RELATED PARTIES LOANS

9 Months Ended

Sep. 30, 2018

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).

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.