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 March 31, 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 March 31, 2018 and December 31, 2017,
the Company had restricted cash of $15,620,870 and $12,927,272, respectively. All restricted cash was related to the various loans
with banks and financial institutions – see Note 5 – Loans.
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. At March 31, 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 March 31, 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 March 31, 2018 and December 31, 2017.
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
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.
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 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.
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 March 31, 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 March 31, 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:
|
|
|
March
31, 2018
|
|
|
|
March
31, 2017
|
|
|
|
December
31, 2017
|
|
Balance sheet items, except
for equity, as of the period ended
|
|
US$
|
1=RMB
6.2807
|
|
|
US$
|
1=RMB
6.8912
|
|
|
US$
|
1=RMB
6.5064
|
|
Amounts included in the statements of
operations and cash flows for the periods presented
|
|
US$
|
1=RMB
6.3582
|
|
|
US$
|
1=RMB
6.8891
|
|
|
US$
|
1=RMB
6.7570
|
|
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Comprehensive income
Comprehensive
income 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
The Company follows the provisions of ASC
718, “Compensation — Stock Compensation,” which establishes the accounting for employee stock-based awards. 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 are 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.
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.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 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.
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
.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 3 – INVENTORIES
Inventories as of March 31, 2018 and December 31, 2017 consisted
of the following:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Raw materials (A)
|
|
$
|
177,684,115
|
|
|
$
|
-
|
|
Work-in-progress (B)
|
|
|
81,470,668
|
|
|
|
90,406,021
|
|
Finished goods (C)
|
|
|
47,358,106
|
|
|
|
44,636,692
|
|
Total inventory
|
|
$
|
306,512,889
|
|
|
$
|
135,042,713
|
|
|
(A)
|
Included
4,751,394 grams of Au9999 gold as of March 31, 2018 and Nil Au9999 gold as of December 31, 2017.
|
|
(B)
|
Included
2,183,890 grams of Au9999 gold March 31, 2018 and 2,508,182 grams of Au9999 gold as of December 31, 2017.
|
|
(C)
|
Included
1,261,172 grams of Au9999 gold March 31, 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 March 31, 2018 and December 31, 2017, respectively.
NOTE 4 – PROPERTY AND EQUIPMENT, NET
The following is a summary of property and equipment as of March
31, 2018 and December 31, 2017:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
Buildings
|
|
$
|
2,502,382
|
|
|
$
|
2,415,577
|
|
Plant and machinery
|
|
|
19,301,537
|
|
|
|
18,615,951
|
|
Motor vehicles
|
|
|
263,364
|
|
|
|
254,228
|
|
Office and electric equipment
|
|
|
1,467,515
|
|
|
|
1,415,194
|
|
Leasehold improvements
|
|
|
1,681,351
|
|
|
|
1,623,027
|
|
Subtotal
|
|
|
25,216,149
|
|
|
|
24,323,977
|
|
Less: accumulated depreciation
|
|
|
(18,067,869
|
)
|
|
|
(17,024,334
|
)
|
Property and equipment, net
|
|
$
|
7,148,280
|
|
|
$
|
7,299,643
|
|
Depreciation and amortization for the three
months ended March 31, 2018 and 2017 was $426,494 and $400,282, respectively.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 5 – LOANS
Short term loans consist of the following:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
(a) Loan payable to Aijian Trust
|
|
$
|
47,765,376
|
|
|
$
|
46,108,447
|
|
(b) Loans payable to Evergrowing Bank - Qixia Branch
|
|
|
-
|
|
|
|
153,694,824
|
|
(c) Loans payable to Evergrowing Bank - Yantai Huanshan Road Branch
|
|
|
79,608,961
|
|
|
|
153,233,739
|
|
(d) Loans payable to Sichuan Trust - gross amount
|
|
|
238,826,883
|
|
|
|
230,542,236
|
|
Loans payable to Sichuan Trust - deferred financing cost
|
|
|
(1,607,207
|
)
|
|
|
(2,239,292
|
)
|
(e) Loans payable to China Aviation Capital - gross amount
|
|
|
46,173,197
|
|
|
|
44,571,499
|
|
Loans payable to China Aviation Capital - deferred financing cost
|
|
|
(303,605
|
)
|
|
|
(457,926
|
)
|
(f) Loans payable to Huarong Trust - gross amount
|
|
|
147,630,837
|
|
|
|
146,163,777
|
|
Loans payable to Huarong Trust - deferred financing cost
|
|
|
(812,247
|
)
|
|
|
(1,324,677
|
)
|
(g) Loans payable to China Construction Investment Trust - gross amount
|
|
|
47,765,376
|
|
|
|
46,108,447
|
|
Loans payable to China Construction Investment Trust - deferred financing cost
|
|
|
(114,937
|
)
|
|
|
(167,796
|
)
|
(h) Loans payable to Zheshang Jinhui Trust
|
|
|
87,569,857
|
|
|
|
84,532,153
|
|
(i) Loans payable to Zhongjiang International Trust
|
|
|
63,687,169
|
|
|
|
61,477,929
|
|
Loans payable to Zhongjiang International Trust - deferred financing cost
|
|
|
(109,615
|
)
|
|
|
(141,614
|
)
|
(j) Loan payable to China Aviation Trust - gross amount
|
|
|
49,357,556
|
|
|
|
-
|
|
Loan payable to China Aviation Trust - deferred financing cost
|
|
|
(606,489
|
)
|
|
|
-
|
|
(k) Loans payable to National Trust - gross amount
|
|
|
55,726,273
|
|
|
|
-
|
|
Loan payable to National Trust - deferred financing cost
|
|
|
(186,113
|
)
|
|
|
-
|
|
(l) Loans payable to Anxin Trust
|
|
|
46,491,633
|
|
|
|
-
|
|
Total short term loans
|
|
$
|
906,862,905
|
|
|
$
|
962,101,746
|
|
(a) Loan payable to Aijian Trust
On April 28, 2016, Wuhan Kingold and Shanghai
Aijian Trust Co., Ltd. (“Aijian Trust”) entered into a gold income right transfer and repurchase agreement. According
to the agreement, Aijian Trust acquired the income rights from Wuhan Kingold for Wuhan Kingold’s Au9999 gold worth at least
RMB 412.5 million based on the closing price of gold on the most recent trading day at the Shanghai Gold Exchange (the “Gold
Income Right”). Aijian Trust’s acquisition price for the Gold Income Right was approximately $47.8 million (RMB 300
million) (the “Acquisition Price”). Wuhan Kingold is required to repurchase the Gold Income Right back from Aijian
Trust with installments and the last installment shall be within the 24 months. The repurchase price is equal to the Acquisition
Price with annual return of 10% for the period from the agreement date and the last repayment date. The repurchase obligation may
be accelerated under certain conditions, including upon breach of representations or warranties, certain cross-defaults, upon the
occurrence of certain material events affecting the financial viability of Wuhan Kingold, and other customary conditions. Wuhan
Kingold pledged the 1,542 kilograms of related Au9999 gold under the Gold Income Right to Aijian Trust with carrying value of approximately
$57.1 million (RMB 358.5 million) as collateral. The agreement is also personally guaranteed by the CEO and Chairman. The Company
also made a restricted deposit of $0.5 million (RMB 3 million) to secure these loans. The deposit will be refunded when the loan
is repaid upon maturity. Since Wuhan Kingold has a right to repurchase the Gold Income Right in 12 months, the loan is treated
as a short-term loan. The loan was subsequently repaid on May 4, 2018. The pledged gold and restricted deposit were released and returned upon the
repayment.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 5 – LOANS (Continued)
(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 $159.2
million (RMB 1 billion) in the 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, approximately $159,218
(RMB 1 million) was repaid in August 2016, approximately $159,218 (RMB 1 million) was repaid on February 23, 2017 and another $159,218
(RMB 1 million) was repaid in August 23, 2017. The Company repaid $79.1 million (RMB 497 million) to Evergrowing bank Yantai Huangshan
Road Branch upon maturity.
For
the remaining balance of $79.6 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 $101.2 million (RMB 635.9 million) and are guaranteed by the CEO and Chairman
of the Company.
(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 $318.4
million (RMB 2 billion) as working capital loan. 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 $268.7 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 $2.4 million (RMB 15 million) to secure these loans. The deposit will be refunded when the loan is repaid upon
maturity. As of March 31, 2018, the Company received an aggregate of approximately $238.8 million (RMB 1.5 billion) from the loan.
The Company paid approximately $5.8 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 months ended March 31, 2018 and 2017, approximately $0.7 million (RMB 4.5
million) and $0.3 million (RMB 2.2 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 $95.5 million (RMB 600 million) as working capital loan. The first installment of the loan was
approximately $46.2 million (RMB 290 million) to mature on September 7, 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 $54.5 million
(RMB 342.5 million) as collateral to secure this loan. The loan is guaranteed by the CEO and Chairman of the Company. As of March
31, 2018, the Company received an aggregate of approximately $46.2 million (RMB 290 million) from the loan.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 5 – LOANS (Continued)
(e) Loans payable to China Aviation Capital
(continued)
The Company paid approximately $1.4 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 months ended March 31, 2018
and 2017, approximately $0.2 million (RMB 1.1 million) and $0.1 million (RMB 1.1 million) deferred financing cost was amortized,
respectively.
(f) Loans payable to Huarong Trust
On
July 28, 2017, the Company entered into a loan agreement with Huarong International Trust Co. Ltd. (“Huarong Trust”)
to borrow a maximum of approximately $159.2 million (RMB 1 billion) as working capital loan. The loan has a 12-month term starting
from the date of releasing the loan and 2.5% of the principal amount is required to be repaid after 6 months from releasing date.
The Company paid a loan origination fee equivalent to 1.5% of the principal amount received which bears interest at a fixed rate
of 7% per annum. The loan is also guaranteed by the CEO and Chairman of the Company. The Company pledged 4,975 kilograms of Au9999
gold with carrying value of approximately $187.3 million (RMB 1.2 billion
)
as collateral to secure this loan. The Company pledged approximately $1.5 million (RMB 9.5 million) restricted cash with Huarong
Trust as collateral.
The Company paid approximately $2.3 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 months ended March 31, 2018 and 2017, approximately $0.6 million (RMB 3.5 million)
and $Nil deferred financing cost was amortized, respectively.
(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 $47.8 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 $53.6 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.
The Company paid approximately $0.5 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 months ended March 31, 2018 and 2017, approximately $0.06 million (RMB 0.4 million) deferred
financing cost was amortized, respectively.
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 $87.6 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 $100.2 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 $0.9 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 $63.7 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 $77.9 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 months ended March 31, 2018 and 2017, approximately $0.04 million (RMB 0.2 million) and $0.04 million (RMB
0.3 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 $49.4 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 $60.2 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 $1.5 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 months ended March 31, 2018 and 2017, approximately $0.2 million (RMB 1.2 million) and
$0.1 million (RMB 0.8 million) deferred financing cost was amortized, respectively.
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 $55.7
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 $65 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 months ended March 31, 2018 and 2017, approximately $0.05 million (RMB 0.3 million) and $0.01 million (RMB
0.1 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 $477.7 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 $572 million (RMB 3.6 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of March
31, 2018, the Company received full amount from the loan. The Company also made a restricted deposit of approximately $4.8 million
(RMB 30 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity.
Interest
expense for all of the short term loans for the three months ended March 31, 2018 and 2017 was $18.5 million and $8.2 million
,
respectively. The weighted average interest rate for the three months ended March 31, 2018 and 2017 was 7.5% and 6.5%
,
respectively.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 5 – LOANS (Continued)
Long-term loans consist of the following:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(unaudited)
|
|
|
|
|
(m) Loans payable to Minsheng Trust
|
|
$
|
222,905,090
|
|
|
$
|
-
|
|
(n) Loans payable to Anxin Trust
|
|
|
431,162,132
|
|
|
|
461,084,471
|
|
(o) Loans payable to Chang'An Trust - gross amount
|
|
|
159,217,922
|
|
|
|
153,694,824
|
|
Loans payable to Chang'An Trust - deferred financing cost
|
|
|
(1,403,005
|
)
|
|
|
(1,563,230
|
)
|
(p) Loans payable to China Aviation Trust - gross amount
|
|
|
-
|
|
|
|
47,645,395
|
|
Loans payable to China Aviation Trust - deferred financing cost
|
|
|
-
|
|
|
|
(761,674
|
)
|
(q) Loans payable to National Trust - gross amount
|
|
|
-
|
|
|
|
53,793,188
|
|
Loans payable to National Trust - deferred financing cost
|
|
|
-
|
|
|
|
(228,068
|
)
|
(r) Loans payable to Zheshang Jinhui Trust (new) - gross amount
|
|
|
79,608,961
|
|
|
|
76,847,412
|
|
Loans payable to Zheshang Jinhui Trust (new) - deferred financing cost
|
|
|
(847,345
|
)
|
|
|
(1,102,181
|
)
|
Total long term loans, net of deferred financing costs
|
|
$
|
890,643,755
|
|
|
$
|
789,410,137
|
|
(m) Loan payable to Minsheng Trust
On December 26, 2017, the Company entered
into a Trust Loan Contract in the amount of no more than RMB 1.5 billion (equivalent to approximately $ 238.9 million) 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
$295.9 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 14 million) to secure these loans. The deposit will be refunded when the loan is repaid
upon maturity. As of March 31, 2018, the Company received an aggregate of approximately $222.9 million (RMB 1.4 billion) from the
loan.
(n) Loans payable to Anxin Trust (see
Note 5 (l) above)
(o) 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 $159.2 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 $179 million (RMB 1.1 billion). The loan is also guaranteed by the CEO and Chairman of the Company. As of March
31, 2018
, the Company received full amount from the
loan. The Company also made a restricted deposit of approximately $1.6 million (RMB 10 million) to secure these loans. The deposit
will be refunded when the loan is repaid upon maturity.
The Company paid approximately $1.7 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 months ended March 31, 2018 and 2017, approximately $0.2 million (RMB 1.4 million)
and $Nil deferred financing cost was amortized, respectively.
(p) Loans payable to China Aviation
Trust (see Note 5 (j) above)
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 5 – LOANS (Continued)
(q) Loans payable to National Trust
(see Note 5 (k) above)
(r) 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
$159.2 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 2,540 kilograms of Au9999 gold in aggregate with carrying value of approximately $93.9 million
(RMB 589.8 million). The loan is also guaranteed by the CEO and Chairman of the Company. As of March 31, 2018, the Company received
an aggregate of approximately $79.6 million (RMB 500 million
)
from the loan. The Company also made a restricted deposit of approximately $0.8 million (RMB 5 million) to secure these loans.
The deposit will be refunded when the loan is repaid upon maturity.
The Company paid approximately $1.2
million
(RMB 7.5 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 months ended March 31, 2018 and 2017, approximately $0.3 million (RMB 1.8 million)
and $Nil deferred financing cost was amortized, respectively.
Total
Interest for the long term loans was $21.4 million and $24 million
for
the three months ended March 31, 2018 and 2017, respectively. The weighted average interest rate for the three months ended March
31, 2018 and 2017 was 9.9% and 9.5%, respectively.
NOTE 6 – INVESTMENTS IN GOLD
As of March 31, 2018 and December 31, 2017,
the Company allocated a total of 58,295 and 59,523 kilograms of Au9999 gold in its inventories with carrying value of approximately
$2,166.6 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 March 31, 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 March 31, 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 March 31, 2018, a total of 29,484
kilograms of Au9999 gold with fair market value of approximately $1,085.6 million was pledged for long term loans, and therefore
classified as non-current investments in gold. The remaining investments in gold of 31,989 kilograms of Au9999 gold with fair market
value of approximately $1,177.8 million was classified as current assets as of March 31, 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 March 31, 2018, a total of 61,473
kilograms of Au9999 gold investments with a change of fair market value of $26.2 million, which resulted in net unrealized loss
of $18.7 million, net of tax, as of March 31, 2018. The Company recorded the change in unrealized gain as other comprehensive income,
net of tax.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
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 $159.2 million (RMB 1 billion
).
The loan has one-year term from January 12, 2017 to January 10, 2018, and bears 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 $200
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 $159.2 million (RMB 1 billion
).
The loan has one-year term from February 20, 2017 to February 20, 2018, and bears 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 $179.2 million
(RMB 1.1 billion)
as collateral.
The Company repaid $235.9 million
(RMB
1.5 billion
) loans to Kangbo upon maturity in January
2018 and February 2018, respectively. 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 $79.6 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 300 kilograms of gold pledged.
|
(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 $334.4 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 three months ended March 31,
2018, the Company repaid loans totaling RMB 1.8 billion and obtained loans totaling RMB 2.1 billion. During the year ended December
31, 2017, the Company repaid loans totaling RMB 5.05 billion and obtained loans totaling RMB 5.45 billion.
As of March 31, 2018, the aggregate borrowing
amount from Wuhan Kingold Industrial Group was $618.6 million (RMB 3.9 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 $553.3
million
(RMB 3.6 billion).
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 7 – RELATED PARTIES LOANS (Continued)
(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 $15.9 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 three months ended March 31, 2018,
the Company repaid RMB 5.5 million, results in the outstanding balance of $14.2 million (RMB 89.1 million) as of March 31, 2018.
Interest expense of $291,569 was recorded for this loan for the three months ended March 31, 2018
.
During the year ended December 31, 2017,
the Company repaid 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 three months ended March 31, 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 March 31, 2018 and December 31, 2017, the amount due to CEO and Chairman was $3,102,653 and $2,630,301,
respectively.
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 loss for income tax purposes through March 31, 2018 resulting
in loss carry forwards of $18,667,008 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 March 31, 2018 and December 31, 2017 was $6,346,783 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 months ended March 31, 2018 and for the year ended December 31, 2017. The
Company recorded $6,405,437 and $6,677,675 deferred income tax assets as of March 31, 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 is necessary
to do a more 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 months ended March 31, 2018 and 2017:
|
|
For the three months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(573,768
|
)
|
|
$
|
(317,240
|
)
|
Foreign
|
|
|
18,411,175
|
|
|
|
(23,276,528
|
)
|
|
|
$
|
17,837,407
|
|
|
$
|
(23,593,768
|
)
|
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 months ended March 31, 2018 and 2017:
|
|
For the three months ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Current tax provision
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
3,257,474
|
|
|
|
-
|
|
|
|
|
3,257,474
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred tax provision (benefit)
|
|
|
|
|
|
|
|
|
Federal
|
|
|
-
|
|
|
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
1,345,009
|
|
|
|
(2,287,949
|
)
|
|
|
|
1,345,009
|
|
|
|
(2,287,949
|
)
|
Income tax provision (benefit)
|
|
$
|
4,602,483
|
|
|
$
|
(2,287,949
|
)
|
The components of deferred tax assets and
deferred tax liabilities as of March 31, 2018 and December 31, 2017 consist of the following:
|
|
As of March 31,
2018
|
|
|
As of December 31,
2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
$
|
1,552,968
|
|
|
$
|
1,824,171
|
|
Inventory Valuation
|
|
|
3,015,890
|
|
|
|
4,545,708
|
|
Accrued expenses
|
|
|
440,141
|
|
|
|
330,663
|
|
Deferred financing costs on the loans
|
|
|
1,338,360
|
|
|
|
741,008
|
|
Other temporary differences
|
|
|
58,078
|
|
|
|
56,062
|
|
Unrealized loss due to change in fair value of investments in gold
|
|
|
6,548,497
|
|
|
|
-
|
|
Net operating losses from parent company
|
|
|
6,346,783
|
|
|
|
6,151,702
|
|
Valuation allowance
|
|
|
(6,346,783
|
)
|
|
|
(6,151,702
|
)
|
|
|
|
12,953,934
|
|
|
|
7,497,612
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized gain due to change in fair value of investments in gold
|
|
$
|
-
|
|
|
$
|
(819,937
|
)
|
Deferred tax assets - Net
|
|
$
|
12,953,934
|
|
|
$
|
6,677,675
|
|
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 10 – EARNINGS (LOSSES) PER SHARE
For the three months ended March 31, 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 months ended March 31, 2018. As a result, total of 427,849 unexercised warrants and options
are dilutive, and were included in the computation of diluted EPS.
For the three months ended March 31, 2017,
the basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares
of common stock was anti-dilutive since the Company had a net loss for the three months ended March 31, 2017. As a result, warrants
to purchase 150,000 shares and 94,000 shares of common stock at weighted average exercise price of $1.50 and $1.20 per shares,
respectively, and options to purchase 3,220,000 shares of common stock at weighted average exercise price of $1.90 per share, were
not included in the computation of diluted EPS.
NOTE 11 – OPTIONS
The Company recorded $5,364 and $11,143
stock-based compensation expense for the three months ended March 31, 2018 and 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, March 31, 2018
|
|
|
3,220,000
|
|
|
$
|
1.90
|
|
|
|
3.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2018
|
|
|
3,197,500
|
|
|
$
|
1.91
|
|
|
|
3.48
|
|
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 December 31, 2017, 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. As of December 31, 2017, there were no warrants outstanding.
For the three months ended March 31, 2018
and 2017, there were no warrants recorded in the general administrative expenses of the Company, respectively.
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
$16,483,867
and
$17,632,270 as of March 31, 2018 and December 31, 2017, respectively. The cash balance held in the BVI bank accounts was $Nil as
of March 31, 2018 and December 31, 2017, respectively. As of March 31, 2018, the Company held $117,483 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 March 31, 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 months ended March 31, 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 months ended March 31, 2018 and 2017.
NOTE 14 – GOLD LEASE TRANSACTIONS
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.
|
a)
|
Gold lease transactions with CCB
|
As of December 31, 2016, the Company pledged
restricted cash of approximately $14.4 million (RMB 100 million) as collateral to safeguard the gold lease from CCB, which was
returned to the Company in early 2017 as the leased gold was returned at the end of December 2016.
As
of March 31, 2018 and December 31, 2017, no leased gold was outstanding and no restricted cash was pledged as collateral to safeguard
the gold lease from CCB.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 14 – GOLD LEASE TRANSACTIONS (Continued)
|
b)
|
Gold lease transactions with SPD Bank
|
During the year ended December 31, 2016,
the Company entered into gold lease agreements with Shanghai Pudong Development Bank and leased an aggregate of 345 kilograms of
gold, which amounted to approximately $13.4 million (RMB 93.3 million). The leases had initial terms of six months to one year
and provided an interest rate from 3.0% to 3.3% per annum. During the year ended December 31, 2016, the Company returned 1,077
kilograms of gold, which amounted to approximately $37.2 million (RMB 258.6 million) back to SPD Bank upon lease maturity.
The
remaining leased gold of 185 kilograms which amounted to approximately $7.2 million (RMB 49.8 million) was returned to the SPD
Bank upon lease maturity in September 2017.
The pledged restricted
cash of approximately $8.1 million (RMB 55.6 million) as collateral to safeguard the gold lease from SPD Bank was also fully refunded
to the Company upon lease maturity.
As of March 31, 2018 and December 31, 2017,
no leased gold was outstanding and no restricted cash was pledged as collateral to safeguard the gold lease from SPD.
|
c)
|
Gold lease transaction with Industrial and Commercial Bank of China (“ICBC’)
|
During the year ended December 31, 2016,
the Company entered into additional gold lease agreements with ICBC and leased an aggregated amount of 527 kilograms of gold, which
amounted to approximately $20.1 million (RMB 139.7 million). The leases have initial terms of half year and provide an interest
rate of 2.75% per annum. As of December 31, 2016, 527 kilograms of leased gold were all returned to ICBC.
As
of March 31, 2018 and December 31, 2017, no leased gold was outstanding and no restricted cash was pledged as collateral to safeguard
the gold lease from ICBC.
|
d)
|
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 March 31, 2018 and December 31, 2017,
the Company had no leased gold outstanding, respectively. Interest expense for all gold lease arrangements for the three months
ended March 31, 2018 and 2017 was Nil and approximately $0.06 million, respectively, which was included in the cost of sales.
KINGOLD JEWELRY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 15 – COMMITMENTS AND CONTINGENCIES
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 $90,592
(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 months ended March 31, 2018
and 2017, the Company recorded $0.07 million and $0.08 million rent expenses, respectively. As of March 31, 2018 and December 31,
2017, the Company had lease payable to Wuhan Huayuan of approximately $0.34 million and $0.26 million, respectively, which included
in other payables and accrued expenses.
For the Twelve Months Ending March 31,
|
|
|
|
2019
|
|
$
|
270,265
|
|
2020
|
|
|
270,265
|
|
2021
|
|
|
270,265
|
|
2022
|
|
|
180,429
|
|
2023 and thereafter
|
|
|
22,648
|
|
|
|
$
|
1,013,872
|
|
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 three months ended March 31, 2017 to conform to the current period
presentation.
The following table provides a reconciliation
of cash and restricted cash reported within the 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 March 31, 2018 and 2017:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Cash
|
|
$
|
999,156
|
|
|
$
|
4,997,125
|
|
|
$
|
9,425,086
|
|
|
$
|
21,333,193
|
|
Restricted cash - current
|
|
|
6,691,929
|
|
|
|
5,534,551
|
|
|
|
64,456,118
|
|
|
|
52,786,257
|
|
Restricted cash – non current
|
|
|
8,928,941
|
|
|
|
7,392,721
|
|
|
|
8,503,599
|
|
|
|
7,558,173
|
|
Total cash and restricted cash
|
|
$
|
16,620,026
|
|
|
$
|
17,924,397
|
|
|
$
|
82,384,803
|
|
|
$
|
81,677,623
|
|
NOTE 17 – SUBSEQUENT EVENTS
In April, 2018, the Company received approximately
$20.7 million (RMB 130.1 million) from Zheshang Jinhui Trust pursuant to the original Trust Loan Contract signed with Zheshang
Jinhui Trust in November 2017 for an aggregated loan amount of RMB 1 billion – see Note 5(r). The Company is required to
pledge additional 690 kilograms of Au999 gold for the loans obtained in April. As a result, the Company received an aggregate
of approximately $100.3 million (RMB 630.1 million) from the loan as of the reporting date.