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): August 14, 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 August 14, 2015, QKL Stores Inc. issued a press release regarding its financial results for the six months ended June 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 August 14, 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: August 14, 2015

 

Exhibit Index

 

Exhibit No.	Description
99.1	Press release dated August 14, 2015

 

 

Exhibit 99.1

 

 

QKL Stores Inc. Announces Second Quarter 2015

 

Financial Results

 

-- 2Q15Revenue increased by 9.2% to $56.4 million from $51.7 million in 2Q14--

-- 2Q15 Gross Profit decreased by 4.3% to $9.1 million from $8.7 million in 2Q14 –

 

Daqing, China, August 14, 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 second quarter ended June 30, 2015.

 

Mr. Zhuangyi Wang, Chairman and CEO, said, “In the second quarter, we were more active with the level of promotional activities among our existing stores opened at least one year in order to strengthen our competitive position. We plan to slow down the pace of our new store openings. Currently, we expect to open two new supermarket 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.”

 

“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 the second half of the year and believe we’ll see an improvement in operating expenses and net result from the current quarter.”

 

Second Quarter 2015 Financial Results

 

Net sales increased by $4.8million, or 9.2%, to $56.4 million for the three months ended June 30, 2015 from $51.7 million for the three months ended June 30, 2014. The change in net sales was primarily attributable to the following: 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 (41 stores) sales generated approximately $49.1 million in sales in the second quarter of 2015, a decrease of $0.8 million, or 1.6%, compared with $49.9 million in net sales in the second quarter of 2014. New store sales increased, reflecting the opening of 4 new stores since January 1, 2014. These stores generated approximately $4.4 million in sales in the second quarter of 2015. The number of stores including supermarkets/hypermarkets and department stores at June 30, 2015 was 45 versus 46 at June 30, 2014.

 

Gross profit, or total revenue minus cost of sales, increased by $0.4 million, or 4.3%, to $9.1 million, or 16.1% of net sales, in the second quarter of 2015 from $8.7 million, or 16.8% of net sales, in the second quarter of 2014. The change in gross profit was primarily attributable to a increase in net sales of $4.8million and a increase in cost of sales of $4.4 million in the second quarter of 2015 compared to the second 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 increased by $1.0 million, or 11.1%, to $10.5 million, or 18.6% of net sales, in the second quarter of 2015, and$9.5 million, or 18.3% of net sales, in the second quarter of 2014. In specific, labor costs increased by $0.4 million or 7.3%, to $5.9 million in the second quarter of 2015 from $5.5 million in the second quarter of 2014. Promotion expenses increased by $0.3 million, or37.5%, to $1.1 million in the second quarter of 2015 from $0.8 million in the second quarter of 2014. Utilities increased by $0.2 million, or13.3%, to $1.7 million in the first quarter of 2015 from $1.5 million in the first quarter of 2014.

 

General and administrative expenses increased by $78,343, or 4.0%, to $2.0 million, or 3.6% of net sales, in the second quarter of 2015 from $2.0 million, or 3.8% of net sales, in the second quarter of 2014.There is no significant change to our general and administrative expense.

 

Our net loss for the second quarter of 2015 was $4.5 million, or $2.98 per diluted share, from net loss of $3.8 million, or $2.47 per diluted share in the prior year period. The number of shares used in the computation of diluted EPS was1,522,326 for the second quarter 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

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

		June 30,  2015				December 31, 2014
		(Unaudited)
ASSETS
Cash		$	36,722,485			$	9,013,006
Restricted cash			21,362,877				8,623,748
Accounts receivable			900,778				949,211
Inventories			41,149,824				62,605,754
Other receivables			19,431,891				21,375,611
Prepaid expenses			11,205,607				12,114,028
Advances to suppliers			9,039,376				8,653,037
Deferred income tax assets – current portion			2,835,577				2,839,714
Total current assets			142,648,415				126,174,109
Property, plant and equipment, net			37,379,217				37,843,171
Land use rights, net			671,140				684,375
Deferred income tax assets – non-current portion			62,057				61,681
Other assets			12,021				11,880
Total assets		$	180,772,850			$	164,775,216
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term loans		$	85,614,196			$	60,201,757
Accounts payable			36,649,329				37,206,633
Cash card and coupon liabilities			14,268,133				14,539,728
Customer deposits received			1,940,154				2,005,136
Accrued expenses and other payables			23,297,704				23,147,611
Income taxes payable			97,270				241,189
Total current liabilities			161,866,786				137,342,054
Total liabilities			161,866,786				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 June 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 June 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			(98,240,260	)			(89,116,190	)
Accumulated other comprehensive income			15,055,341				14,458,369
Total shareholders’ equity			18,906,064				27,433,162
Total liabilities and shareholders’ equity		$	180,772,850			$	164,775,216

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

  

 

		(Unaudited)								(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
Net sales		$	56,433,109			$	51,655,611			$	148,990,795			$	137,688,287
Cost of sales			47,370,425				42,968,964				124,667,893				114,269,481
Gross profit			9,062,684				8,686,647				24,322,902				23,418,806
Operating expenses:
Selling expenses			10,506,151				9,456,970				26,837,972				22,737,153
General and administrative expenses			2,042,181				1,963,838				4,551,883				5,197,248
Total operating expenses			12,548,332				11,420,808				31,389,855				27,934,401
Loss from operations			(3,485,648	)			(2,734,161	)			(7,066,953	)			(4,515,595	)
Non-operating expense:
Interest income			203,388				254,517				289,829				484,616
Interest expense			(1,247,701	)			(1,279,388	)			(2,327,915	)			(2,778,631	)
Total non-operating expense			(1,044,313	)			(1,024,871	)			(2,038,086	)			(2,294,015	)
Loss before income taxes			(4,529,961	)			(3,759,032	)			(9,105,039	)			(6,809,610	)
Income taxes			10,936				3,867				19,031				9,739
Net loss		$	(4,540,897	)		$	(3,762,899	)		$	(9,124,070	)		$	(6,819,349	)
Comprehensive income statement:
Net loss		$	(4,540,897	)		$	(3,762,899	)		$	(9,124,070	)		$	(6,819,349	)
Foreign currency translation adjustment			49,781				21,002				596,972				(732,171	)
Comprehensive loss		$	(4,491,116	)		$	(3,741,897	)		$	(8,527,098	)		$	(7,551,520
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		$	(2.98	)		$	(2.47	)		$	(5.99	)		$	(4.48	)
Diluted		$	(2.98	)		$	(2.47	)		$	(5.99	)		$	(4.48	)

 

 

 

QKL STORES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

		(Unaudited)
		Six Months Ended June 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(9,124,070	)		$	(6,819,349	)
Depreciation			2,230,013				3,279,750
Amortization			14,355				14,708
Share-based compensation			-				204,029
Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable			54,067				222,985
Inventories			21,277,993				16,863,267
Other receivables			2,068,199				(314,995	)
Prepaid expenses			979,528				5,042,852
Advances to suppliers			(332,742	)			2,847,162
Accounts payable			(781,752	)			(1,367,629	)
Cash card and coupon liabilities			(359,160	)			(293,696	)
Customer deposits received			(76,983	)			73,164
Accrued expenses and other payables			17,316				447,597
Income taxes payable			(144,993	)			(33,029	)
Net cash provided by operating activities			15,821,771				20,166,816
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(337,492	)			(1,603,149	)
Increase of restricted cash			(12,652,235	)			-
Net cash used in investing activities			(12,989,727	)			(1,603,149	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank borrowings			(35,916,022	)			(16,275,750	)
Bank loan borrowing			60,893,982				35,806,650
Net cash provided by financing activities			24,977,960				19,530,900
Effect of foreign currency translation			(100,523	)			(172,551	)
Net increase in cash			27,810,004				38,094,567
Cash – beginning of period			9,013,006				9,245,212
Cash – end of period		$	36,722,487			$	47,167,228
Supplemental disclosures of cash flow information:
Interest paid		$	2,327,915			$	2,789,480
Income taxes paid		$	260,494			$	23,252