Kingold Jewelry Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2018

Company to Hold Conference Call with Accompanying Slide Presentation at 8:30 a.m. E.T. on November 15,2018

WUHAN CITY,China,Nov. 15,2018 -- Kingold Jewelry,Inc. ("Kingold" or "the Company") (NASDAQ: KGJI),one of China's leading manufacturers and designers of high quality 24-karat gold jewelry,ornaments and investment-oriented products,today announced its unaudited financial results for the third quarter and nine months ended September 30,2018.

2018 Third Quarter Financial Highlights

Net sales were approximately $626.2 million,an increase of 7.1% from approximately $584.5 million in the same period of 2017

Processed a total of 29.6 metric tons of 24-karat gold products,compared to 30.1 metric tons in the third quarter of 2017

Net income was approximately $13.2 million,or $0.20 per diluted share,compared to net income of approximately $29.0 million,or $0.44 per diluted share in the same period of 2017

Outlook for 2018

Company reiterates guidance of between 100 metric tons and 110 metric tons of 24-karat gold products in 2018

Management Commentary

Mr. Zhihong Jia,Chairman and CEO of the Company,commented,"We were pleased to continue to deliver relatively strong operating results in the third quarter of 2018,despite the challenges from the uncertainty of the rapid changing market along with the RMB depreciation during the quarter. Recent challenging business environment in China has brought lots of pressure on us. Demand for gold has been slowing down in the wake of monetary tighten-up. Kingold is committed to continuous innovations even during the challenging times and believe it is the foundation of the company's long-term development."

2018 THIRD QUARTER AND NINE MONTHS OPERATIONAL REVIEW

Metric Tons of Gold Processed

Three Months Ended:

September 30,2018

September 30,2017

Volume

% of Total

Volume

% of Total

Branded*

16.6

56.1%

14.6

48.6%

Customized**

13.0

43.9%

15.5

51.4%

Total

29.6

100.0%

30.1

100%

Nine Months Ended:

September 30,2017

Volume

% of Total

Volume

% of Total

Branded*

46.5

57.7%

34.7

48.1%

Customized**

34.0

42.3%

37.5

51.9%

Total

80.5

100.0%

72.2

100.0%

*

Branded Production:

The Company acquires gold from the Shanghai Gold Exchange to produce branded products.

**

Customized Production:

Clients who purchase customized products supply gold to the Company for processing.

For the three months ended September 30,2018,the Company processed a total of 29.6 metric tons of gold,of which branded production was 16.6 metric tons,representing 56.1% of total gold processed,and customized production was 13.0 metric tons,representing 43.9% of total gold processed in the third quarter of 2018. In the third quarter of 2017,the Company processed a total of 30.1 metric tons,of which branded production was 14.6 metric tons,or 48.6% of the total gold processed,and customized production was 15.5 metric tons,or 51.4% of total gold processed.

For the nine months ended September 30,the Company processed a total of 80.5 metric tons of gold,of which branded production was 46.5 metric tons,representing 57.7% of total gold processed,and customized production was 34.0 metric tons,representing 42.3% of total gold processed in the first nine months of 2018. In the first nine months of 2017,the Company processed a total of 72.2 metric tons,of which branded production was 34.7 metric tons,or 48.1% of the total gold processed,and customized production was 37.5 metric tons,or 51.9% of total gold processed.

CONSOLIDATED FINANCIAL AND OPERATING REVIEW

Net Sales

Net sales for the three months ended September 30,2018 were approximately $626.2 million,increased by 7.1% from approximately $584.5 million for the same period in 2017. The increase in net sales was mainly due to higher sales volume of branded production sales.

For the first nine months ended September 30,the Company's net sales were approximately $1,844.5 million,increased by 36.4% from approximately $1,352.7 million in the first nine months of 2017. The increase in net sales was due to the same reason described above.

Gross Profit

Gross profit for the three months ended September 30,2018 was approximately $61.2 million,decreased by 22.1% from approximately $78.6 million for the same period in 2017.

For the nine months ended September 30,the Company's gross profit was approximately $189.3 million,increased by 31.9% from approximately $143.5 million in the same period of 2017.

Gross Margin

The Company's gross margin was 9.8% for the three months ended September 30,compared to 13.4% in the prior year period.

The decrease in gross margin was mainly due to the decreased average selling price of branded production,compensated by decreased unit cost of branded production during the three months ended September 30,2018. The average selling price of branded production was RMB 250.77 per gram for the three months ended September 30,decreased by RMB 10.14 or 3.9%,from RMB 260.91 per gram for the same period in 2017. The unit cost of branded production sales was RMB 230.86 per gram for the three months ended September 30,decreased by RMB 16.95 or 6.8%,from RMB 247.81 per gram for the same period in 2017. The decrease of the both average selling price and unit cost of branded production was mainly due to the weak gold price in 2018.

For the nine months ended September 30,the Company's gross margin was 10.3%,compared to 10.6% in the first nine months of 2017.

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

Net Income

Net income for the three months ended September 30,2018 was approximately $13.2 million,or $0.20 per diluted share based on 66.1 million weighted average diluted shares outstanding,compared to net income of approximately $29.0 million in the prior year period,or $0.44 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior year period.

For the nine months ended September 30,the Company's net income was approximately $40.0 million,or $0.60 per diluted share based on 66.3 million weighted average diluted shares outstanding,compared to net income of approximately $15.7 million,or $0.24 per diluted share based on 66.3 million weighted average diluted shares outstanding in the same period of 2017.

Balance Sheet Highlights (USD in Millions)

9/30/2018

12/31/2017

Percentage

Change

Cash

$13.2

$5.0

164%

Inventories

$147.3

$135.0

9.1%

Working Capital(Current Assets -- Current Liabilities)

$623.6

$768.3

(18.8)%

Stockholders' Equity

$354.3

$390.2

(9.2)%

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

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

OUTLOOK FOR 2018

Based on its existing resources and capacity along with expected relatively strong demand for 24-karat gold products in the fourth quarter of 2018 in China,the Company reiterates its expectation that gold processed will be between 100 metric tons and 110 metric tons during 2018.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on November 15,2018 at 8:30 a.m. E.T.

The dial-in numbers are:

Live Participant Dial In (Toll Free): 877-407-9038

Live Participant Dial In (International): 201-493-6742

The conference call will also be webcast live. To listen to the call,please go to the Investor Relations section of Kingold's website at www.kingoldjewelry.com,or click on the following link: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/26970/indexl.html.

The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Kingold Jewelry,Inc.

Kingold Jewelry,Inc. (NASDAQ: KGJI),centrally located in Wuhan City,one of China's largest cities,was founded in 2002 and today is one of China's leading designers and manufacturers of 24-karat gold jewelry,ornaments,and investment-oriented products. The Company sells both directly to retailers as well as through major distributors across China. Kingold has received numerous industry awards and has been a member of the Shanghai Gold Exchange since 2003. For more information,please visit www.kingoldjewelry.com.

Business Risks and Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933,as amended,and the Securities Exchange Act of 1934,as amended. You can identify these forward - looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include statements regarding Kingold's outlook with respect to its 2018 outlook for gold processing. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Forward-looking statements are subject to a number of risks,including those contained in Kingold's SEC filings available at www.sec.gov,including Kingold's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements,which speak only as of the date on which they are made. Kingold undertakes no obligation to update or revise any forward-looking statements for any reason.

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

September 30,

For the nine months

ended September 30,

2018

2017

2018

2017

NET SALES

$

626,171,072

$

584,511,639

$

1,844,491,390

$

1,352,666,916

COST OF SALES

Cost of sales

(564,685,762)

(505,608,405)

(1,654,427,318)

(1,208,376,017)

Depreciation

(255,546)

(300,716)

(801,384)

(806,047)

Total cost of sales

(564,941,308)

(505,909,121)

(1,655,228,702)

(1,209,182,064)

GROSS PROFIT

61,229,764

78,602,518

189,262,688

143,484,852

OPERATING EXPENSES

Selling,general and administrative expenses

2,487,346

3,779,728

7,597,545

10,546,253

Stock compensation expenses

5,364

5,364

16,092

27,650

Depreciation

146,475

135,442

406,962

367,112

Amortization

2,767

2,832

8,703

8,330

Total operating expenses

2,641,952

3,923,366

8,029,302

10,949,345

INCOME FROM OPERATIONS

58,587,812

74,679,152

181,233,386

132,535,507

OTHER INCOME (EXPENSES)

Other Income

64,433

661

64,433

66,158

Interest Income

562,294

633,617

1,384,438

1,824,924

Interest expense,including amortization of debt issuance costs of $3,482,031 and $1,347,832 for the three months,and $8,042,451 and $7,751,818 for the nine months ended September 30,2018 and 2017,respectively

(41,479,730)

(36,585,321)

(128,898,077)

(113,155,443)

Total other expenses,net

(40,853,003)

(35,951,043)

(127,449,206)

(111,264,361)

INCOME FROM OPERATIONS BEFORE TAXES

17,734,809

38,728,109

53,784,180

21,271,146

INCOME TAX PROVISION (BENEFIT)

Current

1,787,717

7,778,520

9,214,312

12,996,602

Deferred

2,699,588

1,962,539

4,523,643

(7,440,305)

Total income tax provision

4,305

9,741,059

13,737,955

5,556,297

NET INCOME

13,247,504

28,987,050

40,046,225

15,714,849

OTHER COMPREHENSIVE INCOME (LOSS)

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

$

(18,935,552)

$

27,074,547

$

(56,908,875)

$

75,884

Foreign currency translation gains (loss)

(13,077,661)

4,455,163

(19,080,264)

12,817,501

Total Other comprehensive income (loss)

$

(32,013,213)

$

31,529,710

$

(75,989,139)

$

88,753,385

COMPREHENSIVE INCOME (LOSS)

$

(18,765,709)

$

60,516,760

$

(35,942,914)

$

104,468,234

Earnings per share

Basic

$

0.20

$

0.44

$

0.61

$

0.24

Diluted

$

0.20

$

0.44

$

0.60

$

0.24

Weighted average number of shares

Basic

66,113,502

66,049,726

66,266

Diluted

66,121,121

66,717

66,311,149

66,337,069

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

September 30,

December 31,

2018

2017

ASSETS

Cash

$

13,245,436

$

4,997,125

Restricted cash

6,567,855

5,534,551

Accounts receivable

198,214

768,167

Inventories

147,405

135,713

Investments in gold

922,084,336

1,562,943,153

Other current assets and prepaid expenses

808,809

100,592

Value added tax recoverable

254,820,263

353,732,758

Total current assets

1,344,318

2,063,119,059

Property and equipment,net

5,903,782

7,299,643

Restricted cash

8,927,100

7,392,721

Investments in gold

1,071,005,836

957,124,267

Other assets

286,155

302,072

Deferred income tax assets

22,054,343

6,677,675

Land use right

399,007

429,915

Total long-term assets

1,108,576,223

979,226,293

TOTAL ASSETS

$

2,453,565,541

$

3,345,352

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short term loans

$

621,518,946

$

962,101,746

Other payables and accrued expenses

18,845,062

18,913,863

Related party loan

72,798,218

307,389,647

Due to related party

3,592,726

2,630,301

Income tax payable

1,855,002

1,742

Other taxes payable

2,818,412

2,615,463

Total current liabilities

721,428,366

1,294,859,762

Related party loans

451,657,343

567,843,066

Long term loans

926,174,267

789,410,137

TOTAL LIABILITIES

2,099,259,976

2,652,112,965

COMMITMENTS AND CONTINGENCIES

EQUITY

Preferred stock,$0.001 par value,500,000 shares authorized,none issued oroutstanding as of September 30,2018 and December 31,2017

-

-

Common stock $0.001 par value,100,000,66,502 shares issued and outstanding as of September 30,2017

66,113

66,113

Additional paid-in capital

80,393,541

80,377,449

Retained earnings

Unappropriated

343,712,836

303,611

Appropriated

967,543

967,543

Accumulated other comprehensive income (loss),net of tax

(70,834,468)

5,154,671

Total Equity

354,305,565

390,232,387

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,352

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

For the nine months ended

September 30,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

40,225

$

15,849

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

Depreciation and amortization

1,346

1,173,159

Amortization of intangible assets

8,330

Amortization of debt issuance costs included in interest expense

8,451

7,818

Share based compensation for services and warrants expense

16,650

Inventory valuation allowance

-

-

Deferred tax provision (benefit)

4,305)

Changes in operating assets and liabilities

Accounts receivable

558,165

647,049

Inventories

321,200,297

(119,627,463)

Other current assets and prepaid expenses

(752,148)

185,892

Value added tax recoverable

84,623,088

(56,530,224)

Other payables and accrued expenses

961,903

4,331,048

Customer deposits

(192,313)

-

Income tax payable

748,416

7,725,853

Other taxes payable

359,224

482,337

Net cash provided by (used in) operating activities

461,092

(145,550,007)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(491,136)

(1,551,847)

Investments in gold

-

(358,279,503)

Net cash used in investing activities

(491,136)

(359,831,350)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from other loans – short term

-

169,103,063

Repayments of other loans – short term

(554,840,248)

(147,212,224)

Proceeds from other loans – long term

435,804,951

96,966,135

Repayments of other loans – long term

-

(102,695,952)

Proceeds from related party loans – short term

-

293,836,774

Repayments of related party loans – short term

(230,227,311)

-

Proceeds from related party loans – long term

443,110,831

771,321,531

Repayments of related party loans – long term

(534,050,005)

(609,711,305)

Payments of loan origination fees

(6,578,966)

(4,114,687)

Repayment of third party loans

-

(29,383,677)

(Repayment of) borrowings from related party

965,643

(5,812)

Proceeds from exercise of warrants

-

113,562

Net cash provided by (used in) financing activities

(445,815,105)

433,010,408

EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH

(4,857)

2,619,437

NET INCREASE DECREASE IN CASH AND RESTRICTED CASH

10,994

(69,512)

CASH AND RESTRICTED CASH,BEGINNING OF PERIOD

17,924,397

81,623

CASH AND RESTRICTED CASH,END OF PERIOD

$

28,740,391

$

11,926,111

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

120,133,935

$

92,580,544

Cash paid for income tax

$

8,465,896

$

5,270,750

NON-CASH INVESTING AND FINANCING ACTIVITIES

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

$

-

$

132,748,925

Investments in gold transferred to inventories

$

557,866,549

$

350,761,730

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

$

(56,884

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