COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

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