NOTE 5 – DEPOSIT ON LAND USE RIGHT AND CONSTRUCTION IN PROGRESS - JEWELRY PARK

On October 23, 2013, the Company, through its wholly-owned subsidiary, Wuhan Kingold, entered into an agreement (the “Agreement”) with third-parties Wuhan Wansheng House Purchasing Limited (“Wuhan Wansheng”) and Wuhan Huayuan Science and Technology Development Limited Company (“Wuhan Huayuan”). The Agreement provides for the build out of the planned “Shanghai Creative Industry Park,” which is proposed to be renamed to “Kingold Jewelry Cultural Industry Park” (the “Jewelry Park”). Pursuant to the Agreement, Wuhan Kingold will acquire the land use rights for a parcel of land (the “Land”) in Wuhan for a total of 66,667 square meters (approximately 717,598 square feet, or 16.5 acres) (the “Land Use Right”), which has been approved for real estate development use. Wuhan Kingold has committed to provide a total sum of RMB 1.0 billion (approximately $164 million) for the acquisition of this Land Use Right and to finance the entire development and construction of a total of 192,149 square meters (approximately 2,068,000 square feet) of commercial properties, which are proposed to include a commercial wholesale center for various jewelry manufacturers, two commercial office buildings, a commercial residence of condominiums as well as a hotel.

As of September 30, 2015, Wuhan Kingold has made RMB 520 million (approximately $93 million) of payments toward the construction of the Jewelry Park project. Of the RMB 520 million, RMB 60.4 million (approximately $9.5 million) was allocated to the deposit on the Land Use Right, which represents the total cost of the Land Use Right. Wuhan Kingold is also required to make the construction payments to finance the entire construction project, as estimated based on certain construction project milestones listed below. Wuhan Kingold recorded approximately $81.7 million as “Construction in Progress,” which includes total payment made plus capitalized interest of RMB 46.2 million (approximately $7.27 million) on the long-term bank loan and plus capitalized interest of RMB 14.3 million (approximately $2.25 million) on the Debts. Due to a delay by the construction company Wuhan Wansheng in charge of the project’s construction, the Company has delayed its payments to the construction company by seven to eight months. However, this delay is not expected to impact the total expected cost of RMB 1.0 billion (approximately $164 million) and any over budget cost will be the construction company's liability. As of September 30, 2015, the Company was still obligated to pay the remaining amount of RMB 480 million (approximately $79 million) to the construction company.

In October 2015, we signed a supplemental agreement with the construction company Wuhan Wansheng to amend the original acquisition agreement dated October 23, 2013. Pursuant to this supplemental agreement, Wuhan Wansheng agreed to fully complete the construction and deliver the completed real estate property to us before January 15, 2016. We agreed to pay the balance of construction payments within ten days after Wuhan Wansheng fully completes the construction and delivers the completed real estate property to us.

Upon the completion of the whole project in accordance with the specific requirements agreed upon by the signing parties, Wuhan Kingold will have 100% ownership of the properties situated on the land and intends to either sell or lease various properties. The following table identifies the original payment milestones as well as the new payment milestones, which have been revised to reflect the delays with construction progress associated with those milestones. The Company will continue to evaluate the milestone payment commitments in relation to actual progress and completion and will revise as deemed necessary.

	Original		Revised		Revised
	Payment Commitment		Payment Commitment		Payment Commitment
Date	(RMB in millions)		(RMB in millions)		(US$ in millions)**
October 2013*		200		200		33
January 2014		50		50		8
June 2014		100		-		-
September 2014		150		20		3
November 2014		-		87		14
December 2014		-		35		6
January 2015†		250		-		-
February 2015†		-		28		5
April 2015		-		100		16
May 2015		-		-		-
June 2015		250		-		-
August 2015		-		-		-
September 2015		-		-		-
October 2015		-		-		-
November 2015		-		-		-
December 2015		-		-		-
January 2016†		-		480		79
Total		1,000		1,000		164

* Includes initial deposit made to seller

** In US$ based on current exchange rates

† Updated to reflect delay to payment schedule

Because the Land Use Right will not be transferred to Wuhan Kingold until the completion of the entire project, the payments of approximately RMB 460 million made plus capitalized interest of RMB 60.5 million as of September 30, 2015 are recorded as “Construction in Progress” on the balance sheet until the project is completed and certified for use. Upon the completion of the Project, the excess of RMB1.0 billion commitment over the actual amount spent on the construction of the project shall be deemed as the actual cost of the Land Use Right. As of September 30, 2015, the payments of RMB 60.4 million made were recorded as “Deposit on Land Use Right.”