Kingold Jewelry Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2018

WUHAN CITY,China,Aug. 10,2018 --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 second quarter and six months ended June 30,2018.

2018 Second Quarter Financial Highlights (all results compared to prior year period)

Net sales were $678.8 million,an increase of 42.6% from $475.9 million

Processed a total of 27.6 metric tons of 24-karat gold products,increased by 6.0% from 26 metric tons

Net income was $13.6 million,or $0.20 per diluted share,compared to net income of $8.0 million,or $0.12 per diluted share

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 deliver strong operating results in the second quarter of 2018 and continue to benefit from our gold investment which enabled us to further expand our production capacity and design capabilities. During the quarter,we have witnessed a strong growing demand for 24-karat gold jewelry and investment products in China,and our management quickly adjusted the product mix in response to market demand with additional trendy design jewelry products and value preserving investment gold products. We are dedicated to building the Kingold brand as an increasingly important participant in the gold industry in China,while quickly responding to market changes and adjusting operational strategies."

2018 SECOND QUARTER AND SIX MONTHS OPERATIONAL REVIEW

Metric Tons of Gold Processed

Three Months Ended:

June 30,2018

June 30,2017

Volume

% of Total

Volume

% of Total

Branded*

16.9

61.1%

12

46.2%

Customized**

10.7

38.9%

14

53.8%

Total

27.6

100.0%

26

100%

Six Months Ended:

June 30,2017

Volume

% of Total

Volume

% of Total

Branded*

29.8

58.6%

20.1

47.7%

Customized**

21.1

41.4%

22.0

52.3%

Total

50.9

100.0%

42.1

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 June 30,2018,the Company processed a total of 27.6 metric tons of gold,of which branded production was 16.9 metric tons,representing 61.1% of total gold processed,and customized production was 10.7 metric tons,representing 38.9% of total gold processed in the second quarter of 2018. In the second quarter of 2017,the Company processed a total of 26 metric tons,of which branded production was 12 metric tons,or 46.2% of the total gold processed,and customized production was 14 metric tons,or 53.8% of total gold processed.

For the six months ended June 30,the Company processed a total of 50.9 metric tons of gold,of which branded production was 29.8 metric tons,representing 58.6% of total gold processed,and customized production was 21.1 metric tons,representing 41.4% of total gold processed in the first half of 2018. In the first half of 2017,the Company processed a total of 42.1 metric tons,of which branded production was 20.1 metric tons,or 47.7% of the total gold processed,and customized production was 22 metric tons,or 52.3% of total gold processed.

CONSOLIDATED FINANCIAL AND OPERATING REVIEW

Net Sales

Net sales for the three months ended June 30,2018 was $678.8 million,increased by 42.6% from $475.9 million for the same period in 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.

For the six months ended June 30,the Company's net sales were $1,218.3 million,increased by 58.6% from $768.1 million in the first half of 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.

Gross Profit

Gross profit for the three months ended June 30,2018 was $63.8 million,increased by 33.4% from $47.8 million for the same period in 2017.

For the six months ended June 30,the Company's gross profit were $128 million increased by 97.3% from $64.9 million in the same period of 2017.

Gross Margin

The Company's gross margin was 9.4% for the three months ended June 30,compared to 10% in the prior year period. The slight decrease in gross margin was primarily due to the decreased average selling price of branded production,compensated by decreased unit cost of branded production during the three months ended June 30,2018. The average selling price of branded production was RMB 252.34 per gram for the three months ended June 30,decreased by RMB 11.66 or 4.4%,from RMB 264 per gram for the same period in 2017. Meanwhile,the unit cost of branded production sales was RMB 232.43 per gram for the three months ended June 30,decreased by RMB 11.63,or 4.8%,from RMB 244.06 per gram for the same period in 2017. The decreases of both the average selling price and unit cost of branded production were mainly due to the weak gold price in the three months ended June 30,2018.

For the six months ended June 30,the Company's gross margin was 10.5%,compared to 8.4% in the first half of 2017. The increase in gross margin was because the decrease in unit cost of branded production sales exceeded the decrease in the average selling price of branded production during the six months ended June 30,2018. The unit cost of branded production sales was RMB 232.30 per gram for the six months ended June 30,decreased by RMB 8.1 or 3.4% from RMB 240.39 per gram for the same period in 2017. However,the average selling price of branded production was RMB 254.95 per gram for the six months ended June 30,decreased by RMB 1.72 or 0.7% from RMB 256.66 per gram for the same period in 2017.

Net Income

Net income for the three months ended June 30,2018 was $13.6 million,or $0.20 per diluted share based on 66.2 million weighted average diluted shares outstanding,compared to net income of $8.0 million in the prior year period,or $0.12 per diluted share based on 66.4 million weighted average diluted shares outstanding in the prior year period.

For the six months ended June 30,the Company's net income was $26.8 million,or $0.40 per basic and diluted share,compared to net loss of $13.3 million,or $(0.20) per basic and diluted share,in the same period of 2017.

Balance Sheet Highlights (USD in Millions)

6/30/2018

12/31/2017

Percentage Change

Cash and Cash Equivalents

$0.24

$5.0

(95.2) %

Inventories

$150

$135

11.1%

Working Capital(Current Assets -- Current Liabilities)

$603

$768

(21.5) %

Stockholders' Equity

$373

$390

(4.4) %

Net cash provided by operating activities was $446.3 million for the six months ended June 30,compared with net cash used in operating activities of $257 million for the same period in 2017. The increase of net cash provided by operating activities was mainly due to the decrease in inventory purchases of $311 million because $349.4 million of gold for investment was released to inventory during the six months ended June 30,a decrease in value added tax receivable of $76.6 million,an increase in income taxable of $2.9 million and an increase in other payables and accrued liabilities of $1.3 million.

The Company's net cash from operating activities can fluctuate significantly due to change in inventories. Other factors that may vary significantly include accounts payable,purchase of gold and income taxes. The Company expects the net cash it generates 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 (principally gold). These fluctuations could cause net cash from operating activities to decrease,even if net income grows as the Company continues to expand. Although the Company expects that net cash from operating activities will increase over the long term,it cannot predict how these fluctuations will affect Kingold's cash flow in any particular quarter.

OUTLOOK FOR 2018

Based on its existing resources and capacity along with strong demand for 24-karat gold products 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 August 9,2018 at 4:30 p.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: http://kingoldjewelry.equisolvewebcast.com/q2-2018.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.

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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(IN US DOLLARS)

(UNAUDITED)

For the three months ended June 30,

For the six months ended June 30,

2018

2017

2018

2017

NET SALES

$

678,796,263

$

475,891,200

$

1,218,320,318

$

768,155,277

COST OF SALES

Cost of sales

(614,775,972)

(427,858,604)

(1,089,741,556)

(702,767,612)

Depreciation

(228,173)

(210,888)

(545,838)

(505,331)

Total cost of sales

(615,004,145)

(428,069,492)

(1,090,287,394)

(703,272,943)

GROSS PROFIT

63,792,118

47,821,708

128,032,924

64,882,334

OPERATING EXPENSES

Selling,general and administrative expenses

2,564,845

3,142

5,110,199

6,766,525

Stock compensation expenses

5,364

11,143

10,728

22,286

Depreciation

151,658

125,831

260,487

231,670

Amortization

2,963

2,755

5,936

5,498

Total operating expenses

2,724,830

3,208,871

5,387,350

7,025,979

INCOME FROM OPERATIONS

61,067,288

44,612,837

122,645,574

57,856,355

OTHER INCOME (EXPENSES)

Other Income

-

132

-

65,497

Interest Income

446,143

504,462

822,144

1,191,307

Interest expense,including amortization of debt

issuance costs of $2,305,354 and $3,116,277 for

the three months,and $4,560,420 and $6,403,986

for the six months ended June 30,2018 and 2017,

respectively

(43,301,467)

(38,980,626)

(87,418,347)

(76,570,122)

Total other expenses,net

(42,855,324)

(38,476,032)

(86,596,203)

(75,313,318)

INCOME (LOSS) FROM OPERATIONS BEFORE TAXES

18,211,964

6,136,805

36,049,371

(17,456,963)

INCOME TAX PROVISION (BENEFIT)

Current

4,169,121

5,082

7,426,595

5,082

Deferred

479,046

(7,114,895)

1,824,055

(9,402,844)

Total income tax provision (benefit)

4,648,167

(1,896,813)

9,250,650

(4,184,762)

NET INCOME (LOSS)

13,563,797

8,033,618

26,798,721

(13,201)

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized gain (loss) related to investments in

gold,net of tax

$

(19,350,626)

$

(54,046,052)

$

(37,973,323)

$

48,861,337

Foreign currency translation gains (loss)

(19,822,304)

11,789,755

(6,002,603)

8,362,338

Total Other comprehensive income (loss)

$

(39,172,930)

$

(42,256,297)

$

(43,975,926)

$

57,223,675

COMPREHENSIVE INCOME (LOSS)

$

(25,609,133)

$

(34,222,679)

$

(17,177,205)

$

43,951,474

Earnings (Loss) per share

Basic

$

0.21

$

0.12

$

0.41

$

(0.20)

Diluted

$

0.20

$

0.12

$

0.40

$

(0.20)

Weighted average number of shares

Basic

66,113,502

66,018,867

66,867

Diluted

66,229,658

66,415,601

66,395,251

66,867

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

June30,

December 31,

2018

2017

ASSETS

Cash

$

240,453

$

4,997,125

Restricted cash

6,965,467

5,534,551

Accounts receivable

-

768,167

Inventories

150,437,622

135,042,713

Investments in gold

1,185,807

1,562,943,153

Other current assets and prepaid expenses

250,183

100,592

Value added tax recoverable

274,622

353,732,758

Total current assets

1,616,970,154

2,063,119,059

Property and equipment,net

6,517,129

7,299,643

Restricted cash

7,600,532

7,392,721

Investments in gold

908,899,905

957,124,267

Other assets

296,897

302,072

Deferred income tax assets

18,545,561

6,677,675

Land use right

416,840

429,915

Total long-term assets

942,276,864

979,226,293

TOTAL ASSETS

$

2,559,247,018

$

3,345,352

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short term loans

$

908,635,791

$

962,101,746

Other payables and accrued expenses

19,906,196

18,913,863

Related party loan

75,530,983

307,389,647

Due to related party

3,420,269

2,630,301

Income tax payable

4,015,473

1,742

Other taxes payable

2,496,472

2,615,463

Total current liabilities

1,014,005,184

1,294,859,762

Related party loans

414,034,451

567,843,066

Long term loans

758,141,473

789,410,137

TOTAL LIABILITIES

2,186,181,108

2,652,112,965

COMMITMENTS AND CONTINGENCIES

EQUITY

Preferred stock,$0.001 par value,500,000 shares authorized,none issued or

outstanding as of June 30,2018 and December 31,2017

-

-

Common stock $0.001 par value,100,000,66,502

shares issued and outstanding as of June 30,2017

66,113

66,113

Additional paid-in capital

80,388,177

80,377,449

Retained earnings

Unappropriated

330,465,332

303,666,611

Appropriated

967,543

967,543

Accumulated other comprehensive income (loss),net of tax

(38,255)

5,154,671

Total Equity

373,065,910

390,232,387

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,352

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

For the six months ended June 30,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

26,721

$

(13,201)

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation and amortization

806,325

737,001

Amortization of intangible assets

5,498

Amortization of debt issuance costs included in interest expense

4,420

6,986

Share based compensation for services and warrants expense

10,286

Inventory valuation allowance

-

17,597,804

Deferred tax provision (benefit)

1,844)

Changes in operating assets and liabilities

Accounts receivable

784,850

572,975

Inventories

331,036,274

(204,138,326)

Other current assets and prepaid expenses

(157,286)

587,453

Value added tax recoverable

76,550,155

(66,772)

Other payables and accrued expenses

1,251,498

5,398

Customer deposits

(82,602)

-

Income tax payable

2,939,193

5,082

Other taxes payable

(77,119)

123,225

Net cash provided by (used in) operating activities

446,148

(257,435)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(453,522)

(1,219)

Investments in gold

-

(270,889,242)

Net cash used in investing activities

(453,522)

(272,030,461)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from other loans – short term

-

29,063

Repayments of other loans – short term

(301,624,503)

(72,870,607)

Proceeds from other loans – long term

240,479,892

95,207

Repayments of other loans – long term

-

(101,815,220)

Proceeds from related party loans – short term

-

290,900,628

Repayments of related party loans – short term

(235,549,065)

-

Proceeds from related party loans – long term

334,672

690,888,992

Repayments of related party loans – long term

(484,255,723)

(415,987,899)

Payments of loan origination fees

(309,511)

(1,998,723)

Repayment of third party loans

-

(29,063)

(Repayment of) borrowings from related party

800,793

(3,988,513)

Net cash provided by (used in) financing activities

(445,978,445)

481,125,865

EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH

(2,937,126)

1,785

NET DECREASE IN CASH AND RESTRICTED CASH

(3,117,945)

(46,204,246)

CASH AND RESTRICTED CASH,BEGINNING OF PERIOD

17,924,397

81,623

CASH AND RESTRICTED CASH,END OF PERIOD

$

14,806,452

$

35,473,377

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

81,761,918

$

56,674,744

Cash paid for income tax

$

4,487,402

$

-

NON-CASH INVESTING AND FINANCING ACTIVITIES

Investments in gold obtained in a lease from a related party and fully repaid

$

-

$

131,303

Investments in gold transferred to inventories

$

389,590

$

180,786,694

Unrealized gain (loss) on investments in gold,net of tax

$

(37,337

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