10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:

September 30, 2018

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

KINGOLD JEWELRY, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-15819	13-3883101
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)

No. 8 Han Huang Road

Jiang’an District

Wuhan, Hubei Province, PRC 430023

(Address of principal executive offices) (Zip Code)

(011) 86 27 65694977

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

x Yes     ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

x Yes     ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes     x  No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 9, 2018, there were 66,113,502 shares of common stock outstanding, par value $0.001. 

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page Number
PART I. FINANCIAL INFORMATION		5
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets as of September 30, 2018 (Unaudited) and December 31, 2017	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine months Ended September 30, 2018 and 2017 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2018 and 2017 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II. OTHER INFORMATION		46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
Signatures		64

2

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” STATEMENT

UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this quarterly report that are not historical facts or information are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “forecast,” “plan,” “believe,” “may,” “expect,” “anticipate,” “intend,” “planned,” “potential,” “can,” “expectation” and similar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based on management’s reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, levels of activity, performance or achievement to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management’s expectations. Such factors include, among others, the following:

· changes in the market price of gold;

· our ability to implement the key initiatives of, and realize the gross and operating margins and projected benefits (in the amounts and time schedules we expect) from, our business strategy;

· non-performance of suppliers on their sale commitments and customers on their purchase commitments;

· non-performance of third-party service providers;

· adverse conditions in the industries in which our customers operate, including a general economic downturn, a recession globally, or sudden disruption in business conditions, and our ability to withstand an economic downturn, recession, cost inflation, competitive or other market pressures, or conditions;

· the effect of political, economic, legal, tax and regulatory risks imposed on us, including foreign exchange or other restrictions, adoption, interpretation and enforcement of foreign laws including any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny in China;

· our ability to manage growth;

· our ability to successfully identify new business opportunities and identify and analyze acquisition candidates, secure financing on favorable terms and negotiate and consummate acquisitions as well as to successfully integrate or manage any acquired business;

· our ability to integrate acquired businesses;

· the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, foreign exchange restrictions and the potential effect of such factors on our business, results of operations and financial condition;

· our ability to retain and attract senior management and other key employees;

· any internal investigations and compliance reviews of Foreign Corrupt Practices Act and related U.S. and foreign law matters in China and additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation;

· changes in the People’s Republic of China or U.S. tax laws;

· increased levels of competition, and competitive uncertainties in our markets, including competition from companies in the gold jewelry industry in the PRC, some of which are larger than we are and have greater resources;

3

· the impact of the seasonal nature of our business, adverse effect of rising energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences;

· our ability to protect our intellectual property rights;

· the risk of an adverse outcome in any material pending and future litigations;

· our ratings, our access to cash and financing and ability to secure financing at attractive rates;

· our ability to comply with environmental laws and regulations;

· our continuing relationship with major banks in China with whom we have certain gold lease agreements and working capital loans;

· the investment in gold may be deficient if the fair market value of the pledged gold in connection with the loans declines, then we may need to increase the pledged gold inventory for the loan collateral or add the restricted cash.

· other risks.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the risks discussed in Part 2, Item 1A “Risk Factors.” We undertake no obligation to revise or update these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

4

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

(UNAUDITED)

	September 30,			December 31,
	2018			2017
ASSETS
Cash	$	13,245,436		$	4,997,125
Restricted cash		6,567,855			5,534,551
Accounts receivable		198,214			768,167
Inventories		147,264,405			135,042,713
Investments in gold		922,084,336			1,562,943,153
Other current assets and prepaid expenses		808,809			100,592
Value added tax recoverable		254,820,263			353,732,758
Total current assets		1,344,989,318			2,063,119,059
Property and equipment, net		5,903,782			7,299,643
Restricted cash		8,927,100			7,392,721
Investments in gold		1,071,005,836			957,124,267
Other assets		286,155			302,072
Deferred income tax assets		22,054,343			6,677,675
Land use right		399,007			429,915
Total long-term assets		1,108,576,223			979,226,293
TOTAL ASSETS	$	2,453,565,541		$	3,042,345,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short term loans	$	621,518,946		$	962,101,746
Other payables and accrued expenses		18,845,062			18,913,863
Related party loan		72,798,218			307,389,647
Due to related party		3,592,726			2,630,301
Income tax payable		1,855,002			1,208,742
Other taxes payable		2,818,412			2,615,463
Total current liabilities		721,428,366			1,294,859,762
Related party loans		451,657,343			567,843,066
Long term loans		926,174,267			789,410,137
TOTAL LIABILITIES		2,099,259,976			2,652,112,965
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of September 30, 2018 and December 31, 2017		-			-
Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of September 30, 2018 and December 31, 2017		66,113			66,113
Additional paid-in capital		80,393,541			80,377,449
Retained earnings
Unappropriated		343,712,836			303,666,611
Appropriated		967,543			967,543
Accumulated other comprehensive income (loss), net of tax		(70,834,468	)		5,154,671
Total Equity		354,305,565			390,232,387
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,453,565,541		$	3,042,345,352

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(IN US DOLLARS)

(UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
NET SALES	$	626,171,072		$	584,511,639		$	1,844,491,390		$	1,352,666,916
COST OF SALES
Cost of sales		(564,685,762	)		(505,608,405	)		(1,654,427,318	)		(1,208,376,017	)
Depreciation		(255,546	)		(300,716	)		(801,384	)		(806,047	)
Total cost of sales		(564,941,308	)		(505,909,121	)		(1,655,228,702	)		(1,209,182,064	)
GROSS PROFIT		61,229,764			78,602,518			189,262,688			143,484,852
OPERATING EXPENSES
Selling, general and administrative expenses		2,487,346			3,779,728			7,597,545			10,546,253
Stock compensation expenses		5,364			5,364			16,092			27,650
Depreciation		146,475			135,442			406,962			367,112
Amortization		2,767			2,832			8,703			8,330
Total operating expenses		2,641,952			3,923,366			8,029,302			10,949,345
INCOME FROM OPERATIONS		58,587,812			74,679,152			181,233,386			132,535,507
OTHER INCOME (EXPENSES)
Other Income		64,433			661			64,433			66,158
Interest Income		562,294			633,617			1,384,438			1,824,924
Interest expense, including amortization of debt issuance costs of $3,482,031 and $1,347,832 for the three months, and $8,042,451 and $7,751,818 for the nine months ended September 30, 2018 and 2017, respectively		(41,479,730	)		(36,585,321	)		(128,898,077	)		(113,155,443	)
Total other expenses, net		(40,853,003	)		(35,951,043	)		(127,449,206	)		(111,264,361	)
INCOME FROM OPERATIONS BEFORE TAXES		17,734,809			38,728,109			53,784,180			21,271,146
INCOME TAX PROVISION (BENEFIT)
Current		1,787,717			7,778,520			9,214,312			12,996,602
Deferred		2,699,588			1,962,539			4,523,643			(7,440,305	)
Total income tax provision		4,487,305			9,741,059			13,737,955			5,556,297
NET INCOME		13,247,504			28,987,050			40,046,225			15,714,849
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) related to investments in gold, net of tax	$	(18,935,552	)	$	27,074,547		$	(56,908,875	)	$	75,935,884
Foreign currency translation gains (loss)		(13,077,661	)		4,455,163			(19,080,264	)		12,817,501
Total Other comprehensive income (loss)	$	(32,013,213	)	$	31,529,710		$	(75,989,139	)	$	88,753,385
COMPREHENSIVE INCOME (LOSS)	$	(18,765,709	)	$	60,516,760		$	(35,942,914	)	$	104,468,234
Earnings per share
Basic	$	0.20		$	0.44		$	0.61		$	0.24
Diluted	$	0.20		$	0.44		$	0.60		$	0.24
Weighted average number of shares
Basic		66,113,502			66,049,726			66,113,502			66,029,266
Diluted		66,121,121			66,484,717			66,311,149			66,337,069

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

	For the nine months ended September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	40,046,225		$	15,714,849
Adjustments to reconcile net income  to cash provided by (used in) operating activities:
Depreciation and amortization		1,208,346			1,173,159
Amortization of intangible assets		8,703			8,330
Amortization of debt issuance costs included in interest expense		8,042,451			7,751,818
Share based compensation for services and warrants expense		16,092			27,650
Inventory valuation allowance		-			-
Deferred tax provision (benefit)		4,523,643			(7,440,305	)
Changes in operating assets and liabilities
Accounts receivable		558,165			647,049
Inventories		321,200,297			(119,627,463	)
Other current assets and prepaid expenses		(752,148	)		185,892
Value added tax recoverable		84,623,088			(56,530,224	)
Other payables and accrued expenses		961,903			4,331,048
Customer deposits		(192,313	)		-
Income tax payable		748,416			7,725,853
Other taxes payable		359,224			482,337
Net cash provided by (used in) operating activities		461,352,092			(145,550,007	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(491,136	)		(1,551,847	)
Investments in gold		-			(358,279,503	)
Net cash used in investing activities		(491,136	)		(359,831,350	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from other loans – short term		-			169,103,063
Repayments of other loans – short term		(554,840,248	)		(147,212,224	)
Proceeds from other loans – long term		435,804,951			96,966,135
Repayments of other loans – long term		-			(102,695,952	)
Proceeds from related party loans – short term		-			293,836,774
Repayments of related party loans – short term		(230,227,311	)		-
Proceeds from related party loans – long term		443,110,831			771,321,531
Repayments of related party loans – long term		(534,050,005	)		(609,711,305	)
Payments of loan origination fees		(6,578,966	)		(4,114,687	)
Repayment of third party loans		-			(29,383,677	)
(Repayment of) borrowings from related party		965,643			(5,212,812	)
Proceeds from exercise of warrants		-			113,562
Net cash provided by (used in) financing activities		(445,815,105	)		433,010,408
EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH		(4,229,857	)		2,619,437
NET INCREASE DECREASE  IN CASH AND RESTRICTED CASH		10,815,994			(69,751,512	)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		17,924,397			81,677,623
CASH AND RESTRICTED CASH, END OF PERIOD	$	28,740,391		$	11,926,111
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense	$	120,133,935		$	92,580,544
Cash paid for income tax	$	8,465,896		$	5,270,750
NON-CASH INVESTING AND FINANCING ACTIVITIES
Investments in gold obtained in a lease from a related party and fully repaid	$	-		$	132,748,925
Investments in gold transferred to inventories	$	557,866,549		$	350,761,730
Unrealized gain (loss) on investments in gold, net of tax	$	(56,908,875	)	$	75,935,884

The accompanying notes are an integral part of these unaudited condensed consolidated Financial Statements

7

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Kingold Jewelry, Inc. (“Kingold” or the “Company”) have been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended September 30, 2018   are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 15, 2018 and subsequently amended on March 26, 2018.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation 

The accompanying unaudited condensed consolidated financial statements include the financial statements of Kingold, Dragon Lead, Wuhan Vogue-Show and Wuhan Kingold. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant and equipment, intangible assets, the recoverability of long-lived assets, inventory valuation, allowance for doubtful accounts, deferred income tax, allowance for investments in gold. Actual results could differ from those estimates.

Cash

Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains most of the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.

Restricted Cash

The Company adopted Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows: Restricted Cash” during the first quarter of 2018. This ASU applies to all entities that have restricted cash or restricted cash equivalents to be presented in the statement of cash flows under Topic 230.

As of September 30, 2018 and December 31, 2017, the Company had restricted cash (current and non-current) of $15,494,955 and $12,927,272, respectively. All restricted cash was related to the various loans with banks and financial institutions – see Note 5 – Loans.

8

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable

The Company generally receives cash payment upon delivery of a product, but may extend unsecured credit to its customers in the ordinary course of business. The Company mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history of the customers and current relationships with them. As of September 30, 2018 and December 31, 2017, there was no allowance recorded as the Company considers all of the accounts receivable fully collectible. 

Inventories

Inventories are stated at the lower of cost and net realizable value, and cost is calculated on the weighted average basis. As of September 30, 2018 and December 31, 2017, there was no lower of cost or market adjustment because the carrying value of the Company’s inventories was lower than the current and expected market price of gold. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overhead and other costs incurred in bringing the inventories to their present condition.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life. 

Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. The estimated useful lives used in connection with the preparation of the financial statements are as follows:

	Estimated Useful Life
Buildings	30 years
Plant and machinery	15 years
Motor vehicles	10 years
Office furniture and electronic equipment	5 – 10 years
Leasehold improvements	5 years

Land Use Right

Under PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. Amortization is provided over the respective useful lives, using the straight-line method. Estimated useful life is 50 years, and is determined in connection with the term of the land use right. 

Long-Lived Assets

Certain assets such as property, plant and equipment and construction in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets that are held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. There were no events or changes in circumstances that triggered a review of impairment of long-lived assets as of September 30, 2018 and December 31, 2017. 

9

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: 

Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect management’s assumptions based on the best available information.

The carrying value of accounts receivable, other current assets and prepaid expenses, short-term loans, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments. The Company determined that the carrying value of the long term loans approximated their fair value by comparing the stated loan interest rate to the rate charged by similar financial institutions. The Company uses quoted prices in active markets to measure the fair value of investments in gold.

Investments in Gold

The Company pledged the gold leased from related party and part of its own gold inventory to meet the requirements of bank loans. The pledged gold will be available for sale upon the repayment of the bank loans. The Company classified these pledged gold as investments in gold, and carried at fair market value, with the unrealized gains and losses, included in the determination of comprehensive income (loss) and reported in equity. The fair market value of the investments in gold is determined by quoted market prices at Shanghai Gold Exchange.

Revenue Recognition

The Company adopted Accounting Standards Codification (“ASC”) 606 in the first quarter of 2018 using the modified retrospective approach. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

10

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (continued)

The Company’s revenues are primarily composed of sales proceeds collected from sales of branded products and customized product fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customers.

Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s branded products and accessories to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers. The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales in the accompanying consolidated statements of operations and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.

Sαles of brαnded products

The Company offers a wide range of in-house designed products including but not limited to gold necklaces, rings, earrings, bracelets, and pendants. In our sales of branded products, the Company only sells on a wholesale basis to distributors and retailers. Pricing of the jewelry products is made at the time of sales contracts are made, based on prevailing market price of gold. These sales contracts are primarily based on a customer’s purchase order followed by the Company’s order acknowledgement, and may also include a master supply or distributor agreement. The performance obligations are generally satisfied at a point in time when the Company ships the product from the Company’s facility. Payment term is typically due within 30 days. 

Customized production fees

In the customized product arrangement, the Company receives orders from other jewelry companies who engage to the Company to design and produce 24-karat jewelry and Chinese ornaments using gold they supply to the Company. Although the Company assumes the responsibilities to design and manufacture the related Jewelry products, the Company does not assume inventory risk and does not determine the product design specification. As a result, the Company is considered the agent in this arrangement for revenue recognition purposes. All of the sales contracts in this customized product arrangements contain performance obligations satisfied at a point in time when we complete the design and ship the product from the Company’s facility. The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services have been performed and (ii) collectability is reasonably assured.

The Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and concluded that there were no differences in the pattern of revenue recognition as a result of the adoption of ASC 606.

11

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (continued)

Contract Balances and Remaining Performance Obligations

Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. The Company contract assets, consist primarily of accounts receivable related to sales of products to customers when revenue is recognized prior to payment and the Company has an unconditional right to payment. The Company had accounts receivable related to revenues from contracts with customers of $198,214 and $768,167 as of September 30, 2018 and December 31, 2017. The Company’s contract liabilities in terms of customer deposit are immaterial.

The Company did not disclose information about remaining performance obligations pertaining to the customer contracts that either (i) contracts with an original expected term of one year or less, or (ii) contracts for which revenue is recognized in proportion to the amount the Company has the right to invoice for products sold or services rendered. 

Revenue by category

Revenue by major product line was as follows for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Branded production sales	$	612,836,724	$	568,620,635	$	1,808,294,992	$	1,318,304,351
Customized production sales		13,279,852		15,746,535		35,961,620		34,125,524
Trade in product sales		54,496		59,532		103,514		109,405
Other		-		84,937		131,264		127,636
	$	626,171,072	$	584,511,639	$	1,844,491,390	$	1,352,666,916

12

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at September 30, 2018 and December 31, 2017.

To the extent applicable, the Company records interest and penalties as a general and administrative expense. The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax years 2012 and after. As of September 30, 2018, the tax years ended December 31, 2012 through December 31, 2017 for the Company’s PRC subsidiaries remain open for statutory examination by PRC tax authorities.

Foreign Currency Translation

Kingold, as well as its wholly owned subsidiary, Dragon Lead, maintain accounting records in United States Dollars (“US$”), whereas Wuhan Vogue-Show and Wuhan Kingold maintain their accounting records in Renminbi (“RMB”), which is the primary currency of the economic environment in which their operations are conducted. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated Other Comprehensive Income (Deficit)”.

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: 

	September 30, 2018		September 30, 2017		December 31, 2017
Balance sheet items, except for equity, as of the period ended	US$	1=RMB 6.8683	US$	1=RMB 6.6549	US$	1=RMB 6.5064
Amounts included in the statements of operations and cash flows for the periods presented	US$	1=RMB 6.5153	US$	1=RMB 6.8065	US$	1=RMB  6.7570

13

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The unrealized gain or loss resulting from the change of the fair market value from the gold investments and the foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ are reported in other comprehensive income (loss) in the consolidated statements of operations   and comprehensive income.

Earnings Per Share (“EPS”)

Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (i.e., options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Share or Stock-Based compensation

For employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award. For the non-employee stock-based awards, the fair value of the awards to non-employees are measured every reporting period based on the value of the Company’s common stock. 

Debts Issuance Costs

Debt issuance cost related to a recognized debt liability is presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. Amortization of debt issuance costs is calculated using the effective interest method and is included as a component of interest expense.  

Risks and Uncertainties

The jewelry industry generally is affected by fluctuations in the price and supply of diamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. The Company potentially has exposure to the fluctuation in gold commodity prices as part of its normal operations. In the past, the Company has not hedged its requirement for gold or other raw materials through the use of options, forward contracts or outright commodity purchasing. A significant increase in the price of gold could increase the Company’s production costs beyond the amount that it is able to pass on to its customers, which would adversely affect the Company’s sales and profitability. A significant disruption in the Company’s supply of gold, or other commodities, could decrease its production and shipping levels, materially increase its operating costs, and materially and adversely affect its profit margins. Shortages of gold, or other commodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which the Company purchases its raw materials, may adversely affect its ability to maintain production of its products and sustain profitability. Although the Company generally attempts to pass on increased commodity prices to its customers, there may be circumstances in which it is not able to do so. In addition, if the Company were to experience a significant or prolonged shortage of gold, it would be unable to meet its production schedules and to ship products to its customers in a timely manner, which would adversely affect its sales, margins and customer relations.  

14

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Risks and Uncertainties (Continued)

Furthermore, the value of the Company’s inventory may be affected by commodity prices. The Company records the value of its inventory using the lower of cost and net realizable value, cost calculated on the weighted average method. As a result, decreases in the market value of precious metals such as gold would result in a lower stated value of the Company’s inventory, which may require it to take a charge for the decrease in the value of its inventory.

The Company also allocated significant portion of its inventories as investment in gold and pledged as collateral to secure loans from banks and financial institutions, so there is a risk that the Company is unable to utilize its inventories, and there could be a disruption in the Company’s supply of gold which could decrease its production and shipping levels. In addition, the investment in gold may be deficient if the fair market value of the pledged gold in connection with the loans declines, then the Company may need to increase the pledged gold inventory for the loan collateral or increase restricted cash. 

The Company’s operations are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. In addition, the Company only controls Wuhan Kingold through a series of agreements. Although the Company believes the contractual relationships through which it controls Wuhan Kingold comply with current licensing, registration and regulatory requirements of the PRC, it cannot assure you that the PRC government would agree, or that new and burdensome regulations will not be adopted in the future. If the PRC government determines that the Company’s structure or operating arrangements do not comply with applicable law, it could revoke the Company’s business and operating licenses, require it to discontinue or restrict its operations, restrict its right to collect revenues, require it to restructure its operations, impose additional conditions or requirements with which the Company may not be able to comply, impose restrictions on its business operations or on its customers, or take other regulatory or enforcement actions against the Company that could be harmful to its business. If such agreements were cancelled, modified or otherwise not complied with, the Company would not be able to retain control of this consolidated entity and the impact could be material to the Company’s operations. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, this may not be indicative of future results.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which contains certain provisions and practical expedients in response to identified implementation issues; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which is intended to clarify the Codification or to correct unintended application of guidance. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The Company adopted ASU 2014-09 and the related ASUs on January 1, 2018 using the modified retrospective method, which will not result in a cumulative catch-up adjustment to the opening balance sheet of retained earnings at the effective date.

15

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements.

On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial position, statements of operations and cash flows. 

16

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 3 – INVENTORIES

Inventories as of September 30, 2018 and December 31, 2017 consisted of the following:

	As of
	September 30, 2018		December 31, 2017
	(unaudited)
Raw materials (A)	$	32,787,260	$	-
Work-in-progress (B)		71,524,413		90,406,021
Finished goods (C)		42,952,732		44,636,692
Total inventory	$	147,264,405	$	135,042,713

(A) Included 964,769 grams of Au9999 gold as of September 30, 2018 and Nil Au9999 gold as of December 31, 2017.

(B) Included 2,110,166 grams of Au9999 gold as of September 30, 2018 and 2,508,182 grams of Au9999 gold as of December 31, 2017.

(C) Included 1,258,327 grams of Au9999 gold as of September 30, 2018 and 1,231,586 grams of Au9999 gold as of December 31, 2017.

No lower of cost or net realizable value adjustment was recorded at September 30, 2018 and December 31, 2017, respectively.

NOTE 4 – PROPERTY AND EQUIPMENT, NET

The following is a summary of property and equipment as of September 30, 2018 and December 31, 2017:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
Buildings	$	2,288,298		$	2,415,577
Plant and machinery		17,722,789			18,615,951
Motor vehicles		240,833			254,228
Office and electric equipment		1,363,581			1,415,194
Leasehold improvements		1,561,822			1,623,027
Subtotal		23,177,323			24,323,977
Less: accumulated depreciation		(17,273,541	)		(17,024,334	)
Property and equipment, net	$	5,903,782		$	7,299,643

Depreciation and amortization expenses for the three and nine months ended September 30, 2018 was $402,021 and $1,208,346, respectively. Depreciation and amortization expenses for the three and nine months ended September 30, 2017 was $436,158 and $1,173,159, respectively.

17

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS

Short term loans consist of the following: 

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(a)   Loan payable to Aijian Trust	$	-		$	46,108,447
(b)   Loans payable to Evergrowing Bank - Qixia Branch		-			153,694,824
(c)   Loans payable to Evergrowing Bank - Yantai Huanshan Road Branch		72,798,218			153,233,739
(d)   Loans payable to Sichuan Trust - gross amount		-			230,542,236
Loans payable to Sichuan Trust - deferred financing cost		-			(2,239,292	)
(e)   Loans payable to China Aviation Capital - gross amount		-			44,571,499
Loans payable to China Aviation Capital - deferred financing cost		-			(457,926	)
(f)   Loans payable to Huarong Trust - gross amount		-			146,163,777
Loans payable to Huarong Trust - deferred financing cost		-			(1,324,677	)
(g) Loans payable to China Construction Investment Trust - gross amount		436,741			46,108,447
Loans payable to China Construction Investment Trust - deferred financing cost		-			(167,796	)
(h) Loans payable to Zheshang Jinhui Trust		80,078,040			84,532,153
(i) Loans payable to Zhongjiang International Trust		58,238,574			61,477,929
Loans payable to Zhongjiang International Trust - deferred financing cost		(31,277	)		(141,614	)
(j) Loan payable to China Aviation Trust - gross amount		45,134,895			-
Loan payable to China Aviation Trust - deferred financing cost		(215,164	)		-
(k)Loans payable to National Trust - gross amount		50,958,753			-
Loan payable to National Trust - deferred financing cost		(76,942	)		-
(l) Loans payable to Anxin Trust		283,913,050			-
(m)Loans payable to China Construction Bank		30,284,058			-
Total short term loans	$	621,518,946		$	962,101,746

(a) Loan payable to Aijian Trust

The Company fully repaid loan to Aijian Trust upon maturity on May 4, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

(b) Loans payable to Evergrowing Bank – Qixia Branch

The Company fully repaid loan to Evergrowing Bank – Qixia Branch upon maturity and the pledged gold was subsequent returned to the Company.

18

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

(c) Loans payable to Evergrowing Bank – Yantai Huanshan Road Branch

From February 24, 2016 to March 24, 2016, Wuhan Kingold signed ten Loan Agreements with the Yantai Huangshan Road Branch of Evergrowing Bank for loans of approximately $145.6 million (RMB 1 billion) in aggregate. The purpose of the loans was for purchasing gold. The terms of loans are two years and bear fixed interest of 4.75% per year. Based on the loan repayment plan as specified in the loan agreements, $145,596 (RMB 1 million) was repaid in August 2016, $145,596 (RMB 1 million) was repaid on February 23, 2017 and another $145,596 (RMB 1 million) was repaid in August 23, 2017. The Company repaid $72.4 million (RMB 497 million) to Evergrowing bank Yantai Huangshan Road Branch upon maturity.

For the remaining balance of $72.8 million (RMB 500 million), the Company entered into a loan extension agreement with the bank to extend the loan borrowing period for additional seven months until October 2018, with the new interest rate of 6.5% per year. The loans are secured by 2,735 kilograms of Au9999 gold in aggregate with carrying value of approximately $92.6 million (RMB 635.9 million) and are guaranteed by the CEO and Chairman of the Company. Upon the maturity of these loans, the Company entered into a series of supplemental agreements with Yantai Huanshan Road Branch of Evergrowing Bank to extend the term of the loan for additional 12 months.

(d) Loans payable to Sichuan Trust

On September 7, 2016, the Company entered into two trust loan agreements with the Sichuan Trust Ltd. (“Sichuan Trust”) to borrow a maximum of approximately $291.2 million (RMB 2 billion) as working capital loan. The required annual interest rate is 8.46%. The Company paid the first interest payment equal to 1.21% of the principle received as loan origination fee on annual basis, then the rest of interest payments are calculated based on a fixed interest rate of 7.25%. The Company pledged 7,258 kilograms of Au9999 gold with carrying value of approximately $245.7 million (RMB 1.7 billion) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

These loans originally have maturity dates between September 20, 2018 and November 30, 2018. During the three months ended September 30, 2018, these loans were extended to have maturity dates between November 20, 2019 and January 30, 2020. Therefore, these loans were recorded as long term. The required annual interest rate changed to from 8.46% to 8.1%.

The Company paid approximately $5.3 million (RMB 36.3 million) as loan origination fee in 2017 and 2016 for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.6 million (RMB 4.4 million) and $2.1 million (RMB 13.4 million) deferred financing cost was amortized, respectively. For three months and nine months ended September 30, 2017, approximately $0.4 million (RMB 2.3 million) and $1 million (RMB 6.8 million) deferred financing cost was amortized, respectively.

(e) Loans payable to China Aviation Capital

On September 7, 2016, the Company entered into a trust loan agreement with China Aviation Capital Investment Management (Shenzhen) (“China Aviation Capital”) to borrow a maximum of approximately $87.4 million (RMB 600 million) as working capital loan. The first installment of the loan was approximately $42.2 million (RMB 290 million) to mature on September 6, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.5% and a one-time consulting fee of 3% based on the principal amount received as loan origination fee. The Company pledged 1,473 kilograms of Au9999 gold with carrying value of approximately $49.9 million (RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The loan was extended upon maturity for another 18 months with a new maturity date of March 5, 2020. Therefore, the $42.2 million loan from China Aviation Capital was recorded as long term at September 30, 2018. The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee.

The Company paid totally approximately $1.3 million (RMB 8.7 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.8 million) and $0.5 million (RMB 3.0 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.1 million) and $0.5 million (RMB 3.3 million) deferred financing cost was amortized, respectively.

19

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

(f) Loans payable to Huarong Trust

The Company fully repaid loan to Huarong International Trust Co. Ltd. (“Huarong Trust”) upon maturity on August 15, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

The Company paid approximately $2.1 million (RMB 14.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.5 million) and $1.3 million (RMB 8.6 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.3 million (RMB 2 million) deferred financing cost was amortized.

(g) Loans payable to China Construction Investment Trust

On August 29, 2016, the Company entered into a trust loan agreement with China Construction Investment Trust to borrow a maximum of approximately $43.7 million (RMB 300 million) as working capital loan for the purpose of purchasing of gold solely with a period of 24 months from October 9, 2016 to October 9, 2018. For the loan obtained the Company is required to make interest payments are calculated based on a fixed annual interest rate. The interest payment is divided into two parts: (1) 1% of the principal amount received need to be paid before December 25, 2016 as loan origination fee; (2) the rest of interest payments are calculated based on a fixed interest rate of 7.5% and due on quarterly basis. The Company pledged 1,447 kilograms of Au9999 gold with carrying value of approximately $49.0 million (RMB 336.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3 million) to secure the loan. During the three months ended September 30, 2018, the Company repaid approximately $43.2 million (RMB 297 million), with an outstanding balance of approximately $0.5 million (RMB 3 million).

The Company paid approximately $0.4 million (RMB 3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.3 million) and $0.2 million (RMB 1.1 million) deferred financing cost was amortized, respectively. For the three months and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.3 million) and $0.2 million (RMB 1.0 million) deferred financing cost was amortized, respectively.

20

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

(h) Loans payable to Zheshang Jinhui Trust

On November 7, 2016, the Company entered into a trust loan agreement with Zheshang Jinhui Trust to borrow a maximum of approximately $80.1 million (RMB 550 million) for purchasing gold with a period of 24 months from principle receiving date November 15, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.8%. The Company pledged 2,708 kilograms of Au9999 gold with carrying value of approximately $91.7 million (RMB 629.6 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.8 million (RMB 5.5 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

(i) Loans payable to Zhongjiang International Trust

On December 23, 2016, the Company entered into a trust loan agreement with Zhongjiang International Trust to borrow a maximum of approximately $58.2 million (RMB 400 million) for purchasing gold with a period of 24 months from December 23, 2016 to December 22, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 8.75%. The Company pledged 2,104 kilograms of Au9999 gold with carrying value of approximately $71.2 million (RMB 489.2 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.3 million (RMB 1.9 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.03 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(j) Loans payable to China Aviation Trust

On January 25, 2017, Wuhan Kingold entered into a trust loan agreement with China Aviation Trust Ltd. to borrow a maximum of approximately $45.1 million (RMB 310 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8%. The Company pledged 1,647 kilograms of Au9999 gold with carrying value of approximately $55.1 million (RMB 378.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3.1 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.5 million) deferred financing cost was amortized, respectively. For three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.2 million) deferred financing cost was amortized, respectively.

21

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

(k) Loans payable to National Trust

On February 28, 2017, Wuhan Kingold entered into a trust loan agreement with National Trust Ltd. (“National Trust”) to borrow a maximum of approximately $50.9 million (RMB 350 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8.617%. The Company pledged 1,745 kilograms of Au9999 gold with carrying value of approximately $59.4 million (RMB 408.1 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.4 million (RMB 2.6 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.9 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(l) Loans payable to Anxin Trust Co., Ltd

In January 2016, Wuhan Kingold signed a Collective Trust Loan Agreement with Anxin Trust Co., Ltd. (“Anxin Trust”). The agreement allowed the Company to access of approximately $436.8 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% or 11% with various maturity dates from February 19, 2019 to October 12, 2019. The purpose of this trust loan was to provide working capital for the Company to purchase gold. The loan is secured by 15,450 kilograms of Au9999 gold in aggregate with carrying value of approximately $523.0 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. During the nine months ended September 30, 2018, the Company repaid approximately $80.1 million (RMB 550 million). The Company also made a restricted deposit of approximately $3.5 million (RMB 24 million) to secure the rest of these loans. The deposit will be refunded when the loan is repaid upon maturity.

(m) Loan payable to China Construction Bank

In September 2018, Wuhan Kingold signed a Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $17.2 million (RMB 118 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 19, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received full amount from the loan.

In September 2018, Wuhan Kingold signed a second Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $25.0 million (RMB 172 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 25, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received approximately $13.1 million (RMB 90 million) from the loan.

The above mentioned two loans were guaranteed by the CEO and Chairman of the Company. In addition, related party Wuhan Huayuan pledged fixed asset buildings as collateral to further secure these loans. The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%.

Interest expense for all of the loans mentioned above amounted to $21.3 million and $62.8 million for the three and nine months ended September 30, 2018, respectively. Interest expense for short-term loan for the three and nine months ended September 30, 2017 was $9.7 million and $29.7 million, respectively.

The weighted average interest rate for the short term loans for the nine months ended September 30, 2018 and 2017 was 8.9% and 6.5%, respectively.

22

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

Long-term loans consist of the following:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(n)Loans payable to Minsheng Trust - gross amount	$	218,394,654		$	-
Loans payable to Minsheng Trust - deferred financing cost		(2,370,401	)		-
(o)  Loans payable to Anxin Trust		72,798,218			461,084,471
(p)  Loans payable to Chang’An Trust - gross amount		142,691,690			153,694,824
Loans payable to Chang’An Trust - deferred financing cost		(880,604	)		(1,563,230	)
(q)Loans payable to China Aviation Trust - gross amount		-			47,645,395
Loans payable to China Aviation Trust - deferred financing cost		-			(761,674	)
(r)   Loans payable to China Aviation Capital		42,222,966			-
(s)   Loans payable to National Trust - gross amount		-			53,793,188
Loans payable to National Trust - deferred financing cost		-			(228,068	)
(t)   Loans payable to Zheshang Jinhui Trust (new) - gross amount		91,929,590			76,847,412
Loans payable to Zheshang Jinhui Trust (new) - deferred financing cost		(448,242	)		(1,102,181	)
(u)Loans payable to Sichuan Trust - gross amount		218,394,654			-
Loans payable to Sichuan Trust - deferred financing cost		(171,345	)		-
(v)Loan payable to Dongguan Trust		145,596,435			-
Loan payable to Dongguan Trust - deferred financing cost		(1,983,348	)		-
Total long term loans, net of deferred financing costs	$	926,174,267		$	789,410,137

(n) Loan payable to Minsheng Trust

On December 26, 2017, the Company entered into a Trust Loan Contract in the amount of no more than approximately $218.4 million (RMB 1.5 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 24-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 30 months. The Trust Loan bears interest at a fixed annual rate of 9.2%. The loan is secured by 7,887 kilograms of Au9999 gold in aggregate with carrying value of approximately $270.6 million (RMB 1.9 billion). The loan is also guaranteed by the CEO and Chairman of the Company. The Company made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

The Company paid approximately $3.8 million (RMB 25.9 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $1.5 million (RMB 9.6 million) deferred financing cost was amortized.

(o) Loans payable to Anxin Trust (see Note 5 (l) above)

(p) Loans payable to Chang’An Trust

In September 2017, Wuhan Kingold entered into a new Trust Loan Contract with Chang’An Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 10% with a term of 24 months and is secured by 4,784 kilograms of Au9999 gold in aggregate with carrying value of approximately $163.6 million (RMB 1.1 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. On September 30, 2018, the Company made repayment of approximately $2.9 million (RMB 20 million). Subsequently on October 31, 2018, the Company made repayment of approximately $25.9 million (RMB 178.2 million) to Chang'An Trust.

The Company paid approximately $1.5 million (RMB 11 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) and $0.6 million (RMB 4.1 million) deferred financing cost was amortized, respectively.  

23

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – LOANS (Continued)

(q) Loans payable to China Aviation Trust (see Note 5 (j) above)

(r) Loans payable to China Aviation Capital (see Note 5 (e) above)

(s) Loans payable to National Trust (see Note 5 (k) above)

(t) Loans payable to Zheshang Jinhui Trust (new)  

In November 2017, Wuhan Kingold entered into a new Trust Loan Contract with Zheshang Jinhui Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 7.7% with a term of 24 months and is secured by 3,264 kilograms of Au9999 gold in aggregate with carrying value of approximately $110.4 million (RMB 758.5 million). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received an aggregate of approximately $91.9 million (RMB 631.4 million) from the loan. The Company also made a restricted deposit of approximately $0.92 million (RMB 6.3 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.5 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.3 million (RMB 1.9 million) and $$0.9 million (RMB 5.6 million) deferred financing cost was amortized, respectively.

(u) Loans payable to Sichuan Trust (see Note 5 (d) above)

(v) Loans payable to Dongguan Trust

In July 2018, Wuhan Kingold entered into a gold income rights transfer and repurchase agreement (the “Agreement”) with Dongguan Trust. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this Agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $2.2 million (RMB 15 million) as loan origination fee for obtaining this loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) deferred financing cost was amortized.

Total interest expense for the above long-term loans was approximately $15.3 million and $53.0 million for the three and nine months ended September 30, 2018, respectively. Total interest expense for the above long-term loans was approximately $17.4 million and $66.2 million for the three and nine months ended September 30, 2017, respectively.

The weighted average interest rate for the long-term loans for the nine months ended September 30,2018 and 2017 was 8.9% and 9.8%, respectively.

24

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 6 – INVESTMENTS IN GOLD

As of September 30, 2018 and December 31, 2017, the Company allocated a total of 57,476 and 59,523 kilograms of Au9999 gold in its inventories with carrying value of approximately $1,953.6 million and $2,131.6 million, respectively, as investments in gold for obtaining various loans from banks and financial institutions. (See Note 5)

As of September 30, 2018 and December 31, 2017, the Company pledged a total of 2,655 and 10,225 kilograms of gold, respectively, as guarantee for Wuhan Kangbo Biotech Limited (“Kangbo”), a related party which is controlled by the CEO and Chairman of the Company, for obtaining total amount of RMB 500 million and 2 billion loan from Evergrowing Bank Huanshan Road Branch, respectively. (See Note 7)

As of September 30, 2018 and December 31, 2017, the Company pledged a total of 523 kilograms of gold and pledged as collateral for obtaining total amount of RMB 100 million loan from Wuhan Huayuan Technology Development Limited (“Huayuan”), a related party which is controlled by the CEO and Chairman of the Company. (See Note 7)   

As of September 30, 2018, a total of 32,593 kilograms of Au9999 gold with fair market value of approximately $1,071 million was pledged for long term loans, and therefore classified as non-current investments in gold. The remaining investments in gold of 28,061 kilograms of Au9999 gold with fair market value of approximately $922.1 million was classified as current assets as of September 30, 2018.

As of December 31, 2017, the total of 26,689 kilograms of Au9999 gold with fair market value of approximately $957.1 million was pledged for long-term bank loans, and therefore classified as non-current investments in gold. The remaining investments in gold of 43,582 kilograms of Au9999 gold with fair market value of approximately $1,562.9 million was classified as current assets as of December 31, 2017. 

As of September 30, 2018, the fair market value of a total of 60,654 kilograms of Au9999 gold investments decreased by $77.0 million, which resulted in net unrealized loss of $56.9 million, net of tax for the nine months ended September 30, 2018. The Company recorded the change in unrealized gain (loss) as other comprehensive income (loss), net of tax.

NOTE 7 – RELATED PARTIES LOANS 

(a) Loans payable to Wuhan Kangbo Biotech Limited

On January 13, 2017, Wuhan Kingold entered into a loan agreement with Wuhan Kangbo Biotech Limited (“Kangbo”), a related party which is controlled by the CEO and Chairman of the Company, for a loan of approximately $145.6 million (RMB 1 billion). The loan had one-year term from January 12, 2017 to January 10, 2018 and bore fixed interest of 4.75%. In order for Kangbo to obtain the loan from the bank, Wuhan Kingold signed the guarantee agreement with Evergrowing Bank - Yantai Huangshan Road Branch on January 11, 2017. As a guarantor of the bank loan, Wuhan Kingold pledged 5,470 kilograms of gold in aggregate with carrying value of approximately $183.0 million (RMB 1.3 billion) as collateral.

On February 20, 2017, Wuhan Kingold entered into a second loan agreement with Kangbo for a loan of approximately $145.6 million (RMB 1 billion). The loan had one-year term from February 20, 2017 to February 20, 2018 bore fixed interest of 4.75%. In order for Kangbo to obtain the loan from the bank, Wuhan Kingold signed the guarantee agreement with Evergrowing Bank - Yantai Huangshan Road Branch on February 16, 2017. As a guarantor of the bank loan, Wuhan Kingold pledged 4,755 kilograms of gold in aggregate with carrying value of approximately $163.8 million (RMB 1.1 billion) as collateral.

The Company repaid $218.4 million (RMB 1.5 billion) loans to Kangbo upon maturity in January 2018 and February 2018. 7,870 kilograms of pledged gold in Evergrowing Bank - Yantai Huanshan Road Branch were released to the Company accordingly with 2,355 kilograms are still pledged as guarantee. For the remaining $72.8 million (RMB 500 million) loan that matured on March 2, 2018, the Company entered into a loan extension agreement with Kangbo to extend the loan borrowing period for additional seven months until October 2, 2018 with additional 2,655 kilograms of gold pledged with carrying value of approximately $91.3 million (RMB 627.3 million) as collateral. Upon the maturity of the loan, the Company entered into a supplemental agreement with the related party Kangbo to extend the term of the loan for 12 months, the 2,655 kilograms of Au9999 gold will still be pledged in Yantai Huanshan Road Branch of Evergrowing Bank for Kangbo to obtain the loan.

25

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – RELATED PARTIES LOANS (Continued)

(b) Loans payable to Wuhan Kingold Industrial Group

Between November 23, 2016 and November 29, 2016, the Company entered into multiple loan agreements of RMB 3.2 billion in aggregate with Wuhan Kingold Industrial Group, a related party which is controlled by the CEO and Chairman of the Company, as working capital loans in order to subsequently purchase raw material of gold.

On February 22, 2017, the Company signed a non-interest bearing credit line agreement with Wuhan Kingold Industrial Group for additional loan of RMB 800 million with a 5 year maturity to February 21, 2022.

In April 2017, the Company signed three additional non-interest bearing credit line agreements with Wuhan Kingold Industrial Group for additional loans totaling RMB 1.35 billion with 5 year maturity to April 2022.

In January 2018, the Company signed an agreement and borrowed additional $305.8 million (RMB 2.1 billion) non-interest bearing loan from Wuhan Kingold Industrial Group as working capital with 5 year maturity to January 2023.

During the nine months ended September 30, 2018, the Company repaid loans totaling $531.5 million (RMB 3.5 billion) and obtained loans totaling $443.1 million (RMB 2.9 billion). During the nine months ended September 30, 2017, the Company repaid loans totaling $609.7 million (RMB 4,150 million) and obtained loans totaling $756.6 million (RMB 5,150 million).

As of September 30, 2018, the aggregate borrowing amount from Wuhan Kingold Industrial Group was approximately $440.3 million (RMB 3.0 billion). The Company classified these loans as non-current liabilities. As of December 31, 2017, the aggregate borrowing amount from Wuhan Kingold Industrial Group was approximately $553.3 million (RMB 3.6 billion).

 (c)   Loans payable to Wuhan Huayuan Technology Development Limited

On June 8, 2017, Wuhan Kingold signed a loan agreement with Wuhan Huayuan Technology Development Limited (“Wuhan Huayuan”), a related party which is controlled by the CEO and Chairman of the Company, for a loan of $14.6 million (RMB 100 million). The purpose for the loans is for working capital and purchasing gold. The loan has four years term from June 8, 2017 to June 8, 2021 and bears fixed interest of 7.8%. The Company also pledged 523 kilograms of Au9999 gold with carrying value of approximately $19.1 million (RMB 124.4 million) as collateral to secure this loan.

During nine months ended September 30, 2018, the Company repaid $2.6 million (RMB 16.8 million), results in the outstanding balance of $11.3 million (RMB 77.8 million) as of September 30, 2018. Interest expense of $237,276 and $799,905 was recorded for this loan for the three and nine months ended September 30, 2018, respectively. Interest expense of $263,306 and $311,385 was recorded for this loan for the three and nine months ended September 30, 2017.

During the year ended December 31, 2017, the Company repaid $0.8 million (RMB 5.4 million), results in the outstanding balance of $14.5 million (RMB 94.6 million) as of December 31, 2017.

NOTE 8 – OTHER RELATED PARTY TRANSACTIONS

For the nine months ended September 30, 2018 and for the year ended December 31, 2017, the Company received working capital proceeds from the CEO and Chairman of the Company, to pay certain expense to various service providers on behalf of the Company. Such amount is unsecured and repayable on demand with no interest.

As of September 30, 2018 and December 31, 2017, the amount due to CEO and Chairman was $3,592,726 and $2,630,301, respectively.

In connection with the Company’s borrowings of approximately $30.3 million loans from China Construction Bank (Note 5), related party Wuhan Huayuan pledged fixed assets buildings as collaterals to secure these loans.

The Company leased office buildings from related party Wuhan Huayuan (see Note 15).

26

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 – INCOME TAXES 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Kingold is incorporated in the United States and has incurred net operating losses for income tax purposes through September 30, 2018, resulting in loss carry forwards of $19,260,430 for U.S. income tax purposes available for offsetting against future taxable U.S. income, expiring in 2037. Management believes that the realization of the benefits from these losses is uncertain due to its history of continuing losses in the United States. Accordingly, a full deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded. The valuation allowance as of September 30, 2018 and December 31, 2017 was $4,044,690 and $6,151,702, respectively.

Dragon Lead is incorporated in the British Virgin Islands (the “BVI”), and under current laws of the BVI, income earned is not subject to income tax.

Wuhan Vogue-Show and Wuhan Kingold are incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. The applicable tax rate is 25% for the three and nine months ended September 30, 2018  and for the year ended December 31, 2017. The Company recorded $22,054,343 and $6,677,675 deferred income tax assets as of September 30, 2018 and December 31, 2017, respectively.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has determined that the Company’s VIE in PRC does not qualify as a reportable controlled foreign corporation (“CFC”) in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result the Company assessed there was no significant income tax impact during the period in which the legislation was enacted. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the Company’s VIE in PRC does not qualify as a reportable CFC, therefore it is not necessary to record any income tax provision in connection with the transition tax on the mandatory deemed repatriation of foreign earnings at December 31, 2017. Additional work has been ongoing to further the detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2018 when the analysis is complete.

Income (loss) from continuing operations before income taxes was allocated between the U.S. and foreign components for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
United States	$	(214,312	)	$	(236,952	)	$	(1,167,190	)	$	(953,598	)
Foreign		17,949,121			38,965,061			54,951,370			22,224,744
	$	17,734,809		$	38,728,109		$	53,784,180		$	21,271,146

27

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 – INCOME TAXES (Continued)

Significant components of the income tax provision (benefit) were as follows for the three and nine months ended September 30, 2018 and 2017: 

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Current tax provision
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		1,787,717		7,778,520		9,214,312		12,996,602
	$	1,787,717	$	7,778,520	$	9,214,312	$	12,996,602
Deferred tax provision (benefit)
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		2,699,588		1,962,539		4,523,643		(7,440,305	)
		2,699,588		1,962,539		4,523,643		(7,440,305	)
Income tax provision (benefit)	$	4,487,305	$	9,741,059	$	13,737,955	$	5,556,297

The components of deferred tax assets and deferred tax liabilities as of September 30, 2018 and December 31, 2017 consist of the following:

	As of September 30, 2018			As of December 31, 2017
Deferred tax assets:
Accrued interest	$	1,609,466		$	1,824,171
Inventory Valuation		-			4,545,708
Accrued expenses		-			330,663
Deferred financing costs on the loans		2,609,240			741,008
Unrealized loss due to change in fair value of investments in gold		19,242,937			-
Other temporary differences		-			56,062
Net operating losses from parent company		4,044,690			6,151,702
Valuation allowance		(4,044,690	)		(6,151,702	)
		23,461,643			7,497,612
Deferred tax liabilities:
Inventory Valuation	$	(840,680	)	$	-
Accrued expenses		(514,296	)		-
Other temporary differences		(52,324	)		-
Unrealized gain due to change in fair value of investments in gold		-			(819,937	)
Deferred tax assets - Net	$	22,054,343		$	6,677,675

28

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 10 – EARNINGS PER SHARE

For the three and nine months ended September 30, 2018, the effect of potential shares of common stock was dilutive since the exercise prices for the warrant and options were lower than the average market price for the three and nine months ended September 30, 2018. As a result, total of 7,619 and 197,647 unexercised warrants and options are dilutive, and were included in the computation of diluted EPS for the three and nine months ended September 30, 2018, respectively.

For the three and nine months ended September 30, 2017, the effect of potential shares of common stock was dilutive since the exercise prices for the warrant and options were lower than the average market price for the three months ended September 30, 2017. As a result, for the three and nine months ended September 30, 2017, total of 434,991 and 307,803 unexercised options are dilutive, respectively, and were included in the computation of diluted EPS. 

NOTE 11 – OPTIONS

The Company recorded $5,364 and $16,092 stock-based compensation expense for the three and nine months ended September 30, 2018, respectively. The Company recorded 5,364 and $27,650 stock-based compensation expense for the three and nine months ended September 30, 2017, respectively. 

The following table summarized the Company’s stock option activity:

					Weighted Average
	Number of Options		Weighted Average Exercise Price		Remaining Life  in Years
Outstanding, December 31, 2017		3,220,000	$	1.90		3.76
Exercisable, December 31, 2017		3,191,875	$	1.91		3.73
Granted		-		-		-
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, September 30, 2018		3,220,000	$	1.90		3.01
Exercisable, September 30, 2018		3,208,750	$	1.91		3.00

29

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 12 – WARRANTS

On August 12, 2015, the Company signed a consulting agreement to engage Bespoke Independent Partners (“BIP”), a wholly owned subsidiary of FPIA Partners LLC to operate as a strategic advisor to Kingold in matters relating to investor relations, capital markets and shareholder value creation strategy. As the part of the agreement with BIP, an aggregate of 900,000 shares of warrants with exercise price ranging from $1.20 to $1.80 will be directly issued at no cost to BIP if certain stock performance targets are met within a three-year period. As of September 30, 2018, no warrants were issued to BIP because the performance target has not been met.

On March 29, 2016, pursuant to the consulting agreement, the Company’s obligation to issue BIP warrants to purchase 150,000 shares of the Company’s common stock for $1.20 per share (the “First Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants were exercised on June 28, 2017, and the Company is in the process of issuing the shares. Accordingly, the Company recorded $64,204 consulting expense and included in the general administrative expense. The fair value of the warrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 81%, risk free interest rate of 0.84%, and expected term of 1.25 years. The fair value of the warrants was $64,204.

On April 18, 2016, pursuant to the consulting agreement, the Company’s obligation to issue BIP warrants to purchase 150,000 shares of the Company’s common stock for $1.50 per share (the “Second Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants were scheduled to expire on July 17, 2017. Accordingly, the Company recorded $65,091 consulting expense and included in the general administrative expense. The fair value of the warrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 79.7%, risk free interest rate of 0.63%, and expected term of 1.25 years. The fair value of the warrants was $65,091.

On May 10, 2016, the Company terminated the consulting agreement. On June 27, 2016, the Company and BIP signed a settlement agreement (the “Settlement Agreement”). In connection with the Settlement Agreement, the Company and BIP agreed that (1) the First Tranche Warrants and the Second Tranche Warrants would remain vested and outstanding, (2) the third, fourth and fifth tranches of success fee warrants would be cancelled; and (3) crediting of $66,439 in outstanding but unpaid fees against the exercise price of the First Tranche Warrants would be the only payment made or required under the Service Agreement. As a result, BIP received (a) 55,365 shares, (b) warrants to purchase 94,635 shares for $1.2 per share, which expired June 28, 2017, and (c) warrants to purchase 150,000 shares for $1.50 per share, which may be exercised until July 17, 2017. As a result of the Settlement Agreement, the Company does not have any liability for future warrants issuance to BIP. During the year ended December 31, 2017, 94,635 warrants were exercised   and these shares were issued in August 2017. On July 17, 2017, the Company received notice from BIP not to exercise the remaining 150,000 warrants.

For the three and nine months ended September 30, 2018 and 2017, there were no warrants recorded in the general administrative expenses of the Company, respectively.

30

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 13 – CONCENTRATIONS AND RISKS

The Company maintains certain bank accounts in the PRC and BVI, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance. The cash and restricted cash balance held in the PRC bank accounts was $28,709,891 and $17,632,270 as of September 30, 2018 and December 31, 2017, respectively. The cash balance held in the BVI bank accounts was $Nil as of September 30, 2018 and December 31, 2017. As of September 30, 2018, the Company held $19,670 of cash balances within the United States. As of December 31, 2017, the Company held $266,012 of cash balances within the United States, which was $16,012 in excess of FDIC insurance limits of $250,000.

As of September 30, 2018 and December 31, 2017, almost 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from its subsidiaries located in the PRC.

The Company’s principal raw material used during the year was gold, which accounted for almost 100% of its total purchases for the three and nine months ended September 30, 2018 and 2017. The gold purchased by the Company was solely from the Shanghai Gold Exchange, the largest gold trading platform in the PRC.

No customer accounted for more than 10% of annual sales for the three and nine months ended September 30, 2018 and 2017.

NOTE 14 – GOLD LEASE TRANSACTIONS

a) Gold lease transactions with related party

On January 3, 2017, Wuhan Kingold entered into a gold lease agreement with Shuntianyi to lease a total of 4,000 kilograms of Au9999 gold in aggregate with carrying value of approximately $131.1 million for a period from January 3, 2017 to February 28, 2017. The leased gold was fully returned by the Company to Shuntianyi on February 28, 2017.

As of September 30, 2018 and December 31, 2017, the Company had no leased gold outstanding from any related party, respectively.

31

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 14 – GOLD LEASE TRANSACTIONS (Continued) 

b) Gold lease transaction with financial institutes

The Company leased gold as a way to finance its growth and will return the same amount of gold to China Construction Bank (“CCB”), Shanghai Pudong Development Bank (“SPD Bank”) and CITIC Bank at the end of the respective lease agreements. Under these gold lease arrangements, each of CCB, SPD Bank and CITIC Bank retains beneficial ownership of the gold leased to the Company and treats it as if the gold is placed on consignment to the Company. All three banks have their own representatives on the Company’s premises to monitor on a daily basis the use and security of the gold leased to the Company. Accordingly, the Company records these gold lease transactions as operating leases because the Company does not have ownership nor has it assumed the risk of loss for the leased gold.  

As of September 30, 2018 and December 31, 2017, no leased gold was outstanding and no restricted cash was pledged as collateral to safeguard any gold leases from financial institutions.

Interest expense for all gold lease arrangements for the three and nine months ended September 30, 2018 was Nil. Interest expense for all gold lease arrangements for the three and nine months ended September 30, 2017 was approximately $1,159 and $115,972, respectively, which was included in the cost of sales.

32

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Gold Income Rights Repurchase Commitment

In connection with the Company’s borrowings of approximately $145.6 million (RMB 1 billion) from Dongguan Trust (Note 5), the Company and Dongguan Trust entered into a gold income rights transfer and repurchase agreement. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

Operating Leases

On June 27, 2016, Wuhan Kingold signed certain 5 years lease agreements with Wuhan Huayuan, a related party which is controlled by the CEO and Chairman of the Company, to rent office and store space at the Jewelry Park, commencing in July 2016 and October 2016, with aggregate annual rent of approximately $0.3 million (RMB 2.3 million). On July 1, 2017, Wuhan Kingold signed another 5 years lease agreement with Wuhan Huayuan to rent additional office space at the Jewelry Park commencing in July 2017 with aggregate annual rent of approximately $88,408 (RMB 576,000). The lease agreement with Wuhan Huayuan has been amended on November 16, 2017, pursuant to which two office spaces and a dormitory were no longer leased.

For the three and nine months ended September 30, 2018, the Company recorded $62,888 and $197,811 rent expense, respectively. For the three and nine months ended September 30, 2017, the Company recorded $108,567 and $278,251 rent expense, respectively.

As of September 30, 2018 and December 31, 2017, the Company had lease payable to Wuhan Huayuan of approximately $0.44 million and $0.26 million, respectively, which included in other payables and accrued expenses. 

For the Twelve Months Ending September 30,
2019	$	263,750
2020		263,750
2021		263,750
2022		66,306
	$	857,556

33

KINGOLD JEWELRY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 16 – COMPARATIVE INFORMATION

The Company adopted ASU No. 2016-18, “Statement of Cash Flows: Restricted Cash” on January 1, 2018. As a result, the Company retroactively applied the new standard on the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2018 to conform to the current period presentation.

The following table provides a reconciliation of cash and restricted cash reported within the condensed consolidated statement of balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statement of cash flows for the period ended September 30, 2018 and 2017:

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash	$	13,245,436	$	4,997,125	$	1,001,830	$	21,333,193
Restricted cash - current		6,567,855		5,534,551		3,170,596		52,786,257
Restricted cash – non current		8,927,100		7,392,721		7,753,685		7,558,173
Total cash and restricted cash	$	28,740,391	$	17,924,397	$	11,926,111	$	81,677,623

NOTE 17 – SUBSEQUENT EVENT

On October 10, 2018, the Company entered into a Trust Loan Contract in the amount of no more than approximately $145.6 million (RMB 1.0 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 12-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 18 months. The Trust Loan bears interest at a fixed annual rate of 10.5%. The loan is secured by 5,356 kilograms of Au9999 gold in aggregate with carrying value of approximately $208.0 million (RMB 1.4 billion). The loan is also guaranteed by the CEO and Chairman of the Company.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read together with the financial statements and related notes included in this report and in our Annual Report on Form 10-K for the year ended December 31, 2017. This discussion contains forward-looking statements that involve risks and uncertainties. See also the “Cautionary Statement for Purposes of the “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995” appearing elsewhere in this report. Our actual results may differ materially from those anticipated in those forward-looking statements as a result of certain factors, including, but not limited to, those contained in the “Risk Factors” section of this report and in our Annual Report on Form 10-K for the year ended December 31, 2017.

Our Business

Through a variable interest entity (“VIE”) relationship with Wuhan Kingold Jewelry Company Limited (“Wuhan Kingold”), a corporation incorporated in the People’s Republic of China (“PRC”), we believe that we are one of the leading professional designers and manufacturers of high quality 24-karat gold jewelry and Chinese ornaments. We develop, promote and sell a broad range of products to the rapidly expanding jewelry market across China. We offer a wide range of in-house designed products including, but not limited to, gold necklaces, rings, earrings, bracelets, and pendants. We have built a partnership with the Jewelry Institute of China University of Geosciences to help us design new products.

We have historically sold our products directly to distributors, retailers and other wholesalers, who then sell our products to consumers through retail counters located in both department stores and other traditional stand-alone jewelry stores. We sell our products to our customers at a price that reflects the market price of the base material, plus a mark-up reflecting our design fees and processing fees. This mark-up typically ranges from 3% – 6% of the price of the base material.

We aim to become an increasingly important participant in the PRC’s gold jewelry design and manufacturing sector. In addition to expanding our design and manufacturing capabilities, our goal is to provide a large variety of gold products in unique styles and superior quality under our brand, Kingold.

We borrow money to finance the purchase of gold, which gold was then pledged to secure the loans. In some cases, the unrestricted gold available for production was insufficient to provide adequate security for such loans, which in turn required us to lease gold from a related party to satisfy the loan conditions and conduct the operations.

35

Results of Operations

The following table sets forth our condensed consolidated statements of operations and comprehensive income (loss) (unaudited) for the three and nine months ended September 30, 2018 and 2017 in U.S. dollars: 

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
NET SALES	$	626,171,072		$	584,511,639		$	1,844,491,390		$	1,352,666,916
COST OF SALES
Cost of sales		(564,685,762	)		(505,608,405	)		(1,654,427,318	)		(1,208,376,017	)
Depreciation		(255,546	)		(300,716	)		(801,384	)		(806,047	)
Total cost of sales		(564,941,308	)		(505,909,121	)		(1,655,228,702	)		(1,209,182,064	)
GROSS PROFIT		61,229,764			78,602,518			189,262,688			143,484,852
OPERATING EXPENSES
Selling, general and administrative expenses		2,487,346			3,779,728			7,597,545			10,546,253
Stock compensation expenses		5,364			5,364			16,092			27,650
Depreciation		146,475			135,442			406,962			367,112
Amortization		2,767			2,832			8,703			8,330
Total operating expenses		2,641,952			3,923,366			8,029,302			10,949,345
INCOME FROM OPERATIONS		58,587,812			74,679,152			181,233,386			132,535,507
OTHER INCOME (EXPENSES)
Other Income		64,433			661			64,433			66,158
Interest Income		562,294			633,617			1,384,438			1,824,924
Interest expense, including amortization of debt issuance costs of $3,482,031 and $1,347,832 for the three months, and $8,042,451 and $7,751,818 for the nine months ended September 30, 2018 and 2017, respectively		(41,479,730	)		(36,585,321	)		(128,898,077	)		(113,155,443	)
Total other expenses, net		(40,853,003	)		(35,951,043	)		(127,449,206	)		(111,264,361	)
INCOME FROM OPERATIONS BEFORE TAXES		17,734,809			38,728,109			53,784,180			21,271,146
INCOME TAX PROVISION (BENEFIT)
Current		1,787,717			7,778,520			9,214,312			12,996,602
Deferred		2,699,588			1,962,539			4,523,643			(7,440,305	)
Total income tax provision		4,487,305			9,741,059			13,737,955			5,556,297
NET INCOME		13,247,504			28,987,050			40,046,225			15,714,849
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) related to investments in gold, net of tax	$	(18,935,552	)	$	27,074,547		$	(56,908,875	)	$	75,935,884
Foreign currency translation gains (loss)		(13,077,661	)		4,455,163			(19,080,264	)		12,817,501
Total Other comprehensive income (loss)	$	(32,013,213	)	$	31,529,710		$	(75,989,139	)	$	88,753,385
COMPREHENSIVE INCOME (LOSS)	$	(18,765,709	)	$	60,516,760		$	(35,942,914	)	$	104,468,234
Earnings per share
Basic	$	0.20		$	0.44		$	0.61		$	0.24
Diluted	$	0.20		$	0.44		$	0.60		$	0.24
Weighted average number of shares
Basic		66,113,502			66,049,726			66,113,502			66,029,266
Diluted		66,121,121			66,484,717			66,311,149			66,337,069

36

Three Months Ended September 30, 2018 Compared to Three Months Ended September 30 2017

Net Sales

Net sales for the three months ended September 30, 2018 amounted to $626.2 million, an increase of $41.7 million, or 7.1%, from net sales of $584.5 million for the three months ended September 30, 2017. The overall increase in our revenue in the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 was mainly the result of the higher sales volume for our branded production sales.

For the three months ended September 30, 2018, our branded production sales accounted for 97.9% of the total sales and customized production sales accounted for 2.1% of the total sales. When compared with the three months ended September 30, 2017, our branded production sales increased by $44.2 million, or 7.8%, and our customized production sales decreased by $2.5 million, or 15.7%. 

In the third quarter of 2018, we processed a total of 29.6 metric tons of gold, of which branded production accounted for 16.6 metric tons (56.1%) and customized production accounted for 13.0 metric tons (43.9%). In the third quarter of 2017, we used in production a total of 30.1 metric tons of gold, of which branded production accounted for 14.6 metric tons (48.6%) and customized production accounted for 15.5 metric tons (51.4%).

Cost of Sales

Cost of sales for the three months ended September 30, 2018 amounted to $564.9 million, an increase of $59.0 million, or 11.7%, from $505.9 million for the same period in 2017. The increase was primarily due to the higher volume of the gold as a raw material used for our branded production.

Gross Profit

Gross profit for the three months ended September 30, 2018 was $61.2 million, a decrease of $17.4 million, or 22.1%, from $78.6 million for the same period in 2017. Accordingly, gross margin for the three months ended September 30, 2018 was 9.8%, compared to 13.4% for the same period in 2017.

The primary reason for the decrease in gross margin was due to the decreased average selling price of our branded production, compensated by decreased unit cost of branded production during the three months ended September 30, 2018. The average selling price of our branded production was RMB 250.77 per gram for the three months ended September 30, 2018, decreased by RMB 10.14 or 3.9%, from RMB 260.91 per gram for the same period in 2017. Meanwhile, the unit cost of branded production sales was RMB 230.86 per gram for the three months ended September 30, 2018, decreased by RMB 16.98, or 6.8%, from RMB 247.81 per gram for the same period in 2017. The decrease of the both average selling price and unit cost of branded production was mainly due to the weak gold price in 2018.

Expenses

Total operating expenses for the three months ended September 30, 2018 were $2.6 million, compared with $3.9 million for the same period in 2017. The significant decrease was mainly due to the decrease in selling, general and administrative expenses because of reduced insurance and custody fees in connection with the decreased level of investment in gold quantity.

Interest expense for the three months ended September 30, 2018 was $41.5 million compared with $36.6 million for the same period in 2017. The increase of interest expense was mainly due to higher balances for interest bearing loans resulted from additional loans obtained and recorded during the three months ended September 30, 2018 compared with the same period of 2017 and more debt issuance costs amortized during the current period.

The income tax expense was approximately $4.5 million for the three months ended September 30, 2018, compared to income tax expense of approximately $9.7 million for the same period in 2017. The decrease of income tax expense was mainly because we had a decrease in taxable income from operations before tax for the three months ended September 30, 2018, comparing to the same period last year.

37

Net Income

For the foregoing reasons, our net income was $13.2 million for the three months ended September 30, 2018, decreased by $15.7 million, or 54.3%, from a net income of $29.0 million for three months end September 30, 2017.

Other Comprehensive Loss

Other comprehensive loss was approximately $32.0 million for the three months ended September 30, 2018, compared to other comprehensive income of $31.5 million for the three months ended September 30, 2017. The Other comprehensive loss for the three months ended September 30, 2018 was mainly due to the change in market value of gold investment resulting in an unrealized loss of $18.9 million, net of tax, and foreign currency translation loss of approximately $13.1 million resulted from the depreciation of the Chinese RMB against the U.S. Dollar for the three months ended September 30, 2018.

Nine Months Ended September 30, 2018 compared to the Nine Months Ended September 30, 2017

Net Sales

Net sales for the nine months ended September 30, 2018 amounted to $1,844.5 million, an increase of $491.8 million, or 36.4%, from net sales of $1,352.7 million for the nine months ended September 30, 2017. The overall increase in our revenue in the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 was mainly the result of the higher sales volume for our branded production sales.

For the nine months ended September 30, 2018, our branded production sales accounted for 98.0% of the total sales and customized production sales accounted for 2.0% of the total sales. When comparing with the nine months ended September 30, 2017, our branded production sales increased by $490.0 million or 37.2%, and our customized production sales increased by $1.8 million or 5.4%.

In the nine months ended September 30, 2018, we used in production a total of 80.5 metric tons of gold, of which branded production accounted for 46.5 metric tons (57.7%) and customized production accounted for 34.0 metric tons (42.3%). In the nine months ended September 30, 2017, we used in production a total of 72.2 metric tons of gold, of which branded production accounted for 34.7 metric tons (48.1%) and customized production accounted for 37.5 metric tons (51.9%).

Cost of Sales

Cost of sales for the nine months ended September 30, 2018 amounted to approximately $1,655.2 million, an increase of $446.0 million, or 36.9%, from $1,209.2 million for the same period in 2017. The increase was primarily due to the higher volume of the gold as a raw material used for our branded production.

Gross Profit

Gross profit for the nine months ended September 30, 2018 was $189.3 million, an increase of $45.8 million, or 31.9%, from $143.5 million for the same period in 2017. Accordingly, gross margin for the nine months ended September 30, 2018 was 10.3%, compared to 10.6% for the same period in 2017.

The primary reason for the slightly decrease in gross margin was due to the decrease of average selling price of our branded production exceeded the decrease in unit cost of our branded production sales during the nine months ended September 30, 2018.

The average selling price of our branded production was RMB 253.45 per gram for the nine months ended September 30, 2018, decreased by RMB 5.00 or 1.9% from RMB 258.45 per gram for the same period in 2017. The unit cost of branded production sales was RMB 231.78 per gram for the nine months ended September 30, 2018, decreased by RMB 4.94 or 2.1% from RMB 236.72 per gram for the same period in 2017.

38

Expenses

Total operating expenses for the nine months ended September 30, 2018 were $8.0 million compared with $10.9 million for the same period in 2017. The decrease was mainly due to the decrease in selling, general and administrative expenses because of reduced insurance and custody fees in connection with decreased level the investment in gold quantity.

Interest expense for the nine months ended September 30, 2018 was $128.9 million compared with $113.2 million for the same period in 2017. The increase of interest expense was mainly due to higher balances for interest bearing loans resulted from additional loans obtained and recorded during the nine months ended September 30, 2018 as well as more debt issuances costs were amortized during the current period.  

The income tax expense was approximately $13.7 million for the nine months ended September 30, 2018, comparing to income tax expense of approximately $5.6 million for the same period in 2017. The increase of income tax expense was mainly because we had higher taxable income for the nine months ended September 30, 2018, comparing to the same period last year.

Net Income

For the foregoing reasons, our net income was $40.0 million for the nine months ended September 30, 2018, increased by $24.3 million, from a net income of $15.7 million for nine months end September 30, 2017.

Other Comprehensive Loss

Other comprehensive loss was approximately $76.0 million for the nine months ended September 30, 2018, compared to other comprehensive income of $88.8 million for the nine months ended September 30, 2017. The Other comprehensive loss was mainly due to the change in market value of gold investment resulting in an unrealized loss of $56.9 million, net of tax, and the foreign currency translation loss of approximately $19.1 million resulted from depreciation of the Chinese RMB against the U.S. Dollar for the nine months ended September 30, 2018.

Cash Flows

Operating activities

We had $461.4 million of net cash provided by operating activities for the nine months ended September 30, 2018, compared with $145.6 million of net cash used in operating activities for the same period in 2017. The net cash provided by operating activities was mainly due to net income of approximately $40.0 million for the nine months ended September 30, 2018, the decrease in inventory purchased of $321 million because $557.9 million of gold for investment was released to inventory and processed during the nine months ended September 30, 2018, collections from value added tax receivables of $84.6 million, an increase in income tax payable of $0.7 million and an increase in other payables and accrued liabilities of $1.0 million.

We used $145.6 million of net cash in operating activities for the nine months ended September 30, 2017. The reason of net cash used in operating activities for the nine months ended September 30, 2017 was mainly due to the increased inventory of 119.6 million purchased to prepare for the sales to match customer demand as well as increased value added tax recoverable of 56.5 million, offset by increased income tax payable of 7.7 million. The reason of net cash provided by operating activities for the same period on 2016 was mainly due to decreased inventory level of 127.5 million, collection of deposit from Jewelry Park of $151.4 million, and increased income tax payable of 23.5 million, offset by increased value added tax recoverable of 117.4 million.

Our net cash from operating activities can fluctuate significantly due to changes in our inventories. Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. Looking forward, we expect the net cash that we generate from operating activities to continue to fluctuate as our inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger or smaller quantities of raw materials. These fluctuations could cause net cash from operating activities to decrease, even if our net income grows as we continue to expand. Although we expect that net cash from operating activities will increase over the long term, we cannot predict how these fluctuations will affect our cash flow in any particular quarter.

Financing activities  

Net cash used in financing activities was $445.8 million for the nine months ended September 30, 2018, compared with net cash provided by financing activities of $ 433.0 for the nine months ended September 30, 2017. The net used in the financing activities was mainly due to repayment of an aggregate amount of loans than that of new borrowings during the nine months ended September 30, 2018. 

39

During the nine months ended September 30, 2018, we borrowed additional $435.8 million loans from banks and other financial institutions, and $443.1 million loans from related parties, and repaid $554.8 million loans from banks and other financial institutions, and $764.3 million loans from related parties. During the nine months ended September 30, 2017, we borrowed $266.1 million bank loans and $1,065 million related party loans. We also repaid $249.9 million bank loans, $609.7 million related party loans, and $29.4 million third party loans during the nine months ended September 30, 2017. 

Investing activities

Net cash used in investing activities was $0.5 million for the nine months ended September 30, 2018, compared with net cash used in investing activities of $ 359.8 million for the nine months ended September 30, 2017.  The decrease of net cash used in investing activities was mainly because we released gold investment of $557.9 million to inventory for production during the nine months ended September 30, 2018. However, we purchased gold for investment of $358.3 million in connection with our significant borrowings during the nine months ended September 30, 2017.

While our net cash used in investing activities did not fluctuate much historically, we expect that cash used in investing activities will continue to fluctuate significantly in the short-term as we continue to obtain financings from the banks which may require us to purchase more gold as collateral.  

Off-Balance Sheet Arrangements 

During the nine months ended September 30, 2018, we guaranteed payments for a related party of approximately $72.8 million (RMB 500 million) for bank loan. 

As of September 30, 2018, we had no gold lease outstanding.

Obligations and Commitments

The following table sets forth our contractual obligations as of September 30, 2018:

	Payment Due by Period
Contractual Obligations	Total		Less Than 1 year		1-3 years		3-5 years		More than 5 years
Long-term bank loans (1)	$	926,174,267	$	-	$	926,174,267	$	-	$	-
Short-term bank loans (2)		621,518,946		621,518,946		-		-		-
Related party loans (3)		524,455,561		72,798,218		11,330,042		440,327,301		-
Operating leases (4)		857,556		263,750		527,500		66,306		-
Total	$	2,073,006,330	$	694,580,914	$	938,031,809	$	440,393,607	$	-

(1) Represents the outstanding principal balance of long-term loans from bank and financial institutions.

(2) Represents the outstanding principal balance of short-term loans from bank and financial institutions.

(3) Represents the outstanding principal balance of loans from related parties.

(4) On June 27, 2016, Wuhan Kingold signed certain 5 years lease agreements with Wuhan Huayuan, a related party which is controlled by the CEO and Chairman of the Company, to rent office and store space at the Jewelry Park, commencing in July 2016 and October 2016, with aggregate annual rent of approximately $0.4 million (RMB 2.3 million). On July 1, 2017, Wuhan Kingold signed another 5 years lease agreement with Wuhan Huayuan to rent additional office space at the Jewelry Park commencing in July 2017 with aggregate annual rent of approximately $88,046 (RMB 576,000). The lease agreement with Wuhan Huayuan has been amended on November 16, 2017, pursuant to which two office spaces and a dormitory were no longer leased.

For the three and nine months ended September 30, 2018, the Company recorded $62,888 and $197,811 rent expense, respectively. As of September 30, 2018 and December 31, 2017, the Company had lease payable to Wuhan Huayuan of approximately $0.44 million and $0.26 million, respectively, which included in other payables and accrued expenses. 

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(5) In connection with the Company’s borrowings of approximately $145.6 million (RMB 1 billion) from Dongguan Trust (Note 5), the Company and Dongguan Trust entered into a gold income rights transfer and repurchase agreement. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months.  The Company determined that this agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

Liquidity and Capital Resources 

As of September 30, 2018, we had approximately $13.2 million in cash and approximately $15.5 million restricted cash. We have financed our operations with cash flow generated from operations and primarily through bank borrowings as well as through private borrowing.

As of September 30, 2018, we had total outstanding loans of $2,072.1 million (including $926.2 million short-term loans, $928.5 million long-term loans, and $524.5 million related party loans). For additional information regarding our loans, please see Notes 5 and 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

We have maintained a close relationship with the banks from where we leased gold in the past. Therefore, we expect that we are able to obtain additional gold leases from the banks, if necessary. We are expecting to generate additional cash flows in the coming period of time from developing new customers and an increase in our revenue in the following years due to the higher interest in investing in gold against the currency depreciation.   

As of September 30, 2018, the Company had working capital of $623.6 million. We believe that our current cash and cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital for the next 12 months from the date we issue this Form 10Q. We may, however, require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. Our ability to maintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. We continue to seek favorable additional financings to meet our capital requirements to fund our operations and growth plans in the ordinary course of business.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this report.

Inventories

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. We continually evaluate the composition of our inventory, turnover of our products, the price of gold, and the ability of our customers to pay for their products. We write down slow-moving and obsolete inventory based on an assessment of these factors, but principally customer demand. Such assessments require the exercise of significant judgment by management. Additionally, the value of our inventory may be affected by commodity prices. Decreases in the market value of gold would result in a lower stated value of our inventory, which may require us to take a charge for the decrease in the value. In addition, if the price of gold changes substantially in a very short period, it might trigger customer defaults, which could result in inventory obsolescence. If any of these factors were to become less favorable than those projected, inventory write-downs could be required, which would have a negative effect on our earnings and working capital.

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Investments in Gold

We pledged the gold leased from related party and part of its own gold inventory to meet the requirements of bank loans. The pledged gold will be available for sale upon the repayment of the bank loans. We classified these pledged gold as investment in gold, and carried at fair market value, with the unrealized gains and losses, included in the determination of comprehensive income and reported in shareholders’ equity. The fair market value of the investments in gold is determined by quoted market prices at Shanghai Gold Exchange. Any fluctuation in gold price may significantly impact the investments in gold and other comprehensive income (loss). 

Revenue Recognition

The Company adopted Accounting Standards Codification (“ASC”) 606 in the first quarter of 2018 using the modified retrospective approach. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

The Company’s revenues are primarily composed of sales proceeds collected from sales of branded products and customized product fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customers.

Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s branded products and accessories to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers. The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales in the accompanying consolidated statements of operations and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.

Sαles of brαnded products

The Company offers a wide range of in-house designed products including but not limited to gold necklaces, rings, earrings, bracelets, and pendants. In our sales of branded products, the Company only sells on a wholesale basis to distributors and retailers. Pricing of the jewelry products is made at the time of sales contracts are made, based on prevailing market price of gold. These sales contracts are primarily based on a customer’s purchase order followed by the Company’s order acknowledgement, and may also include a master supply or distributor agreement. The performance obligations are generally satisfied at a point in time when the Company ships the product from the Company’s facility. Payment term is typically due within 30 days or less. 

Customized production fees

In the customized product arrangement, the Company receives orders from other jewelry companies who engage to the Company to design and produce 24-karat jewelry and Chinese ornaments using gold they supply to the Company. Although the Company assumes the responsibilities to design and manufacture the related Jewelry products, the Company does not assume inventory risk and does not determine the product design specification. As a result, the Company is considered the agent in this arrangement for revenue recognition purposes. All of the sales contracts in this customized product arrangements contain performance obligations satisfied at a point in time when we complete the design and ship the product from the Company’s facility. The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services have been performed and (ii) collectability is reasonably assured.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

We are exposed to market risk from fluctuations in foreign currency exchange rates, precious metal prices and interest rates, which could affect its consolidated financial position, earnings and cash flows. We manage our exposure to market risk through its regular operating and financing activities.

Foreign Currency Exchange Rate Risk

Given that all of our revenues are generated in RMB, while our results are reported in U.S. dollars, devaluation of the RMB could negatively impact our results of operations. The value of the RMB is subject to changes in the PRC’s governmental policies and to international economic and political developments. In January 1994, the PRC government implemented a unitary managed floating rate system. Under this system, the People’s Bank of China, or PBOC, began publishing a daily base exchange rate with reference primarily to the supply and demand of RMB against the U.S. dollar and other foreign currencies in the market during the previous day. Authorized banks and financial institutions are allowed to quote buy and sell rates for RMB within a specified band around the central bank’s daily exchange rate. On July 21, 2005, the PBOC announced an adjustment of the exchange rate of the U.S. dollar to RMB from 1:8.27 to 1:8.11 and modified the system by which the exchange rates are determined. Over the past eleven years, RMB has appreciated 9.3% against the U.S. dollar (from USD1 = RMB 7.2946 on January 1, 2008 to USD1 = RMB 6.8683 on September 30, 2018). While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further fluctuations of the exchange rate of RMB against the U.S. dollar, including possible devaluations. As all of our net revenues are recorded in RMB, any future devaluation of RMB against the U.S. dollar could negatively impact our results of operations.

Along these lines, the income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks. 

Interest Rate Risk

Our borrowings from banks and other financial institutions as of September 30, 2018, were approximately $1,550.1 million, and interest expense paid for these loans was $120.1 million for the nine months ended September 30, 2018.

For the nine months ended September 30, 2018, our weighted average interest rate was approximately 8.9%. We do not expect the interest expense will be changed dramatically and we currently have no interest rate hedging positions in place to reduce our exposure to interest rates.

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Commodity Price Risk

Most of our sales are of products that include gold, precious metals and other commodities, and fluctuations in the availability and pricing of commodities would adversely impact our ability to obtain and make products at favorable prices. The jewelry industry generally is affected by fluctuations in the price and supply of diamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. In the past, we have not hedged our requirement for gold or other raw materials through the use of options, forward contracts or outright commodity purchasing, although we may do so in the future. A significant increase in the price of gold could increase our production costs beyond the amount that we are able to pass on to our customers, which would adversely affect our sales and profitability. A significant disruption in our supply of gold or other commodities could decrease our production and shipping levels, materially increase our operating costs, and materially and adversely affect our profit margins. Shortages of gold, or other commodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which we purchase our raw materials, may adversely affect our ability to maintain production of our products and sustain profitability. If we were to experience a significant or prolonged shortage of gold, we would be unable to meet our production schedules and to ship products to our customers in a timely manner, which would adversely affect our sales, margins and customer relations.

A dramatic increase in the price of gold could increase our production costs beyond the amount that we may be able to pass on to our customers, which could adversely affect our gross profit margin and profitability. Furthermore, the carrying value of our inventory may be affected. Slight decreases in the market price of gold following the end of a reporting period could impact the carrying amount of the inventory at the balance sheet date and/or the following reporting period’s gross profit margin and profitability.

Inflation Risk

We do not believe inflation has had a material impact on our net sales, income from continuing operations, plans for expansion or other capital expenditures for any year during the three-year period ended September 30, 2018. However, we cannot be sure inflation will not have an adverse impact on our operating results, financial condition, plans for operations or other capital expenditures in future periods.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on our review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this report due to the continued existence of material weaknesses in our internal control over financial reporting.

In connection with the preparation of this report, management determined that, as of September 30, 2018, we did not maintain effective internal control over financial reporting due to the existence of the following material weaknesses: 

· Material adjustments were proposed by the auditors and recorded by the Company for the nine months ended September 30, 2018;

· Lack of resources with technical competency to review and record non-routine or complex transactions;

· Lack of a full-time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions;

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· Lack of communication between management, chief executive officer and the board of directors relating to the approval of obtaining loans from banks, other financial institutions, related parties, third parties, and proving guarantees to related parties, third parties and gold lease transactions with related parties;

· Lack of functional internal audit department that monitors the consistencies of the prescribed internal control procedures;

· Lack of proper accounting and recording of the investments in gold and the related loans payable to banks, financial institutions and related parties.

In order to remediate the material weakness of inadequate controls over cash management, our Board adopted resolutions requiring management to seek Board approval prior to entering into any transactions including gold leases and loans with a value in excess of $250,000. Notwithstanding this requirement, our Board determined in the course of preparing this quarterly report that management did not consistently seek Board approval prior to causing Wuhan Kingold to enter into transactions covered by these resolutions. In addition to failing to approve such transactions as anticipated, this absence of prior approval resulted in our failure to disclose such transactions at the time they occurred. Further, we intend to explore implementing additional policies and procedures, which may include: 

· Reporting other material and non-routine transactions to the Board and obtain proper approval by management;

· Recruiting qualified professionals with appropriate levels of knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions;

· Improving the communication between management, board of directors and chief financial officer;

· Improving the internal audit function, internal control policies and monitoring controls.

· Holding monthly Business Meeting - management reports to the board of directors of significant events such as loans renewals, related parties’ transactions, new loans obtained from related and third parties, gold inventories and gold investment (pledged gold) movements and guarantees to related parties and third parties loans;

· To hold financial controller accountable for any omitted or misleading transactions not reported to the board of directors and the independent auditors.

Changes in Internal Control over Financial Reporting

The following changes in our internal controls over financial reporting occurred during the nine months ended September 30, 2018, which are reasonably likely to materially affect our internal control over financial reporting: 

· We have begun to implement segregation of duties for accounting personnel who prepare and review journal entries.

· We have begun to implement and maintain proper recording of the leased gold inventory with related parties and the related party loan agreements and restricted cash.  

We believe these efforts are likely to improve our internal controls. We recognize that we must continue to implement policies and procedures to further enhance our internal controls. Except for the actions taken to remedy the material weaknesses described above, there have been no other changes in our internal control over financial reporting that have materially affected, or are reasonably to have materially affect, our internal control over financial reporting during our nine months ended September 30, 2018. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. These mechanisms may not always be effective at alerting our Board of important transactions.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition. Our business may also be adversely affected by risks and uncertainties not presently known to us or that we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur, our business, prospects, financial condition and results of operations may suffer.

Item 1A.  Risk Factors

Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part of your investment. You should not invest in our securities unless you can afford to lose your entire investment.

Risks Related to our Business

Significant decreases in the price and availability of gold and other precious metal commodities could adversely impact our earnings, cash flows and results of operation.

The jewelry industry generally is affected by fluctuations in the price and supply of diamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. In the past, we have not hedged our needs for gold or other raw materials through commodity purchasing or other common methods such as the use of options or forward contracts. Prior to 2016, we purchased gold in order to produce jewelry and gold products. While jewelry and gold product manufacturing is still our core business, starting in 2016, we began to purchase gold for the purposes of investment and hedging against the risks in gold and other commodity price fluctuations.

Our investment objective is to purchase gold in response to the rising price trend of gold for the recent years. By doing so, we have been able to use bank loans or other third party borrowings to finance our gold investment and repay the debts with the gold purchased upon due. The upward increases in the gold price in the last few years have enabled us to use a lesser amount of gold than originally purchased to repay the same debts. However, gold investment has exposed us to a greater degree of risks associated with any future decreases in the price of gold. When gold price decreases, we would have to use or sell a larger amount of gold to repay the outstanding borrowings when they become due. The more investment we make in gold and more loans we borrow to finance such purchases, the greater the risks we would be subject to in any future decreases in the price of gold. Any significant decreases in the price and availability of gold could weaken our cash flow position and adversely affect our costs for conducting our business and results of operation.

On the other hand, a sudden significant increase in the price of gold could increase our immediate costs for gold investment as well as production costs beyond the amount that we are able to pass on to our customers, which would adversely affect our sales and profitability. A significant disruption in our supply of gold or other commodities could decrease our production and shipping levels, materially increase our operating costs and materially and adversely affect our profit margins. Shortages of gold or other commodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which we purchase our raw materials, may adversely affect our ability to maintain production of our products and sustain profitability. Although we generally attempt to pass increased commodity prices to our customers, there may be circumstances in which we are not able to do so. In addition, if we were to experience a significant or prolonged shortage of gold, we would be unable to meet our production schedules and to ship products to our customers in a timely manner, which would adversely affect our sales, margins and customer relations. 

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If we are unable to accurately manage our inventory, our reputation, earnings and results of operations could suffer.

We are faced with the increased challenge of balancing our gold inventory levels to meet gold investment needs with our ability to meet our jewelry manufacturing demands. We purchase gold based on internally generated projections, and the projections are based on many unknown assumptions around the price and price trend of gold, consumer demands, and product pricing, among other things. If these inventory projections are too high, our inventory may be too high, which may result in overstock of the amount of gold we purchase, lower sales prices and gross margins and cause harm to our financial results. Conversely, if these projections are too low, and we underestimate our inventory needs and the consumer demand for our products, we would be exposed to lost business opportunities and experience shortage in our gold inventory to meet our production, financing and investment needs. Either situation could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may be unable to repay our debts as they become due.

Over the last two years, we have dramatically increased the amount of debts we borrowed. The borrowings were used to purchase gold, and because the price of gold has increased over the last year, we have profited by such increases. However, in the event the gold market experiences a downturn, we will find that the assets on hand (i.e., gold purchased with loans) are insufficient to repay those loans. Moreover, if the price of gold decreases, banks may be unwilling to refinance our debts as they become due. In addition, a price drop could result in a default under the terms of such loans, regardless of whether we are current in our payment under such loans. If this were to happen, our business could be materially harmed.

We may need to implement additional accounting systems, procedures and controls as we grow our business and organization to satisfy the new reporting requirements.

As a public reporting company, we are required to comply with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, including expanded disclosures and accelerated reporting requirements and more complex accounting rules. Compliance with these new requirements may increase our costs and require additional management time and resources. In the prior two fiscal years, our management assessed and found our internal control over financial reporting to be ineffective. To remedy the material weakness of inadequate controls over cash management, our Board adopted resolutions requiring management to seek the Board’s approval prior to entering into any transactions with a value in excess of a certain threshold, and we are in the process of implementing additional policies and procedures to enhance our internal controls. Notwithstanding these additional measures, we may still need to implement additional or enhance finance and accounting systems, procedures and controls to satisfy new accounting and reporting requirements. If our internal control over financial reporting continues to be determined to be ineffective, investors could lose confidence in the reliability of our internal controls, which could adversely affect our stock price.

Jewelry purchases are discretionary, may be particularly affected by adverse trends in the general economy, and an economic decline will make it more difficult to generate revenue.

The success of our operations depends, to a significant extent, upon a number of factors relating to discretionary consumer spending in China. These factors include economic conditions and perceptions of such conditions by consumers, employment rates, the level of consumers’ disposable income, business conditions, interest rates, consumer debt levels, availability of credit and levels of taxation in regional and local markets in China where we manufacture and sell our products. There can be no assurance that consumer spending on jewelry will not be adversely affected by changes in general economic conditions in China and globally.

While the Chinese economy has experienced rapid growth in the past decade, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. During the past two decades, the rate of inflation in China has been as high as approximately 20%. If prices for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our profitability. In the recent years, Chinese economic growth had been slowing down, and for example, GDP growth was only 6.7% in 2016. While the China economic growth showed a considerable improvement in 2017, should it experience another slow growth for a sustained period of time, it could substantially affect consumer demand and confidence, which could adversely impact our business, results of operation and financial condition.

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Competition in the jewelry industry could cause us to lose market share, thereby materially and adversely affecting our business, results of operations and financial condition.

The jewelry industry in China is highly fragmented and very competitive. We believe that the market may become even more competitive as the industry grows and/or consolidates. We compete with local jewelry manufacturers and large foreign multinational companies that offer products that are similar to ours. Some of these competitors have larger local or regional customer bases, more locations, more brand equity, and substantially greater financial, marketing and other resources than we have. As a result of this increasing competition, we could lose market share, thereby materially and adversely affecting our business, results of operations and financial condition.

We may need to raise additional funds in the future. These funds may not be available on acceptable terms or at all, and, without additional funds, we may not be able to maintain or expand our business. The sale of additional shares or equity or debt securities could result in additional dilution to our shareholders.

Our operations require substantial funds to finance our operating expenses, to maintain and expand our manufacturing, marketing and sales capabilities and to cover public company costs. Without these funds, we may not be able to meet our goals. We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain one or more additional credit facilities. If we cannot raise additional funds when needed, or on acceptable terms, we may not be able to effectively execute our growth strategy take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. In addition, we may be required to scale back or discontinue expansion plans, or obtain funds through strategic alliances that may require us to relinquish certain rights.

We may seek additional funding through public or private financing or through collaborative arrangements with strategic partners. However, you should also be aware that in the future:

¨ we cannot be certain that additional capital will be available on favorable terms, if at all;

¨ any available additional financing may not be adequate to meet our goals; and

¨ any equity financing would result in dilution to stockholders.

In addition, the incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

Our ability to maintain or increase our revenue could be harmed if we are unable to strengthen and maintain our brand image.

We believe that the primary factors in facilitating customer buying decisions in China’s jewelry sector include price, confidence in the merchandise sold, and the level and quality of customer service. The ability to differentiate our products from competitors’ by our brand-based marketing strategies is a key factor in attracting consumers, and if our strategies and efforts to promote our brand, such as television and magazine advertising and beauty contest sponsorships fail to garner brand recognition, our ability to generate revenue may suffer. If we are unable to differentiate our products, our ability to sell our products wholesale and our planned sale of products retail will be adversely affected. If we fail to identify or react appropriately or timely to customer buying decisions, we could experience a reduction in consumer recognition of our products, a diminished brand image, higher markdowns, and costs to recast overstocked jewelry. These factors could result in lowering selling prices and sales volumes for our products, which could adversely affect our financial condition and results of operations.

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There is only one source in China for us to obtain the precious metals used in our jewelry products; accordingly, any interruptions of our arrangement with this source would disrupt our ability to fulfill customer orders and substantially affect our ability to continue our business operations.

Under PRC law, the supply of precious metals such as platinum, gold, and silver is highly regulated by PRC government agencies. The Shanghai Gold Exchange (“the Exchange”) is the only supplier in China for gold used for our jewelry products (including the gold we lease from leading PRC banks). We are required to obtain and maintain several membership and approval certificates from government agencies in order to do business involving precious metals. The loss of our relationship or failure to renew our membership with the Exchange, or its inability to furnish precious metals to us (or the banks we lease from) as anticipated in terms of cost, quality, and timeliness, would adversely affect our ability to fulfill customer orders in accordance with our required delivery, quality, and performance requirements. If this situation were to occur, we would not have any alternative suppliers in China to obtain our raw materials from, which would result in a decline in revenue and revenue potential, and ultimately risk the overall continuation of our business operations.

If we are not able to adapt to changing jewelry trends in China, our inventory may be overstocked and we may be forced to reduce the price of our overstocked jewelry or incur the cost to recast it into new jewelry.

Our jewelry sales depend on consumer fashions, preferences for jewelry and the demand for particular products in China. Jewelry design trends in China can and do change rapidly. The ability to accurately predict future changes in taste, respond to changes in consumer preferences, carry the inventory demanded by customers, deliver the appropriate quality, price products correctly, and implement effective purchasing procedures all have an important influence on determining sales performance and maximizing gross margin. If we fail to anticipate, identify or react appropriately to changes in styles and trends, we could experience excess inventories, higher than normal markdowns or an inability to sell our products. If such a situation were to exist, we would need to incur additional costs to recast our products to fit the demand, and the labor and manufacturing costs previously invested in the recast products would be lost.

Our failure to manage growth effectively could have an adverse effect on our employee efficiency, product quality, working capital levels, and results of operations.

We intend to develop the retail distribution of our products, which we believe will result in rapid growth, but will also place significant demands on our managerial, operational and financial resources. Any significant growth in the market for our current wholesale business and our planned retail distribution would require us to expand our managerial, operational, financial, and other resources. During any period of growth, we may face problems related to our operational and financial systems and controls, including quality control and delivery and service capabilities. We also will need to continue to expand, train and manage our employee base. If we are unable to successfully build these skills and expand our number of skilled management and staff, we may be unsuccessful in achieving our intended level of growth.

Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the purchases of raw materials and supplies, development of new products and the hiring of additional employees. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure you that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.

We maintain a relatively large inventory of our raw materials and jewelry products to support customer delivery requirements, and if this inventory is lost due to theft, our results of operations would be negatively impacted.

We purchase large volumes of precious metals and store significant quantities of raw materials and jewelry products at our warehouse and show room in Wuhan, China. Although we have an inventory security system in place, we may be subject to future significant inventory losses due to third-party or employee theft from our warehouses or other forms of theft. The implementation of enhanced security measures beyond those that we already utilize, which include onsite police station with direct deployment of officers and instant access to Wuhan city police department, security cameras, and alarm systems in our warehouse, would increase our operating costs. Also, any such losses of inventory could exceed the limits of, or be subject to an exclusion from, coverage under our insurance policies. Claims filed by us under our insurance policies could lead to increases in the insurance premiums payable by us or the termination of coverage under the relevant policy. In addition, loss of gold inventory may cause violation of our pledge agreements of loans.

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We have outstanding borrowings, and if our ability to obtain new loans or to renew current loans from financial institutions or other third parties is substantially diminished, our business may be severely disrupted and the results of operations could suffer.

In the recent years, we have substantially increased our borrowings as we grew our business and expanded our operations. Almost all of our loans from financial institutions and other unrelated third-parties are secured by restricted cash on deposit at various banks, or gold we own or have leased, as we may agree from time to time with the respective lenders.

In addition, many of our loans are borrowed conditioned upon personal guarantees provided by our Chairman and CEO because of his personal credit worthiness and his reputation and expertise in the China gold industry. Thus our ability to obtain loans or credits, to a great extent, depends on the continued services of our founder, Chairman and CEO, Mr. Zhihong Jia. If Mr. Jia is unable or unwilling to continue his service with us or to provide personal guarantees for our loans, we may not be able to obtain new loans or renew existing loans, or our existing loans may be deemed in default or called for immediate repayment acceleration by the lenders.

Although we have been able to receive sufficient funding in the past, we cannot assure you that we will be able to renew our loans at maturity or obtain alternative funding on reasonable terms from banks or other parties. If we fail to do so, we would have to repay the existing borrowings with our cash or other assets, including our gold inventory, and our business may be severely disrupted and the results of operations could suffer.

Our business could be materially adversely affected if we cannot protect our intellectual property rights.

We have developed trademarks, patents, know-how, trade-names and other intellectual property rights that are of significant value to us. In particular, we have applied for patents on a limited number of designs of our jewelry products and trademarks as well. However, the legal regime governing intellectual property in the PRC is still evolving and the level of protection of intellectual property rights in the PRC may differ from those in other jurisdictions. Thus, it may be difficult to enforce our rights relating to these designs as well as our trademarks. Any unauthorized use of, or other infringement upon our designs or trademarks, could result in potential sales being diverted to such unauthorized sellers, and dilute the value of our brand.

While we are not aware of any data breach in the past, any future failure to adequately maintain security and prevent unauthorized access to electronic and other confidential information could result in a data breach which could materially adversely affect our reputation, financial condition and operating results.

The protection of our customer, business partner, Company and employee data is critically important to us. Our customers, business partners, and employees expect we will adequately safeguard and protect their sensitive personal and business information. We have become increasingly dependent upon automated information technology processes. Improper activities by third parties, exploitation of encryption technology, data-hacking tools and discoveries and other events or developments may result in a future compromise or breach of our networks, payment terminals or other settlement systems. In particular, the techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognized until launched against a target; accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures. Any failure to maintain the security of our customers’ sensitive information, or data belonging to ourselves, our business partners or other relationship third parties, could put us at a competitive disadvantage, result in deterioration of our customers’ confidence in us, and subject us to potential litigation, liability, fines and penalties, resulting in a possible material adverse impact on our financial condition and results of operations. There can be no assurance that we will not suffer a criminal cyber-attack in the future, that unauthorized parties will not gain access to personal or business information or sensitive data, or that any such incident will be discovered in a timely manner.

We are dependent on certain key personnel, and the loss of these key personnel could have a material adverse effect on our business, financial conditions and results of operations. 

Our success, to a great extent, has been attributable to the management, sales and marketing, and operational and technical expertise of certain key personnel. Moreover, our daily operation and performance rely heavily upon our senior management. There can be no assurance that we will be able to retain these officers or that such personnel may not receive and/or accept competing offers of employment. The loss of a significant number of these employees could have a material adverse effect upon our business, financial condition, and results of operations. We do not maintain key-man life insurance for any of our senior management. 

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We rely on our distribution network for virtually all of our sales revenues. Failure to maintain good distributor relations, or our inability to successfully execute our planned expansion of our customer base, may affect our revenues and earnings.

Our business depends directly on the performance of roughly 300 of our major distributors, which we also refer to as our customers. No customer accounted for more than 10% of annual sales for the nine months ended 2018 and 2017. As all purchases of our products by customers are made through purchase orders and we do not have long-term contracts with any of our customers, it is critical that we maintain good relationships with them. However, maintaining good relationships with existing distributors requires time and efforts by our management, and replacing any existing distributor would be difficult and time consuming. Our failure to maintain good relationships with our distributors could materially disrupt our product distributions and harm our net sales.

We may not maintain sufficient insurance coverage for the risks associated with our business operations. As a result, we may incur uninsured losses.

Except for property, accident and automobile insurance, we do not have other insurance of such as business liability or disruption insurance coverage for our operations in the PRC. As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business. There can be no guarantee that we will be able to obtain additional insurance coverage in the future, and even if we are able to obtain additional coverage, we may not carry sufficient insurance coverage to satisfy potential claims. Should uninsured losses occur, it could adversely affect our business, results of operations and financial condition.

Global financial crises and economic downturns may have an adverse effect on our businesses, results of operation and financial condition.

Global economic conditions can have an effect on our business. If there is an additional global financial crisis or economic downturn, such as that which occurred in 2008, it may adversely affect economies and businesses around the world, including in China, which in turn will have an adverse impact on our business and operations.

Potential environmental liability could have a material adverse effect on our operations and financial condition.

As a manufacturer, we are subject to various Chinese environmental laws and regulations on air emission, waste water discharge, solid wastes and noise. Although we believe that our operations are in substantial compliance with current environmental laws and regulations, we may not be able to comply with these regulations at all times as the Chinese environmental legal regime is evolving and becoming more stringent. Therefore, if the Chinese government imposes more stringent regulations in the future, we may have to incur additional and potentially substantial costs and expenses in order to comply with new regulations, which may negatively affect our results of operations. Further, no assurance can be given that all potential environmental liabilities have been identified or properly quantified or that any prior owner, operator, or tenant has not created an environmental condition unknown to us. If we fail to comply with any of the present or future environmental regulations in any material aspects, we may suffer from negative publicity and be subject to claims for damages that may require us to pay substantial fines or force us to suspend or cease operations.

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related Commission regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to more fully comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. 

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We may have additional tax liabilities.

We are subject to income and other taxes in the U.S. and China. Tax laws are complex and subject to constant changes as new laws are passed and new interpretations of the law are issued or applied. The U.S. has recently enacted significant tax reform which may impact our tax liabilities. Significant judgment is required in estimating our provision for income taxes. In our business operations and corporate structure, there are contractual arrangements, transactions or calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, any final determination pursuant to tax audits could be materially different from what is reflected in our consolidated financial statements. Should any tax authority disagree with our estimates and determine any additional tax liabilities, including interest and penalties for us, this could adversely impact our results of operations, financial position and cash flows.

Uncertainty in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate

The 2017 Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, introduces significant changes to U.S. income tax law, including how the U.S. imposes income tax on multinational corporations. Accounting for the income tax effects of the Act requires significant judgments and estimates in the interpretation of the provisions of the Act. The U.S. Department of Treasury has authority to issue regulations and interpretative guidance that may impact how we apply the law and impact our results of operations in the period issued and subsequently. The Act requires complex computations not previously required under U.S. tax law. Further, compliance with the Act and the accounting for such provisions require the accumulation of information not previously required or regularly produced. The Treasury, the Internal Revenue Service (“IRS”), and other standard-setting bodies may issue new guidance on how the provisions of the Act will be applied or otherwise administered that is different from our interpretation. As additional regulatory guidance is issued, and as we perform additional analysis on the application of the law and any additional guidance issued, our final analysis may be different from our current reported amounts, and we may make adjustments that could materially affect our financial position and results of operations as well as our effective tax rate in the period in which the adjustments are made.

Risks Related to Doing Business in the PRC

Substantially all of our assets are located in China and substantially all of our revenues are currently derived from our operations in China, and changes in the political and economic policies of the PRC government could have a significant impact upon what business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.

The PRC’s legal system is a civil law system based on written statutes. Unlike the common law system prevalent in the United States, decided legal cases have little value as precedent in China. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

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One of our principal operating subsidiaries, Vogue-Show, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:

¨ levying fines;

¨ revoking our business license, other licenses or authorities;

¨ requiring that we restructure our ownership or operations; and

¨ requiring that we discontinue some or all of our business.

The scope of our business license in China is limited, and we may not expand or continue our business without government approval and renewal, respectively.

Our operating affiliate, Wuhan Kingold, can only conduct business within its business scope, as detailed on its business license. Our license permits us to design, manufacture, sell and market jewelry products to department stores throughout the PRC and to engage in the retail distribution of our products. Any amendment to the scope of our business requires further application and government approval. In order for us to expand our business beyond the scope of our license, we will be required to enter into a negotiation with the authorities for the approval to expand the scope of our business. We cannot assure you that Wuhan Kingold will be able to obtain the necessary government approval for any change or expansion of our business scope.

Our PRC stockholders are required to register with the State Administration of Foreign Exchange and their failure to do so could cause us to lose our ability to remit profits out of the PRC as dividends.

The SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. 

SAFE Circular 37 was issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75.

If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

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These regulations apply to our stockholders who are PRC residents. As of the date of this registration statement, our Chairman and Chief Executive Officer, Zhihong Jia, has obtained his registration under Circular 75, and the other PRC residents are in the process of obtaining registrations under Circular 37. However, there is no assurance that such persons can successfully complete such registrations, and there is no assurance that all of the PRC resident stockholders and beneficiary stockholders have complied with and will comply with the SAFE registration requirements currently or in the future. In the event that these or other of our PRC-resident stockholders do not follow the procedures required by SAFE, we could (i) be exposed to fines and legal sanctions, (ii) lose the ability to contribute additional capital into our PRC subsidiaries or distribute dividends to our company, (iii) face liability for evasion of foreign-exchange regulations, and/or (iv) lose the ability to consolidate the financial statements of our PRC subsidiaries under applicable accounting principles.

PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate. Our failure to obtain the prior approval of the China Securities Regulatory Commission, or CSRC for the listing and trading of our common stock could have a material adverse effect on our business, operating results, reputation and trading price of our common stock.

On August 8, 2006, the PRC Ministry of Commerce, or MOFCOM, joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission, or CSRC, and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises, or the Revised M&A Regulations, which took effect September 8, 2006. These rules significantly revised China’s regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic enterprises. These rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, these rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries. 

In addition, the Revised M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on any non-PRC stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement.

Our wholly-owned BVI subsidiary, Dragon Lead, was formerly owned by eight BVI companies whose shareholders are non-PRC individuals. We understand that some of these non-PRC individuals are nominee shareholders holding shares on behalf of and for the interest of some PRC individuals and PRC companies who are also Wuhan Kingold minority shareholders. These minority Wuhan Kingold shareholders do not have experience in conducting or managing businesses outside the PRC, and therefore believe that to engage nominee shareholders to hold shares on their behalf are in their best commercial interest, and could provide them with guidance when they evaluate whether to purchase, sell or dispose of our shares after the closing.

Also, on December 23, 2009, immediately before the reverse acquisition of Vogue Show, Fok Wing Lam Winnie (whose Mandarin name is Huo Yong Lin), the sole shareholder of Famous Grow and the majority shareholder of Dragon Lead prior to the closing of the reverse acquisition, entered into the call option with Zhihong Jia and Bin Zhao (our former general manager and former director) to comply with PRC regulations that restrict PRC residents from owning offshore entities like us in direct exchange for their shares in the PRC operating company and as an inducement to encourage them to provide services to Wuhan Kingold and our company. The call option does not include a vesting schedule and continued employment is not a condition to the call option. Under the call option, as amended and restated, Fok Wing Lam Winnie granted to Zhihong Jia certain call options to acquire up to 100% of the shares of Famous Grow at an exercise price of $1.00, which is par value per share, or $0.001 per Famous Grow share, subject to any exercise notice, or Call Option which was determined in an arm’s length negotiation with the parties.

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The PRC regulatory authorities may take the view that entry into the VIE Agreements by Vogue-Show and Wuhan Kingold and entry into the call option agreement by Zhihong Jia and Fok Wing Lam Winnie may collectively constitute an onshore to offshore restructuring and a related party acquisition under the M&A Regulations, because upon the consummation of these transactions and after the Call Option is fully exercised, PRC individuals would become majority owners and effective controlling parties of a foreign entity that acquired ownership of Wuhan Kingold. The PRC regulatory authorities may also take the view that the relevant parties should fully disclose to the Wuhan SAFE or MOFCOM the overall restructuring arrangements, the existence of the reverse acquisition and its connection with the VIE Agreement. Our PRC counsel has opined among other things that: (i) each of our VIE agreements with Wuhan Kingold are valid and enforceable under relevant PRC laws, (ii) all government authorizations for the execution, delivery, performance and enforcement of our VIE agreements have been obtained as required by PRC laws, (iii) the ownership structure of Vogue Show and Wuhan Kingold created by our VIE agreements and the call options in favor of Zhihong Jia do not violate any provisions of applicable PRC laws, and (iv) no PRC governmental approvals were required under the Revised M&A Regulations in connection with our acquisition of our current ownership interests in any of our PRC subsidiaries or in connection with the VIE agreements. Our PRC counsel has reviewed and approved of these statements.

We, however, cannot assure you that the PRC regulatory authorities, MOFCOM and CSRC will take the same view as our PRC counsel. If the PRC regulatory authorities take the view that the reverse acquisition and VIE arrangement constitute a related party acquisition under the revised M&A Regulations, we cannot assure you we will be able to obtain any approval required from the national offices of MOFCOM or otherwise.

If the PRC regulatory authorities take the view that the call options or the VIE arrangement constitutes a related party acquisition without the approval of the national offices of MOFCOM, they could invalidate the call options and VIE arrangement. We may also face regulatory actions or other sanctions from the MOFCOM or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our shares.

If we make equity compensation grants to persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt additional equity compensation plans for our directors and employees and other parties under PRC law.

On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company,” also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those that provide for the granting of stock options. For any plans that are so covered and are adopted by a non-PRC listed company, such as our company, after April 6, 2007, Circular 78 requires all participants who are PRC citizens to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6, 2007. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. 

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

As we are a Delaware corporation and a U.S. publicly listed company, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Some foreign companies, including some that may compete with our company, may not be subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

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Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

Under the Enterprise Income Tax Law, or EIT Law, an enterprise established outside the PRC with its “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its worldwide income. The “de facto management body” is defined as the organizational body that effectively exercises overall management and control over production and business operations, personnel, finance and accounting, and properties of the enterprise. It remains unclear how the PRC tax authorities will interpret such a broad definition. If the PRC tax authorities determine that we should be classified as a resident enterprise, then our worldwide income will be subject to income tax at a uniform rate of 25%, which may have a material adverse effect on our financial condition and results of operations. However, it remains unclear how the PRC tax authorities will interpret the PRC tax resident treatment of an offshore company, like us, having indirect ownership interests in PRC enterprises through intermediary holding vehicles.

Moreover, under the EIT Law, foreign shareholders of an entity that is classified as a PRC resident enterprise may be subject to a 10% withholding tax upon dividends payable by such entity, unless the jurisdiction of incorporation of the foreign shareholder of such entity has a tax treaty with the PRC that provides for a reduced rate of withholding tax, and gains realized on the sale or other disposition of shares, if such income is sourced from within the PRC. It remains unclear whether the dividends payable by our PRC subsidiary or the gains our foreign shareholders may realize will be regarded as income from sources within the PRC if we are classified as a PRC resident enterprise. Any such tax will reduce the returns on your investment in our Shares.

Because our business is located in the PRC, we may have difficulty establishing adequate management, legal and financial controls, which we are required to do in order to comply with U.S. securities laws.

PRC companies have historically not adopted a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and, computer, financial and other control systems. Most of our middle and top management staff are not educated and trained in the Western system, and we may have difficulty hiring new employees in the PRC with such training. In addition, we may need to rely on a new and developing communication infrastructure to efficiently transfer our information from retail outlets to our headquarters. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls, which could impact the reliability of our financial statements and prevent us from complying with Commission rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our business.

If we continue to be unable to maintain effective internal control over financial reporting or effective disclosure controls and procedures, the price of our common stock may be adversely affected.

We are required to establish and maintain appropriate internal control over financial reporting and put in place appropriate disclosure controls and procedures to allow our management to make timely decisions regarding required disclosures. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of our internal control over financial reporting could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial fraud.

Since we became public, our management has continually determined that we had a material weakness in our internal control over financial reporting due to some problems with cash management, as well as continued ineffective disclosure controls and procedures, and other significant deficiencies due to inadequate controls over the appropriate approval procedures for certain material transactions, inadequate controls over certain material cash transactions, and lack of technical competency in review and recording of non-routine or complex transactions. Moreover, our management concluded that our disclosure controls and procedures continued to be ineffective this period because we continued to fail to disclose the entry into certain material agreements within the time periods required by the Commission.

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Although we are evaluating how to improve the effectiveness of our disclosure controls and procedures and are evaluating additional remedial measures, such efforts may not be successful. In addition, management’s assessment of internal control over financial reporting may identify additional material weaknesses or significant deficiencies that need to be addressed or other potential matters that may raise concerns for investors. Any actual or perceived material weaknesses or significant deficiencies that need to be addressed in our internal control over financial reporting, or the actual or perceived ineffectiveness of our disclosure controls and procedures could have an adverse impact on the price of our common stock.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including the federal securities laws, or other foreign laws against us or our management.

All of our current operations, including the manufacturing and distribution of jewelry, are conducted in China. Most of our directors and officers are nationals and residents of China. All or substantially all of the assets of these persons are located outside the United States. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these persons. In addition, uncertainty exists as to whether the courts of China would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof.

Inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may, in the future, cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

Governmental control of currency conversions could prevent us from paying dividends.

Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders.

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms.

Our reporting currency is the U.S. dollar and our operations in China use their local currency, the Renminbi, as their functional currency. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

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The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss that is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

Risks Related to the VIE Agreements

If the PRC government determines that the contractual arrangements through which we control Wuhan Kingold do not comply with applicable regulations, our business could be adversely affected.

Although we believe our contractual relationships through which we control Wuhan Kingold comply with current licensing, registration and regulatory requirements of the PRC, we cannot assure you that the PRC government would agree, or that new and burdensome regulations will not be adopted in the future. If the PRC government determines that our structure or operating arrangements do not comply with applicable law, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, require us to restructure our operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business.

The PRC government may determine that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations.

Vogue-Show manages and operates our gold jewelry business through Wuhan Kingold pursuant to the rights it holds under the VIE Agreements. Almost all economic benefits and risks arising from Wuhan Kingold’s operations are transferred to Vogue-Show under these agreements.

There are risks involved with the operation of our business in reliance on the VIE Agreements, including the risk that the VIE Agreements may be determined by PRC regulators or courts to be unenforceable. Our PRC counsel has provided a legal opinion that the VIE Agreements are binding and enforceable under PRC law, but has further advised that if the VIE Agreements were for any reason determined to be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such breach, including:

¨ imposing economic penalties;

¨ discontinuing or restricting the operations of Vogue-Show or Wuhan Kingold;

¨ imposing conditions or requirements in respect of the VIE Agreements with which Vogue-Show may not be able to comply;

¨ requiring our company to restructure the relevant ownership structure or operations;

¨ taking other regulatory or enforcement actions that could adversely affect our company’s business; and

¨ revoking the business licenses and/or the licenses or certificates of Vogue-Show, and/or voiding the VIE Agreements.

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Any of these actions could adversely affect our ability to manage, operate and gain the financial benefits of Wuhan Kingold, which would have a material adverse impact on our business, financial condition and results of operations.

Our ability to manage and operate Wuhan Kingold under the VIE Agreements may not be as effective as direct ownership.

We conduct our jewelry processing and sales businesses in the PRC and generate virtually all of our revenues through the VIE Agreements. Our plans for future growth are based substantially on growing the operations of Wuhan Kingold. However, the VIE Agreements may not be as effective in providing us with control over Wuhan Kingold as direct ownership. Under the current VIE arrangements, as a legal matter, if Wuhan Kingold fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce such arrangements, and (ii) reply on legal remedies under PRC law, which we cannot be sure would be effective. Therefore, if we are unable to effectively control Wuhan Kingold, it may have an adverse effect on our ability to achieve our business objectives and grow our revenues.

As the VIE agreements are governed by PRC law, we would be required to rely on PRC law to enforce our rights and remedies under them; PRC law may not provide us with the same rights and remedies as are available in contractual disputes governed by the law of other jurisdictions.

The VIE Agreements are governed by the PRC law and provide for the resolution of disputes through court proceedings pursuant to PRC law. If Wuhan Kingold or its shareholders fail to perform the obligations under the VIE Agreements, we would be required to resort to legal remedies available under PRC law, including seeking specific performance or injunctive relief, or claiming damages. We cannot be sure that such remedies would provide us with effective means of causing Wuhan Kingold to meet its obligations, or recovering any losses or damages as a result of non-performance. Further, the legal environment in China is not as developed as in other jurisdictions. Uncertainties in the application of various laws, rules, regulations or policies in PRC legal system could limit our liability to enforce the VIE Agreements and protect our interests.

The VIE Agreements may be subject to audit or challenge by PRC tax authorities. A finding that we owe additional taxes could substantially reduce our net earnings and the value of your investment

Under PRC laws and regulations, arrangements and transactions among affiliated parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax and financial consequences if the PRC tax authorities determine that the VIE Agreements do not represent arm’s-length prices. As a result of such a determination, the PRC tax authorities could adjust any of the income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions for PRC tax purposes recorded by us or Wuhan Kingold or an increase in taxable income, all of which could increase our tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on us or Wuhan Kingold for under-paid taxes.

Our shareholders have potential conflicts of interest with us which may adversely affect our business.

Zhihong Jia is our Chief Executive Officer and our Chairman, and is also the largest shareholder of Wuhan Kingold. There could be conflicts that arise from time to time between our interests and the interests of Mr. Jia. There could also be conflicts that arise between us and Wuhan Kingold that would require our shareholders and Wuhan Kingold’s shareholders to vote on corporate actions necessary to resolve the conflict. There can be no assurance in any such circumstances that Mr. Jia will vote his shares in our best interest or otherwise act in the best interests of our company. If Mr. Jia fails to act in our best interests, our operating performance and future growth could be adversely affected. In addition, some or all of our shareholders could violate the non-competition agreements they have signed with our company by diverting business opportunities from our company to others. In such event, our business, financial condition and results of operation could be adversely affected. 

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We rely on the approval certificates and business license held by Vogue-Show and any deterioration of the relationship between Vogue-Show and Wuhan Kingold could materially and adversely affect our business operations.

We operate our jewelry processing and sales businesses in China on the basis of the approval certificates, business license and other requisite licenses held by Vogue-Show. There is no assurance that Vogue-Show will be able to renew its license or certificates when their terms expire with substantially similar terms as the ones they currently hold.

Further, our relationship with Wuhan Kingold is governed by the VIE Agreements that are intended to provide us with effective control over the business operations of Wuhan Kingold. However, the VIE Agreements may not be effective in providing control over the application for and maintenance of the licenses required for our business operations. Wuhan Kingold could violate the VIE Agreements, go bankrupt, suffer from difficulties in its business or otherwise become unable to perform its obligations under the VIE Agreements and, as a result, our operations, reputations and business could be severely harmed.

If Vogue-Show exercises the purchase options it holds over Wuhan Kingold’s share capital and assets pursuant to the VIE Agreements, the payment of the purchase price could materially and adversely affect our financial position.

Under the VIE Agreements, Wuhan Kingold’s shareholders have granted Vogue-Show a ten-year option to purchase 100% of the share capital in Wuhan Kingold at a price determined by appraisal by an asset evaluation institution to be jointly appointed by Vogue-Show and Wuhan Kingold’s shareholders. Concurrently, Wuhan Kingold granted Vogue-Show a ten-year option to purchase Wuhan Kingold’s assets at a price determined by appraisal by such asset evaluation institution. As Wuhan Kingold is already our contractually controlled affiliate, Vogue-Show’s exercising of the above two options would not bring immediate benefits to our company, and payment of the purchase prices could adversely affect our financial position.

Risks Related to Our Common Stock

Following the exercise of his Call Option, our Chairman and Chief Executive Officer would exercise significant influence over us.

Our Chairman and Chief Executive Officer, Zhihong Jia, will beneficially own or control approximately 25.5% of our outstanding shares if he chooses to fully exercise his Call Option to purchase shares of Famous Grow. Mr. Jia thereafter could possibly have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. Mr. Jia may also have the power to prevent or cause a change in control. In addition, without the consent of Mr. Jia, we could be prevented from entering into transactions that could be beneficial to us. The interests of Mr. Jia may differ from the interests of our other stockholders.

We do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.

We do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their shares of our company at or above the price they paid for them.

Because we do not intend to pay dividends on our shares, stockholders will benefit from an investment in our shares only if those shares appreciate in value. 

We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business. As a result, we do not anticipate paying cash dividends in the foreseeable future. Any future determination as to the declaration and payment of cash dividends will be at the discretion of our board of directors and will depend on factors our board of directors deems relevant, including among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our credit facilities, if any, and any other financing arrangements. Accordingly, realization of a gain on stockholders’ investments.

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The market price for our shares may be volatile.

The market price for our shares is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

¨ actual or anticipated fluctuations in our quarterly operating results and changes or revisions of our expected results;

¨ changes in financial estimates by securities research analysts;

¨ conditions in the markets for our products;

¨ changes in the economic performance or market valuations of companies specializing in gold jewelry;

¨ announcements by us, or our competitors of new products, acquisitions, strategic relationships, joint ventures or capital commitments;

¨ addition or departure of senior management and key personnel; and

¨ fluctuations of exchange rates between the RMB and the U.S. dollar.

The following table sets forth, for the periods indicated, the range of quarterly high and low closing sales prices for our common stock in U.S. dollars. Prior to our listing on the NASDAQ Capital Market, these quotations reflect inter- dealer prices, without retail mark-up, mark-down or commission, involving our common stock during each calendar quarter, and may not represent actual transactions.

	High		Low
2018
First Quarter	$	2.02	$	1.23
Second Quarter	$	1.44	$	1.21
Third Quarter	$	1.27	$	1.00
2017
First Quarter	$	1.38	$	1.09
Second Quarter	$	2.03	$	1.06
Third Quarter	$	2.06	$	1.53
Fourth Quarter	$	2.31	$	1.92

Volatility in the price of our shares may result in shareholder litigation that could in turn result in substantial costs and a diversion of our management’s attention and resources.

The financial markets in the United States and other countries have experienced significant price and volume fluctuations, and market prices have been and continue to be extremely volatile. Volatility in the price of our shares may be caused by factors outside of our control and may be unrelated or disproportionate to our results of operations. In the past, following periods of volatility in the market price of a public company’s securities, shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.

SEC regulations concerning conflict minerals could negatively impact our business.

In response to provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, in August 2013, the Securities and Exchange Commission adopted annual disclosure and reporting requirements regarding the use of certain minerals, known as “conflict minerals,” mined from the Democratic Republic of Congo and adjoining countries. Conflict minerals include gold.

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These requirements and the changes we may adopt as a result of compliance with them may prove both costly and time-consuming. The disclosure requirements, which began in 2014, necessitated due diligence efforts to identify the sources of conflict minerals contained in our products. Because we currently acquire our gold directly from the Exchange or leading Chinese banks, or lease it from leading Chinese banks, there is uncertainty as to the amount of diligence we may be able to do on our supply chain.

Implementation of these regulations will require us to divert management attention and resources away from our business operations. In addition, as conflict-free minerals may only be available from a limited pool of suppliers, it may or may not include the Exchange, our primary source of gold. In addition, if we are unable to sufficiently verify the origin of all conflict minerals used in our products, we may face reputational challenges with customers, stockholders, or other stakeholders.

Our quarterly results may fluctuate because of many factors and, as a result, investors should not rely on quarterly operating results as indicative of future results.

Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the value of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could affect revenues or expenses in any particular quarter. Fluctuations in quarterly operating results could cause the value of our securities to decline. Investors should not rely on quarter-to-quarter comparisons of results of operations as an indication of future performance. As a result of the factors listed below, it is possible that in future periods the results of operations may be below the expectations of public market analysts and investors. This could cause the market price of our securities to decline. Factors that may affect our quarterly results include:

¨ vulnerability of our business to a general economic downturn in China;

¨ fluctuation and unpredictability of costs related to the gold, platinum and precious metals and other commodities used to manufacture our products;

¨ seasonality of our business;

¨ changes in the laws of the PRC that affect our operations;

¨ competition from our competitors; and

¨ our ability to obtain all necessary government certifications and/or licenses to conduct our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None. 

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Item 6. Exhibits

No.	Description
10.1	Trust Loan Contract (English translation), dated January 2, 2018, between Wuhan Kingold Jewelry Company Limited and China Minsheng Trust Co., Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report filed on Form 8-K with the Commission on January 2, 2018).
10.2	Loan Contract (English translation), dated January 2, 2018, between Wuhan Kingold Jewelry Company Limited and Wuhan Kingold Industrial Group Co., Ltd. (incorporated by reference to Exhibit 10.2 to our Quarterly Report filed on Form 10-Q with the Commission on May 10, 2018).
10.3	Gold Income Rights Transfer and Repurchase Agreement  (English translation), dated July 31, 2018, between Wuhan Kingold Jewelry Company Limited and Dongguan Trust Co., Ltd. *
10.4	Trust Loan Contracts (English translation), dated September 5, 2018, between Wuhan Kingold Jewelry Company Limited and China Aviation Capital Investment Management (Shenzhen).*
10.5	Trust Loan Contracts (English translation), dated September 7, 2018, between Wuhan Kingold Jewelry Company Limited and Sichuan Trust Ltd.*
10.6	Trust Loan Contracts (English translation), dated September 7, 2018, between Wuhan Kingold Jewelry Company Limited and Sichuan Trust Ltd.*
10.7	RMB Working Capital Loan Agreement (English translation), dated September 17, 2018, between Wuhan Kingold Jewelry Company Limited and Wuhan Jiang’An Branch of China Construction Bank.*
10.8	RMB Working Capital Loan Agreement (English translation), dated September 25, 2018, between Wuhan Kingold Jewelry Company Limited and Wuhan Jiang’An Branch of China Construction Bank.*
10.9	Summary English translation of Loan Extension Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huanshan Road Branch of Evergrowing Bank.*
10.10	Summary English translation of Loan Extension Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huanshan Road Branch of Evergrowing Bank.*
10.11	Summary English translation of Loan Extension Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huanshan Road Branch of Evergrowing Bank.*
10.12	Summary English translation of Loan Extension Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huanshan Road Branch of Evergrowing Bank.*
10.13	Summary English translation of Loan Extension Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huanshan Road Branch of Evergrowing Bank.*
10.14	Summary English translation of Collateral Pledge Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huangshan Road Branch of Evergrowing Bank for  borrowings by Wuhan Kangbo Biotech Limited.*
10.15	Summary English translation of Collateral Pledge Agreement, dated September 28, 2018, between Wuhan Kingold Jewelry Company Limited and Yantai Huangshan Road Branch of Evergrowing Bank for  borrowings by Wuhan Kangbo Biotech Limited.*
10.16	Loan Contract (English translation), dated September 20, 2018, between Wuhan Kingold Jewelry Company Limited and Wuhan Kangbo Biotech Limited.*
10.17	Trust Loan Contract (English translation), dated October 10, 2018, between Wuhan Kingold Jewelry Company Limited and China Minsheng Trust Co., Ltd.*
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1	Press release dated November 14, 2018, titled “Kingold Jewelry Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2018.”*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed herewith

63

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 thereunto duly authorized.

Date: November 14, 2018 

KINGOLD JEWELRY, INC.
By:	/s/ Zhihong Jia
	Zhihong Jia
	Chairman, Chief Executive Officer and Principal Executive Officer
By:	/s/ Bin Liu
	Bin Liu
	Chief Financial Officer and Principal Accounting Officer

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EX-10.3

Exhibit 10.3

The Assets Income Right Transfer and Repurchase Contract

Contract No.:22B1191800318001

Party A: Dongguan Trust Co., Ltd (represents the “Dongguan Trust·Taixin-Kingold Jewelry Assembled Fund Trust Plan”)

Legal representative: Huang Xiaowen

Adress:No.2 Building, Innovation Park, High-Tech Industrial Development Zone Of Songshan, Dongguan City. Zip code:523808

Contact person: Liu Xiaomeng

Tel:     18565638063            E-Mail:  liuxm@dgxt.com              

Party B: Wuhan Kingold Jewelry Co., Ltd

License number: 914201007414027360

Legal representative: Zhihong Jia

Address: No. 15 (special), Huangpu Science Park, Jiang’an District Zip code: 430023

Contact person:Hu Qiao

Tel:   13317109760    E-Mail:     445747508@qq.com                    

Whereas:

Party A is the trustee of “Dongguan Trust·Taixin-Kingold Jewelry Assembled Fund Trust Plan” (hereinafter referred to as the “Trust Plan”), and party A purchases the Assets Income Right of Au9999 standard gold (no less than 4 tons)from Shanghai Gold Exchange(“SGE”) held by Party B with trust fund of the Trust Plan. And Party B shall repurchase the above Assets Income Right by the time price according to the agreement of both parties.

According to The Contract Law of the People’s Republic of China and other laws and regulations, based on the principles of good faith and justice and through friendly consultation, both sides reach this contract to comply regarding the transfer and repurchase of the Object Assets Income Right.

Article 1 Transfer Object

1       The transfer object under this contract is the Assets Income Right of no less than 4 tons of Au9999 standard gold from Shanghai Gold Exchange held by Party B.

2       Assets Income Right shall include:

(1) The income gained by object assets disposal;

(2) Other income generated by the object assets.

Article 2 Transfer Price and Payment

1       Both parties agree that the transfer price of the Object Assets Income Right is no less than RMB 10 million yuan and is no more than RMB 1000 million yuan.

2       The transfer price shall be paid by the trust fund under Trust Plan and the actual amount shall be subject to the amount of raised trust fund in every period of Trust Plan. On receiving every transfer payment, Party B shall submit payment confirmation to Party A.

3       Party A agrees to pay transfer price in lump sum or in installments after the establishment of Trust Plan and the guarantee, which is promised by Party B, is implemented.

Account name: Wuhan Kingold Jewelry Co., Ltd

Account number: 630202248

Bank: China Minsheng Bank, Wuhan branch, Binjiang sub-branch

Party A shall be deemed to perform duty after paying the transfer price to the above account of Party B. If any change occurs on the above account, party B shall give written notice to Party A on the date of change, otherwise any responsibilities arising from that shall be taken by Party B.

4       After the date that Party A signed this contract and pays the first transfer payment, Party A obtains all the Object Assets Income Right since this date. Since this delivery date, Party B shall deposit all interests and other earnings of Object Assets in the special trust account in 2 work days.

Article 3 Assets Income Right Repurchase

1       After transferring the Assets Income Right to Party A, Party B promises to repurchase the Assets Income Right in the agreed period since the establishment of trust plan. After Party B completed the payment, Party B shall be deemed to complete the repurchase of the Assets Income Right, and the Assets Income Right is owned by Party B.

2       Repurchase payment price consists two parts: Base repurchase price and repurchase premium

(1) base repurchase price: Base repurchase price equals the transfer price stipulated in article 2 of this contract.

Party B shall pay off all base repurchase price to Party A in 18 months since the establishment of the Trust Plan. And on completion of base repurchase price payment, Party B shall settle the unsettled payable repurchase premium. If Party B needs to pay base repurchase price in advance, it shall deliver written application to Party A, and shall implement it with agreement of Party A.

(2) repurchase premium: Before the settlement of base repurchase price, party b shall pay repurchase premium, repurchase premium is calculated according to the following items:

The first premium: Party B should pay a first premium, 1.5 % of the transfer price, to the trust plan. The first premium= unsettled base repurchase price

‚Duration premium: Party B shall pay current duration premium according to the annual rate of repurchase premium in the chart agreed below before 21st (included) of every month and the last base repurchase price due date.

starting date	annual rate of repurchase premium
due date of the first transfer price	11  %

Calculation formula is as below:

current duration premium= unsettled base repurchase price×days in this accounting period×annual rate of repurchase premium/360

Days in this accounting period refers to the days from 21^st of previous month to the 20^th (included) of current month. And days in last accounting period refers to the days from 21^st of previous month to the day (not included) of the settlement of all base repurchase prices.

Repurchase premium due date and repurchase due date should not be moved backward when meet with statutory holiday. Party b shall transfer money to the special account in the nearest workday.

If party b does not transfer payment within due date, the penalty shall be counted from repurchase premium due date or repurchase due date and in accordance with the articles stipulated in this contract.

3       Party b shall pay the repurchase price by transferring money to the special account appointed by Party A(Account Name: Dongguan Trust Co., Ltd (Taixinkingold), Account Number: 8114801412800237721, Bank: China Citic Bank, Dongguan Branch Business Department)

4       When Party B is paying the repurchase price, all interests and other earnings produced by Object Assets that has been transferred to special account shall be deduction to the repurchase price.

Article 4 Trust Protection Fund

1       According to relevant stipulations in Measures for the Administration of Protection funds in the Trust Industry, Party B shall subscribe trust protection funds at the price of 1% of base repurchase price. Every time when Party A pays the transfer amount, it will send trust protection fund subscription notice and confirm the subscription amount to Party B. Party B shall transfer subscription amount to the special account Party A designated within 10days since Party A pays transfer amount, and Party A shall subscribe the protection fund on its behalf.

2       When Party B partially pays base repurchase amount, Party A shall return pro rata protection fund subscription money within 10 business days. When Party B entirely pays base repurchase amount, Party A shall return all remaining protection fund subscription money and its earnings within 10 business days

3       If Party B’s subscription amount is overdue, Party B shall pay overdue fine at 0.05% of subscription amount per day since the date of overdue.

4       If Party B fails to pay repurchase amount timely, Party A shall be entitled to settle with the subscription money and its earnings in protection fund returned by Party B.

Article 5 Documents Submission

Party B shall submit necessary documents and materials in accordance with Party A’s requirements, including but not limited to original pieces or copies of relevant materials on object assets owned by Party B, including but not limited to journal account of capital, value added tax invoice, delivery note, list of outgoing items. The documents and materials that Party B submits to Party A are all deemed as effective attachment to this contract.

Article 6 tax payment

The taxes produced in the process of the exercise of rights or obligations under the contract shall be paid by each party respectively

Article 7 Representations and Warranties of Party B

Follows are the representation and warranties of Party B:

1       After this contract is signed, it will constitute the legal, valid and binding obligation to it.

2       Party B is the entire, effective and legal owner of the object assets, and is entitled to transfer the assets income right of the object assets to Party A. Party A shall not meet any legal or actual impediment.

3       Party B guarantees that there are no any other priority rights or third part rights except for additional articles in this contract.

4       After this contract is signed, without Party A’s written permission, Party B shall not dispose object assets in any form, and there shall be no priory right and other third party power on the object assets in any form.

5       Relevant materials offered by Kingold Jewelry to Party A are true, effective, complete and there is no material omission or concealment.

6       The transfer and repurchase of assets income right are equipped with necessary authorization and permission, and are within Party B’s authority and are obedient with relevant laws.

Article 8 Representations and Warranties of Party A

Follows are the representation and warranties of Party A

1       An enterprise as a legal person, which forms legally according to the Law of the PRC and validly exists, and guarantees that it operates legally

2       It is complied with relevant trust stipulations to purchase assets income right by trust fund and the purchase is nit obedient with compulsory stipulations in laws and administrations.

3       Relevant materials offered Party B are true, effective, and complete and there is no material omission or concealment.

4       After this contract is signed, it will constitute the legal, valid and binding obligation to it.

5       To pay the transfer price to Party B according to this contract.

Article 9 Contract Entry into Force

1       The Contract should come into effect since being signed (or stamped) by the legal representatives/responsible persons of both parties and stamped with the corresponding official seal (or special seal for contract).

2       The Contract should be terminated if the trust plan fails to establish or party b’s promised guarantees are not implemented in 60days since the date that the contract is signed.

Article 10 Special Agreement

1       After coming into force of this contract, Party A is empowered to learn about Party B’s management, financial activities, major transactions, and Party A is not entitled to intervene Party B’s management.

2       After this contract becomes effective, if one of the following credit risks happens, Party B shall inform Party A in written form within five business days after knowing this situation. Effects, possible effects on Party B , and remedial measures which has taken or are going to take, deadline of remedy and expected effects should be listed carefully in the written notice.

(1) The operating status of Party B deteriorates.

(2) Party B has lost the business reputation.

(3) Significant suit or arbitration cases happen which affect or may affect interests of Party B and make the operating status of Party B deteriorate.

(4) Events happen in Party B, which may have material adverse effect on Party B’s business, capital and property status.

(5) Other items that have material adverse influences on Party B when it performs this contract’s obligation.

Article 11 Notification

1       Unless there are other provisions in the contract, otherwise, all notices between the two parties under the terms of the contract shall be in written form, which can be delivered by people, registered letters, express mail service, and fax can be as an auxiliary way, however, it must have a supplementary delivery according to the agreed ways in the contract.

2       The notices delivered by registered letter (postage paid) are effective delivery on the third day after they are delivered (as indicated by the postmark). The notices issued by express mail service (postage paid) are effective delivery in the being delivered (as indicated by the postmark).

3       The delivery and notification articles in this contract and dispute settlement articles are independent articles, not involved in the effectiveness of the whole contract or other articles in the contract.

Article 12 Confidentiality

Each party should maintain confidentiality about this contract and matters related with this contract. If there are no written permissions of the other party, any matters related with this contract cannot be disclosed to a third party, except the disclosures because of following reasons:

1       Party A performs the obligation of disclosing information ruled by the laws and regulations or trust documents and discloses information to clients and beneficiaries.

2       Disclose information to auditors, lawyers and other working staff, who are authorized in the normal business, with the precondition that these people should perform the obligation of maintaining confidentiality to the information related with this contract in their work.

3       The data and documents can be gained publicly or the disclosure of this data is required by laws and regulations.

4       Disclosing information to court, arbitration institution, or the disclosure related with this contract is required by the disclosure procedures before lawsuit or the similar procedures, or the law procedure requires information to be disclosed.

5       According to the requirement of financial regulator, Party A discloses information to the financial regulator.

Rules of this article are still valid after the termination of contract.

Article 13 Force Majeure

1       The force majeure referred in this contract, means earthquake, flood, war, governmental behaviors and other events which cannot be foreseen, whose results can’t be prevented or avoided reasonably.

2       If one party of this contract cannot perform this contract completely or partly, this party shall inform the other party within 5 business days after the happening of the force majeure; And offer the detail situation of the event within 15 business days and the documentations offered by the relevant competent authorities, functional departments, or notary public which proves that this contract cannot be performed completely or partly.

3       If one party cannot perform this contract completely or partly because of force majeure, this party is not responsible for breaking the contract, but this party shall take the necessary and proper measures to relieve losses which may bring to the other party.

4       If force majeure happens, both parties shall decide in negotiation on the change or termination of this contract by the judging the influence on execution this contract.

Article 14 Amendment and Supplement to the Contract

1       The agreed content in this contract can be changed after negotiating of two parties.

2       On the matters not being specified in this contract, two parties can sign supplement to the contract.

3       The contents which have changed in this contract or supplement contract have the same legal effect with this contract. If there are conflicts between the content after the change or supplement contract and this contract, the content after the change or supplement contract prevails.

Article 15 Default Liability

1       Any party that breaches the contract or its representations and warranties shall bear the corresponding liability for breach of contract and compensate for all the loss of the observant party because of its default.

2       If Party A does not make transfer payment to Party B as agreed in contract, Party B is entitled to end the contract and Party B shall not transfer assets income right to Party A, and shall return the paid transfer payment as Party A required.

3       Party A is entitled to charge default fines on Party B if Party B fails to make repurchase payment premium or base repurchase payment in time as this contract agreed; Default fine is 0.5‰ of overdue repurchase price per day.

4       If any default below occurs, Party A shall end this contract and require that Party B should make repurchase payment in advance and claim compensation from guarantor or dispose guarantees.

(1) Party B delays or fails to make the repurchase payment;

(2) Party B fails to offer guarantee as agreed in this contract or relevant guarantee contract is not performed.

(3) Party B fails to fulfill its commitment to Party A or breach relevant agreement signed with Party A.

(4) Situations happens that Party A is well grounded to regard it may influence Party B’s assets income right repurchase.

Article 16 Dispute Resolution

All disputes arising from this contract shall be settled through friendly negotiation. In case no settlement can be reached through negotiation, they shall bring proceedings to the local People's Courts with the jurisdiction where Party A is located.

Article 17 Others

1       In case any article of this contract is invalid for any reason, the invalidity of this article does affect the validity of other articles of this contract, so both parties shall continue to execute the other articles of this contract.

2       Party A has reminds Party B appropriately on articles about its liability exemptions or limitations; and has detailed explanation on articles that Party B requested. Both parties show consensus on the understanding of this contract.

3       The contract is in quadruplicate. Party A holds two copies while Party B holds one copy, and relevant administration holds one copy. All copies are with equal legal effect.

Article 18 Miscellaneous

1       In the duration of this trust plan, when gold price (closing price of Au9999 in afternoon hours in Shanghai Gold Exchange in last transaction day) changes and it causes the pledge rate to be higher than [0.85],it is hit alarming line. And Party B shall pay cash in corresponding amount to the pledgee within 3 working days so that the pledge rate will decrease to [0.75]. When gold price (closing price of Au9999 in afternoon hours in Shanghai Gold Exchange in last transaction day) changes and it causes the pledge rate to be higher than [0.90], it is hit close position. In this situation, if Party B does not supplement corresponding gold or cash to make the pledge rate to decrease to 70%, Party A has right to dispose directly the pledged gold, Party B shall cooperate to do corresponding work.

2       Party B commits that it or a third party it appointed shall offer guarantee for Party A and guarantee the obligations of Party B under this contract, such as repurchase payment and etc.

Guarantees	Name Of Guarantee contracts	Contract Number
Wuhan Kingold Jewelry Co., Ltd	Pledge Contract	22B1491800318001
Wuhan Kingold Industrial Group Co., Ltd	Guaranty Contract	22B1391800318001
Jia Zhihong	Guaranty Contract	22A1391800318002

3       Notarization: (1) Party A and Party B confirm that, after signing the Contract, both parties will transact compulsory notarization of the Contract and relevant fees would be borne by Party B(2) Party B hereby commits that if it fails to fulfill or incompletely fulfills any of its obligations under the Contract, it is willing to receive judiciary compulsory execution, without any judicial proceeding. Party A can directly apply for compulsory execution to people’s court with jurisdiction. Party B waives right of defense for such application.(3) This Article has priority to the Article Dispute Resolution in this contract.

4       Property insurance for object assets: (1) After signing this contract, the two parties should purchase property insurance for object assets at People’s Insurance Company of China for the quality and weight. All the insurance costs produced in insurance shall be borne by Party B. Where Party B violates the provisions of the contract, Party A shall have the right to apply for compulsory enforcement to the People’s Court with jurisdiction for directly disposing the pledged object.

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Party A: Dongguan Trust Co.,Ltd (Official Seal)

Legal representative or authorized agent:

Party B: Wuhan Kingold Jewelry Co., Ltd. (Official Seal)

Legal representative or authorized agent:

Signing date: Contract signed in

EX-10.4

Exhibit 10.4

Contract No.:2018-jh-01

Loan Contract by and between AVIC Capital

Investment Management (Shenzhen) Co., Ltd and

Wuhan Kingold Jewelry Inc

Date

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Table of Contents

Article I Definition	3
Article II Loan Amount	5
Article III Intended Use of Loan and Supervision	5
Article IV Loan Term	5
Article V Interest Rate, Arrangement Fee, Interest Accrual, Interest Settlement, Interest Payment and Default Interest	5
Article VI Loan Issuance	7
Article VII Repayment	8
Article VIII Loan guarantee	9
Article IX Party A’s Rights and Obligations, Statement and Promise	10
Article X Party B’s Rights and Obligations, Statement and Promise	11
Article XI Default Responsibility	15
Article XII Contract Alteration and Termination	18
Article XIII Applicable Laws and Dispute Solution	19
Article XIV Notification and Delivery	19
Article XV Other Issues	21

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Loan Contract

The Loaner (Party A): AVIC Capital Investment Management (Shenzhen) Co., Ltd

Residence: Room 201, Building A, 1# First Qianwan Road, Qianhai Hong Kong - Shenzhen Cooperation Zone, Shenzhen City

Business Address: 3906# Times Square Excellence, Futian Centre, Shenzhen City

Post Code: 518017

Legal Representative: Cai Mingsheng

The Borrower (Party B): Wuhan Kingold Jewelry Inc.

Residence: 15# Huangpu Science and Technology Park, Jiang’an District, Wuhan City

Post Code: 430023

Legal Representative (Responsible Person): Jia Zhihong

Fax: 027-65694977

Telephone: 027-65694977

Whereas:

Party A is a limited liability company validly existing and established under the laws, and Party B is an incorporated company validly existing and established under the laws; both parties hereto conclude and sign the Contract for mutual compliance and execution through negotiation according to relevant laws and regulations.

Article I Definition

Unless otherwise specified in the Contract or explained in the context, the terms and definitions in the Contract should have the same implications as those in other documents concerned.

1.1 The Contract: it refers to the Loan Contract (Contract No.: 2018-jh-01) concluded and signed between Party A and Party B as well as any valid revision and supplementation concerned.

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1.2 Loan issuance date: It refers to 6^th September 2018. Party A issued a 290 million RMB loan to Party B in 7^th September 2016 and as agreed in Contract No.:2016-jh-01 between Party A and Party B, signed in 30th August 2016, Party B shall repay the principal and unpaid interest. When loan contract numbered 2016-jh-01 is expired, Party A shall not withdraw the loan principal, and this amount shall be deemed as loan issuance under this contract.

1.4 Interest settlement date: it refers to March 15, June 15, September 15, December 15 of each civil year and the loan expiry date. The interest settlement date should not be postponed.

1.5 Interest payment date: it refers to each interest settlement date, and in case the interest settlement date is a non-working day, the interest payment date should be postponed to the next working day.

1.6 Month: for each loan, it refers to the loan month calculated from the loan issuance date or the date corresponding to the monthly loan issuance date (including the current date; if no corresponding date in this month, it refers to the last day of current month) to the date corresponding to the loan issuance date of the next month (including the current date; if no corresponding date in this month, it refers to the last day of current month). The specific start date should be consistent with the date indicated in the Loan Receipt corresponding to the loan.

1.7 Year: for each loan, it refers to a loan year when the loan is issued for twelve months since the loan issuance.

1.8 Pledgor: it refers to Wuhan Kingold Jewelry Co., Ltd

1.9 Gold pledge contract: it refers to the Gold Pledge Contract (Contract No.:2018-jh-02 ) concluded and signed between Party A and the pledgor.

1.10 Chattel mortgage contract: it refers to the Chattel mortgage contract (Contract No.:2018-jh-03 ) concluded and signed between Party A and the pledgor.

1.11 Yuan: it refers to RMB.

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1.12 China: it refers to the People’s Republic of China (excluding Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Region).

Article II Loan Amount

The total amount of the loan under the Contract is RMB TWO HUNDRED AND NINETY MILLION ONLY (¥290,000,000.00).

Article III Intended Use of Loan and Supervision

3.1 The loan under the Contract should be used for supplementing the circulating fund of Party B.

Party B should strictly utilize the loan under the Contract as specified, and should not change the intended use of the loan without obtaining the written consent from Party A in advance. Moreover, Party B should not utilize the loan for fixed asset investment, equity investment, securities investment, land banking, real estate development, etc., or for other projects violating national laws & regulations and policies.

Article IV Loan Term

4.1 corresponding loan term should be EIGHTEEN months since 6^th September 2018.

4.2 In case of any condition agreed in the Contract, Party A has the right to announce the accelerated expiry of all or part of the loans.

Article V Interest Rate, Arrangement Fee, Interest Accrual, Interest Settlement, Interest Payment and Default Interest

5.1 Borrowing rate

The borrowing rate under the Contract is the annual interest rate, namely 10%/year.

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5.2 Arrangement fee

The arrangement fee under the Contract is 3% of the total amount of the loan, and should be paid by Party B to Party A within one month since the initial loan issuance date.

5.3 Interest accrual

The loan interest should be calculated since the loan issuance date according to the actual amount and the actual loan days. The interest of the loan under the Contract should be daily calculated: daily interest rate = monthly interest rate/30 = annual interest rate/360. Daily interest payable of Party B = current loan balance x [7.5%]/360.

5.4 Interest settlement

The loan interest for the period from the loan issuance date (including) or the previous interest settlement date (including) to current interest settlement date (excluding) should be calculated on the corresponding interest settlement date under the Contract, and the last interest settlement date of the loan under the Contract should be the principal repayment date of the loan under the Contract, and both the principal and the interests accrued should be paid off on that day.

5.5 Interest payment

Party B should pay the corresponding loan interest as scheduled at a full amount on each interest payment date. In case of installment loan issuance, the corresponding interest should be independently calculated and paid for each loan as follows:

The interest payable of Party B on each interest payment date in the first year of the loan issuance = ∑ daily loan balance during the period from the loan issuance date (including) or the previous interest settlement date (including) to current interest settlement date (excluding) ×[10]%/360; The interest payable of Party B on each interest payment date in the second year of the loan issuance = ∑ daily loan balance during the period from the loan issuance date (including) or the previous interest settlement date (including) to current interest settlement date (excluding) ×[10]%/360

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5.6 Default interest

(1) In case Party B fails to utilize the loan as agreed, for the part of the loan, not utilized as agreed in the Contract, the interests accrued should be collected at double original interest rate since the date of loan utilization change.

(2) In case Party B fails to repay the loan as scheduled, for the unpaid loan, the interests accrued should be daily collected at the interest rate of 1‰. In case the interests accrued are not paid as scheduled, the compound interests should be collected according to above default interest rate.

(3) The original interest rate refers to the applicable interest rate before the loan expiry date (including the accelerated expiry date or the extended expiry date).

(4) In case the loan is overdue and is not utilized as agreed in the Contract, the higher default interest rate should be taken to calculate the interests accrued.

Article VI Loan Issuance

6.1 Only when the following conditions can be met and when loan contract numbered 2016-jh-01 is expired, Party A has the obligation not to withdraw the loan principal, and it shall be deemed as issuance of loan under this contract:

(1) Party B and other parties concerned should have provided their necessary and legally valid internal and/or external approval and authorization documents for relevant issues according to validly existing laws & regulations, articles of incorporation or other organization documents;

(2) Such transaction documents as the Contract, the Gold Pledge Contract and the Guaranty Contract should have been signed and come into effect;

(3) The notarial procedure for the compulsory execution of the Contract, the Gold Pledge Contract and the Guaranty Contract should have been completely handled;

(4) The pledge registration procedure should have been completely handled, and the pledged gold should have been sealed and stored in the safe deposit box of a local bank in Wuhan;

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(5) All pledged objects should have been insured to the People’s Insurance Company of China (PICC), and PICC should have issued the insurance contract in which Party A is the first beneficiary;

(6) As of the loan issuance date, any statement and guarantee made by Party B should be truthful, accurate and valid, and the financial condition of Party B should be basically as the same as that at the contract signing, without any significant adverse change;

(7) As of the loan issuance date, the loan issued by Party A to Party B according to the Contract should not violate any laws & regulations or any stipulation of the supervision department;

(8) The business condition of Party B (including but not limited to the financial condition) should not have any substantial change which may bring significant adverse influence on the transactions under the Contract;

(9) The loan under the Contract should not be prohibited or restricted by any law, regulation, rule or other normative document, or any supervision organization;

(10) Other conditions required by Party A.

6.2 Party A should, within [three] days after all preconditions specified in Article 6.1 are met (except that one or more preconditions are clearly exempted by Party A), issue the loan to the following account of Party B:

Deposit Bank:

Bank Account:

Account Name: Wuhan Kingold Jewelry Inc.

Article VII Repayment

7.1 Repayment principle

Any repayment from Party B under the Contract should be firstly for the interest accrued and then for the principal, but Party A has the right to use the repayment from Party B to pay various expenses that should be borne by Party B but is paid by Party A therefor and the expense for realizing the creditor’s right of Party A.

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In case the repayment from Party B is not enough to settle the due payable for Party A under the Contract (including but not limited to loan principal, interest, default interest, compound interest, default penalty, damage compensation, expense for realizing the creditor’s rights of Party A and other accrual expenses), Party A has the right to determine the repayment sequence of loan principal, interest, etc.

7.2 Principal and interest repayment

Party B should pay the due interest to Party A on each interest payment date as agreed in Article 5.4 of the Contract, and the last interest payment date should be the principal repayment date of the loan under the Contract, and the principal and the interests accrued should be paid off on that day.

7.3 Prepayment

(1) Party B may, after each loan is issued for twelve months, request for the prepayment of the loan concerned, but must apply to Party A in a written form at least [sixty] days in advance.

(2) The interest rate agreed in the Contract should not be changed, regardless of the prepayment of Party B.

(3) The interest for the prepayment of Party B should be collected as agreed in the Contract. In case the loan term in current month is less than thirty days, the interest accrued should be also calculated according to thirty days; in case the loan term in current month is more than thirty days (including), the interest accrued should be calculated according to the actual borrowing days.

(4) In case of prepayment, Party B must once pay off the loan principal and interest.

Article VIII Loan guarantee

8.1 Party B should provide the following guarantees for all debts under the Contract (including but not limited to loan principal, interest, default interest, compound interest, default penalty, damage compensation, all expenses for the realization of the creditor’s rights of the lender and other expenses payable):

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(1) Pledge: Party B should provide legally owned gold with the content not less than 99.99% as the pledge guarantee to Party A. Please refer to the Gold Pledge Contract for the specific information.

(2) Guarantee: the actual controller — Jia Zhihong of Party B should provide guarantee for all debts under the Contract. Please refer to the Guaranty Contract for the specific information.

Article IX Party A’s Rights and Obligations, Statement and Promise

9.1 Party A’s rights

(1) Party A has the right to collect loan principal and other funds incurred from Party B;

(2) Party A has the right to request Party B to provide the latest financial statement audited by an accounting firm and all information regarding the loan under the Contract;

(3) Party A has the right to know the production & operation and financial activities of Party B;

(4) Party A has the right to report Party B’s default behaviors, including avoidance of Party A’s supervision, principal and interest arrears and other default behaviors, to relevant department or unit;

(5) Party A has the right to personally implement the after-loan management for the loan issued thereby or employ the third party to do the same, including but not limited to the acquaintance and the field inspection of Party B’s production & operation and financial activities, loan utilization, funds or other matters agreed in the Loan Contract;

(6) In case Party B fails to repay the loan principal and interest as scheduled at a full amount, Party A or the third party employed thereby has the right to take collection actions (including but not limited to short message, email, telephone, etc.), and all expenses incurred by the collection, including but not limited to express fee, counsel fee, travel expense, etc., should be borne by Party B;

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(7) In case the condition specified in Article XI of the Contract occurs and Party A believes that the creditor’s rights thereof under the Contract may be endangered or Party B violates the Contract, Party A has the right to announce the immediate expiry of all loans under the Contract and request Party B to immediately repay all outstanding principals and interests;

(8) Other rights that Party A should entitle according to laws & regulations and the Contract.

9.2 Party A’s obligations

(1) Party A should issue the loans as agreed in the Contract, except the delay caused by Party B or other reasons not attributed to Party A;

(2) Party A should have the confidentiality responsibility for relevant financial information and production & operation business secrets provided by Party B, except that such information should be disclosed as required by laws & regulations and the supervision department or the administrative department, or is disclosed to the intermediary organ employed thereby.

9.3 Party A’s statement and promise

Party A states and promises as follows:

(1) Party A is a limited liability company validly existing and established under laws, and has the subject qualification for signing the Contract;

(2) Party A signs and performs the Contract for the truthful intentions thereof, and has obtained all necessary legal authorizations, and completely handled all legal procedures for signing and performing the Contract;

(3) Party A will issue the loan to Party B as agreed, and the contract signing and performance will not violate any obligation under the Loan Contract.

Article X Party B’s Rights and Obligations, Statement and Promise

10.1 Party B’s rights

(1) Party B has the right to withdraw and utilize the loan according to the loan term and the intended use agreed in the Contract;

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(2) Party B has the right to request Party A to bear the confidentiality responsibility for relevant financial information and business secrets regarding production & operation, except that such information should be disclosed according to laws & regulations, rules and the Contract.

10.2 Party B’s obligation

(1) Party B should withdraw the loans as agreed in the Contract;

(2) Party B should, as required by Party A, provide relevant financial accounting information and production & operation information to Party A, including but not limited to balance sheet, profit and loss statement, cash flow statement, loan utilization, and should be responsible for the authenticity, legality, completeness and validity of the information provided thereby;

(3) Party B should utilize the loans as agreed in the Contract, and should not occupy or embezzle for other purposes or utilize for the projects violating national laws & regulations and policies;

(4) Party B should positively cooperate for and conscientiously accept the inspection and supervision from Party A or the third party employed thereby, upon the production & operation and financial activities and the utilization of the loans under the Contract;

(5) Party B should pay the loan principal and interest and other payables as agreed in the Contract;

(6) Party B should bear the expenses of relevant insurance under the Contract;

(7) Party B and the investors thereof should not secretly withdraw the funds or transfer assets to avoid the debts owed to Party A;

(8) In case of transferring all or part of the debts under the Contract to the third party, Party B should obtain the corresponding consent from Party A in advance;

(9) In case of changing name, legal representative (responsible person), residence, business scope, registered capital, etc. within the contract term, Party B should inform Party A in a written form within ten days after occurrence;

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(10) In case of involving in insurance acceptance, rent, shareholding reform, joint operation, consolidation, merge, separation, joint venture, capital reduction, stock right transfer, major assets transfer and other behaviors which are sufficient to influence the realization of the creditor’s rights of Party A within the contract term, Party B should inform Party A in a written form at least thirty days in advance and obtain the corresponding consent, and should pay off and guarantee the debts under the Contract; or else, the above behaviors should not be allowed before all debts are paid off for Party A;

(11) In case Party B suffers from business suspension, bankruptcy, dismission, rectification, business license cancellation or revoking, etc. within the contract term, the Contract should be deemed to be expired. Party B should inform Party A in a written form within three days after occurrence and immediately repay the loan principal and interest;

(12) In case Party B involves in the events that may threaten the normal operation thereof or bring significant adverse influence on the performance of the repayment obligation under the Contract, including but not limited to major economic dispute, litigation, financial condition deterioration, production & operation difficulty, bankruptcy, dismission, business suspension for rectification, business license cancellation or revoking, etc. within the contract term, Party B should inform Party A in a written form within three days after occurrence, and should pay off and guarantee the debts under the Contract as required by Party A;

(13) Party B should guarantee various guarantors (if any) to cooperate with Party A for concluding and signing various guaranty contracts (if any) and handle relevant notarization and registration procedures, etc;

(14) In case any guarantor under the Contract involves in production suspension, business suspension, registration cancellation, business license revoking, bankruptcy, etc., or completely or partially loses the guarantee capability for the loan concerned, Party B should timely provide other guarantees accepted by Party A;

(15) Within the contract term, Party B should not provide dividends to the shareholders;

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(16) Party B should bear all responsibilities for the losses caused thereby to Party A.

10.3 Party B’s statement and promise

Party B states and promises to Party A as follows, and Party A issues the loans under the Contract according to such statement and promise:

(1) Party B is a validly existing legal entity registered under the laws and the regulations of the People’s Republic of China. As of the loan issuance date, Party B is continuously under normal operation state, without any existing or reasonably predicted factors probably influencing the continuous and normal operation thereof within the contract term;

(2) Party B signs and performs the Contract for the truthful intentions thereof, and has obtained all necessary legal authorizations; the above authorizations and the contract signing and performance behaviors under the authorizations should not violate articles of incorporation or other organization documents or any binding laws, regulations, rules and other normative documents, judicial decision, contract, promise or arrangement; the procedure for signing and performing the Contract should have been completely handled and is legally valid;

(3) All documents, information, statements, vouchers, etc. provided thereby to Party A under the Contract should be truthful, accurate, complete and legally valid, without any misleading statement, false record or significant omission;

(4) Party B should not conceal any existing or probably existing conditions probably enabling Party A to disagree the loan issuance under the Contract, including but not limited to:

1) Significant discipline violation, law violation or claimed compensation concerning Party B or the main responsible persons thereof;

2) The default events under the contract concluded and signed with any other creditor;

3) Such dispute events as litigation and arbitration;

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4) The debts borne thereby and the guarantees provided thereby;

5) Other conditions probably influencing the financial condition and the debt paying ability.

(5) Party B should agree Party A to check the credit status thereof from People's Bank of China, the credit database approved to be established by the competent department for credit investigation, relevant unit and department, or reasonably utilize and disclose the information for business needs;

(6) The legal documents corresponding to the existing financing and/or guarantee (if any) should exclude any article which restricts Party B for re-financing and/or providing guarantee, or which may influence the performance of Party B’s obligations under the Contract.

In case of contract modification, supplementation or alteration, Party B should be deemed to repeatedly make the above statement and promise.

Article XI Default Responsibility

11.1 Default

(1) In case of any one of the following conditions, Party B should be deemed to violate the Contract:

1) Party B fails to provide truthful, complete and valid financial accounting information, production & operation information and other relevant information as required by Party A, or conceals the information probably influencing the debt paying ability thereof;

2) Party B fails to utilize the loans as agreed by both parties, or refuses or obstructs Party A or the third party employed thereby to supervise and inspect the loan utilization;

3) Party B fails to repay the loan principal or any interest or other payables (if any);

4) Party B transfers assets or secretly withdraws the capitals to evade debts;

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5) Party B suffers from business deterioration and financial condition deterioration, cannot pay off the due debts, involves in or will involve in major litigation or arbitration procedure or other legal dispute, bears any other debts, etc., and Party A believes that the above events may influence or have influenced or damaged the rights and interests thereof under the Contract;

6) Party B involves in contracting, rent, consolidation, merge, joint venture, separation, joint operation, shareholding reform, registered capital reduction, or has other behaviors for business pattern change or business mechanism transform, and Party A believes that the above events or behaviors may influence or have influenced or damaged the rights and interests thereof under the Contract;

7) Party B changes legal representative/controlling shareholder/actual controller, or cannot normally perform the duty thereof or involves in major economic dispute or suffers from financial condition deterioration, compulsory measure, right limitation or unavailable contact, etc.;

8) Any other debt borne thereby has influenced or may influence Party A upon the obligation performance thereof under the Contract;

9) Without the consent from Party A, Party B provides dividends to the shareholders within the contract term;

10) Party B involves in such legal procedures as trusteeship, take-over, rectification, reconciliation, reorganization, bankruptcy or dismission, or the business license thereof is forcedly revoked by relevant authority, or Party B is ordered by relevant authority to be suspended, closed, cancelled or dismissed;

11) In case the enterprise and/or the guarantor affiliated to Party B, the associated party or the actual controller are/is believed by Party A to be under significant adverse situation, or have/has any violation behavior against any project cooperation with Party A, the associated party or other third party of Party A, or against any contract signed thereby, Party A has the right to take the remedy measure for the breach of contract as agreed in Article 11.2 of the Contract; in case of severe default, Party A has the right to announce the termination of all project cooperation with Party B;

12) Party B violates other articles of the Contact or involves in other events that, in Party A’s opinion, influence the realization of the creditor’s rights thereof;

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(2) In case the pledgor involves in any one of the following conditions, Party A believes that such condition may influence the guarantee capability of the pledgor and requests the pledgor to eliminate the adverse effect caused thereby, but the pledgor and Party B fail to cooperate, or Party B refuses to provide the new guarantee accepted by Party A and/or other remedial measures, Party B should be deemed to violate the Contract:

1) When signing the Gold Pledge Contract, the pledgor conceals the equity disposal of the pledge from Party A, including but not limited to pledge rent & selling, the pledgor’s behaviors for transfer of usufruct & management right and long-term rent collection, pledge hypothecation & mortgage, etc.;

2) The third party causes the damage, loss or devaluation of the pledge, but the pledgor fails to provide the damage compensation as agreed in the Gold Pledge Contract;

3) The pledgor’s behavior is sufficient to devaluate the pledge, and Party A requests the pledgor to stop such behavior and recover the pledge or provide the corresponding guarantee, but the pledgor refuses or fails to implement as required by Party A;

4) Without the written consent from Party A, the pledgor disposes the pledge through donation, transfer, rent, repeated mortgage, migration or other modes, or sets other rights upon the pledge;

5) Although the pledgor is agreed by Party A to dispose the pledge, but the revenue obtained from the pledge disposal is not disposed according to the Gold Pledge Contract;

6) The pledge damage, loss or devaluation is sufficient to influence the debt settlement under the Contract, and the pledgor fails to timely recover the pledge value or provide other guarantees accepted by Party A or supplement the corresponding cash as agreed in Article 11 of the Gold Pledge Contract;

7) The pledgor’s other default behaviors specified in the Gold Pledge Contract.

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11.2 Remedy measure for breach of contract

In case of any default event mentioned above, Party A has the right to take one or more following measures:

(1) Stop issuing loans granted to Party B

(2) Announce the immediate expiry of the loan, beforehand collect all loan issued thereby, request Party B to immediately pay off the loan principle, interest and other relevant funds under the Contract;

(3) Collect the default penalty from Party B at [20]% of the loan principal;

(4) Perform the guarantee right;

(5) Terminate the Contract and various guaranty contracts (if any);

(6) Other measures specified in laws & regulations, the Contract and the accessory contract;

Where Party A realizes the creditor’s rights under the Contract through litigation due to Party B’s default behavior, Party B should bear the reasonable expenses (including but not limited to legal fare, reasonable counsel fee, etc.) for Party A to realize the creditor’s rights thereof.

11.3 Special agreement

Within [thirty] days since the signing of the Loan Contract, in case Party B fails to perform relevant obligations under the Contract without a warrant, Party B should pay RMB [THREE MILLION ONLY] as the default penalty once for all to Party A. Meanwhile, Party A has the right to unilaterally terminate the Contract.

Article XII Contract Alteration and Termination

Unless otherwise specified in the Contract, after the Contract comes into effect, any party should not unilaterally alter or terminate the Contract. Any contract modification or alteration must be agreed by both parties through negotiation, and the corresponding written agreement should be provided.

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Article XIII Applicable Laws and Dispute Solution

13.1 In case of any dispute caused by the Contract or pertinent to the Contract, the parties concerned should solve such dispute through negotiation or conciliation; if failed, both parties should submit the dispute to the jurisdictional people’s court at the place where Party A is located.

13.2 The establishment, interpretation, performance and dispute solution of the Contract are all applicable to existing laws, administrative regulations and rules in China.

13.3 During dispute solution, the articles of the Contract, not involved in the dispute, should be continuously executed, and both parties should not refuse to perform any obligation under the Contract on the excuse of dispute solution.

Article XIV Notification and Delivery

14.1 All notices, documents, information, etc. sent or provided by both parties during contract performance should be delivered according to the contact information listed in Article 14.2 of the Contract. In case one party changes the contact information, the party concerned should inform the other party in a written form (fax or EMS should be valid) within three days since the change of the contact information; or else, when the party not changing the contact information informs the other party in a written form — fax or EMS according to the contact information indicated in the Contract, relevant information should be deemed to be delivered.

14.2 Contact information of the two parties is as follows:

Party A: AVIC Capital Investment Management (Shenzhen) Co., Ltd

Contact Address: 3906# Times Square Excellence, Futian Centre, Shenzhen City

Post Code: 518017

Contact Person: Liang Xinyue

Telephone: +8613823212812

Fax:

Email: lillian.liang@aviccapital.com

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Party B: Wuhan Kingold Jewelry Inc.

Contact Address: 15# Huangpu Science and Technology Park, Jiang’an District, Wuhan City

Post Code: 430023

Contact Person: Hu Qiao

Telephone: 027-65694977

Fax: 027-65694977

Email: webmaster@kingold.com.cn

14.3 The notification should be deemed to be delivered to the informed party on the following date:

(1) The notification sent by a specially-assigned person should be deemed to be effectively delivered on the delivery date;

(2) The notification sent as a registered letter should be deemed to be effectively delivered on the third day after mailing (postmark as the voucher);

(3) The notification sent by fax should be deemed to be effectively delivered when the fax machine generates the corresponding confirmation for successful transmission;

(4) The notification sent by EMS should be deemed to be effectively delivered on the second day after mailing (postmark as the voucher);

(5) The notification sent by email should be deemed to be effectively delivered on the date when the successful transmission information is displayed in the mail system of the sender.

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Article XV Other Issues

15.1 Any supplemental agreement concluded and signed between both parties for the issues not mentioned in the Contract should be made as the annex of the Contract and should have equal legal effect.

15.2 The Loan Receipt under the Contract and relevant documents confirmed by both parties should be deemed as an integral part of the Contract.

15.3 Party B should have read all articles of the Contract, completely known and comprehensively understood the implications of the articles of the Contract and the corresponding legal consequence. As required by Party B, Party A should have interpreted the corresponding articles of the Contract.

15.4 During contract performance, in case Party A fails to perform or timely perform any right under the Contract, Party A should not be deemed to waive this right and such behavior should not influence the performance of other rights of Party A or the performance of any obligation of Party B under the Contract. All right waivers should be made in a written form.

15.5 The statements and the promises mentioned in the Contract should be separated from and independent of each other. Unless otherwise specified clearly or agreed by both parties in a written form, any statement or promise should not be expressed or restricted on the excuse of any opposite implication probably included in any other article of the Contract. In case an article or a part of an article of the Contract is or will be invalid, such invalid article or invalid part should not influence the Contract and the validity of the other articles or the other contents of the articles therein.

15.6 Any violation against any statement or promise clearly indicated and agreed in the Contract should be deemed as a default behavior.

15.7 Both parties hereto should prepare and sign or guarantee to prepare and sign the further actions, behaviors, events and documents needed for executing the articles of the Contract in order to fully achieve the expected purpose of the Contract.

21

15.8 Any title for an article of the Contract is only for convenient reading, and should not be deemed as a part of the Contract in any case or as the restriction to the article concerned.

15.9 The Contract should be deemed as a complete document concluded and signed by both parties for the issues concerned. The Contract and any annex of the Contract should be deemed to compose all agreements concluded between both parties. In case of any inconsistency between the Contract and the letter of intent previously signed by the parties or any other legal document or any written or oral agreement, the Contract should prevail.

15.10 The Contract should come into effect since being signed (or stamped) by the legal representatives/responsible persons of both parties and stamped with the corresponding official seal (or special seal for contract), and should be terminated on the date when the loan principal, interest, default interest, default penalty and other payables (if any) are paid off.

15.11 The Contract is made into [six] parts with equal legal effect. Party A holds [three copies], Party B holds [two] copies, and the rest copies are used for handling mortgage (pledge) procedure, etc.

When signing the Contract, the parties concerned should have read and understood all articles of the Contract, without any objection, and should have accurately understood the legal relation between both parties and the legal implications of the articles regarding rights, obligations and responsibilities. Any party should not propose any objection upon any article of the Contract on the excuse of serious misunderstanding, obvious unfairness, etc.

(The reminder of this page is intentionally left blank)

22

(This is the signature page of the Loan Contract (Contract No.: “”), no text)

Party A: AVIC Capital Investment Management (Shenzhen) Co., Ltd Party B: Wuhan Kingold Jewelry Inc.

(Official Seal/Special Seal for Contract)	(Official Seal/Special Seal for Contract)
Legal Representative or Authorized Representative:	Legal Representative or Authorized Representative:
(Signature/Seal)	(Signature/Seal)

Date of Contract Signing: 5^th September 2018

Place of Contract Signing: Wuhan Hubei

23

EX-10.5

Exhibit 10.5

Contract No.: SCXT2016(DXD)Zi. No.167-2-1

Trust Loan Contract

Supplementary Contract One

Borrower: Wuhan Kingold Jewelry Co., Ltd.

Legal Representative: Jia Zhihong

Address: Special No. 15 of Huangpu Science and Technology Park, Jiang’an District, Wuhan City

Agent:

Fax: 027-65694977

Tel: 027-65694977

Postcode: 430023

Lender: Sichuan Trust Co., Ltd.

Legal Representative: MouYue

Address: No.18, Second section of South Renmin Avenue, Jinjiang District,Chengdu

Agent: Zhu Pan

Tel: 0571-85238957

Fax: 0571-85238957

Postcode: 610016

WHEREAS:

(1) The lender, as the trustee of “Chuanxin-Kingold No.1 Single Trust” ( hereinafter referred to as “this trust” or “the trust”), in accordance with the agreement in Chuanxin-KingoldNo.1 Single Trust Contract, numbered 【SCXT2016(DXD)Zi. No.167-1】, planned to make loans which are delivered by the consignor for the borrower as the RMB trust loan, which shall be used by the borrower to purchase raw materials. The lender and borrower have signed Trust Loan Contract (hereinafter referred to as “original contract”), numbered SCXT2016(DXD) Zi. No.167-2 at 7^th September 2016. The lender has issued loan RMB [in small: 1,000,000,000.00; capital: one billion] yuan to borrower in accordance with original contract.

(2) The consignor has extended this trust one year by conclude and sign with consignee Chuanxin-KingoldNo.1 Single Trust Contract Supplementary Contract numbered [SCXT2016(DXD)Zi. No.167-1-1]. Relevant issues on trust loan shall be agreed by future agreement of both of lender and borrower. Now all conditions under this contract are met and the lender agrees to extend the duration of original contract 14 months.

In the contract, except that there are other explanations or implications in the context of Chuanxin-KingoldNo.1 Single Trust Contract, numbered 【SCXT2016(DXD)Zi. No.167-1】, the words and phrases in this contract bear the same meanings with Chuanxin-KingoldNo.1 Single Trust Contract Supplementary Contract numbered [SCXT2016(DXD)Zi. No.167-1-1].

1. Article 2.1.2 and 2.1.3 in “Article 2.1 Amount and term of trust loans”, and Article 2.2.1 in “Article 2.2 The Expansion of Term”

2.1.2 The total term of loans under this contract is 24 months, calculating from the first day when the first sum of trust loan fund is disbursed to the borrower’s special loan account(specifically subject to the withdrawal application for the loan). It is expected to be from 7^th September 2016 to 7^th September 2018(specifically subject to the withdrawal application for the loan). If the condition agreed in article 6.2.5 occurs, the term of trust loans shall be calculated from the setup of the trust plan.

2.1.3 Except for additional agreement, when the starting day of the term of trust loans does not comply with the actual disbursement day under this contract, the actual disbursement day shall prevail. Besides, the expiry date of loans agreed in article 2.1.2 in this contract shall also be adjusted accordingly.

(1) The lender is entitled to issue loans by stages. The limit of each stage is 24 months or no more than 24 months, and the expiry date of last stage loan should be before the expiry date for the total amount.

2.2.1 The term of the trust loans under this contract shall not be expanded.

Revised to:

2.1.2 The total term of loans under this contract is 38 months, calculating from the first day when the first sum of trust loan fund is disbursed to the borrower’s special loan account(specifically subject to the withdrawal application for the loan). It is expected to be from 7^th September 2016 to 7^th November 2019(specifically subject to the withdrawal application for the loan). If the condition agreed in article 6.2.5 occurs, the term of trust loans shall be calculated from the setup of the trust plan.

2.1.3 Except for additional agreement, when the starting day of the term of trust loans does not comply with the actual disbursement day under this contract, the actual disbursement day shall prevail. Besides, the expiry date of loans agreed in article 2.1.2 in this contract shall also be adjusted accordingly.

(1) The lender is entitled to issue loans by stages. The limit of each stage is 38 months or no more than 38 months, and the expiry date of last stage loan should be before the expiry date for the total amount.

2.2.1 The term of the trust loans under this contract shall be expanded with two parties’ consensus.

2 Article 6.1 in “Article 6 interest”

6.1	Trust loan interest rate
	The trust loan interest rate under this contract is annual interest rate 8.46%.

Revised to:

The trust loan interest rate of first 24 months (included) under this contract is annual interest rate 8.46%.; after 24 months, the trust loan interest rate is annual interest rate 8.1%.

3 Article 6.3.1 in “Article 6 interest” of original contract

6.3.1 Within five days after each trust loan is issued and within five days after the loan is disbursed for one year, the interest amount the borrower should pay to the lender=the principal of this term of loan*1.21%

Revised to:

6.3.1	Within five days after each trust loan is issued and within five days after the loan is disbursed for one year, the interest amount the borrower should pay to the lender=the principal of this term of loan*1.21%.
	Within five workdays after two years since the issuance of each loan, the borrower shall pay the loaner interest=the principal of each loan*0.99%

4 Article 7.4“protection fund” in “Article 7 Repayment” of original contract “Protection Fund” adds one item:

(5) The items that are not involved in the agreement on protection fund subscription are subject to the provisions and stipulations of method, notice, relevant laws and regulatory department. If the agreements are not complied with the above provisions and stipulations since there are of newly issued or changed provisions and stipulations, the matters concerned the protection fund subscription will be conducted in accordance with the adjusted laws or provisions.

5 The borrower and the lender conduct notarial process on this contract and enforce it with effect after signing this contract with consent. If the borrower does not or not fully perform his obligation under the main contract, or the borrower does not or not fully perform his obligation under this contract, or when the hostage is realized as is agreed in this contract happens, the lender is entitled to apply the people’s court with jurisdiction for compulsory execution with this contract and executive certificate under notarization. The borrower should accept the compulsory execution and abstain the right to defend on his own accord. The cost for compulsory execution process is assumed by the borrower.

6. This contract is effective after the legal representatives or authorized representatives of both parties signed or sealed and stamped with official seal

7. This contract has three original copies, one copy belongs to the lender, and one copy is kept by the borrower, and the rest is reserved for possible use, and each one has the same legal effect.

(The remainder of this page is intentionally left blank.)

(No text in this page, signing page of No. SCXT2016(DXD)Zi. No.167-2-1 Trust Loan Contract)

The lender: Sichuan Trust Co., Ltd.(Seal)

Legal Representative or Authorized Representative (Signature or Seal):

The borrower: Wuhan Kingold Jewelry Co., Ltd. (Seal)

Legal Representative or Authorized Representative (Signature or Seal) :

Sign Date: 7 September 2018

Place of signing:

EX-10.6

Exhibit 10.6

Contract No.: SCXT2016(DXD)Zi. No.168-2-1

Trust Loan Contract

Supplementary Contract One

Borrower: Wuhan Kingold Jewelry Co., Ltd.

Legal Representative: Jia Zhihong

Address: Special No. 15 of Huangpu Science and Technology Park, Jiang’an District, Wuhan City

Agent:

Fax: 027-65694977

Tel: 027-65694977

Postcode: 430023

Lender: Sichuan Trust Co., Ltd.

Legal Representative: MouYue

Address: No.18, Second section of South Renmin Avenue, Jinjiang District,Chengdu

Agent: Zhu Pan

Tel: 0571-85238957

Fax: 0571-85238957

Postcode: 610016

WHEREAS:

(1) The lender, as the trustee of “Chuanxin-Kingold No.1 Single Trust” ( hereinafter referred to as “this trust” or “the trust”), in accordance with the agreement in Chuanxin-KingoldNo.1 Single Trust Contract, numbered 【SCXT2016(DXD)Zi. No.168-1】, planned to make loans which are delivered by the consignor for the borrower as the RMB trust loan, which shall be used by the borrower to purchase raw materials. The lender and borrower have signed Trust Loan Contract (hereinafter referred to as “original contract”), numbered SCXT2016(DXD) Zi. No.168-2 at 7^th September 2016. The lender has issued loan RMB [in small: 500,000,000.00; capital: five hundred million] yuan to borrower in accordance with original contract.

(2) The consignor has extended this trust one year by conclude and sign with consignee Chuanxin-KingoldNo.1 Single Trust Contract Supplementary Contract numbered [SCXT2016(DXD)Zi. No.168-1-1]. Relevant issues on trust loan shall be agreed by future agreement of both of lender and borrower. Now all conditions under this contract are met and the lender agrees to extend the duration of original contract 14 months.

In the contract, except that there are other explanations or implications in the context of Chuanxin-KingoldNo.1 Single Trust Contract, numbered 【SCXT2016(DXD)Zi. No.168-1】, the words and phrases in this contract bear the same meanings with Chuanxin-KingoldNo.1 Single Trust Contract Supplementary Contract numbered [SCXT2016(DXD)Zi. No.168-1-1].

1. Article 2.1.2 and 2.1.3 in “Article 2.1 Amount and term of trust loans”, and Article 2.2.1 in “Article 2.2 The Expansion of Term”

2.1.2 The total term of loans under this contract is 24 months, calculating from the first day when the first sum of trust loan fund is disbursed to the borrower’s special loan account(specifically subject to the withdrawal application for the loan). It is expected to be from September 2016 to September 2018(specifically subject to the withdrawal application for the loan). If the condition agreed in article 6.2.5 occurs, the term of trust loans shall be calculated from the setup of the trust plan.

2.1.3 Except for additional agreement, when the starting day of the term of trust loans does not comply with the actual disbursement day under this contract, the actual disbursement day shall prevail. Besides, the expiry date of loans agreed in article 2.1.2 in this contract shall also be adjusted accordingly.

(1) The lender is entitled to issue loans by stages. The limit of each stage is 24 months or no more than 24 months, and the expiry date of last stage loan should be before the expiry date for the total amount.

2.2.1 The term of the trust loans under this contract shall not be expanded.

Revised to:

2.1.2 The total term of loans under this contract is 38 months, calculating from the first day when the first sum of trust loan fund is disbursed to the borrower’s special loan account(specifically subject to the withdrawal application for the loan). It is expected to be from 7^th September 2016 to 7^th November 2019(specifically subject to the withdrawal application for the loan). If the condition agreed in article 6.2.5 occurs, the term of trust loans shall be calculated from the setup of the trust plan.

2.1.3 Except for additional agreement, when the starting day of the term of trust loans does not comply with the actual disbursement day under this contract, the actual disbursement day shall prevail. Besides, the expiry date of loans agreed in article 2.1.2 in this contract shall also be adjusted accordingly.

(1) The lender is entitled to issue loans by stages. The limit of each stage is 38 months or no more than 38 months, and the expiry date of last stage loan should be before the expiry date for the total amount.

2.2.1 The term of the trust loans under this contract shall be expanded with two parties’ consensus.

2       Article 6.1 in “Article 6 interest”

6.1       Trust loan interest rate

The trust loan interest rate under this contract is annual interest rate 8.46%.

Revised to:

The trust loan interest rate of first 24 months (included) under this contract is annual interest rate 8.46%.; after 24 months, the trust loan interest rate is annual interest rate 8.1%.

3       Article 6.3.1 in “Article 6 interest” of original contract

6.3.1 Within five days after each trust loan is issued and within five days after the loan is disbursed for one year, the interest amount the borrower should pay to the lender=the principal of this term of loan*1.21%

Revised to:

6.3.1 Within five days after each trust loan is issued and within five days after the loan is disbursed for one year, the interest amount the borrower should pay to the lender=the principal of this term of loan*1.21%.

Within five workdays after two years since the issuance of each loan, the borrower shall pay the loaner interest=the principal of each loan*0.99%

4 Article 7.4 “protection fund” in “Article 7 Repayment” of original contract “Protection Fund” adds one item:

(5) The items that are not involved in the agreement on protection fund subscription are subject to the provisions and stipulations of method, notice, relevant laws and regulatory department. If the agreements are not complied with the above provisions and stipulations since there are of newly issued or changed provisions and stipulations, the matters concerned the protection fund subscription will be conducted in accordance with the adjusted laws or provisions.

5 The borrower and the lender conduct notarial process on this contract and enforce it with effect after signing this contract with consent. If the borrower does not or not fully perform his obligation under the main contract, or the borrower does not or not fully perform his obligation under this contract, or when the hostage is realized as is agreed in this contract happens, the lender is entitled to apply the people’s court with jurisdiction for compulsory execution with this contract and executive certificate under notarization. The borrower should accept the compulsory execution and abstain the right to defend on his own accord. The cost for compulsory execution process is assumed by the borrower.

6. This contract is effective after the legal representatives or authorized representatives of both parties signed or sealed and stamped with official seal

7. This contract has three original copies, one copy belongs to the lender, and one copy is kept by the borrower, and the rest is reserved for possible use, and each one has the same legal effect.

(The remainder of this page is intentionally left blank.)

(No text in this page, signing page of No. SCXT2016(DXD)Zi. No.168-2-1 Trust Loan Contract)

The lender: Sichuan Trust Co., Ltd.(Seal)

Legal Representative or Authorized Representative (Signature or Seal):

The borrower: Wuhan Kingold Jewelry Co., Ltd. (Seal)

Legal Representative or Authorized Representative (Signature or Seal) :

Sign Date: 7^th September 2018

Place of signing:

EX-10.7

Exhibit 10.7

Loan Agreement of RMB Circulating Funds

CONTRACT NO.:XJA-2018-1230-0019

Borrower (Party A): _Wuhan Kingold Jewelry Co., Ltd

Legal Representative/ Principal: Jia Zhihong

Address: Te #15 Huangpu Technology Park, Jiang An District, Wuhan Postcode: 430023

Telephone: __027-65660346_____ Fax: 027-65694977

Lender (Party B): China Construction Bank, Wuhan Jiang’anBranch

Legal Representative/Principal: __Huang Ziqiang

Address: _No. 1328 Jiefang Road, Jiang’an District Wuhan City Postcode:430015

Telephone: _027-82280798_____________ Fax: 027-82280958

Since the Borrower applies for loan from the Lender, to specify the rights and obligations of both parties, the Borrower and the Lender reach consensus through consultation and agree with following agreement.

Article 1 Loan

1.1 Currency: RMB.

1.2 The amount of loan under the Agreement is: _ONE HUNDRED AND EIGHTEEN MILLION.

1.3 This loan should be used for Purchasing Gold Raw Material and Other Business Use only.

1.4 The life of loan under the Agreement is from September 20, 2018 to September 19, 2019.

The life of loan is from the date of issuing the first loan under this Agreement to the date when Borrower pays back the principal and interest under the Agreement.

Article 2 Interest Rate of Loan and Interest Settlement

2.1 The interest rate of loan under the Agreement uses the way in 2.1.1 as follows:

2.1.1 Fixed rate, i.e. LPR interest rate plus 5 base points (one base point=0.01%, accurate to 0.01 base point). During the life of loan, it is unchangeable and will not adjust basing on national interest.

2.1.2 Floating interest rate, i.e. ___∕__ (choose “rising” or “lowering”) _∕__% based on the benchmark interest rate of value date. If the People’s Bank of China adjusts the benchmark interest rate during the loan term, following / is used as the interest rate adjustment date:

(1) The adjustment is made monthly, once per month.

(2) The adjustment is made quarterly, once per quarter.

(3) The adjustment is made every half year, once per half year.

(4) The adjustment is made every year, once per year.

If the People’s Bank of China changes the benchmark interest rate into floating interest or calls the benchmark interest rate, the parties should adjust the loan interest under mutual discussion, but the interest after the adjustment should be not lower than the interest before; if after ___∕__ month from the date when the People’s Bank of China adjusts the interest, the two parties have not reached a consensus regarding the adjusted interest rate, the Lender has right to declare the acceleration of maturity regarding the loan under this Agreement.

2.1.3       /       (foreign currency) interest       /      ;

2.1.4                        /                      .

2.2 Interest settlement

2.2.1 Daily interest = monthly interest rate / 30, monthly interest rate = annual interest rate / 12.

2.2.2 Normal interest = agreed rate of interest under this agreement × loan amount × usage days been used. The usage days should start from the lending day to the date of expiry.

2.2.3 The interest settlement of loan under the Agreement is based on the following __SECOND__ way. When the loan expires, the principal and interest should be repaid. The interest settlement date is the interest payment date.

(1) The interest is settled on the 20^th day of last month of every season;

(2) The interest is settled on the 20^th day of every month.

2.3 Default interest

2.3.1 If the Borrower fails to use the loan in accordance with the agreed purposes, or the Borrower fails to repay the loan within the agreed deadline and has not reached agreement on extension with the Lender (so it is overdue loan), the Lender has the right to get the default interest for the misappropriated loan or overdue loan according to the default interest rate under this Agreement.

2.3.2 If the loan currency is RMB, when the Borrower fails to repay the loan within the agreed deadline, the default interest rate will increase by 50% regarding the overdue loan; when the Borrower fails to use the loan in accordance with the agreed purposes, the loan interest rate will increase by 100% regarding the misappropriated loan. If the People’s Bank of China adjusted the benchmark interest rate, the floating interest loan is overdue or misappropriated; the Lender has the right to adjust the default interest rate, and applies the new default interest since the interest adjustment date of the People’s Bank of China. If the loan currency is foreign currency, the default interest rate is: increase       /       basing on the agreed interest rate.

2.4 If the Borrower repays or the Lender calls in loan in advance, the relevant interest will not be adjusted and the agreed interest rate still applies.

Article 3 Issuance, Payment and Repayment of Loan

3.1 The Borrower can draw the loan amount by several allocations, but the sum of all allocations does not exceed the amount provided by Article 1. The drawing shall comply with following allocation plan:

Drawing Date	Drawing Amount
September 21, 2018	FOUR HUNDRED MILLION
\	\

DD 3.2 The Lender is only obliged to loan when the following conditions are met constantly:

(1) The Borrower has completed all the relevant legal procedures including the government license, approval, registration and other legal procedures required by the Borrower, and such legal procedures are continuously effective;

(2) The guarantee agreement (if any) under this Agreement has taken effect and will be continuously effective; if the guarantee agreement is pledge agreement and/or mortgage agreement, the guarantee right has been set and will be continuously effective;

(3) The Borrower’s operation and financial status does not have any substantial adverse changes;

(4) The Borrower does not violate this Agreement;

(5) The way of this loan payment is consistent with the Agreement; if the lender entrusted payment is the payment way, the Lender agrees to pay;

(6) If the loan is issued in foreign currency, the Borrower has already opened the relevant account according to the management requirement of foreign exchange and provided the documents showing that the loan conforms the relevant foreign exchange policy, including but not limited to, effective foreign exchange purpose documentary evidence, registration or approval documents;

(7) The Borrower has already opened the capital recovery account according to Article 3.9;

(8) ______________/____________________________________________________.

3.3 The Borrower appointed the account below as the loan account:

Account Name : Wuhan Kingold Jewelry Co., Ltd.

Account No.: 42001116208053017159-3001

Bank Name : China Construction Bank Wuhan Jiang’an Branch.

3.4 The actual date of lending and the amount is subject to the Loan Certificate.

3.5 The Borrower shall go through the drawing procedure at least three bank business days in advance, send the application of drawing to the Lender to meet the amount payment need for the future / days, and clarify the way of payment (entrusted payment by the Lender or the direct payment by the Borrower).

3.6 Entrusted payment by the Lender is that after the loan is issued pursuant to this Agreement, the Lender pays the loan to the counterparty of the Borrower who conforms to the agreed purposes of the Agreement, according to the entrusted payment power of attorney of the Borrower.

The lender entrusted payment is used if any of the conditions below is met:

(1) The amount of one payment is more than ZERO Yuan (this amount is the limit of entrusted payment).

(2)       /        .

If the entrusted payment of the Lender is the way of capital payment, the Borrower should send Loan Capital Payment Power of Attorney. The Lender reviews the Credit Usage Application, Loan Capital Payment Power of Attorney, Loan Certificate and relevant payment transaction documents (including but not limited commercial contract, invoices and goods receipts). If the application conforms with this Agreement and the relevant payment transaction documents, the Lender will pay the loan capital to the counterparty of the Borrower according to the agreed purposes of the Agreement. If the planned payment of the Borrower is not in compliance with the this Agreement, the corresponding commerce agreement, proof materials or has any other default, the Lender has the right to refuse to pay and return the payment power of attorney submitted by the Borrower.

If the Lender agrees to pay, but since the information provided by the Borrower is wrong so it can’t be paid, or the payment is refunded, the Borrower shall resubmit relevant certificate and documents with correct information before the deadline provided by the Lender. The Lender does not bear the loss of the Borrower caused by the payment failure.

If the Lender pays to the wrong party because the information provided by the Borrower is wrong, the Lender does not bear any responsibility to the Borrower. The Borrower still needs to repay the principal and the interest for the part of wrong payment.

3.7 Direct payment by the Borrower means, after the Lender pays the loan to the account of the Borrower according to this Agreement, the Borrower directly pays to its counterparty according to the agreed purposes of the Agreement.

For loan amount payment not exceeding / Yuan, and the Borrower and the Lender do not agree to adopt entrusted payment, the direct payment by the Borrower will be used.

If direct payment is used, the Lender has the right to examine if the loan payment conforms to the agreed purposes by ways such as account analysis, certificate review, and on-site investigation. The Borrower shall cooperate with the Lender about the examination.

3.8 The Borrower shall pay back according to the deadline in Article 1.4 and following plan. If the Loan Certificate states a deadline different with this Agreement, the Loan Certificate prevails.

Deadline	Amount
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION

3.9 Loan capital recovery account.

The Borrower shall open specialized loan capital recovery account opened in party b from the Lender (Account Name: Wuhan Kingold Jewelry Co., Ltd. Account No.:42001116208053017159, Bank Name: China Construction Bank, Wuhan Jiang’an Branch.), so the Lender can recover the loan capital. The capital recovery account is used to receive the relevant sales revenue or planned repayment capital. If the relevant sales revenue is calculated in non-cash way, the Borrower shall insure that the capital is allocated to the recovery account on time after receipt. In the meanwhile, the Borrower shall provide the loan capital recovery account details to the Lender Every quarter (week/ month/ quarter).

DD 3.10 If the Lender receives loans in advance according to Article 8 of this Agreement, it deems that the loan deadline advances accordingly.

DD 3.11 If the Borrower prepays the loan, the Borrower shall send the application in writing 30 days in advance for consent by the Lender. When the Borrower prepays the loan, the Lender has the right to charge the loan interest according to the Agreement in the actual loan period, and charges the repayment procedure fee which is   ∕ % of the prepaid capital.

DD 3.12 The Borrower hereby irrevocably authorizes that when any of the situations under Article 8 or 9 happens, the Lender can withdraw principal and interest from any account of the Borrower. The Borrower agrees to give up any right of defense.

DD Article 4 Guaranty

The guaranty contracts are as follow:

1)     , the way of warrant:         warrantor:     .

2)     , the way of warrant:      , warrantor:     .

Article 5 Representations and Warranties of the Borrower

5.1 The Borrower is an independent civil subject set in accordance with the law, has all the necessary civil rights capability and civil action capability; and has the ability to fulfill the obligations of the Agreement and take civil responsibility.

5.2 Signing and fulfilling the Agreement is the Borrower’s true intention, and has gone through all the necessary approvals and authorization, and there is no legal flaw.

5.3 The operation and business of the Borrower is legal and in compliance. The Borrower has the ability of continuing operation, it has legal repayment source, and it does not have material bad credit record. The management team of the Borrower has no bad record.

5.4 The circulating fund loan matters are in compliance with the law.

5.5 The Borrower shall provide complete, true and accurate, effective documents, statements, materials and information on time according to the Lender’s requirement. The Borrower never hides any information that will give bad influence to its financial condition and ability of repayment. There is no material adverse change to the Borrower’s financial condition since the date of the latest financial statement.

5.6 When signing the Agreement, the Borrower is not a shareholder or “actual controller” under the Company Law of the guarantor, and has no plan to be a shareholder or actual controller of the guarantor, or the guarantor has provided its shareholder resolution about agreeing to provide guaranty to the Borrower.

DD 5.7 Before paying off all debt under the Agreement, the Borrower’s financial target should be controlled in :

(1) Asset-liability ratio should not be higher than _/_%;

(2) Liquidity ratio should not be lower than _/__%;

(3) Quick ratio should not be lower than _/_%;

(4) The balance of external guarantee should not be higher than _/_% of net assets;

(5) ____/______________________________________

5.8 The Borrower promises that it will cooperate with the Lender regarding loan payment management, the post-loan management and relevant examination.

5.9 Before external investment, material increase of debt financing, merge, split, equity transfer and other material matters, the Borrower should get permission from the Lender first.

5.10 The Lender has the right to call back the loan in advance according to the capital recovery situation of the Borrower.

5.11 The Borrower should inform the Lender timely if any material disadvantage issues happened that would affect the ability of taking back the loan of the Lender.

Article 6 The Rights and Obligations of the Lender

6.1 The Lender has right to call back the loan capital, interest (including default interest for expiration and misuse) according to the Agreement, charge the fees payable by the Borrower, has right to call back the loan in advance according to the Borrower’s capital recovery situation, and exercise other rights under the Agreement or under the law.

6.2 During the process of exercising the Agreement, the Lender checks the documents provided by the Borrower. If the Lender cannot complete the entrusted payment on time because the Borrower provided untrue, inaccurate or incomplete documents or the Borrower conducts the payment in violation of this Agreement, the Lender shall not undertake any responsibilities.

6.3 If the lending or the payment failed because of the frozen loan account or the payment account appointed by the Borrower or because of any other reasons, the Lender shall not undertake any responsibilities.

Article 7 The Rights and Obligations of the Borrower

7.1 The Borrower shall repay the loan and interest under the Agreement according to the timing, amount and currency agreed in this Agreement.

The Borrower shall allocate the sales revenue or planed repayment into the capital recovery account timely, and shall provide capital flow details of the capital recovery account according to the Agreement’s requirement.

7.2 The Borrower shall not divert the loan under the Agreement to other purposes, shall not use the loan to invest in fixed assets or equity, or areas and uses for production and operation forbidden by the country.

The Borrower shall pay the loan capital according to the Agreement, shall not avoid the lender entrusted payment by breaking the whole into the parts. The loan capital payment shall comply with the Agreement rules if the borrower direct payment is adopted.

7.3 The Borrower shall provide the record and materials regarding the loan amount usage to the Lender each quarter (week/month/quarter).

DD 7.4 The Borrower shall bear the expenses under the Agreement, including but not limited to the notary fee and the appraisal fee.

The Borrower shall bear the loan capital clearing fee (including the lender entrusted payment and the borrower direct payment), and shall pay in full the relevant fees on time according to the fee items, rates and timing required by the Lender. The payment may be processed through People’s Bank payment system or the clearing system in the same city.

DD 7.5 The Borrower shall follow the Lender’s business regulations and operation customs related to the loan business, including but not limited to cooperating with the Lender to manage the loan payment system and check the utilization of the loan and the Borrower’s operation, and timely providing the Lender financial reports, loan payment usage record and materials, information of affiliates and related party transactions, other documents and information, and guarantee that provided materials are all valid, true and complete.

DD 7.6 The Borrower shall notify the Lender for any of the following events at least 30 days in advance, and shall not act before paying off all of the loan principal and interest under this Agreement or providing the payment schedule and guaranty approved by the Lender:

(1) Address material assets or all or most of the materials assets by sale, gift, lease, lend, transfer, guarantee, pledge or other ways;

(2) There is or may be material change to the operation system or ownership organization form, including but not limited to contracting, renting, joint venture, corporation reform, share cooperation reform, enterprise sale, M&A, joint operation, split, setting subsidiary, ownership transfer, capital decrease;

(3) There is other situation of losing or has possibility of losing the ability to repay debt;

DD 7.7 The Borrower shall inform the Lender with a written notice at least 7 days in advance if any of the below situations happened or might happen:

(1) The Borrower or its affiliates modify its bylaws, change its industry and commerce registration matters such as articles of incorporation, enterprise name, legal representative, domicile, mailing address or business scope or makes decisions with material effect to finance or personnel;

(2) The Borrower, its affiliates or guarantor plans to file bankruptcy or may have been filed bankruptcy by the creditor;

(3) The Borrower or its affiliates involve in major lawsuits, arbitrations, administrative measures, or the main property or guaranty under this Agreement has been conducted property attachment or other enforcement measures, or, the safe and complete status of the main property or guaranty under this Agreement is or may have been impacted or the value decreased or it is possible to decrease;

(4) The Borrower or its affiliates provide guarantee for a third party so it causes major adverse implication to its economic status, financial status, or the ability of performing the obligations under this Agreement;

(5) The Borrower or its affiliates sign an agreement which has major implication to its operation and financial status;

(6) The Borrower, its affiliates or guarantor stops production, closes business, dissolves, suspends business for rectification, is repealed or is revoked business license;

(7) The Borrower or its affiliates, the major investor individual of the Borrower or its affiliates, the legal representative (responsible person), director or senior manager of the Borrower or its affiliates disappears, involves in violation of the laws and rules or the applicable exchange rules or appears abnormal changes;

(8) The Borrower or its affiliates have serious operational problems, its financial situation deteriorates, or any other events happened which have negative impact on the Borrower or its affiliates’ operation, financial condition, the ability of repayment or the economic status;

(9) Related party transaction happens, and the transaction amount reaches to or beyond 10% of the latest audited net asset;

(10) Before paying off the debts under the Agreement, the Borrower is or might become a shareholder of the guarantor or the “actual controller” defined by the Company Law;

(11) The Borrower or its affiliate breaks the laws and regulations, rules of supervision, national policy or industry standards and results in liability accident or is exposed by media;

(12) The relationship of controlling or being controlled between the Borrower and its affiliates changes;

(13) Any material negative events that will impact the ability of loan repayment of the Borrower or its affiliates.

DD 7.8 When the guaranty under the Agreement changes and disadvantages the right of the Lender as a creditor, the Borrower should timely provide other guaranty approved by the Lender according to the Lender’s requirement.

“Change” under this article includes but not limited to: the guarantor stops production, closes business, dissolves, suspends business for rectification, business license is repealed or is revoked, file or is filed for bankruptcy; material change happens to the guarantor’s operational or financial condition; the guarantor involves in significant lawsuit, arbitration, administrative measures, attachment or other compulsory measures are conducted to its major asset; the value of collateral decreases or may decrease or is conducted attachment or other compulsory measures; the sound condition of the collateral is affected or might be affected; the guarantor or its legal representative (responsible person) or the major manager of the guarantor is involved in violation laws and rules or the applicable exchange rules; the guarantor disappears or dies (or declaring death) if the guarantor is an individual; the guarantor violates the Guaranty Agreement; the Guarantor and the Borrower have disputes; the Guarantor requires to dissolve the Guaranty Agreement; the Guaranty Agreement is not effective, invalid or cancelled; the guaranty right is unset or invalid; other events impact the safety of the Lender’s creditor’s right.

7.9 Open a loan capital recovery account according to the Article 3.9 of this Agreement.

DD Article 8 Call Back the Loan in advance

If any of the situations at bellow happens, the Lender has the right to stop paying the loan unused by the Borrower, unilaterally declare that the issued loan principal under the Agreement is expired in advance, and require the Borrower to pay back all the loan principal and interest immediately, and has the right to deduct capital directly from the Borrower’s any account. After the deduction, the Lender shall inform the Borrower timely. If the Borrower can prove that the deducted capital is protected by law specially so it shall not to be deducted, the Lender shall return the capital to the deducted account.

(1) The Borrower does not pay the interest on time;

(2) The Borrower provides untrue financial reports and materials;

(3) The Borrower misappropriates the loan;

(4) Any of the events in the Articles 7.6, 7.7 happened, and the Lender believes it will endanger the loan safety;

(5) The Borrower’s financial index is out of range of the Article 5.6;

(6) The Lender believes that the Borrower should prepay the loan according to the the situation of the Borrower’s capital recovery;

(7) The issuance of the loan under this Agreement by the Lender causes or may cause law violation because of the changed supervision regulation;

(8) When the Borrower is performing other contracts with the Lender or with a third party, it has violation or the debt may expire in advance or has been declared expired in advance;

(9) Other situations that might endanger the loan capital safety.

DD Article 9 Defaults and Dispositions

9.1 If any following matters happen to the Borrower, it is considered as default:

(1) Fails to repay the loan principal and interest on time in accordance with the Agreement;

(2) Violates the representations and warranties of the Article 5 in the Agreement;

(3) Violates the obligations of the Borrower under the Article 7 in the Agreement;

(4) Fails to use the loan amount in the agreed way, or avoid Lender entrusted payment in a way by breaking up the whole into pieces;

(5) Fails to open the loan capital recovery account pursuant to the Agreement;

(6) Material cross-default happens;

(7) Violates other articles of this Agreement.

9.2 After default, the Lender has the right to adopt one or more of measures as below:

(1) Corrects default with deadline;

(2) Adjusts the amount threshold of the loan capital entrusted payment or the payment way of the loan capital;

(3) Stops withdrawal by the Borrower;

(4) Dissolves the loan agreement, and requires the Borrower to pay off expired or unexpired loan principal, interest and other dues;

(5) Requires the Borrower to pay overdue default interest if the loan is overdue;

(6) Requires the Borrower to pay misappropriation default interest if the Borrower misappropriates the loan;

(7) Deducts owed loan principal and interest from any account that the Borrower has at China Construction Bank;

(8) Pursues the loan principal and interest by the legal ways, and all fees paid to claim the credit (including but not limited to collecting fees, litigation fees, arbitration fees, property attachment fees, enforcement fees, attorney’s fees, case fees, declaration fees, appraisal fees, audit fees and so on) shall be borne by the Borrower.

 9.3 If the guarantor (i.e. warrantor, mortgagor, pledgor) has any following situation, the Lender has the right to adopt the measures according to Article 9.2:

(1) The warrantor violates the Warrant Agreement, its credit status deteriorates, or other event happens which decreases its warrant ability;

(2) The mortgagor violates the Mortgage Agreement, or breaks the mortgage, or the value of the mortgage may decrease or has decreased substantially, or other event happens which harm the mortgage right of the Lender happen;

(3) The pledgor violates the Pledge Agreement, or the value of the pledge has decreased or may have decreased, or the pledge right has to be realized before the loan is paid off, or other event happens which harms the pledge right of the Lender.

DD Article 10 Deduction Arrangement

10.1 The Borrower authorizes that, if there is any due and payable loan principal, interest, default interest or other fess, the Lender has the right to deduct the capital from the Borrower’s any account in China Construction Bank to pay it off. After the deduction, the Lender shall inform the Borrower timely. If the Borrower can prove that the deducted capital is protected by law and it shall not be deducted, the Lender shall return the capital to the related account.

10.2 After the deduction, the Lender shall inform the Borrower about the related account, the contract number of the Loan Agreement, the document number of the Loan Certificate, the deducted amount and the remaining debt balance.

10.3 If the deducted amount is not enough to pay off all the debts of the Borrower, it shall be used to compensate for the due fees first. If the principal and interest is overdue for less than 90 days, the balance shall be used to pay the interest or default interest due and then be used to pay the principal due. If the principal and interest are overdue for more than 90 days, the balance shall be used to pay the principal due, and then be used to pay the interest or default interest due.

10.4 If the currency of deducted amount is different from the currency of the due amount, it shall be converted to the currency of due amount according to foreign exchange rate on that day.

DD Article 11 Notice

11.1 All of the contact information that the Borrower fills out in this Agreement (including contact address, telephone number and fax number) is real and effective. If any contact information is changed, the Borrower shall give written notice of the changed information to the contact address that the Lender provides in this Agreement. Only after the Lender has actually received the notice of changed information and has updated relevant records, can this information change comes into effect.

11.2 Until this Agreement provides otherwise, any notice that Lender gives to the Borrower can be given by the following ways. The Lender has the right to choose the approach of notice which it deems proper, and under any circumstance, the Lender does not bear responsibilities for any transmission errors, omissions, or deferral happened in mails, faxes, telephones or any other contact systems. If the Lender chooses several contact ways at the same time, the one that reaches the Borrower more quickly shall prevail.

(1) Announcement: the service date is the day when the Lender announces on its websites, online bank, telephone bank or sales departments.

(2) Personal service: the service date is the day when the Borrower signs the notice.

(3) Mail delivery (including EMS, ordinary mail and registered mail) to the Borrower’s contact address that the Lender knows as the latest: the service date is the third day after the mailing date (in the same city) or the fifth day after the mailing date (different city) (even the mail may be returned).

(4) Faxes or other electronic contact methods to the Borrower’s fax number or electronic contact address that the Lender knows as the latest: the service date is the sending day.

DD Article 12 Information Disclosure and Confidentiality

12.1 The Lender shall take the responsibility of keeping confidential for the Borrower’s trade secrets and other information and materials which are marked as confidential, except following situations:

(1) Information is required to disclose according to laws and regulations or listing rules;

(2) Information that is required to disclose by judicial departments or government departments;

(3) Information that shall be disclosed to the external professional advisers of the Lender;

(4) Information that the Borrower agrees or authorizes the Lender to disclose.

12.2 Under the following circumstances, the Borrower agrees that China Construction Bank can use or disclose all the information and materials related to the Borrower, including but not limited to the basic information, credit transaction information and other relevant information and materials. The Borrower is willing to take responsibility for any results caused by it.

(1) For the following purposes, disclose to or permit usage of such information and materials by outsourcing agencies, the third party service providers, other financial agencies and other agencies or persons which China Construction Bank considers necessary, including but not limited to, other branches of China Construction Bank or subsidiary companies owned or partially owned by China Construction Bank: ① to conduct the loan transactions or is related to loan transactions, such as promoting China Construction Bank’s loan, collecting dues of the Borrower, and transfer of the creditor’s right; ② to let the Lender offer or may offer new products, new services or further services for the Borrower; ③ to better maintain, manage and improve client relationships.

(2) Provide such information and materials to the China Credit Information Center and other credit information agencies or Credit Information Database established with the approval of The People's Bank of China.

(3) Use or permit a third party to use such information and materials on the basis of confidentiality for the purpose of business operation, management, statistics, analyses, and risk control.

Article 13 Law Application and Dispute Resolution

The Agreement applies to PRC laws. The disputes of the Agreement shall be submitted to the local court at the Lender’s residence. During the period of the dispute, the provisions without disputes shall continue to be fulfilled by both parties.

Article 14 Other Provisions

DD 14.1 The Borrower agrees that the Lender can enquiry and keep the Borrower’s credit information for loan application and post-loan management.

DD 14.2 The Lender doesn’t bear any responsibility for the failure to issue loans on schedule or handle payment if the failure is caused by force majeure, communication failure, network failure, or the malfunction of Lender’s system. However, the Lender shall inform the Borrower in time.

14.3 Phrases referred to in the Agreement including affiliate, related-party transaction and main investor individual have the same meaning with those in Accounting Standards for Business Enterprises No. 36— Affiliate Disclosure (Finance and Accounting Department [2006] No. 3) and its later revised edition.

 14.4 The Agreement’s Loan Certificate, Loan Withdrawal Application Form, Loan Capital Payment Power of Attorney and relevant documents and materials confirmed by both two parties are indispensable parts of the Agreement.

14.5 If the Borrower avoids monitor of the Lender, defaults on principal and interest of the loan, maliciously evades repayment obligations for loans and so on, the Lender has the right to report its behaviors to relevant departments and publicize them on news media.

14.6 The Agreement comes into effect after the Borrower’s legal representative (person in charge) or authorized representative signs (or seals) and affixes the official seal, and Lender’s person in charge or authorized representative also signs (or seals) and affixes the official seal.

DD 14.7 When signing the Agreement, the Lender and the Borrower have clearly read and understood all the provisions of the Agreement. Both parties have no doubt about all the provisions and interpretations of the Agreement and correctly understand the rights and duties clauses, and the legal meaning of the limitation and waiver of liability clauses.

14.8 The Agreement is made out in      copies. The Borrower holds      copies. The Lender holds      copies.      holds      copies.      holds      copies.      holds      copies.

(There is no text below in this page)

(This is the signature page of Contract numbered XJA-2018-1230-0019)

Party A (official seal)	The Lender (official seal)
Legal representative (person in charge) or authorized representative (signature)	Person in charge or authorized representative (signature or seal)
Party B (official seal)
Legal representative (person in charge) or authorized representative (signature)
Sign on September 17, 2018	Sign on January 28, 2016

EX-10.8

Exhibit 10.8

Loan Agreement of RMB Circulating Funds

 CONTRACT NO.:XJA-2018-1230-0021

Borrower (Party A): _Wuhan Kingold Jewelry Co., Ltd

Legal Representative/ Principal: Jia Zhihong

Address: Te #15 Huangpu Technology Park, Jiang An District, Wuhan Postcode: 430023

Telephone:        027-65660346             Fax: 027-65694977

Lender (Party B): China Construction Bank, Wuhan Jiang’an Branch

Legal Representative/Principal: __Huang Ziqiang

Address: _No. 1328 Jiefang Road, Jiang’an District Wuhan City Postcode:430015

Telephone: _027-82280798_____________ Fax: 027-82280958

Since the Borrower applies for loan from the Lender, to specify the rights and obligations of both parties, the Borrower and the Lender reach consensus through consultation and agree with following agreement.

Article 1 Loan

1.1 Currency: RMB.

1.2 The amount of loan under the Agreement is: _ONE HUNDRED AND SEVENTY TWO MILLION.

1.3 This loan should be used for Purchasing Gold Raw Material and Other Business Use only.

1.4 The life of loan under the Agreement is from September 26, 2018 to September 25, 2019.

The life of loan is from the date of issuing the first loan under this Agreement to the date when Borrower pays back the principal and interest under the Agreement.

Article 2 Interest Rate of Loan and Interest Settlement

2.1 The interest rate of loan under the Agreement uses the way in 2.1.1 as follows:

2.1.1 Fixed rate, i.e. LPR interest rate plus 5 base points (one base point=0.01%, accurate to 0.01 base point). During the life of loan, it is unchangeable and will not adjust basing on national interest.

2.1.2 Floating interest rate, i.e. ___∕__ (choose “rising” or “lowering”) _∕__% based on the benchmark interest rate of value date. If the People’s Bank of China adjusts the benchmark interest rate during the loan term, following / is used as the interest rate adjustment date:

(1) The adjustment is made monthly, once per month.

(2) The adjustment is made quarterly, once per quarter.

(3) The adjustment is made every half year, once per half year.

(4) The adjustment is made every year, once per year.

If the People’s Bank of China changes the benchmark interest rate into floating interest or calls the benchmark interest rate, the parties should adjust the loan interest under mutual discussion, but the interest after the adjustment should be not lower than the interest before; if after ___∕__ month from the date when the People’s Bank of China adjusts the interest, the two parties have not reached a consensus regarding the adjusted interest rate, the Lender has right to declare the acceleration of maturity regarding the loan under this Agreement.

2.1.3       /       (foreign currency) interest       /      ;

2.1.4                        /                      .

2.2 Interest settlement

2.2.1 Daily interest = monthly interest rate / 30, monthly interest rate = annual interest rate / 12.

2.2.2 Normal interest = agreed rate of interest under this agreement × loan amount × usage days been used. The usage days should start from the lending day to the date of expiry.

2.2.3 The interest settlement of loan under the Agreement is based on the following __SECOND__ way. When the loan expires, the principal and interest should be repaid. The interest settlement date is the interest payment date.

(1) The interest is settled on the 20^th day of last month of every season;

(2) The interest is settled on the 20^th day of every month.

2.3 Default interest

2.3.1 If the Borrower fails to use the loan in accordance with the agreed purposes, or the Borrower fails to repay the loan within the agreed deadline and has not reached agreement on extension with the Lender (so it is overdue loan), the Lender has the right to get the default interest for the misappropriated loan or overdue loan according to the default interest rate under this Agreement.

2.3.2 If the loan currency is RMB, when the Borrower fails to repay the loan within the agreed deadline, the default interest rate will increase by 50% regarding the overdue loan; when the Borrower fails to use the loan in accordance with the agreed purposes, the loan interest rate will increase by 100% regarding the misappropriated loan. If the People’s Bank of China adjusted the benchmark interest rate, the floating interest loan is overdue or misappropriated; the Lender has the right to adjust the default interest rate, and applies the new default interest since the interest adjustment date of the People’s Bank of China. If the loan currency is foreign currency, the default interest rate is: increase       /       basing on the agreed interest rate.

2.4 If the Borrower repays or the Lender calls in loan in advance, the relevant interest will not be adjusted and the agreed interest rate still applies.

Article 3 Issuance, Payment and Repayment of Loan

3.1 The Borrower can draw the loan amount by several allocations, but the sum of all allocations does not exceed the amount provided by Article 1. The drawing shall comply with following allocation plan:

Drawing Date	Drawing Amount
September 27, 2018	FOUR HUNDRED MILLION
\	\

DD 3.2 The Lender is only obliged to loan when the following conditions are met constantly:

(1) The Borrower has completed all the relevant legal procedures including the government license, approval, registration and other legal procedures required by the Borrower, and such legal procedures are continuously effective;

(2) The guarantee agreement (if any) under this Agreement has taken effect and will be continuously effective; if the guarantee agreement is pledge agreement and/or mortgage agreement, the guarantee right has been set and will be continuously effective;

(3) The Borrower’s operation and financial status does not have any substantial adverse changes;

(4) The Borrower does not violate this Agreement;

(5) The way of this loan payment is consistent with the Agreement; if the lender entrusted payment is the payment way, the Lender agrees to pay;

(6) If the loan is issued in foreign currency, the Borrower has already opened the relevant account according to the management requirement of foreign exchange and provided the documents showing that the loan conforms the relevant foreign exchange policy, including but not limited to, effective foreign exchange purpose documentary evidence, registration or approval documents;

(7) The Borrower has already opened the capital recovery account according to Article 3.9;

(8) ______________/____________________________________________________.

3.3 The Borrower appointed the account below as the loan account:

Account Name : Wuhan Kingold Jewelry Co., Ltd.

Account No.: 42001116208053017159-3001

Bank Name : China Construction Bank Wuhan Jiang’an Branch.

3.4 The actual date of lending and the amount is subject to the Loan Certificate.

3.5 The Borrower shall go through the drawing procedure at least three bank business days in advance, send the application of drawing to the Lender to meet the amount payment need for the future / days, and clarify the way of payment (entrusted payment by the Lender or the direct payment by the Borrower).

3.6 Entrusted payment by the Lender is that after the loan is issued pursuant to this Agreement, the Lender pays the loan to the counterparty of the Borrower who conforms to the agreed purposes of the Agreement, according to the entrusted payment power of attorney of the Borrower.

The lender entrusted payment is used if any of the conditions below is met:

(1) The amount of one payment is more than ZERO Yuan (this amount is the limit of entrusted payment).

(2)       /        .

If the entrusted payment of the Lender is the way of capital payment, the Borrower should send Loan Capital Payment Power of Attorney. The Lender reviews the Credit Usage Application, Loan Capital Payment Power of Attorney, Loan Certificate and relevant payment transaction documents (including but not limited commercial contract, invoices and goods receipts). If the application conforms with this Agreement and the relevant payment transaction documents, the Lender will pay the loan capital to the counterparty of the Borrower according to the agreed purposes of the Agreement. If the planned payment of the Borrower is not in compliance with the this Agreement, the corresponding commerce agreement, proof materials or has any other default, the Lender has the right to refuse to pay and return the payment power of attorney submitted by the Borrower.

If the Lender agrees to pay, but since the information provided by the Borrower is wrong so it can’t be paid, or the payment is refunded, the Borrower shall resubmit relevant certificate and documents with correct information before the deadline provided by the Lender. The Lender does not bear the loss of the Borrower caused by the payment failure.

If the Lender pays to the wrong party because the information provided by the Borrower is wrong, the Lender does not bear any responsibility to the Borrower. The Borrower still needs to repay the principal and the interest for the part of wrong payment.

3.7 Direct payment by the Borrower means, after the Lender pays the loan to the account of the Borrower according to this Agreement, the Borrower directly pays to its counterparty according to the agreed purposes of the Agreement.

For loan amount payment not exceeding / Yuan, and the Borrower and the Lender do not agree to adopt entrusted payment, the direct payment by the Borrower will be used.

If direct payment is used, the Lender has the right to examine if the loan payment conforms to the agreed purposes by ways such as account analysis, certificate review, and on-site investigation. The Borrower shall cooperate with the Lender about the examination.

3.8 The Borrower shall pay back according to the deadline in Article 1.4 and following plan. If the Loan Certificate states a deadline different with this Agreement, the Loan Certificate prevails.

Deadline	Amount
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION
	ONE HUNDRED MILLION

3.9 Loan capital recovery account.

The Borrower shall open specialized loan capital recovery account opened in party b from the Lender (Account Name: Wuhan Kingold Jewelry Co., Ltd. Account No.:42001116208053017159, Bank Name: China Construction Bank, Wuhan Jiang’an Branch.), so the Lender can recover the loan capital. The capital recovery account is used to receive the relevant sales revenue or planned repayment capital. If the relevant sales revenue is calculated in non-cash way, the Borrower shall insure that the capital is allocated to the recovery account on time after receipt. In the meanwhile, the Borrower shall provide the loan capital recovery account details to the Lender Every quarter (week/ month/ quarter).

DD 3.10 If the Lender receives loans in advance according to Article 8 of this Agreement, it deems that the loan deadline advances accordingly.

DD 3.11 If the Borrower prepays the loan, the Borrower shall send the application in writing 30 days in advance for consent by the Lender. When the Borrower prepays the loan, the Lender has the right to charge the loan interest according to the Agreement in the actual loan period, and charges the repayment procedure fee which is   ∕ % of the prepaid capital.

DD 3.12 The Borrower hereby irrevocably authorizes that when any of the situations under Article 8 or 9 happens, the Lender can withdraw principal and interest from any account of the Borrower. The Borrower agrees to give up any right of defense.

DD Article 4 Guaranty

The guaranty contracts are as follow:

1) __, the way of warrant: __warrantor: __.

2) __, the way of warrant:__, warrantor: __.

Article 5 Representations and Warranties of the Borrower

5.1 The Borrower is an independent civil subject set in accordance with the law, has all the necessary civil rights capability and civil action capability; and has the ability to fulfill the obligations of the Agreement and take civil responsibility.

5.2 Signing and fulfilling the Agreement is the Borrower’s true intention, and has gone through all the necessary approvals and authorization, and there is no legal flaw.

5.3 The operation and business of the Borrower is legal and in compliance. The Borrower has the ability of continuing operation, it has legal repayment source, and it does not have material bad credit record. The management team of the Borrower has no bad record.

5.4 The circulating fund loan matters are in compliance with the law.

5.5 The Borrower shall provide complete, true and accurate, effective documents, statements, materials and information on time according to the Lender’s requirement. The Borrower never hides any information that will give bad influence to its financial condition and ability of repayment. There is no material adverse change to the Borrower’s financial condition since the date of the latest financial statement.

5.6 When signing the Agreement, the Borrower is not a shareholder or “actual controller” under the Company Law of the guarantor, and has no plan to be a shareholder or actual controller of the guarantor, or the guarantor has provided its shareholder resolution about agreeing to provide guaranty to the Borrower.

DD 5.7 Before paying off all debt under the Agreement, the Borrower’s financial target should be controlled in :

(1) Asset-liability ratio should not be higher than _/_%;

(2) Liquidity ratio should not be lower than _/__%;

(3) Quick ratio should not be lower than _/_%;

(4) The balance of external guarantee should not be higher than _/_% of net assets;

(5) ____/______________________________________

5.8 The Borrower promises that it will cooperate with the Lender regarding loan payment management, the post-loan management and relevant examination.

5.9 Before external investment, material increase of debt financing, merge, split, equity transfer and other material matters, the Borrower should get permission from the Lender first.

5.10 The Lender has the right to call back the loan in advance according to the capital recovery situation of the Borrower.

5.11 The Borrower should inform the Lender timely if any material disadvantage issues happened that would affect the ability of taking back the loan of the Lender.

Article 6 The Rights and Obligations of the Lender

6.1 The Lender has right to call back the loan capital, interest (including default interest for expiration and misuse) according to the Agreement, charge the fees payable by the Borrower, has right to call back the loan in advance according to the Borrower’s capital recovery situation, and exercise other rights under the Agreement or under the law.

6.2 During the process of exercising the Agreement, the Lender checks the documents provided by the Borrower. If the Lender cannot complete the entrusted payment on time because the Borrower provided untrue, inaccurate or incomplete documents or the Borrower conducts the payment in violation of this Agreement, the Lender shall not undertake any responsibilities.

6.3 If the lending or the payment failed because of the frozen loan account or the payment account appointed by the Borrower or because of any other reasons, the Lender shall not undertake any responsibilities.

Article 7 The Rights and Obligations of the Borrower

7.1 The Borrower shall repay the loan and interest under the Agreement according to the timing, amount and currency agreed in this Agreement.

The Borrower shall allocate the sales revenue or planed repayment into the capital recovery account timely, and shall provide capital flow details of the capital recovery account according to the Agreement’s requirement.

7.2 The Borrower shall not divert the loan under the Agreement to other purposes, shall not use the loan to invest in fixed assets or equity, or areas and uses for production and operation forbidden by the country.

The Borrower shall pay the loan capital according to the Agreement, shall not avoid the lender entrusted payment by breaking the whole into the parts. The loan capital payment shall comply with the Agreement rules if the borrower direct payment is adopted.

7.3 The Borrower shall provide the record and materials regarding the loan amount usage to the Lender each quarter (week/month/quarter).

DD 7.4 The Borrower shall bear the expenses under the Agreement, including but not limited to the notary fee and the appraisal fee.

The Borrower shall bear the loan capital clearing fee (including the lender entrusted payment and the borrower direct payment), and shall pay in full the relevant fees on time according to the fee items, rates and timing required by the Lender. The payment may be processed through People’s Bank payment system or the clearing system in the same city.

DD 7.5 The Borrower shall follow the Lender’s business regulations and operation customs related to the loan business, including but not limited to cooperating with the Lender to manage the loan payment system and check the utilization of the loan and the Borrower’s operation, and timely providing the Lender financial reports, loan payment usage record and materials, information of affiliates and related party transactions, other documents and information, and guarantee that provided materials are all valid, true and complete.

DD 7.6 The Borrower shall notify the Lender for any of the following events at least 30 days in advance, and shall not act before paying off all of the loan principal and interest under this Agreement or providing the payment schedule and guaranty approved by the Lender:

(1) Address material assets or all or most of the materials assets by sale, gift, lease, lend, transfer, guarantee, pledge or other ways;

(2) There is or may be material change to the operation system or ownership organization form, including but not limited to contracting, renting, joint venture, corporation reform, share cooperation reform, enterprise sale, M&A, joint operation, split, setting subsidiary, ownership transfer, capital decrease;

(3) There is other situation of losing or has possibility of losing the ability to repay debt;

DD 7.7 The Borrower shall inform the Lender with a written notice at least 7 days in advance if any of the below situations happened or might happen:

(1) The Borrower or its affiliates modify its bylaws, change its industry and commerce registration matters such as articles of incorporation, enterprise name, legal representative, domicile, mailing address or business scope or makes decisions with material effect to finance or personnel;

(2) The Borrower, its affiliates or guarantor plans to file bankruptcy or may have been filed bankruptcy by the creditor;

(3) The Borrower or its affiliates involve in major lawsuits, arbitrations, administrative measures, or the main property or guaranty under this Agreement has been conducted property attachment or other enforcement measures, or, the safe and complete status of the main property or guaranty under this Agreement is or may have been impacted or the value decreased or it is possible to decrease;

(4) The Borrower or its affiliates provide guarantee for a third party so it causes major adverse implication to its economic status, financial status, or the ability of performing the obligations under this Agreement;

(5) The Borrower or its affiliates sign an agreement which has major implication to its operation and financial status;

(6) The Borrower, its affiliates or guarantor stops production, closes business, dissolves, suspends business for rectification, is repealed or is revoked business license;

(7) The Borrower or its affiliates, the major investor individual of the Borrower or its affiliates, the legal representative (responsible person), director or senior manager of the Borrower or its affiliates disappears, involves in violation of the laws and rules or the applicable exchange rules or appears abnormal changes;

(8) The Borrower or its affiliates have serious operational problems, its financial situation deteriorates, or any other events happened which have negative impact on the Borrower or its affiliates’ operation, financial condition, the ability of repayment or the economic status;

(9) Related party transaction happens, and the transaction amount reaches to or beyond 10% of the latest audited net asset;

(10) Before paying off the debts under the Agreement, the Borrower is or might become a shareholder of the guarantor or the “actual controller” defined by the Company Law;

(11) The Borrower or its affiliate breaks the laws and regulations, rules of supervision, national policy or industry standards and results in liability accident or is exposed by media;

(12) The relationship of controlling or being controlled between the Borrower and its affiliates changes;

(13) Any material negative events that will impact the ability of loan repayment of the Borrower or its affiliates.

DD 7.8 When the guaranty under the Agreement changes and disadvantages the right of the Lender as a creditor, the Borrower should timely provide other guaranty approved by the Lender according to the Lender’s requirement.

“Change” under this article includes but not limited to: the guarantor stops production, closes business, dissolves, suspends business for rectification, business license is repealed or is revoked, file or is filed for bankruptcy; material change happens to the guarantor’s operational or financial condition; the guarantor involves in significant lawsuit, arbitration, administrative measures, attachment or other compulsory measures are conducted to its major asset; the value of collateral decreases or may decrease or is conducted attachment or other compulsory measures; the sound condition of the collateral is affected or might be affected; the guarantor or its legal representative (responsible person) or the major manager of the guarantor is involved in violation laws and rules or the applicable exchange rules; the guarantor disappears or dies (or declaring death) if the guarantor is an individual; the guarantor violates the Guaranty Agreement; the Guarantor and the Borrower have disputes; the Guarantor requires to dissolve the Guaranty Agreement; the Guaranty Agreement is not effective, invalid or cancelled; the guaranty right is unset or invalid; other events impact the safety of the Lender’s creditor’s right.

7.9 Open a loan capital recovery account according to the Article 3.9 of this Agreement.

DD Article 8 Call Back the Loan in advance

If any of the situations at bellow happens, the Lender has the right to stop paying the loan unused by the Borrower, unilaterally declare that the issued loan principal under the Agreement is expired in advance, and require the Borrower to pay back all the loan principal and interest immediately, and has the right to deduct capital directly from the Borrower’s any account. After the deduction, the Lender shall inform the Borrower timely. If the Borrower can prove that the deducted capital is protected by law specially so it shall not to be deducted, the Lender shall return the capital to the deducted account.

(1) The Borrower does not pay the interest on time;

(2) The Borrower provides untrue financial reports and materials;

(3) The Borrower misappropriates the loan;

(4) Any of the events in the Articles 7.6, 7.7 happened, and the Lender believes it will endanger the loan safety;

(5) The Borrower’s financial index is out of range of the Article 5.6;

(6) The Lender believes that the Borrower should prepay the loan according to the the situation of the Borrower’s capital recovery;

(7) The issuance of the loan under this Agreement by the Lender causes or may cause law violation because of the changed supervision regulation;

(8) When the Borrower is performing other contracts with the Lender or with a third party, it has violation or the debt may expire in advance or has been declared expired in advance;

(9) Other situations that might endanger the loan capital safety.

DD Article 9 Defaults and Dispositions

9.1 If any following matters happen to the Borrower, it is considered as default:

(1) Fails to repay the loan principal and interest on time in accordance with the Agreement;

(2) Violates the representations and warranties of the Article 5 in the Agreement;

(3) Violates the obligations of the Borrower under the Article 7 in the Agreement;

(4) Fails to use the loan amount in the agreed way, or avoid Lender entrusted payment in a way by breaking up the whole into pieces;

(5) Fails to open the loan capital recovery account pursuant to the Agreement;

(6) Material cross-default happens;

(7) Violates other articles of this Agreement.

9.2 After default, the Lender has the right to adopt one or more of measures as below:

(1) Corrects default with deadline;

(2) Adjusts the amount threshold of the loan capital entrusted payment or the payment way of the loan capital;

(3) Stops withdrawal by the Borrower;

(4) Dissolves the loan agreement, and requires the Borrower to pay off expired or unexpired loan principal, interest and other dues;

(5) Requires the Borrower to pay overdue default interest if the loan is overdue;

(6) Requires the Borrower to pay misappropriation default interest if the Borrower misappropriates the loan;

(7) Deducts owed loan principal and interest from any account that the Borrower has at China Construction Bank;

(8) Pursues the loan principal and interest by the legal ways, and all fees paid to claim the credit (including but not limited to collecting fees, litigation fees, arbitration fees, property attachment fees, enforcement fees, attorney’s fees, case fees, declaration fees, appraisal fees, audit fees and so on) shall be borne by the Borrower.

9.3 If the guarantor (i.e. warrantor, mortgagor, pledgor) has any following situation, the Lender has the right to adopt the measures according to Article 9.2:

(1) The warrantor violates the Warrant Agreement, its credit status deteriorates, or other event happens which decreases its warrant ability;

(2) The mortgagor violates the Mortgage Agreement, or breaks the mortgage, or the value of the mortgage may decrease or has decreased substantially, or other event happens which harm the mortgage right of the Lender happen;

(3) The pledgor violates the Pledge Agreement, or the value of the pledge has decreased or may have decreased, or the pledge right has to be realized before the loan is paid off, or other event happens which harms the pledge right of the Lender.

DD Article 10 Deduction Arrangement

10.1 The Borrower authorizes that, if there is any due and payable loan principal, interest, default interest or other fess, the Lender has the right to deduct the capital from the Borrower’s any account in China Construction Bank to pay it off. After the deduction, the Lender shall inform the Borrower timely. If the Borrower can prove that the deducted capital is protected by law and it shall not be deducted, the Lender shall return the capital to the related account.

10.2 After the deduction, the Lender shall inform the Borrower about the related account, the contract number of the Loan Agreement, the document number of the Loan Certificate, the deducted amount and the remaining debt balance.

10.3 If the deducted amount is not enough to pay off all the debts of the Borrower, it shall be used to compensate for the due fees first. If the principal and interest is overdue for less than 90 days, the balance shall be used to pay the interest or default interest due and then be used to pay the principal due. If the principal and interest are overdue for more than 90 days, the balance shall be used to pay the principal due, and then be used to pay the interest or default interest due.

10.4 If the currency of deducted amount is different from the currency of the due amount, it shall be converted to the currency of due amount according to foreign exchange rate on that day.

DD Article 11 Notice

11.1 All of the contact information that the Borrower fills out in this Agreement (including contact address, telephone number and fax number) is real and effective. If any contact information is changed, the Borrower shall give written notice of the changed information to the contact address that the Lender provides in this Agreement. Only after the Lender has actually received the notice of changed information and has updated relevant records, can this information change comes into effect.

11.2 Until this Agreement provides otherwise, any notice that Lender gives to the Borrower can be given by the following ways. The Lender has the right to choose the approach of notice which it deems proper, and under any circumstance, the Lender does not bear responsibilities for any transmission errors, omissions, or deferral happened in mails, faxes, telephones or any other contact systems. If the Lender chooses several contact ways at the same time, the one that reaches the Borrower more quickly shall prevail.

(1) Announcement: the service date is the day when the Lender announces on its websites, online bank, telephone bank or sales departments.

(2) Personal service: the service date is the day when the Borrower signs the notice.

(3) Mail delivery (including EMS, ordinary mail and registered mail) to the Borrower’s contact address that the Lender knows as the latest: the service date is the third day after the mailing date (in the same city) or the fifth day after the mailing date (different city) (even the mail may be returned).

(4) Faxes or other electronic contact methods to the Borrower’s fax number or electronic contact address that the Lender knows as the latest: the service date is the sending day.

DD Article 12 Information Disclosure and Confidentiality

12.1 The Lender shall take the responsibility of keeping confidential for the Borrower’s trade secrets and other information and materials which are marked as confidential, except following situations:

(1) Information is required to disclose according to laws and regulations or listing rules;

(2) Information that is required to disclose by judicial departments or government departments;

(3) Information that shall be disclosed to the external professional advisers of the Lender;

(4) Information that the Borrower agrees or authorizes the Lender to disclose.

12.2 Under the following circumstances, the Borrower agrees that China Construction Bank can use or disclose all the information and materials related to the Borrower, including but not limited to the basic information, credit transaction information and other relevant information and materials. The Borrower is willing to take responsibility for any results caused by it.

(1) For the following purposes, disclose to or permit usage of such information and materials by outsourcing agencies, the third party service providers, other financial agencies and other agencies or persons which China Construction Bank considers necessary, including but not limited to, other branches of China Construction Bank or subsidiary companies owned or partially owned by China Construction Bank: ① to conduct the loan transactions or is related to loan transactions, such as promoting China Construction Bank’s loan, collecting dues of the Borrower, and transfer of the creditor’s right; ② to let the Lender offer or may offer new products, new services or further services for the Borrower; ③ to better maintain, manage and improve client relationships.

(2) Provide such information and materials to the China Credit Information Center and other credit information agencies or Credit Information Database established with the approval of The People's Bank of China.

(3) Use or permit a third party to use such information and materials on the basis of confidentiality for the purpose of business operation, management, statistics, analyses, and risk control.

Article 13 Law Application and Dispute Resolution

The Agreement applies to PRC laws. The disputes of the Agreement shall be submitted to the local court at the Lender’s residence. During the period of the dispute, the provisions without disputes shall continue to be fulfilled by both parties.

Article 14 Other Provisions

DD 14.1 The Borrower agrees that the Lender can enquiry and keep the Borrower’s credit information for loan application and post-loan management.

DD 14.2 The Lender doesn’t bear any responsibility for the failure to issue loans on schedule or handle payment if the failure is caused by force majeure, communication failure, network failure, or the malfunction of Lender’s system. However, the Lender shall inform the Borrower in time.

14.3 Phrases referred to in the Agreement including affiliate, related-party transaction and main investor individual have the same meaning with those in Accounting Standards for Business Enterprises No. 36-- Affiliate Disclosure (Finance and Accounting Department [2006] No. 3) and its later revised edition.

 14.4 The Agreement’s Loan Certificate, Loan Withdrawal Application Form, Loan Capital Payment Power of Attorney and relevant documents and materials confirmed by both two parties are indispensable parts of the Agreement.

14.5 If the Borrower avoids monitor of the Lender, defaults on principal and interest of the loan, maliciously evades repayment obligations for loans and so on, the Lender has the right to report its behaviors to relevant departments and publicize them on news media.

14.6 The Agreement comes into effect after the Borrower’s legal representative (person in charge) or authorized representative signs (or seals) and affixes the official seal, and Lender’s person in charge or authorized representative also signs (or seals) and affixes the official seal.

DD 14.7 When signing the Agreement, the Lender and the Borrower have clearly read and understood all the provisions of the Agreement. Both parties have no doubt about all the provisions and interpretations of the Agreement and correctly understand the rights and duties clauses, and the legal meaning of the limitation and waiver of liability clauses.

14.8 The Agreement is made out in      copies. The Borrower holds      copies. The Lender holds      copies.      holds      copies.      holds      copies.      holds      copies.

(There is no text below in this page)

(This is the signature page of Contract numbered XJA-2018-1230-0021)

Party A (official seal)	The Lender (official seal)
Legal representative (person in charge) or authorized representative (signature)	Person in charge or authorized representative (signature or seal)
Party B (official seal)
Legal representative (person in charge) or authorized representative (signature)
Sign on September 25, 2018	Sign on January 28, 2016

EX-10.9

Exhibit 10.9

Summary Translation

Loan Renewal Agreement

(Contract No. 2018-280003100021)

Lender: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

Borrower: Wuhan Kingold Jewelry Co., Ltd

In consideration of the mutual promises, covenants and agreements, Borrower and Lender agree as follows:

1. Currency: RMB.

2. Loan Amount: ONE HUNDRED MILLION.

3. This loan shall be used for purchasing gold only.

4. Renewal Term: 12 months from 10/9/2018 to 10/9/2019. This agreement is a renewal of the Loan Agreement of Circulating Funds (Evergrowing Bank No. 2016 280003100021).

5. Interest rate: 6.5%

6. Guarantees: the loan is guaranteed by Borrower under a separate collateral pledge agreement and by Mr. Zhihong Jia under a guarantee agreement entered into by the relevant parties thereof.

The remaining terms and conditions of the loan renewal agreement are substantially identical to that of the above-referenced original agreement.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.10

Exhibit 10.10

Summary Translation

Loan Renewal Agreement

(Contract No. 2018-280003100031)

Lender: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

Borrower: Wuhan Kingold Jewelry Co., Ltd

In consideration of the mutual promises, covenants and agreements, Borrower and Lender agree as follows:

1. Currency: RMB.

2. Loan Amount: ONE HUNDRED MILLION.

3. This loan shall be used for purchasing gold only.

4. Renewal Term: 12 months from 10/9/2018 to 10/9/2019. This agreement is a renewal of the Loan Agreement of Circulating Funds (Evergrowing Bank No. 2016 280003100031).

5. Interest rate: 6.5%

6. Guarantees: the loan is guaranteed by Borrower under a separate collateral pledge agreement and by Mr. Zhihong Jia under a guarantee agreement entered into by the relevant parties thereof.

The remaining terms and conditions of the loan renewal agreement are substantially identical to that of the above-referenced original agreement.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.11

Exhibit 10.11

Summary Translation

Loan Renewal Agreement

(Contract No. 2018-280003240011)

Lender: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

Borrower: Wuhan Kingold Jewelry Co., Ltd

In consideration of the mutual promises, covenants and agreements, Borrower and Lender agree as follows:

1. Currency: RMB.

2. Loan Amount: ONE HUNDRED MILLION.

3. This loan shall be used for purchasing gold only.

4. Renewal Term: 12 months from 10/21/2018 to 10/21/2019. This agreement is a renewal of the Loan Agreement of Circulating Funds (Evergrowing Bank No. 2016 280003240011).

5. Interest rate: 6.5%

6. Guarantees: the loan is guaranteed by Borrower under a separate collateral pledge agreement and by Mr. Zhihong Jia under a guarantee agreement entered into by the relevant parties thereof.

The remaining terms and conditions of the loan renewal agreement are substantially identical to that of the above-referenced original agreement.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.12

Exhibit 10.12

Summary Translation

Loan Renewal Agreement

(Contract No. 2018-280003240021)

Lender: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

Borrower: Wuhan Kingold Jewelry Co., Ltd

In consideration of the mutual promises, covenants and agreements, Borrower and Lender agree as follows:

1. Currency: RMB.

2. Loan Amount: ONE HUNDRED MILLION.

3. This loan shall be used for purchasing gold only.

4. Renewal Term: 12 months from 10/21/2018 to 10/21/2019. This agreement is a renewal of the Loan Agreement of Circulating Funds (Evergrowing Bank No. 2016 280003240021).

5. Interest rate: 6.5%

6. Guarantees: the loan is guaranteed by Borrower under a separate collateral pledge agreement and by Mr. Zhihong Jia under a guarantee agreement entered into by the relevant parties thereof.

The remaining terms and conditions of the loan renewal agreement are substantially identical to that of the above-referenced original agreement.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.13

Exhibit 10.13

Summary Translation

Loan Renewal Agreement

(Contract No. 2018-280003240031)

Lender: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

Borrower: Wuhan Kingold Jewelry Co., Ltd

In consideration of the mutual promises, covenants and agreements, Borrower and Lender agree as follows:

1. Currency: RMB.

2. Loan Amount: ONE HUNDRED MILLION.

3. This loan shall be used for purchasing gold only.

4. Renewal Term: 12 months from 10/21/2018 to 10/21/2019. This agreement is a renewal of the Loan Agreement of Circulating Funds (Evergrowing Bank No. 2016 280003240031).

5. Interest rate: 6.5%

6. Guarantees: the loan is guaranteed by Borrower under a separate collateral pledge agreement and by Mr. Zhihong Jia under a guarantee agreement entered into by the relevant parties thereof.

The remaining terms and conditions of the loan renewal agreement are substantially identical to that of the above-referenced original agreement.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.14

Exhibit 10.14

Summary Translation

Collateral Pledge Renewal Agreement

(Contract No. 2018-2800030600)

Pledgor : Wuhan Kingold Jewelry Co., Ltd.

Pledgee: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

In consideration of the mutual promises, covenants and agreements, Pledgor and Pledgee agree as follows:

1. Pledged asset: Gold (Collateral).

2. Details of the pledged asset are set forth in the “Collateral List” attached to this Agreement.

3. Debtor’s obligation under the loan agreement: RMB FIVE HUNDRED MILLION; interest rate of 6.5%; and Maturity Date: 10/2/2019, as set forth in the loan agreement between Wuhan Kangbo Biotech Limited and Evergrowing Bank Co., Ltd. Yantai Huanshan Road Branch (Evergrowing Bank No. 28000306011).

5. Scope of Guarantee: the principal, interest, penalty interest, liquidated damages, damage awards, collection fees, legal costs (or arbitration fees), asset safekeeping fees, execution fees, attorneys’ fees, announcement fees, evaluation fees, auction fees and other relevant fees.

The remaining terms and conditions of this renewal agreement are substantially identical to that of the original collateral pledge agreement by the parties entered into on February 16, 2017.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.15

Exhibit 10.15

Summary Translation

Collateral Pledge Renewal Agreement

(Contract No. 2018-28000301001)

Pledgor : Wuhan Kingold Jewelry Co., Ltd.

Pledgee: Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

In consideration of the mutual promises, covenants and agreements, Pledgor and Pledgee agree as follows:

1. Pledged asset: Gold (Collateral).

2. Details of the pledged asset are set forth in the “Collateral List” attached to this Agreement.

3. Debtor’s obligation under the loan agreement: RMB FIVE HUNDRED MILLION; interest rate of 6.5%; and Maturity Date: 10/2/2019, as set forth in the loan agreement between Wuhan Kangbo Biotech Limited and Evergrowing Bank Co., Ltd. Yantai Huanshan Road Branch (Evergrowing Bank No. 280003060011).

5. Scope of Guarantee: the principal, interest, penalty interest, liquidated damages, damage awards, collection fees, legal costs (or arbitration fees), asset safekeeping fees, execution fees, attorneys’ fees, announcement fees, evaluation fees, auction fees and other relevant fees.

The remaining terms and conditions of this renewal agreement are substantially identical to that of the original collateral pledge agreement by the parties entered into on February 16, 2017.

Date: September 28, 2018

/seal/ Evergrowing Bank Co., Ltd., Yantai Huanshan Road Branch

/seal/ Wuhan Kingold Jewelry Co., Ltd

EX-10.16

Exhibit 10.16

Loan Contract

Party A (Lender): Wuhan KangBo Biotechnology Co., Ltd.

Party B (Borrower): Wuhan Kingold Jewelry Co., Ltd.

This contract is signed in line with relevant national law, regulation and rules after the consensus between the Party A and Party B.

Article 1 Amount and purpose of the loan: Party A agrees to extend loans to Party B (capitalization) Five Hundred Million Yuan, (in lowercase)¥500,000,000. Purpose of the loan is circulating fund supplement to purchase gold raw material.

Article 2 Life of loan: life of loan for this contract is 12 months since October 2^nd, 2018 to October 2^nd 2019. The actual loan date is not in line with above appointment and shall be subject to the actual loan date.

Article 3 Lending rate: The parties agree on an interest rate of 6.5% for this loan.

Article 4 Mode of repayment: The principal should be refunded once at the end of the repayment period.

Article 5 The Party B should obtain written consent from Party A once it replays the loan in advance.

Article 6 Rights and obligations of Party A:

It has the right to receive the principal of the loan in accordance with the stipulations of this contract.

Article 7 Rights and obligations of Party B:

1. Truthfully provide relevant documents, certificates and other materials, and accept Party A's supervision and inspection.

2. Guarantee that this loan is not used for illegal activities.

3. Acquire the principal of the loan in accordance with the provisions of this contract.

Aticle 8 Payment release:

The Party A will remit all its borrowings to the following Party B's accounts:

Account name:

Openging bank:

Account Number:

Article 9 Loan extension: If the Party B needs to extend the loan period, then it should submit an application in writing to Party A 60 days before the expiration of the loan. After the consent of Party A, the parties separately sign a repayment agreement.

Article 10 Liability for breach of contract

(I) Borrower's default and its liability for breach of contract

1. If the borrower takes one of the following circumstances, the lender has the right to stop the loan that has not been issued in this contract and recover the unpaid loan in advance:

(1) Provide false or illegal documents, certification materials, etc.;

(2) Failure to repay the loan principals on schedule;

(3) The loan is not used according to the agreed loan application;

(4) Does not accept or cooperate with the lender's inquiry or supervision of its loan usage;

(5) Being involved in material adverse litigation;

(6) Being subject to major administrative penalties by administrative agencies;

(7) Stopping production due to mismanagement;

(8) Concealing the company's financial status, operating conditions, or drawing funds (capital);

(9) There are taxes for stealing (escape), being ordered to suspend business for rectification, or being revoked (revoked) of a business license;

(10) There are situations which have any other serious impact on the ability to repay loans or lose credit.

(II) Lender's breach of contract and its liability for breach of contract: To the extent that the Party A is not able to issue loans to Party B in accordance with this contract, it shall be deemed as a serious breach of contract, and the Party A shall bear the direct expenses paid by other parties, and shall pay Party B a separate penalty of 0.5% of the total loan principal. .

Article 11 The formation, effectiveness and termination of the contract: This contract shall be established since the date of signature (seal) by all parties.

Article 12 Disputes arising from this contract shall be under the jurisdiction of the People's Court of the place where the contract is signed

Article 13 This contract is made in two copies and each party holds one.

(The remainder of this page intentionally left blank. Signatures appear on the following page.)

Party A (Lender):

Party B (Borrower):

Date: September 20, 2018

EX-10.17

Exhibit 10.17

Trust Loan Contract

Between

China Minsheng Trust Co., Ltd.

And

Wuhan Kingold Jewelry Co., Ltd.

Contract No.: [2018-MSJH-61-2]

2018

Trust Loan Contract

Lender (Party A): China Minsheng Trust Co., Ltd.

Address: 19/F, Tower C, Minsheng Financial Center, No. 28, Jianguo Mennei Road, Dongcheng District, Beijing

Zip Code: 100005

Legal Representative: Zhiqiang Lu

Fax Number: 010-85259080

Phone Number: 010-85259071

Borrower (Party B): Wuhan Kingold Jewelry Co., Ltd.

Address: Te 15, Huangpu Science & Technology Garden, Jiangan District

Zip Code: 430023

Legal representative: Zhihong Jia

Fax Number: 027-65694977

Phone Number: 027-65694977

Whereas:

1. Party A is a duly incorporated trust company with good standing, and Party B is a duly incorporated limited liability company with good standing.

2. According to [2016-MSJH-60-1] China Mingshen Trust – Zhixin No. 511 Kingold Jewelry Loan Assembled Fund Trust Plan Trust Contract (“Trust Contract” or “Trust Document”), Party A sets up China Mingshen Trust – Zhixin No. 511 Kingold Jewelry Loan Assembled Fund Trust Plan (“Trust Plan”) and agrees the trust fund is used to issue loans to Party B.

3. According to the Trust Document, Party A plans to sign this Contract with Party B and issue a trust loan to Party B.

The Contract is made in line with relevant laws and regulations to specify the rights and obligations of both parties after reaching consensus through consultation.

Article 1 Definitions

1. In the Contract (as defined below), save where the context or text otherwise requires, the following words and expressions shall have the same meanings in the Trust Document:

1.1 Contract: the Contract [2018-MSJH-61-2] Trust Loan Contract between China Minsheng Trust Co., Ltd. and Wuhan Kingold Jewelry Co., Ltd. and any other effective revisions and annexes.

1.2 Issuance Date of Loan: for each allocation of trust loan, the date of issued loan by Party A to Party B, specified on the certificate of indebtedness of loan regarding that allocation. If the first Issuance Date of Loan is inconsistent with the date of establishment of the Trust Plan, or if any following Issuance Date of Loan is inconsistent with the date of successful funding of the fund corresponding to this loan, the date of when the Trust Plan begins effective or the corresponding following date of actual usage of each fund allocation is the Issuance Date of Loan.

1.3 Expiration Date of Loan: for each allocation of the trust loan, the expected expiration date of each trust loan, or the date of advanced expiration of loan of each trust loan, or the date when the extending period of this loan ends.

1.4 Interest Settlement Date: March 15, June 15, September 15, December 15 of each natural year and each Expiration Date of Loan. The Interest Settlement Date cannot be extended.

1.5 Interest Payment Date: each Interest Settlement Date. If Interest Payment Date is not a business day, then it will be the next business day.

1.6 Month: for each allocation of trust loan, the period from the Issuance Date of Loan or corresponding date of the Issuance Date of Loan (including that date; if there is no corresponding date of that month, then to be the last date of that month) to the corresponding date of the Issuance Date of Loan of next month (excluding that date; if there is no corresponding date of that month, then to be the last date of that month) is a loan Month for that allocation. The specific starting date and ending date should be the dates on the certificate of indebtedness of that allocation.

1.7 Year: for each allocation of the trust loan, the 12 Month period since the Date of Loan is a loan Year for that allocation.

1.8 Pledgor: Wuhan Kingold Jewelry Co., Ltd.

1.9 Gold Pledge Agreement: Gold Pledge Agreement between China Minsheng Trust Co., Ltd. and Wuhan Kingold Jewelry Co., Ltd. signed by Party A and Pledgor [2018-MSJH-61-3].

1.10 Yuan: refers to the monetary unit of China, the Reminbi or RMB.

1.11 China: Refers to the People’s Republic of China excluding Hong Kong, Macau and Taiwan.

Article 2 Amount of Loan

The amount of loan under the Contract is ONE Billion Yuan, or RMB 1,000,000,000.00, in multiple allocations. The specific amount of each allocation of loan shall follow the amount specified on the certificate of indebtedness of loan.

Article 3 Purpose of Loan and Supervision

3.1 Party B shall use the loan for supplementary liquidity needs.

Party B is not allowed to change the purpose of loan without prior written consent of Party A. Party B is not allowed to use the loan for fixed investment in assets and stock rights etc., securities market investment, land storage, and real estate development, projects prohibited by any law, regulation, regulatory provision and national policy.

3.2 The trustor under the trust or a third party designated by it supervises if Party uses the money according to this Contract, and checks if

Article 4 Life of Loan

4.1 The loan under this Contract is issued in allocations. The life of loan of each allocation of loan is 12 Months, calculated since its respective Issuance Date of Loan. And the time from first loan issuance to the last loan issuance shall not surpass 18 months.

4.2 Based on conditions prescribed in the Contract, Party A shall have the right to announce that the loan or partial of the loan is due in advance.

Article 5 Interest Rate, Interest Calculation, Settlement of Interest, Payment of Interest and Penalty Interest

5.1 Interest Rate

The annual interest rate of loan under the Contract is 10. 5%.

5.2 Interest Calculation

Interest of each loan under the Contract will calculated respectively starting from the Issuance Date of Loan. The interest of each loan is calculated by day, with daily interest rate= monthly interest rate/30= yearly interest rate/360. For each loan, amount of loan interest due every day = amount of loan balance on that date x [10. 5]%/360.

5.3 Interest Settlement

Interest on the loan under this Contract is calculated by using the Interest Settlement Date corresponding to each loan. The period is from loan issuance date (inclusive) or the last Interest Settlement Date (inclusive) to this Interest Settlement Date (exclusive). The last interest settlement date of each loan under this Contract is the Expiration Date of Loan. The principal should be paid off along with its interest.

5.4 Interest Payment

Party B shall make full interest payment to Party A for each loan on each Interest Payment Date.

5.5 Penalty Interest

(1) If Party B changes the purpose of loan, Party B should pay additional 100% interest based on the original interest rate starting from the date of such change regarding the changed part.

(2) If Party B fails to make loan payments as scheduled, Party B shall pay additional 50% interest based on the original interest rate starting from the date of such failure. If Party B fails to make interest payment as scheduled, Party B shall pay compound interest according to the 50% penalty interest rate.

(3) Original interest rate refers to the applicable rate used prior to the Expiration Date of Loan (including accelerated maturity date or expiration date for extension).

(4) In case the payment is overdue and the purpose of loan has been changed, Party B shall pay the higher interest rate according to above provisions.

Article 6 Issuance of Loan

6.1 Only after satisfying the following prerequisites, Party A is in duty bound to issue a loan to Party B.

(1) To issue the first loan, the trust plan has been set; to issue each of following loans, the subscription of that trust unit is successful;

(2) According to currently effective laws, regulations, certificate of incorporations and other organizational documents, Party B, each Warrantor and others have provided all necessary legal documents and legally valid internal/external approval and authorization documents, and submit the list of persons with signature rights and the signature specimen of these persons;

(3) The Contract, Contract of Warranty, Fund Supervision Contract, Safekeeping Contract, Authorized Subscription Contract of Trust Industry Security Fund and other transaction documents have been signed and taken affect;

(4) Notarization of compulsory execution of the Contract and Gold Pledge Agreement has been transacted;

(5) Contract of Pledge has been signed and taken affect and the pledged gold has been stored in a safe in Industial and Commercial Bank of China, Wuhan Shuiguohu Branch;

(6) Until the issuance date of the loan, all the statements and guarantees provided by Party B in Article 10 of this Contract are true, accurate and effective. Party B’s financial situation is basically similar with it when signs this Contract without any major adverse change;

(7) Until the issuance date of the loan, the issuance of the trust loan of Party A to Party B under the Contract does not violate all the laws and regulations;

(8) Party B’s business operation status (including but not limited to its financial status) does not have any substantial changes which cause any major adverse influence on the transaction under the Contrac;.

(9) Any laws, regulations, regulatory provisions, other regulatory documents or regulatory agencies do not limit or prohibit Party A to issue a loan to Party B as described in the Contract;

(10) Other requirements by Party A.

6.2 Within three days since all conditions under Article 6.1 are met (unless Party A waives any or more of them), Party A should transfer each loan to the following loan account opened by Party B.

Bank Name: Bohai Bank, Wuhan Guanggu Branch

Account Number: 2002127680000406

Account Name: Wuhan Kingold Jewelry Co., Ltd

Article 7 Repayment

7.1 Principal of Repayment

As for the loan under the Contract, Party B shall repay interest first and then principal. Party A is entitled to use the payment of Party B to first pay off all expenses which should be undertaken by Party B but are paid by Party A for Party B and expenses for Party A realizing creditor’s right.

If the payment of Party B is insufficient to pay off the payable amount of Party A (including but not limited to loan principal, interest, liquidated damages, compensation for damage, expense for achieving the creditor’s right and other expenses payable) under the Contract, Party A is entitled to decide the sequence of refunding principal, interest and other expenses.

7.2 Repayment of Principal and Interest

Party B shall pay the interest according to the Article 5.4 in the Contract on each Interest Payment Date. The last Interest Payment Date of every loan is the Expiration Date of Loan for such loan under the Contract and the principal should be paid along with the interest.

7.3 Prepayment

(1) After each allocation is issued for 12 months, Party B could request prepayment, but only after sending request in writing 30 days in advance to Party A and getting Party A’s approval.

(2) Interest rate under the Contract shall not change if Party B prepays.

(3) The interest of prepayment is calculated according to this Contract. If the life of the loan of that month is less than 30 days, the loan interest is calculated basing on 30 days. If the life of the loan is over 30 days (including), the loan interest is calculated basing on the actual usage dates.

(4) If Party B prepays, Party B shall make one lump-sum payment of principal along with interest.

7.4 Party B shall transfer the payment of principals and interests to the following account appointed by Party A:

Bank name: Chian Merchants Bank Beijing Changanjie Branch

Account number: 91190153910001603

Account name: China Minsheng Trust Co., Ltd

Article 8 Warrant of Loan

8.1 All debts under the Contract (including but not limited to all principals, interests, default interests, compound interests, liquidated damages, compensation, all payments for creditor to realize the creditor’s rights and other payments that Party B shall pay) are guaranteed by the Pledgor in the following manners:

(1) Pledge: Party B provides pledge guarantee with its inventory of gold with standard not lower than Au9995. Under the presumption of principal pledge rate no higher than 70%, the gold amount that should be pledged is calculated basing on the Au9995 closing price of Shanghai Gold Exchange on the day prior to pledgor date. The details are specified in the Gold Pledge Agreement.

8.2 For the details about all warrant ways under Article 8., the Gold Pledge Agreement prevails.

Article 9 Rights, Obligations, Representations and Warranties of Party A

9.1 Rights of Party A

(1) Party A is entitled to require Party B to repay the principals, interests and expenses of the loan;

(2). Party A is entitled to require Party B to provide the most recent audited financial statements and all other relevant documents related to the loan under the Contract;

(3) Party A is entitled to understand the production and management, financial activity of Party B;

(4) Party A is entitled to report to the authorities if Party B evades Party A’s supervision, delays payment of loan principal and interest and conducts other actions of breach of Contract;

(5) Party A or its authorized third party is entitled to collect payments that are not fully paid or timely paid by Party B via various communication channels. The expenses resulted from such collection acts will be borne by Party B;

(6) Party A or its authorized third party is entitled to perform regular inspections on Party B’s purchase agreements to check the matching status of the actual purchase agreements and actual fund usage;

(7) If any situation happens as prescribed in Article 11 and Party A believes it may endanger creditor’s rights under the Contract, or Party B defaults under this Contract in any way, Party A is entitled to announce the loan is due in advance and require Party B to pay all due principals and interests of the loan;

(8) Party A’s other rights entitled by law, regulations and the Contract.

9.2 Obligations of Party A

(1) Issue the loan on schedule based on the Contract, save the delay due to reason of Party B or other reasons not concerned about Party A;

(2) Keep the financial information and the commercial secrets about production and management provided by Party B in confidentiality, save the laws and regulations otherwise require, or disclose according to regulatory department and administrative supervision department or disclose to engaged third parties.

9.3 Representations and Warranties of Party A

Representations and Warranties of Party A are as follows:

(1) It is a registered trust company approved by China Banking Regulatory Commission and has the qualification to sign this Contract;

(2) It is its real intention to sign and perform the Contract. It has legally performed all necessary formalities for signing and performing the Contract. All the procedures to sign and fulfill the Contract have been legally performed and are legally effective.

(3) It issues trust loan to Party B under the Trust Contract and its execution and enforcement of this Contract does not violate any of its obligations under the Trust Contract.

Article 10 Rights and Obligations of Party B

10.1 Rights of Party B

(1) Entitled to get and use the loan according to the stipulated terms and loan usages of the Contract.

(2) Entitled to require Party A to keep the relevant financial information and commercial secrets about production and management provided by Party B in confidentiality, save where laws, regulations or this Contract otherwise require or necessary disclosure to principals and beneficiaries because Party A sets up the trust.

10.2 Obligations of Party B

(1) Get the loan according to stipulations of the Contract;

(2) Per Party A’s requests, provide materials quarterly to Party A about financial accounting and production and management (depending on specific situation of projects), including but not limited to the balance sheet, profit and loss statement, cash flow statement and financing situation (all the banks with its accounts, accounts, balance situation, etc.), usage situation of loan fund, etc., and takes responsibility of the authenticity, legality, completeness and validity of the foregoing provided documents;

(3) Use the loan for the purpose agreed in the Contract and do not forcibly occupy and misappropriate it or use it in any project that violates the laws and regulations;

(4) Actively cooperate and consciously accept the investigation and supervision of Party A or its engaged third party on its production and management, financial activity and loan utilization under the Contract;

(5) Pay off principals and interests of loan on schedule and pay other amounts due (if any) in accordance with the stipulations of the Contract;

(6) Bear related expenses under this Contract, including but not limited to insurance, evaluation, registration, safekeeping, appraisal, notarization and other matters;

(7) Party B and its investors are not allowed to secretly withdraw funds or transfer assets to evade debts to Party A;

(8) Before paying off the principals and interests, it shall not, without Party A’s consent, use the assets resulted from the loan to warrant for a third party;

(9) During the duration of the Contract, it shall not provide any warrant to a third party without Party A’s consent, shall not allocate its profits; repayment of loans of Party A’s shareholders shall not be done before the repayment of principal and interest of the loan under this Contract;

(10) Before any full or partial transfer of debt to a third party, it shall get prior written consent of Party A;

(11) During the duration of the Contract, if Party B alters its name, legal representative, address, business scope and registered capital, it should notify Party A in writing;

(12) During the duration of the Contract, in case Party B engages in contracting out business operation, lease, shareholding system transformation, joint venture, merger, acquisition, separation, increase and decrease of capital, alternation of stock rights, transfer of material assets or other acts of disposition which will impact the realization of Party A’s credit, Party B shall notify Party A in writing at least 30 days in advance for its consent and address the matters of payment and guaranty of the debt under the Contract according to Party A’s requirements;

(13) In case Party B suffers business halts, bankruptcy, dissolution, closure of business, cancellation of business license, and revocation, the Contract is deemed to reach its expiration. Party B shall send a written notice to Party A within three days since the date of its occurrence and repay all principals and interests immediately;

(14) If any incident causes danger to Party B’s normal business or materially and adversely affect Party B’s ability to fulfill its payment obligation under the Contract, including but not limited to, material financial disputes, litigation, deterioration of financial situation, serious hardship of production and operation, dissolution, closure of business, cancellation of business license, and revocation, etc., Party B shall send a written notice to Party A within three days since the date of its occurrence and address the matters of payment and guaranty of the debt under the Contract according to Party A’s requirements;

(15) Ensure all Warrantors (if any) to work with Party A to sign Contracts of Warranty (if any) and go through relevant notarization and registration procedures;

(16) In case the Warrantors under the Contract suffers business halts, bankruptcy, dissolution, closure of business, cancellation of business license, revocation or similar situations, and partly or fully loses the warrant ability corresponding to this loan, Party B shall promptly provide Party A other warrant recognized by Party A;

(17) Party B, without any consent from Party A, shall not incur any kind of debt, investment or financing, including but not limited to, bank loan, trust loan, merger loan, setting property trust, setting special asset earning right, share or share beneficiary investment and financing, and other kinds of investment and financing activities;

(18) During the term of this Contract, Party B does not distribute dividends to shareholders;

(19) Party B shall take responsibility to Party A for the loss caused by breaching the Contract.

10.3 Representations and Warranties of Party B

Representations and warranties of Party B are as follows:

(1) It is a legally registered and validly existing business entity. Until the Issuance Date of Loan, it is in normal operation, and does not have any current or reasonably expected factor which may cause it to be unable to keep the normal operation during the loan term;

(2) It is its real intention to sign and perform the Contract. It has legally performed all necessary formalities for signing and performing the Contract. These conducts do not violate the certificate of incorporation or other organizational documents or any laws, regulations, charters and other regulatory documents, judgments, contracts, commitments, or arrangements. All the procedures to sign and fulfill the Contract have been legally performed and are legally effective;

(3) All the documents, materials, relevant financial statements and certificates provided to Party A for the loan under the Contract are true, correct, complete, legally valid, and do not have any misleading statements, false record or material omission;

(4) It does not conceal any past actions or actions that may happen which might prevent the issuance of the loan under the Contract, including but not limited to,

1) serious illegal actions, discipline incidents or material claims related to it or its person in charge;

3) any breach actions related to contracts with other creditors;

2) litigations, arbitrations and other disputes;

4) its debt and debt guarantees;

5) other situations that might influence its financial status or repayment ability.

(5) It allows Party A to investigate its credits from the credit data center approved and set up by People's Bank of China and its credit supervisor department or relevant agencies, agrees Party A to disclose its information to the credit data center approved and set up by People's Bank of China and its credit supervisor department, or reasonably use or disclose those credit information out of business needs;

(6) Any existing legal documents relevant to financing and/or guarantee (if any) do not include any terms that limit Party B’s refinancing or providing guarantee and do not affect Party B’s application of trust loan to Party A under the Contract.

Article 11 Responsibility of Default

11.1 Default Situations

(1) Party B shall take the responsibility of default by law if any situation as follow happens:

1) Fail to provide true, complete and valid financial, accounting, operation status and other materials; conceal information that may affect its ability to repay the loan;

2) Fail to use the loan for the purpose agreed in the Contract, refuse Party A’s or its authorized third party’s supervision over the usage of the loan;

3) Fail to pay interests or any term of interest under the Contract on schedule, or fail to pay other amount payable (if any);

4) Transfer assets or withdraw funds to evade debt;

5) Deterioration of operation and financial conditions, failure to pay off due debt, involvement in serious litigation, arbitration or other legal disputes or undertaking other debts happens and Party A believes it may affect or threaten its rights and benefits under the Contract;

6) During the duration of the Contract, conducting transactions such as contracting out business operation, lease, shareholding system transformation, joint venture, merger, acquisition, separation, increase and decrease of capital, alternation of stock rights, and other actions changing operating way or system which Party A believes may impact or have impacted Party A’s rights under the Contract;

7) Its other debts may or have affected the fulfillment of obligations to Party A;

8) Distribute dividend without any consent from Party A during the duration of the Contract;

9) Enter into legal proceedings of custody, taken over, consolidation, settlement, reorganization, bankruptcy, or dissolution, or being cancelled business license, or being ordered business closure, stop, revocation or dissolution;

10) If Party B and/or Warrantor has any situation that Party A believes material and disadvantageous, or violates any other project or contract with Party A or other financial institution, Party A has the right to adopt the remedies under Article 11.2 under this Contract. If the violation is serious, Party A has the right to terminate all projects cooperated with Party B;

11) Other breaches of the Contract or other circumstances that Party A believes may affect or threaten or have affected or threatened the realization of Party A’s rights and benefits under the Contract.

(2) If any following circumstances happens to the Pledgor that Party A believes may affect the warrant ability of the mortgagor (or the Pledgor) and requires the mortgagor (or the Pledgor) to remove the adverse implication caused by it, but the Pledgor and Party B do not cooperate, or Party B refuses to provide new warrant and/or other remedies approved by Party A, Party B is deemed to violate the contract:

1) Upon signing the Gold Pledge Agreement, the Pledgor concealed any situation that the rights associated with the pledge has been addressed, including but not limited to, that the pledge has been rented, sold, the beneficial rights, operation rights or other rights have been transferred by the Pledgor, the Pledgor/lessor has obtained long term rent in a lump-sum, or the Pledgor has already set up warrant, pledge and other rights;

2) The behavior of a third party resulted in the damage, lost, or devaluation of the pledge, and the Pledgor fails to address the damages under the mortgage agreement;

3) The Pledgor’s behavior will decrease the value of the pledge but refuses or fails to stop the action, restore its original situation or provide any warrant upon Party A’s request;

4) Without any written consent from Party A, the Pledgor gives, transfer, leases, repledges, transfer-pledges, moves the pledge, or addresses the pledge in any other way or sets up other rights on the pledge;

5) The Pledgor addresses the pledge with Party A’s consent, but fails to follow the Gold Pledge Agreement when handling the disposal price of the pledge;

6) The pledge is damaged, lost or its value is reduced which affects the repayment of the debt under the Contract, and the pledgor does not restore its value promptly, or provides other warrants recognized by Party A;

7) The Pledgor fails to transact notarization according to the Contract and the Gold Pledge Agreement;

8) Other breach scenarios under the Gold Pledge Agreement.

11.2 Default Remedies

Party A is entitled to take one or more of the following measures if and of the abovementioned defaults happen:

1) Stop issuing the rest of the loan that has not been issued yet;

2) Announce the payment is due immediately, collect in advance those loans issued, and require Party B to repay all the loan principals, interests and other payments under the Contract;

3) Charge Party B the liquidated damage which is 20% of the principal;

4) Exercise guarantee rights;

5) Terminate the Contract and other Contracts of Warranty (if needed);

6) Other measures provided by regulations, regulatory provisions and the Contract.

11.3 Special Agreement

Within 5 days since the Loan Trust is set up, if Party B fails to fulfill relevant borrowing obligations under this Contract without any reasons, it shall pay Party A liquidated damages of 3,000,000 Yuan and Party A has the right to terminate this Contract unilaterally.

Article 12 Amendment and Termination of Contract

Upon the effectiveness of the Contract, any party shall not alter or terminate the Contract unilaterally unless the Contract provides otherwise. Any amendments or alterations shall be agreed by both parties in a written agreement.

Article 13 Applicable Laws and Dispute Resolutions

13.1 Both parties shall solve disputes arising from the Contract or related to the Contract by negotiation or settlement. In case no settlement can be reached through negotiation, the parties shall submit the dispute to the people’s court with jurisdiction in the domicile of Party A. Unless otherwise specified in the judgment, the actual cost of the parties related to the suit (including but not limited to court fees and reasonable attorneys' fees) shall be borne by the losing party.

13.2 The agreement, interpretation, performance and dispute resolution under the Contract are subject to laws and regulations of People’s Republic of China.

13.3 During the period of dispute resolution, Party A and Party B shall still perform the terms without disputes under the Contract. No party could refuse to perform any of its obligations under the Contract.

Article 14 Notarization of Compulsory Execution

14.1 Party A and Party B confirm that, within three days of execution of the Contract, both parties will transact compulsory notarization of the Contract at Beijing Fangzheng Notary Office.

14.2 Party B hereby commits that if it fails to fulfill or incompletely fulfills any of its obligations under the Contract, it is willing to receive judiciary compulsory execution, without any judicial proceeding. Party A can directly apply for compulsory execution to people’s court with jurisdiction according to Article 238 of Civil Procedure. Party B waives right of defense for such application.

14.3 Party A and Party B confirm that both parties fully understand the meaning, content, procedure and effect of notarization of compulsory execution proscribed by relevant laws, regulations and regulatory documents.

14.4 If Party B fails to perform or inappropriately performs debt documents which has been notarized and have the compulsory execution effect, Party A can apply for issuance of compulsory execution document to the notary office. Party B shall cooperate with the notary office to complete the verification procedure. Party B commits to cooperate fully with the application by Party A (including but not limited to the verification procedure with the completion of the notary office). If Party B fails to fulfill such obligation timely, Party B hereby confirms: in the case of absence of Party B, after the notary, based on the notary application by Party A and its internal procedure, completes the verification process, it deems to finish the verification process. Party B fully recognizes its legal consequences.

14.5 This Article has priority to the Article 13.1. Party B shall bear the expense arising from application of compulsory notarization.

Article 15 Notification and Delivery

15.1 All the notifications, documents and materials sent or provided to each party because of execution of the Contract shall be delivered according to the contact in the cover page. If the contact information of one party changes, it shall notify the other party in writing (fax or express mail) within three workdays since the date of change. Otherwise, the notification from the party which does not change the contact information to the other party by fax or express mail according to the contact information in this Contract is deemed to be delivered.

15.2 Contact information of both parties:

Party A: China Minsheng Trust Co., Ltd.

Mailing Address: 19/F, Tower C, Minsheng Financial Center, No. 28, Jianguo Mennei Road, Dongcheng District, Beijing

Zip Code: 430023

Contact Person: Jia Lei

Phone Number: 18672139527

Fax Number: 010-85259080

Email: jialei@msxt.com

Party B: Wuhan Kingold Jewelry Co., Ltd.

Mailing Address: Te 15, Huangpu Science & Technology Garden, Jiangan District

Zip Code: 430023

Contact Person: Hu Qiao

Phone Number: 13317109760

Fax Number: 027-65694977

Email: webmaster@kingold.com.cn

15.3 Notification is deemed to be delivered to the other party on the following date:

(1) Personal delivery: effectively delivered on the date when the designated person delivers it;

(2) Registered letter service: the third day after the mailing day (postmark as the proof);

(3) Fax: when the confirmation of successful delivery is created by the fax machine;

(4) Express mail service: the second day after postmark date;

(5) Email: date stated in the email system of successful delivery.

Article 16 Supplementary Provisions

16.1 Any amendment of the Contract as the attachment of the Contract has the equal legal effect with the Contract.

16.2 The Certificate of Indebtedness under the Contract and other relevant documents confirmed by both parties are indivisible component of the Contract.

16.3 Party B has read all the terms of this Contract. Per Party B’s requirements, Party A has explained the relevant provisions under this Contract. Party B has acknowledged and fully understood on the meaning of the Contract terms and the corresponding legal consequences.

16.4 In the course of performing this Contract, if Party A does not exercise or timely exercise any of its rights under this Contract, it shall not be deemed to have waived such rights, and it does not affect the exercise of Party A’s other rights and fulfillment of Party B’s obligations under this Contract. All waiver of rights shall be made in writing.

16.5 Representations and Warranties in the Contract are set out separately and independently. Except as otherwise expressly agreed in this Contract or the parties otherwise agreed in writing, they will not be restricted by other terms in the Contract that may contain contrary meanings. If a provision of this Contract or any part of a provision becomes invalid at present or in the future, this invalid provision or the invalid part of the terms of the Contract does not affect the other terms of the Contract or the validity of other content in the term.

16.6 The agreements in the Contract include Representations and Warranties specified in this Contract, and any violation of these Representations and Warranties are treated as breach of Contract.

16.7 Both parties shall ensure that the Contract is fully executed by conducting and signing any further actions, incidents, documents, so the expected purpose of this Contract could be fully achieved.

16.8 The titles in the Contract only serve as easy access to all the terms. Under no circumstances they shall be construed as an integral part of this Contract, or as limitation of its terms of indication.

16.9 The Contract is the complete document on the matters covered by it agreed by both parties. This Contract, together with any attachments to this Contract constitutes the entire agreement between the parties of this Contract. If any previously signed letter of intent, other legal documents or other written and oral agreements are inconsistent with this Contract, this Contract shall prevail.

16.10 The Contract is effective on the day when it is signed and stamped by the legal representative or an authorized representative of each party and shall terminate when all loan principals, interests, penalty interests, liquidated damages, damages compensation and all other sums due (if any) are paid off.

16.11 All six copies of the original Contract has the same legal effect; three copies are possessed by Party A and two copies are possessed by Party B; the remaining copy is for handling enforcement of notarization, pledge registration procedures, etc.

Both parties have read all terms of the Contract and have completely understood the meaning of Contract terms and corresponding legal consequences. No party shall challenge any terms under the Contract on the any basis such as material misunderstanding or unconscionability.

(Signature page follows)

(This is the signature page of Trust Loan Contract of No. 2018-MSJH-61-2 and has no content of contract)

Party A: /s/ China Minsheng Trust Co., Ltd.

Legal Representative/Authorized Representative: /s/ Zhibo Zhang

Party B: /s/ Kingold Jewelry Co., Ltd.

Legal Representative/Authorized Representative: /s/ Zhihong Jia

Contract signed on: October 10, 2018

Contract signed in: Dongcheng District of Beijing City

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Zhihong Jia, certify that:

        (1)       I have reviewed this Form 10-Q of Kingold Jewelry, Inc.;

        (2)       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

        (3)       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

        (4)       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

        (a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

        (b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        (c)       Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        (d)       Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

        (5)       The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        (a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        (b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:   November 14, 2018	/s/ Zhihong Jia
	Zhihong Jia
	Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

and Securities and Exchange Commission Release 34-46427

I, Bin Liu, certify that:

        (1)       I have reviewed this Form 10-Q of Kingold Jewelry, Inc.;

        (2)       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

        (3)       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

        (4)       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

        (a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

        (b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        (c)       Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        (d)       Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

        (5)       The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        (a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        (b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:   November 14, 2018	/s/ Bin Liu
	Bin Liu
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Form 10-Q report of Kingold Jewelry, Inc. for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Zhihong Jia, certify that: 

(1)       This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)       The information contained in the this period report fairly presents, in all material respects, the financial condition and results of operations of Kingold Jewelry, Inc.

Date: November 14, 2018	/s/ Zhihong Jia
	Zhihong Jia
	Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Form 10-Q report of Kingold Jewelry, Inc. for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Bin Liu, certify that: 

(1)       This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)       The information contained in the this period report fairly presents, in all material respects, the financial condition and results of operations of Kingold Jewelry, Inc.

Date: November 14, 2018	/s/ Bin Liu
	Bin Liu
	Chief Financial Officer (Principal Financial Officer)

EX-99.1

Exhibit 99.1

 

Kingold Jewelry Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2018

Company to Hold Conference Call with Accompanying Slide Presentation at 8:30 a.m. E.T. on November 15, 2018

WUHAN CITY, China, November 14, 2018 - Kingold Jewelry, Inc. ("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading manufacturers and designers of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2018.

2018 Third Quarter Financial Highlights

· Net sales were approximately $626.2 million, an increase of 7.1% from approximately $584.5 million in the same period of 2017

· Processed a total of 29.6 metric tons of 24-karat gold products, compared to 30.1 metric tons in the third quarter of 2017

· Net income was approximately $13.2 million, or $0.20 per diluted share, compared to net income of approximately $29.0 million, or $0.44 per diluted share in the same period of 2017

Outlook for 2018

· Company reiterates guidance of between 100 metric tons and 110 metric tons of 24-karat gold products in 2018

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, “We were pleased to continue to deliver relatively strong operating results in the third quarter of 2018, despite the challenges from the uncertainty of the rapid changing market along with the RMB depreciation during the quarter. Recent challenging business environment in China has brought lots of pressure on us. Demand for gold has been slowing down in the wake of monetary tighten-up. Kingold is committed to continuous innovations even during the challenging times and believe it is the foundation of the company's long-term development.”

2018 THIRD QUARTER AND NINE MONTHS OPERATIONAL REVIEW

Metric Tons of Gold Processed

Three Months Ended:

	September 30, 2018					September 30, 2017
	Volume		% of Total			Volume		% of Total
Branded*		16.6		56.1	%		14.6		48.6	%
Customized**		13.0		43.9	%		15.5		51.4	%
Total		29.6		100.0	%		30.1		100	%

Nine Months Ended:
	September 30, 2018					September 30, 2017
	Volume		% of Total			Volume		% of Total
Branded*		46.5		57.7	%		34.7		48.1	%
Customized**		34.0		42.3	%		37.5		51.9	%
Total		80.5		100.0	%		72.2		100.0	%

*	Branded Production:	The Company acquires gold from the Shanghai Gold Exchange to produce branded products.
**	Customized Production:	Clients who purchase customized products supply gold to the Company for processing.

For the three months ended September 30, 2018, the Company processed a total of 29.6 metric tons of gold, of which branded production was 16.6 metric tons, representing 56.1% of total gold processed, and customized production was 13.0 metric tons, representing 43.9% of total gold processed in the third quarter of 2018. In the third quarter of 2017, the Company processed a total of 30.1 metric tons, of which branded production was 14.6 metric tons, or 48.6% of the total gold processed, and customized production was 15.5 metric tons, or 51.4% of total gold processed.

Kingold Jewelry, Inc.

November 14, 2018

For the nine months ended September 30, 2018, the Company processed a total of 80.5 metric tons of gold, of which branded production was 46.5 metric tons, representing 57.7% of total gold processed, and customized production was 34.0 metric tons, representing 42.3% of total gold processed in the first nine months of 2018. In the first nine months of 2017, the Company processed a total of 72.2 metric tons, of which branded production was 34.7 metric tons, or 48.1% of the total gold processed, and customized production was 37.5 metric tons, or 51.9% of total gold processed.

CONSOLIDATED FINANCIAL AND OPERATING REVIEW

Net Sales

Net sales for the three months ended September 30, 2018 were approximately $626.2 million, increased by 7.1% from approximately $584.5 million for the same period in 2017. The increase in net sales was mainly due to higher sales volume of branded production sales.

For the first nine months ended September 30, 2018, the Company's net sales were approximately $1,844.5 million, increased by 36.4% from approximately $1,352.7 million in the first nine months of 2017. The increase in net sales was due to the same reason described above.

Gross Profit

Gross profit for the three months ended September 30, 2018 was approximately $61.2 million, decreased by 22.1% from approximately $78.6 million for the same period in 2017.

For the nine months ended September 30, 2018, the Company's gross profit was approximately $189.3 million, increased by 31.9% from approximately $143.5 million in the same period of 2017.

Gross Margin

The Company’s gross margin was 9.8% for the three months ended September 30, 2018, compared to 13.4% in the prior year period.

The decrease in gross margin was mainly due to the decreased average selling price of branded production, compensated by decreased unit cost of branded production during the three months ended September 30, 2018. The average selling price of branded production was RMB 250.77 per gram for the three months ended September 30, 2018, decreased by RMB 10.14 or 3.9%, from RMB 260.91 per gram for the same period in 2017. The unit cost of branded production sales was RMB 230.86 per gram for the three months ended September 30, 2018, decreased by RMB 16.95 or 6.8%, from RMB 247.81 per gram for the same period in 2017. The decrease of the both average selling price and unit cost of branded production was mainly due to the weak gold price in 2018.

For the nine months ended September 30, 2018, the Company's gross margin was 10.3%, compared to 10.6% in the first nine months of 2017.

The slightly decrease in gross margin was mainly due to the decrease of average selling price of our branded production exceeded the decrease in unit cost of branded production sales during the nine months ended September 30, 2018. The average selling price of branded production was RMB 253.45 per gram for the nine months ended September 30, 2018, decreased by RMB 5.00 or 1.9% from RMB 258.45 per gram for the same period in 2017. The unit cost of branded production sales was RMB 231.78 per gram for the nine months ended September 30, 2018, decreased by RMB 4.94 or 2.1% from RMB 236.72 per gram for the same period in 2017.

Net Income

Net income for the three months ended September 30, 2018 was approximately $13.2 million, or $0.20 per diluted share based on 66.1 million weighted average diluted shares outstanding, compared to net income of approximately $29.0 million in the prior year period, or $0.44 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior year period.

For the nine months ended September 30, 2018, the Company's net income was approximately $40.0 million, or $0.60 per diluted share based on 66.3 million weighted average diluted shares outstanding, compared to net income of approximately $15.7 million, or $0.24 per diluted share based on 66.3 million weighted average diluted shares outstanding in the same period of 2017.

Kingold Jewelry, Inc.

November 14, 2018

Balance Sheet Highlights (USD in Millions)

	9/30/2018		12/31/2017		Percentage Change
Cash	$	13.2	$	5.0		164	%
Inventories	$	147.3	$	135.0		9.1	%
Working Capital (Current Assets — Current Liabilities)	$	623.6	$	768.3		(18.8	)%
Stockholders’ Equity	$	354.3	$	390.2		(9.2	)%

Net cash provided by operating activities was approximately $461.4 million for the nine months ended September 30, 2018, compared with approximately $145.6 million of net cash used in operating activities for the same period in 2017. The net cash provided by operating activities was mainly due to net income of approximately $40.0 million for the nine months ended September 30, 2018, the decrease in inventory purchased of $321 million because $557.9 million of gold for investment was released to inventory and processed during the nine months ended September 30, 2018, collections from value added tax receivables of $84.6 million, an increase in income tax payable of $0.7 million and an increase in other payables and accrued liabilities of $1.0 million.

Kingold’s net cash from operating activities can fluctuate significantly due to changes in our inventories. Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. The Company expects the net cash generated from operating activities to continue to fluctuate as inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger or smaller quantities of raw materials. These fluctuations could cause net cash from operating activities to decrease, even if the net income grows as Kingold continues to expand. Although the Company expect that net cash from operating activities will increase over the long term, but cannot predict how these fluctuations will affect the cash flow in any particular quarter.

OUTLOOK FOR 2018

Based on its existing resources and capacity along with expected relatively strong demand for 24-karat gold products in the fourth quarter of 2018 in China, the Company reiterates its expectation that gold processed will be between 100 metric tons and 110 metric tons during 2018.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on November 15, 2018 at 8:30 a.m. E.T.

The dial-in numbers are:

Live Participant Dial In (Toll Free):	877-407-9038
Live Participant Dial In (International):	201-493-6742

The conference call will also be webcast live. To listen to the call, please go to the Investor Relations section of Kingold's website at www.kingoldjewelry.com, or click on the following link: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/26970/indexl.html.

The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Kingold Jewelry, Inc.

Kingold Jewelry, Inc. (NASDAQ: KGJI), centrally located in Wuhan City, one of China's largest cities, was founded in 2002 and today is one of China's leading designers and manufacturers of 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells both directly to retailers as well as through major distributors across China. Kingold has received numerous industry awards and has been a member of the Shanghai Gold Exchange since 2003. For more information, please visit www.kingoldjewelry.com.

Business Risks and Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. You can identify these forward - looking statements by words such as “expects,” “believe,” “project,” “anticipate,” or similar expressions. The forward-looking statements in this release include statements regarding Kingold’s outlook with respect to its 2018 outlook for gold processing. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Forward-looking statements are subject to a number of risks, including those contained in Kingold's SEC filings available at www.sec.gov, including Kingold's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Kingold undertakes no obligation to update or revise any forward-looking statements for any reason.

Kingold Jewelry, Inc.

November 14, 2018

COMPANY CONTACT

Kingold Jewelry, Inc.

Bin Liu, CFO

Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)

bl@kingoldjewelry.com

INVESTOR RELATIONS COUNSEL:

The Equity Group Inc.

Katherine Yao, Senior Associate

Phone: +86-10-5661 7012

kyao@equityny.com

Kingold Jewelry, Inc.

November 14, 2018

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(IN US DOLLARS)

(UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
NET SALES	$	626,171,072		$	584,511,639		$	1,844,491,390		$	1,352,666,916
COST OF SALES
Cost of sales		(564,685,762	)		(505,608,405	)		(1,654,427,318	)		(1,208,376,017	)
Depreciation		(255,546	)		(300,716	)		(801,384	)		(806,047	)
Total cost of sales		(564,941,308	)		(505,909,121	)		(1,655,228,702	)		(1,209,182,064	)
GROSS PROFIT		61,229,764			78,602,518			189,262,688			143,484,852
OPERATING EXPENSES
Selling, general and administrative expenses		2,487,346			3,779,728			7,597,545			10,546,253
Stock compensation expenses		5,364			5,364			16,092			27,650
Depreciation		146,475			135,442			406,962			367,112
Amortization		2,767			2,832			8,703			8,330
Total operating expenses		2,641,952			3,923,366			8,029,302			10,949,345
INCOME FROM OPERATIONS		58,587,812			74,679,152			181,233,386			132,535,507
OTHER INCOME (EXPENSES)
Other Income		64,433			661			64,433			66,158
Interest Income		562,294			633,617			1,384,438			1,824,924
Interest expense, including amortization of debt issuance costs of $3,482,031 and $1,347,832 for the three months, and $8,042,451 and $7,751,818 for the nine months ended September 30, 2018 and 2017, respectively		(41,479,730	)		(36,585,321	)		(128,898,077	)		(113,155,443	)
Total other expenses, net		(40,853,003	)		(35,951,043	)		(127,449,206	)		(111,264,361	)
INCOME FROM OPERATIONS BEFORE TAXES		17,734,809			38,728,109			53,784,180			21,271,146
INCOME TAX PROVISION (BENEFIT)
Current		1,787,717			7,778,520			9,214,312			12,996,602
Deferred		2,699,588			1,962,539			4,523,643			(7,440,305	)
Total income tax provision		4,487,305			9,741,059			13,737,955			5,556,297
NET INCOME		13,247,504			28,987,050			40,046,225			15,714,849
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) related to investments in gold, net of tax	$	(18,935,552	)	$	27,074,547		$	(56,908,875	)	$	75,935,884
Foreign currency translation gains (loss)		(13,077,661	)		4,455,163			(19,080,264	)		12,817,501
Total Other comprehensive income (loss)	$	(32,013,213	)	$	31,529,710		$	(75,989,139	)	$	88,753,385
COMPREHENSIVE INCOME (LOSS)	$	(18,765,709	)	$	60,516,760		$	(35,942,914	)	$	104,468,234
Earnings per share
Basic	$	0.20		$	0.44		$	0.61		$	0.24
Diluted	$	0.20		$	0.44		$	0.60		$	0.24
Weighted average number of shares
Basic		66,113,502			66,049,726			66,113,502			66,029,266
Diluted		66,121,121			66,484,717			66,311,149			66,337,069

Kingold Jewelry, Inc.

November 14, 2018

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

	September 30,			December 31,
	2018			2017
ASSETS
Cash	$	13,245,436		$	4,997,125
Restricted cash		6,567,855			5,534,551
Accounts receivable		198,214			768,167
Inventories		147,264,405			135,042,713
Investments in gold		922,084,336			1,562,943,153
Other current assets and prepaid expenses		808,809			100,592
Value added tax recoverable		254,820,263			353,732,758
Total current assets		1,344,989,318			2,063,119,059
Property and equipment, net		5,903,782			7,299,643
Restricted cash		8,927,100			7,392,721
Investments in gold		1,071,005,836			957,124,267
Other assets		286,155			302,072
Deferred income tax assets		22,054,343			6,677,675
Land use right		399,007			429,915
Total long-term assets		1,108,576,223			979,226,293
TOTAL ASSETS	$	2,453,565,541		$	3,042,345,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short term loans	$	621,518,946		$	962,101,746
Other payables and accrued expenses		18,845,062			18,913,863
Related party loan		72,798,218			307,389,647
Due to related party		3,592,726			2,630,301
Income tax payable		1,855,002			1,208,742
Other taxes payable		2,818,412			2,615,463
Total current liabilities		721,428,366			1,294,859,762
Related party loans		451,657,343			567,843,066
Long term loans		926,174,267			789,410,137
TOTAL LIABILITIES		2,099,259,976			2,652,112,965
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of September 30, 2018 and December 31, 2017		-			-
Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of September 30, 2018 and December 31, 2017		66,113			66,113
Additional paid-in capital		80,393,541			80,377,449
Retained earnings
Unappropriated		343,712,836			303,666,611
Appropriated		967,543			967,543
Accumulated other comprehensive income (loss), net of tax		(70,834,468	)		5,154,671
Total Equity		354,305,565			390,232,387
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,453,565,541		$	3,042,345,352

Kingold Jewelry, Inc.

November 14, 2018

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

	For the nine months ended September 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	40,046,225		$	15,714,849
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization		1,208,346			1,173,159
Amortization of intangible assets		8,703			8,330
Amortization of debt issuance costs included in interest expense		8,042,451			7,751,818
Share based compensation for services and warrants expense		16,092			27,650
Inventory valuation allowance		-			-
Deferred tax provision (benefit)		4,523,643			(7,440,305	)
Changes in operating assets and liabilities
Accounts receivable		558,165			647,049
Inventories		321,200,297			(119,627,463	)
Other current assets and prepaid expenses		(752,148	)		185,892
Value added tax recoverable		84,623,088			(56,530,224	)
Other payables and accrued expenses		961,903			4,331,048
Customer deposits		(192,313	)		-
Income tax payable		748,416			7,725,853
Other taxes payable		359,224			482,337
Net cash provided by (used in) operating activities		461,352,092			(145,550,007	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(491,136	)		(1,551,847	)
Investments in gold		-			(358,279,503	)
Net cash used in investing activities		(491,136	)		(359,831,350	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from other loans – short term		-			169,103,063
Repayments of other loans – short term		(554,840,248	)		(147,212,224	)
Proceeds from other loans – long term		435,804,951			96,966,135
Repayments of other loans – long term		-			(102,695,952	)
Proceeds from related party loans – short term		-			293,836,774
Repayments of related party loans – short term		(230,227,311	)		-
Proceeds from related party loans – long term		443,110,831			771,321,531
Repayments of related party loans – long term		(534,050,005	)		(609,711,305	)
Payments of loan origination fees		(6,578,966	)		(4,114,687	)
Repayment of third party loans		-			(29,383,677	)
(Repayment of) borrowings from related party		965,643			(5,212,812	)
Proceeds from exercise of warrants		-			113,562
Net cash provided by (used in) financing activities		(445,815,105	)		433,010,408
EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH		(4,229,857	)		2,619,437
NET INCREASE DECREASE IN CASH AND RESTRICTED CASH		10,815,994			(69,751,512	)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		17,924,397			81,677,623
CASH AND RESTRICTED CASH, END OF PERIOD	$	28,740,391		$	11,926,111
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense	$	120,133,935		$	92,580,544
Cash paid for income tax	$	8,465,896		$	5,270,750
NON-CASH INVESTING AND FINANCING ACTIVITIES
Investments in gold obtained in a lease from a related party and fully repaid	$	-		$	132,748,925
Investments in gold transferred to inventories	$	557,866,549		$	350,761,730
Unrealized gain (loss) on investments in gold, net of tax	$	(56,908,875	)	$	75,935,884

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 09, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Registrant Name	KINGOLD JEWELRY, INC.
Entity Central Index Key	0001089531
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	KGJI
Entity Common Stock, Shares Outstanding		66,113,502
Entity Emerging Growth Company	false
Entity Small Business	false

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CONDENSED CONSOLIDATED BALANCE SHEETS ¥ in Millions	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
ASSETS
Cash	$ 13,245,436	$ 4,997,125
Restricted cash	6,567,855	5,534,551
Accounts receivable	198,214	768,167
Inventories	147,264,405	135,042,713
Investments in gold	922,084,336	1,562,943,153
Other current assets and prepaid expenses	808,809	100,592
Value added tax recoverable	254,820,263	353,732,758
Total current assets	1,344,989,318	2,063,119,059
Property and equipment, net	5,903,782	7,299,643
Restricted cash	8,927,100	7,392,721
Investments in gold	1,071,005,836	957,124,267
Other assets	286,155	302,072
Deferred income tax assets	22,054,343	6,677,675
Land use right	399,007	429,915
Total long-term assets	1,108,576,223	979,226,293
TOTAL ASSETS	2,453,565,541	3,042,345,352
CURRENT LIABILITIES
Short term loans	621,518,946	962,101,746
Other payables and accrued expenses	18,845,062	18,913,863
Related party loan	72,798,218	307,389,647
Due to related party	3,592,726	2,630,301
Income tax payable	1,855,002	1,208,742
Other taxes payable	2,818,412	2,615,463
Total current liabilities	721,428,366	1,294,859,762
Related party loans	451,657,343	567,843,066
Long term loans	926,174,267	789,410,137
TOTAL LIABILITIES	2,099,259,976	2,652,112,965
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of September 30, 2018 and December 31, 2017	0	0
Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of September 30, 2018 and December 31, 2017	66,113	66,113
Additional paid-in capital	80,393,541	80,377,449
Retained earnings
Unappropriated	343,712,836	303,666,611
Appropriated	967,543	967,543
Accumulated other comprehensive income (loss), net of tax	(70,834,468)	5,154,671
Total Equity	354,305,565	390,232,387
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 2,453,565,541	$ 3,042,345,352

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	500,000	500,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	66,113,502	66,113,502
Common stock, shares outstanding	66,113,502	66,113,502

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
NET SALES	$ 626,171,072	$ 584,511,639	$ 1,844,491,390	$ 1,352,666,916
COST OF SALES
Cost of sales	(564,685,762)	(505,608,405)	(1,654,427,318)	(1,208,376,017)
Depreciation	(255,546)	(300,716)	(801,384)	(806,047)
Total cost of sales	(564,941,308)	(505,909,121)	(1,655,228,702)	(1,209,182,064)
GROSS PROFIT	61,229,764	78,602,518	189,262,688	143,484,852
OPERATING EXPENSES
Selling, general and administrative expenses	2,487,346	3,779,728	7,597,545	10,546,253
Stock compensation expenses	5,364	5,364	16,092	27,650
Depreciation	146,475	135,442	406,962	367,112
Amortization	2,767	2,832	8,703	8,330
Total operating expenses	2,641,952	3,923,366	8,029,302	10,949,345
INCOME FROM OPERATIONS	58,587,812	74,679,152	181,233,386	132,535,507
OTHER INCOME (EXPENSES)
Other Income	64,433	661	64,433	66,158
Interest Income	562,294	633,617	1,384,438	1,824,924
Interest expense, including amortization of debt issuance costs of $3,482,031 and $1,347,832 for the three months, and $8,042,451 and $7,751,818 for the nine months ended September 30, 2018 and 2017, respectively	(41,479,730)	(36,585,321)	(128,898,077)	(113,155,443)
Total other expenses, net	(40,853,003)	(35,951,043)	(127,449,206)	(111,264,361)
INCOME FROM OPERATIONS BEFORE TAXES	17,734,809	38,728,109	53,784,180	21,271,146
INCOME TAX PROVISION (BENEFIT)
Current	1,787,717	7,778,520	9,214,312	12,996,602
Deferred	2,699,588	1,962,539	4,523,643	(7,440,305)
Total income tax provision	4,487,305	9,741,059	13,737,955	5,556,297
NET INCOME	13,247,504	28,987,050	40,046,225	15,714,849
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) related to investments in gold, net of tax	(18,935,552)	27,074,547	(56,908,875)	75,935,884
Foreign currency translation gains (loss)	(13,077,661)	4,455,163	(19,080,264)	12,817,501
Total Other comprehensive income (loss)	(32,013,213)	31,529,710	(75,989,139)	88,753,385
COMPREHENSIVE INCOME (LOSS)	$ (18,765,709)	$ 60,516,760	$ (35,942,914)	$ 104,468,234
Earnings per share
Basic	$ 0.20	$ 0.44	$ 0.61	$ 0.24
Diluted	$ 0.20	$ 0.44	$ 0.60	$ 0.24
Weighted average number of shares
Basic	66,113,502	66,049,726	66,113,502	66,029,266
Diluted	66,121,121	66,484,717	66,311,149	66,337,069

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Amortization of Debt Issuance Costs	$ 3,482,031	$ 1,347,832	$ 8,042,451	$ 7,751,818

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 40,046,225	$ 15,714,849
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Depreciation and amortization	1,208,346	1,173,159
Amortization of intangible assets	8,703	8,330
Amortization of debt issuance costs included in interest expense	8,042,451	7,751,818
Share based compensation for services and warrants expense	16,092	27,650
Inventory valuation allowance	0	0
Deferred tax provision (benefit)	4,523,643	(7,440,305)
Changes in operating assets and liabilities
Accounts receivable	558,165	647,049
Inventories	321,200,297	(119,627,463)
Other current assets and prepaid expenses	(752,148)	185,892
Value added tax recoverable	84,623,088	(56,530,224)
Other payables and accrued expenses	961,903	4,331,048
Customer deposits	(192,313)	0
Income tax payable	748,416	7,725,853
Other taxes payable	359,224	482,337
Net cash provided by (used in) operating activities	461,352,092	(145,550,007)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(491,136)	(1,551,847)
Investments in gold	0	(358,279,503)
Net cash used in investing activities	(491,136)	(359,831,350)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from other loans – short term	0	169,103,063
Repayments of other loans – short term	(554,840,248)	(147,212,224)
Proceeds from other loans – long term	435,804,951	96,966,135
Repayments of other loans – long term	0	(102,695,952)
Proceeds from related party loans – short term	0	293,836,774
Repayments of related party loans – short term	(230,227,311)	0
Proceeds from related party loans – long term	443,110,831	771,321,531
Repayments of related party loans – long term	(534,050,005)	(609,711,305)
Payments of loan origination fees	(6,578,966)	(4,114,687)
Repayment of third party loans	0	(29,383,677)
(Repayment of) borrowings from related party	965,643	(5,212,812)
Proceeds from exercise of warrants	0	113,562
Net cash provided by (used in) financing activities	(445,815,105)	433,010,408
EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH	(4,229,857)	2,619,437
NET INCREASE DECREASE IN CASH AND RESTRICTED CASH	10,815,994	(69,751,512)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD	17,924,397	81,677,623
CASH AND RESTRICTED CASH, END OF PERIOD	28,740,391	11,926,111
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense	120,133,935	92,580,544
Cash paid for income tax	8,465,896	5,270,750
NON-CASH INVESTING AND FINANCING ACTIVITIES
Investments in gold obtained in a lease from a related party and fully repaid	0	132,748,925
Investments in gold transferred to inventories	557,866,549	350,761,730
Unrealized gain (loss) on investments in gold, net of tax	$ (56,908,875)	$ 75,935,884

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Kingold Jewelry, Inc. (“Kingold” or the “Company”) have been prepared in accordance with generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended September 30, 2018   are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 15, 2018 and subsequently amended on March 26, 2018.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation 

The accompanying unaudited condensed consolidated financial statements include the financial statements of Kingold, Dragon Lead, Wuhan Vogue-Show and Wuhan Kingold. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant and equipment, intangible assets, the recoverability of long-lived assets, inventory valuation, allowance for doubtful accounts, deferred income tax, allowance for investments in gold. Actual results could differ from those estimates.

Cash

Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains most of the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.

Restricted Cash

The Company adopted Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows: Restricted Cash” during the first quarter of 2018. This ASU applies to all entities that have restricted cash or restricted cash equivalents to be presented in the statement of cash flows under Topic 230.

As of September 30, 2018 and December 31, 2017, the Company had restricted cash (current and non-current) of $15,494,955 and $12,927,272, respectively. All restricted cash was related to the various loans with banks and financial institutions – see Note 5 – Loans.

Accounts Receivable

The Company generally receives cash payment upon delivery of a product, but may extend unsecured credit to its customers in the ordinary course of business. The Company mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history of the customers and current relationships with them. As of September 30, 2018 and December 31, 2017, there was no allowance recorded as the Company considers all of the accounts receivable fully collectible. 

Inventories

Inventories are stated at the lower of cost and net realizable value, and cost is calculated on the weighted average basis. As of September 30, 2018 and December 31, 2017, there was no lower of cost or market adjustment because the carrying value of the Company’s inventories was lower than the current and expected market price of gold. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overhead and other costs incurred in bringing the inventories to their present condition.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life. 

Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. The estimated useful lives used in connection with the preparation of the financial statements are as follows:

	Estimated Useful Life
Buildings	30 years
Plant and machinery	15 years
Motor vehicles	10 years
Office furniture and electronic equipment	5 – 10 years
Leasehold improvements	5 years

Land Use Right

Under PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. Amortization is provided over the respective useful lives, using the straight-line method. Estimated useful life is 50 years, and is determined in connection with the term of the land use right. 

Long-Lived Assets

Certain assets such as property, plant and equipment and construction in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets that are held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. There were no events or changes in circumstances that triggered a review of impairment of long-lived assets as of September 30, 2018 and December 31, 2017. 

Fair Value of Financial Instruments

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: 

Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect management’s assumptions based on the best available information.

The carrying value of accounts receivable, other current assets and prepaid expenses, short-term loans, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments. The Company determined that the carrying value of the long term loans approximated their fair value by comparing the stated loan interest rate to the rate charged by similar financial institutions. The Company uses quoted prices in active markets to measure the fair value of investments in gold.

Investments in Gold

The Company pledged the gold leased from related party and part of its own gold inventory to meet the requirements of bank loans. The pledged gold will be available for sale upon the repayment of the bank loans. The Company classified these pledged gold as investments in gold, and carried at fair market value, with the unrealized gains and losses, included in the determination of comprehensive income (loss) and reported in equity. The fair market value of the investments in gold is determined by quoted market prices at Shanghai Gold Exchange.

Revenue Recognition

The Company adopted Accounting Standards Codification (“ASC”) 606 in the first quarter of 2018 using the modified retrospective approach. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

The Company’s revenues are primarily composed of sales proceeds collected from sales of branded products and customized product fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customers.

Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s branded products and accessories to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers. The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales in the accompanying consolidated statements of operations and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.

Sαles of brαnded products

The Company offers a wide range of in-house designed products including but not limited to gold necklaces, rings, earrings, bracelets, and pendants. In our sales of branded products, the Company only sells on a wholesale basis to distributors and retailers. Pricing of the jewelry products is made at the time of sales contracts are made, based on prevailing market price of gold. These sales contracts are primarily based on a customer’s purchase order followed by the Company’s order acknowledgement, and may also include a master supply or distributor agreement. The performance obligations are generally satisfied at a point in time when the Company ships the product from the Company’s facility. Payment term is typically due within 30 days. 

Customized production fees

In the customized product arrangement, the Company receives orders from other jewelry companies who engage to the Company to design and produce 24-karat jewelry and Chinese ornaments using gold they supply to the Company. Although the Company assumes the responsibilities to design and manufacture the related Jewelry products, the Company does not assume inventory risk and does not determine the product design specification. As a result, the Company is considered the agent in this arrangement for revenue recognition purposes. All of the sales contracts in this customized product arrangements contain performance obligations satisfied at a point in time when we complete the design and ship the product from the Company’s facility. The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services have been performed and (ii) collectability is reasonably assured.

The Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and concluded that there were no differences in the pattern of revenue recognition as a result of the adoption of ASC 606.

Contract Balances and Remaining Performance Obligations

Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. The Company contract assets, consist primarily of accounts receivable related to sales of products to customers when revenue is recognized prior to payment and the Company has an unconditional right to payment. The Company had accounts receivable related to revenues from contracts with customers of $198,214 and $768,167 as of September 30, 2018 and December 31, 2017. The Company’s contract liabilities in terms of customer deposit are immaterial.

The Company did not disclose information about remaining performance obligations pertaining to the customer contracts that either (i) contracts with an original expected term of one year or less, or (ii) contracts for which revenue is recognized in proportion to the amount the Company has the right to invoice for products sold or services rendered. 

Revenue by category

Revenue by major product line was as follows for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Branded production sales	$	612,836,724	$	568,620,635	$	1,808,294,992	$	1,318,304,351
Customized production sales		13,279,852		15,746,535		35,961,620		34,125,524
Trade in product sales		54,496		59,532		103,514		109,405
Other		-		84,937		131,264		127,636
	$	626,171,072	$	584,511,639	$	1,844,491,390	$	1,352,666,916

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at September 30, 2018 and December 31, 2017.

To the extent applicable, the Company records interest and penalties as a general and administrative expense. The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax years 2012 and after. As of September 30, 2018, the tax years ended December 31, 2012 through December 31, 2017 for the Company’s PRC subsidiaries remain open for statutory examination by PRC tax authorities.

Foreign Currency Translation

Kingold, as well as its wholly owned subsidiary, Dragon Lead, maintain accounting records in United States Dollars (“US$”), whereas Wuhan Vogue-Show and Wuhan Kingold maintain their accounting records in Renminbi (“RMB”), which is the primary currency of the economic environment in which their operations are conducted. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated Other Comprehensive Income (Deficit)”.

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: 

	September 30, 2018		September 30, 2017		December 31, 2017
Balance sheet items, except for equity, as of the period ended	US$	1=RMB 6.8683	US$	1=RMB 6.6549	US$	1=RMB 6.5064
Amounts included in the statements of operations and cash flows for the periods presented	US$	1=RMB 6.5153	US$	1=RMB 6.8065	US$	1=RMB  6.7570

Comprehensive income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The unrealized gain or loss resulting from the change of the fair market value from the gold investments and the foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ are reported in other comprehensive income (loss) in the consolidated statements of operations   and comprehensive income.

Earnings Per Share (“EPS”)

Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (i.e., options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Share or Stock-Based compensation

For employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award. For the non-employee stock-based awards, the fair value of the awards to non-employees are measured every reporting period based on the value of the Company’s common stock. 

Debts Issuance Costs

Debt issuance cost related to a recognized debt liability is presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. Amortization of debt issuance costs is calculated using the effective interest method and is included as a component of interest expense.  

Risks and Uncertainties

The jewelry industry generally is affected by fluctuations in the price and supply of diamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. The Company potentially has exposure to the fluctuation in gold commodity prices as part of its normal operations. In the past, the Company has not hedged its requirement for gold or other raw materials through the use of options, forward contracts or outright commodity purchasing. A significant increase in the price of gold could increase the Company’s production costs beyond the amount that it is able to pass on to its customers, which would adversely affect the Company’s sales and profitability. A significant disruption in the Company’s supply of gold, or other commodities, could decrease its production and shipping levels, materially increase its operating costs, and materially and adversely affect its profit margins. Shortages of gold, or other commodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which the Company purchases its raw materials, may adversely affect its ability to maintain production of its products and sustain profitability. Although the Company generally attempts to pass on increased commodity prices to its customers, there may be circumstances in which it is not able to do so. In addition, if the Company were to experience a significant or prolonged shortage of gold, it would be unable to meet its production schedules and to ship products to its customers in a timely manner, which would adversely affect its sales, margins and customer relations.  

Furthermore, the value of the Company’s inventory may be affected by commodity prices. The Company records the value of its inventory using the lower of cost and net realizable value, cost calculated on the weighted average method. As a result, decreases in the market value of precious metals such as gold would result in a lower stated value of the Company’s inventory, which may require it to take a charge for the decrease in the value of its inventory.

The Company also allocated significant portion of its inventories as investment in gold and pledged as collateral to secure loans from banks and financial institutions, so there is a risk that the Company is unable to utilize its inventories, and there could be a disruption in the Company’s supply of gold which could decrease its production and shipping levels. In addition, the investment in gold may be deficient if the fair market value of the pledged gold in connection with the loans declines, then the Company may need to increase the pledged gold inventory for the loan collateral or increase restricted cash. 

The Company’s operations are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. In addition, the Company only controls Wuhan Kingold through a series of agreements. Although the Company believes the contractual relationships through which it controls Wuhan Kingold comply with current licensing, registration and regulatory requirements of the PRC, it cannot assure you that the PRC government would agree, or that new and burdensome regulations will not be adopted in the future. If the PRC government determines that the Company’s structure or operating arrangements do not comply with applicable law, it could revoke the Company’s business and operating licenses, require it to discontinue or restrict its operations, restrict its right to collect revenues, require it to restructure its operations, impose additional conditions or requirements with which the Company may not be able to comply, impose restrictions on its business operations or on its customers, or take other regulatory or enforcement actions against the Company that could be harmful to its business. If such agreements were cancelled, modified or otherwise not complied with, the Company would not be able to retain control of this consolidated entity and the impact could be material to the Company’s operations. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, this may not be indicative of future results.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which contains certain provisions and practical expedients in response to identified implementation issues; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which is intended to clarify the Codification or to correct unintended application of guidance. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The Company adopted ASU 2014-09 and the related ASUs on January 1, 2018 using the modified retrospective method, which will not result in a cumulative catch-up adjustment to the opening balance sheet of retained earnings at the effective date.

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements.

On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial position, statements of operations and cash flows. 

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INVENTORIES

9 Months Ended

Sep. 30, 2018

Inventory, Net [Abstract]

INVENTORIES

NOTE 3 – INVENTORIES

Inventories as of September 30, 2018 and December 31, 2017 consisted of the following:

	As of
	September 30, 2018		December 31, 2017
	(unaudited)
Raw materials (A)	$	32,787,260	$	-
Work-in-progress (B)		71,524,413		90,406,021
Finished goods (C)		42,952,732		44,636,692
Total inventory	$	147,264,405	$	135,042,713

(A) Included 964,769 grams of Au9999 gold as of September 30, 2018 and Nil Au9999 gold as of December 31, 2017.

(B) Included 2,110,166 grams of Au9999 gold as of September 30, 2018 and 2,508,182 grams of Au9999 gold as of December 31, 2017.

(C) Included 1,258,327 grams of Au9999 gold as of September 30, 2018 and 1,231,586 grams of Au9999 gold as of December 31, 2017.

No lower of cost or net realizable value adjustment was recorded at September 30, 2018 and December 31, 2017, respectively.

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PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

NOTE 4 – PROPERTY AND EQUIPMENT, NET

The following is a summary of property and equipment as of September 30, 2018 and December 31, 2017:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
Buildings	$	2,288,298		$	2,415,577
Plant and machinery		17,722,789			18,615,951
Motor vehicles		240,833			254,228
Office and electric equipment		1,363,581			1,415,194
Leasehold improvements		1,561,822			1,623,027
Subtotal		23,177,323			24,323,977
Less: accumulated depreciation		(17,273,541	)		(17,024,334	)
Property and equipment, net	$	5,903,782		$	7,299,643

Depreciation and amortization expenses for the three and nine months ended September 30, 2018 was $402,021 and $1,208,346, respectively. Depreciation and amortization expenses for the three and nine months ended September 30, 2017 was $436,158 and $1,173,159, respectively.

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LOANS

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

LOANS

NOTE 5 – LOANS

Short term loans consist of the following: 

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(a)   Loan payable to Aijian Trust	$	-		$	46,108,447
(b)   Loans payable to Evergrowing Bank - Qixia Branch		-			153,694,824
(c)   Loans payable to Evergrowing Bank - Yantai Huanshan Road Branch		72,798,218			153,233,739
(d)   Loans payable to Sichuan Trust - gross amount		-			230,542,236
Loans payable to Sichuan Trust - deferred financing cost		-			(2,239,292	)
(e)   Loans payable to China Aviation Capital - gross amount		-			44,571,499
Loans payable to China Aviation Capital - deferred financing cost		-			(457,926	)
(f)   Loans payable to Huarong Trust - gross amount		-			146,163,777
Loans payable to Huarong Trust - deferred financing cost		-			(1,324,677	)
(g)   Loans payable to China Construction Investment Trust - gross amount		436,741			46,108,447
Loans payable to China Construction Investment Trust - deferred financing cost		-			(167,796	)
(h)   Loans payable to Zheshang Jinhui Trust		80,078,040			84,532,153
(i)    Loans payable to Zhongjiang International Trust		58,238,574			61,477,929
Loans payable to Zhongjiang International Trust - deferred financing cost		(31,277	)		(141,614	)
(j)    Loan payable to China Aviation Trust - gross amount		45,134,895			-
Loan payable to China Aviation Trust - deferred financing cost		(215,164	)		-
(k)   Loans payable to National Trust - gross amount		50,958,753			-
Loan payable to National Trust - deferred financing cost		(76,942	)		-
(l)    Loans payable to Anxin Trust		283,913,050			-
(m)  Loans payable to China Construction Bank		30,284,058			-
Total short term loans	$	621,518,946		$	962,101,746

(a) Loan payable to Aijian Trust

The Company fully repaid loan to Aijian Trust upon maturity on May 4, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

(b) Loans payable to Evergrowing Bank – Qixia Branch

The Company fully repaid loan to Evergrowing Bank – Qixia Branch upon maturity and the pledged gold was subsequent returned to the Company.

(c) Loans payable to Evergrowing Bank – Yantai Huanshan Road Branch

From February 24, 2016 to March 24, 2016, Wuhan Kingold signed ten Loan Agreements with the Yantai Huangshan Road Branch of Evergrowing Bank for loans of approximately $145.6 million (RMB 1 billion) in aggregate. The purpose of the loans was for purchasing gold. The terms of loans are two years and bear fixed interest of 4.75% per year. Based on the loan repayment plan as specified in the loan agreements, $145,596 (RMB 1 million) was repaid in August 2016, $145,596 (RMB 1 million) was repaid on February 23, 2017 and another $145,596 (RMB 1 million) was repaid in August 23, 2017. The Company repaid $72.4 million (RMB 497 million) to Evergrowing bank Yantai Huangshan Road Branch upon maturity.

For the remaining balance of $72.8 million (RMB 500 million), the Company entered into a loan extension agreement with the bank to extend the loan borrowing period for additional seven months until October 2018, with the new interest rate of 6.5% per year. The loans are secured by 2,735 kilograms of Au9999 gold in aggregate with carrying value of approximately $92.6 million (RMB 635.9 million) and are guaranteed by the CEO and Chairman of the Company. Upon the maturity of these loans, the Company entered into a series of supplemental agreements with Yantai Huanshan Road Branch of Evergrowing Bank to extend the term of the loan for additional 12 months.

(d) Loans payable to Sichuan Trust

On September 7, 2016, the Company entered into two trust loan agreements with the Sichuan Trust Ltd. (“Sichuan Trust”) to borrow a maximum of approximately $291.2 million (RMB 2 billion) as working capital loan. The required annual interest rate is 8.46%. The Company paid the first interest payment equal to 1.21% of the principle received as loan origination fee on annual basis, then the rest of interest payments are calculated based on a fixed interest rate of 7.25%. The Company pledged 7,258 kilograms of Au9999 gold with carrying value of approximately $245.7 million (RMB 1.7 billion) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

These loans originally have maturity dates between September 20, 2018 and November 30, 2018. During the three months ended September 30, 2018, these loans were extended to have maturity dates between November 20, 2019 and January 30, 2020. Therefore, these loans were recorded as long term. The required annual interest rate changed to from 8.46% to 8.1%.

The Company paid approximately $5.3 million (RMB 36.3 million) as loan origination fee in 2017 and 2016 for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.6 million (RMB 4.4 million) and $2.1 million (RMB 13.4 million) deferred financing cost was amortized, respectively. For three months and nine months ended September 30, 2017, approximately $0.4 million (RMB 2.3 million) and $1 million (RMB 6.8 million) deferred financing cost was amortized, respectively.

(e) Loans payable to China Aviation Capital

On September 7, 2016, the Company entered into a trust loan agreement with China Aviation Capital Investment Management (Shenzhen) (“China Aviation Capital”) to borrow a maximum of approximately $87.4 million (RMB 600 million) as working capital loan. The first installment of the loan was approximately $42.2 million (RMB 290 million) to mature on September 6, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.5% and a one-time consulting fee of 3% based on the principal amount received as loan origination fee. The Company pledged 1,473 kilograms of Au9999 gold with carrying value of approximately $49.9 million (RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The loan was extended upon maturity for another 18 months with a new maturity date of March 5, 2020. Therefore, the $42.2 million loan from China Aviation Capital was recorded as long term at September 30, 2018. The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee.

The Company paid totally approximately $1.3 million (RMB 8.7 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.8 million) and $0.5 million (RMB 3.0 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.1 million) and $0.5 million (RMB 3.3 million) deferred financing cost was amortized, respectively.

(f) Loans payable to Huarong Trust

The Company fully repaid loan to Huarong International Trust Co. Ltd. (“Huarong Trust”) upon maturity on August 15, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

The Company paid approximately $2.1 million (RMB 14.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.5 million) and $1.3 million (RMB 8.6 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.3 million (RMB 2 million) deferred financing cost was amortized.

(g) Loans payable to China Construction Investment Trust

On August 29, 2016, the Company entered into a trust loan agreement with China Construction Investment Trust to borrow a maximum of approximately $43.7 million (RMB 300 million) as working capital loan for the purpose of purchasing of gold solely with a period of 24 months from October 9, 2016 to October 9, 2018. For the loan obtained the Company is required to make interest payments are calculated based on a fixed annual interest rate. The interest payment is divided into two parts: (1) 1% of the principal amount received need to be paid before December 25, 2016 as loan origination fee; (2) the rest of interest payments are calculated based on a fixed interest rate of 7.5% and due on quarterly basis. The Company pledged 1,447 kilograms of Au9999 gold with carrying value of approximately $49.0 million (RMB 336.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3 million) to secure the loan. During the three months ended September 30, 2018, the Company repaid approximately $43.2 million (RMB 297 million), with an outstanding balance of approximately $0.5 million (RMB 3 million).

The Company paid approximately $0.4 million (RMB 3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.3 million) and $0.2 million (RMB 1.1 million) deferred financing cost was amortized, respectively. For the three months and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.3 million) and $0.2 million (RMB 1.0 million) deferred financing cost was amortized, respectively.

(h) Loans payable to Zheshang Jinhui Trust

On November 7, 2016, the Company entered into a trust loan agreement with Zheshang Jinhui Trust to borrow a maximum of approximately $80.1 million (RMB 550 million) for purchasing gold with a period of 24 months from principle receiving date November 15, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.8%. The Company pledged 2,708 kilograms of Au9999 gold with carrying value of approximately $91.7 million (RMB 629.6 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.8 million (RMB 5.5 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

(i) Loans payable to Zhongjiang International Trust

On December 23, 2016, the Company entered into a trust loan agreement with Zhongjiang International Trust to borrow a maximum of approximately $58.2 million (RMB 400 million) for purchasing gold with a period of 24 months from December 23, 2016 to December 22, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 8.75%. The Company pledged 2,104 kilograms of Au9999 gold with carrying value of approximately $71.2 million (RMB 489.2 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.3 million (RMB 1.9 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.03 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(j) Loans payable to China Aviation Trust

On January 25, 2017, Wuhan Kingold entered into a trust loan agreement with China Aviation Trust Ltd. to borrow a maximum of approximately $45.1 million (RMB 310 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8%. The Company pledged 1,647 kilograms of Au9999 gold with carrying value of approximately $55.1 million (RMB 378.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3.1 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.5 million) deferred financing cost was amortized, respectively. For three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.2 million) deferred financing cost was amortized, respectively.

(k) Loans payable to National Trust

On February 28, 2017, Wuhan Kingold entered into a trust loan agreement with National Trust Ltd. (“National Trust”) to borrow a maximum of approximately $50.9 million (RMB 350 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8.617%. The Company pledged 1,745 kilograms of Au9999 gold with carrying value of approximately $59.4 million (RMB 408.1 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.4 million (RMB 2.6 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.9 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(l) Loans payable to Anxin Trust Co., Ltd

In January 2016, Wuhan Kingold signed a Collective Trust Loan Agreement with Anxin Trust Co., Ltd. (“Anxin Trust”). The agreement allowed the Company to access of approximately $436.8 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% or 11% with various maturity dates from February 19, 2019 to October 12, 2019. The purpose of this trust loan was to provide working capital for the Company to purchase gold. The loan is secured by 15,450 kilograms of Au9999 gold in aggregate with carrying value of approximately $523.0 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. During the nine months ended September 30, 2018, the Company repaid approximately $80.1 million (RMB 550 million). The Company also made a restricted deposit of approximately $3.5 million (RMB 24 million) to secure the rest of these loans. The deposit will be refunded when the loan is repaid upon maturity.

(m) Loan payable to China Construction Bank

In September 2018, Wuhan Kingold signed a Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $17.2 million (RMB 118 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 19, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received full amount from the loan.

In September 2018, Wuhan Kingold signed a second Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $25.0 million (RMB 172 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 25, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received approximately $13.1 million (RMB 90 million) from the loan.

The above mentioned two loans were guaranteed by the CEO and Chairman of the Company. In addition, related party Wuhan Huayuan pledged fixed asset buildings as collateral to further secure these loans. The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%.

Interest expense for all of the loans mentioned above amounted to $21.3 million and $62.8 million for the three and nine months ended September 30, 2018, respectively. Interest expense for short-term loan for the three and nine months ended September 30, 2017 was $9.7 million and $29.7 million, respectively.

The weighted average interest rate for the short term loans for the nine months ended September 30, 2018 and 2017 was 8.9% and 6.5%, respectively.

Long-term loans consist of the following:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(n)   Loans payable to Minsheng Trust - gross amount	$	218,394,654		$	-
Loans payable to Minsheng Trust - deferred financing cost		(2,370,401	)		-
(o)  Loans payable to Anxin Trust		72,798,218			461,084,471
(p)  Loans payable to Chang’An Trust - gross amount		142,691,690			153,694,824
Loans payable to Chang’An Trust - deferred financing cost		(880,604	)		(1,563,230	)
(q)   Loans payable to China Aviation Trust - gross amount		-			47,645,395
Loans payable to China Aviation Trust - deferred financing cost		-			(761,674	)
(r)   Loans payable to China Aviation Capital		42,222,966			-
(s)   Loans payable to National Trust - gross amount		-			53,793,188
Loans payable to National Trust - deferred financing cost		-			(228,068	)
(t)   Loans payable to Zheshang Jinhui Trust (new) - gross amount		91,929,590			76,847,412
Loans payable to Zheshang Jinhui Trust (new) - deferred financing cost		(448,242	)		(1,102,181	)
(u)   Loans payable to Sichuan Trust - gross amount		218,394,654			-
Loans payable to Sichuan Trust - deferred financing cost		(171,345	)		-
(v)   Loan payable to Dongguan Trust		145,596,435			-
Loan payable to Dongguan Trust - deferred financing cost		(1,983,348	)		-
Total long term loans, net of deferred financing costs	$	926,174,267		$	789,410,137

(n) Loan payable to Minsheng Trust

On December 26, 2017, the Company entered into a Trust Loan Contract in the amount of no more than approximately $218.4 million (RMB 1.5 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 24-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 30 months. The Trust Loan bears interest at a fixed annual rate of 9.2%. The loan is secured by 7,887 kilograms of Au9999 gold in aggregate with carrying value of approximately $270.6 million (RMB 1.9 billion). The loan is also guaranteed by the CEO and Chairman of the Company. The Company made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

The Company paid approximately $3.8 million (RMB 25.9 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $1.5 million (RMB 9.6 million) deferred financing cost was amortized.

(o) Loans payable to Anxin Trust (see Note 5 (l) above)

(p) Loans payable to Chang’An Trust

In September 2017, Wuhan Kingold entered into a new Trust Loan Contract with Chang’An Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 10% with a term of 24 months and is secured by 4,784 kilograms of Au9999 gold in aggregate with carrying value of approximately $163.6 million (RMB 1.1 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. On September 30, 2018, the Company made repayment of approximately $2.9 million (RMB 20 million). Subsequently on October 31, 2018, the Company made repayment of approximately $25.9 million (RMB 178.2 million) to Chang'An Trust.

The Company paid approximately $1.5 million (RMB 11 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) and $0.6 million (RMB 4.1 million) deferred financing cost was amortized, respectively.   

(q) Loans payable to China Aviation Trust (see Note 5 (j) above)

(r) Loans payable to China Aviation Capital (see Note 5 (e) above)

(s) Loans payable to National Trust (see Note 5 (k) above)

(t) Loans payable to Zheshang Jinhui Trust (new)  

In November 2017, Wuhan Kingold entered into a new Trust Loan Contract with Zheshang Jinhui Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 7.7% with a term of 24 months and is secured by 3,264 kilograms of Au9999 gold in aggregate with carrying value of approximately $110.4 million (RMB 758.5 million). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received an aggregate of approximately $91.9 million (RMB 631.4 million) from the loan. The Company also made a restricted deposit of approximately $0.92 million (RMB 6.3 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.5 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.3 million (RMB 1.9 million) and $0.9 million (RMB 5.6 million) deferred financing cost was amortized, respectively.

(u) Loans payable to Sichuan Trust (see Note 5 (d) above)

(v) Loans payable to Dongguan Trust

In July 2018, Wuhan Kingold entered into a gold income rights transfer and repurchase agreement (the “Agreement”) with Dongguan Trust. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this Agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $2.2 million (RMB 15 million) as loan origination fee for obtaining this loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) deferred financing cost was amortized.

Total interest expense for the above long-term loans was approximately $15.3 million and $53.0 million for the three and nine months ended September 30, 2018, respectively. Total interest expense for the above long-term loans was approximately $17.4 million and $66.2 million for the three and nine months ended September 30, 2017, respectively.

The weighted average interest rate for the long-term loans for the nine months ended September 30,2018 and 2017 was 8.9% and 9.8%, respectively.

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INVESTMENTS IN GOLD

9 Months Ended

Sep. 30, 2018

Schedule of Investments [Abstract]

INVESTMENT IN GOLD

NOTE 6 – INVESTMENTS IN GOLD

As of September 30, 2018 and December 31, 2017, the Company allocated a total of 57,476 and 59,523 kilograms of Au9999 gold in its inventories with carrying value of approximately $1,953.6 million and $2,131.6 million, respectively, as investments in gold for obtaining various loans from banks and financial institutions. (See Note 5)

As of September 30, 2018 and December 31, 2017, the Company pledged a total of 2,655 and 10,225 kilograms of gold, respectively, as guarantee for Wuhan Kangbo Biotech Limited (“Kangbo”), a related party which is controlled by the CEO and Chairman of the Company, for obtaining total amount of RMB 500 million and 2 billion loan from Evergrowing Bank Huanshan Road Branch, respectively. (See Note 7)

As of September 30, 2018 and December 31, 2017, the Company pledged a total of 523 kilograms of gold and pledged as collateral for obtaining total amount of RMB 100 million loan from Wuhan Huayuan Technology Development Limited (“Huayuan”), a related party which is controlled by the CEO and Chairman of the Company. (See Note 7)   

As of September 30, 2018, a total of 32,593 kilograms of Au9999 gold with fair market value of approximately $1,071 million was pledged for long term loans, and therefore classified as non-current investments in gold. The remaining investments in gold of 28,061 kilograms of Au9999 gold with fair market value of approximately $922.1 million was classified as current assets as of September 30, 2018.

As of December 31, 2017, the total of 26,689 kilograms of Au9999 gold with fair market value of approximately $957.1 million was pledged for long-term bank loans, and therefore classified as non-current investments in gold. The remaining investments in gold of 43,582 kilograms of Au9999 gold with fair market value of approximately $1,562.9 million was classified as current assets as of December 31, 2017. 

As of September 30, 2018, the fair market value of a total of 60,654 kilograms of Au9999 gold investments decreased by $77.0 million, which resulted in net unrealized loss of $56.9 million, net of tax for the nine months ended September 30, 2018. The Company recorded the change in unrealized gain (loss) as other comprehensive income (loss), net of tax.

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RELATED PARTIES LOANS

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

RELATED PARTIES LOANS

NOTE 7 – RELATED PARTIES LOANS 

(a) Loans payable to Wuhan Kangbo Biotech Limited

On January 13, 2017, Wuhan Kingold entered into a loan agreement with Wuhan Kangbo Biotech Limited (“Kangbo”), a related party which is controlled by the CEO and Chairman of the Company, for a loan of approximately $145.6 million (RMB 1 billion). The loan had one-year term from January 12, 2017 to January 10, 2018 and bore fixed interest of 4.75%. In order for Kangbo to obtain the loan from the bank, Wuhan Kingold signed the guarantee agreement with Evergrowing Bank - Yantai Huangshan Road Branch on January 11, 2017. As a guarantor of the bank loan, Wuhan Kingold pledged 5,470 kilograms of gold in aggregate with carrying value of approximately $183.0 million (RMB 1.3 billion) as collateral.

On February 20, 2017, Wuhan Kingold entered into a second loan agreement with Kangbo for a loan of approximately $145.6 million (RMB 1 billion). The loan had one-year term from February 20, 2017 to February 20, 2018 bore fixed interest of 4.75%. In order for Kangbo to obtain the loan from the bank, Wuhan Kingold signed the guarantee agreement with Evergrowing Bank - Yantai Huangshan Road Branch on February 16, 2017. As a guarantor of the bank loan, Wuhan Kingold pledged 4,755 kilograms of gold in aggregate with carrying value of approximately $163.8 million (RMB 1.1 billion) as collateral.

The Company repaid $218.4 million (RMB 1.5 billion) loans to Kangbo upon maturity in January 2018 and February 2018. 7,870 kilograms of pledged gold in Evergrowing Bank - Yantai Huanshan Road Branch were released to the Company accordingly with 2,355 kilograms are still pledged as guarantee. For the remaining $72.8 million (RMB 500 million) loan that matured on March 2, 2018, the Company entered into a loan extension agreement with Kangbo to extend the loan borrowing period for additional seven months until October 2, 2018 with additional 2,655 kilograms of gold pledged with carrying value of approximately $91.3 million (RMB 627.3 million) as collateral. Upon the maturity of the loan, the Company entered into a supplemental agreement with the related party Kangbo to extend the term of the loan for 12 months, the 2,655 kilograms of Au9999 gold will still be pledged in Yantai Huanshan Road Branch of Evergrowing Bank for Kangbo to obtain the loan.

(b) Loans payable to Wuhan Kingold Industrial Group

Between November 23, 2016 and November 29, 2016, the Company entered into multiple loan agreements of RMB 3.2 billion in aggregate with Wuhan Kingold Industrial Group, a related party which is controlled by the CEO and Chairman of the Company, as working capital loans in order to subsequently purchase raw material of gold.

On February 22, 2017, the Company signed a non-interest bearing credit line agreement with Wuhan Kingold Industrial Group for additional loan of RMB 800 million with a 5 year maturity to February 21, 2022.

In April 2017, the Company signed three additional non-interest bearing credit line agreements with Wuhan Kingold Industrial Group for additional loans totaling RMB 1.35 billion with 5 year maturity to April 2022.

In January 2018, the Company signed an agreement and borrowed additional $305.8 million (RMB 2.1 billion) non-interest bearing loan from Wuhan Kingold Industrial Group as working capital with 5 year maturity to January 2023.

During the nine months ended September 30, 2018, the Company repaid loans totaling $531.5 million (RMB 3.5 billion) and obtained loans totaling $443.1 million (RMB 2.9 billion). During the nine months ended September 30, 2017, the Company repaid loans totaling $609.7 million (RMB 4,150 million) and obtained loans totaling $756.6 million (RMB 5,150 million).

As of September 30, 2018, the aggregate borrowing amount from Wuhan Kingold Industrial Group was approximately $440.3 million (RMB 3.0 billion). The Company classified these loans as non-current liabilities. As of December 31, 2017, the aggregate borrowing amount from Wuhan Kingold Industrial Group was approximately $553.3 million (RMB 3.6 billion).

 (c)   Loans payable to Wuhan Huayuan Technology Development Limited

On June 8, 2017, Wuhan Kingold signed a loan agreement with Wuhan Huayuan Technology Development Limited (“Wuhan Huayuan”), a related party which is controlled by the CEO and Chairman of the Company, for a loan of $14.6 million (RMB 100 million). The purpose for the loans is for working capital and purchasing gold. The loan has four years term from June 8, 2017 to June 8, 2021 and bears fixed interest of 7.8%. The Company also pledged 523 kilograms of Au9999 gold with carrying value of approximately $19.1 million (RMB 124.4 million) as collateral to secure this loan.

During nine months ended September 30, 2018, the Company repaid $2.6 million (RMB 16.8 million), results in the outstanding balance of $11.3 million (RMB 77.8 million) as of September 30, 2018. Interest expense of $237,276 and $799,905 was recorded for this loan for the three and nine months ended September 30, 2018, respectively. Interest expense of $263,306 and $311,385 was recorded for this loan for the three and nine months ended September 30, 2017.

During the year ended December 31, 2017, the Company repaid $0.8 million (RMB 5.4 million), results in the outstanding balance of $14.5 million (RMB 94.6 million) as of December 31, 2017.

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OTHER RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

OTHER RELATED PARTY TRANSACTIONS

NOTE 8 – OTHER RELATED PARTY TRANSACTIONS

For the nine months ended September 30, 2018 and for the year ended December 31, 2017, the Company received working capital proceeds from the CEO and Chairman of the Company, to pay certain expense to various service providers on behalf of the Company. Such amount is unsecured and repayable on demand with no interest.

As of September 30, 2018 and December 31, 2017, the amount due to CEO and Chairman was $3,592,726 and $2,630,301, respectively.

In connection with the Company’s borrowings of approximately $30.3 million loans from China Construction Bank (Note 5), related party Wuhan Huayuan pledged fixed assets buildings as collaterals to secure these loans.

The Company leased office buildings from related party Wuhan Huayuan (see Note 15).

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INCOME TAXES

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Kingold is incorporated in the United States and has incurred net operating losses for income tax purposes through September 30, 2018, resulting in loss carry forwards of $19,260,430 for U.S. income tax purposes available for offsetting against future taxable U.S. income, expiring in 2037. Management believes that the realization of the benefits from these losses is uncertain due to its history of continuing losses in the United States. Accordingly, a full deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded. The valuation allowance as of September 30, 2018 and December 31, 2017 was $4,044,690 and $6,151,702, respectively.

Dragon Lead is incorporated in the British Virgin Islands (the “BVI”), and under current laws of the BVI, income earned is not subject to income tax.

Wuhan Vogue-Show and Wuhan Kingold are incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. The applicable tax rate is 25% for the three and nine months ended September 30, 2018  and for the year ended December 31, 2017. The Company recorded $22,054,343 and $6,677,675 deferred income tax assets as of September 30, 2018 and December 31, 2017, respectively.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has determined that the Company’s VIE in PRC does not qualify as a reportable controlled foreign corporation (“CFC”) in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result the Company assessed there was no significant income tax impact during the period in which the legislation was enacted. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the Company’s VIE in PRC does not qualify as a reportable CFC, therefore it is not necessary to record any income tax provision in connection with the transition tax on the mandatory deemed repatriation of foreign earnings at December 31, 2017. Additional work has been ongoing to further the detailed analysis of the Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2018 when the analysis is complete.

Income (loss) from continuing operations before income taxes was allocated between the U.S. and foreign components for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
United States	$	(214,312	)	$	(236,952	)	$	(1,167,190	)	$	(953,598	)
Foreign		17,949,121			38,965,061			54,951,370			22,224,744
	$	17,734,809		$	38,728,109		$	53,784,180		$	21,271,146

Significant components of the income tax provision (benefit) were as follows for the three and nine months ended September 30, 2018 and 2017: 

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Current tax provision
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		1,787,717		7,778,520		9,214,312		12,996,602
	$	1,787,717	$	7,778,520	$	9,214,312	$	12,996,602
Deferred tax provision (benefit)
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		2,699,588		1,962,539		4,523,643		(7,440,305	)
		2,699,588		1,962,539		4,523,643		(7,440,305	)
Income tax provision (benefit)	$	4,487,305	$	9,741,059	$	13,737,955	$	5,556,297

The components of deferred tax assets and deferred tax liabilities as of September 30, 2018 and December 31, 2017 consist of the following:

	As of September 30, 2018			As of December 31, 2017
Deferred tax assets:
Accrued interest	$	1,609,466		$	1,824,171
Inventory Valuation		-			4,545,708
Accrued expenses		-			330,663
Deferred financing costs on the loans		2,609,240			741,008
Unrealized loss due to change in fair value of investments in gold		19,242,937			-
Other temporary differences		-			56,062
Net operating losses from parent company		4,044,690			6,151,702
Valuation allowance		(4,044,690	)		(6,151,702	)
		23,461,643			7,497,612
Deferred tax liabilities:
Inventory Valuation	$	(840,680	)	$	-
Accrued expenses		(514,296	)		-
Other temporary differences		(52,324	)		-
Unrealized gain due to change in fair value of investments in gold		-			(819,937	)
Deferred tax assets - Net	$	22,054,343		$	6,677,675

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 10 – EARNINGS PER SHARE

For the three and nine months ended September 30, 2018, the effect of potential shares of common stock was dilutive since the exercise prices for the warrant and options were lower than the average market price for the three and nine months ended September 30, 2018. As a result, total of 7,619 and 197,647 unexercised warrants and options are dilutive, and were included in the computation of diluted EPS for the three and nine months ended September 30, 2018, respectively.

For the three and nine months ended September 30, 2017, the effect of potential shares of common stock was dilutive since the exercise prices for the warrant and options were lower than the average market price for the three months ended September 30, 2017. As a result, for the three and nine months ended September 30, 2017, total of 434,991 and 307,803 unexercised options are dilutive, respectively, and were included in the computation of diluted EPS. 

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OPTIONS

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

OPTIONS

NOTE 11 – OPTIONS

The Company recorded $5,364 and $16,092 stock-based compensation expense for the three and nine months ended September 30, 2018, respectively. The Company recorded 5,364 and $27,650 stock-based compensation expense for the three and nine months ended September 30, 2017, respectively. 

The following table summarized the Company’s stock option activity:

					Weighted Average
	Number of Options		Weighted Average Exercise Price		Remaining Life  in Years
Outstanding, December 31, 2017		3,220,000	$	1.90		3.76
Exercisable, December 31, 2017		3,191,875	$	1.91		3.73
Granted		-		-		-
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, September 30, 2018		3,220,000	$	1.90		3.01
Exercisable, September 30, 2018		3,208,750	$	1.91		3.00

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WARRANTS

9 Months Ended

Sep. 30, 2018

Warrants [Abstract]

WARRANTS

NOTE 12 – WARRANTS

On August 12, 2015, the Company signed a consulting agreement to engage Bespoke Independent Partners (“BIP”), a wholly owned subsidiary of FPIA Partners LLC to operate as a strategic advisor to Kingold in matters relating to investor relations, capital markets and shareholder value creation strategy. As the part of the agreement with BIP, an aggregate of 900,000 shares of warrants with exercise price ranging from $1.20 to $1.80 will be directly issued at no cost to BIP if certain stock performance targets are met within a three-year period. As of September 30, 2018, no warrants were issued to BIP because the performance target has not been met.

On March 29, 2016, pursuant to the consulting agreement, the Company’s obligation to issue BIP warrants to purchase 150,000 shares of the Company’s common stock for $1.20 per share (the “First Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants were exercised on June 28, 2017, and the Company is in the process of issuing the shares. Accordingly, the Company recorded $64,204 consulting expense and included in the general administrative expense. The fair value of the warrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 81%, risk free interest rate of 0.84%, and expected term of 1.25 years. The fair value of the warrants was $64,204.

On April 18, 2016, pursuant to the consulting agreement, the Company’s obligation to issue BIP warrants to purchase 150,000 shares of the Company’s common stock for $1.50 per share (the “Second Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants were scheduled to expire on July 17, 2017. Accordingly, the Company recorded $65,091 consulting expense and included in the general administrative expense. The fair value of the warrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 79.7%, risk free interest rate of 0.63%, and expected term of 1.25 years. The fair value of the warrants was $65,091.

On May 10, 2016, the Company terminated the consulting agreement. On June 27, 2016, the Company and BIP signed a settlement agreement (the “Settlement Agreement”). In connection with the Settlement Agreement, the Company and BIP agreed that (1) the First Tranche Warrants and the Second Tranche Warrants would remain vested and outstanding, (2) the third, fourth and fifth tranches of success fee warrants would be cancelled; and (3) crediting of $66,439 in outstanding but unpaid fees against the exercise price of the First Tranche Warrants would be the only payment made or required under the Service Agreement. As a result, BIP received (a) 55,365 shares, (b) warrants to purchase 94,635 shares for $1.2 per share, which expired June 28, 2017, and (c) warrants to purchase 150,000 shares for $1.50 per share, which may be exercised until July 17, 2017. As a result of the Settlement Agreement, the Company does not have any liability for future warrants issuance to BIP. During the year ended December 31, 2017, 94,635 warrants were exercised   and these shares were issued in August 2017. On July 17, 2017, the Company received notice from BIP not to exercise the remaining 150,000 warrants.

For the three and nine months ended September 30, 2018 and 2017, there were no warrants recorded in the general administrative expenses of the Company, respectively.

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CONCENTRATIONS AND RISKS

9 Months Ended

Sep. 30, 2018

Risks and Uncertainties [Abstract]

CONCENTRATIONS AND RISKS

NOTE 13 – CONCENTRATIONS AND RISKS

The Company maintains certain bank accounts in the PRC and BVI, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance. The cash and restricted cash balance held in the PRC bank accounts was $28,709,891 and $17,632,270 as of September 30, 2018 and December 31, 2017, respectively. The cash balance held in the BVI bank accounts was $Nil as of September 30, 2018 and December 31, 2017. As of September 30, 2018, the Company held $19,670 of cash balances within the United States. As of December 31, 2017, the Company held $266,012 of cash balances within the United States, which was $16,012 in excess of FDIC insurance limits of $250,000.

As of September 30, 2018 and December 31, 2017, almost 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from its subsidiaries located in the PRC.

The Company’s principal raw material used during the year was gold, which accounted for almost 100% of its total purchases for the three and nine months ended September 30, 2018 and 2017. The gold purchased by the Company was solely from the Shanghai Gold Exchange, the largest gold trading platform in the PRC.

No customer accounted for more than 10% of annual sales for the three and nine months ended September 30, 2018 and 2017.

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GOLD LEASE TRANSACTIONS

9 Months Ended

Sep. 30, 2018

Gold Lease Transactions [Abstract]

GOLD LEASE TRANSACTIONS

NOTE 14 – GOLD LEASE TRANSACTIONS

a) Gold lease transactions with related party

On January 3, 2017, Wuhan Kingold entered into a gold lease agreement with Shuntianyi to lease a total of 4,000 kilograms of Au9999 gold in aggregate with carrying value of approximately $131.1 million for a period from January 3, 2017 to February 28, 2017. The leased gold was fully returned by the Company to Shuntianyi on February 28, 2017.

As of September 30, 2018 and December 31, 2017, the Company had no leased gold outstanding from any related party, respectively.

b) Gold lease transaction with financial institutes

The Company leased gold as a way to finance its growth and will return the same amount of gold to China Construction Bank (“CCB”), Shanghai Pudong Development Bank (“SPD Bank”) and CITIC Bank at the end of the respective lease agreements. Under these gold lease arrangements, each of CCB, SPD Bank and CITIC Bank retains beneficial ownership of the gold leased to the Company and treats it as if the gold is placed on consignment to the Company. All three banks have their own representatives on the Company’s premises to monitor on a daily basis the use and security of the gold leased to the Company. Accordingly, the Company records these gold lease transactions as operating leases because the Company does not have ownership nor has it assumed the risk of loss for the leased gold.  

As of September 30, 2018 and December 31, 2017, no leased gold was outstanding and no restricted cash was pledged as collateral to safeguard any gold leases from financial institutions.

Interest expense for all gold lease arrangements for the three and nine months ended September 30, 2018 was Nil. Interest expense for all gold lease arrangements for the three and nine months ended September 30, 2017 was approximately $1,159 and $115,972, respectively, which was included in the cost of sales.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Gold Income Rights Repurchase Commitment

In connection with the Company’s borrowings of approximately $145.6 million (RMB 1 billion) from Dongguan Trust (Note 5), the Company and Dongguan Trust entered into a gold income rights transfer and repurchase agreement. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

Operating Leases

On June 27, 2016, Wuhan Kingold signed certain 5 years lease agreements with Wuhan Huayuan, a related party which is controlled by the CEO and Chairman of the Company, to rent office and store space at the Jewelry Park, commencing in July 2016 and October 2016, with aggregate annual rent of approximately $0.3 million (RMB 2.3 million). On July 1, 2017, Wuhan Kingold signed another 5 years lease agreement with Wuhan Huayuan to rent additional office space at the Jewelry Park commencing in July 2017 with aggregate annual rent of approximately $88,408 (RMB 576,000). The lease agreement with Wuhan Huayuan has been amended on November 16, 2017, pursuant to which two office spaces and a dormitory were no longer leased.

For the three and nine months ended September 30, 2018, the Company recorded $62,888 and $197,811 rent expense, respectively. For the three and nine months ended September 30, 2017, the Company recorded $108,567 and $278,251 rent expense, respectively.

As of September 30, 2018 and December 31, 2017, the Company had lease payable to Wuhan Huayuan of approximately $0.44 million and $0.26 million, respectively, which included in other payables and accrued expenses. 

For the Twelve Months Ending September 30,
2019	$	263,750
2020		263,750
2021		263,750
2022		66,306
	$	857,556

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COMPARATIVE INFORMATION

9 Months Ended

Sep. 30, 2018

Comparative Information [Abstract]

COMPARATIVE INFORMATION

NOTE 16 – COMPARATIVE INFORMATION

The Company adopted ASU No. 2016-18, “Statement of Cash Flows: Restricted Cash” on January 1, 2018. As a result, the Company retroactively applied the new standard on the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2018 to conform to the current period presentation.

The following table provides a reconciliation of cash and restricted cash reported within the condensed consolidated statement of balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statement of cash flows for the period ended September 30, 2018 and 2017:

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash	$	13,245,436	$	4,997,125	$	1,001,830	$	21,333,193
Restricted cash - current		6,567,855		5,534,551		3,170,596		52,786,257
Restricted cash – non current		8,927,100		7,392,721		7,753,685		7,558,173
Total cash and restricted cash	$	28,740,391	$	17,924,397	$	11,926,111	$	81,677,623

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SUBSEQUENT EVENT

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 17 – SUBSEQUENT EVENT

On October 10, 2018, the Company entered into a Trust Loan Contract in the amount of no more than approximately $145.6 million (RMB 1.0 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 12-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 18 months. The Trust Loan bears interest at a fixed annual rate of 10.5%. The loan is secured by 5,356 kilograms of Au9999 gold in aggregate with carrying value of approximately $208.0 million (RMB 1.4 billion). The loan is also guaranteed by the CEO and Chairman of the Company.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation 

The accompanying unaudited condensed consolidated financial statements include the financial statements of Kingold, Dragon Lead, Wuhan Vogue-Show and Wuhan Kingold. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant and equipment, intangible assets, the recoverability of long-lived assets, inventory valuation, allowance for doubtful accounts, deferred income tax, allowance for investments in gold. Actual results could differ from those estimates.

Cash

Cash

Cash includes cash on hand and demand deposits in accounts maintained with commercial banks within the PRC. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company maintains most of the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.

Restricted Cash

Restricted Cash

The Company adopted Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows: Restricted Cash” during the first quarter of 2018. This ASU applies to all entities that have restricted cash or restricted cash equivalents to be presented in the statement of cash flows under Topic 230.

As of September 30, 2018 and December 31, 2017, the Company had restricted cash (current and non-current) of $15,494,955 and $12,927,272, respectively. All restricted cash was related to the various loans with banks and financial institutions – see Note 5 – Loans.

Accounts Receivable

Accounts Receivable

The Company generally receives cash payment upon delivery of a product, but may extend unsecured credit to its customers in the ordinary course of business. The Company mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history of the customers and current relationships with them. As of September 30, 2018 and December 31, 2017, there was no allowance recorded as the Company considers all of the accounts receivable fully collectible. 

Inventories

Inventories

Inventories are stated at the lower of cost and net realizable value, and cost is calculated on the weighted average basis. As of September 30, 2018 and December 31, 2017, there was no lower of cost or market adjustment because the carrying value of the Company’s inventories was lower than the current and expected market price of gold. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overhead and other costs incurred in bringing the inventories to their present condition.

Property and equipment

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, major renewals and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life. 

Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. The estimated useful lives used in connection with the preparation of the financial statements are as follows:

	Estimated Useful Life
Buildings	30 years
Plant and machinery	15 years
Motor vehicles	10 years
Office furniture and electronic equipment	5 – 10 years
Leasehold improvements	5 years

Land Use Right

Land Use Right

Under PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land use rights are stated at cost less accumulated amortization. Amortization is provided over the respective useful lives, using the straight-line method. Estimated useful life is 50 years, and is determined in connection with the term of the land use right. 

Long-lived assets

Long-Lived Assets

Certain assets such as property, plant and equipment and construction in progress, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets that are held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. There were no events or changes in circumstances that triggered a review of impairment of long-lived assets as of September 30, 2018 and December 31, 2017. 

Fair value of financial instruments

Fair Value of Financial Instruments

The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: 

Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect management’s assumptions based on the best available information.

The carrying value of accounts receivable, other current assets and prepaid expenses, short-term loans, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments. The Company determined that the carrying value of the long term loans approximated their fair value by comparing the stated loan interest rate to the rate charged by similar financial institutions. The Company uses quoted prices in active markets to measure the fair value of investments in gold.

Investment in Gold

Investments in Gold

The Company pledged the gold leased from related party and part of its own gold inventory to meet the requirements of bank loans. The pledged gold will be available for sale upon the repayment of the bank loans. The Company classified these pledged gold as investments in gold, and carried at fair market value, with the unrealized gains and losses, included in the determination of comprehensive income (loss) and reported in equity. The fair market value of the investments in gold is determined by quoted market prices at Shanghai Gold Exchange.

Revenue recognition

Revenue Recognition

The Company adopted Accounting Standards Codification (“ASC”) 606 in the first quarter of 2018 using the modified retrospective approach. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

The Company’s revenues are primarily composed of sales proceeds collected from sales of branded products and customized product fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised services have transferred to the customers.

Revenue is recognized when obligations under the terms of a contract with the Company’s customers are satisfied. Satisfaction of contract terms occur with the transfer of title of the Company’s branded products and accessories to the customers. Net sale is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods to the wholesaler and retailers. The amount of consideration the Company expects to receive consists of the sales price adjusted for any incentives if applicable. Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales in the accompanying consolidated statements of operations and the related costs incurred by the Company are included in cost of goods sold. In applying judgment, the Company considered customer expectations of performance, materiality and the core principles of ASC Topic 606. The Company’s performance obligations are generally transferred to the customer at a point in time. The Company’s contracts with customers generally do not include any variable consideration.

Sαles of brαnded products

The Company offers a wide range of in-house designed products including but not limited to gold necklaces, rings, earrings, bracelets, and pendants. In our sales of branded products, the Company only sells on a wholesale basis to distributors and retailers. Pricing of the jewelry products is made at the time of sales contracts are made, based on prevailing market price of gold. These sales contracts are primarily based on a customer’s purchase order followed by the Company’s order acknowledgement, and may also include a master supply or distributor agreement. The performance obligations are generally satisfied at a point in time when the Company ships the product from the Company’s facility. Payment term is typically due within 30 days. 

Customized production fees

In the customized product arrangement, the Company receives orders from other jewelry companies who engage to the Company to design and produce 24-karat jewelry and Chinese ornaments using gold they supply to the Company. Although the Company assumes the responsibilities to design and manufacture the related Jewelry products, the Company does not assume inventory risk and does not determine the product design specification. As a result, the Company is considered the agent in this arrangement for revenue recognition purposes. All of the sales contracts in this customized product arrangements contain performance obligations satisfied at a point in time when we complete the design and ship the product from the Company’s facility. The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services have been performed and (ii) collectability is reasonably assured.

The Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and concluded that there were no differences in the pattern of revenue recognition as a result of the adoption of ASC 606.

Contract Balances and Remaining Performance Obligations

Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. The Company contract assets, consist primarily of accounts receivable related to sales of products to customers when revenue is recognized prior to payment and the Company has an unconditional right to payment. The Company had accounts receivable related to revenues from contracts with customers of $198,214 and $768,167 as of September 30, 2018 and December 31, 2017. The Company’s contract liabilities in terms of customer deposit are immaterial.

The Company did not disclose information about remaining performance obligations pertaining to the customer contracts that either (i) contracts with an original expected term of one year or less, or (ii) contracts for which revenue is recognized in proportion to the amount the Company has the right to invoice for products sold or services rendered. 

Revenue by category

Revenue by major product line was as follows for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Branded production sales	$	612,836,724	$	568,620,635	$	1,808,294,992	$	1,318,304,351
Customized production sales		13,279,852		15,746,535		35,961,620		34,125,524
Trade in product sales		54,496		59,532		103,514		109,405
Other		-		84,937		131,264		127,636
	$	626,171,072	$	584,511,639	$	1,844,491,390	$	1,352,666,916

Income taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at September 30, 2018 and December 31, 2017.

To the extent applicable, the Company records interest and penalties as a general and administrative expense. The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax years 2012 and after. As of September 30, 2018, the tax years ended December 31, 2012 through December 31, 2017 for the Company’s PRC subsidiaries remain open for statutory examination by PRC tax authorities.

Foreign currency translation

Foreign Currency Translation

Kingold, as well as its wholly owned subsidiary, Dragon Lead, maintain accounting records in United States Dollars (“US$”), whereas Wuhan Vogue-Show and Wuhan Kingold maintain their accounting records in Renminbi (“RMB”), which is the primary currency of the economic environment in which their operations are conducted. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated Other Comprehensive Income (Deficit)”.

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: 

	September 30, 2018		September 30, 2017		December 31, 2017
Balance sheet items, except for equity, as of the period ended	US$	1=RMB 6.8683	US$	1=RMB 6.6549	US$	1=RMB 6.5064
Amounts included in the statements of operations and cash flows for the periods presented	US$	1=RMB 6.5153	US$	1=RMB 6.8065	US$	1=RMB  6.7570

Comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The unrealized gain or loss resulting from the change of the fair market value from the gold investments and the foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ are reported in other comprehensive income (loss) in the consolidated statements of operations   and comprehensive income.

Earnings (loss) per Share

Earnings Per Share (“EPS”)

Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (i.e., options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Share or Stock-Based compensation

Share or Stock-Based compensation

For employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award. For the non-employee stock-based awards, the fair value of the awards to non-employees are measured every reporting period based on the value of the Company’s common stock. 

Debts issuance cost

Debts Issuance Costs

Debt issuance cost related to a recognized debt liability is presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. Amortization of debt issuance costs is calculated using the effective interest method and is included as a component of interest expense.  

Risks and Uncertainties

Risks and Uncertainties

The jewelry industry generally is affected by fluctuations in the price and supply of diamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. The Company potentially has exposure to the fluctuation in gold commodity prices as part of its normal operations. In the past, the Company has not hedged its requirement for gold or other raw materials through the use of options, forward contracts or outright commodity purchasing. A significant increase in the price of gold could increase the Company’s production costs beyond the amount that it is able to pass on to its customers, which would adversely affect the Company’s sales and profitability. A significant disruption in the Company’s supply of gold, or other commodities, could decrease its production and shipping levels, materially increase its operating costs, and materially and adversely affect its profit margins. Shortages of gold, or other commodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which the Company purchases its raw materials, may adversely affect its ability to maintain production of its products and sustain profitability. Although the Company generally attempts to pass on increased commodity prices to its customers, there may be circumstances in which it is not able to do so. In addition, if the Company were to experience a significant or prolonged shortage of gold, it would be unable to meet its production schedules and to ship products to its customers in a timely manner, which would adversely affect its sales, margins and customer relations.  

Furthermore, the value of the Company’s inventory may be affected by commodity prices. The Company records the value of its inventory using the lower of cost and net realizable value, cost calculated on the weighted average method. As a result, decreases in the market value of precious metals such as gold would result in a lower stated value of the Company’s inventory, which may require it to take a charge for the decrease in the value of its inventory.

The Company also allocated significant portion of its inventories as investment in gold and pledged as collateral to secure loans from banks and financial institutions, so there is a risk that the Company is unable to utilize its inventories, and there could be a disruption in the Company’s supply of gold which could decrease its production and shipping levels. In addition, the investment in gold may be deficient if the fair market value of the pledged gold in connection with the loans declines, then the Company may need to increase the pledged gold inventory for the loan collateral or increase restricted cash. 

The Company’s operations are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment, and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. In addition, the Company only controls Wuhan Kingold through a series of agreements. Although the Company believes the contractual relationships through which it controls Wuhan Kingold comply with current licensing, registration and regulatory requirements of the PRC, it cannot assure you that the PRC government would agree, or that new and burdensome regulations will not be adopted in the future. If the PRC government determines that the Company’s structure or operating arrangements do not comply with applicable law, it could revoke the Company’s business and operating licenses, require it to discontinue or restrict its operations, restrict its right to collect revenues, require it to restructure its operations, impose additional conditions or requirements with which the Company may not be able to comply, impose restrictions on its business operations or on its customers, or take other regulatory or enforcement actions against the Company that could be harmful to its business. If such agreements were cancelled, modified or otherwise not complied with, the Company would not be able to retain control of this consolidated entity and the impact could be material to the Company’s operations. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, this may not be indicative of future results.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to fiscal years beginning after December 31, 2017, and interim periods within those fiscal years, with early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, the FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which contains certain provisions and practical expedients in response to identified implementation issues; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which is intended to clarify the Codification or to correct unintended application of guidance. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. The Company adopted ASU 2014-09 and the related ASUs on January 1, 2018 using the modified retrospective method, which will not result in a cumulative catch-up adjustment to the opening balance sheet of retained earnings at the effective date.

In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its condensed consolidated financial statements.

On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The new standard is effective for us on January 1, 2019. Early adoption is permitted, including in interim periods, and should be applied to all new awards granted after the date of adoption. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

In August 2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company does not expect this guidance will have a material impact on its condensed consolidated financial statements.

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have material impact on the unaudited condensed consolidated financial position, statements of operations and cash flows. 

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Estimated Useful Lives

Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. The estimated useful lives used in connection with the preparation of the financial statements are as follows:

	Estimated Useful Life
Buildings	30 years
Plant and machinery	15 years
Motor vehicles	10 years
Office furniture and electronic equipment	5 – 10 years
Leasehold improvements	5 years

Schedule of Product Information

Revenue by major product line was as follows for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Branded production sales	$	612,836,724	$	568,620,635	$	1,808,294,992	$	1,318,304,351
Customized production sales		13,279,852		15,746,535		35,961,620		34,125,524
Trade in product sales		54,496		59,532		103,514		109,405
Other		-		84,937		131,264		127,636
	$	626,171,072	$	584,511,639	$	1,844,491,390	$	1,352,666,916

Currency Exchange Rates

The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: 

	September 30, 2018		September 30, 2017		December 31, 2017
Balance sheet items, except for equity, as of the period ended	US$	1=RMB 6.8683	US$	1=RMB 6.6549	US$	1=RMB 6.5064
Amounts included in the statements of operations and cash flows for the periods presented	US$	1=RMB 6.5153	US$	1=RMB 6.8065	US$	1=RMB  6.7570

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2018

Inventory, Net [Abstract]

Inventories

Inventories as of September 30, 2018 and December 31, 2017 consisted of the following:

	As of
	September 30, 2018		December 31, 2017
	(unaudited)
Raw materials (A)	$	32,787,260	$	-
Work-in-progress (B)		71,524,413		90,406,021
Finished goods (C)		42,952,732		44,636,692
Total inventory	$	147,264,405	$	135,042,713

(A) Included 964,769 grams of Au9999 gold as of September 30, 2018 and Nil Au9999 gold as of December 31, 2017.

(B) Included 2,110,166 grams of Au9999 gold as of September 30, 2018 and 2,508,182 grams of Au9999 gold as of December 31, 2017.

(C) Included 1,258,327 grams of Au9999 gold as of September 30, 2018 and 1,231,586 grams of Au9999 gold as of December 31, 2017.

No lower of cost or net realizable value adjustment was recorded at September 30, 2018 and December 31, 2017, respectively.

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PROPERTY AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2018

Property, Plant and Equipment [Abstract]

Property Plant and Equipment

The following is a summary of property and equipment as of September 30, 2018 and December 31, 2017:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
Buildings	$	2,288,298		$	2,415,577
Plant and machinery		17,722,789			18,615,951
Motor vehicles		240,833			254,228
Office and electric equipment		1,363,581			1,415,194
Leasehold improvements		1,561,822			1,623,027
Subtotal		23,177,323			24,323,977
Less: accumulated depreciation		(17,273,541	)		(17,024,334	)
Property and equipment, net	$	5,903,782		$	7,299,643

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LOANS (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of Short-term Debt

Short term loans consist of the following: 

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(a)   Loan payable to Aijian Trust	$	-		$	46,108,447
(b)   Loans payable to Evergrowing Bank - Qixia Branch		-			153,694,824
(c)   Loans payable to Evergrowing Bank - Yantai Huanshan Road Branch		72,798,218			153,233,739
(d)   Loans payable to Sichuan Trust - gross amount		-			230,542,236
Loans payable to Sichuan Trust - deferred financing cost		-			(2,239,292	)
(e)   Loans payable to China Aviation Capital - gross amount		-			44,571,499
Loans payable to China Aviation Capital - deferred financing cost		-			(457,926	)
(f)   Loans payable to Huarong Trust - gross amount		-			146,163,777
Loans payable to Huarong Trust - deferred financing cost		-			(1,324,677	)
(g)   Loans payable to China Construction Investment Trust - gross amount		436,741			46,108,447
Loans payable to China Construction Investment Trust - deferred financing cost		-			(167,796	)
(h)   Loans payable to Zheshang Jinhui Trust		80,078,040			84,532,153
(i)    Loans payable to Zhongjiang International Trust		58,238,574			61,477,929
Loans payable to Zhongjiang International Trust - deferred financing cost		(31,277	)		(141,614	)
(j)    Loan payable to China Aviation Trust - gross amount		45,134,895			-
Loan payable to China Aviation Trust - deferred financing cost		(215,164	)		-
(k)   Loans payable to National Trust - gross amount		50,958,753			-
Loan payable to National Trust - deferred financing cost		(76,942	)		-
(l)    Loans payable to Anxin Trust		283,913,050			-
(m)  Loans payable to China Construction Bank		30,284,058			-
Total short term loans	$	621,518,946		$	962,101,746

(a) Loan payable to Aijian Trust

The Company fully repaid loan to Aijian Trust upon maturity on May 4, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

(b) Loans payable to Evergrowing Bank – Qixia Branch

The Company fully repaid loan to Evergrowing Bank – Qixia Branch upon maturity and the pledged gold was subsequent returned to the Company.

(c) Loans payable to Evergrowing Bank – Yantai Huanshan Road Branch

From February 24, 2016 to March 24, 2016, Wuhan Kingold signed ten Loan Agreements with the Yantai Huangshan Road Branch of Evergrowing Bank for loans of approximately $145.6 million (RMB 1 billion) in aggregate. The purpose of the loans was for purchasing gold. The terms of loans are two years and bear fixed interest of 4.75% per year. Based on the loan repayment plan as specified in the loan agreements, $145,596 (RMB 1 million) was repaid in August 2016, $145,596 (RMB 1 million) was repaid on February 23, 2017 and another $145,596 (RMB 1 million) was repaid in August 23, 2017. The Company repaid $72.4 million (RMB 497 million) to Evergrowing bank Yantai Huangshan Road Branch upon maturity.

For the remaining balance of $72.8 million (RMB 500 million), the Company entered into a loan extension agreement with the bank to extend the loan borrowing period for additional seven months until October 2018, with the new interest rate of 6.5% per year. The loans are secured by 2,735 kilograms of Au9999 gold in aggregate with carrying value of approximately $92.6 million (RMB 635.9 million) and are guaranteed by the CEO and Chairman of the Company. Upon the maturity of these loans, the Company entered into a series of supplemental agreements with Yantai Huanshan Road Branch of Evergrowing Bank to extend the term of the loan for additional 12 months.

(d) Loans payable to Sichuan Trust

On September 7, 2016, the Company entered into two trust loan agreements with the Sichuan Trust Ltd. (“Sichuan Trust”) to borrow a maximum of approximately $291.2 million (RMB 2 billion) as working capital loan. The required annual interest rate is 8.46%. The Company paid the first interest payment equal to 1.21% of the principle received as loan origination fee on annual basis, then the rest of interest payments are calculated based on a fixed interest rate of 7.25%. The Company pledged 7,258 kilograms of Au9999 gold with carrying value of approximately $245.7 million (RMB 1.7 billion) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

These loans originally have maturity dates between September 20, 2018 and November 30, 2018. During the three months ended September 30, 2018, these loans were extended to have maturity dates between November 20, 2019 and January 30, 2020. Therefore, these loans were recorded as long term. The required annual interest rate changed to from 8.46% to 8.1%.

The Company paid approximately $5.3 million (RMB 36.3 million) as loan origination fee in 2017 and 2016 for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.6 million (RMB 4.4 million) and $2.1 million (RMB 13.4 million) deferred financing cost was amortized, respectively. For three months and nine months ended September 30, 2017, approximately $0.4 million (RMB 2.3 million) and $1 million (RMB 6.8 million) deferred financing cost was amortized, respectively.

(e) Loans payable to China Aviation Capital

On September 7, 2016, the Company entered into a trust loan agreement with China Aviation Capital Investment Management (Shenzhen) (“China Aviation Capital”) to borrow a maximum of approximately $87.4 million (RMB 600 million) as working capital loan. The first installment of the loan was approximately $42.2 million (RMB 290 million) to mature on September 6, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.5% and a one-time consulting fee of 3% based on the principal amount received as loan origination fee. The Company pledged 1,473 kilograms of Au9999 gold with carrying value of approximately $49.9 million (RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The loan was extended upon maturity for another 18 months with a new maturity date of March 5, 2020. Therefore, the $42.2 million loan from China Aviation Capital was recorded as long term at September 30, 2018. The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee.

The Company paid totally approximately $1.3 million (RMB 8.7 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.8 million) and $0.5 million (RMB 3.0 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.1 million) and $0.5 million (RMB 3.3 million) deferred financing cost was amortized, respectively.

(f) Loans payable to Huarong Trust

The Company fully repaid loan to Huarong International Trust Co. Ltd. (“Huarong Trust”) upon maturity on August 15, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. 

The Company paid approximately $2.1 million (RMB 14.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.5 million) and $1.3 million (RMB 8.6 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.3 million (RMB 2 million) deferred financing cost was amortized.

(g) Loans payable to China Construction Investment Trust

On August 29, 2016, the Company entered into a trust loan agreement with China Construction Investment Trust to borrow a maximum of approximately $43.7 million (RMB 300 million) as working capital loan for the purpose of purchasing of gold solely with a period of 24 months from October 9, 2016 to October 9, 2018. For the loan obtained the Company is required to make interest payments are calculated based on a fixed annual interest rate. The interest payment is divided into two parts: (1) 1% of the principal amount received need to be paid before December 25, 2016 as loan origination fee; (2) the rest of interest payments are calculated based on a fixed interest rate of 7.5% and due on quarterly basis. The Company pledged 1,447 kilograms of Au9999 gold with carrying value of approximately $49.0 million (RMB 336.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3 million) to secure the loan. During the three months ended September 30, 2018, the Company repaid approximately $43.2 million (RMB 297 million), with an outstanding balance of approximately $0.5 million (RMB 3 million).

The Company paid approximately $0.4 million (RMB 3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.3 million) and $0.2 million (RMB 1.1 million) deferred financing cost was amortized, respectively. For the three months and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.3 million) and $0.2 million (RMB 1.0 million) deferred financing cost was amortized, respectively.

(h) Loans payable to Zheshang Jinhui Trust

On November 7, 2016, the Company entered into a trust loan agreement with Zheshang Jinhui Trust to borrow a maximum of approximately $80.1 million (RMB 550 million) for purchasing gold with a period of 24 months from principle receiving date November 15, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.8%. The Company pledged 2,708 kilograms of Au9999 gold with carrying value of approximately $91.7 million (RMB 629.6 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.8 million (RMB 5.5 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

(i) Loans payable to Zhongjiang International Trust

On December 23, 2016, the Company entered into a trust loan agreement with Zhongjiang International Trust to borrow a maximum of approximately $58.2 million (RMB 400 million) for purchasing gold with a period of 24 months from December 23, 2016 to December 22, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 8.75%. The Company pledged 2,104 kilograms of Au9999 gold with carrying value of approximately $71.2 million (RMB 489.2 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.3 million (RMB 1.9 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.03 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(j) Loans payable to China Aviation Trust

On January 25, 2017, Wuhan Kingold entered into a trust loan agreement with China Aviation Trust Ltd. to borrow a maximum of approximately $45.1 million (RMB 310 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8%. The Company pledged 1,647 kilograms of Au9999 gold with carrying value of approximately $55.1 million (RMB 378.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3.1 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.5 million) deferred financing cost was amortized, respectively. For three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.2 million) deferred financing cost was amortized, respectively.

(k) Loans payable to National Trust

On February 28, 2017, Wuhan Kingold entered into a trust loan agreement with National Trust Ltd. (“National Trust”) to borrow a maximum of approximately $50.9 million (RMB 350 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8.617%. The Company pledged 1,745 kilograms of Au9999 gold with carrying value of approximately $59.4 million (RMB 408.1 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company.

The Company paid approximately $0.4 million (RMB 2.6 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.9 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

(l) Loans payable to Anxin Trust Co., Ltd

In January 2016, Wuhan Kingold signed a Collective Trust Loan Agreement with Anxin Trust Co., Ltd. (“Anxin Trust”). The agreement allowed the Company to access of approximately $436.8 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% or 11% with various maturity dates from February 19, 2019 to October 12, 2019. The purpose of this trust loan was to provide working capital for the Company to purchase gold. The loan is secured by 15,450 kilograms of Au9999 gold in aggregate with carrying value of approximately $523.0 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. During the nine months ended September 30, 2018, the Company repaid approximately $80.1 million (RMB 550 million). The Company also made a restricted deposit of approximately $3.5 million (RMB 24 million) to secure the rest of these loans. The deposit will be refunded when the loan is repaid upon maturity.

(m) Loan payable to China Construction Bank

In September 2018, Wuhan Kingold signed a Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $17.2 million (RMB 118 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 19, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received full amount from the loan.

In September 2018, Wuhan Kingold signed a second Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $25.0 million (RMB 172 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 25, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received approximately $13.1 million (RMB 90 million) from the loan.

The above mentioned two loans were guaranteed by the CEO and Chairman of the Company. In addition, related party Wuhan Huayuan pledged fixed asset buildings as collateral to further secure these loans. The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%.

Interest expense for all of the loans mentioned above amounted to $21.3 million and $62.8 million for the three and nine months ended September 30, 2018, respectively. Interest expense for short-term loan for the three and nine months ended September 30, 2017 was $9.7 million and $29.7 million, respectively.

The weighted average interest rate for the short term loans for the nine months ended September 30, 2018 and 2017 was 8.9% and 6.5%, respectively.

Schedule of Long-term Debt Instruments

Long-term loans consist of the following:

	As of
	September 30, 2018			December 31, 2017
	(unaudited)
(n)   Loans payable to Minsheng Trust - gross amount	$	218,394,654		$	-
Loans payable to Minsheng Trust - deferred financing cost		(2,370,401	)		-
(o)  Loans payable to Anxin Trust		72,798,218			461,084,471
(p)  Loans payable to Chang’An Trust - gross amount		142,691,690			153,694,824
Loans payable to Chang’An Trust - deferred financing cost		(880,604	)		(1,563,230	)
(q)   Loans payable to China Aviation Trust - gross amount		-			47,645,395
Loans payable to China Aviation Trust - deferred financing cost		-			(761,674	)
(r)   Loans payable to China Aviation Capital		42,222,966			-
(s)   Loans payable to National Trust - gross amount		-			53,793,188
Loans payable to National Trust - deferred financing cost		-			(228,068	)
(t)   Loans payable to Zheshang Jinhui Trust (new) - gross amount		91,929,590			76,847,412
Loans payable to Zheshang Jinhui Trust (new) - deferred financing cost		(448,242	)		(1,102,181	)
(u)   Loans payable to Sichuan Trust - gross amount		218,394,654			-
Loans payable to Sichuan Trust - deferred financing cost		(171,345	)		-
(v)   Loan payable to Dongguan Trust		145,596,435			-
Loan payable to Dongguan Trust - deferred financing cost		(1,983,348	)		-
Total long term loans, net of deferred financing costs	$	926,174,267		$	789,410,137

(n) Loan payable to Minsheng Trust

On December 26, 2017, the Company entered into a Trust Loan Contract in the amount of no more than approximately $218.4 million (RMB 1.5 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 24-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 30 months. The Trust Loan bears interest at a fixed annual rate of 9.2%. The loan is secured by 7,887 kilograms of Au9999 gold in aggregate with carrying value of approximately $270.6 million (RMB 1.9 billion). The loan is also guaranteed by the CEO and Chairman of the Company. The Company made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan.

The Company paid approximately $3.8 million (RMB 25.9 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $1.5 million (RMB 9.6 million) deferred financing cost was amortized.

(o) Loans payable to Anxin Trust (see Note 5 (l) above)

(p) Loans payable to Chang’An Trust

In September 2017, Wuhan Kingold entered into a new Trust Loan Contract with Chang’An Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 10% with a term of 24 months and is secured by 4,784 kilograms of Au9999 gold in aggregate with carrying value of approximately $163.6 million (RMB 1.1 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. On September 30, 2018, the Company made repayment of approximately $2.9 million (RMB 20 million). Subsequently on October 31, 2018, the Company made repayment of approximately $25.9 million (RMB 178.2 million) to Chang'An Trust.

The Company paid approximately $1.5 million (RMB 11 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) and $0.6 million (RMB 4.1 million) deferred financing cost was amortized, respectively.   

(q) Loans payable to China Aviation Trust (see Note 5 (j) above)

(r) Loans payable to China Aviation Capital (see Note 5 (e) above)

(s) Loans payable to National Trust (see Note 5 (k) above)

(t) Loans payable to Zheshang Jinhui Trust (new)  

In November 2017, Wuhan Kingold entered into a new Trust Loan Contract with Zheshang Jinhui Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 7.7% with a term of 24 months and is secured by 3,264 kilograms of Au9999 gold in aggregate with carrying value of approximately $110.4 million (RMB 758.5 million). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received an aggregate of approximately $91.9 million (RMB 631.4 million) from the loan. The Company also made a restricted deposit of approximately $0.92 million (RMB 6.3 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $1.4 million (RMB 9.5 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.3 million (RMB 1.9 million) and $0.9 million (RMB 5.6 million) deferred financing cost was amortized, respectively.

(u) Loans payable to Sichuan Trust (see Note 5 (d) above)

(v) Loans payable to Dongguan Trust

In July 2018, Wuhan Kingold entered into a gold income rights transfer and repurchase agreement (the “Agreement”) with Dongguan Trust. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this Agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity.

The Company paid approximately $2.2 million (RMB 15 million) as loan origination fee for obtaining this loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) deferred financing cost was amortized.

Total interest expense for the above long-term loans was approximately $15.3 million and $53.0 million for the three and nine months ended September 30, 2018, respectively. Total interest expense for the above long-term loans was approximately $17.4 million and $66.2 million for the three and nine months ended September 30, 2017, respectively.

The weighted average interest rate for the long-term loans for the nine months ended September 30,2018 and 2017 was 8.9% and 9.8%, respectively.

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INCOME TAXES (Tables)

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income from Continuing Operations Before Income Taxes

Income (loss) from continuing operations before income taxes was allocated between the U.S. and foreign components for the three and nine months ended September 30, 2018 and 2017:

	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
United States	$	(214,312	)	$	(236,952	)	$	(1,167,190	)	$	(953,598	)
Foreign		17,949,121			38,965,061			54,951,370			22,224,744
	$	17,734,809		$	38,728,109		$	53,784,180		$	21,271,146

Components of Income Tax Provision

Significant components of the income tax provision (benefit) were as follows for the three and nine months ended September 30, 2018 and 2017: 

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Current tax provision
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		1,787,717		7,778,520		9,214,312		12,996,602
	$	1,787,717	$	7,778,520	$	9,214,312	$	12,996,602
Deferred tax provision (benefit)
Federal	$	-	$	-	$	-	$	-
State		-		-		-		-
Foreign		2,699,588		1,962,539		4,523,643		(7,440,305	)
		2,699,588		1,962,539		4,523,643		(7,440,305	)
Income tax provision (benefit)	$	4,487,305	$	9,741,059	$	13,737,955	$	5,556,297

Schedule of Deferred Tax Assets and Liabilities

The components of deferred tax assets and deferred tax liabilities as of September 30, 2018 and December 31, 2017 consist of the following:

	As of September 30, 2018			As of December 31, 2017
Deferred tax assets:
Accrued interest	$	1,609,466		$	1,824,171
Inventory Valuation		-			4,545,708
Accrued expenses		-			330,663
Deferred financing costs on the loans		2,609,240			741,008
Unrealized loss due to change in fair value of investments in gold		19,242,937			-
Other temporary differences		-			56,062
Net operating losses from parent company		4,044,690			6,151,702
Valuation allowance		(4,044,690	)		(6,151,702	)
		23,461,643			7,497,612
Deferred tax liabilities:
Inventory Valuation	$	(840,680	)	$	-
Accrued expenses		(514,296	)		-
Other temporary differences		(52,324	)		-
Unrealized gain due to change in fair value of investments in gold		-			(819,937	)
Deferred tax assets - Net	$	22,054,343		$	6,677,675

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OPTIONS (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarized the Company’s stock option activity:

					Weighted Average
	Number of Options		Weighted Average Exercise Price		Remaining Life  in Years
Outstanding, December 31, 2017		3,220,000	$	1.90		3.76
Exercisable, December 31, 2017		3,191,875	$	1.91		3.73
Granted		-		-		-
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, September 30, 2018		3,220,000	$	1.90		3.01
Exercisable, September 30, 2018		3,208,750	$	1.91		3.00

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COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

For the Twelve Months Ending September 30,
2019	$	263,750
2020		263,750
2021		263,750
2022		66,306
	$	857,556

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COMPARATIVE INFORMATION (Tables)

9 Months Ended

Sep. 30, 2018

Income Statement [Abstract]

Schedule of Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The following table provides a reconciliation of cash and restricted cash reported within the condensed consolidated statement of balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statement of cash flows for the period ended September 30, 2018 and 2017:

	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash	$	13,245,436	$	4,997,125	$	1,001,830	$	21,333,193
Restricted cash - current		6,567,855		5,534,551		3,170,596		52,786,257
Restricted cash – non current		8,927,100		7,392,721		7,753,685		7,558,173
Total cash and restricted cash	$	28,740,391	$	17,924,397	$	11,926,111	$	81,677,623

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Significant Accounting Policies [Line Items]
Restricted Cash and Cash Equivalents	$ 15,494,955	$ 12,927,272
Accounts Receivable, Net, Current	$ 198,214	$ 768,167
Land Use Right
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	50 years

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Estimated Useful Lives Used in Connection With Preparation of Financial Statements (Detail)	9 Months Ended
	Sep. 30, 2018
Buildings
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	30 years
Plant and machinery
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	15 years
Motor vehicles
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Office furniture and electronic equipment | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Office furniture and electronic equipment | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Significant Accounting Policies [Line Items]
Revenues	$ 626,171,072	$ 584,511,639	$ 1,844,491,390	$ 1,352,666,916
Branded Production Sales [Member]
Significant Accounting Policies [Line Items]
Revenues	612,836,724	568,620,635	1,808,294,992	1,318,304,351
Customized Production Sales [Member]
Significant Accounting Policies [Line Items]
Revenues	13,279,852	15,746,535	35,961,620	34,125,524
Trade in Product Sales [Member]
Significant Accounting Policies [Line Items]
Revenues	54,496	59,532	103,514	109,405
Other Product Sales [Member]
Significant Accounting Policies [Line Items]
Revenues	$ 0	$ 84,937	$ 131,264	$ 127,636

XML

Currency Exchange Rates (Detail)	Sep. 30, 2018 $ / shares	Sep. 30, 2018 ¥ / shares	Dec. 31, 2017 $ / shares	Dec. 31, 2017 ¥ / shares	Sep. 30, 2017 $ / shares	Sep. 30, 2017 ¥ / shares
Balance Sheet
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items]
Currency exchange rate used in creating the amounts included in balance sheet, statements of operations and cash | (per share)	$ 1	¥ 6.8683	$ 1	¥ 6.5064	$ 1	¥ 6.6549
Statements of Operations and Cash Flows
Financial Statement Line Items with Differences in Reported Amount and Reporting Currency Denominated Amounts [Line Items]
Currency exchange rate used in creating the amounts included in balance sheet, statements of operations and cash | (per share)	$ 1	¥ 6.5153	$ 1	¥ 6.7570	$ 1	¥ 6.8065

XML

INVENTORIES - Additional Information (Detail) - g	Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Line Items]
Gold Included In Raw Materials	964,769	0
Gold Included In Work-In-Progress	2,110,166	2,508,182
Gold Included In finished goods	1,258,327	1,231,586

XML

INVENTORIES (Detail) - USD ($)		Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Line Items]
Raw materials	[1]	$ 32,787,260	$ 0
Work-in-progress	[2]	71,524,413	90,406,021
Finished goods	[3]	42,952,732	44,636,692
Total inventory		$ 147,264,405	$ 135,042,713

[1] Included 964,769 grams of Au9999 gold as of September 30, 2018 and Nil Au9999 gold as of December 31, 2017.

[2] Included 2,110,166 grams of Au9999 gold as of September 30, 2018 and 2,508,182 grams of Au9999 gold as of December 31, 2017.

[3] Included 1,258,327 grams of Au9999 gold as of September 30, 2018 and 1,231,586 grams of Au9999 gold as of December 31, 2017.

XML

PROPERTY AND EQUIPMENT, NET - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Property, Plant and Equipment [Line Items]
Depreciation, Depletion and Amortization	$ 402,021	$ 436,158	$ 1,208,346	$ 1,173,159

XML

PROPERTY AND EQUIPMENT, NET (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Buildings	$ 2,288,298	$ 2,415,577
Plant and machinery	17,722,789	18,615,951
Motor vehicles	240,833	254,228
Office and electric equipment	1,363,581	1,415,194
Leasehold improvements	1,561,822	1,623,027
Subtotal	23,177,323	24,323,977
Less: accumulated depreciation	(17,273,541)	(17,024,334)
Property and equipment, net	$ 5,903,782	$ 7,299,643

XML

LOANS - Additional Information (Detail) ¥ in Millions				1 Months Ended																						3 Months Ended				9 Months Ended				12 Months Ended
	Nov. 07, 2016 USD ($) g	Sep. 07, 2016 USD ($) g kg	Sep. 07, 2016 CNY (¥)	Oct. 31, 2018 USD ($)	Oct. 31, 2018 CNY (¥)	Oct. 10, 2018 USD ($) g	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Jul. 31, 2018 USD ($) kg	Jul. 31, 2018 CNY (¥)	Dec. 26, 2017 USD ($) g	Dec. 26, 2017 CNY (¥)	Nov. 30, 2017 USD ($) g	Nov. 30, 2017 CNY (¥)	Sep. 30, 2017 USD ($) g	Sep. 30, 2017 CNY (¥)	Feb. 28, 2017 USD ($) g	Feb. 28, 2017 CNY (¥)	Jan. 25, 2017 USD ($) g	Jan. 25, 2017 CNY (¥)	Dec. 23, 2016 USD ($) g	Dec. 23, 2016 CNY (¥)	Sep. 07, 2016 USD ($) g kg	Aug. 29, 2016 USD ($) g	Jan. 31, 2016 USD ($) g	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Sep. 30, 2017 USD ($) g	Sep. 30, 2017 CNY (¥)	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Sep. 30, 2017 USD ($) g	Sep. 30, 2017 CNY (¥)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 CNY (¥)	Oct. 10, 2018 CNY (¥) g	Sep. 30, 2018 g	Sep. 30, 2018 kg	Sep. 30, 2018 CNY (¥)	Sep. 30, 2018	Jul. 31, 2018 CNY (¥) kg	Dec. 31, 2017 USD ($)	Dec. 26, 2017 CNY (¥) g	Nov. 30, 2017 CNY (¥) g	Sep. 30, 2017 CNY (¥) g	Aug. 23, 2017 USD ($)	Aug. 23, 2017 CNY (¥)	Feb. 28, 2017 CNY (¥) g	Feb. 23, 2017 USD ($)	Feb. 23, 2017 CNY (¥)	Jan. 25, 2017 CNY (¥) g	Dec. 23, 2016 CNY (¥) g	Nov. 07, 2016 CNY (¥) g	Sep. 07, 2016 CNY (¥) g kg	Aug. 29, 2016 CNY (¥) g	Aug. 23, 2016 CNY (¥)	Mar. 24, 2016 USD ($)	Mar. 24, 2016 CNY (¥)	Jan. 31, 2016 CNY (¥) g
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate						10.50%																														10.50%				11.00%
Restricted cash							$ 15,494,955																			$ 15,494,955				$ 15,494,955												$ 12,927,272
Debt Instrument, Collateral Amount							1,953,600,000																			1,953,600,000				1,953,600,000									¥ 635.9			$ 2,131,600,000
Line of Credit Facility, Maximum Borrowing Capacity						$ 145,600,000	145,600,000																			145,600,000				145,600,000						¥ 1.0			1,000.0
Long-term Debt, Total						$ 208,000,000	$ 166,000,000																			166,000,000				$ 166,000,000						¥ 1.4			1,140.2										$ 145,596
Gold Lease Outstanding						5,356																														5,356	4,974	57,476
Debt Instrument, Term							1 month	1 month																						18 months	18 months
Payments of Loan Costs																														$ 6,578,966		$ 4,114,687
Amortization of Debt Issuance Costs																										$ 3,482,031		$ 1,347,832		8,042,451		7,751,818
Repayments of Long-term Debt																														0		102,695,952
Debt Instrument, Interest Rate Terms																										The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee.	The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee.
Proceeds from Issuance of Long-term Debt																														$ 435,804,951		96,966,135
Loan Agreement Terms																														The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%.	The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%.
First Loan Agreement [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage																																								4.35%
Long-term Debt, Total							$ 17,200,000																			$ 17,200,000				$ 17,200,000									118.0
Debt Instrument, Maturity Date							Sep. 19, 2019	Sep. 19, 2019
Second Loan Agreement [Member]
Debt Instrument [Line Items]
Amortization of Debt Issuance Costs | ¥																																	¥ 3.3
Maximum [Member]
Debt Instrument [Line Items]
Debt Instrument, Term						18 months
Minimum [Member]
Debt Instrument [Line Items]
Debt Instrument, Term						12 months
Amortization of Debt Issuance Costs | ¥																																	1.1
Yangtai Huangshan Road Branch of Evergrowing Bank [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																																								6.50%																	4.75%	4.75%
Debt Instrument, Collateral Amount							$ 92,600,000																			92,600,000				92,600,000
Long-term Debt, Total							72,800,000																			72,800,000				72,800,000									500.0							$ 145,596	¥ 1.0		$ 145,596	¥ 1.0						¥ 1.0	$ 145,600,000	¥ 1,000.0
Repayments of Long-term Debt																														72,400,000	¥ 497.0
Gold quantity secured | kg																																						2,735
The National Trust Ltd [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																	8.617%																															8.617%
Secured Debt																	$ 59,400,000																															¥ 408.1
Line of Credit Facility, Maximum Borrowing Capacity																	$ 50,900,000																															¥ 350.0
Gold Lease Outstanding | g																	1,745																															1,745
Debt Instrument, Term																	24 months	24 months
Payments of Loan Costs																	$ 400,000	¥ 2.6
Amortization of Debt Issuance Costs																										50,000	¥ 0.3	50,000	¥ 0.3	100,000	0.9	100,000	0.7
Anxin Trust Co., Ltd [Member]
Debt Instrument [Line Items]
Interest Expense, Short-term Borrowings																										21,300,000		$ 9,700,000		62,800,000		$ 29,700,000
Restricted cash							3,500,000																			3,500,000				3,500,000									24.0
Secured Debt																									$ 523,000,000																																		¥ 3,600.0
Short-term Debt, Weighted Average Interest Rate, at Point in Time															6.50%													6.50%				6.50%								8.90%					6.50%
Long-term Debt, Total																									$ 436,800,000																																		¥ 3.0
Gold Lease Outstanding | g																									15,450																																		15,450
Debt Instrument, Term																									60 months
Repayments of Long-term Debt																										80,100,000	550.0
Anxin Trust Co., Ltd [Member] | Maximum [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																									14.80%																																		14.80%
Anxin Trust Co., Ltd [Member] | Minimum [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																									11.00%																																		11.00%
Minsheng Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate											9.20%																																9.20%
Restricted cash							2,200,000																			2,200,000				2,200,000									15.0
Secured Debt | ¥																																											¥ 1,900.0
Line of Credit Facility, Maximum Borrowing Capacity											$ 218,400,000																																¥ 1,500.0
Debt Instrument, Term											30 months	30 months
Payments of Loan Costs											$ 3,800,000	¥ 25.9
Amortization of Debt Issuance Costs																										1,500,000	¥ 9.6			1,500,000	9.6
Proceeds from Lines of Credit											$ 270,600,000																			218,400,000	1.5
Gold quantity secured | g											7,887																																7,887
Sichuan Trust Ltd [Member]
Debt Instrument [Line Items]
Restricted cash		$ 2,200,000																					$ 2,200,000																															¥ 15.0
Secured Debt							218,400,000																			$ 218,400,000				218,400,000									1,500.0
Debt Instrument, Interest Rate, Stated Percentage		8.46%																					8.46%																	8.10%														8.46%
Line of Credit Facility, Maximum Borrowing Capacity		$ 291,200,000																					$ 291,200,000																															¥ 2,000.0
Long-term Debt, Total		$ 245,700,000																					$ 245,700,000																															¥ 1,700.0
Debt Instrument, Maturity Date Range, Start																							Sep. 20, 2018			Nov. 20, 2019	Nov. 20, 2019
Debt Instrument, Maturity Date Range, End																							Nov. 30, 2018			Jan. 30, 2020	Jan. 30, 2020
Gold Lease Outstanding | g		7,258																					7,258																															7,258
Payments of Loan Costs																																		$ 5,300,000	¥ 36.3
Amortization of Debt Issuance Costs																										$ 600,000	¥ 4.4	$ 400,000	2.3	2,100,000	13.4	$ 1,000,000	6.8
Debt, Weighted Average Interest Rate		1.21%																					1.21%																															1.21%
China Aviation Capital Investment Management [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate During Period		3.00%	3.00%
Line Of Credit Facility Additional Borrowing Capacity | ¥																																																						¥ 600.0
Debt Instrument, Interest Rate, Stated Percentage		7.50%																					7.50%																															7.50%
Debt Instrument, Collateral Amount		$ 49,900,000																					$ 49,900,000																															¥ 342.5
Line of Credit Facility, Maximum Borrowing Capacity		$ 87,400,000																					$ 87,400,000
Long-term Debt, Total							42,200,000																			42,200,000				42,200,000
Gold Lease Outstanding | kg		1,473																					1,473																															1,473
Payments of Loan Costs		$ 42,200,000	¥ 290.0																											1,300,000	8.7	200,000
Amortization of Debt Issuance Costs																										100,000	0.8			500,000	3.0	500,000
China Aviation Capital Investment Management [Member] | Second Loan Agreement [Member]
Debt Instrument [Line Items]
Amortization of Debt Issuance Costs | ¥																																	0.3
China Construction Investment Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																								7.50%																															7.50%
Restricted cash																								$ 500,000																															¥ 3.0
Debt Instrument, Collateral Amount																								49,000,000																															336.4
Line of Credit Facility, Maximum Borrowing Capacity																								$ 43,700,000																															¥ 300.0
Long-term Debt, Total															$ 500,000													$ 500,000				500,000													¥ 3.0
Gold Lease Outstanding | g																								1,447																															1,447
Debt Instrument, Term																								24 months
Payments of Loan Costs																														400,000	3.0
Amortization of Debt Issuance Costs																										100,000	0.3			200,000		$ 200,000	1.0
Repayments of Debt																										43,200,000	297.0
China Construction Investment Trust [Member] | First Loan Agreement [Member]
Debt Instrument [Line Items]
Amortization of Debt Issuance Costs | ¥																											0.3
China Construction Investment Trust [Member] | Maximum [Member]
Debt Instrument [Line Items]
Amortization of Debt Issuance Costs																										40,000
Zheshang Jinhui Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	7.80%												7.70%																															7.70%									7.80%
Restricted cash							91,900,000																			91,900,000				91,900,000									631.4
Secured Debt	$ 91,700,000																																																				¥ 629.6
Debt Instrument, Collateral Amount													$ 110,400,000																															¥ 758.5
Line of Credit Facility, Maximum Borrowing Capacity	$ 80,100,000												$ 145,600,000																															1,000.0									¥ 550.0
Gold Lease Outstanding | g	2,708																																																				2,708
Debt Instrument, Term	24 months												24 months	24 months
Restricted Investments	$ 800,000												$ 920,000																															¥ 6.3									¥ 5.5
Payments of Loan Costs													$ 1,400,000	¥ 9.5
Amortization of Debt Issuance Costs																										300,000	1.9			900,000	5.6
Gold quantity secured | g													3,264																															3,264
Zhongjiang International Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate															9.80%						8.75%							9.80%				9.80%								8.90%					9.80%							8.75%
Secured Debt																					$ 71,200,000																															¥ 489.2
Line of Credit Facility, Maximum Borrowing Capacity																					$ 58,200,000																															¥ 400.0
Interest Expense, Long-term Debt																										15,300,000		$ 17,400,000		53,000,000		$ 66,200,000
Gold Lease Outstanding | g																					2,104																															2,104
Debt Instrument, Periodic Payment | ¥																						¥ 1.9
Debt Instrument, Term																					24 months	24 months
Payments of Loan Costs																					$ 300,000
Amortization of Debt Issuance Costs																										30,000	0.2	40,000	0.2	100,000	0.7	100,000	0.7
Loans payable to China Aviation Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																			8.00%																																8.00%
Secured Debt																			$ 55,100,000																																¥ 378.4
Line of Credit Facility, Maximum Borrowing Capacity																			$ 45,100,000																																¥ 310.0
Gold Lease Outstanding | g																			1,647																																1,647
Debt Instrument, Term																			24 months	24 months
Restricted Investments																			$ 500,000																																¥ 3.1
Payments of Loan Costs																			$ 1,400,000	¥ 9.3
Amortization of Debt Issuance Costs																										200,000	1.2	200,000	1.2	500,000	3.5	$ 500,000	3.2
Huarong Trust [Member]
Debt Instrument [Line Items]
Payments of Loan Costs																														2,100,000	14.3
Amortization of Debt Issuance Costs																										200,000	1.5	$ 0.3	¥ 2.0	1,300,000	8.6		¥ 2.0
Loans Payable to Changan Trust [Member]
Debt Instrument [Line Items]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate															10.00%													10.00%				10.00%													10.00%
Debt Instrument, Collateral Amount															$ 163,600,000													$ 163,600,000				$ 163,600,000													¥ 1,100.0
Line of Credit Facility, Maximum Borrowing Capacity															$ 145,600,000													145,600,000				145,600,000													1,000.0
Debt Instrument, Term															24 months	24 months
Restricted Investments															$ 1,500,000													$ 1,500,000				$ 1,500,000													¥ 10.0
Payments of Loan Costs															$ 1,500,000	¥ 11.0
Amortization of Debt Issuance Costs																										200,000	1.4			600,000	4.1
Gold quantity secured | g															4,784													4,784				4,784													4,784
Repayments of Debt							2,900,000	¥ 20.0
Loans Payable to Changan Trust [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Repayments of Debt				$ 25,900,000	¥ 178.2
China Construction Bank [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity							30,300,000																			30,300,000				30,300,000
China Construction Bank [Member] | Second Loan Agreement [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage																																								4.35%
Long-term Debt, Total							$ 25,000,000																			25,000,000				25,000,000									¥ 172.0
Debt Instrument, Term							1 year	1 year
Debt Instrument, Maturity Date							Sep. 25, 2019	Sep. 25, 2019
Proceeds from Issuance of Long-term Debt							$ 13,100,000	¥ 90.0
Loans Payable To Dongguan Trust [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage									11.00%																																11.00%
Debt Instrument, Collateral Amount									$ 166,000,000																																¥ 1,140.2
Line of Credit Facility, Maximum Borrowing Capacity									$ 145,600,000																																¥ 1,000.0
Debt Instrument, Term									18 months	18 months
Payments of Loan Costs									$ 2,200,000	¥ 15.0
Amortization of Debt Issuance Costs																										$ 200,000	¥ 1.4			$ 200,000	¥ 1.4
Gold quantity secured | kg									4,974																																4,974
Deposit Assets									$ 1,500,000																																¥ 10.0

XML

Short Term Loans (Detail) - Short Term Loans [Member] - USD ($)		Sep. 30, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Short term loans		$ 621,518,946	$ 962,101,746
National Trust
Short-term Debt [Line Items]
Short term loans	[1]	50,958,753	0
Debt Issuance Costs, Line of Credit Arrangements, Net	[1]	(76,942)	0
Aijian Trust
Short-term Debt [Line Items]
Short term loans	[2]	0	46,108,447
Qixia Branch of Evergrowing Bank [Member]
Short-term Debt [Line Items]
Short term loans	[3]	0	153,694,824
Huangshan Road Branch of Evergrowing Bank [Member]
Short-term Debt [Line Items]
Short term loans	[4]	72,798,218	153,233,739
Sichuan Trust [Member]
Short-term Debt [Line Items]
Short-term Debt, Gross	[5]	0	230,542,236
Debt Issuance Costs, Line of Credit Arrangements, Net	[5]	0	(2,239,292)
China Aviation Capital [Member]
Short-term Debt [Line Items]
Short-term Debt, Gross	[6]	0	44,571,499
Debt Issuance Costs, Line of Credit Arrangements, Net	[6]	0	(457,926)
Huarong Trust [Member]
Short-term Debt [Line Items]
Short-term Debt, Gross	[7]	0	146,163,777
Debt Issuance Costs, Line of Credit Arrangements, Net	[7]	0	(1,324,677)
China Construction Investment Trust [Member]
Short-term Debt [Line Items]
Short term loans	[8]	436,741	46,108,447
Debt Issuance Costs, Line of Credit Arrangements, Net	[8]	0	(167,796)
Zheshang Jinhui Trust [Member]
Short-term Debt [Line Items]
Short term loans	[9]	80,078,040	84,532,153
Zhongjiang International Trust [Member]
Short-term Debt [Line Items]
Short term loans	[10]	58,238,574	61,477,929
Debt Issuance Costs, Line of Credit Arrangements, Net	[10]	(31,277)	(141,614)
China Aviation Trust [Member]
Short-term Debt [Line Items]
Short term loans	[11]	45,134,895	0
Debt Issuance Costs, Line of Credit Arrangements, Net	[11]	(215,164)	0
Anxin Trust [Member]
Short-term Debt [Line Items]
Short term loans	[12]	283,913,050	0
China Construction Bank [Member]
Short-term Debt [Line Items]
Short-term Debt, Gross	[13]	$ 30,284,058	$ 0

[1] On February 28, 2017, Wuhan Kingold entered into a trust loan agreement with National Trust Ltd. (“National Trust”) to borrow a maximum of approximately $50.9 million (RMB 350 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8.617%. The Company pledged 1,745 kilograms of Au9999 gold with carrying value of approximately $59.4 million (RMB 408.1 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company paid approximately $0.4 million (RMB 2.6 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.9 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

[2] The Company fully repaid loan to Aijian Trust upon maturity on May 4, 2018. The pledged gold and restricted deposit were released and returned upon the repayment.

[3] The Company fully repaid loan to Evergrowing Bank – Qixia Branch upon maturity and the pledged gold was subsequent returned to the Company.

[4] From February 24, 2016 to March 24, 2016, Wuhan Kingold signed ten Loan Agreements with the Yantai Huangshan Road Branch of Evergrowing Bank for loans of approximately $145.6 million (RMB 1 billion) in aggregate. The purpose of the loans was for purchasing gold. The terms of loans are two years and bear fixed interest of 4.75% per year. Based on the loan repayment plan as specified in the loan agreements, $145,596 (RMB 1 million) was repaid in August 2016, $145,596 (RMB 1 million) was repaid on February 23, 2017 and another $145,596 (RMB 1 million) was repaid in August 23, 2017. The Company repaid $72.4 million (RMB 497 million) to Evergrowing bank Yantai Huangshan Road Branch upon maturity. For the remaining balance of $72.8 million (RMB 500 million), the Company entered into a loan extension agreement with the bank to extend the loan borrowing period for additional seven months until October 2018, with the new interest rate of 6.5% per year. The loans are secured by 2,735 kilograms of Au9999 gold in aggregate with carrying value of approximately $92.6 million (RMB 635.9 million) and are guaranteed by the CEO and Chairman of the Company. Upon the maturity of these loans, the Company entered into a series of supplemental agreements with Yantai Huanshan Road Branch of Evergrowing Bank to extend the term of the loan for 12 months.

[5] On September 7, 2016, the Company entered into two trust loan agreements with the Sichuan Trust Ltd. (“Sichuan Trust”) to borrow a maximum of approximately $291.2 million (RMB 2 billion) as working capital loan. The required annual interest rate is 8.46%. The Company paid the first interest payment equal to 1.21% of the principle received as loan origination fee on annual basis, then the rest of interest payments are calculated based on a fixed interest rate of 7.25%. The Company pledged 7,258 kilograms of Au9999 gold with carrying value of approximately $245.7 million (RMB 1.7 billion) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan. These loans originally have maturity dates between September 20, 2018 and November 30, 2018. During the three months ended September 30, 2018, these loans were extended to have maturity dates between November 20, 2019 and January 30, 2020. Therefore, these loans were recorded as long term. The required annual interest rate changed to from 8.46% to 8.1%. The Company paid approximately $5.3 million (RMB 36.3 million) as loan origination fee in 2017 and 2016 for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.6 million (RMB 4.4 million) and $2.1 million (RMB 13.4 million) deferred financing cost was amortized, respectively. For three months and nine months ended September 30, 2017, approximately $0.4 million (RMB 2.3 million) and $1 million (RMB 6.8 million) deferred financing cost was amortized, respectively.

[6] On September 7, 2016, the Company entered into a trust loan agreement with China Aviation Capital Investment Management (Shenzhen) (“China Aviation Capital”) to borrow a maximum of approximately $87.4 million (RMB 600 million) as working capital loan. The first installment of the loan was approximately $42.2 million (RMB 290 million) to mature on September 6, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.5% and a one-time consulting fee of 3% based on the principal amount received as loan origination fee. The Company pledged 1,473 kilograms of Au9999 gold with carrying value of approximately $49.9 million (RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The loan was extended upon maturity for another 18 months with a new maturity date of March 5, 2020. The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee. The Company paid totally approximately $1.3 million (RMB 8.7 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.8 million) and $0.5 million (RMB 3.0 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.1 million) and $0.5 million (RMB 3.3 million) deferred financing cost was amortized, respectively.

[7] The Company fully repaid loan to Huarong International Trust Co. Ltd. (“Huarong Trust”) upon maturity on August 15, 2018. The pledged gold and restricted deposit were released and returned upon the repayment. The Company paid approximately $2.1 million (RMB 14.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.5 million) and $1.3 million (RMB 8.6 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.3 million (RMB 2 million) deferred financing cost was amortized.

[8] On August 29, 2016, the Company entered into a trust loan agreement with China Construction Investment Trust to borrow a maximum of approximately $43.7 million (RMB 300 million) as working capital loan for the purpose of purchasing of gold solely with a period of 24 months from October 9, 2016 to October 9, 2018. For the loan obtained the Company is required to make interest payments are calculated based on a fixed annual interest rate. The interest payment is divided into two parts: (1) 1% of the principal amount received need to be paid before December 25, 2016 as loan origination fee; (2) the rest of interest payments are calculated based on a fixed interest rate of 7.5% and due on quarterly basis. The Company pledged 1,447 kilograms of Au9999 gold with carrying value of approximately $49.0 million (RMB 336.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3 million) to secure the loan. During the three months ended September 30, 2018, the Company repaid approximately $43.2 million (RMB 297 million), with an outstanding balance of approximately $0.5 million (RMB 3 million). The Company paid approximately $0.4 million (RMB 3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.3 million) and $0.2 million (RMB 1.1 million) deferred financing cost was amortized, respectively. For the three months and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.3 million) and $0.2 million (RMB 1.0 million) deferred financing cost was amortized, respectively.

[9] On November 7, 2016, the Company entered into a trust loan agreement with Zheshang Jinhui Trust to borrow a maximum of approximately $80.1 million (RMB 550 million) for purchasing gold with a period of 24 months from principle receiving date November 15, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.8%. The Company pledged 2,708 kilograms of Au9999 gold with carrying value of approximately $91.7 million (RMB 629.6 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.8 million (RMB 5.5 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.

[10] On December 23, 2016, the Company entered into a trust loan agreement with Zhongjiang International Trust to borrow a maximum of approximately $58.2 million (RMB 400 million) for purchasing gold with a period of 24 months from December 23, 2016 to December 22, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 8.75%. The Company pledged 2,104 kilograms of Au9999 gold with carrying value of approximately $71.2 million (RMB 489.2 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company paid approximately $0.3 million (RMB 1.9 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.03 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.04 million (RMB 0.2 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

[11] On January 25, 2017, Wuhan Kingold entered into a trust loan agreement with China Aviation Trust Ltd. to borrow a maximum of approximately $45.1 million (RMB 310 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8%. The Company pledged 1,647 kilograms of Au9999 gold with carrying value of approximately $55.1 million (RMB 378.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3.1 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. The Company paid approximately $1.4 million (RMB 9.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.5 million) deferred financing cost was amortized, respectively. For three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.2 million) deferred financing cost was amortized, respectively.

[12] In January 2016, Wuhan Kingold signed a Collective Trust Loan Agreement with Anxin Trust Co., Ltd. (“Anxin Trust”). The agreement allowed the Company to access of approximately $436.8 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% or 11% with various maturity dates from February 19, 2019 to October 12, 2019. The purpose of this trust loan was to provide working capital for the Company to purchase gold. The loan is secured by 15,450 kilograms of Au9999 gold in aggregate with carrying value of approximately $523.0 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. During the nine months ended September 30, 2018, the Company repaid approximately $80.1 million (RMB 550 million). The Company also made a restricted deposit of approximately $3.5 million (RMB 24 million) to secure the rest of these loans. The deposit will be refunded when the loan is repaid upon maturity.

[13] In September 2018, Wuhan Kingold signed a Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $17.2 million (RMB 118 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 19, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received full amount from the loan. In September 2018, Wuhan Kingold signed a second Loan Agreements with Wuhan JiangAn Branch of China Construction for a loan of approximately $25.0 million (RMB 172 million). The purpose of this loan is to provide working capital for the Company to purchase gold. The term of the loan is one year with maturity date of September 25, 2019 and bears fixed interest of 4.35% per year. As of September 30, 2018, the Company received approximately $13.1 million (RMB 90 million) from the loan. The above mentioned two loans were guaranteed by the CEO and Chairman of the Company. In addition, related party Wuhan Huayuan pledged fixed asset buildings as collateral to further secure these loans. The loan agreements also required that Company to maintain an asset-liability ratio less than 90% and current ratio over 1. The Company is not allowed to increase contingent liabilities without notice to the bank, the balance of contingent liabilities should be no larger than RMB 3.05 billion, contingent asset-liability ratio should be less than 60%. Interest expense for all of the loans mentioned above amounted to $21.3 million and $62.8 million for the three and nine months ended September 30, 2018, respectively. Interest expense for short-term loan for the three and nine months ended September 30, 2017 was $9.7 million and $29.7 million, respectively. The weighted average interest rate for the short term loans for the nine months ended September 30, 2018 and 2017 was 8.9% and 6.5%, respectively.

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Long Term Loans (Detail) - USD ($)		Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Total long term loans		$ 926,174,267	$ 789,410,137
Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans		926,174,267	789,410,137
Mingsheng Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[1]	218,394,654	0
Debt Issuance Costs, Line of Credit Arrangements, Net	[1]	(2,370,401)	0
Anxin Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[2]	72,798,218	461,084,471
Changan Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[3]	142,691,690	153,694,824
Debt Issuance Costs, Line of Credit Arrangements, Net	[3]	(880,604)	(1,563,230)
China Aviation Trust [Member]
Debt Instrument [Line Items]
Total long term loans	[4]	0	47,645,395
China Aviation Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Debt Issuance Costs, Line of Credit Arrangements, Net	[4]	0	(761,674)
National Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[5]	0	53,793,188
Debt Issuance Costs, Line of Credit Arrangements, Net	[5]	0	(228,068)
Zheshang Jinhui Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[6]	91,929,590	76,847,412
Debt Issuance Costs, Line of Credit Arrangements, Net	[6]	(448,242)	(1,102,181)
Sichuan Trust Ltd [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[7]	218,394,654	0
Debt Issuance Costs, Line of Credit Arrangements, Net	[7]	(171,345)	0
Loans Payable To Dongguan Trust [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[8]	145,596,435	0
Debt Issuance Costs, Line of Credit Arrangements, Net	[8]	(1,983,348)	0
China Aviation Capital Investment Management [Member] | Long-Term Loans [Member]
Debt Instrument [Line Items]
Total long term loans	[9]	$ 42,222,966	$ 0

[1] On December 26, 2017, the Company entered into a Trust Loan Contract in the amount of no more than approximately $218.4 million (RMB 1.5 billion) with China Minsheng Trust Co., Ltd. (“Minsheng Trust”). The purpose of the trust loan is to supplement liquidity needs. The Trust Loan will be issued in installments. Each installment of the Trust Loan has a 24-month term, and the period from issuance date of the first installment to the expiration date of the last installment shall not exceed 30 months. The Trust Loan bears interest at a fixed annual rate of 9.2%. The loan is secured by 7,887 kilograms of Au9999 gold in aggregate with carrying value of approximately $270.6 million (RMB 1.9 billion). The loan is also guaranteed by the CEO and Chairman of the Company. The Company made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan. The Company paid approximately $3.8 million (RMB 25.9 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $1.5 million (RMB 9.6 million) deferred financing cost was amortized.

[2] In January 2016, Wuhan Kingold signed a Collective Trust Loan Agreement with Anxin Trust Co., Ltd. (“Anxin Trust”). The agreement allowed the Company to access of approximately $436.8 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% or 11% with various maturity dates from February 19, 2019 to October 12, 2019. The purpose of this trust loan was to provide working capital for the Company to purchase gold. The loan is secured by 15,450 kilograms of Au9999 gold in aggregate with carrying value of approximately $523.0 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. During the nine months ended September 30, 2018, the Company repaid approximately $80.1 million (RMB 550 million). The Company also made a restricted deposit of approximately $3.5 million (RMB 24 million) to secure the rest of these loans. The deposit will be refunded when the loan is repaid upon maturity.

[3] In September 2017, Wuhan Kingold entered into a new Trust Loan Contract with Chang’An Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 10% with a term of 24 months and is secured by 4,784 kilograms of Au9999 gold in aggregate with carrying value of approximately $163.6 million (RMB 1.1 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received full amount from the loan. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. On September 30, 2018, the Company made repayment of approximately $2.9 million (RMB 20 million). Subsequently on October 31, 2018, the Company made repayment of approximately $25.9 million (RMB 178.2 million) to Chang'An Trust. The Company paid approximately $1.5 million (RMB 11 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) and $0.6 million (RMB 4.1 million) deferred financing cost was amortized, respectively.

[4] On January 25, 2017, Wuhan Kingold entered into a trust loan agreement with China Aviation Trust Ltd. to borrow a maximum of approximately $45.1 million (RMB 310 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8%. The Company pledged 1,647 kilograms of Au9999 gold with carrying value of approximately $55.1 million (RMB 378.4 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $0.5 million (RMB 3.1 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. The Company paid approximately $1.4 million (RMB 9.3 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.5 million) deferred financing cost was amortized, respectively. For three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.2 million) and $0.5 million (RMB 3.2 million) deferred financing cost was amortized, respectively.

[5] On February 28, 2017, Wuhan Kingold entered into a trust loan agreement with National Trust Ltd. (“National Trust”) to borrow a maximum of approximately $50.9 million (RMB 350 million) for working capital with a period of 24 months from the date of releasing the loan. The Company is required to make interest payments that are calculated based on a fixed annual interest rate of 8.617%. The Company pledged 1,745 kilograms of Au9999 gold with carrying value of approximately $59.4 million (RMB 408.1 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company paid approximately $0.4 million (RMB 2.6 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.9 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.05 million (RMB 0.3 million) and $0.1 million (RMB 0.7 million) deferred financing cost was amortized, respectively.

[6] In November 2017, Wuhan Kingold entered into a new Trust Loan Contract with Zheshang Jinhui Trust. The agreement allows the Company to access a total of approximately $145.6 million (RMB 1 billion) for the purpose of working capital needs. The loan bears a fixed annual interest of 7.7% with a term of 24 months and is secured by 3,264 kilograms of Au9999 gold in aggregate with carrying value of approximately $110.4 million (RMB 758.5 million). The loan is also guaranteed by the CEO and Chairman of the Company. As of September 30, 2018, the Company received an aggregate of approximately $91.9 million (RMB 631.4 million) from the loan. The Company also made a restricted deposit of approximately $0.92 million (RMB 6.3 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. The Company paid approximately $1.4 million (RMB 9.5 million) as loan origination fee for obtaining the new loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.3 million (RMB 1.9 million) and $$0.9 million (RMB 5.6 million) deferred financing cost was amortized, respectively.

[7] On September 7, 2016, the Company entered into two trust loan agreements with the Sichuan Trust Ltd. (“Sichuan Trust”) to borrow a maximum of approximately $291.2 million (RMB 2 billion) as working capital loan. The required annual interest rate is 8.46%. The Company paid the first interest payment equal to 1.21% of the principle received as loan origination fee on annual basis, then the rest of interest payments are calculated based on a fixed interest rate of 7.25%. The Company pledged 7,258 kilograms of Au9999 gold with carrying value of approximately $245.7 million (RMB 1.7 billion) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $2.2 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. As of September 30, 2018, the Company received an aggregate of approximately $218.4 million (RMB 1.5 billion) from the loan. These loans originally have maturity dates between September 20, 2018 and November 30, 2018. During the three months ended September 30, 2018, these loans were extended to have maturity dates between November 20, 2019 and January 30, 2020. Therefore, these loans were recorded as long term. The required annual interest rate changed to from 8.46% to 8.1%. The Company paid approximately $5.3 million (RMB 36.3 million) as loan origination fee in 2017 and 2016 for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.6 million (RMB 4.4 million) and $2.1 million (RMB 13.4 million) deferred financing cost was amortized, respectively. For three months and nine months ended September 30, 2017, approximately $0.4 million (RMB 2.3 million) and $1 million (RMB 6.8 million) deferred financing cost was amortized, respectively.

[8] In July 2018, Wuhan Kingold entered into a gold income rights transfer and repurchase agreement (the “Agreement”) with Dongguan Trust. The Agreement allows the Company to obtain no more than approximately $145.6 million (RMB 1 billion) to exchange the income earning rights of the Company. The Company committed to buy back the rights and repay the proceeds received, and shall pay a fixed interest of 11% over a term of 18 months. The Company determined that this Agreement is essentially a loan agreement due to the nature of this transaction. This loan is secured by 4,974 kilograms of Au9999 gold in aggregate with carrying value of approximately $166.0 million (RMB 1,140.2 million). The loan is also guaranteed by the CEO and Chairman of the Company. The Company also made a restricted deposit of approximately $1.5 million (RMB 10 million) to secure the loan. The deposit will be refunded when the loan is repaid upon maturity. The Company paid approximately $2.2 million (RMB 15 million) as loan origination fee for obtaining this loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.2 million (RMB 1.4 million) deferred financing cost was amortized. Total interest expense for the above long-term loans was approximately $15.3 million and $53.0 million for the three and nine months ended September 30, 2018, respectively. Total interest expense for the above long-term loans was approximately $17.4 million and $66.2 million for the three and nine months ended September 30, 2017, respectively. The weighted average interest rate for the long-term loans for the nine months ended September 30,2018 and 2017 was 8.9% and 9.8%, respectively.

[9] On September 7, 2016, the Company entered into a trust loan agreement with China Aviation Capital Investment Management (Shenzhen) (“China Aviation Capital”) to borrow a maximum of approximately $87.4 million (RMB 600 million) as working capital loan. The first installment of the loan was approximately $42.2 million (RMB 290 million) to mature on September 6, 2018. The Company is required to make interest payments calculated based on a fixed annual interest rate of 7.5% and a one-time consulting fee of 3% based on the principal amount received as loan origination fee. The Company pledged 1,473 kilograms of Au9999 gold with carrying value of approximately $49.9 million (RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. The loan was extended upon maturity for another 18 months with a new maturity date of March 5, 2020. The Company is required to pay interest based on a fixed annual interest rate of 10% and a one-time consulting fee of 3% based on the principal amount extended as loan origination fee. The Company paid totally approximately $1.3 million (RMB 8.7 million) as loan origination fee for obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $0.1 million (RMB 0.8 million) and $0.5 million (RMB 3.0 million) deferred financing cost was amortized, respectively. For the three and nine months ended September 30, 2017, approximately $0.2 million (RMB 1.1 million) and $0.5 million (RMB 3.3 million) deferred financing cost was amortized, respectively.

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INVESTMENTS IN GOLD - Additional Information (Detail) ¥ in Millions	9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Dec. 31, 2017 USD ($) kg	Oct. 10, 2018 g	Sep. 30, 2018 g	Sep. 30, 2018 kg	Sep. 30, 2018 CNY (¥)	Jun. 08, 2017 kg	Feb. 20, 2017 kg	Jan. 13, 2017 kg
Schedule of Investments [Line Items]
Gold Lease Outstanding				5,356	4,974	57,476
Gold Pledged For Bank Loan			59,523
Proceeds from Secured Lines of Credit		¥ 500.0	$ 2,000,000,000
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax | $	$ 56,900,000
Investment in Physical Commodities | $	1,071,005,836		957,124,267
Debt Instrument, Collateral Amount	1,953,600,000		$ 2,131,600,000				¥ 635.9
Investments [Member]
Schedule of Investments [Line Items]
Investment in Physical Commodities | $	77,000,000
Wuhan Kangbo Biotech Limited [Member]
Schedule of Investments [Line Items]
Gold Lease Outstanding			10,225			2,655			4,755	5,470
Wuhan Huatuan Technology Development Limited [Member]
Schedule of Investments [Line Items]
Gold Lease Outstanding						523		523
Proceeds from Secured Lines of Credit | ¥		¥ 100.0
Long-term Debt [Member]
Schedule of Investments [Line Items]
Gold Pledged For Bank Loan			26,689			60,654
Long-term Debt [Member] | Non current Investments [Member]
Schedule of Investments [Line Items]
Gold Pledged For Bank Loan						32,593
Short-term Debt [Member]
Schedule of Investments [Line Items]
Gold Pledged For Bank Loan			43,582			28,061
Investment in Physical Commodities | $	$ 922,100,000		$ 1,562,900,000

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RELATED PARTIES LOANS - Additional Information (Detail) ¥ in Millions		1 Months Ended					3 Months Ended		9 Months Ended				12 Months Ended
	Oct. 02, 2018 USD ($) kg	Sep. 30, 2018 USD ($)	Jan. 31, 2018 USD ($)	Jan. 31, 2018 CNY (¥)	Apr. 30, 2017 USD ($)	Feb. 22, 2017 CNY (¥)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Sep. 30, 2017 USD ($)	Sep. 30, 2017 CNY (¥)	Dec. 31, 2017 USD ($) kg	Dec. 31, 2017 CNY (¥)	Oct. 10, 2018 USD ($) g	Oct. 10, 2018 CNY (¥) g	Oct. 02, 2018 CNY (¥)	Sep. 30, 2018 g	Sep. 30, 2018 kg	Sep. 30, 2018 CNY (¥)	Sep. 30, 2018	Dec. 31, 2017 CNY (¥) kg	Jun. 08, 2017 USD ($) kg	Jun. 08, 2017 CNY (¥) kg	Feb. 20, 2017 USD ($) kg	Feb. 20, 2017 CNY (¥) kg	Jan. 13, 2017 USD ($) kg	Jan. 13, 2017 CNY (¥) kg	Nov. 29, 2016 USD ($)
Debt Instrument, Term		1 month							18 months	18 months
Gold Lease Outstanding															5,356	5,356		4,974	57,476
Line of Credit Facility, Maximum Borrowing Capacity		$ 145,600,000					$ 145,600,000		$ 145,600,000						$ 145,600,000	¥ 1.0				¥ 1,000.0
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate															10.50%	10.50%					11.00%
Notes Payable, Related Parties, Current | $		72,798,218					72,798,218		72,798,218				$ 307,389,647
Repayments of Related Party Debt | $									534,050,005		$ 609,711,305
Proceeds from Related Party Debt | $									0		293,836,774
Due to Related Parties, Current		3,592,726					3,592,726		3,592,726				$ 2,630,301									¥ 94.6
Scenario, Forecast [Member]
Secured Debt	$ 91,300,000																¥ 627.3
Kangbo [Member]
Gold Lease Outstanding | kg																									7,870	7,870
Gold Lease Remaining Outstanding | kg																									2,355	2,355
Line of Credit Facility, Fair Value of Amount Outstanding		72,800,000					72,800,000		$ 72,800,000											500.0
Kangbo [Member] | Scenario, Forecast [Member]
Addtional Gold Pledge | kg	2,655
Wuhan Kangbo Biotech Limited [Member]
Debt Instrument, Term									12 months	12 months
Gold Lease Outstanding | kg													10,225						2,655			10,225			4,755	4,755	5,470	5,470
Line of Credit Facility, Maximum Borrowing Capacity																									$ 145,600,000	¥ 1,000.0	$ 145,600,000	¥ 1,000.0
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																									4.75%	4.75%	4.75%	4.75%
Secured Debt																									$ 163,800,000	¥ 1,100.0	$ 183,000,000	¥ 1,300.0
Notes Payable, Related Parties, Current		218,400,000					218,400,000		$ 218,400,000											1,500.0
Wuhan Kingold Industrial Group [Member]
Debt Instrument, Term			5 years	5 years	5 years	5 years
Line of Credit Facility, Maximum Borrowing Capacity					$ 1,350,000,000	¥ 800.0
Repayments of Related Party Debt				¥ 2,100.0					531,500,000	¥ 3,500.0	609,700,000	¥ 4,150.0
Proceeds from Related Party Debt			$ 305,800,000						443,100,000	2,900.0	756,600,000	¥ 5,150.0
Notes Payable, Related Parties		440,300,000					440,300,000		440,300,000				$ 553,300,000							3,000.0		¥ 3,600.0
Debt Instrument, Face Amount | $																													$ 3,200,000,000
Wuhan Huatuan Technology Development Limited [Member]
Gold Lease Outstanding | kg																			523				523	523
Line of Credit Facility, Maximum Borrowing Capacity																							$ 14,600,000	¥ 100.0
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate																							7.80%	7.80%
Secured Debt																							$ 19,100,000	¥ 124.4
Repayments of Related Party Debt									2,600,000	¥ 16.8			800,000	¥ 5.4
Interest Expense, Related Party | $							237,276	$ 263,306	799,905		$ 311,385
Due to Related Parties, Current		$ 11,300,000					$ 11,300,000		$ 11,300,000				$ 14,500,000							¥ 77.8
Yantai Huanshan Road Branch of Evergrowing Bank [Member]
Gold Lease Outstanding | g																		2,655

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OTHER RELATED PARTY TRANSACTIONS - Additional Information (Detail) ¥ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)	Oct. 10, 2018 USD ($)	Oct. 10, 2018 CNY (¥)	Sep. 30, 2018 CNY (¥)	Dec. 31, 2017 USD ($)
Related Party Transaction [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 145,600,000	$ 145,600,000	¥ 1.0	¥ 1,000.0
China Construction Bank [Member]
Related Party Transaction [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	30,300,000
Wuhan Kingold Industrial Group Co Ltd [Member]
Related Party Transaction [Line Items]
Proceeds from Divestiture of Interest in Consolidated Subsidiaries	$ 3,592,726
Accrued Liabilities and Other Liabilities					$ 2,630,301

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INCOME TAXES - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Income Taxes [Line Items]
Net operating loss carry forwards	$ 19,260,430	$ 19,260,430
Net operating loss carry forwards, expiration date		2037
Net operating loss carry forwards, valuation allowance	4,044,690	$ 4,044,690		$ 6,151,702
Deferred income tax assets	$ 22,054,343	$ 22,054,343		$ 6,677,675
Applicable income tax rate	25.00%	25.00%		25.00%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent				35.00%
Scenario, Plan [Member]
Income Taxes [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

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Income (loss) from Continuing Operations before Income Taxes (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Schedule of Income Before Income Tax [Line Items]
Income from operations before taxes	$ 17,734,809	$ 38,728,109	$ 53,784,180	$ 21,271,146
United States
Schedule of Income Before Income Tax [Line Items]
Income from operations before taxes	(214,312)	(236,952)	(1,167,190)	(953,598)
Foreign
Schedule of Income Before Income Tax [Line Items]
Income from operations before taxes	$ 17,949,121	$ 38,965,061	$ 54,951,370	$ 22,224,744

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Components of Income Tax Provision (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Current tax provision
Federal	$ 0	$ 0	$ 0	$ 0
State	0	0	0	0
Foreign	1,787,717	7,778,520	9,214,312	12,996,602
Current Income Tax Expense (Benefit), Total	1,787,717	7,778,520	9,214,312	12,996,602
Deferred tax provision (benefit)
Federal	0	0	0	0
State	0	0	0	0
Foreign	2,699,588	1,962,539	4,523,643	(7,440,305)
Deferred Income Tax Expense (Benefit), Total	2,699,588	1,962,539	4,523,643	(7,440,305)
Income tax provision (benefit)	$ 4,487,305	$ 9,741,059	$ 13,737,955	$ 5,556,297

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Components Of Deferred Tax Assets and Deferred Tax Liability (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Deferred tax assets:
Accrued interest	$ 1,609,466	$ 1,824,171
Inventory valuation	0	4,545,708
Accrued expense	0	330,663
Deferred financing costs on the loans	2,609,240	741,008
Unrealized loss due to change in fair value of investments in gold	19,242,937	0
Other temporary differences	0	56,062
Net operating losses from parent company	4,044,690	6,151,702
Valuation allowance	(4,044,690)	(6,151,702)
Deferred tax assets	23,461,643	7,497,612
Deferred tax liability:
Inventory Valuation	(840,680)	0
Accrued expenses	(514,296)	0
Other temporary differences	(52,324)	0
Unrealized gain due to change in fair value of investments in gold	0	(819,937)
Deferred tax assets - Net	$ 22,054,343	$ 6,677,675

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EARNINGS PER SHARE - Additional Information (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings Per Share Disclosure [Line Items]
Weighted Average Number Diluted Shares Outstanding Adjustment	7,619	434,991	197,647	307,803

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OPTIONS - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 5,364	$ 5,364	$ 16,092	$ 27,650

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Stock Option Activity (Detail) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options Granted	0
Number of options Forfeited	0
Number of options Exercised	0
Number of options Outstanding	3,220,000	3,220,000
Number of options Exercisable	3,208,750	3,191,875
Weighted Average Exercise Price Granted	$ 0
Weighted Average Exercise Price Forfeited	0
Weighted Average Exercise Price Exercised	0
Weighted Average Exercise Price Outstanding	1.90	$ 1.90
Weighted Average Exercise Price Exercisable	$ 1.91	$ 1.91
Weighted Average Remaining Life in Years Outstanding	3 years 4 days	3 years 9 months 4 days
Weighted Average Remaining Life in Years Exercisable	3 years	3 years 8 months 23 days

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WARRANTS - Additional Information (Detail) - USD ($)		1 Months Ended			3 Months Ended		9 Months Ended
	Aug. 12, 2015	Jun. 27, 2016	Apr. 18, 2016	Mar. 29, 2016	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Jul. 17, 2017
Selling, General and Administrative Expense					$ 2,487,346	$ 3,779,728	$ 7,597,545	$ 10,546,253
Bespoke Independent Partners [Member]
Class of Warrant or Right, Issued	900,000			150,000
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 1.50	$ 1.20
Investment Warrants Expiration Date 1		Jun. 28, 2017
Warrants and Rights Outstanding			$ 150,000
Selling, General and Administrative Expense			$ 65,091	$ 64,204
Stock Issued During Period, Value, Issued for Services		$ 66,439
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									150,000
Bespoke Independent Partners [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate			79.70%	81.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			0.63%	0.84%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term			1 year 3 months	1 year 3 months
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Intrinsic Value			$ 65,091	$ 64,204
Bespoke Independent Partners [Member] | Warrant One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		55,365
Bespoke Independent Partners [Member] | Warrant Two [Member]
Class of Warrant or Right, Issued		94,635
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 1.2
Bespoke Independent Partners [Member] | Warrant Three [Member]
Class of Warrant or Right, Issued		150,000
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 1.50
Bespoke Independent Partners [Member] | Maximum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1.80
Bespoke Independent Partners [Member] | Minimum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 1.20

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CONCENTRATIONS AND RISKS - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Concentration Risk [Line Items]
Cash balance excess of FDIC insurance limits				$ 0
Cash balance with in United States				0
China income tax
Concentration Risk [Line Items]
Cash balance excess of FDIC insurance limits	$ 28,709,891	$ 28,709,891		$ 17,632,270
China income tax | Geographic Concentration Risk | Assets, Total
Concentration Risk [Line Items]
Concentration of risk percentage	100.00%	100.00%	100.00%	100.00%
British Virgin Islands
Concentration Risk [Line Items]
Cash balance with in United States				$ 16,012
United States
Concentration Risk [Line Items]
Cash balance excess of FDIC insurance limits				250,000
Cash balance with in United States	$ 19,670	$ 19,670		$ 266,012

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GOLD LEASE TRANSACTIONS - Additional Information (Detail) ¥ in Millions	2 Months Ended	3 Months Ended		9 Months Ended			12 Months Ended
	Feb. 28, 2017 USD ($) kg	Sep. 30, 2018 USD ($) g	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) g	Sep. 30, 2018 CNY (¥) g	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Oct. 10, 2018 g	Sep. 30, 2018 kg
Gold Lease Transactions [Line Items]
Proceeds from secured lines of credit					¥ 500		$ 2,000,000,000
Gold Lease Outstanding		4,974		4,974	4,974			5,356	57,476
Deposits For Gold Lease				$ 0
Wuhan Shuntianyi Investment Management Ltd [Member]
Gold Lease Transactions [Line Items]
Proceeds from secured lines of credit	$ 131,100,000
Gold Lease from CCB [Member]
Gold Lease Transactions [Line Items]
Deposits For Gold Lease							$ 0
Shuntianyi [Member]
Gold Lease Transactions [Line Items]
Gold Lease Outstanding | kg	4,000
Gold lease transactions [Member] | Gold Lease from CCB [Member]
Gold Lease Transactions [Line Items]
Interest expense, debt		$ 0	$ 1,159,000,000	$ 0		$ 115,972,000,000

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COMMITMENTS AND CONTINGENCIES - Additional Information (Detail)	1 Months Ended								3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Jan. 31, 2018	Jul. 31, 2017 USD ($)	Jul. 31, 2017 CNY (¥)	Apr. 30, 2017 USD ($)	Feb. 22, 2017 CNY (¥)	Jun. 27, 2016 USD ($)	Jun. 27, 2016 CNY (¥)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Oct. 10, 2018 USD ($) g	Oct. 10, 2018 CNY (¥) g	Sep. 30, 2018 g	Sep. 30, 2018 kg	Sep. 30, 2018 CNY (¥)	Sep. 30, 2018	Dec. 31, 2017 USD ($)	Jul. 17, 2017	Feb. 23, 2017 USD ($)
Commitments And Contingencies [Line Items]
Operating Leases, Rent Expense, Net			$ 88,408	¥ 576,000			$ 300,000	¥ 2,300,000	$ 62,888		$ 197,811
Lessee, Operating Lease, Term of Contract							5 years	5 years												5 months
Line of Credit Facility, Maximum Borrowing Capacity	$ 145,600,000								145,600,000		$ 145,600,000		$ 145,600,000	¥ 1,000,000			¥ 1,000,000,000
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate													10.50%	10.50%				11.00%
Debt Instrument, Term	1 month										18 months
Gold Lease Outstanding													5,356	5,356	4,974	57,476
Long-term Debt	$ 166,000,000								166,000,000		$ 166,000,000		$ 208,000,000	¥ 1,400,000			1,140,200,000				$ 145,596
Restricted Deposit	1,500,000								1,500,000		1,500,000						¥ 10,000,000
Wuhan Kingold Industrial Group [Member]
Commitments And Contingencies [Line Items]
Operating Leases, Rent Expense, Net										$ 108,567		$ 278,251
Accrued Liabilities and Other Liabilities	$ 440,000								$ 440,000		$ 440,000								$ 260,000
Line of Credit Facility, Maximum Borrowing Capacity					$ 1,350,000,000	¥ 800,000,000
Debt Instrument, Term		5 years			5 years	5 years

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The Company was obligated under non-cancellable operating leases for minimum rentals (Detail)	Sep. 30, 2018 USD ($)
2019	$ 263,750
2020	263,750
2021	263,750
2022	66,306
Total minimum lease payments	$ 857,556

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COMPARATIVE INFORMATION (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Cash	$ 13,245,436	$ 4,997,125	$ 1,001,830	$ 21,333,193
Restricted cash - current	6,567,855	5,534,551	3,170,596	52,786,257
Restricted cash - non current	8,927,100	7,392,721	7,753,685	7,558,173
Total cash and restricted cash	$ 28,740,391	$ 17,924,397	$ 11,926,111	$ 81,677,623

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SUBSEQUENT EVENT - Additional Information (Detail) ¥ in Millions	1 Months Ended		9 Months Ended
	Oct. 10, 2018 USD ($) g	Sep. 30, 2018 USD ($)	Sep. 30, 2018 USD ($)	Oct. 10, 2018 CNY (¥) g	Sep. 30, 2018 g	Sep. 30, 2018 kg	Sep. 30, 2018 CNY (¥)	Sep. 30, 2018	Feb. 23, 2017 USD ($)
Subsequent Event [Line Items]
Long-term Debt	$ 208,000,000	$ 166,000,000	$ 166,000,000	¥ 1.4			¥ 1,140.2		$ 145,596
Line of Credit Facility, Maximum Borrowing Capacity	$ 145,600,000	$ 145,600,000	$ 145,600,000	¥ 1.0			¥ 1,000.0
Debt Instrument, Term		1 month	18 months
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	10.50%			10.50%				11.00%
Gold Lease Outstanding	5,356			5,356	4,974	57,476
Minimum [Member]
Subsequent Event [Line Items]
Debt Instrument, Term	12 months
Maximum [Member]
Subsequent Event [Line Items]
Debt Instrument, Term	18 months