Kingold Jewelry Reports Financial Results for The First Quarter 2019

WUHAN,China,May 16,2019 -- 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 financial results for the first quarter ended March 31,2019.

2019 First Quarter Financial Highlights (all results compared to prior year period)

Net sales were approximately $453.5 million,compared to approximately $539.5 million in the prior year period.

Processed a total of 22 metric tons of 24-karat gold products,compared to 23.3 tons in the first quarter 2018.

Net income was approximately $6.4 million,or $0.10 per diluted share,compared to net income of approximately $13.2 million,or $0.20 per diluted share in the prior year period.

Outlook for 2019

The Company reiterates its guidance of processing between 110 metric tons and 120 metric tons of 24-karat gold products in 2019.

Management Commentary

Mr. Zhihong Jia,Chairman and CEO of the Company,commented,"In the first quarter of 2019,both of Kingold's operational and financial performances were affected by China's economic slowdown,which negatively impacted our customers' purchases of gold products and it was not until the end of the first quarter that the market gradually warmed up. Every time when Kingold encounters the impact from challenging environment,we have always maintained a positive attitude and focused on our product research and development. We believe in our ability of providing good quality products to meet consumer demand once the market picks up,which is a key strength of Kingold."

2019FIRST QUARTER OPERATIONALREVIEW

MetricTonsofGoldProcessed

ThreeMonthsEnded:

March31,2019

March31,2018

Volume

% ofTotal

Volume

% ofTotal

Branded*

11.2

50.9%

13.0

55.8%

Customized**

10.8

49.1%

10.3

44.2%

Total

22.0

100%

23.3

100%

*

BrandedProduction:

TheCompanyacquires goldfromtheShanghaiGoldExchangetoproducebrandedproducts.

**

CustomizedProduction:

ClientswhopurchasecustomizedproductssupplygoldtotheCompanyforprocessing.

Forthethree monthsendedMarch31,2019,theCompanyprocessedatotalof22.0 metric tons ofgold,ofwhichbrandedproduction was11.2metrictons,representing50.9%oftotalgoldprocessed,andcustomized production was10.8metrictons,representing49.1%of totalgoldprocessedinthefirstquarter of2019. Inthefirstquarter of2018,theCompanyprocessedatotalof23.3 metrictons,ofwhich brandedproductionwas13.0metrictons,or 55.8%ofthetotalgoldprocessed,andcustomizedproductionwas 10.3 metrictons,or 44.2%of totalgoldprocessed.

2019 FIRST QUARTER FINANCIAL REVIEW

Net Sales

Net sales forthethreemonthsendedMarch 31,2019was$453.5 million,a decrease of approximately $86.0 million,or 15.9%,from net sales of $539.5 million for the three months ended March 31,2018.

The decrease in net sales was mainly due to the decrease in sales volume of 1.3 metric tons resulting in a revenue decrease of approximately $73.4 million,the currency translation loss of approximately $29.5 million,offset by the revenue increase of approximately $17.0 million as a result of the increase in average unit selling price. The average unit selling price for brand production sales increased from RMB 258.32 per gram in three months ended March 31,2018 to RMB 266.65 per gram in three months ended March 31,2019. The average unit selling price for customized production sales increased from RMB 6.84 per gram in three months ended March 31,2018 to RMB 6.96 per gram in three months ended March 31,2019.

Gross Profit

Gross profit for the three months ended March 31,2019 was $55.3 million,compared to $64.2 million for the same period in 2018.

The decrease in gross profit was mainly due to the decrease in sales volume,and the increase in unit cost of raw materials used in production reduced gross profit for the three months ended March 31,2019 as compared to the same period of 2018. The unit cost of branded production sales was RMB 239.7 per gram for the three months ended March 31,2019 while the unit cost of branded production sales was RMB 232.12 per gram for three months ended March 31,2018. The unit cost of customized production sales was RMB 0.34 per gram for the three months ended March 31,2019 while the unit cost of customized production sales was RMB 0.31 per gram for three months ended March 31,2018.

Gross Margin

The Company's gross margin was 12.2% for the three months ended March 31,compared to 11.9% in the prior year period.

The increase in gross margin was mainly due to the increased average selling price of branded production and customized production sales. The average selling price of branded production was RMB 266.65 per gram for the three months ended March 31,increased by RMB 8.33 or 3.2%,from RMB 258.32 per gram for the same period in 2018. The average selling price of customized production sales was RMB 6.96 per gram for the three months ended March 31,increased by RMB 0.12,or 1.7%,from RMB 6.84 per gram for the three months ended March 31,2018 to RMB 6.96 per gram for the three months ended March 31,2019.

Net Income

Net income for the three months ended March 31,2018 was $6.4 million,or $0.10 per diluted share based on 66.1 million weighted average diluted shares outstanding,compared to net income of $13.2 million,or $0.20 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior-year period.

Balance Sheet and Cash Flow

(inmillionsexceptfor percentages)

3/31/2019

12/31/2018

%Changed

Cash

$ 1.0

$ 0.23

335%

Inventories

$ 163.8

$ 127.0

29%

WorkingCapital

$ 919.8

$ 837.3

9.9%

Stockholders'Equity

$ 632.0

$ 638.3

(1%)

Net cash used in operating activities was $96.7 million for the year ended March 31,compared with net cash provided by operating activities of $211.4 million for the same period in 2018. The decrease of operating cash flows was mainly due to the increase in gold purchases of approximately $33.5 million in order to meet the production demand,the increased gold purchases of approximately $55.8 million in order to pledge such gold as collateral with various financial institutions to obtain additional loans,and the increase in value added tax receivable of $11.7 million and a decrease in income tax payable of approximately $1.2 million and decrease in other tax payable by approximately $2.6 million.

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories. Other factors that may vary significantly include accounts payable,purchases of gold and income taxes. Looking forward,the Company expects the net cash that it generates from operating activities to continue to fluctuate as the Company's 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 Kingold's net income grows as the Company continue 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 its cash flow in any particular quarter.

OUTLOOKFOR2019

Basedonitsexistingresourcesandcapacityalongwithstrongdemandfor24-karatgold productsinChina,theCompanyreiterates its expectation that gold processed will be between110metrictonsand 120 metrictonsduring2019.

ConferenceCallDetails

Kingold also announced that it will discuss these financial results in a conference call on May 16,at 8:30 a.m. ET. The dial-in numbers are:

LiveParticipantDialIn(TollFree):

+1-877-407-9038

LiveParticipantDialIn(International):

+1-201-493-6742

Theconferencecallwillalsobewebcastlive.Tolistentothecall,pleasegototheInvestor RelationssectionofKingold'swebsiteat www.kingoldjewelry.com,orclickonthefollowing link: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/30429/indexl.html.TheCompanywill alsohaveanaccompanyingslidepresentationavailableinPDFformatonitshomepagepriortotheconferencecall.

AboutKingoldJewelry,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 high quality 24-karat gold jewelry,ornaments,and investment-oriented products. The Company sells its products both directly to retailers and 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.

BusinessRisksandForward-LookingStatements

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 for gold processing and investment in 2019. 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

KingoldJewelry,Inc. BinLiu,CFO

Phone:+1-847-660-3498(US)/+86-27-6569-4977(China)

bl@kingoldjewelry.com

INVESTORRELATIONS

TheEquityGroupInc.

KatherineYao,SeniorAssociate

Phone:+86-10-6587-6435

kyao@equityny.com

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)

For the three months ended

March 31,

2019

2018

NET SALES

$

453,539,100

$

539,524,055

COST OF SALES

Cost of sales

(397,991,894)

(474,965,584)

Depreciation

(245,740)

(317,665)

Total cost of sales

(398,237,634)

(475,283,249)

GROSS PROFIT

55,301,466

64,240,806

OPERATING EXPENSES

Selling,general and administrative expenses

2,618,192

2,477,788

Stock compensation expenses

5,364

5,364

Depreciation

82,941

108,829

Amortization,other

2,801

2,973

Lease expense

21,338

67,566

Total operating expenses

2,730,636

2,662,520

INCOME FROM OPERATIONS

52,570,830

61,578,286

OTHER INCOME (EXPENSES)

Interest Income

338,613

376,001

Interest expense,including amortization of financing costs of $2,322,964 and $2,255,066

(44,300,105)

(44,116,880)

Total other expenses,net

(43,961,492)

(43,740,879)

INCOME FROM OPERATIONS BEFORE TAXES

8,609,338

17,837,407

INCOME TAX PROVISION (BENEFIT)

Current

3,762,171

3,257,474

Deferred

(1,533,412)

1,345,009

Total income tax provision

2,228,759

4,602,483

NET INCOME (LOSS)

6,380,579

13,234,924

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized loss related to investments in gold,net of tax

$

(29,416,040)

$

(18,622,697)

Total foreign currency translation gain

16,651,738

13,819,701

Total Other comprehensive loss

$

(12,764,302)

$

(4,802,996)

COMPREHENSIVE INCOME (LOSS)

$

(6,383,723)

$

8,431,928

Earnings per share

Basic and diluted

$

0.10

$

0.20

Weighted average number of shares

Basic

66,113,502

66,502

Diluted

66,541,351

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

(UNAUDITED)

March 31,

December 31,

2019

2018

ASSETS

(Unaudited)

Cash

$

926,028

$

233,391

Restricted cash

15,705,478

4,798,185

Accounts receivable

-

451,059

Inventories

163,848,955

127,034,673

Investments in gold

2,174,076,950

1,593,557,391

Value added tax recoverable

277,741,555

259,582,324

Prepaid expenses and other current assets

381,376

87,590

Total current assets

2,632,680,342

1,985,744,613

Property and equipment,net

5,104,757

5,395,330

Restricted cash

1,660,633

7,766,372

Investments in gold

232,428,147

700,225,896

Land use right

402,673

395,719

Other noncurrent assets

519,295

285,768

Total long-term assets

240,115,505

714,069,085

TOTAL ASSETS

$

2,872,795,847

$

2,699,813,698

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short term loans

$

1,600,320,041

$

1,947,774

Related party loan

74,494,554

72,779

Due to related party

4,164,872

3,976,742

Income tax payable

15,443,613

18,504,197

Other taxes payable

2,008,975

2,577,102

Accrued expenses and other payables

16,457,625

15,749,564

Total current liabilities

1,712,889,680

1,148,455,158

Deferred tax liabilities

12,809,830

24,218,911

Other long-term liability

163,887

-

Related party loans

348,912,801

373,327,862

Long term loans

166,063,261

515,020

TOTAL LIABILITIES

$

2,839,459

$

2,061,478,951

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Preferred stock,$0.001 par value,500,000 shares authorized,none issued oroutstanding as of March 31,

2019 and December 31,2018

-

-

Common stock $0.001 par value,100,000,66,502 shares issued and outstanding

as of March 31,2019 and December 31,2018

66,113

66,113

Additional paid-in capital

224,298,271

224,292,907

Retained earnings

Unappropriated

359,904

353,213,325

Appropriated

967,543

967,543

Accumulated other comprehensive income,net of tax

47,030,557

59,794,859

Total Shareholders' Equity

631,956,388

638,334,747

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,698

KINGOLD JEWELRY,INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

For the three months ended March 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

6,579

$

13,924

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

Depreciation

484,271

426,494

Amortization of intangible assets

2,973

Share based compensation for services and warrants expense

5,364

Amortization of debt origination costs included in interest expense

2,964

2,066

Deferred tax provision (benefit)

(1,009

Changes in operating assets and liabilities

Accounts receivable

459,688

786,072

Inventories

(89,285,287)

155,338,325

Prepaid expenses and other current assets

(515,299)

(608,086)

Value added tax recoverable

(11,687,064)

37,013,840

Accrued expenses and other payables

491,789

63,818

Income tax payable

(1,932)

2,020,558

Other taxes payable

(2,626,402)

(439,118)

Net cash provided by (used in) operating activities

(96,713,940)

211,445,239

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(62,800)

(375,289)

Net cash used in investing activities

(62,289)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short term loans

238,565,607

-

Repayments of short term loans

(168,037,342)

(239,183,259)

Proceeds from long term loans

105,890,198

220,188,104

Repayments of related party loan – short term

-

(235,915,825)

Proceeds from related party loan – long term

10,313

335,472

Repayments of related party loan – long term

(43,525,506)

(290,176,465)

Payment of debt origination fees

(2,200,489)

-

Borrowings from related party

196,771

485,179

Net cash provided by (used in) financing activities

140,552

(209,601,794)

EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH

(38,694,621)

(2,772,527)

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH

5,191

(1,304,371)

CASH AND RESTRICTED CASH,BEGINNING OF PERIOD

12,797,948

17,924,397

CASH AND RESTRICTED CASH,END OF PERIOD

$

18,139

$

16,620,026

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

41,921,367

$

43,192,416

Cash paid for income tax

$

6,974,183

$

1,236,915

NON-CASH INVESTING AND FINANCING ACTIVITIES

Investments in gold transferred to inventories

$

176,670,960

$

333,328,678

Inventories transferred to investments in gold

$

271,682,171

$

303,391,045

Unrealized loss on investments in gold

$

(29,697)

Right-of-use assets obtained in exchange for operating lease obligations

$

226,472

$

-

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