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QKL Stores Inc. Announces Fourth Quarter and Full Year 2012 Financial Results

QKL Stores Inc. Announces Fourth Quarter and Full Year 2012 Financial Results

PR Newswire

DAQING, China, April 15, 2013

DAQING, China, April 15, 2013 /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 fourth quarter
and full year financial results ended December 31, 2012.

Mr. Zhuangyi Wang, Chairman and CEO, said, "In the fourth 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. Our
47 older stores that have been operating for more than one year have
outperformed our younger stores as many of our new store locations are in new
smaller markets which typically take longer to ramp up sales and profit. We
believe our product quality, assortment and value can result in improved
performance over time."

"In 2012, we opened up one new store that has approximately 5,700 square
meters of space. During the fourth quarter, we closed three stores that have
approximately 26,800 square meters of space. As of December 31, 2012, we
operated 30 supermarkets, 14 hypermarkets, 4 department stores and 3
distribution centers situated in Daqing, Shenyang and Harbin, respectively.

As we advance into 2013, we plan to slow down the pace of our new store
openings. Currently, we expect to open three 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 2012 Financial Results
Revenue in the fourth quarter of 2012 decreased by 17.1% to $86.0 million from
$103.7 million in the fourth quarter of 2011. Comparable stores are stores
that were opened for at least one year before the beginning of the
comparisonperiod, or by January 1, 2011. Those 47 stores generated
approximately $84.4 million in sales in the fourth quarter of 2012,
representing a decrease of $8.4 million, or 9.1% compared with $92.8 million
in sales in fiscal 2011.

Gross profit decreased by 13.1% year over year to $14.6 million, compared to
$16.8 million in the prior year period. Gross profit as a percentage of
revenue for the fourth quarter of 2012 was 17.0%, compared to 16.2% for the
fourth quarter of 2011. The decrease in gross profit percentage was primarily
attributable to increased competition and the low profit margin in our new
stores.

Operating expenses increased by 35.7% to $20.9 million compared to $15.4
million in the prior year period. This was primarily a result of increases in
labor costs, depreciation, rent expense and other operating costs for 2012
compared with the same period in 2011.

We had a net loss of $30.8 million in the fourth quarter of 2012 compared with
net income of $18.4 million in the fourth quarter of 2011. Excluding the
impairment of goodwill, we had a net loss of $4.1 million in the fourth
quarter of 2012 compared with net income of $0.8 million in the fourth quarter
of 2011.

Full Year 2012 Financial Results
Revenue decreased by 1.4% to $365.6 million for fiscal 2012 from $370.5
million for fiscal 2011. Comparable stores are stores that were opened for at
least one year before the beginning of the comparison period, or by January 1,
2011. Those 35 stores generated approximately $294.0 million in sales in
fiscal 2012, an increase of $0.9 million, or 0.3% compared with $293.1 million
in sales in fiscal 2011. New store sales increased, reflecting the opening of
13 new stores since January 1, 2011. One store opened in fiscal 2012 generated
approximately $2.0 million for fiscal 2012, and 11 stores opened in fiscal
2011 generated $48.6 million in sales for fiscal 2012 and $38.4 million in
sales for fiscal 2011, respectively.

Gross profit decreased by 2.0% to $62.4 million in fiscal 2012, compared to
$63.7 million in fiscal 2011. Gross profit as a percentage of revenue for
fiscal 2012 was 17.1%, compared to 17.2% for fiscal 2011. The slight decrease
in gross profit percentage was primarily attributable to increased competition
and the low profit margin in our new stores.

Operating expenses increased by 13.5% to $68.3 million for fiscal 2012
compared to $60.2 million in the prior year. This was primarily a result of
increase in labor costs, depreciation, rent expense and other operating costs
for 2012 compared with 2011.

We had a net loss of $31.0 million in fiscal 2012 compared with net loss of
$16.6 million in fiscal 2011. Excluding the impairment of goodwill, adjusted
net loss for fiscal 2012 changed to $4.3 million, or $3.31 per diluted share,
from adjusted net income of $2.6 million, or $2.07 per diluted share for
fiscal 2011. The number of shares used in the computation of diluted EPS
(excluding the impairment of goodwill) increased by 3.37% to 1.31 million
shares in fiscal 2012 from 1.27 million shares in fiscal 2011.

As of December 31, 2012, the Company operated 48 stores totaling 297,800 sq.
meters compared to 48 stores totaling 324,400 sq. meters in the prior year
period.

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                 December
                                  31,2012                 31,2011
ASSETS
Cash                              $   8,479,413            $   9,037,550
Restricted cash                       253                      253
Accounts receivable                   796,897                  115,163
Inventories                           59,812,645               54,336,501
Other receivables                     18,042,360               11,991,134
Prepaid expenses                      11,083,708               6,085,379
Advances to suppliers                 9,525,250                10,160,552
Deferred income tax assets            6,327,932                2,972,570
Total current assets                  114,068,458              94,699,102
Property, plant equipment,            45,439,360               43,042,136
net
Land use rights, net                  724,760                  748,410
Goodwill                              -                        26,346,942
Other assets                          12,976                   520,559
Total assets                      $   160,245,554          $   165,357,149
LIABILITIES AND STOCKHOLDERS'
EQUITY
Short term bank loans                 15,832,555               10,998,162
Accounts payable                      30,900,586               28,417,894
Cash card and coupon                  18,604,188               16,024,437
liabilities
Customer deposits received            1,248,278                931,604
Accrued expenses and other            28,097,212               14,328,656
payables
Income taxes payable                  2,726                    227,016
Total current liabilities             94,685,545               70,927,769
Warrant liabilities                                            -
Total liabilities                     94,685,545               70,927,769
Commitments and contingencies                                  -
Shareholders' equity
Common stock, $.001 par value
per share,
authorized 100,000,000,
shares, issued
and outstanding 11,551,587            11,552                   10,448
and
10,448,197 at December 31,
2012
and December 31, 2011,
respectively
Series A convertible
preferred stock,
par value $0.01, 10,000,000
shares
authorized, 2,386,110and             23,861                   56,945
5,694,549
shares outstanding at
December 31,
2012 and December 31, 2011,
respectively
Additional paid-in capital            92,492,892               91,610,531
Retained earnings –                   8,323,312                7,282,560
appropriated
Retained earnings                     (47,841,708)             (15,758,416)
Accumulated other                     12,550,100               11,227,312
comprehensive income
Total shareholders' equity            65,560,009               94,429,380
Total liabilities and             $   160,245,554          $   165,357,149
shareholders' equity
*The number of shares of common stock has been retroactively restated to
reflect the Reverse Stock Split effected on June 11, 2012.
See notes to audited consolidated financial statements.



QKL STORES INC. AND SUBSIDIARIES
Consolidated Statements of Operations
                                YearsEndedDecember31,
                                2012                     2011
Net sales                       $   365,624,781          $   370,500,420
Cost of sales                       303,198,690              306,770,553
Gross profit                        62,426,091               63,729,867
Operating expenses:
Selling expenses                    59,084,865               51,651,713
General and administrative          9,231,987                8,543,023
expenses
Impairment of goodwill              26,697,561               19,219,870
Total operating expenses            95,014,413               79,414,606
Loss from operations                (32,588,322)             (15,684,739)
Non-operating
income(expense):
Interest income                     259,713                  676,186
Interest expense                    (1,014,145)              (121,425)
Total non-operating income          (754,432)                554,761
Loss before income tax              (33,342,754)             (15,129,978)
Income taxes                        (2,300,214)              1,453,403
Net loss                        $   (31,042,540)         $   (16,583,381)
*Basic earnings per share of    $   (2.95)               $   (1.63)
common stock
*Diluted earnings per share     $   (2.95)               $   (1.63)
*Weighted average shares
used in                                                     
calculating net income per
ordinary                            10,509,469               10,166,618
share – basic
*Weighted average shares
used in                                                     
calculating net income per
ordinary                            10,509,469               10,166,618
share – diluted
**Basic earnings per share                                  
of common stock                     (23.63)
                                $                            (13.05)
                                                           
**Diluted earnings per share
                                $   (23.63)                  (13.05)
**Weighted average shares
used in                                                     
calculating net income per
ordinary                            1,313,684                1,270,827
share – basic
**Weighted average shares
used in                                                     
calculating net income per
ordinary                            1,313,684                1,270,827
share – diluted
* The earnings (losses) per share data and the weighted average shares
outstanding for all periods
have been retroactively restated to reflect the 1-for-3 Reverse Stock Split
effected on June 11, 2012.
Reference for amount restated to reflect the 1-for-8 Reverse Stock Split
effected on February 4, 2013..
See notes to audited consolidated financial statements.



QKL STORES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
                                              YearsEndedDecember31,
                                              2012             2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                    $ (31,042,540)   $ (16,583,381)
Depreciation-property, plant and equipment      6,702,740        6,065,858
Amortization                                    29,391           28,693
Deferred income tax                             (3,330,517)      (2,403,124)
Loss on disposal of property, plant and         (303,396)        27,310
equipment
Share-based compensation                        850,381          864,608
Impairment of goodwill                          26,697,561       19,219,870
Provision on inventory and sales return         453,311          -
Adjustments to reconcile net income to net
cash provided by operating activities:
Accounts receivable                             (680,445)        58,849
Inventories                                     (5,481,236)      (8,142,931)
Other receivables                               (5,289,513)      17,341,478
Prepaid expenses                                (4,437,289)      (833,463)
Advances to suppliers                           713,061          (6,275,018)
Accounts payable                                2,262,687        (12,038,941)
Cash card and coupon liabilities                2,454,996        4,790,050
Customer deposits received                      309,322          (621,496)
Accrued expenses and other payables             13,357,512       4,069,493
Income taxes payable                            (225,903)        (2,230,766)
Net cash provided by operating activities       3,040,123        3,337,089
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment      (9,411,202)      (23,640,152)
Sales proceeds of fixed assets disposal         947,049          155,310
Decrease of restricted cash                     -                76,952
Net cash used in investing activities           (8,464,153)      (23,407,890)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank repayment                                  (11,076,230)     -
Bank borrowings                                 15,823,185       10,998,162
Net cash provided by financing activities       4,746,955        10,998,162
Net decrease in cash                            (677,075)        (9,072,639)
Effect of foreign currency translation          118,938          650,155
Cash at beginning of period                     9,037,550        17,460,034
Cash at end of period                         $ 8,479,413      $ 9,037,550
Supplemental disclosures of cash flow
information:
Interest paid                                   1,014,145        121,425
Income taxes paid                             $ 822,923        $ 5,995,442
See notes to audited consolidated financial statements.

SOURCE QKL Stores Inc.

Website: http://www.qklstoresinc.com