the third quarter of 2013. The increase in selling expenses relative to net sales was due to the realize of significant preliminary expenses of new stores opening of $1.8 million in the three months ended September 30, 2014 compared to nil in the same period in 2013.

 

General and administrative expenses decreased by $0.1 million, or 3.5%, to $2.0 million, or 3.3% of net sales, in the third quarter of 2014 from $2.1 million, or 3.5% of net sales, in the third quarter of 2013. There is no significant change to our general and administrative expense.

 

For the three months ended September 30, 2014, our net loss was $5.5 million, or $(3.60) per diluted share, compared to net loss of $1.7 million, or ($1.11) per diluted share, for the three months ended September 30, 2013. The number of shares used in the computation of diluted EPS was 1,522,326 for the third quarter of 2014 and 2013. 

 

Conference Call

 

Management will host a conference call at 8:30 am ET on Friday, November 14th. To participate, please dial one of the local access numbers, listed below. The conference call identification number is 10017432.

 

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:	4001-201213
China (S) Toll Free:	4001-201213
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,  2014				December 31, 2013
		(Unaudited)
ASSETS
Cash		$	42,605,679			$	9,245,212
Restricted cash			8,609,740				8,668,882
Accounts receivable			320,570				557,745
Inventories			47,453,891				64,724,923
Other receivables			19,231,805				21,979,152
Prepaid expenses			6,933,867				9,915,479
Advances to suppliers			4,942,444				7,822,660
Income taxes receivables			1,695,685				1,739,773
Deferred income tax assets – current portion			2,778,076				2,788,918
Total current assets			134,571,757				127,442,744
Property, plant and equipment, net			38,109,472				40,247,576
Land use rights, net			698,756				718,337
Deferred income tax assets – non-current portion			66,956				66,956
Other assets			17,276				17,276
Total assets		$	173,464,217			$	168,492,889
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term loans		$	60,103,964			$	40,889,761
Accounts payable			33,991,621				35,840,964
Cash card and coupon liabilities			18,045,922				18,465,030
Customer deposits received			977,804				984,308
Accrued expenses and other payables			18,910,586				18,827,472
Total current liabilities			132,029,897				115,007,535
Total liabilities			132,029,897				115,007,535
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, 2014 and December 31, 2013			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, 2014 and December 31, 2013			5,294				5,294
Additional paid-in capital			93,644,266				93,337,957
Retained earnings – appropriated			8,329,586				8,329,586
Retained earnings			(74,446,030	)			(62,145,794	)
Accumulated other comprehensive income			13,899,682				13,956,789
Total shareholders’ equity			41,434,320				53,485,354
Total liabilities and shareholders’ equity		$	173,464,217			$	168,492,889

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

 

		(Unaudited)								(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2014				2013				2014				2013
Net sales		$	61,121,016			$	59,243,560			$	198,809,303			$	215,296,669
Cost of sales			50,855,098				49,118,005				165,124,579				178,397,763
Gross profit			10,265,918				10,125,555				33,684,724				36,898,906
Operating expenses:
Selling expenses			13,062,967				10,031,669				35,800,120				33,235,756
General and administrative expenses			2,022,426				2,095,044				7,219,674				6,693,516
Total operating expenses			15,085,393				12,126,713				43,019,794				39,929,272
Loss from operations			(4,819,475	)			(2,001,158	)			(9,335,070	)			(3,030,366	)
Non-operating income (expense):
Interest income			241,800				190,224				726,416				645,788
Interest expense			(891,855	)			(349,665	)			(3,670,486	)			(873,553	)
Total non-operating expense			(650,055	)			(159,441	)			(2,944,070	)			(227,765	)
Loss before income taxes			(5,469,530	)			(2,160,599	)			(12,279,140	)			(3,258,131	)
Income taxes			11,357				(468,392	)			21,096				(514,983	)
Net loss		$	(5,480,887	)		$	(1,692,207	)		$	(12,300,236	)		$	(2,743,148	)
Comprehensive income statement:
Net loss		$	(5,480,887	)		$	(1,692,207	)		$	(12,300,236	)		$	(2,743,148	)
Foreign currency translation adjustment			675,064				954,945				(57,107	)			2,587,998
Comprehensive loss		$	(4,805,823	)		$	(737,262	)		$	(12,357,343	)		$	(155,150	)
Weighted average number of shares outstanding:
Basic			1,522,326				1,522,326				1,522,326				1,555,978
Diluted			1,522,326				1,522,326				1,522,326				1,555,978
Losses per share:
Basic		$	(3.60	)		$	(1.11	)		$	(8.08	)		$	(1.76	)
Diluted		$	(3.60	)		$	(1.11	)		$	(8.08	)		$	(1.76	)

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

		(Unaudited)
		Nine Months Ended September 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(12,300,236	)		$	(2,743,148	)
Depreciation			5,084,837				5,034,492
Amortization			24,173				24,361
Share-based compensation			306,309				612,351
Deferred income tax			(8,770	)			880,073
Loss on disposal of fixed assets			-				25,755
Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable			233,589				23,117
Inventories			16,845,228				20,708,613
Other receivables			2,599,829				523,424
Prepaid expenses			2,916,696				1,963,042
Advances to suppliers			2,829,497				4,947,618
Accounts payable			(1,606,320	)			(3,428,459	)
Cash card and coupon liabilities			(293,403	)			1,748,812
Customer deposits received			212				(234,533	)
Accrued expenses and other payables			211,765				(3,819,724	)
Income taxes payable			32,248				20,408
Net cash provided by operating activities			16,875,654				26,286,202
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(3,229,057	)			(787,373	)
Net cash used in investing activities			(3,229,057	)			(787,373	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank loan borrowing			35,771,021				11,251,270
Bank loan repayment			(16,259,555	)			(16,073,243	)
Net cash provided by (used in) financing activities			19,511,466				(4,821,973	)
Effect of foreign currency translation			202,404				457,364
Net increase in cash			33,360,467				21,134,220
Cash – beginning of period			9,245,212				8,479,413
Cash – end of period		$	42,605,679			$	29,613,633
Supplemental disclosures of cash flow information:
Interest paid		$	3,670,486			$	873,553
Income taxes paid		$	65,184			$	205,905