securities & exchange commission edgar...

SECURITIES & EXCHANGE COMMISSION EDGAR FILING

KINGOLD JEWELRY, INC.

Form: 10-Q

Date Filed: 2016-08-12

Corporate Issuer CIK: 1089531

© Copyright 2016, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:

June 30, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________


(Exact name of registrant as specified in its charter)

Delaware 001-15819 13-3883101

(State or other jurisdiction (Commission (I.R.S. Employerof incorporation) File Number) Identification No.)

15 Huangpu Science and Technology Park

Jiang’an DistrictWuhan, Hubei Province, PRC 430023

(Address of principal executive offices) (Zip Code)

(011) 86 27 65694977(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements forthe past 90 days.

x Yes o No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files).

x Yes o No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).

¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 8, 2016, there were 66,018,867 shares of common stock outstanding, par value $0.001.

EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page NumberPART I. FINANCIAL INFORMATION 4 Item 1. Financial Statements 4 Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 (Unaudited) 4 Condensed Consolidated Statements of Income and Comprehensive Income for the Three and six months Ended June 30,

2016 and 2015 (Unaudited)

5 Condensed Consolidated Statements of Cash Flows for the Three and six months Ended June 30, 2016 and 2015 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk 34 Item 4. Controls and Procedures 36 PART II. OTHER INFORMATION 37 Item 1. Legal Proceedings 37 Item 1A. Risk Factors 37 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37 Item 3. Defaults Upon Senior Securities 37 Item 4. Mine Safety Disclosures 37 Item 5. Other Information 37 Item 6. Exhibits 38 Signatures 39

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CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACTOF 1995

Statements in this report that are not historical facts or information are forward-looking statements within the meaning of the Private Securities Litigation ReformAct of 1995. Words such as “estimate,” “project,” “forecast,” “plan,” “believe,” “may,” “expect,” “anticipate,” “intend,” “planned,” “potential,” “can,” “expectation” andsimilar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based onmanagement’s reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which maycause our actual results, levels of activity, performance or achievement to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management’s expectations. Such factors include, amongothers, the following:

• changes in the market price of gold; • our ability to implement the key initiatives of, and realize the gross and operating margins and projected benefits (in the amounts and time schedules

we expect) from, our business strategy; • non-performance of suppliers of their sale commitments and customers of their purchase commitments; • non-performance of third-party service providers; • adverse conditions in the industries in which our customers operate, including a general economic downturn, a recession globally, or sudden

disruption in business conditions, and our ability to withstand an economic downturn, recession, cost inflation, competitive or other marketpressures, or conditions;

• the effect of political, economic, legal, tax and regulatory risks imposed on us, including foreign exchange or other restrictions, adoption,interpretation and enforcement of foreign laws including any changes thereto, as well as reviews and investigations by government regulators thathave occurred or may occur from time to time, including, for example, local regulatory scrutiny in China;

• our ability to manage growth; • our ability to successfully identify new business opportunities and identify and analyze acquisition candidates, secure financing on favorable terms

and negotiate and consummate acquisitions as well as to successfully manage any acquired business; • our ability to integrate acquired businesses; • the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, foreign exchange restrictions and

the potential effect of such factors on our business, results of operations and financial condition; • our ability to retain and attract senior management and other key employees; • any internal investigations and compliance reviews of the Foreign Corrupt Practices Act and related U.S. and foreign law matters in China and

additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation; • changes in People’s Republic of China (“PRC”) or U.S. tax laws; • increased levels of competition, and competitive uncertainties in our markets, including competition from companies in the gold jewelry industry in

the PRC, some of which are larger than we are and have greater resources; • the impact of the seasonal nature of our business, adverse effect of rising energy, commodity and raw material prices, changes in market trends,

purchasing habits of our consumers and changes in consumer preferences; • our ability to protect our intellectual property rights; • the risk of an adverse outcome in any material pending and future litigations; • our ratings, our access to cash and financing and ability to secure financing at attractive rates; • · our continuing relationship with major banks in China with whom we have certain gold lease agreements and working capital loans;

· our ability to understand China’s commercial real estate market as we build Kingold Jewelry Cultural Industry Park and to manage therelationships with the planned tenants in the Kingold Jewelry Cultural Industry Park;

· our ability to sell the commercial property for which we received permission to sell in 2014 that we are building in the Kingold Jewelry CulturalIndustry Park

· our knowledge of and marketing capabilities in markets outside of China, particularly the Middle East, as we begin to expand our businessoutside of China; and

• other risks, including those described in the “Risk Factors” discussion of this periodic report and in our Annual Report on Form 10-K for the yearended December 31, 2015 filed with the Securities and Exchange Commission.

We undertake no obligation to update any such forward looking statement, except as required by law.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

KINGOLD JEWELRY, INC.CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)(UNAUDITED)

June 30, December 31, 2016 2015

ASSETS

CURRENT ASSETS Cash $ 37,496,173 $ 3,100,569 Restricted cash 46,107,680 26,649,687 Accounts receivable 403,267 1,624,323 Inventories 786,485,088 298,303,185 Other current assets and prepaid expenses 4,954,662 1,046,032 Value added tax recoverable 86,193,253 15,526,002

Total current assets 961,640,123 346,249,798 PROPERTY AND EQUIPMENT, NET 7,158,325 7,622,509 OTHER ASSETS

Deposit on land use right - Jewelry Park 9,084,474 9,296,763 Construction in progress- Jewelry Park 153,484,370 105,844,259 Other assets 145,317 148,713 Land use right 438,119 454,180

Total long-term assets 170,310,605 123,366,424 TOTAL ASSETS $ 1,131,950,728 $ 469,616,222

LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES

Short term loans $ 165,878,918 $ 55,455,428 Debts payable, net - 61,471,962 Construction payables-Jewelry Park 54,189,120 23,876,642 Deposit payable-Jewelry Park 90,736,671 22,182,171 Other payables and accrued expenses 5,849,813 6,355,979 Due to related party 449,809 200,059 Income tax payable 6,740,793 1,119,918 Other taxes payable 608,321 710,104

Total current liabilities 324,453,445 171,372,263 Deferred income tax liability 1,986,173 1,774,993 Long term loans 511,334,558 30,808,571 TOTAL LIABILITIES 837,774,176 203,955,827 COMMITMENTS AND CONTINGENCIES EQUITY

Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June 30, 2016 andDecember 31, 2015 - -

Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 and 65,963,502 shares issued andoutstanding as of June 30, 2016 and December 31, 2015 66,018 65,963

Additional paid-in capital 80,208,682 79,990,717 Retained earnings

Unappropriated 219,523,436 184,564,147 Appropriated 967,543 967,543

Accumulated other comprehensive loss (6,662,512) (1,249)Total stockholders' equity 294,103,167 265,587,121 Non-controlling interest 73,385 73,274 Total Equity 294,176,552 265,660,395

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,131,950,728 $ 469,616,222

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(IN US DOLLARS)

(UNAUDITED)

For the three months ended June 30, For the six months ended June 30, 2016 2015 2016 2015 NET SALES $ 390,260,645 $ 249,421,052 $ 672,448,702 $ 455,616,272 COST OF SALES

Cost of sales (343,880,390) (246,684,484) (597,292,834) (441,805,439)Depreciation (291,683) (311,110) (582,365) (620,110)

Total cost of sales (344,172,073) (246,995,594) (597,875,199) (442,425,549) GROSS PROFIT 46,088,572 2,425,458 74,573,503 13,190,723 OPERATING EXPENSES

Selling, general and administrative expenses 6,443,126 2,205,197 9,712,491 3,883,563 Stock compensation expenses 11,142 102,344 22,285 315,127 Depreciation 23,474 25,237 46,987 50,428 Amortization 2,891 3,096 5,781 6,170

Total operating expenses 6,480,633 2,335,874 9,787,544 4,255,288 INCOME FROM OPERATIONS 39,607,939 89,584 64,785,959 8,935,435 OTHER INCOME (EXPENSES)

Other Income 130 6,530 130 6,530 Interest Income 624,199 133,803 683,423 151,072 Interest expense (13,621,813) (84,616) (18,595,166) (382,153)

Total other income (expenses), net (12,997,484) 55,717 (17,911,613) (224,551) INCOME FROM OPERATIONS BEFORE TAXES 26,610,455 145,301 46,874,346 8,710,884 INCOME TAX PROVISION (BENEFIT)

Current 6,849,780 557,373 11,660,784 3,286,274 Deferred 64 (985,503) 255,738 (1,730,028)

Total income tax provision (benefit) 6,849,844 (428,130) 11,916,522 1,556,246 NET INCOME 19,760,611 573,431 34,957,824 7,154,638

Add: net loss attributable to non-controlling interest (268) (188) (1,465) (188) NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 19,760,879 $ 573,619 $ 34,959,289 $ 7,154,826

OTHER COMPREHENSIVE INCOME (LOSS)

Total foreign currency translation gains (loss) (8,622,381) 488,151 (6,659,687) 1,587,816 Less: foreign currency translation gain attributable to non-controlling

interest 2,030 81 1,576 81Foreign currency translation gains (loss) attributable to common

stockholders $ (8,624,411) $ 488,070 $ (6,661,263) $ 1,587,735

COMPREHENSIVE INCOME ATTRIBUTABLE TO:

Common stockholders $ 11,136,468 $ 1,061,689 $ 28,298,026 $ 8,742,561 Non-controlling interest 1,762 - 111 - $ 11,138,230 $ 1,061,689 $ 28,298,137 $ 8,742,561

Earnings per share

Basic $ 0.30 $ 0.01 $ 0.53 $ 0.11 Diluted $ 0.30 $ 0.01 $ 0.53 $ 0.11

Weighted average number of shares Basic 65,964,110 65,963,502 65,963,806 65,963,502 Diluted 66,273,246 65,963,502 65,970,164 65,963,502

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(IN US DOLLARS)

(UNAUDITED)

For the six months ended June 30, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 34,957,824 $ 7,154,638 Adjustments to reconcile net income to cash used in operating activities:

Depreciation 629,352 670,538 Amortization of intangible assets 5,781 6,170 Amortization of deferred financing costs 144,134 326,509 Share based compensation for services and warrants and shares issued for consulting services 151,580 315,127 Inventory valuation allowance - 10,315,970 Deferred tax provision (benefit) 255,738 (1,730,028)

Changes in operating assets and liabilities (Increase) decrease in:

Accounts receivable 1,202,904 372,622 Inventories (502,911,887) (37,695,661)Other current assets and prepaid expenses (3,995,411) (120,344)Value added tax recoverable (72,157,904) (5,280,553)

Increase (decrease) in: Other payables and accrued expenses (388,356) 1,086,129 Deposit payable, Jewelry Park, net 70,165,780 - Income tax payable 5,649,770 581,994 Other taxes payable 67 366,577 Net cash used in operating activities (466,290,628) (23,630,312)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (334,586) (29,825)Payment for construction in progress-Jewelry Park (19,506,468) (24,233,680)Net cash used in investing activities (19,841,054) (24,263,505)

CASH FLOWS FROM FINANCING ACTIVITIES

Capital contribution from minority interest for the new subsidiary - 73,465 Proceeds from bank loans 611,580,106 6,530,186 Repayments of bank loans (9,175,996) (13,060,372)Restricted cash (20,387,531) (9,991,098)Proceeds from related party loan 250,226 - Proceeds from exercise of warrants 66,439 - (Repayment) proceeds from debt financing instruments under private placement (61,173,304) 65,301,858 Deferred financing costs - (653,019)

Net cash provided by financing activities 521,159,940 48,201,020

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (632,654) (140,539) NET INCREASE IN CASH AND CASH EQUIVALENTS 34,395,604 166,664 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,100,569 1,331,658 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,496,173 $ 1,498,322 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense $ 19,126,073 $ 2,584,438 Cash paid for income tax $ 11,660,842 $ 2,704,280

The accompanying notes are an integral part of these unaudited condensed consolidated Financial Statements

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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 inaccordance with generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securitiesand Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financialstatements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements notmisleading have been included. Operating results for the interim period ended June 30, 2016 are not necessarily indicative of the results that may be expectedfor the fiscal year ending December 31, 2016. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion andAnalysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015, filed with the SECon March 29, 2016. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Wuhan Kingold Jewelry Co., Inc. (“Wuhan Kingold”) should be considered as a 100% contractually controlled affiliate. Kingold is empowered, through its whollyowned subsidiaries Dragon Lead Group Limited (“Dragon Lead”) and Wuhan Vogue-Show Jewelry Co., Inc. (“Wuhan Vogue-Show”), with the ability to controland substantially influence Wuhan Kingold’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholders’approval. Kingold is also obligated to absorb a majority of expected losses of Wuhan Kingold, which enables Kingold to receive a majority of expected residualreturns from Wuhan Kingold, and because Kingold has the power to direct the activities of Wuhan Kingold that most significantly impact Wuhan Kingold’seconomic performance, Kingold, through its wholly-owned subsidiaries, accounts for Wuhan Kingold as its Variable Interest Entity under Accounting StandardsCodification (“ASC”) 810-10-05-8A. Accordingly, Kingold consolidates Wuhan Kingold’s operating results, assets and liabilities. The Company makes an ongoingassessment to determine whether Wuhan Kingold is still a Variable Interest Entity.

The accompanying unaudited condensed consolidated financial statements include the financial statements of Kingold, Dragon Lead, Wuhan Vogue-Show,Wuhan Kingold and its 55% controlled subsidiaries Wuhan Kingold Internet Co., Ltd. (“Kingold Internet”) and Yuhuang Jewelry Design Co., Ltd (“Yuhuang”). Allsignificant inter-company balances and transactions have been eliminated in consolidation.

Kingold, Dragon Lead, Wuhan Vogue-Show, Wuhan Kingold, Kingold Internet and Yuhuang are hereinafter collectively referred to as the “Company.” Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect thereported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as thereported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by management include, but are not limitedto, useful lives of property, plant and equipment, intangible assets, the recoverability of long-lived assets, inventory valuation, allowance for doubtful accounts,deferred tax asset and liability and share based compensation. Actual results could differ from those estimates. Restricted Cash As of June 30, 2016 and December 31, 2015, the Company had restricted cash of $46,107,680 and $26,649,687, respectively. Approximately $2.7 million wasrelated to the bank loan with various financial institutions. Approximately $43.4 million was related to the gold lease deposits with Shanghai PudongDevelopment Bank (“SPD Bank”), China Construction Bank (“CCB”) Commerce Bank of China (“ICBC”) and CITIC Bank – see Note 16 – Gold LeaseTransactions. 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 isestablished and recorded based on management’s assessment of the credit history of the customers and current relationships with them. At June 30, 2016 andDecember 31, 2015, there was no allowance recorded as the Company considers all of the accounts receivable fully collectible.

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Inventories Inventories are stated at the lower of cost or market value, and cost is calculated on the weighted average basis. As of June 30, 2016 and December 31, 2015,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 priceof gold. The cost of inventories comprises all costs of purchases, costs of fixed and variable production overhead and other costs incurred in bringing theinventories 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, andexpenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. The estimated useful lives used inconnection with the preparation of the financial statements are as follows:

EstimatedUseful Life

Buildings 30 yearsPlant and machinery 15 yearsMotor vehicles 10 yearsOffice furniture and electronic equipment 5 – 10 yearsBuilding improvements Over lease term

Construction-in-Progress Construction in progress represents property and buildings under construction and consists of construction expenditures, equipment procurement, and otherdirect costs attributable to the construction. Construction in progress is not depreciated. Upon completion and when ready for intended use, construction inprogress is reclassified to the appropriate category within property, plant and equipment or will be classified as an asset held for sale. 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 andcompanies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as “ownership.” Land userights are stated at cost less accumulated amortization. Amortization is provided over the respective useful lives, using the straight-line method. Estimated usefullife 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 circumstancesindicate 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 ofan asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated futurecash 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 orchanges in circumstances that necessitated a review of impairment of long-lived assets as of June 30, 2016 and December 31, 2015. Property Held for Sale Property held for sale relates to the Company’s commitment to sell the Shanghai Creative Industry Park, or Kingold Jewelry Cultural Industry Park (the “JewelryPark”), to third party. On June 27, 2016, the Company entered into a transfer contract with third party, Wuhan Lianfuda Investment Management Co., Ltd.(“Wuhan Lianfuda”), to sell all of its interest in the Jewelry Park to Wuhan Lianfuda (the “Transfer Transaction;” see Note 5). The Transfer Transaction has notbeen consummated as of June 30, 2016 therefore Jewelry Park real estate property was treated as property held for sale.

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Fair Value of Financial Instruments The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures. ” ASC 820 clarifies thedefinition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value asfollows:

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 inmarkets 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 all current assets and liabilities approximate their fair values because of the short-term nature of these instruments. The Companydetermined 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 similarfinancial institutions. Revenue Recognition

Net sales (gross sales less valued added tax) are primarily composed of sales of branded products to wholesale and retail customers, as well as fees generatedfrom customized production. In customized production, a customer supplies the Company with the raw materials and the Company creates products per thatcustomer’s instructions, whereas in branded production the Company generally purchases gold directly and manufactures and markets the products on its own.The Company recognizes revenues under ASC 605 as follows:

Sales of branded products

The Company recognizes revenue on sales of branded products when the goods are delivered and title to the goods passes to the customer provided that: (i)there are no uncertainties regarding customer acceptance; (ii) persuasive evidence of an arrangement exists, and (iii) the sales price is fixed and determinable;and collectability is deemed probable.

Customized production fees

The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services havebeen performed and (ii) collectability is deemed probable. Internet sales The Company also engages in promoting the online sales of jewelry products through cooperation with Tmall.com, a large business-to-consumer online retailplatform owned by Alibaba Group. Consistent with the criteria of ASC 605, Revenue Recognition, the Company recognizes revenues of internet sales when thefollowing four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the selling price is fixed ordeterminable, and (iv) collectability is reasonably assured. In accordance with ASC 605, Revenue Recognition, the Company evaluates whether it is appropriate to record the gross amount of product sales and relatedcosts or the net amount earned as commissions. When the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude inestablishing prices and selecting suppliers, or has several but not all of these indicators, revenues should be recorded on a gross basis. When the Company isnot the primary obligor, doesn’t bear the inventory risk and doesn’t have the ability to establish the price, revenues are recorded on a net basis. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets andliabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in theyears 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 isrecognized in net income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets tothe 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 recognition and measurement ofa 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 June 30, 2016 and December 31, 2015.

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 2010 and after. As of June 30, 2016, the tax years ended December31, 2010 through December 31, 2015 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 andWuhan Kingold maintain their accounting records in Renminbi (“RMB”), which is the primary currency of the economic environment in which their operations areconducted. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the localcurrency, as the functional currency. The results of operations and the statement of cash flows denominated in foreign currency are translated at the averagerate 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 capitalcontribution and stock issuance. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported onthe statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments arising fromthe use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated Other Comprehensive Income(deficit)”.

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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 economicconditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines thecurrency exchange rates that were used in creating the consolidated financial statements in this report:

June 30, 2016 June 30, 2015 December 31, 2015Balance sheet items, except for share capital, additional paid in capitaland retained earnings, as of the period ended

US$1=RMB 6.6434 US$1=RMB 6.1088 US$1=RMB6.417

Amounts included in the statements of operations and cash flows for theperiod

US$1=RMB 6.5388 US$1=RMB 6.1254 US$1=RMB 6.2288

Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resultingfrom translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income in the consolidated statements of income andcomprehensive income. Earnings per Share 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 butpresents 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 theperiods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decreaseloss 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 asexpense 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 fairvalue of the awards to non-employees are measured every reporting period based on the value of the Company’s common stock. Debts Payable Debt issuance costs 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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-preciousmetals and stones. The Company potentially has exposure to the fluctuation in gold commodity prices as part of its normal operations. In the past, the Companyhas not hedged its requirement for gold or other raw materials through the use of options, forward contracts or outright commodity purchasing. A significantincrease 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 wouldadversely affect the Company’s sales and profitability. A significant disruption in the Company’s supply of gold, or other commodities, could decrease itsproduction and shipping levels, materially increase its operating costs, and materially and adversely affect its profit margins. Shortages of gold, or othercommodities, or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in theemployment of labor or transportation in the markets in which the Company purchases its raw materials, may adversely affect its ability to maintain production ofits products and sustain profitability. Although the Company generally attempts to pass on increased commodity prices to its customers, there may becircumstances 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 tomeet its production schedules and to ship products to its customers in a timely manner, which would adversely affect its sales, margins and customer relations.

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 ofcost or market value, cost calculated on the weighted average method. As a result, decreases in the market value of precious metals such as gold would resultin 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’s operations are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by thepolitical, 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 subjectto 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 inthe 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 controlsWuhan Kingold through a series of agreements. Although the Company believes the contractual relationships through which it controls Wuhan Kingold complywith current licensing, registration and regulatory requirements of the PRC, it cannot assure you that the PRC government would agree, or that new andburdensome regulations will not be adopted in the future. If the PRC government determines that the Company’s structure or operating arrangements do notcomply with applicable law, it could revoke the Company’s business and operating licenses, require it to discontinue or restrict its operations, restrict its right tocollect 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 toits business. If such agreements were cancelled, modified or otherwise not complied with, the Company would not be able to retain control of Wuhan Kingoldand the impact could be material to the Company’s consolidated statements of income. Although the Company has not experienced losses from these situationsand believes that it is in compliance with existing laws and regulations, including the organization and structure disclosed in Note 1, this may not be indicative offuture results. Reclassification “Comprehensive income” in 2015 statements of income and comprehensive income has been changed to conform to the current period presentation. Thisreclassification has no effect on the accompanying unaudited condensed financial statements. Recent Accounting Pronouncements In January 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition andMeasurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments.The new guidance makes targeted improvements to existing U.S. GAAP by: (1) requiring equity investments (except those accounted for under the equitymethod of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.Requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) Requiringseparate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) onthe balance sheet or the accompanying notes to the financial statements; (3) Eliminating the requirement for public business entities to disclose the method(s)and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balancesheet; and (4) Requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of aliability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability atfair value in accordance with the fair value option for financial instruments. The new guidance is effective for public companies for fiscal years beginning afterDecember 15, 2017, including interim periods within those fiscal years. The Company is evaluating the effect, if any, that this update will have on theCompany's unaudited condensed consolidated financial position, results of operations and cash flows.

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Recent Accounting Pronouncements – continued In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU areeffective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certaintransition relief. The Company is currently evaluating the impact of this new standard on its unaudited condensed consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in DebtInstruments. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to havea debt host) with embedded call (put) options. The amendments clarify what steps are required when assessing whether the economic characteristics and risksof call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating anembedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers theability to exercise a call (put) option is related to interest rates or credit risks. Public business entities must apply the new requirements for fiscal years beginningafter December 15, 2016 and interim periods within those fiscal years. All other entities must apply the new requirements for fiscal years beginning afterDecember 15, 2017 and interim periods within fiscal years beginning after December 15, 2018. All entities have the option of adopting the new requirementsearly, including adoption in an interim period. If an entity early adopts the new requirements in an interim period, it must reflect any adjustments as of thebeginning of the fiscal year that includes that interim period. The Company does not expect any material impact of this new standard on its unaudited condensedconsolidated financial statements.

In April 2016, the FASB released ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. While aimed at reducing thecost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income, EPS, and the statement ofcash flows. Implementation and administration may present challenges for companies with significant share-based payment activities. The ASU is effective forpublic companies in annual periods beginning after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impactof this new standard on its unaudited condensed consolidated financial statements.

In April 2016, FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying PerformanceObligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensingimplementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for theamendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reportingperiods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application forpublic entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.The Company is currently evaluating the impact of this new standard on its unaudited condensed consolidated financial statements.

In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC GuidanceBecause of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescindingcertain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective uponadoption of Topic 606. The Company is assessing the impact of the adoption of the ASU on its unaudited condensed consolidated financial statements,disclosure requirements and methods of adoption. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients,which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potentialfor diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. TheCompany is assessing the impact of the adoption of the ASU on its unaudited condensed consolidated financial statements, disclosure requirements andmethods of adoption.

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NOTE 3 – INVENTORIES, NET Inventories as of June 30, 2016 and December 31, 2015 consisted of the following:

As of June 30, December 31, 2016 2015 Raw materials (A) $ 670,193,289 $ 162,766,248 Work-in-progress (B) 101,650,866 108,276,834 Finished goods (C) 14,640,933 27,260,103 Inventory valuation allowance - -

Total inventory $ 786,485,088 $ 298,303,185

(A) Included 20,017,968 grams of Au9999 gold as of June 30, 2016 and 5,624,476 grams of Au9999 gold as of December 31, 2015. (B) Included 3,094,955 grams of Au9999 gold June 30, 2016 and 3,549,984 grams of Au9999 gold as of December 31, 2015. (C) Included 444,931 grams of Au9999 gold June 30, 2016 and 886,849 grams of Au9999 gold as of December 31, 2015. As of June 30, 2016, 22,059,240 grams of Au9999 gold with carrying value of approximately $738.5 million were pledged for certain bank loans (see Note 6). Noinventory was pledged on the debts payable because it has been fully repaid upon maturity and accordingly previously pledged inventory has been released(see Note 7). As of December 31, 2015, 3,977,490 grams of Au9999 gold with carrying value of approximately $115.1 million were pledged for certain bank loans and another2,456,000 grams of Au9999 gold with carrying value of approximately $71 million were pledged for the Company’s debts payable. For the three and six months ended June 30, 2016, the Company recorded $Nil lower cost or market adjustment. For the three and six months ended June 30,2015, the Company recorded $10,344,003 lower of cost or market adjustment. NOTE 4 – PROPERTY AND EQUIPMENT, NET The following is a summary of property and equipment as of June 30, 2016 and December 31, 2015:

As of June 30, December 31, 2016 2015 Buildings $ 2,309,133 $ 2,363,093 Plant and machinery 18,151,983 18,496,731 Motor vehicles 52,703 53,935 Office and electric equipment 624,308 630,312 Building improvements 243,309 -

Subtotal 21,381,436 21,544,071 Less: accumulated depreciation (14,223,111) (13,921,562)Property and equipment, net $ 7,158,325 $ 7,622,509

Depreciation expense for the three and six months ended June 30, 2016 was $315,157 and $629,352, respectively. Depreciation expense for the three and sixmonths ended June 30, 2015 was $336,346 and $670,538, respectively.

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NOTE 5 – PROPERTY HELD FOR SALE, JEWELRY PARK On October 23, 2013, the Company, through its wholly-owned subsidiary, Wuhan Kingold, entered into an acquisition agreement (the “Acquisition Agreement”)with third-parties Wuhan Wansheng House Purchasing Limited (“Wuhan Wansheng”) and Wuhan Huayuan Science and Technology Development LimitedCompany (“Wuhan Huayuan”). The Agreement provides for the build out of the planned “Shanghai Creative Industry Park,” which is proposed to be renamed to“Kingold Jewelry Cultural Industry Park” (the “Jewelry Park”). Pursuant to the Agreement, Wuhan Kingold acquired the land use rights for a parcel of land (the“Land”) in Wuhan for a total of 66,667 square meters (approximately 717,598 square feet, or 16.5 acres) (the “Land Use Right”), which had been approved forreal estate development use. Wuhan Kingold committed to provide a total sum of RMB 1.0 billion (approximately $151 million) for the acquisition of this LandUse Right and to finance the entire development and construction of a total of 192,149 square meters (approximately 2,068,000 square feet) of commercialproperties, which were proposed to include a commercial wholesale center for various jewelry manufacturers, two commercial office buildings, a commercialresidence of condominiums as well as a hotel. On June 27, 2016, Wuhan Kingold entered into a transfer contract with Wuhan Lianfuda Investment Management Co., Ltd. (“Wuhan Lianfuda”), an unrelatedparty, to sell all of its interest in the Jewelry Park to Wuhan Lianfuda (“Transfer Transaction”). Pursuant to the transfer contract, Wuhan Lianfuda is obligated topay Wuhan Kingold RMB 1.14 billion (approximately US $171.6 million) (“Selling Price”). This amount includes (1) RMB 640 million (approximately US $96.3million) for the share acquisition fees and the construction fees that Wuhan Kingold has paid to Wuhan Wansheng; and (2) transfer fees of RMB 500 million(approximately US $75.3 million). In addition, Wuhan Kingold transfers and Wuhan Lianfuda receives, all the rights and obligations in the Transfer TransactionAgreement, including 60% stock rights of Wuhan Huayuan. Wuhan Lianfuda will undertake Wuhan Kingold’s remaining payment obligation of RMB 360 million(approximately US $54.2 million) stipulated in the Acquisition Agreement.

In the Transfer Transaction, deposit payables consist of the following two components: (1) amounts received from customers relating to the pre-sale of theresidential or commercial units in the Jewelry Park. The Company receives these funds and recognizes them as a liability until the revenue can be recognized;(2) amounts received from third party in connection with the Transfer Transaction.

As of June 30, 2016, the carrying value of Jewelry Park was approximately $162.6 million (RMB 1.08 billion), included the following components (1) Land useright of approximately $9.1 million (RMB 60.4 million), which represents the total cost of the Land Use Right and (2) the construction progress of approximately$153.5 million (RMB 1 billion), consisting of the Company’s cash payment of approximately $87.3 million (RMB 579.6 million) towards the construction of JewelryPark project, capitalized interest of approximately $12 million (RMB 80 million) and construction payable of approximately $54.2 million (RMB 360.0 million) whichhas been accrued based on the billing request by the construction company as of June 30, 2016. As of June 30, 2016 and December 31, 2015, the constructionpayable of approximately $54.2 million and $23.9 million has been accrued based on the billing request of the construction company Wuhan Wansheng,respectively.

The Transfer Transaction has not been consummated as of June 30, 2016, because the project was still in the process of final inspection, acceptance and filingfor the record, and the ownership title has not been transferred to Wuhan Lianfuda as of June 30, 2016. As of the date of this Report, the Company is unable topredict the actual timing of the completion of the Jewelry Park transfer because the inspection report and related government filings have not yet beencompleted.

Based on the total budget of approximately $151 million (RMB 1.0 billion) on the Jewelry Park, Wuhan Kingold was still obligated to pay the remainingapproximately $54.2 million (RMB 360 million) to Wuhan Wansheng as of June 30, 2016 after deducting all the progress payments made by Wuhan Kingold. Inconnection with the Transfer Transaction, Wuhan Lianfuda will undertake Wuhan Kingold’s remaining payment obligation of approximately $54.2 million (RMB360 million), when the Transfer Transaction is consummated in the near future.

The following table presents the components of the property held for sale- Jewelry Park, at June 30, 2016 and December 31, 2015:

As of June 30, December 31, 2016 2015 Deposit on land use right $ 9,084,474 $ 9,296,763 Construction in progress 153,484,370 105,844,259

Total assets $ 162,568,844 $ 115,141,022

Construction payables $ 54,189,120 $ 23,876,642 Deposit payable 90,736,671 22,182,171

Total liabilities $ 144,925,791 $ 46,058,813

NOTE 6 – LOANS Short term loans consist of the following:

As of June 30, December 31, 2016 2015 (a) Loans payable to CITIC Bank Wuhan Branch $ - $ 6,161,714 (b) Loan payable to Bank of Hubei Wuhan Jiang’an Branch 3,080,857 (c) Loan payable to Minsheng Trust 45,157,600 46,212,857 (d) Current portion of long-term loan payable to Evergrowing Bank 301,051 - (e) National Trust 75,262,667 - (f) Aijian Trust 45,157,600 -


Total short term loans $ 165,878,918 $ 55,455,428

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NOTE 6 – LOANS - continued Short term loans a) Loans payable to CITIC Bank Wuhan Branch with an aggregate amount of approximately $6.2 million (RMB 40 million) with annual interest of 6.7% hasmatured and was fully repaid on March 1, 2016.

b) Loan payable to Bank of Hubei, Wuhan Jiang’an Branch with an aggregate amount of approximately $3.1 million (RMB 20 million) originated on November12, 2015 with annual interest rate of 6.7%. The loan was fully repaid by June 30, 2016.

c) Loan payable to Minsheng Trust, with an aggregate amount of approximately $45.2 million (RMB 300 million) originated on September 17, 2015, with amaturity date of September 25, 2016. The annual interest rate was 12.5%. The loan is to be used for the Company’s working capital. Wuhan Kingold pledged1,877,490 grams of gold with carrying value of approximately $62.9 million (RMB 417.6 million) as of June 30, 2016 to secure this loan. The Company was alsorequired to pledge approximately $0.5 million (RMB 3 million) restricted cash with Minsheng Trust as collateral. In addition, the Company’s CEO, Mr. Zhihong Jiaand his wife, Ms. Lili Huang, jointly signed a guarantee agreement with the Minsheng Trust, to provide a guarantee for the loan.

d) The current portion of loans payable to Yantai Huangshan Road Branch of Evergrowing Bank (see note (i) below)).

e) On April 26, 2016, the Company entered into a trust loan agreement and an amendment to the trust loan agreement with the National Trust Ltd. (“NationalTrust”) to borrow a maximum of approximately $75.3 million (RMB 500 million) as working capital loan. The loan is comprised of two installments, with the firstinstallment of approximately $15.1 million (RMB 100 million) and the second installment of approximately $60.2 million (RMB 400 million). Each installment has aone-year term starting from the installment release date. For each installment, the Company is required to make the first interest payment equal to 4.1% of theprinciple received, then the rest of interest payments are calculated based on a fixed interest rate of 8% and due on semi-annual basis. The Company is requiredto pledge 2,600 kilogram of Au9995 gold with carrying value of approximately $87.0 million (RMB 578.3 million) as collateral to secure this loan. The loan isjointly guaranteed by Mr. Zhihong Jia, the CEO and Chairman of the Company, and Wuhan Vogue-Show. The Company received full proceeds in May 2016.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 isrepaid upon maturity.

f) On April 28, 2016, Wuhan Kingold and Shanghai AJ Trust Co., Ltd. (“AJ Trust”) entered into a gold income right transfer and repurchase agreement. Accordingto the agreement, AJ Trust acquired the income rights from Wuhan Kingold for Wuhan Kingold’s Au9999 gold worth at least RMB 412.5 million based on theclosing price of gold on the most recent trading day at the Shanghai Gold Exchange (the “Gold Income Right”). AJ Turst’s acquisition price for the Gold IncomeRight was approximately $45.2 million (RMB 300 million) (the “Acquisition Price”). Wuhan Kingold is required to repurchase the Gold Income Right back from AJTrust with installments and the last installment shall be within the 24 months after establishment of the trust plan. The repurchase price is equal to the AcquisitionPrice with annual return of 10% for the period from the agreement date and the last repayment date. The repurchase obligation may be accelerated undercertain conditions, including upon breach of representations or warranties, certain cross-defaults, upon the occurrence of certain material events affecting thefinancial viability of Wuhan Kingold, and other customary conditions. Wuhan Kingold pledged the related Au9999 gold under the Gold Income Right to AJ Trust.The agreement is also personally guaranteed by Mr. Zhihong Jia, our CEO and Chairman. As of June 30, 2016, the carrying value of the pledged gold wasapproximately $49.1 million (RMB 325.9 million). The Company also made a restricted deposit of $0.5 million (RMB 3 million) to secure these loans. The depositwill be refunded when the loan is repaid upon maturity. Management believe the substance of this agreement is a debt arrangement with AJ Trust, therefore AJTrust’s acquisition price was recorded as loan payable. Since Wuhan Kingold has a right to repurchase the Gold Income Right in 12 months, the loan is treatedas a short term loan.

Interest expense for all of the short-term loans mentioned above amounted approximately to $5.1 million and $6.7 million for the three and six months endedJune 30, 2016, respectively. Short term loan interest expense for the three and six months ended June 30, 2015 was $84,616 and $382,153, respectively.

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NOTE 6 – LOANS - continued Long term loans consist of the following: As of June 30, December 31, 2016 2015 (h) Loans payable to Qixia Branch of Evergrowing Bank $ 150,525,333 $ 30,808,571 (i) Loans payable to Huangshan Road Branch of Evergrowing Bank 150,224,283 - (j) Loans payable to Anxin Trust 150,525,333 (k) Loans payable to Mingsheng Trust 30,105,067 (l) Loans payable to Changan Trust 29,954,542

Total long term loans $ 511,334,558 $ 30,808,571

(h) Loans payable to Evergrowing Bank – Qixia Branch On December 18, 2015, Wuhan Kingold signed a loan agreement with the Qixia Branch of Evergrowing Bank in the amount of approximately $30.1 million (RMB200 million). This loan was used to partially fund the construction of the Jewelry Park and as working capital. The loan period was from December 18, 2015 toDecember 15, 2017 with the annual interest of 7.5%. The loan is secured by 1,300,000 grams of Au9999 gold with carrying value of approximately $43.5 million.In addition, the Company’s CEO and Chairman, Mr. Zhihong Jia signed a guarantee agreement with the bank, to provide a guarantee for the loan. In January 2016, Wuhan Kingold further signed two Loan Agreements of Circulating Funds with the Qixia Branch of Evergrowing Bank for loans of approximately$120.4 million (RMB 800 million) in aggregate. The purpose of the loans is for purchasing gold. The terms of loans are two years and bear fixed interest of 7.5%per year. The loans are secured by 5,000,000 grams of Au9999 gold in aggregate with carrying value of approximately $167.4 million and are guaranteed by Mr.Zhihong Jia, the CEO and Chairman of the Company. Both loans are due in January 2018. The repayment of the loans may be accelerated under certainconditions, including upon a default of principal or interest payment when due, breach of representations or warranties, certain cross-defaults, upon theoccurrence of certain material events affecting the financial viability of Wuhan Kingold, and other customary conditions. There are no financial covenantrequirements for the loans. (i) Loans payable to Evergrowing Bank- Yantai Huangshan Branch From February 24, 2016 to March 24, 2016, Wuhan Kingold signed ten Loan Agreements with the Yantai Huangshan Road Branch of Evergrowing Bank forloans of approximately $150.5 million (RMB 1 billion) in aggregate. The purpose of the loans is for purchasing gold. The terms of loans are two years and bearfixed interest of 7% per year. The loans are secured by 5,828,750 gram of Au9999 gold in aggregate with carrying value of approximately $195.1 million and areguaranteed by Mr. Zhihong Jia, the CEO and Chairman of the Company. Based on the loan repayment plan as specified in the loan agreements, approximately$150,525 (RMB 1 million) should be repaid on August 23, 2016 and additional approximately $150,526 (RMB 1 million) should be repaid on February 23, 2017and accordingly these amounts have been reclassified as the current portion of the long-term loans (see note (d) above). The remaining loans are due inFebruary to March 2018. The repayment of the loans may be accelerated under certain conditions, including upon a default of principal or interest payment whendue, breach of representations or warranties, certain cross-defaults, upon the occurrence of certain material events affecting the financial viability of WuhanKingold, and other customary conditions. There are no financial covenant requirements for the loans. The repayment requirement is listed below:

As of June 30, 2016 August 23, 2016 $ 150,525 February 23, 2017 150,526 August 23, 2017 150,526 February 23, 2018 – March 24, 2018 150,073,757

Total 150,525,334 Short term portion

(refer to short term loan – d) 301,051 Long term portion $ 150,224,283

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NOTE 6 – LOANS - continued Long term loans (j) 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 allows the Company toaccess of approximately $451.6 million (RMB 3 billion) within 60 months. Each individual loan will bear a fixed annual interest of 14.8% with a term of 36 monthsor less. The loan is subject to certain covenants required by the agreement. The purpose of this trust loan is to provide working capital for the Company topurchase gold. The loan is secured by 1,700,000 gram of Au9999 gold in aggregate with carrying value of approximately $56.9 million. There is no financialcovenant requirement for this loan. The loan is also guaranteed by Mr. Zhihong Jia, the CEO and Chairman of the Company. As of June 30, 2016, the Companyreceived an aggregate of approximately $150.5 million (RMB 1 billion) from the loan. The Company also made a restricted deposit of approximately $0.4 million(RMB 2.92 million) to secure these loans. The deposit will be refunded when the loan is repaid upon maturity. Subsequently in early August 2016, the Companyreceived additional approximately $75.3 million (RMB 500 million) from this line of credit.

k) On June 24, 2016, Wuhan Kingold entered into a loan agreement with Minsheng Trust, with an aggregate amount of approximately $30.2 million (RMB 200million), with a maturity date of June 22, 2018. The annual interest rate was 10.85%. The loan is to be used for the working capital. Wuhan Kingold pledged1,090,000 grams of gold with carrying value of approximately $36.5 million (RMB 242.4 million) as of June 30, 2016 to secure this loan. The Company was alsorequired to pledge approximately $0.3 million (RMB 2 million) restricted cash with Minsheng Trust as collateral. In addition, the Company’s CEO, Mr. Zhihong Jiaand his wife, Ms. Lili Huang, jointly signed a guarantee agreement with the Minsheng Trust, to provide a guarantee for the loan.

(l) On March 9, 2016, Wuhan Kingold entered into a Trust Loan Contract with Chang’An International Trust Co., Ltd. (“Chang’An Trust”). The agreement allowsthe Company to access a total of approximately $45.2 million (RMB 300 million) for the purpose of working capital needs. The loan has a 24-month term startingfrom the date of releasing the loan, and bears interest at a fixed rate of 13% per annum. The loan is secured by 1,121 kilograms of Au9995 gold, whichapproximately $37.5 million (RMB 249.3 million) is pledged by Wuhan Kingold. The loan is guaranteed by Mr. Zhihong Jia, the CEO and Chairman of theCompany and shall be repaid upon maturity. As of June 30, 2016, the Company received an aggregate of approximately $30.0 million (RMB 199 million) fromthe loan. The Company also made a restricted deposit of approximately $0.3 million (RMB 1.99 million) to secure these loans. The deposit will be refunded whenthe loan is repaid upon maturity.

Interest expense for all of the long-term loans mentioned above amounted to $8.5 million and $11.9 million for the three and six months ended June 30, 2016,respectively. Long term loan interest of $1.1 million and $2.2 million for the three and six months ended June 30, 2015 was capitalized into construction inprogress and was not recorded as part of total interest expenses.

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NOTE 7 – DEBTS PAYABLE On February 9, 2015, Wuhan Kingold received a Notice of Acceptance of Registration (the “Acceptance”) from the PRC’s National Association of FinancialMarket Institutional Investors (the “NAFMII”), registering the issuance of up to RMB 750 million (approximately US$112.9 million) of debt financing instruments byWuhan Kingold pursuant to a Non-Public Oriented Debt Financing Instruments Private Placement Agreement, by and among Wuhan Kingold, SPD Bank and theother institutional investors named therein (together with SPD Bank, the “Investors”), dated July 21, 2014 (the “Private Placement Agreement”). Such PrivatePlacement Agreement became valid upon the Acceptance. In connection with the Private Placement Agreement, Wuhan Kingold and SPD Bank entered into anUnderwriting Agreement dated August 12, 2014, appointing SPD Bank as the lead underwriter and bookkeeping manager for the issuance of the debt securities.The debt financing program is intended to operate similar to a commercial paper program. Under the program, Wuhan Kingold may issue the debt securities atany time within two years from the date of the Acceptance, with the initial issuance completed within six months from the date of the Acceptance. WuhanKingold is required to report any issuance to the NAFMII. The Private Placement Agreement provides that the Investors are entitled to, but are not required to,participate in any issuance, and prohibits using the proceeds from any issuance of debt securities for real estate and equity acquisition transactions. On March 26, 2015, Wuhan Kingold completed the issuance of the first phase of debt financing instruments with the total amount of approximately $62 million(RMB 400 million) under the Private Placement Agreement. The debt has a one-year term with the annual interest rate of 7%. The debt was secured by certaingold or gold products held by Wuhan Kingold and approximately $5.3 million (RMB 35 million) security deposit. Management determined the debt was for thepurpose of financing the Jewelry Park project (see Note 5). In connection with the foregoing, Wuhan Kingold and SPD Bank have entered into a Credit AgentAgreement (the “Credit Agent Agreement”), pursuant to which SPD Bank serves as the agent of the holders of the debt securities. Zhihong Jia, Chairman andCEO of the Company, has executed a guaranty, to guarantee Wuhan Kingold’s obligations under the Credit Agent Agreement. The interest expense incurred onthe debt financing instruments amounted to approximately $3.3 million for the year ended December 31, 2015 and was capitalized into construction in progressof Jewelry Park project. The RMB 400 million debts payable have been fully repaid to SPD Bank upon maturity on March 24, 2016. A one-time financing cost of approximately $0.6 million (RMB 4 million) related to the issuance has been offset against the debts payable carrying amount and isbeing amortized on a quarterly basis. For the year ended December 31, 2015, amortization of the deferred financing costs was $490,870. The remainingdeferred financing cost of $144,134 was fully amortized in the six months ended June 30, 2016.

As of June 30, December 31, 2016 2015 Gross Debts Payable for Phase One $ - $ 61,617,142 Net financing cost - (145,180) Debts Payable, net $ - $ 61,471,962

Pursuant to the Private Placement Agreement dated on August 12, 2014, the RMB 750 million debt financing instruments can be issued within two years. TheCompany originally planned to request the second phase of issuance of approximately $52.7 million (RMB 350 million) before the first phase debt expiration datein March 2016 and the proceeds were planned to pay back the first phase debt. However, because the Company obtained alternative financing through severalbank borrowings, management does not expect the second phase of debt issuance will be materialized in the near future. NOTE 8 – DEPOSIT PAYABLES - JEWELRY PARK

As of December 31, 2015, the Company received the advance payment from potential customers of approximately $22 million (RMB 144 million) to acquirecertain real estate property in the Jewelry Park. As of June 30, 2016, in connection with the Transfer Transaction, the Company received the advance paymentsfrom Wuhan Lianfuda approximately $90.7 million (RMB 602.8 million) (see Note 5) and included in Deposit payable, while the Company refunded $22 million ofcustomer deposits to Wuhan Lianfuda because Wuhan kingold transferred all its interest in Jewelry Park to Wuhan Lianfuda in accordance with the TransferTransaction.

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NOTE 9 – OTHER RELATED PARTY TRANSACTIONS

For the six months ended June 30, 2016, the Company borrowed total of $449,809 from Mr. Zhihong Jia, the CEO and Chairman of the Company, to pay certainexpense to various service providers on behalf of the Company. Such amount is unsecured and repayable on demand with free of interest. As of June 30, 2016and December 31, 2015, the due to related party amounted to $449,809 and $200,059, respectively.

For the six months end June 30, 2016 and 2015, Mr. Zhihong Jia, the CEO and Chairman of the Company, provided his personal guarantees to various financialinstitutions to support the Company (see Notes 6 and 7).

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NOTE 10 – 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 2015 resulting in loss carry forwards ofapproximately $16.3 million available for offsetting against future taxable U.S. income, expiring in 2035. Management believes that the realization of the benefitsfrom these losses is uncertain due to its history of continuing losses in the United States. Accordingly, a full deferred tax asset valuation allowance has beenprovided and no deferred tax asset benefit has been recorded. The valuation allowance as of June 30, 2016 and December 31, 2015 was approximately $5.5million and $5.4 million, respectively. The net increase in the valuation allowance for the six months ended June 30, 2016 and 2015 was $180,290 and$268,840, 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, Wuhan Kingold, Kingold Internet, and Yuhuang are incorporated in the PRC and are subject to PRC income tax, which is computedaccording to the relevant laws and regulations in the PRC. The applicable tax rate is 25% for the periods ended June 30, 2016 and 2015. The Companyrecorded $Nil deferred income tax assets as of June 30, 2016 and December 31, 2015. The Company intends to reinvest its foreign profits indefinitely in order to avoid a tax liability upon repatriation to the United States. Income (loss) from continuing operations before income taxes was allocated between the U.S. and foreign components for the three and six months ended June30, 2016 and 2015: For the three months ended June 30, For the six months ended June 30,

2016 2015 2016 2015 United States $ (235,312) $ (29,098) $ (530,264) $ (790,705)Foreign 26,845,767 174,399 47,404,610 9,501,589 $ 26,610,455 $ 145,301 $ 46,874,346 $ 8,710,884

Significant components of the income tax provision were as follows for the three and six months ended June 30, 2016 and 2015:

For the three months ended June 30, For the six months ended June 30,

2016 2015 2016 2015 Current tax provision Federal $ - $ - $ - $ - State - - - - Foreign 6,849,780 557,373 11,660,784 3,286,274 $ 6,849,780 $ 557,373 $ 11,660,784 $ 3,286,274

Deferred tax provision (benefit) Federal $ - $ - $ - $ - State - - - - Foreign 64 (985,503) 255,738 (1,730,028) 64 (985,503) 255,738 (1,730,028)Income tax provision $ 6,849,844 $ (428,130) $ 11,916,522 $ 1,556,246

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NOTE 10 – INCOME TAXES - continued The components of deferred tax assets and deferred tax liability as of June 30, 2016 and December 31, 2015 consist of the following:

As of June 30,

2016 As of December 31,

2015 Deferred tax assets: Deferred tax assets from net operating losses from parentcompany $ 5,535,469 $ 5,335,180 Valuation allowance (5,535,469) (5,335,180) $ - $ - Deferred tax liability:

Deferred tax liability from capitalized interest $ 1,986,173 $ 1,774,993 $ 1,986,173, $ 1,774,993

NOTE 11 – EARNINGS PER SHARE For three and six months ended June 30, 2016 and 2015, the basic average shares outstanding and diluted average shares outstanding were the same becausethe effect of potential shares of common stock was anti-dilutive since the exercise prices for the warrant and options were greater than the average market pricefor the related periods. As a result, for the three and six months ended June 30, 2016, total of 309,136 and 6,356 unexercised warrants and options are dilutive,respectively, and were included in the computation of diluted EPS. For the three and six months ended June 30, 2015, no unexercised warrants and optionswere dilutive. The following table presents a reconciliation of basic and diluted net income per share: For the three months ended June 30, For the six months ended June 30,

2016 2015 2016 2015 Net income attributable to common stockholders $ 19,760,879 $ 573,619 $ 34,959,289 $ 7,154,826

Weighted average number of common shares outstanding - Basic 65,964,110 65,963,502 65,963,808 65,963,502 Effect of dilutive securities: Unexercised warrants and options 309,136 - 6,356 - Weighted average number of common shares outstanding - Diluted 65,273,246 65,963,502 65, 970,164 65,963,502

Earnings per share-Basic $ 0.30 $ 0.01 $ 0.53 $ 0.11

Earnings per share-Diluted $ 0.30 $ 0.01 $ 0.53 $ 0.11

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NOTE 12 – OPTIONS

On March 24, 2011, the Board of Directors voted to adopt the 2011 Stock Incentive Plan (the “Plan”), which was later ratified by the Company’s stockholders onOctober 31, 2011, at the 2011 annual meeting.

The Plan permits the granting of stock options (including incentive stock options as well as nonstatutory stock options), stock appreciation rights, restricted andunrestricted stock awards, restricted stock units, performance awards, other stock-based awards or any combination of the foregoing. Under the terms of thePlan, up to 5,000,000 shares of the Company’s common stock may be granted. Prior to January 1, 2012, the Company granted 1,620,000 options under theplan. In accordance with the vesting periods, $Nil was recorded as part of operating expense-stock compensation for the three and six months ended June 30,2016, respectively. The Company recorded $Nil and $110,439 as part of operating expense-stock compensation for the three and six months ended June 30,2015, respectively

On January 9, 2012, the Company granted 1,300,000 options with an exercise price of $1.22 to certain members of management and directors. These optionscan be exercised within ten years from the grant date once they become exercisable. The options become exercisable in accordance with the schedule below:(a) 25% of the options become exercisable on the first anniversary of the grant date (such date is the initial vesting date), and (b) 6.25% of the options becomeexercisable on the date three months after the initial vesting date and on such date every third month thereafter, through the fourth anniversary of the grant date.The fair value of the options was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 124.81%, risk freeinterest rate of 1.98 %, and expected term of 10 years. The fair value of the options was $1,516,435. In accordance with the vesting periods, $Nil was recordedas part of operating expense-stock compensation for the 1,300,000 options above for the three and six months ended June 30, 2016, respectively. TheCompany recorded $91,201 and $185,978 as part of operating expense-stock compensation for the three and six months ended June 30, 2015, respectively.

On April 1, 2012, the Company granted 120,000 options with an exercise price of $1.49 to its Chief Financial Officer (“CFO”) per his employment agreement.These options can be exercised within ten years from the grant date once they become exercisable. The options become exercisable every three monthsstarting from grant date for the one year service period from April 1, 2012. The fair value of the options was calculated using the Black-Scholes options pricingmodel using the following assumptions: volatility of 124.50%, risk free interest rate of 2.23%, and expected term of 10 years. The fair value of the options was$170,967. These options have fully vested by December 31, 2013.

On July 16, 2013, the Company granted 90,000 options with an exercise price of $1.18 to its non-employee directors, which options expire ten years from thegrant date under the Plan. These options became exercisable in accordance with the following schedule: (a) 25% of the options became exercisable on the firstanniversary of the grant date (the “Initial Vesting Date”), and (b) 6.25% of the options became exercisable on the date three months after the Initial Vesting Dateand on such date every third month thereafter, through the fourth anniversary of the grant date. The fair value of the options was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 118.01%, risk free interest rate of 2.55%, and expected term of 6.25 years. The fairvalue of the options was $92,458. In accordance with the vesting periods, $5,779 and $11,558 were recorded as part of operating expense-stock compensationfor the three and six months ended June 30, 2016, respectively. The Company recorded $5,779 and $11,558 as part of operating expense-stock compensationfor the three and six months ended June 30, 2015, respectively.

On February 25, 2015, the Company granted 90,000 options with an exercise price of $1.11 to its non-employee directors, which options expire ten years fromthe grant date under the Plan. These options became exercisable in accordance with the following schedule: (a) 25% of the options became exercisable on thefirst anniversary of the grant date, and (b) 6.25% of the options became exercisable on the date three months after the initial vesting date and on such dateevery third month thereafter, through the fourth anniversary of the grant date. The fair value of the options was calculated using the Black-Scholes optionspricing model under the following assumptions: volatility of 115.20%, risk free interest rate of 1.96%, and expected term of 6.25 years. The aggregate fair valueof the options was $85,822. In accordance with the vesting periods, $5,363 and $10,727 were recorded as part of operating expense-stock compensation for the90,000 options above for the three and six months ended June 30, 2016, respectively. The Company recorded $5,364 and $7,152 as part of operating expense-stock compensation for the three and six months ended June 30, 2015, respectively.

The Company recorded $11,142 and $22,285 stock-based compensation expense for the three and six months ended June 30, 2016, respectively. TheCompany recorded $102,344 and $315,127 stock-based compensation expense for the three and six months ended June 30, 2015, respectively.

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NOTE 12 – OPTIONS - continued The following table summarized the Company’s stock option activity:

Weighted Average

Number of

Options Weighted Average

Exercise Price Remaining Life

in Years Aggregate

Intrinsic Value Outstanding, December 31, 2015 3,220,000 $ 1.90 5.76 $ - Exercisable, December 31, 2015 3,009,375 $ 1.95 5.63 $ -

Granted - $ - - - Forfeited - - - - Exercised - - - - Outstanding, June 30, 2016 3,220,000 $ 1.90 5.26 $ -

Exercisable, June 30, 2016 3,130,000 $ 1.93 5.18 $ -

NOTE 13 – WARRANTS

Following is a summary of the status of warrant activities as of June 30, 2016 and December 31, 2015:

Number of Weighted Average Weighted average warrants Exercise Price Remaining Life in Years Outstanding, December 31, 2015 294,000 $ 3.61 0.04 Granted 300,000 $ 1.35 1.25 Forfeited (294,000) - - Exercised (55,365) - - Outstanding, June 30, 2016 244,635 $ 1.38 1.03

On August 12, 2015, the Company signed a consulting agreement to engage Bespoke Independent Partners (“BIP”), a fully owned subsidiary of FPIA PartnersLLC to operate as a strategic advisor to Kingold in matters relating to investor relations, capital markets and shareholder value creation strategy. As the part ofthe 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 ifcertain stock performance targets are met within a three-year period. As of December 31, 2015, no warrants were issued to BIP because the performance targethas 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’scommon stock for $1.20 per share (the “First Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants will expire onJune 29, 2017. Accordingly, the Company recorded $64,204 consulting expense and included in the general administrative expense. The fair value of thewarrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 81%, risk free interest rate of 0.84%, andexpected 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’scommon stock for $1.50 per share (the “Second Tranche Warrants”) was triggered as a result of certain milestone accomplishments. The warrants will expire onJuly 17, 2017. Accordingly, the Company recorded $65,091 consulting expense and included in the general administrative expense. The fair value of thewarrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility of 79.7%, risk free interest rate of 0.63%, andexpected 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 “SettlementAgreement”). In connection with the Settlement Agreement, the Company and BIP agreed that (1) the First Tranche Warrants and the Second Tranche Warrantswould remain vested and outstanding, (2) the third, fourth and fifth tranches of success fee warrants would be cancelled; and (3) crediting of $66,439 inoutstanding 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 will receive (a) 55,365 shares, (b) warrants to purchase 94,635 shares for $1.2 per share, expiring June 28, 2017, and (c) warrants to purchase150,000 shares for $1.50 per share, which may be exercised from July 18, 2016 until July 17, 2017.

Pursuant to the Settlement Agreement, the Company agreed to pay BIP outstanding fees for previously rendered services in the aggregate amount of $66,439by crediting such fees against the exercise price of the First Tranche Warrants on June 29, 2016, resulting in the issuance to BIP of 55,365 shares of theCompany’s common stock. As a result of the Settlement Agreement, the Company does not have any liability for future warrants issuance to BIP. As of June 30,2016, the remaining 244,635 outstanding warrants may be exercised in the future by BIP upon delivery of cash and an exercise notice to the Company.

A total of 294,000 warrants consisting of 150,000 warrants issued to Wallington Investment Holdings Ltd with exercise price of $3.25 per share on January 13,2011 and 144,000 warrants issued to Rodman & Renshaw, LLC with exercise price of $3.99 per share on January 13, 2011 were expired on January 13, 2016.During the three and six months ended June 30, 2016, the Company included $65,091 and $129,295 warrants cost in the general administrative expenses,respectively.

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NOTE 14 – NONCONTROLLING INTEREST

Non-controlling interest represents the minority stockholders’ 45% proportionate share of the results of the newly established subsidiary Kingold Internet andYuhuang. A reconciliation of non-controlling interest as of June 30, 2016 and December 31, 2015 are as follows:

As of June 30, 2016 As of December 31, 2015 Beginning Balance $ 73,274 $ -

Capital Contribution - 69,319 Proportionate shares of Net loss (1,441) (296)Foreign currency translation gain 1,552 4,251

Ending Balance $ 73,385 $ 73,274

NOTE 15 – 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 orother insurance. The cash and restricted cash balance held in the PRC bank accounts was $83,407,491 and $29,544,475 as of June 30, 2016 and December31, 2015, respectively. The cash balance held in the BVI bank accounts was $25,278 and $13,277 as of June 30, 2016 and December 31, 2015, respectively.As of June 30, 2016 and December 31, 2015, the Company held $51,146 and $144,465 of cash balances within the United States, no balance was in excess ofFDIC insurance limits of $250,000 as of June 30, 2016 and December 31, 2015, respectively. For the periods ended June 30, 2016 and 2015, almost 100% of the Company's assets were located in the PRC and 100% of the Company's revenues werederived 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 periods ended June 30,2016 and 2015. The Company purchased gold directly, and 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 periods ended June 30, 2016 or 2015.

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NOTE 16 – 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 PudongDevelopment Bank (“SPD Bank”), CITIC Bank and Industrial & Commercial Bank of China (“ICBC”) at the end of the respective lease agreements. Under thesegold lease arrangements, each of CCB, SPD Bank, CITIC Bank and ICBC retains beneficial ownership of the gold leased to the Company and treats it as if thegold 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 useand security of the gold leased to the Company. Accordingly, the Company records these gold lease transactions as operating leases because the Companydoes not have ownership nor has it assumed the risk of loss for the leased gold.

1) Gold lease transactions with China Construction Bank’s Wuhan Jiang’an Branch (“CCB”)

During 2015, the Company renewed gold lease agreements with CCB and leased an aggregate of 1,515 kilograms of gold, which amounted to approximately$54.9 million (RMB 365 million). The leases have initial terms of one year and provide an interest rate of 6% per annum. The leased gold shall be returned to theBank upon lease maturity in 2016. During six months ended June 30, 2016, the Company entered into gold lease agreements with CCB and leased an aggregated of 815 kilograms of gold, whichamounted to approximately $28.5 million (RMB 189.4 million). The leases have initial terms of one year and provide an interest rate of 5.7% per annum. Theleased gold shall be returned to the Bank upon lease maturity in 2017. During the six months ended June 30, 2016, the Company returned 880 kilograms ofgold, which amounted to approximately $32.8 million (RMB 218.1 million) back to CCB upon lease maturity. As of June 30, 2016 and December 31, 2015,1,450 kilograms and 1,515 kilograms of leased gold were outstanding and not yet returned to the Bank whichamounted to approximately $50.7 million (RMB 336.6 million) and due in various months through out of 2016 and 2017. As of June 30, 2016 and December 31,2015, the Company pledged restricted cash of approximately $5.3 million and $Nil as collateral to safeguard the gold lease from CCB, respectively.

2) Gold lease transactions with SPD Bank

On April 10, 2015, Wuhan Kingold entered into a gold lease agreement with SPD Bank to lease additional 197 kilograms of gold (valued at approximately RMB46.98 million or approximately $7.1 million). The lease has initial term of one year and provides an interest rate of 3.2% per annum.

In the third quarter of 2015, Wuhan Kingold entered into several gold lease agreements with SPD Bank to lease an aggregate of 720 kilograms of gold, valuedapproximately $25.3 million (RMB 168.2 million). The leases have initial terms of one year and provide an interest rate of 2.8% to 6% per annum. The Companyis required to deposit cash into an account at SPD Bank equal to approximately $17.1 million (RMB 113.4 million). During six months ended June 30, 2016, the Company entered into gold lease agreements with SPD bank and leased an aggregated of 345 kilograms of gold,which amounted to approximately $14.0 million (RMB 93.3 million). The leases have initial terms of six months to one year and provide an interest rate of 6.0%per annum. During six month ended June 30, 2016, the Company returned 507 kilograms of gold, which amounted to approximately $17.8 million (RMB 118.2million) back to SPD bank upon lease maturity. The Company returned additional 95 kilograms of gold back to SPD bank on August 1, 2016. The remainingleased gold shall be returned to the Bank upon lease maturity in December 2016 and June 2017. As of June 30, 2016 and December 31, 2015, about 1,262 kilograms and 917 kilograms of leased gold were outstanding and not yet returned to SPD Bank,respectively, which amounted to approximately $28.6 million (RMB 190.2 million) and $33.1 million (RMB 215.2 million), respectively. Such gold leases will bedue in various months in 2016 and 2017. As of June 30, 2016 and December 31, 2015, the Company pledged restricted cash of approximately $17.1 million and$21.7 million as collateral to safeguard the gold lease from SPD Bank, respectively.

3) Gold lease transaction with CITIC Bank

During 2015, Wuhan Kingold entered into a gold lease agreement with CITIC Bank to lease an additional 850 kilograms of gold (valued at approximately $31million or RMB 201 million). The lease has an initial term of one to six months and provides an interest rate of 6% per annum. The Company is required todeposit cash into an account at CITIC Bank equal to approximately $1.2 million (RMB 8.0 million). During 2015, the Company returned 1,150 kilograms ofleased gold upon maturity, which amounted to approximately $43.3 million (RMB 287.4 million). The remaining amount shall be returned to the Bank upon leasematurity in 2016. The Company is required to deposit cash into an account at the Bank equal to approximately $2.9 million (RMB 19.5 million). As of December 31, 2015, 350 kilograms of leased gold were outstanding and not yet returned to CITIC Bank, which amounted to approximately $12.4 million.During the six months ended June 30, 2016, the Company returned 350 kilograms of gold, which amounted to approximately $12.1 million (RMB 80.4 million)back to CITIC upon lease maturity. As of June 30, 2016, there was no leased gold outstanding and not yet returned to CITIC Bank. As of June 30, 2016 and December 31, 2015, the Companypledged restricted cash of $Nil and $4.4 million as collateral to safeguard the gold lease from CITIC Bank, respectively

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NOTE 16 – GOLD LEASE TRANSACTIONS - continued 4) Gold lease transaction with Industrial and Commercial Bank of China (“ICBC’) During the six months ended June 30, 2016, the Company entered into additional gold lease agreements with ICBC and leased an aggregated of 527 kilogramsof gold, which amounted to approximately $21.0 million (RMB 139.7 million). The leases have initial terms of half year and provide an interest rate of 2.75% perannum. The leased gold shall be returned to the Bank upon lease maturity in September 2016. As of June 30, 2016, 527 kilograms of leased gold wereoutstanding and not yet returned to ICBC. As of June 30, 2016 and December 31, 2015, the Company pledged restricted cash of approximately $21.1 millionand $Nil as collateral to safeguard the gold lease from ICBC, respectively. As of June 30, 2016 and December 31, 2015, aggregated of 2,732 kilograms and 2,782 kilograms of leased gold were outstanding, at the approximatedamounts of $100.3 million and $101.8 million, respectively. Interest expense for the leased gold for the six month period ended June 30, 2016 and 2015 wereapproximately $2.4 million and $3.7 million, respectively, which was included in the cost of sales. Interest expense for the leased gold for the three month periodended June 30, 2016 and 2015 were approximately $1.2 million and $1.9 million, respectively, which was included in the cost of sales. NOTE 17 – COMMITMENTS AND CONTINGENCIES Operating Lease On June 27, 2016, Wuhan Kingold signed certain 5 years lease agreements to rent office and store space at the Jewelry Park commencing in July 2016 andOctober 2016, respectively, with aggregated annual rent of approximately $0.09 million and $0.172 million, respectively. For the three and six months endedJune 30, 2016 and 2015, the Company did not incur rent expense. As of June 30, 2016, the Company was obligated under non-cancellable operating leases forminimum rentals as follows:

For the Twelve Months Ending June 30, 2017 $ 215,673 2018 258,663 2019 258,663 2020 258,663 2021 and thereafter 301,653 Total minimum lease payments $ 1,293,315

NOTE 18 – SUBSEQUENT EVENTS On July 25, 2016, Wuhan Kingold entered into a gold lease agreement with CCB to lease additional 160 kilograms of gold (valued at approximately RMB 45.6million or approximately $6.9 million). The lease has initial term of one year and provides an interest rate of 5.7% per annum. On July 11, 2016, the Company entered into a Trust Loan Agreement with the National Trust Ltd. (“National Trust”) to borrow a maximum of approximately$75.3 million (RMB 500 million) as a working capital loan. The Company is required to make first interest payment equal to 4.1% of the loan principal amountwithin 3 days after the loan proceeds are received. Subsequently, the Company is subject to 8% interest which will be paid on a semiannual basis. The term ofthe loan could be extended for one additional year. The Company is required to pledge 2,660 kilogram of Au9995 gold with carrying value of approximately$91.8 million (RMB 591.6 million) as collateral. The loan is guaranteed by Mr. Zhihong Jia, the CEO and Chairman of the Company, and Wuhan Vogue-Show.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read together with the financial statements and related notes included inthis Report and in our Annual Report on Form 10-K for the year ended December 31, 2015. This discussion contains forward-looking statements that involverisks and uncertainties. See also the “Cautionary Statement for Purposes of the “Safe Harbor” Statement under the Private Securities Litigation Reform Act of1995” appearing elsewhere in this Report. Our actual results may differ materially from those anticipated in those forward-looking statements as a result ofcertain factors, including, but not limited to, those contained in the “Risk Factors” section of this Report and in our Annual Report on Form 10-K for the yearended December 31, 2015. Our Business Through a variable interest entity, or VIE, relationship with Wuhan Kingold Jewelry Company Limited (“Wuhan Kingold”), a company incorporated in the People’sRepublic of China, or PRC, we believe that we are one of the leading professional designers and manufacturers of high quality 24 Karat gold jewelry and PRCornaments developing, promoting, and selling a broad range of products to the rapidly expanding jewelry market across the PRC. We offer a wide range of in-house designed products including, but not limited to, gold necklaces, rings, earrings, bracelets, and pendants.

We have historically sold our products directly to distributors, retailers and other wholesalers, who then sell our products to consumers through retail counterslocated in both department stores and other traditional stand-alone jewelry stores. We sell our products to our customers at a price that reflects the market priceof the base material, plus a mark-up reflecting our design fees and processing fees. This mark-up typically ranges from 3% – 6% of the price of the base material.During 2015, we established a new subsidiary Wuhan Kingold Internet Co., Ltd. and started the online sales of our jewelry products to customers. However, theonline sales were immaterial as of June 30, 2016.

We aim to become an increasingly important participant in the PRC’s gold jewelry design and manufacturing sector. In addition to expanding our design andmanufacturing capabilities, our goal is to provide a large variety of gold products in unique styles and superior quality under our brand, Kingold.

To broaden our business lines and strengthen our processing capacity, in October 2013, we entered into an agreement (“the Acquisition Agreement”) to acquirethe operating rights for 66,667 square meters (approximately 717,598 square feet, or 16.5 acres) of land in Wuhan for an aggregate purchase price of RMB 1billion (approximately US $154 million at the spot rate). The $154 million include the land use right costs and the construction costs of the Jewelry Park. Wefinanced the installment payments paid to date through bank loans. The land use rights are held in the Shanghai Creative Industry Park, which we intended torename as the Kingold Jewelry Cultural Industry Park (the “Jewelry Park”). The acquisition was structured as an equity purchase of the company holding theland use rights, with Wuhan Wansheng House Purchasing Limited (“Wuhan Wansheng”) (i) initially granting us a portion of ownership of Wuhan HuayuanScience and Technology Development Limited Company (“Wuhan Huayuan”), (ii) granting us the right to appoint the chief financial officer for the project tosupervise and manage the use of funds, and (iii) naming Wuhan Wansheng as agent for the completion of the construction. Accordingly, we owned 60% of theJewelry Park as of June 30, 2016. However, because no other assets or liabilities have been transferred with the acquisition of Wuhan Huayuan, we are treatingthe Jewelry Park acquisition as an asset purchase for accounting purposes.

We originally intend to develop the land and to utilize the completed Jewelry Park as our new operation center and show center, lease spaces within the JewelryPark to other jewelry manufacturers and retailers in China, and sell developed commercial and residential properties to individual and corporate buyers. To moveaway from the real estate industry and to solely focus on its jewelry business, on June 27, 2016, we entered into a transfer contract with Wuhan LianfudaInvestment Management Co., Ltd. (“Wuhan Lianfuda”), an unrelated party, to sell all of its interest in the Jewelry Park to Wuhan Lianfuda (“TransferTransaction”). Pursuant to the transfer contract, Wuhan Lianfuda is obligated to pay Wuhan Kingold RMB 1.14 billion (approximately US $171.6 million). Thisamount includes (1) RMB 640 million (approximately US $96.3 million) for the share acquisition fees and the construction fees that Wuhan Kingold has paid toWuhan Wansheng; and (2) transfer fees of RMB 500 million (approximately US $75.3 million). In addition, Wuhan Kingold transfers and Wuhan Lianfudareceives, all the rights and obligations in the Acquisition Agreement, including 60% stock rights of Wuhan Huayuan. Wuhan Lianfuda will undertake WuhanKingold’s remaining payment obligation of RMB 360 million (approximately US $54.2 million) stipulated in the Acquisition Agreement. According to an evaluationreport issued by an independent evaluation agency, the evaluated value of the Jewelry Park on June 26, 2016 was approximately RMB 1.48 billion(approximately US $222.8 million). The Transfer Transaction has not been consummated as of June 30, 2016, because the inspection report and related filingshave not yet been completed, and the ownership title has not been transferred to Wuhan Lianfuda as of June 30, 2016. The Company is unable to predict theactual timing of the completion of the Jewelry Park transfer because of the uncertainties in spent on the inspection and related government filings.

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Results of Operations The following table sets forth our statements of operations (unaudited) for the three and six months ended June 30, 2016 and 2015 in U.S. dollars:

KINGOLD JEWELRY, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN US DOLLARS)(UNAUDITED)

For the three months ended June 30, For the six months ended June 30, 2016 2015 2016 2015 NET SALES $ 390,260,645 $ 249,421,052 $ 672,448,702 $ 455,616,272 COST OF SALES










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Three Month Period Ended June 30, 2016 Compared to the Three Month Period Ended June 30, 2015 Net Sales

Net sales for the three months ended June 30, 2016 amounted to $390.3 million, an increase of $140.8 million, or 56.5%, from net sales of $249.4 million for thethree months ended June 30, 2015. For the the three months ended June 30, 2016, our branded production sales accounted for 98.3% of the total sales andcustomized production sales accounted for 1.6% of the total sales. When comparing with three months ended June 30, 2015, our branded production salesincreased by $142.3 million or 58.9%, our customized production sales decreased by $1.3 million or 16.7%. The overall increase in our revenue in three months ended June 30, 2016 as compared to three months ended June 30, 2015 was due to the following factors:(1) total sales volume (in terms of quantity sold) increased from 14.5 metric tons in three months ended June 30, 2015 to 20.3 metric tons in three monthsended June 30, 2016, causing 5.8 metric tons or 40.1% increase. As a result, approximately $131.8 million increase in our revenue was attributable to theincrease in our sales volume. (2) The average unit selling price for our brand production sales increased from RMB 212.5 per gram in three months ended June30, 2015 to RMB 238.4 per gram in three months ended June 30, 2016, causing 12.2% increase. As a result, approximately $29.5 million increase in brandproduction revenue was affected by the increase in our selling price, partially offset against the decrease in customized production revenue to certain extent. (3)foreign currency adjustment effect was approximately a $16.3 million foreign currency translation loss converting RMB into USD when the average exchangerate of USD: RMB increased from 1 USD=6.1097 RMB in three months ended June 30, 2015 to 1 USD=6.5376 RMB in three months ended June 30, 2016. In the second quarter of 2016, we processed a total of 20.3 metric tons of gold, of which branded production accounted for 10.5 metric tons (51.7%) andcustomized production accounted for 9.8 metric tons (48.3%). In the second quarter of 2015, we processed a total of 14.5 metric tons of gold, of which brandedproduction accounted for 6.9 metric tons (47.8%) and customized production accounted for 7.6 metric tons (52.2%). Cost of Sales Cost of sales for the three months ended June 30, 2016 amounted to $344.2 million, an increase of $97.2 million, or 39.3%, from $247.0 million for the sameperiod in 2015. The increase was primarily due to higher volume of products sold. The sale quantity increased 40.1% to approximately 20.3 metric tons in threemonths ended June 30, 2016 from 14.5 metric tons in three months ended June 30, 2015.

Gross Profit and Margin

Gross profit for the three months ended June 30, 2016 was $46.1 million, an increase of $43.7 million from $2.4 million for the same period in 2015.Accordingly, gross margin for the three months ended June 30, 2016 was 11.8%, compared to 1.0% for the same period in 2015. The primary reason for thesubstantial increase in gross margin was that since the unit price of branded production sales was RMB 238.4 per gram for the three months ended June 30,2016, while the unit price of branded production sales was RMB 212.5 per gram for the three months ended June 30, 2015, the unit price increased by 12.2%.On the other hand, the unit cost of branded production was RMB 213.45 per gram for the three months ended June 30, 2016, consistent with the unit cost ofRMB 216.78 per gram for the three months ended June 30, 2015. As a result, the unit margin of branded production was RMB 25.0 per gram for the threemonths ended June 30, 2016 compared to the unit loss of RMB 4.3 per gram for the three months ended June 30, 2015.

Expenses

Total operating expenses for the three months ended June 30, 2016 were $6.5 million compared with $2.3 million for the same period in 2015. The increase wasmainly due to increased Selling, General and Administrative expenses for broader marketing efforts, such as increased employee salary and annual bonusexpense during the Chinese Spring Festival, increased legal, accounting for special projects, and additional stock-based compensation expenses to settle ourconsulting agreement with a consultant.

Interest expenses for the three months ended June 30, 2016 were $13.6 million compared with $0.08 million for the same period in 2015. The increase ofinterest expenses was mainly due to the significant loan borrowings for the three months ended June 30, 2016.

The provision for income tax expense was approximately $6.8 million for three months ended June 30, 2016, an increase of $7.3 million from income taxrecovery of approximately $0.4 million for the same period in 2015. The increase was primarily due to the increase in our taxable income, arising from increasedsales and higher gross margin.

Net Income Attributable to Common Stockholders

For the forgoing reasons, net income was $19.8 million for the three months ended June 30, 2016 compared to $0.6 million for the same period in 2015, anincrease of $19.2 million.

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Six Month Period Ended June 30, 2016 Compared to the Six Month Period Ended June 30, 2015 Net Sales

Net sales for the six months ended June 30, 2016 amounted to $672.4 million, an increase of $216.8 million, or 47.6%, from net sales of $455.6 million for thesix months ended June 30, 2015. For the six months ended June 30, 2016, our branded production sales accounted for 98.4% of the total sales and customizedproduction sales accounted for 1.6% of the total sales. When comparing with six months ended June 30, 2015, our branded production sales increased by$221.7 million or 50.4%, and our customized production sales decreased by $4.7 million or 30.4%.

The overall increase in our revenue in six months ended June 30, 2016 as compared to six months ended June 30, 2015 was due to the following combinedfactors: (1) total sales volume (in terms of quantity sold) increased from 26.8 metric tons in six months ended June 30, 2015 to 35.2 metric tons in six monthsended June 30, 2016, causing 8.4 metric tons or 31.3% increase. As a result, approximately $221.6 million increase in our revenue was attributable to theincrease in our sales volume. (2) The average unit selling price for our brand production sales increased from RMB 216.1 per gram in six months ended June30, 2015 to RMB 231.3 per gram in six months ended June 30, 2016, causing 7.1% increase. As a result, approximately $31.1 million increase in brandproduction revenue was affected by the increase in our selling price, partially offset against the decrease in customized production revenue to certain extent. (3)foreign currency adjustment effect was approximately a $28.8 million foreign currency translation loss converting RMB into USD when the average exchangerate of USD: RMB increased from 1 USD=6.1254 RMB in six months ended June 30, 2015 to 1 USD=6.5388 RMB in six months ended June 30, 2016.

In the first half of 2016, we processed a total of 35.2 metric tons of gold, of which branded production accounted for 18.7 metric tons (53.2%) and customizedproduction accounted for 16.5 metric tons (46.8%). In the first half of 2015, we processed a total of 26.8 metric tons of gold, of which branded productionaccounted for 12.5 metric tons (46.6%) and customized production accounted for 14.3 metric tons (53.4%).

Cost of Sales

Cost of sales for the six months ended June 30, 2016 amounted to $597.9 million, an increase of $155.4 million, or 35.1%, from $442.4 million for the sameperiod in 2015. The increase was primarily due to higher volume of products sold. The sale quantity increased 31.3% to approximately 35.2 metric tons in sixmonths ended June 30, 2016 from 26.8 metric tons in six months ended June 30, 2015.

Gross Profit and Margin

Gross profit for the six months ended June 30, 2016 was $74.6 million, an increase of $61.4 million from $13.2 million for the same period in 2015. Accordingly,gross margin for the three months ended June 30, 2016 was 11.1%, compared to 2.9% for the same period in 2015. The primary reason for the substantialincrease in gross margin was that because the unit price of branded production sales was RMB 231.3 per gram for the six months ended June 30, 2016, whilethe unit price of branded production sales was RMB 216.1 per gram for the six months ended June 30, 2015, the unit price increased by 7.1%. On the otherhand, the unit cost of branded production was RMB 208.7 per gram for the three months ended June 30, 2016, while the unit cost of brand production was RMB216.7 per gram for the six months ended June 30, 2015. As a result, the unit margin of branded production was RMB 22.7 per gram for the six months endedJune 30, 2016 compared to a loss of RMB 0.7 per gram for the six months ended June 30, 2015.

Expenses

Total operating expenses for the six months ended June 30, 2016 were $9.8 million compared with $4.3 million for the same period in 2015. The increase wasmainly due to increased Selling, General and Administrative expenses for broader marketing efforts, such as increased employee salary and annual bonusexpense during the Chinese Spring Festival, increased legal, accounting for special projects, and additional stock-based compensation expenses to settle ourconsulting agreement with a consultant.

Interest expenses for the six months ended June 30, 2016 were $18.6 million compared with $0.4 million for the same period in 2015. The increase of interestexpenses was mainly due to the significant loan borrowings of $611.6 million for the six months ended June 30, 2016. The provision for income tax expense was approximately $11.9 million for six months ended June 30, 2016, an increase of $10.4 million from income taxprovision of approximately $1.6 million for the same period in 2015. The increase was primarily due to the increase in our taxable income, arising from increasedsales and higher gross margin. Net Income Attributable to Common Stockholders For the forgoing reasons, net income was $35.0 million for the six months ended June 30, 2016 compared to $7.2 million for the same period in 2015, anincrease of $27.8 million.

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Cash Flows Net cash used in operating activities. Net cash used in operating activities was $466.3 million for the six months ended June 30, 2016, compared with net cash used in operating activities of $23.6million for the same period in 2015. The significant increase in net cash used in operating activities was mainly due to our spending on purchase of inventory of$502.9 million in anticipation of the increased production and sales demand when the Jewelry Park is completed which may stimulate our sales starting from thesecond half of 2016. In addition, in connection with our significant bank borrowings during the quarter ended June 30, 2016, we are required to pledgeapproximately 22 metric tons of gold with the banks as collateral, which also led us to increase the inventory purchases and stockpile. On the other hand, inconnection with the Jewelry Park Transfer Transaction, we received $90.1 million cash payment from Wuhan Lianfuda for the Jewelry Park transfer and at thesame time we transferred back approximately $22.1 million customer deposit to the Jewelry Park property buyers, which led to a net change of deposit payableof $70.2 million. Such amount will be adjusted when we deliver the Jewelry Park to Wuhan Lianfuda in the near future. The overall increase in cash used inoperating activities for the six months ended June 30, 2016 is reflected in the above mentioned factors.

Analysis and Expectations: Our net cash from operating activities can fluctuate significantly due to changes in our inventories. Factors that may vary significantlyinclude our purchases of gold and value added tax. Looking forward, we expect the net cash that we generate from operating activities to continue to fluctuate asour inventories, receivables, accounts payables and other factors described above change with increased production and the purchase of larger quantities of rawmaterials. These fluctuations could cause net cash from operating activities to fall, even if, as we expect, our net income grows as we expand. Although weexpect net cash from operating activities will rise over the long term, we cannot predict how these fluctuations will affect our cash flow in any particular quarter.

Net cash (used in) investing activities.

Net cash used in investing activities was $19.8 million for the six months ended June 30, 2016, compared with net cash used in investing activities of $24.3million for the six months ended June 30, 2015. The decrease in the net cash used in the investing activities was mainly because there was $4.7 million lesscash paid to finance the construction of the Jewelry Park during the current period.

Analysis and Expectations: Since we have committed to sell the Jewelry Park to Wuhan Fulianda, we do not expect a significant fluctuation in our investingactivities in the near future.

Net cash provided by financing activities.

Net cash provided by financing activities was $521.2 million for the six months ended June 30, 2016, compared with net cash provided by financing activities of$48.2 million for the six months ended June 30, 2015. The increase in net cash provided by the financing activities was mainly due to the fact that the Companyborrowed additional $611.6 million bank loans during the six months ended June 30, 2016 and repaid $9.2 million bank loans and $61.2 million debts payableupon maturity. Analysis and Expectations: We expect that cash generated from financing activities may increase significantly as a result of additional financing being obtainedto meet the needs of expanded production. Off-Balance Sheet Arrangements We originally guaranteed payment to a non-related third-party of approximately $10.2 million (RMB 68 million) in bank loans. The guarantee terminated in May2015. As of June 30, 2016 and December 31, 2015, an aggregate of 2,732 kilograms and 2,782 kilograms of leased gold were outstanding, worth approximately$100.3 million and $101.8 million, respectively. Interest expense for the leased gold for the six month period ended June 30, 2016 and 2015 was approximately$2.4 million and $3.7 million, respectively, which was included in the cost of sales. Interest expense for the leased gold for the three month period ended June30, 2016 and 2015 were approximately $1.2 million and $1.9 million, respectively, which was included in the cost of sales. Liquidity and Capital Resources As of June 30, 2016, we had approximately $37.5 million in cash and cash equivalents. We have financed our operations with cash flow generated fromoperations and through borrowing of bank loans as well as through private and public borrowing and offerings in the U.S. and Chinese capital markets, such asour recent placement under our commercial paper program with Shanghai Pudong Development Bank (“SPD Bank”). At June 30, 2016, we had total outstanding loans of $677.2 million (including $165.9 million short-term loans and $511.3 million long term loans). The amountsoutstanding under these bank loans are presented in our financial statements as “loans.” For additional information regarding our loans, please see Note 6 to ourunaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

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We have maintained a close relationship with the banks from where we leased gold. Therefore we expect that we are able to renew current gold leases uponmaturity and obtain additional gold leases from the banks, if necessary. We are expecting to generate additional cash flows in the coming period of time fromdeveloping new customers, expanding our sales through our online sales platform and an increase in our revenue during the upcoming sales season.

As of June 30, 2016, the Company had positive working capital of $637.2 million. We believe that our current cash and cash flow from operations will besufficient to meet our anticipated cash needs, including our cash needs for working capital for the next 12 months. We may, however, require additional cashresources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. Our ability tomaintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. We continue to seekfavorable additional financing to meet our capital requirements to fund our operations and growth plans in the ordinary course of business. The ability of Wuhan Vogue-Show to pay dividends may be restricted due to the PRC’s foreign exchange control policies and our availability of cash. A majorityof our revenue being earned and currency received is denominated in RMB. We may be unable to distribute any dividends outside of China due to PRCexchange control regulations that restrict our ability to convert RMB into U.S. Dollars. Accordingly, Vogue-Show’s funds may not be readily available to us tosatisfy obligations incurred outside the PRC, which could adversely affect our business and prospects or our ability to meet our cash obligations. On June 27, 2016, Wuhan Kingold signed certain 5 years lease agreements to rent office and store space at the Jewelry Park commencing in July 2016 andOctober 2016, respectively, with aggregated annual rent of approximately $0.09 million and $0.172 million, respectively. For the three and six months endedJune 30, 2016 and 2015, the Company did not incur rent expense. As of June 30, 2016, the Company was obligated under non-cancellable operating leases forminimum rentals as follows:

For the Twelve Months Ending June 30, 2017 $ 215,673 2018 258,663 2019 258,663 2020 258,663 2021 and thereafter 301,653 Total minimum lease payments $ 1,293,315

Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions thataffect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures in the financial statements. Critical accounting policies arethose accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or thesusceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates andjudgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from theseestimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our financial statementsrequire significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our unaudited condensedconsolidated financial statements included elsewhere in this Quarterly Report. Inventories Inventory is stated at the lower of cost or market value. Cost is determined using the weighted average method. We continually evaluate the composition of ourinventory, turnover of our products, the price of gold, and the ability of our customers to pay for their products. We write down slow-moving and obsolete inventorybased on an assessment of these factors, but principally customer demand. Such assessments require the exercise of significant judgment by management.Additionally, the value of our inventory may be affected by commodity prices. Decreases in the market value of gold would result in a lower stated value of ourinventory, which may require us to take a charge for the decrease in the value. In addition, if the price of gold changes substantially in a very short period, itmight trigger customer defaults, which could result in inventory obsolescence. If any of these factors were to become less favorable than those projected,inventory write-downs could be required, which would have a negative effect on our earnings and working capital. Revenue Recognition Net sales are primarily composed of sales of branded products to wholesale and retail customers, as well as fees generated from customized production. Incustomized production, a customer supplies the Company with the raw materials and the Company creates products per that customer’s instructions, whereasin branded production the Company generally purchases gold directly and manufactures and markets the products on its own. The Company recognizesrevenues under ASC 605 as follows:

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Sales of branded products The Company recognizes revenue on sales of branded products when the goods are delivered and title to the goods passes to the customer provided that: (i)there are no uncertainties regarding customer acceptance; (ii) persuasive evidence of an arrangement exists; (iii) the sales price is fixed and determinable; and(iv) collectability is reasonably assured. Customized production fees The Company recognizes services-based revenue (the processing fee) from such contracts for customized production when: (i) the contracted services havebeen performed and (ii) collectability is reasonably assured. Internet sales The Company also engages in promoting the online sales of jewelry products through cooperation with Tmall.com, a large business-to-consumer online retailplatform owned by Alibaba Group. Consistent with the criteria of ASC 605, Revenue Recognition, the Company recognizes revenues when the following fourrevenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the selling price is fixed or determinable,and (iv) collectability is reasonably assured. In accordance with ASC 605, Revenue Recognition, the Company evaluates whether it is appropriate to record the gross amount of product sales and relatedcosts or the net amount earned as commissions. When the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude inestablishing prices and selecting suppliers, or has several but not all of these indicators, revenues should be recorded on a gross basis. When the Company isnot the primary obligor, doesn’t bear the inventory risk and doesn’t have the ability to establish the price, revenues are recorded on a net basis. Long-Lived Assets Certain assets such as property, plant and equipment and construction in progress, are reviewed for impairment whenever events or changes in circumstancesindicate 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 ofan asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated futurecash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk Foreign Currency Exchange Rate Risk Given that all of our revenues are generated in RMB, yet our results are reported in U.S. dollars, devaluation of the RMB could negatively impact our results ofoperations. The value of RMB is subject to changes in the PRC’s governmental policies and to international economic and political developments. In January1994, the PRC government implemented a unitary managed floating rate system. Under this system, the People’s Bank of China, or PBOC, began publishing adaily base exchange rate with reference primarily to the supply and demand of RMB against the U.S. dollar and other foreign currencies in the market during theprevious day. Authorized banks and financial institutions are allowed to quote buy and sell rates for RMB within a specified band around the central bank’s dailyexchange rate. On July 21, 2005, the PBOC announced an adjustment of the exchange rate of the U.S. dollar to RMB from 1:8.27 to 1:8.11 and modified thesystem by which the exchange rates are determined. Over the past years, RMB has appreciated 8.9% against the U.S. dollar (from USD 1 = RMB 7.2946 onJanuary 1, 2008 to USD 1 = RMB 6.6434 on June 30, 2016). While the international reaction to the RMB revaluation has generally been positive, there remainssignificant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further fluctuations of theexchange rate of RMB against the U.S. dollar, including possible devaluations. As all of our net revenues are recorded in RMB, any future devaluation of RMBagainst the U.S. dollar could negatively impact our results of operations. Along these lines, the income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To theextent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue,operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation ofthese foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are alsoexposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is achange in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or losswhich is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies otherthan the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to atransaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future.The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

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Interest Rate Risk Our bank borrowings as of June 30, 2016, were approximately $677.2 million, and interest expense paid was $19.1 million for the six months ended June 30,2016. At the end of June 30, 2016, our weighted average interest rate was 9.0%. We do not expect the interest expense will change dramatically as we have securedthe gold lease for a period of 12 months. We currently have no interest rate hedging positions in place to reduce our exposure to interest rates. Commodity Price Risk Most of our sales are of products that include gold, precious metals and other commodities, and fluctuations in the availability and pricing of commodities wouldadversely impact our ability to obtain and make products at favorable prices. The jewelry industry generally is affected by fluctuations in the price and supply ofdiamonds, gold, and, to a lesser extent, other precious and semi-precious metals and stones. In the past, we have not hedged our requirement for gold or otherraw materials through the use of options, forward contracts or outright commodity purchasing, although we may do so in the future. A significant increase in theprice of gold could increase our production costs beyond the amount that we are able to pass on to our customers, which would adversely affect our sales andprofitability. A significant disruption in our supply of gold or other commodities could decrease our production and shipping levels, materially increase ouroperating costs, and materially and adversely affect our profit margins. Shortages of gold, or other commodities, or interruptions in transportation systems, laborstrikes, work stoppages, war, acts of terrorism, or other interruptions to or difficulties in the employment of labor or transportation in the markets in which wepurchase our raw materials, may adversely affect our ability to maintain production of our products and sustain profitability. If we were to experience a significantor prolonged shortage of gold, we would be unable to meet our production schedules and to ship products to our customers in a timely manner, which wouldadversely affect our sales, margins and customer relations.

A dramatic increase in the price of gold could increase our production costs beyond the amount that we may be able to pass on to our customers, which couldadversely affect our gross profit margin and profitability. Furthermore, the carrying value of our inventory may be affected. Significant decreases in the marketprice of gold following the end of a reporting period could impact the carrying amount of the inventory at the balance sheet date and/or the following reportingperiod’s gross profit margin and profitability.

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Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reportsfiled or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified inthe Securities and Exchange Commission rules and forms, and that the information is accumulated and communicated to our management, including our ChiefExecutive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on our review, our management,including our Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were not effective at thereasonable assurance level as of the end of the period covered by this Quarterly Report due to the continued existence of material weaknesses in our internalcontrol over financial reporting. In connection with the preparation of this Quarterly Report, management determined that, as of June 30, 2016, we did not maintain effective internal control overfinancial reporting due to the existence of the following material weaknesses:

· Lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries;

· Cashier does not deposit cash collected into the Company’s bank accounts on a timely manner;

· Material audit adjustments were proposed by the auditors and recorded by the Company for the fiscal year 2015; · Lack of appropriate approval procedures for certain material transactions, including guarantees of third-party obligations;

· Lack of resources with technical competency to review and record non-routine or complex transactions;

· Lack of a full-time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions;

· Lack of adequate policies and procedures in internal audit function, which could result in: (1) lack of communication between internal audit department

and the Audit Committee and the Board of Directors; (2) Insufficient internal audit work to ensure that the Company’s policies and procedures have beencarried out as planned; and

· Lack of adequate policies and procedures in internal control to include material transaction incurred subsequent to the period end for financial statementsdisclosure purpose.

In order to remedy the material weakness of inadequate controls over cash management, our Board adopted resolutions requiring management to seek Boardapproval prior to entering into any transactions including gold leases and loans with a value in excess of $250,000. Further, we intend to explore implementingadditional policies and procedures, which may include:

· Reporting other material and non-routine transactions to the Board and obtain proper approval,

· Recruiting qualified professionals with appropriate levels of knowledge and experience to assist in resolving accounting issues in non-routine or complex

transactions. To mitigate the reporting risks, Kingold has now contracted with a third-party qualified consultant on GAAP reporting to improve the abilityto prepare GAAP statements. The new consultant will also assist the Company to analyze non-routine, complex transactions in accordance with GAAP;

· Improving the communication between management, board of directors and chief financial officer; and

· Improving the internal audit function, internal control policies and monitoring controls. Changes in Internal Controls

There have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting during our six months ended June 30, 2016. Because of its inherent limitations, a system of internal control over financialreporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness ofinternal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies asthey are identified.

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PART II – OTHER INFORMATION Item 1. Legal Proceedings From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently a party to any litigation theoutcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on ourbusiness, operating results, cash flows or financial condition. Our business may also be adversely affected by risks and uncertainties not presently known to usor that we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur, our business, prospects,financial condition and results of operations may suffer. Item 1A. Risk Factors

As a smaller reporting company, we are not required to provide the information otherwise required by this Item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None. Item 3. Defaults Upon Senior Securities.

None. Item 4. Mine Safety Disclosures

Not applicable. Item 5. Other Information.

None.

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Item 6. Exhibits No. Description3.1

Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to our Registration Statement filed on Form SB-2 with theCommission on August 13, 1999).

3.2 Amendment to Certificate of Incorporation of Registrant, dated September 29, 1995 (incorporated by reference to Exhibit 3.2 to our RegistrationStatement filed on Form SB-2 with the Commission on August 13, 1999).

3.3 Amendment to Certificate of Incorporation of Registrant, dated October 12, 1995 (incorporated by reference to Exhibit 3.3 to our RegistrationStatement filed on Form SB-2 with the Commission on August 13, 1999).

3.4 Amendment to Certificate of Incorporation of Registrant, dated January 21, 1999 (incorporated by reference to Exhibit 3.4 to our RegistrationStatement filed on Form SB-2 with the Commission on August 13, 1999).

3.5 Amendment to Certificate of Incorporation of Registrant, dated April 7, 2000 (incorporated by reference to Exhibit 3.5 to our Registration Statementfiled on Form SB-2/A with the Commission on April 12, 2000).

3.6 Amendment to Certificate of Incorporation of Registrant, dated December 18, 2009 (incorporated by reference to Exhibit 3.6 to our RegistrationStatement filed on Form S-1 with the Commission on October 1, 2010).

3.7 Amendment to Certificate of Incorporation of Registrant, dated June 8, 2010 (incorporated by reference to Exhibit 3.7 to our Registration Statementfiled on Form S-1 with the Commission on October 1, 2010).

3.8 Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.1 to our Current Report filed on Form 8-K with the Commission onSeptember 30, 2010).

4.1 Form of Common Stock Certificate of Registrant (incorporated by reference to Exhibit 4.1 to our Registration Statement filed on Form SB-2 with theCommission on August 13, 1999).

10.1 Trust Loan Agreement (English translation), dated April 26, 2016, between Wuhan Kingold Jewelry Company Limited and The National Trust Ltd.(incorporated by reference to Exhibit 10.1 to our Current Report filed on Form 8-K with the Commission on May 19, 2016)

10.2 Amendment to Trust Loan Agreement (English translation), dated April 26, 2016, between Wuhan Kingold Jewelry Company Limited and The NationalTrust Ltd. (incorporated by reference to Exhibit 10.2 to our Current Report filed on Form 8-K with the Commission on May 19, 2016)

10.3 Gold Income Right Transfer and Repurchase Agreement of AJ Trust & Wuhan Kingold Jewelry Gold Income Right Collective Fund Trust Plan(English translation), dated April 28, 2016, between Wuhan Kingold Jewelry Company Limited and Shanghai AJ Trust Co., Ltd. (incorporated byreference to Exhibit 10.1 to our Current Report filed on Form 8-K with the Commission on July 26, 2016)

10.4 Trust Loan Contract (English translation), dated June 6, 2016, between Wuhan Kingold Jewelry Company Limited and China Minsheng Trust Co., Ltd.(incorporated by reference to Exhibit 10.1 to our Current Report filed on Form 8-K with the Commission on August 4, 2016)

10.5 Contract to Transfer The Contractual Rights and Obligations (English translation), dated June 27, 2016, between Wuhan Kingold Jewelry CompanyLimited and Wuhan Lianfuda Investment Management Co., Ltd. (incorporated by reference to Exhibit 10.1 to our Current Report filed on Form 8-K withthe Commission on July 29, 2016)

10.6 Office Lease (English translation), dated June 27, 2016, between Wuhan Kingold Jewelry Company Limited and Wuhan Huayuan Science andTechnology Development Limited Company (incorporated by reference to Exhibit 10.2 to our Current Report filed on Form 8-K with the Commissionon July 29, 2016)

10.7 Store Lease (English translation), dated June 27, 2016, between Wuhan Kingold Jewelry Company Limited and Wuhan Huayuan Science andTechnology Development Limited Company (incorporated by reference to Exhibit 10.3 to our Current Report filed on Form 8-K with the Commissionon July 29, 2016)

10.8 Trust Loan Agreement (English translation), dated July 11, 2016, between Wuhan Kingold Jewelry Company Limited and The National Trust Ltd.*31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of

2002*31.2 Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of

2002*32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*99.1 Press release dated August 12, 2016, titled “Kingold Jewelry Reports Financial Results for the Second Quarter Ended June 30, 2016.” * 101.INS XBRL Instance Document*101.SCH XBRL Taxonomy Extension Schema Document*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*101.DEF XBRL Taxonomy Extension Definition Linkbase Document*101.LAB XBRL Taxonomy Extension Label Linkbase Document*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* * Filed Herewith

38


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersignedthereunto duly authorized. Date: August 12, 2016 KINGOLD JEWELRY, INC. By: /s/ Zhihong Jia Zhihong Jia Chairman, Chief Executive Officer and Principal Executive Officer By: /s/ Bin Liu Bin Liu Chief Financial Officer and Principal Accounting Officer

39


Exhibit 10.8

Fenghui No. 1 Single Trust Fund

Trust Loan Agreement

NO: �NT 16-020-021-002�

The National Trust Ltd.

�7�Month� 2016 �YearTrust Loan Agreement


Trust Loan Agreement

Lender (Party A): The National Trust Ltd.

Address: No.1 building, No.18 courtyard on Binhe Road, Western Anwai, Dongcheng District, Beijing

Zip code: 100011

Legal representative: Xiaoyang Yang

Fax: 010-84268000

Tel: 010-84268088

Borrower (Party B): Wuhan Kingold Jewelry Co., Ltd.

Address: Te No. 15, Huangpu Science and Technology Park, Jiang an District, Wuhan City

Zip code: 430023

Legal representative: Zhihong Jia

Fax: 027-65694977

Tel: 027-65694977

In view of:

I. Party A, in accordance with the written agreement of the Fenghui No.3 Single Fund Trust (hereinafter referred to as “this Trust” or “this Trust Plan”) and thetrustor’s intention, will deliver the RMB trusted funds (hereinafter referred to as “Trust Loan” or “Loan”) to Party B in the name of Lender.

II. The terms in the provisions of this agreement not defined specifically will follow the definitions and connotations in the Trust Agreement (No. NT Trust. 16-020-021-001) and the Trust Loan Agreement.

III. According to the relevant laws and regulations, two Parties implement this Amendment to the Trust Loan Agreement to abide to and enforce the provisions.

Article 1 The contents of the Loan

1.1 Amount of Loan

The contract under the Loan amount is not more than RMB [500,000,000.00], Capital: RMB [Five hundred million] yuan as a whole. Agreed by the two parties,the source of the Loan under this Agreement is the Trust Fund under the Trust managed by the Lender.

1.2 Terms of Loan

(1) The term of the Loan under this Agreement is the following ①:

j The term of the Loan is [12] months, from July 15, 2016 to July 14, 2017. The Loan period starts from the date of payment. Unless in accordance with thisAgreement, Party B shall not make the repayment in advance;


k The Loan period is [/] months, the surrender period of Loans to the date of payment of the first phase of the Loan which reaches to [/] month is thecorresponding days; the corresponding date of the day when the first phase of the Loan has been paid for [/] months is the maturity date of the Loan for eachinstallment;

l Loan period for the surrender of the Loan period is corresponding with the date of final issue of the Loan which is full [/] months, and the last issue of the Loanis full [/] months with the corresponding date for the Loan maturity date;

m The funds to be delivered by installments in each load term of [/] months, the corresponding day after [/] months upon the date the release begins should bethe expiration date for each installment;

(2) In general the principle of the Loan shall not be extended under this Agreement. If the Lender and the Borrower through consultation agree to extend theLoan and agree on the extension terms, they should sign an amendment. The extension is up to one year.

(3) When the Loan is issued, Party B shall fill in Loan IOU, the specific amount of the Loan, issuance date and the date of repayment should be subject to thecontent of the Loan IOU.

1.3 Interest rate of Loan

The calculation of interest under this Agreement shall be subject to the provisions of Article 3 of this Agreement.

1.4 Purpose of Loan

1.4.1 The purpose of the Loan under this Agreement is the following (2):

(1) all Trust Loans under this Agreement are used in the construction of the project [ ];

(2) to provide working capital Loan to Party B.

1.4.2 Without the written consent of the Lender, the Borrower shall not arbitrarily change the use of the Loan, including but not limited to, Party B shall be usethe Loan fund under this Agreement for fixed assets, equity investment and industries restricted by national policies, and shall not use it for the investments inshares, futures investment, financial derivatives, and shall not use it for the production and operation prohibited by the nation.

Article 2 Release of Loan

2.1 Unless Party A agrees to give up all or part of the conditions under this Article in written form, when and only when the following terms continue to meet andthe trustor issued Loan Notice, Party A is obligated to issue Loan to Party B:

2.1.1 Party B has obtained the internal authority’s valid agreement of this Loan in accordance with relevant laws and corporate regulations;

2.1.2 The Agreement has been signed and entered into force without any violation of the Agreement by Party B;

2.1.3 This Trust takes effect;

2.1.4 Party B has provided the irrevocable Loan IOU to Party A;

2.1.5 Party B has submitted all documents required by Party A as follows:

(1) The sealed business license (copy) of corporation;

(2) The sealed valid corporate bylaws (copy);


(3) The sealed legal representative’s ID card (copy);

(4) The sealed annual financial audit reports of previous year and financial statements of the last three months (copy);

(5) The internal authority’s valid agreement or documents in approval of this Loan;

(6) Other required materials;

2.1.6 The Borrower [Wuhan Kingold Jewelry Co., Ltd.] has issued the legal and effective resolutions of its internal authority about pledging and guaranteeing thisTrust Loan, and the Pledge Agreement of NT Trust 16-020-021-003 and Mortgage Agreement of NT Trust. 16-020-021-004 has taken effect and guarantyprocedures have been finished;

2.1.7 The Guarantors, Wuhan Vogue-Show Jewelry Co., Inc. and Jia Zhihong (ID No: 420102196111133118) have taken the joint responsibilities for guaranteefor this Trust Loan, and the Agreements of Guaranty of NT Trust. 16-020-021-005 and NT Trust. 16-020-021-006 signed with Party A have taken effect.

2.1.8 The trustor obtains the proper insurance policy;

2.1.9 The Borrower deposits the pledge into the designated safe box in the keep of trustor and the insurance company;

2.1.10 Party B’s commitments in Article 11 are real and valid;

2.1.11 Party B has opened an account for the Trust Loan as stipulated in Article 2.5;

2.1.12 Party B agrees to purchase the required trust insurance fund and the subscription of the subscription agreement of the trust industry security fund withParty A takes into force;

2.1.13 No any law amendment or enactment, the new managing and supervision regulation issued by the department concerned that may cause the incapabilityof releasing the Loan funds or performing the intention specified in this Agreement. Party B confirms that all above-mentioned conditions will be finished before July 20, 2016.

2.2 Loans under this Agreement shall be issued by Party A in accordance with the following first 1):

1) The load funds of each period shall be transferred to Party B’ s account mentioned above (hereinafter referred to as “Loan Account”, see Article 2.5) after [5]business days by Party A upon the issuance of trustor’s Notice of Loan Grant along with the foregoing conditions stipulated in 2.1 fulfilled.

2) Party A shall transfer the first Loan fund to Party B’s Loan Account in [/] business days upon the performance of release conditions stipulated in 2.1, theissuance of irrevocable Loan IOU by Party B and the Notice of Loan Grant by the trustor. Party A shall transfer the second Loan fund to Party B’s Loan Accountin [/] business days after the circumstances of the continuous performance of release conditions stipulated in 2.1, the payment of the first fund’s interest to thetrust-special account, the issuance of irrevocable “Loan IOU” to Party A and the “Notice of Loan Grant” by the trustor.

2.3 If the Article 2.2 chooses 1) for the issuance, the Loan issuance date is the day when Loan funds are actually distributed to the Loan account of Party B. Inprincipal, the day when the Loan funds are actually distributed to the Loan account of Party B should be as same as the issuance date on the Loan IOU. Ifinconsistent, it is subject to the issuance date on the Loan IOU. The interest starting date under this Agreement is the Loan issuance date.

If Article 2.2 chooses 2) for the issuance, the Loan issuance date of each installment is the day when Loan funds of this installment are actually distributed to theLoan account of Party B. In principal, the day when the Loan funds of each installment are actually distributed to the Loan account of Party B should be as sameas the issuance date on the corresponding Loan IOU. If inconsistent, it is subject to the issuance date of this installment on the Loan IOU. The interest startingdate of each installment is the Loan issuance date of this installment.


2.4 Once a Loan has been distributed to the Loan account of Party B, it is deemed that Party A has issued the Loan and Party B has borrowed the Loan.

2.5 Under this Agreement, the Loan account that Party B receives the Trust Loan is as follows:

Opening Bank: Wuhan 4 Houhu Branch of the China Construction Bank

Account Name: Wuhan Kingold Jewelry Co., Ltd.

Account No: 42050110242500000003

2.6 Party B shall draw the Loan in accordance with the usage plan or application agreed or approved by Party A’s written consent. Unless the Lender agreed inwriting, the Borrower may not advance, postpone or cancel the withdrawal. During the Loan period, without the written consent of Party A, Party B shall notcancel the Loan account.

Article 3 Interest Settlement of Loan

3.1 The interest of each Loan fund is yielded daily from the interest starting date specified in Article 2.3 under this Agreement in the payment of the method of (5)as follows:

(1) Party B should pay Loan interest every 6 months from the interest starting date. Interest settlement day is the corresponding day of every 6 months from theinterest starting date and the expiration date of the Loan. Interest payment date is the interest settlement date. If any payment day said above is not a businessday, the payment will be automatically postponed to the next business day. The Loan is cleared with the principal and interest at maturity.

Interest calculation: Interest payable on each payment date = ∑ (principal amount of daily loan× / %/360), the computing interval of “∑” is from the latest interestsettlement date (including) to this interest settlement date of interest (excluding). The last computing interval is the neighboring latest interest settlementdate (including) to this interest settlement date of interest (excluding).

(2) Each loan under this Agreement is calculated separately. Within [/] business days from the interest starting date of each loan, [/] % of the principal should bepaid as the first interest. The exact amount of the first interest of each loan = [/] ; the rest interest of each loan is paid by Party B every [ ] (3/6/12) months. Theexpiration date for interest of each loan is the corresponding day of every [ ] (3/6/12) months from the interest starting date and the expiration date of theloan. Interest payment date is the very interest settlement date. The loan is cleared with the principal and interest at maturity. If any payment day said above isnot a business day, the payment will be automatically postponed to the next business day.

The rest interest payable calculation: Interest payable of each loan on each payment date= ∑ (principal amount of daily loan of each loan× / [/] %/360),the computing interval of “∑”of each loan is from the latest interest settlement date (including) to this interest settlement date (excluding). The first computinginterval is from the interest starting date of each loan to the first interest settlement date (including) for interest of each loan (excluding); the last computinginterval is from the neighboring latest interest settlement date (including) to this interest settlement date (excluding) or paid-off day of the loan (excluding).

(3) Loan interest should be paid by Party B every calendar season. The expiration date for interest is the [/] day of last month of every calendar season, ( i.e.month [ ] day, month [ ] day, month [ ] day, month [ ] day), and maturity date of every loan. Interest payment date is the every interest settlement date. The firstvalue date is the [/] day of last month of every calendar season. If any payment day said above is not a business day, the payment will be automaticallypostponed to the next business day.


Interest payable of every interest payment day = ∑ (principal amount of daily loan× /[/] %/360), the computing interval of “∑” is from the latest interest settlementdate (including) to this interest settlement date of interest (excluding). The first computing interval is from the interest starting date of each loan to the first interestsettlement date (including) for interest of each loan (excluding); the last computing interval is from the neighboring latest interest settlement date (including) tothis interest settlement date of interest (excluding) or paid-off day of the loan (excluding).

(4) Within [ / ] business days from the interest starting date of each loan, [/] % of the principal should be paid as the first interest. The specific amount of the firstinterest of each loan = [/]; The rest interest of each loan is paid by Party B every calendar season. The expiration date for interest of each loan is [/] day of lastmonth of every calendar season month / [ ] day (March [ ] day, June [ ] day, September [ ] day, and December [ ] day) and the expiration date of theloan. Interest payment date is the very interest settlement date of interest. The end of the first calendar season of the interest starting date month September [ ]day is the first interest settlement date of rest loan. If any payment day said above is not a business day, it will be automatically postponed to the next businessday.

The rest interest payable calculation: Interest payable of each loan on each payment date = ∑ (principal amount of daily loan of each loan× / [/] %/360),the computing interval of “∑”of each loan is from the latest interest settlement date (including) to this interest settlement date (excluding). The first computinginterval is from the interest starting date of each loan to the first interest settlement date (including) for interest of each loan (excluding); the last computinginterval is from the neighboring latest interest settlement date (including) to this interest settlement date of interest (excluding) or paid-off day of the loan(excluding).

(5) Loan interest under this Agreement is computed in two ways:

A. The interest of the first loan and payment date:

The Borrower should pay RMB 20,500,000 (loan principal * 4.1%) as the first interest within [3] business days from the disbursement date. The Borrower herebyconfirms that the interest of the first loan should not be limited to the actual Article of borrowing. The first loan should not be returned as soon as the Lenderreceives it. And the Borrower should not claim any advocacy about the interest of the first loan to the Lender.

B. The interest of rest loan and payment date:

The interest of rest loan is calculated by rate 8%/2 every year, and should be paid on the corresponding day of 6 months from the payment date of interest of thefirst loan. If the interest payment date is not a business day, it will be automatically postponed to the next business day.

For interest recovery of loan under this Agreement, Party A has the right to send Party B a notice of interest receivable 3 business days in advance. Party Bshould ensure to pay Party A interest and/or principal according to the prescribed amount in the notice unconditionally at the appointed time.

3.2 After Party A receives the interest paid by Party B, if Party B applies in writing for a receipt voucher provided by Party A, Party A should simply provide PartyB an interest revenue with special seal for finance according to its inner requirements as the receipt voucher which can prove the receipt of interest paid by PartyB.

Article 4 Loan principal repayment

4.1 Unless otherwise agreed upon on this Agreement, any agreement about repayment fund sources under any other contract with Party B as a party of it will notaffect or oppose obligations of principal and interest repayment under this Agreement.

4.2 Party B should pay off the principal of loan before (including) maturity date, loan clearing with the principal and interests. Party B should repay principal ofloan according to the following (1) way:

(1) One-time principal repay. Party B should pay off all loan principal before maturity date of loan.


(2) On the corresponding day of every [/] months from the interest starting date, Party B should repay Party A principal RMB [/], loan clearing with the principaland interests. Party B should repay all the rest principal before maturity date of the loan, loan clearing with the principal and interests.

(3) On the corresponding day of every [/] months from the interest starting date of each loan, Party B should repay Party A principal of each loan, loan clearingwith the principal and interests. Party B should repay all the rest principal before maturity date of the loan, loan clearing with the principal and interests.

(4) On the corresponding day of every [/] months from the interest starting date of each loan, Party B should repay Party A principal [/] of each loan, loan clearingwith the principal and interests. Party B should repay all the rest principal before maturity date of each loan, loan clearing with the principal and interests.

4.3 All the funds repaid by Party B including capital and interest payment and penalty interest, compound interest, penalty due, compensation and all the othermoney repaid to Party A under this Agreement in case of breaching by Party B, should be transferred into the following account appointed by Party A:

Bank of Deposit: Beijing Jinshu Street Branch of Industrial & Commercial Bank of China

Account title: National Trust Co., Ltd.

Account number: 0200 2914 1920 0056 695

4.4 If there is any prepayment by Party B according to provisions of this Agreement, Party B should supply Party A a written application 15 days in advance. Theprepayment should be paid after Party A provides a written consent, unless otherwise provided hereunder.

5.1 The way of loan guarantee under this Agreement:

The Borrower Wuhan Kingold Jewelry Co., Ltd. provides pledge and mortgage guarantees for the Trust Loan under this Agreement, and signed Pledge ContractNT16-020-021-003 and Mortgage Contract NT 16-020-021-004 with Party A. Particulars shall be subject to the Pledge Contract and Mortgage Contract.

Guarantors, Wuhan Vogue-Show Jewelry Co., Inc. and Jia Zhihong (ID No: 420102196111133118) will provide joint guaranty for Trust Loan under thisAgreement, and signed Contract of Guaranty No.16-020-021-005 and Contract of Guaranty No. 16-020-021-006. Particulars shall be subject to the approvalregulars in the contract of guaranty.

5.2 Party B has the obligation to prompt the pledger, mortgager and guarantor to sign relevant contracts of guaranty about concrete matters of this Agreement.Guaranty issues shall be subject to the approval regulars in the contract of guaranty.

5.3 In case of value decline, damage or destruction happens to the collateral, Party A has the right to request Party B or designated third party to provide furthercollateral.

5.4 If there are two or more than two ways of guaranty under this Agreement, Party A has the right to choose one or some of them to implement its securityinterest. And whether one or some ways Party A choose shall not impact or exclude any other right of Party A committed in the contract of guaranty. UnlessParty A claims in writing, in any way Party A does not exercise, partially exercise and/or delay in exercising any of its guaranty rights will not commit abdicationor partial abdication of above-mentioned right, and will not affect, prevent or interfere with the continue of the right or exercise of any other right.


Article 6 Repayment Order

6.1 If the total amount repaid by Party B is lower than the total amount of payables on the term day according to this Agreement, this is the order of payables:

6.1.1 Fees, compensation, penal sum according to law or this Agreement;

6.1.2 Default interest, compound interest;

6.1.3 Interest payable;

6.1.4 Principle payable.

6.2 If the fund repaid by Party B is insufficient for the total amount in one order, the repayment should be paid by the actual payment order, and the simultaneouspayments should be paid according to the fund percentage.

Article 7 Acceleration of Maturity of Loan

7.1 Party B apply for prepayment according to this Agreement, Party B can partial or total repay with Party A's written consent, unless otherwise providedhereunder.

7.2 In one of the following circumstances, Party A has the right to announce acceleration of maturity of the loan or/and terminate the loans not issued under thisAgreement. And Party A has the right to notice Party B in written to repay in advance and repay all the owed under this Agreement, which includes but is notlimited to the loan principal, interest and other payments. And under such conditions Party B will be deemed default, and Party A has the right to take actionsagainst Party B's breach.

7.2.1 Party B does not withdraw funds in the prescribed way or does not use the loan funds in the way prescribed in clause 1.4 under this Agreement;

7.2.2 Party B does not abide by the promises, or the application documents and formalities provided for the loan is false;

7.2.3 Party B suspends business passively or actively;

7.2.4 There are major operational errors or financial status changes that Party A recognizes may influence the safety of the loan;

7.2.5 Party B receives major administrative sanctions, judicial sanctions due to illegal business behavior;

7.2.6 Equity transfer that can influence the repayment capability happens to Party B, and Party B does not notify Party A in advance or inform but does not getParty A's written consent;

7.2.7 Division, merger, liquidation, reorganization, cancellation, declared bankrupt, dissolved, or any other events that may affect the situation of Loan securityhappens to Party B;

7.2.8 Party B does not repay on time any of the principal or interest under this Agreement;

7.2.9 Party B diverts loans;

7.2.10 Party B commits breach of contract signed with Party A or any other third party about other loans, credits and debts;

7.2.11 Any account Party B opened in the bank is closed, frozen, deducted or under other enforcement measures or execution measures by law, and Party Arecognizes that has affected Party B's ability to repay;

7.2.12 Party B’s fund is closed, frozen, deducted by the court (the arbitration organization) or under enforcement measures due to gross debt dispute sued(arbitrated) by other creditors;


7.2.13 Party B does not subscribe trust industry security funds according to the request of Party A;

7.2.14 Party B violates other clauses of this Agreement;

7.2.15 Other circumstances Party A recognizes as affecting the safety of the Loan happens to Party B.

7.3 If Party B repays all or part of the Loan under this Agreement in advance without the prior written consent of Party A, Party A shall be entitled to requestParty B to repay the full principal and interest of the Loan under this Agreement.

7.4 If prepayment situations prescribed in clause 7.1 occur, the interest of the prepayment shall be computed by rate according to this Agreement and calculatedby the actual survival days. The interest Party A has charged will not be returned.

If situations prescribed in clause 7.2 and 7.3 occur, the interest of the Loan is computed by the rate according to this Agreement and the interest period iscounted to the maturity date of Loan under the agreement. Party B should also pay Party A principal, penalty interest, compound interest, liquidated damages,compensations, etc. according to this Agreement.

7.5 Party B irrevocably agrees that Party A is entitled to request Party B to repay all debts payable in advance according to the requirements of the client. If PartyA hereby announces the Loan is due in advance, Party B shall repay all the debts under this Agreement according to the requirements of Party A.

Article 8 Information Disclosure

8.1 Party B should disclosure relevant information to Party A in time according to the following requirements:

8.1.1 During Trust Loan period under this Agreement, Party B should submit the full set of financial report of last quarter / business days before / month / dayeach year; submit the full set of financial report of first half year before / month / day each year; submit a full set of financial statements (including balance sheet,income statement, the cash flow statement and audit report) of last fiscal year of public accountants audit before / month / day each year

8.1.2 If there is any changes about Party B such as change of enterprise name, domicile, registered capital, business scope, company type, company's articles ofassociation, a third party capital increase and the change of equity structure, or a significant change in terms of finance, management, a written notice should besent to Party A 10 working days in advance, and relevant materials should be sent to Party A as record after the completion of the relevant changes. If majorchanges happen to Party B's legal representative or financial director, a written notice should be sent to Party A 10 working days after the changes.

8.1.3 Party A is entitled to require Party B to provide the important dynamic information of Loan funds usage at any time, and Party B should provide in time.

Article 9 Loan Usage Regulation

9.1 After the Trust Loan is paid, Party A has the right to check the usage of the Trust Loan under this Agreement. Party B should submit written reports about theusage of the Loan under this Agreement and corresponding certificates of usage of the funds according to the request of Party A, which includes but is notlimited to contracts, invoices, etc.; Party A can check the usage of Loan on spot, and Party B should actively cooperate with Party A and provide relatedinformation according to the requirements of Party A.

9.2 The content Party A shall check includes but is not limited to:

9.2.1 Whether the use of the Loan has been changed, whether used in land consolidation, whether invested into the securities trading, futures trading, riskinvestment and other fields that laws and regulations and financial regulations prohibit;


9.2.2 The operation situation and performance of Party B is good or not; whether there is any major accident; whether involved in significant litigation thatseriously influences ability of repayment;

9.2.3 Other conditions that Party A recognizes need to be checked.

9.3 In the process of inspection, if Party A finds out Party B does not use the Loan according to the purposes agreed upon in this Agreement, Party A has theright to take the following actions: including but not limited to announcing the Loan is due in advance, collecting penalty interest, requesting Party B to correctwithin a time limit, etc. and requesting Party B to take liability of breaches.

Article 10 The Representations and Warranties of Lender/Party A

10.1 The Lender is a lawfully established trust company;

10.2 All the internal authorization procedures of the Lender needed for the signing of this Agreement has been completed. The signing of this Agreement is doneby an effective authorized representative of the Lender, and once the contract comes into force it is legally binding on the Lender;

10.3 The Loan under this Agreement is granted from trust fund by the Lender according to the regulation of the Trust Contract.

Article 11 The Representations and Warranties of the Borrower/Party B

11.1 Party B is a legal body of enterprise which is incorporated and validly existing in the administrative department for industry and commerce in accordancewith the law. Party B holds a valid business license, has the ability to maintain good operating conditions, has the right to operate business related to Loan usageunder this Agreement, and also has the right to sign and perform this Agreement;

11.2 All the necessary authorization procedures for the signing of this Agreement by Party B have been completed. Party B has the approval and authorization ofthe transaction from the examination and approval authorities which have such rights. The signing of this Agreement is done by an effective authorizedrepresentative of Party B, and once the Agreement comes into force it is legally binding on Party B;

11.3 All documents provided by Party B are ensured true, accurate, legal and effective, and the submitted copies are consistent with the original ;

11.4 The financial statements provided by Party B to Party A are based on the current effective laws, regulations and accepted accounting principles, andaccurately reflect the real financial situation of Party B of the year;

11.5 The signing of this Agreement by Party B does not violate any other agreement, administrative regulations or the articles of association made by Party B,and has no conflict of legal or business interest with other agreements administrative regulations or the articles of association made by Party B;

11.6 Party B does not conceal any situation happened or happening that may affect the performance of the Agreement, including but not limited to:

(1) Serious disciplinary violations, illegal events or claims related to its main leader/master;

(2) The major events of default under any other contract;

(3) The debt, contingent liabilities, or provided guarantee, mortgage guarantee to a third person;

(4) Significant pending litigation, arbitration cases;

(5) Other events that may seriously affect its financial position and solvency;


11.7 Party B approves that Party A checks its credit status via credit database established under the approval of The People’s Bank of China and the competentdepartment of credit investigation or related organizations or departments. And Party B also approves that Party A provides its information for credit databaseestablished under the approval of The People’s Bank of China and the competent department of credit investigation; Party B agrees that Party A can reasonablyuse and disclose the information of Party B for business need;

11.8 The above representations and warranties are effective before all debts owed under this Agreement are completed.

Article 12 The Rights and Obligations of Party A

12.1 Shall have the right to require Party B to provide all the information related to the Loan;

12.2 Should abide by the contract, grant the Trust Loan to the Borrower according to the agreed time limit, the amount and interest rate (unless the delay iscaused by the Borrower);

12.3 Shall have the right to request Party B to fully repay the Loan principal and interest on schedule;

12.4 Shall have the right to know the production and business operation, financial activities and operating and repayment plan of Party B;

12.5 Shall have the right to supervise the Borrower to use Loan under this Agreement , supervise and inspect the capital usage, business development andcompany management of the Borrower, require the Borrower provides explanation for related problems, and require the Borrower to correct the use fromdefaults that exist in the capital usage; shall have the right to take the necessary legal, economic, administrative and other means to safeguard the legitimaterights and interests of itself once the Borrower escapes from the Lender’s supervision, does not pay principal and interest, or commit other breaches;

12.6 Shall have the right to require Party B to repay Loan in advance or stop paying the Loan according to the requirements of this Agreement ;

12.7 Once property right transfer, system change, creditor's rights and debts transfer or other behaviors that may affect the Loan security happens to Party B,Party A has the right to require Party B to pay off the principal and interest of Loan and other related fees under this Agreement immediately, or transfer all thedebt under this Agreement to an assignee which is accepted by Party A, or provide new security measures accepted by Party A;

12.8 If the Borrower fails to repay the principal and interest of Loan or other payments on schedule according to this Agreement, Party A has the right to exerciseits guarantee rights;

12.9 Shall have the right to transfer the Loan under this Agreement to a third party at any time according to the instructions of the client;

12.10 Shall keep Party B's debt, financial, production, operating situation confidential, but the ones that are required disclosure according to laws, administrativeregulations, rules or national reserves are excepted;

12.11 During the safekeeping period of the pledge of the client, the dynamic loan-to-value ratio shall be controlled within 70%. If the market price of the pledgefalls by 5% within the investment period, Party A shall have the right to require Party B to cover positions immediately or to repay part of the Loan to meet the70% dynamic loan-to-value ratio. If Party B fails to cover on or repay the Loan within a prescribed period of time, Party A has the right to terminate the contract inadvance or dispose the pledge;

12.12 Party B should make quality insurance for the pledge. The insurance clause shall be determined via negotiation between Party A and Party B. Two monthsbefore the expiry of the insurance, Party B should make renewal insurance for the pledge. If Party B fails to make the renewal insurance in time, it will bedeemed defaulted and Party A shall have the right to terminate the contract in advance and require Party B to repay the principal and interest.


12.13 Performing other rights and obligations according to the laws and regulations and other clauses of this Agreement.

Article 13 The Rights and Obligations of Party B

13.1 Party B is entitled to withdraw and use all the Loan in accordance with this Agreement;

13.2 Party B Shall provide documents and materials required by Party A and cooperate with Party A to perform loan investigation, examination and inspection aswell as payment administration for loan fund and after-loan administration;

13.3 Party B shall accept the supervision and inspection of Party A on the usage of Loan fund, related business production and operation and its financialactivities;

13.4 The Borrower shall spend the loan fund under this Agreement on items pursuant to this Agreement and no unwarranted diversion of fund is allowed. TheBorrower shall promise to spend acquired fund on fields that adhere to the laws and regulations and are consistent with the policy orientation for industriesinstead of on fields that are prohibited by laws of China or are strictly restricted by recent macro-control policies of China. The means of capital employing shallnot violate other laws and regulations and provisions of national policies and the introduction of loan fund spending and payment document shall be submittedfaithfully;

13.5 The principal and interests of Loan shall be paid in full and in due course in accordance with the Agreement;

13.6 All or partial transference of debt under this Agreement to a third party shall be subject to the prior written approval of Party A;

13.7 The transference and other treatments of the operational assets by the Borrower, which occupies over 30% of the total assets listed in recent financialreports, shall be subject to the prior written approval of the Lender;

13.8 Where the change of property rights and mechanism change are involved (including but not just confined to merger, division, reorganization, sharestransference, assets reduction and other aspects), the Borrower shall submit relevant changing plans to the Lender for written approval at least 15 working daysin advance, given that the Borrowers are subject to the listed company who are entitled to expose information, the Borrowers shall not perform above actions.Above change plans shall not damage the legal rights and interests of the Lender pursuant to this Agreement;

13.9 The transference, pledge, offset or other treatment of its major creditor’s right to a third party (the debt capital is larger than or equal to RMB 10,000,000), bythe Borrower shall be subject to the prior written agreement of the Lender;

13.10 The Borrower shall not sign any agreements or documents that may damage the interests of the Lender or perform any activities that may damage theinterests of the Lender;

13.11 The Borrower shall cooperate with the Lender to acknowledge and inspect the usage status of Loan fund, the development of loan business, majorbusiness operation of the company and other business affairs and are obliged to provide relevant materials for the Lender;

13.12 The Borrower shall cooperate with Lender with respect to credit rating and credit investigation on Borrower himself and shall offer relevant authenticmaterials as the requirement of the Lender;

13.13 Where the accumulative capital guaranteed by the Borrower for a third party exceeds 50% of the net assets listed in recent annual financial report, priorwritten approval by the Lender shall be applied;


13.14 If the guarantee capability of the guarantor declines so much that affect the Loan security, the Borrower shall issue notice to the Lender in time and pay thesecurity bonds in full within the term required by the Lender;

13.15 If the value of the guaranty declines so much that affect the security of the Loan, the Borrower shall issue notice to the Lender and take necessarymeasures as required by the Lender;

13.16 Where the net profit after tax in relevant accounting year is zero or minus, or net profit after tax is not enough to compensate for accumulative loss ofprevious accounting year, or profit before tax that is not used to pay the principal, interests, and costs of this accounting year, or profit before tax is not enough topay the principal, the interests and the costs of next term in full, the Borrower shall not distribute share interests and bonus to shareholders in any form;

13.17 Within the term of validity of this Agreement, if the Borrower is forced to stop production, close business temporarily, cancel registration, revoke businesslicense, or the legal representatives or main principal take part in illegal activities or get involved in major litigious activities, or its business production andoperation is subject to serious predicament or deteriorating financials, the Lender shall be issued written notice and put the full payment of the debt and guarantyinto practice pursuant to this Agreement as required by the Lender; 13.18 Pay trust industry security fund subscription payment to the Lender timely with enough amount according to the subscription agreement of the trustindustry security fund.

13.19 The Party B shall perform other rights and obligations pursuant to the relevant laws and regulations and the provisions of this Agreement. Article 14 Term of Cost

14.1 The Party B shall be responsible for the payment of reasonable expenses pursuant to this Agreement, including but not just confined to the cost ofnotarization, authentication, appraisal, registration and other costs.

14.2 If the Party B is unable to pay back the principal and interests of the Loan, which leads to the cost generated by the collection of debt by Party A includingbut not confined to the expenses for public notice, delivery and authentication, attorney fee, court cost, travel expenditure, appraisal fee, auction fee, propertysecurity fee, mandatory execution fee, and other cost spent to actualize the creditor’s right, the Party B shall be responsible for all above fees.

Article 15 The Default Incidents and the Liability of the Lender for Default

15.1 If the Lender violates the provisions of the contract without any justified reasons, the Borrower has right to require the Lender to correct its behaviors withinlimited terms. The Borrower has right to claim compensation for its loss caused by such default.

15.2 Where the Lender’s incapability of issuing the Loan is caused by the unavailability of established trust and is at request of supervision department, theLender shall not be liable to any default.

Article 16 The Default Incidents and the Liability of the Lender for Default

16.1 The default incidents of Borrower include

(1) The Borrower fails to provide true, integral, and validate financial report, information business production and operation state and other relevant materials;

(2) The Borrower fails to use the Loan according to agreed usage;

(3) The Borrower fails to pay back the principal and interests within agreed terms;

(4) The Borrower refuses or inhibits the Lender to supervise and inspect the spending state of loan fund;


(5) The Borrower transfer assets and secretly withdraw funds to evade debts;

(6) The operation and financial sate of the Borrower continues to deteriorate, or the Borrower gets involved in major litigation or arbitration procedure and otherlegal conflicts, which have or may affect or damage the rights and interests of the Lender pursuant to this Agreement;

(7) Other debts of the Borrower have already or may affect or damage its capability of fulfilling its liabilities for the Lender under this Agreement;

(8) Within the term of validity, the Borrower changes the business pattern and the operation mechanism including contracting, lease, merger, joint capital,division, joint operation, and shareholding reform, which have already or may affect the interests of the Lender pursuant to this Agreement;

(9) Violates the Representations and Warranties of the Borrower;

(10) Following accidents happen to guaranty, which endanger the security of the creditors’ right under this Agreement: (i) the value of guaranty declinesobviously; (ii) the guaranty is seal up, detained, auctioned, supervised by administrative authority or involved in ownership conflict; (iii) the pledger violates anyagreement of the pledge contract or any fault, mistakes, and omission exist in the guaranteed matters; (iv) other situations that endanger the actualization of thewarranty of guarantors;

(11) The guaranty (all or part) is not established, has not come into effect and is void, revoked or dismissed, the guarantor violates or clearly express or expresswith its behavior not to perform any guarantee liability, the value of guaranty declines and other situations that endangers the security of creditor’s right pursuantto this Agreement;

(12) Where pledge used as guaranty, if the dynamic pledge rate is over 70%, and the Borrower fails to compensate or pay back the borrowings in time;

(13) With respect to the pledge as guaranty, the Borrower fails to insure as required or fails to renew insurance before the expiration date of the insurance;

(14) Other situations that affect the actualization of creditors’ right on part of the Lender;

(15) The Lender fails to subscribe the security fund of trust institution in accordance with the requirement of the Lender;

(16) The Borrower violates other agreement of the contract.

16.2 If the Borrower fails to issue Loan IOU and submit other materials required by the Lender to apply for loan issuance, the Borrower shall pay RMB 50,000 ascompensation to the Lender before the termination of this Agreement.

16.3 If any defaults listed in Article 16.1 occur, the Lender has the right to exercise following one or several actions:

(1) Stopping issuing Loan, claiming that all or part of its Loan become due and requiring the Borrower pay back all the principals pursuant to this Agreement andinterests of the Loan calculated in light of the agreed interests rate and Loan term in accordance with the contract;

(2) If any situations listed in above (2) and (3) in Article 16.1 happens to Borrower, the Lender has the right to claim default penalty in accordance with 0.1% ofall the loan fund;

(3) If the Borrower fails to pay the principal and interests of Trust Loan (including the principal and interests of Loan claimed by the Lender who advances theexpiration date of all or part of the Loan) in full before the due date, the Lender has the right to require Borrower to pay in full in limited term; if the Borrower failsto pay the principal and interests required to be paid in limited term, the Lender has the right to charge penalty interests per day in accordance with the penaltyinterests rate (the real annual interests rate of this Loan has risen by 50%, that is, the overdue penalty interests rate =the real annual interests rate of this Loan inoverdue date × 150%) since the overdue date until the full payment of the trust principal and interests; As for the interests that is required to be paid inaccordance with this Agreement, the Lender may charge interests in overdue date in accordance with the interests rate that has risen by 50% than previousinterest rate until the interests is paid in full.


(4) If the Borrower diverts and embezzles the Loan under this Agreement, the Lender has the right to withdraw all the Trust Loan in advance, and has the right tocharge penalty interests per day for the principal and interests of Trust Loan in accordance with the penalty interests rate (the real annual interests rate of thisLoan has risen by 100%, that is, the diversion penalty interests = the real annual interests of Loan in diversion date × 200%) since the date of diversion until thedate of full payment of Trust Loan principal and interests. If the diversion of Loan fund and late payment of principal and interests of Loan pursuant to thisAgreement all happen to Borrowers, the Borrower shall be charged with higher penalty interests instead of being imposed on together.

(5)The Lender requires the Borrower to correct its default in limited term.

(6)The Lender may exercise the power of guarantee.

16.4 If the litigation and arbitration is caused by the Borrower, the Borrower shall be responsible for the expenses spent by the Lender on litigation and arbitrationas well as the employment of attorney;

16.5 If the default penalty charged by the Lender in accordance with proceeding agreement is not enough to compensate for the damage loss of theLender(including the direct and indirect loss), the Lender has the right to claim damage loss to the Borrower.

Article 17 Tolerance and the Divisibility of the Clause

17.1 Within the validity period of the contract, any tolerance, grace or delay in the exercise and not exercising rights under the contract given by the Lender tothe Borrower for any default of the Borrower, is without prejudice to and does not affect or restrict the Lender to enjoy all interests that are in accordance with theprovisions of this Agreement and relevant laws. It shall not be deemed as a permission given by the Lender for any default and it shall not be deemed as that theLender has given up to take legal actions in respect of any default, while it shall not be also regarded as that the Lender has given up rights and interests underthis Agreement, and it shall not affect the Borrower to bear any obligation under this Agreement.

17.2 The rights, benefits and remedies as agreed upon in this Agreement are cumulative and may be exercised at the same time or separately. It will also notexclude any other rights, interests and remedies prescribed by law.

17.3 If any provisions of this Agreement declared invalid, the validity of any others will not be affected.

Article 18 Confidentiality

18.1 The two parties shall be responsible for the confidentiality of this Agreement and the matters relating to it. Without the written consent of the opposite party,either party shall not disclose any of the relevant matters of this Agreement to any other person unrelated to it. But disclosures of the following circumstancesare exceptional:

1) The Lender, performing the information disclosure obligation prescribed by laws or trust documents, discloses the information to the clients and thebeneficiary.

2) Disclose the information to auditors, lawyers and other staff members commissioned in the normal business, with the premise that such staff must bear theconfidentiality obligations of information related to this Agreement and obtained in the above work.

3) The information and documents can be obtained by public ways or the disclosure of the information is required by laws and regulations.


4) Disclose the information related to the contract to the court or in accordance with the requirements of the disclosure procedure or similar procedure, or inaccordance with the legal procedures adopted.

5) Disclose the information to the financial regulatory agencies according to their requirements.

6) Disclose the information to assignees or potential transferees as a result of the Lender's disposal of the Loan.

18.2 The provisions of this article shall be still effective after the termination of this Agreement.

Article 19 Change, Dissolution and Termination of the Agreement

19.1 Except as otherwise agreed upon in this Agreement, either party must not unilaterally modify or terminate the Agreement after it being in force.Modifications or changes to the contract must be agreed upon by both the Lender and the Borrower and a written agreement shall be reached.

19.2 The Borrower hereby agrees that the Lender has the right to transfer all or part of the rights under this Agreement to a third party without the consent of theBorrower, but the Lender shall notify the Borrower of the above assignment in a timely manner. Without the written consent of the Lender, the Borrower shall nottransfer obligations under this Agreement to a third party.

19.3 If the changes of national laws, regulations, rules or policies result in all or part of the terms of the contract no longer meeting their requirements, both theLender and the Borrower shall make timely consultation and amend the relevant provisions as soon as possible.

19.4 Due to force majeure, the two parties who cannot perform the agreement shall notify the other party in time and take effective measures to prevent loss.The party suffering from the force majeure shall provide details to the other party and proof documents issued by the relevant government departments aboutthe occurrence and influence in 15 business days after the incident. The two parties should promptly negotiate to find a solution.

19.5 When the trust is not established, the Lender has the right to terminate this Agreement and has no need to assume responsibility for the breach of thecontract. If the trust does not set up because that the Borrower does not provide relevant pre Loan review information timely, the guarantor does not handle therelevant security procedures in time and other reasons, the Lender has the right to require the Borrower and the guarantor to bear the damage compensation.

Article 20 Notification

20.1 Notification and Delivery

20.1.1 Notice or other correspondence sent by either party to the opposite party (hereinafter referred to as the "correspondence") should be sent out by handdelivery, courier, registered letter or fax according to the contact of the opposite party recorded on the contract. The delivery goes into force under the followingconditions:

1) Delivered by hand, the delivery date is deemed to be served.

2) Issued by courier or registered letter, the date of receipt of the recipient is deemed to be served.

3) If the recipient did not sign or rejected, the date of the third working days counting from the date recorded on the sending document or on the registered mailreceipt is deemed to be served. The sending document or the registered mail receipt is held by the party who has sent the notice.

4) Issued by fax, the confirmation of receipt sent by the sending party after receiving the fax is deemed to be served.

5) Using the above several ways at the same time, the fastest that reaches to the receiver is deemed to be the standard.


20.1.2 The contacts confirmed by the two sides are as follows:

Party A: The National Trust Co., Ltd.

Contacts: Zhang Lei

Address: No. 1, No. 18 yard, An Wai West Riverside Road, Dongcheng District, Beijing

Postal Code: 100011

Telephone: 029-86265402

Fax: 029-86265402

Party B: Wuhan Kingold Jewelry Co., Ltd.

Contacts: Huang Yi

Address: Te No. 15, the River Economic Development Zone, Wuhan

Postal Code: 430023

Telephone: 027-65694977

Fax: 027-65694977

20.1.3 If the contact information (including contact or contact method) stated in this Agreement has changed, the changed party shall notify the other party inwriting within 5 days after the change.

Article 21 Applicable Law and Dispute Resolution

21.1 Matters, including conclusion, effectiveness, performance, interpretation, amendment and termination of the contract, shall apply to laws of the People’sRepublic of China (for the purpose of the Agreement, not including laws of the Hong Kong Special Administrative Region, the Macao Special AdministrativeRegion and Taiwan region).

21.2 The two parties shall consult or mediate disputes aroused in the performance of this Agreement. While if negotiation or mediation fails, legal proceedingsshall be instituted to the people's court with jurisdiction in this Agreement signing region.

21.3 In the course of the proceedings, the two parties shall continue to perform the obligations of other parts in addition to the matters that are disputed by them.

Article 22 Effective Conditions and Failure Conditions of the Loan Contract

22.1 This Agreement comes into force from the day when it is signed or sealed by the legal representative of Party A and Party B or signed by the authorizedrepresentative, and also stamped with the seal of both parties;

22.2 This Agreement shall lose effectiveness when satisfies one of the following conditions:

22.1.1 Party B has settled completely all the principal and interest and other expenses under the contract.

22.1.2 Party A decides to terminate the contract with the instructions of the principal, which shall also be in accordance with the conditions of the contract;


Article 23 Other Matters Stipulated by Party A and Party B

23.1 According to the Administrative Measures of the Trust Industry Security Fund made by the China Banking Regulatory Commission and related regulatorypolicies, Party B shall entrust Party A to subscribe trust industry security fund. Party B should sign the subscription agreement of the trust industry security fundaccording to the requirements of Party A on the day of signing this Agreement. Party B shall subscribe the Fund with fully amount, timely and also according tothe contract. The subscription amount is 1% of the Loan funds that Party A has paid to Party B.

23.2 Matters, uncovered in this Agreement, shall be negotiated by both the Lender and the Borrower, or shall be performed according to the provisions ofrelevant laws and regulations of the state. If no provision has been made, the two parties may reach a written supplementary agreement annex to thisAgreement, which shall have the same legal effect as this Agreement.

23.3 This Agreement is in 8 copies. Both sides of Party A and Party B hold 2 copies separately, and the remaining copies shall be used for handling relatedprocedures, with each copy having the same legal effect.

Special Notice: All the terms and conditions of this Agreement have been fully negotiated by both parties. Texts in print have equal effect to Texts inhandwritten. The Borrower shall ensure that full attention has been paid to the clause under this Agreement which exempts and restricts theresponsibility of the Lender and which agrees on obligations of the Borrower, and there is no objection to the understandings of all the terms andconditions of this Agreement.

(There is no text below)


(This is signature page with number "NT 16-020-021-002" of the "Trust Loan Agreement", no text)

Party A: Wuhan Kingold Jewelry Co., Ltd. Party B: The National Trust Ltd. Legal representative: Legal representative: Or Authorized representative (signature or seal): Or Authorized representative (signature or seal): Signing date: July 11, 2016 Place of signing: [Chaoyang District, Beijing]


EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

UNDERSECTION 302 OF THE SARBANES-OXLEY ACT

I, Zhihong Jia, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Kingold Jewelry, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.

/s/ Zhihong Jia Zhihong Jia Date: August 12, 2016 Chairman, Chief Executive Officer and

Principal Executive Officer


EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

UNDERSECTION 302 OF THE SARBANES-OXLEY ACT

I, Bin Liu, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Kingold Jewelry, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.

/s/ Bin Liu Bin Liu Date: August 12, 2016 Chief Financial Officer and

Principal Accounting Officer


EXHIBIT 32.1

CERTIFICATION

OFCHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. 1350,AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of Kingold Jewelry, Inc. (the “Registrant”) on Form 10-Q for the quarter ended June 30, 2016 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer of the Registrant, certifies, in accordance with18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report, to which this certification is attached as Exhibit 32.1, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange

Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and

for, the periods presented in the Report.

Date: August 12, 2016 /s/ Zhihong Jia Zhihong Jia Chairman, Chief Executive Officer and

Principal Executive Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,and is not being “filed” as part of the Form 10-Q or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, asamended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into anyfiling under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32.1 is expressly and specifically incorporated byreference in any such filing. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to theSecurities and Exchange Commission or its staff upon request.


EXHIBIT 32.2

CERTIFICATION

OFCHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. 1350,AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of Kingold Jewelry, Inc. (the “Registrant”) on Form 10-Q for the quarter ended June 30, 2016 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Financial Officer of the Registrant, certifies, in accordance with18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report, to which this certification is attached as Exhibit 32.2, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange

Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and

for, the periods presented in the Report.

Date: August 12, 2016 /s/ Bin Liu Bin Liu Chief Financial Officer and

Principal Accounting Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,and is not being “filed” as part of the Form 10-Q or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, asamended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into anyfiling under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32.2 is expressly and specifically incorporated byreference in any such filing. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to theSecurities and Exchange Commission or its staff upon request.


Exhibit 99.1

KINGOLD JEWELRY REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2016

Company to Hold Conference Call with Accompanying Slide Presentation on Friday, August 12, 2016, at 5:00 PM ET

WUHAN CITY, China, August 12, 2016 - Kingold Jewelry, Inc. ("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading manufacturers anddesigners of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced its financial results for the second quarter and sixmonths ended June 30, 2016. 2016 Second Quarter Financial Highlights (all results are compared to prior year comparative period )· Net sales were $390.3 million, an increase of 56.5% from $249.4 million· Processed 20.3 metric tons of 24-karat gold products during the period, an increase of 40.1% from 14.5 metric tons· Net income was $19.8 million, or $0.30 per diluted share, an increase from $0.6 million, or $0.01 per diluted share· Book value per diluted share was $4.46 at June 30, 2016, compared to $4.03 at December 31, 2015 Outlook for 2016· Company reiterates guidance of between 50 and 60 metric tons of 24-karat gold processed in 2016. Mr. Zhihong Jia, Chairman and CEO of the Company, commented, “ We were pleased to report strong operating results for the second quarter of 2016, as wehave taken advantage of the increasing gold demand in China as well as a quick rebound of gold price. Our management team made adjustments on our salesgo-to-market strategy and successfully achieved a 56.5% increase in net sales, a 40.1% increase in gold processed volume, plus over 30 times of growth in netincome.” 2016 SECOND QUARTER OPERATIONAL REVIEW· In the second quarter of 2016, Kingold sold approximately 20.3 metric tons of 24-karat gold products, an increase of 40.1% over the 14.5 metric tons sold in

the second quarter of 2015.

Metric Tons of Gold Processed Three Months Ended: June 30, 2016 June 30, 2015 Volume Volume Volume VolumeBranded* 10.5 51.7% 6.9 47.8%Customized** 9.8 48.3% 7.6 52.2%Total 20.3 100% 14.5 100.0% Six Months Ended: June 30, 2016 June 30, 2015 Volume % of Total Volume % of TotalBranded* 18.7 53.2% 12.5 46.6%Customized** 16.5 46.8% 14.3 53.4%Total 35.2 100% 26.8 100.0%

* 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.


Kingold Jewelry, Inc. Page 2August 12, 2016

· For the three months ended June 30, 2016, the Company sold a total of 20.3 metric tons of gold, of which branded production was 10.5 metric tons,

representing 51.7% of total gold sold, and customized production was 9.8 metric tons, representing 48.3% of total gold sold, in the second quarter of 2016.In the second quarter of 2015, the Company sold a total of 14.5 metric tons, of which branded production was 6.9 metric tons, or 47.8% of total gold sold,and customized production was 7.6 metric tons, or 52.2% of total gold sold.

KINGOLD JEWELRY SELLS JEWELRY PARK FOR APPROXIMATELY $171 MILLION On July 29, 2016, Kingold announced that it sold all of its interest in the Shanghai Creative Industry Park, or the Kingold Jewelry Cultural Industry Park (the"Jewelry Park") to Wuhan Lianfuda Investment Management Co., Ltd. ("Wuhan Lianfuda") for RMB 1.14 billion (approximately US $171 million). In connectionwith the sale, Kingold leased space in the Jewelry Park for its new headquarter office and exhibit center for an aggregate of annual rent of RMB 1,718,400(approximately US $258,600). Wuhan Lianfuda has paid Wuhan Kingold the total consideration of RMB 1.14 billion (approximately US $171 million), pursuant to a contract to transfer thecontractual rights and obligations (the "Transfer Contract") entered between Wuhan Kingold and Wuhan Lianfuda. In addition, Kingold transfers and WuhanLianfuda receives, all the rights and obligations in an acquisition agreement (the "Acquisition Agreement") signed among Kingold, Wuhan Wansheng and WuhanHuayuan Science and Technology Development Limited Company ("Wuhan Huayuan") on October 23, 2013, including 60% stock rights of Wuhan Huayuan.Wuhan Lianfuda will undertake the remaining payment obligation of RMB 360 million (approximately US $54.2 million) stipulated in the Acquisition Agreement.According to an evaluation report issued by an independent evaluation agency, the evaluated value of the Jewelry Park on June 18, 2016 was approximatelyRMB 1.48 billion (approximately US $221 million). Chairman Jia continued, “Our management team decided that it was in our best interest for Kingold to focus our capital and personal resources on expandingour core jewelry design and manufacturing business. We expect to use the proceeds to continue to grow both within China and internationally.” CONSOLIDATED FINANCIAL AND OPERATING REVIEW Net SalesNet sales for the three months ended June 30, 2016 increased 56.5% to $390.3 million from $249.4 million for the same period in 2015. The increase wasprimarily due to an increase in sales volume, the increase of average unit selling price for the Company’s branded production, and offset by a loss from currencytranslation. The average unit selling price for the Company’s branded production sales increased from RMB 212.5 per gram in the three months ended June 30, 2015 toRMB 238.4 per gram in the three months ended June 30, 2016. As a result, approximately $29.5 million increase in brand production revenue was affected bythe increase in our selling price, partially offset against the decrease in customized production revenue to certain extent. For the six months ended June 30, 2016, the Company’s net sales were $672.4 million, increased 47.6% from $455.6 million in the first half of 2015.



Gross ProfitGross profit for the three months ended June 30, 2016 increased 1,821% to $46.1 million from $2.4 million for the same period in 2015. For the six months ended June 30, 2016, the Company’s Gross profit were $74.6 million increased from $13.2 million in the first half of 2015. Gross MarginThe Company’s gross margin was 11.8% for the three months ended June 30, 2016, compared to 1.0% in the prior year period. The substantial increase wasdue to the increase of the unit price of branded production sales during the period mentioned above. For the six months ended June 30, 2016, the Company’s gross margin was 11.1%, compared to 2.9% for the same period of 2015. Net IncomeNet income for the three months ended June 30, 2016 was $19.8 million, or $0.30 per diluted share based on 66.0 million weighted average diluted sharesoutstanding, compared to net income of $0.6 million, or $0.01 per diluted share based on 66.0 million weighted average diluted shares outstanding in the prior-year period. For the six months ended June 30, 2016, the Company’s net income was $35.0 million, or $0.53 per basic and diluted share, compared to net income of $7.2million, or $0.11 per basic and diluted share, in the same period of 2015. Balance Sheet and Cash Flow (UNAUDITED) (in millions except for per share data) 6/30/2016 12/31/2015

Cash $ 37.5 $ 3.1 Inventories (gold) $ 786.5 $ 298.3 Working Capital $ 637.2 $ 174.9 Stockholders’ Equity $ 294.1 $ 265.6 Book Value Per Share (in $) $ 4.46 $ 4.03 Net cash used in operating activities was $466.3 million for the six months ended June 30, 2016, compared with net cash used in operating activities of $23.6million for the same period in 2015. The significant increase in net cash used in operating activities was mainly due to spending on purchase of inventory of$502.9 million in anticipation of the increased production and sales demand when the Jewelry Park is completed which may stimulate our sales starting from thesecond half of 2016. In addition, in connection with Kingold’s significant bank borrowings during the quarter ended June 30, 2016, the Company was required topledge approximately 22 metric tons of gold with the banks as collateral, which also led the Company to increase the inventory purchases and stockpile. On theother hand, in connection with the Jewelry Park Transfer Transaction, the Company received $90.1 million cash payment from Wuhan Lianfuda for the JewelryPark transfer and at the same time the Company transferred back approximately $22.1 million customer deposit to the Jewelry Park property buyers, which ledto a net change of deposit payable of $70.2 million. Such amount will be adjusted when the Company delivers the Jewelry Park to Wuhan Lianfuda in the nearfuture. The overall increase in cash used in operating activities for the six months ended June 30, 2016 is reflected in the above mentioned factors.



Kingold’s net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantlyinclude the Company’s purchases of gold and income taxes. The Company expects that the net cash it generates from operating activities will continue tofluctuate as the Company’s inventories, receivables, accounts payables, and the other factors described above change with increased production and thepurchase of larger quantities of raw materials (principally gold). OUTLOOK FOR 2016Based on its existing resources and capacity, the Company reiterates its expectation that gold processed will be between 50 metric tons and 60 metric tonsduring 2016. Conference Call DetailsKingold also announced that it will discuss these financial results in a conference call on Friday, August 12, 2016, at 5:00 PM ET .The dial-in numbers are: Live Participant Dial In (Toll Free): +1 877-407-9038Live Participant Dial In (International): +1 201-493-6742 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, orclick on the following link: http://kingoldjewelry.equisolvewebcast.com/q2-2016. The Company will also have an accompanying slide presentation available inPDF 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 leadingdesigners and manufacturers of 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells both directly to retailers as well asthrough 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 StatementsThis press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and theSecurities Exchange Act of 1934, as amended. You can identify these forward-looking statements by words such as “expects,” “believe,” “project,” “anticipate,” orsimilar expressions. The forward-looking statements in this release include statements regarding Kingold’s outlook with respect to its 2016 outlook for goldprocessing, its expectations with respect to completion of transferring the Jewelry Park. Readers are cautioned that actual results could differ materially fromthose expressed in any forward-looking statements. Forward-looking statements are subject to a number of risks, including those contained in Kingold's SECfilings 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 notto 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 updateor revise any forward-looking statements for any reason.



Company ContactKingold Jewelry, Inc.Bin Liu, CFOPhone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)[email protected]

INVESTOR RELATIONS COUNSEL:The Equity Group Inc.Katherine Yao, Senior AssociatePhone: [email protected]



KINGOLD JEWELRY, INCCONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(IN U.S. DOLLARS) (UNAUDITED)

For the three months ended June 30, For the six months ended June 30, 2016 2015 2016 2015

NET SALES $ 390,260,645 $ 249,421,052 $ 672,448,702 $ 455,616,272 COST OF SALES










OTHER COMPREHENSIVE INCOME (LOSS)

Total foreign currency translation gains (loss) (8,622,381) 488,151 (6,659,687) 1,587,816 Less: foreign currency translation gain attributable to non-controlling

interest 2,030 81 1,576 81 Foreign currency translation gains (loss) attributable to common

stockholders $ (8,624,411) $ 488,070 $ (6,661,263) $ 1,587,735

COMPREHENSIVE INCOME ATTRIBITABLE TO:

Common stockholders $ 11,136,468 $ 1,061,689 $ 28,298,026 $ 8,742,561 Non-controlling interest 1,762 - 111 - $ 11,138,230 $ 1,061,689 $ 28,298,137 $ 8,742,561

Earnings per share Basic $ 0.30 $ 0.01 $ 0.53 $ 0.11 Diluted $ 0.30 $ 0.01 $ 0.53 $ 0.11

Weighted average number of shares Basic 65,964,110 65,963,502 65,963,806 65,963,502 Diluted 66,273,246 65,963,502 65,970,164 65,963,502



KINGOLD JEWELRY, INCCONDENSED CONSOLIDATED BALANCE SHEETS(IN U.S. DOLLARS) (UNAUDITED) June 30, December 31, 2016 2015

ASSETS CURRENT ASSETS

Cash $ 37,496,173 $ 3,100,569 Restricted cash 46,107,680 26,649,687 Accounts receivable 403,267 1,624,323 Inventories 786,485,088 298,303,185 Other current assets and prepaid expenses 4,954,662 1,046,032 Value added tax recoverable 86,193,253 15,526,002

Total current assets 961,640,123 346,249,798 PROPERTY AND EQUIPMENT, NET 7,158,325 7,622,509 OTHER ASSETS

Deposit on land use right - Jewelry Park 9,084,474 9,296,763 Construction in progress- Jewelry Park 153,484,370 105,844,259 Other assets 145,317 148,713 Land use right 438,119 454,180

Total long-term assets 170,310,605 123,366,424 TOTAL ASSETS $ 1,131,950,728 $ 469,616,222

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Short term loans $ 165,878,918 $ 55,455,428 Debts payable, net - 61,471,962 Construction payables-Jewelry Park 54,189,120 23,876,642 Deposit payable-Jewelry Park 90,736,671 22,182,171 Other payables and accrued expenses 5,849,813 6,355,979 Due to related party 449,809 200,059 Income tax payable 6,740,793 1,119,918 Other taxes payable 608,321 710,104

Total current liabilities 324,453,445 171,372,263 Deferred income tax liability 1,986,173 1,774,993 Long term loans 511,334,558 30,808,571 TOTAL LIABILITIES 837,774,176 203,955,827 COMMITMENTS AND CONTINGENCIES EQUITY

Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June 30, 2016 andDecember 31, 2015 - -

Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 and 65,963,502 shares issued andoutstanding as of June 30, 2016 and December 31, 2015 66,018 65,963

Additional paid-in capital 80,208,682 79,990,717 Retained earnings

Unappropriated 219,523,436 184,564,147 Appropriated 967,543 967,543

Accumulated other comprehensive loss (6,662,512) (1,249)Total stockholders' equity 294,103,167 265,587,121 Non-controlling interest 73,385 73,274 Total Equity 294,176,552 265,660,395

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,131,950,728 $ 469,616,222



KINGOLD JEWELRY, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(IN U.S. DOLLARS) (UNAUDITED) For the six months ended June 30, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 34,957,824 $ 7,154,638 Adjustments to reconcile net income to cash used in operating activities:

Depreciation 629,352 670,538 Amortization of intangible assets 5,781 6,170 Amortization of deferred financing costs 144,134 326,509 Share based compensation for services and warrants and shares issued for consulting services 151,580 315,127 Inventory valuation allowance - 10,315,970 Deferred tax provision (benefit) 255,738 (1,730,028)

Changes in operating assets and liabilities (Increase) decrease in:

Accounts receivable 1,202,904 372,622 Inventories (502,911,887) (37,695,661)Other current assets and prepaid expenses (3,995,411) (120,344)Value added tax recoverable (72,157,904) (5,280,553)

Increase (decrease) in: Other payables and accrued expenses (388,356) 1,086,129 Deposit payable, Jewelry Park, net 70,165,780 - Income tax payable 5,649,770 581,994 Other taxes payable 67 366,577 Net cash used in operating activities (466,290,628) (23,630,312)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (334,586) (29,825)Payment for construction in progress-Jewelry Park (19,506,468) (24,233,680)Net cash used in investing activities (19,841,054) (24,263,505)

CASH FLOWS FROM FINANCING ACTIVITIES

Capital contribution from minority interest for the new subsidiary - 73,465 Proceeds from bank loans 611,580,106 6,530,186 Repayments of bank loans (9,175,996) (13,060,372)Restricted cash (20,387,531) (9,991,098)Proceeds from related party loan 250,226 - Proceeds from exercise of warrants 66,439 - (Repayment) proceeds from debt financing instruments under private placement (61,173,304) 65,301,858 Deferred financing costs - (653,019)

Net cash provided by financing activities 521,159,940 48,201,020

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (632,654) (140,539) NET INCREASE IN CASH AND CASH EQUIVALENTS 34,395,604 166,664 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,100,569 1,331,658 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,496,173 $ 1,498,322 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense $ 19,126,073 $ 2,584,438 Cash paid for income tax $ 11,660,842 $ 2,704,280


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