UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
quarterly period ended: June 30, 2010
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
transition period from: _____________ to _____________
Commission File Number:
001-15819
KINGOLD
JEWELRY, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
13-3883101
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer
|
|
of
Incorporation)
|
Identification
No.)
|
40
Wall Street
58
th
Floor
New York, NY
10170
(Address
of Principal Executive Office) (Zip Code)
(212)
509-1700
(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 during the
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 for the past 90 days.
þ
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 be
submitted 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 the
registrant was required to submit and post such files).
x
Yes
¨
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.
|
Large
accelerated filer
|
o
|
|
Accelerated
filer
|
o
|
|
Non-accelerated
filer
|
o
|
|
Smaller
reporting company
|
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
¨
Yes
þ
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 10, 2010 there were 41,766,389 shares of common stock outstanding, par
value $0.001.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTTIVEWORLDS CORP.)
(UNAUDITED)
TABLE
OF CONTENTS
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Page Number
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Cautionary
Statement Relevant to Forward-Looking Information
|
3
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Certain
Defined Terms
|
3
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PART
I. Financial Statements
|
4
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|
|
Item
1.
|
Condensed
Consolidated
Financial
Information
|
4
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|
|
|
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|
|
Condensed
Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and
December 31, 2009
|
4
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|
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|
|
|
|
Condensed
Consolidated Statements of Income for the Three and Six Months Ended June
30, 2010 and June 30, 2009 (Unaudited)
|
5
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2010 and June 30, 2009 (Unaudited)
|
6
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements –
June 30
, 2010
(unaudited)
|
7
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|
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|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
21
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|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
25
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|
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|
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|
Item
4.
|
Controls
and Procedures
|
25
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Item
4T.
|
Controls
and Procedures
|
25
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PART
II. Other Information
|
26
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|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
26
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Item
1A.
|
Risk
Factors
|
26
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|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
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|
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|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
26
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|
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|
|
Item
4.
|
Removed
and Reserved
|
27
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|
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|
|
|
Item
5.
|
Other
Information
|
27
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|
|
|
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|
Item
6.
|
Exhibits
|
27
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|
|
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|
Signatures
|
|
27
|
CAUTIONARY
STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
All
statements, other than statements of historical fact, included in this Form
10-Q, including without limitation the statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” are, or may be
deemed to be, forward-looking statements. Such forward-looking statements
involve assumptions, known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of Kingold
Jewelry, Inc. (formerly known as Activeworlds Corp.), a Delaware corporation,
and our wholly-owned subsidiaries, Dragon Lead, a BVI corporation, Wuhan
Vogue-Show Jewelry Co., Ltd., a PRC wholly foreign owned enterprise, and Wuhan
Kingold Jewelry Company Limited, or Wuhan Kingold, our contractually controlled
entity and a PRC company limited by shares (collectively, the “Company”), to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements contained in this Form
10-Q. In our capacity as Company management, we may from time to time make
written or oral forward-looking statements with respect to our long-term
objectives or expectations which may be included in our filings with the
Securities and Exchange Commission (the “SEC”), reports to stockholders and
information provided in our web site.
The words
or phrases “will likely,” “are expected to,” “is anticipated,” “is predicted,”
“forecast,” “estimate,” “project,” “plans to continue,” “believes,” or similar
expressions identify “forward-looking statements.” Such forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. We caution you not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. We are calling
to your attention important factors that could affect our financial performance
and could cause actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The
following list of important factors may not be all-inclusive, and we
specifically decline to undertake an obligation to publicly revise any
forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events. Among the factors that could have an impact
on our ability to achieve expected operating results and growth plan goals
and/or affect the market price of our stock are:
|
|
•
|
changes in the market price of
gold;
|
|
|
•
|
changes in political, economic or
regulatory conditions generally and in the PRC markets in which we
operate;
|
|
|
•
|
non-performance of suppliers on
their sale commitments and customers on their purchase
commitments;
|
|
|
•
|
non-performance of third-party
service providers;
|
|
|
•
|
adverse conditions in the
industries in which our customers operate, including a continuation of the
global recession;
|
|
|
•
|
our ability to manage
growth;
|
|
|
•
|
our ability to integrate acquired
businesses;
|
|
|
•
|
our ability to retain and attract
senior management and other key
employees;
|
|
|
•
|
changes in PRC or U.S. tax
laws;
|
|
|
•
|
increased levels of
competition;
|
|
|
•
|
our ability to comply with
environmental laws and regulations;
and
|
|
|
•
|
other risks, including those
described in the “Risk Factors” discussion of this
prospectus.
|
CERTAIN
DEFINED TERMS
Throughout
this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” ” Company,” and
“our Company” refer to Kingold Jewelry, Inc. (formerly known as
Activeworlds Corp.), a Delaware corporation, and our wholly-owned subsidiaries,
Dragon Lead, a BVI corporation, Wuhan Vogue-Show Jewelry Co., Ltd., a PRC wholly
foreign owned enterprise, and Wuhan Kingold Jewelry Company
Limited, our contractually controlled entity and a PRC company
limited by shares.
PART
I – FINANCIAL INFORMATION
|
Item
1.
|
Financial
Statements.
|
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(IN
US DOLLARS)
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,643,253
|
|
|
$
|
7,964,120
|
|
|
Restricted
cash
|
|
|
-
|
|
|
|
1,462,587
|
|
|
Accounts
receivable
|
|
|
250,820
|
|
|
|
485,399
|
|
|
Inventories
|
|
|
44,923,854
|
|
|
|
31,756,009
|
|
|
Other
current assets and prepaid expenses
|
|
|
212,395
|
|
|
|
101,189
|
|
|
Value
added tax recoverable
|
|
|
5,649,702
|
|
|
|
5,792,014
|
|
|
Total
Current Assets
|
|
|
57,680,024
|
|
|
|
47,561,318
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
13,644,058
|
|
|
|
14,126,950
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
142,360
|
|
|
|
141,198
|
|
|
Intangible
assets, net
|
|
|
496,089
|
|
|
|
497,572
|
|
|
Total
other assets
|
|
|
638,449
|
|
|
|
638,770
|
|
|
TOTAL
ASSETS
|
|
$
|
71,962,531
|
|
|
$
|
62,327,038
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Short
term loans
|
|
$
|
8,847,678
|
|
|
$
|
8,775,522
|
|
|
Other
payables and accrued expenses
|
|
|
750,037
|
|
|
|
368,196
|
|
|
Income
tax payable
|
|
|
1,600,228
|
|
|
|
1,347,295
|
|
|
Other
taxes payable
|
|
|
45,812
|
|
|
|
192,415
|
|
|
Total
Current Liabilities
|
|
|
11,243,755
|
|
|
|
10,683,428
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 500,000 shares authorized, none issued or
outstanding as of June 30, 2010 and December 31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock $0.001 par value, 100,000,000 shares authorized, 83,532,777 shares
issued and outstanding as of June 30, 2010 and December 31,
2009
|
|
|
83,532
|
|
|
|
83,532
|
|
|
Additional
paid-in capital
|
|
|
31,035,352
|
|
|
|
31,035,352
|
|
|
Retained
earnings
|
|
|
|
|
|
|
|
|
|
Unappropriated
|
|
|
23,885,309
|
|
|
|
15,669,257
|
|
|
Appropriated
|
|
|
915,767
|
|
|
|
878,911
|
|
|
Accumulated
other comprehensive income
|
|
|
3,600,323
|
|
|
|
3,156,305
|
|
|
Total
Stockholders' Equity
|
|
|
59,520,283
|
|
|
|
50,823,356
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interest
|
|
|
1,198,493
|
|
|
|
820,254
|
|
|
Total
Equity
|
|
|
60,718,776
|
|
|
|
51,643,610
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
71,962,531
|
|
|
$
|
62,327,038
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(IN
US DOLLARS)
(UNAUDITED)
|
|
|
For the three months ended
June 30,
|
|
|
For the six months
ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
$
|
107,843,982
|
|
|
$
|
60,418,354
|
|
|
$
|
168,356,310
|
|
|
$
|
98,479,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(100,568,471
|
)
|
|
|
(57,277,251
|
)
|
|
|
(154,782,581
|
)
|
|
|
(91,939,064
|
)
|
|
Depreciation
|
|
|
(276,269
|
)
|
|
|
(278,334
|
)
|
|
|
(555,084
|
)
|
|
|
(556,603
|
)
|
|
Total
cost of sales
|
|
|
(100,844,740
|
)
|
|
|
(57,555,585
|
)
|
|
|
(155,337,665
|
)
|
|
|
(92,495,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
6,999,242
|
|
|
|
2,862,769
|
|
|
|
13,018,645
|
|
|
|
5,983,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
742,564
|
|
|
|
440,871
|
|
|
|
1,125,566
|
|
|
|
835,938
|
|
|
Depreciation
|
|
|
29,614
|
|
|
|
29,741
|
|
|
|
56,277
|
|
|
|
59,442
|
|
|
Amortization
|
|
|
2,769
|
|
|
|
2,767
|
|
|
|
5,538
|
|
|
|
5,532
|
|
|
Total
Operating Expenses
|
|
|
774,947
|
|
|
|
473,379
|
|
|
|
1,187,381
|
|
|
|
900,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
6,224,295
|
|
|
|
2,389,390
|
|
|
|
11,831,264
|
|
|
|
5,082,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
2,294
|
|
|
|
966
|
|
|
|
4,052
|
|
|
|
966
|
|
|
Interest
income
|
|
|
1,126
|
|
|
|
(273
|
)
|
|
|
2,307
|
|
|
|
24
|
|
|
Interest
expense
|
|
|
(134,568
|
)
|
|
|
(246,247
|
)
|
|
|
(269,536
|
)
|
|
|
(510,504
|
)
|
|
Total
Other Expenses, net
|
|
|
(131,148
|
)
|
|
|
(245,554
|
)
|
|
|
(263,177
|
)
|
|
|
(509,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS BEFORE TAXES
|
|
|
6,093,147
|
|
|
|
2,143,836
|
|
|
|
11,568,087
|
|
|
|
4,572,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
(1,590,197
|
)
|
|
|
(536,657
|
)
|
|
|
(2,946,095
|
)
|
|
|
(1,144,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
4,502,950
|
|
|
$
|
1,607,179
|
|
|
$
|
8,621,992
|
|
|
$
|
3,428,309
|
|
|
Less:
net income attribute to the noncontrolling interest
|
|
|
(198,934
|
)
|
|
|
(156,118
|
)
|
|
|
(369,084
|
)
|
|
|
(231,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
4,304,016
|
|
|
$
|
1,451,061
|
|
|
$
|
8,252,908
|
|
|
$
|
3,196,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
foreign currency translation gains
|
|
|
393,852
|
|
|
|
79,041
|
|
|
|
453,174
|
|
|
|
97,924
|
|
|
Less:
foreign currency translation gains attributable to noncontrolling
interest
|
|
|
(7,754
|
)
|
|
|
(284
|
)
|
|
|
(9,155
|
)
|
|
|
(567
|
)
|
|
Foreign
currency translation gains attributable to common
stockholders
|
|
|
386,098
|
|
|
|
78,757
|
|
|
|
444,019
|
|
|
|
97,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
$
|
4,690,114
|
|
|
$
|
1,529,818
|
|
|
$
|
8,696,927
|
|
|
$
|
3,294,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
|
|
0.02
|
|
|
$
|
0.10
|
|
|
|
0.05
|
|
|
Diluted
|
|
$
|
0.05
|
|
|
|
0.02
|
|
|
$
|
0.09
|
|
|
|
0.05
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
KINGOLD
JEWELRY INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN
US DOLLARS)
(UNAUDITED)
|
|
|
For the six months ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
8,621,992
|
|
|
$
|
3,428,309
|
|
|
Adjusted
to reconcile net income to cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
616,899
|
|
|
|
621,577
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
237,022
|
|
|
|
1,046,051
|
|
|
Inventories
|
|
|
(12,822,975
|
)
|
|
|
12,790,677
|
|
|
Other
current assets and prepaid expenses
|
|
|
(110,193
|
)
|
|
|
113,014
|
|
|
Value
added tax recoverable
|
|
|
188,703
|
|
|
|
-
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
Other
payables and accrued expenses
|
|
|
379,370
|
|
|
|
40,042
|
|
|
Income
tax payable
|
|
|
285,799
|
|
|
|
(952,530
|
)
|
|
Other
taxes payable
|
|
|
(192,738
|
)
|
|
|
(508,331
|
)
|
|
Net
cash provided by (used in) operating activities
|
|
|
(2,796,120
|
)
|
|
|
16,578,809
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(16,198
|
)
|
|
|
(9,906
|
)
|
|
Net
cash used in investing activities
|
|
|
(16,198
|
)
|
|
|
(9,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
1,465,044
|
|
|
|
1,243,302
|
|
|
Proceeds
from bank loans
|
|
|
5,860,174
|
|
|
|
5,853,853
|
|
|
Repayments
of bank loans
|
|
|
(5,860,174
|
)
|
|
|
(5,414,814
|
)
|
|
Net
cash provided by financing activities
|
|
|
1,465,044
|
|
|
|
1,682,341
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS
|
|
|
26,407
|
|
|
|
14,379
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(1,320,867
|
)
|
|
|
18,265,623
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
7,964,120
|
|
|
|
337,903
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
6,643,253
|
|
|
$
|
18,603,526
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest expense
|
|
$
|
232,910
|
|
|
$
|
414,529
|
|
|
Cash
paid for income tax
|
|
$
|
2,705,810
|
|
|
$
|
2,097,286
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1-
BASIS OF
PRESENTAION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles (“
US
GAAP
”)
for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary to make the financial
statements not misleading have been included. Operating results for the periods
ended June 30, 2010 and 2009 are not necessarily indicative of the results that
may be expected for the full year. The information included in this Form 10-Q
should be read in conjunction with Management’s Discussion and Analysis and the
financial statements and notes thereto included in the Company’s 2009 Form
10-K.
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
accompanying condensed consolidated financial statements include the financial
statements of Kingold Jewelry Inc. (Kingold), its wholly owned subsidiaries,
Dragon Lead Group Limited (“Dragon Lead”) and Wuhan Vogue-Show Jewelry Co.,
Limited (“Wuhan Vogue-Show”) and Wuhan Kingold Jewelry Co., Limited (“Wuhan
Kingold”), its 95.83% contractually controlled affiliate. The noncontrolling
interests represent the minority stockholders' 4.17% proportionate share of the
results of Wuhan Kingold. All significant inter-company balances and
transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash and
cash equivalents include cash on hand and demand deposits with a bank with an
original maturity of less than three months.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Restricted
cash
The
Company's financing facilities require a minimum cash deposit as security for
borrowings outstanding under its demand financing facilities. The restricted
cash amount is classified as a current asset in the balance sheets since the
borrowings it secures are classified as current liabilities. As of June 30, 2010
the balance was $0, compared to the balance of $1,462,587 as of December 31,
2009. Because of our accumulated good credit record, the restricted cash is
currently waived by the financing facilities.
Accounts
Receivable
The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and recorded based on managements' assessment of the credit history
with the customers and current relationships with them. As of June 30, 2010 and
December 31, 2009, the Company has not recorded any write off of customer
receivables and there was no allowance for doubtful accounts established. The
Company considers all the accounts receivable fully collectible.
Inventories
Inventories
are stated at the lower of cost or market value, cost being calculated on the
weighted average basis. The cost of inventories comprises all costs of
purchases, costs of fixed and variable production overheads and other costs
incurred in bringing the inventories to their present location and condition.
The Company provides inventory allowances based on excess and obsolete
inventories determined principally by customer demand. The Company has not
recorded any write down of inventory as a result of the Company’s entire
inventory is turned over usually within thirty to sixty
days. Therefore, the Company has determined no allowance for
inventories is considered necessary for the six months ended June 30, 2010 and
2009.
Property
and equipment
Property
and equipment are stated at cost, less accumulated depreciation. Expenditures
for additions, major renewals and betterments are capitalized and expenditures
for maintenance and repairs are charged to expense as incurred.
Depreciation
is provided on a straight-line basis, less estimated residual value over the
assets' estimated useful lives. The estimated useful lives are as
follows:
|
|
|
Estimate Useful Life
|
|
|
Estimated Redidual Value
|
|
|
Buildings
|
|
30
Years
|
|
|
|
5
|
%
|
|
Plant
and Machinery
|
|
15
Years
|
|
|
|
5
|
%
|
|
Motor
Vehicles
|
|
10
Years
|
|
|
|
5
|
%
|
|
Office
Furniture and Electronic Equipment
|
|
5-10
Years
|
|
|
|
5
|
%
|
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-lived
assets
The
Company accounts for long-lived assets under the FASB Codification Topic 360
(ASC Topic 360) "Accounting for Goodwill and Other Intangible Assets" and
"Accounting for Impairment or Disposal of Long-Lived Assets". In accordance with
ASC Topic 360, indefinite -lived intangible assets held and used by the Company
are reviewed for impairment annually in the fourth quarter or more frequently if
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Finite-lived assets and intangibles are also reviewed
for impairment test when circumstance requires it. For purposes of evaluating
the recoverability of long-lived assets, when undiscounted future cash flows
will not be sufficient to recover an asset's carrying amount, the asset is
written down to its fair value. The long-lived assets of the Company, which are
subject to evaluation, consist primarily of property, plant and equipment and
land use rights. No impairment loss is recorded for the six months ended June
30, 2010 and 2009.
Fair
value of financial instruments
FASB
Codification Topic 825(ASC Topic 825), "Disclosure about Fair Value of Financial
Instruments," requires certain disclosures regarding the fair value of financial
instruments. Fair value of financial instruments is made at a specific point in
time, based on relevant information about financial markets and specific
financial instruments. As these estimates are subjective in nature, involving
uncertainties and matters of significant judgment, they cannot be determined
with precision. Changes in assumptions can significantly affect estimated fair
values.
The
carrying value of accounts receivable, other current assets and prepaid
expenses, other payables and accrued expenses approximate their fair values
because of the short-term nature of these instruments. The management of the
Company is of the opinion that the Company is not exposed to significant
interest or credit risks arising from these financial instruments.
Revenue
recognition
Net sales
are primarily composed of sales of products to wholesale and retail customers
and subcontracting fees. The Company recognizes revenues under the FASB
Codification Topic 605 ("ASC Topic 605"), Revenue is recognized when all of the
following have occurred: persuasive evidence of arrangement with the customer,
services has been performed, fees are fixed or determinable and collectability
of the fees is reasonably assured. These criteria as related to the Company's
revenues are considered to have been met as follows:
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales of
products
The
Company recognizes revenue on sales of products when the goods are delivered and
title to the goods passes to the customers provided that: there are no
uncertainties regarding customer acceptance; persuasive evidence of an
arrangement exists; the sales price is fixed and determinable; and
collectability is deemed probable.
Sub-contracting
fees
The
Company also provides sub-contracting services to its customers based on a
fixed-price contract. The Company recognizes services-based revenue from all its
contracts when the services have been performed, the customers have approved the
completion of services, invoices have been issued and collectability is deemed
probable. The revenues from sub-contracting services only consist of
approximately 3.98% of the total revenue recognized.
Income
taxes
The
Company accounts for income taxes under the FASB Codification Topic 740-10-25
(“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the consolidated financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized as income in the period included the
enactment date.
On
January1, 2007, the Company adopted the provisions of ASC 740-10-25, "Accounting
for Uncertainty in Income Taxes". ASC 740-10-25 prescribes a
more-likely-than-not threshold for consolidated financial statement recognition
and measurement of a tax position taken (or expected to be taken) in a tax
return. This Interpretation also provides guidance on the recognition of income
tax assets and liabilities, classification of current and deferred income tax
assets and liabilities, accounting for interest and penalties associated with
tax positions, accounting for interest and penalties associated with tax
positions. The adoption of ASC 740-10-25 has not resulted in any material impact
on the Company's financial position or results.
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 remain open for tax
years 2007 and after. The Company’s foreign tax returns, mainly PRC,
remain open for tax years 2008 and after.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign
currency translation
Kingold
and Dragon Lead maintain their accounting records in the United States Dollars
("US$"), whereas Wuhan Vogue-Show and Wuhan Kingold maintain their accounting
records in the currency of Renminbi ("RMB"), being the primary currency of the
economic environment in which their operations are conducted.
The
Company’s principal country of operations is the PRC. The financial position and
results of operations of the Company are determined using the local currency
(“RMB”) as the functional currency. The results of operations and the statement
of cash flows denominated in foreign currency are translated at the average rate
of exchange during the reporting period. Assets and liabilities denominated in
foreign currencies at the balance sheet date are translated at the applicable
rates of exchange in effect at that date. The equity denominated in the
functional currency is translated at the historical rate of exchange at the time
of capital contribution. Because cash flows are translated based on the average
translation rate, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet. Translation adjustments arising
from the use of different exchange rates from period to period are included as a
component of stockholders’ equity as “Accumulated Other Comprehensive
Income”.
The value
of RMB against US$ and other currencies may fluctuate and is affected by, among
other things, changes in China's political and economic conditions, Any
significant revaluation of RMB may materially affect the Company's financial
condition in terms of US$ reporting.
Other
comprehensive income
The
foreign currency translation gain or loss resulting from translation of the
financial statements expressed in HK$ and RMB to US$ is reported as other
comprehensive income in the statements of operations and stockholders'
equity.
Other
comprehensive income for the six months ended June 30, 2010 and 2009 was
$444,019 and $97,357, respectively, and for three months ended June 30, 2010 and
2009 was $386,098 and $78,757, respectively.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings
per share
The
Company computes earnings per share (“EPS’) in accordance with ASC 260 “Earnings
per Share” (“ASC 260”). ASC 260 requires companies with complex capital
structures to present basic and diluted EPS. Basic EPS is measured as net
income divided by the weighted average common shares outstanding for the
period. Diluted EPS is similar to basic EPS but presents the dilutive
effect on a per share basis of potential common shares (e.g., convertible
securities, options and warrants) as if they had been converted at the beginning
of the periods presented, or issuance date, if later. Potential common
shares that have an anti-dilutive effect (i.e., those that increase income per
share or decrease loss per share) are excluded from the calculation of diluted
EPS.
Segments
The
Company operates in only one segment; As a result segment disclosure is not
presented.
Recent
Accounting Pronouncements
In
May 2009, the FASB issued ASC 855-10, "Subsequent Events" ("ASC 855-10"),
which establishes principles and standards related to the accounting for and
disclosure of events that occur after the balance sheet date but before the
financial statements are issued. ASC 855-10 requires an entity to recognize, in
the financial statements, subsequent events that provide additional information
regarding conditions that existed at the balance sheet date. Subsequent events
that provide information about conditions that did not exist at the balance
sheet date shall not be recognized in the financial statements under ASC 855-10.
ASC 855-10 was effective for interim and annual reporting periods on or after
June 15, 2009. The adoption of ASC 855-10 did not have a material effect on
the Company's financial position or results of operations. In February 2010, the
FASB issued
ASU
2010-09 "Subsequent Events -
Amendments to Certain Recognition and Disclosure Requirements" ("ASU 2010-09"),
which removed the requirements in ASC 855-10 for an SEC filer to disclose the
date through which subsequent events have been evaluated for both issued and
revised financial statements. ASU 2010-09 became effective upon
issuance and the adoption of ASU 2010-09 did not have a material effect on the
Company's financial position or results of operations.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
3- INVENTORIES, NET
Inventories
consist the following:
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Raw
Materials
|
|
$
|
11,630,310
|
|
|
$
|
9,645,402
|
|
|
Work-in-progress
|
|
|
27,556,197
|
|
|
|
17,894,676
|
|
|
Finished
Goods
|
|
|
5,737,347
|
|
|
|
4,215,931
|
|
|
Less:
Provision for Obsolescence
|
|
|
-
|
|
|
|
-
|
|
|
Total
Inventory
|
|
$
|
44,923,854
|
|
|
$
|
31,756,009
|
|
For the
six months ended June 30, 2010 and 2009, no provision for obsolete inventories
was recorded by the Company.
NOTE
4- PROPERTY AND EQUIPMENT, NET
The
following is a summary of property and equipment:
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
1,851,154
|
|
|
$
|
1,881,339
|
|
|
Plant
and Machinery
|
|
|
17,366,074
|
|
|
|
17,325,868
|
|
|
Motor
Vehicles
|
|
|
38,872
|
|
|
|
38,555
|
|
|
Office
and Electronic Equipment
|
|
|
591,355
|
|
|
|
423,658
|
|
|
Subtotal
|
|
|
19,847,455
|
|
|
|
19,669,420
|
|
|
Less:
accumulated depreciation
|
|
|
(6,203,397
|
)
|
|
|
(5,542,470
|
)
|
|
Property
and Equipment, Net
|
|
$
|
13,644,058
|
|
|
$
|
14,126,950
|
|
Depreciation
expense for the six months ended June 30, 2010 and 2009 were $611,361 and
$616,045, respectively. Depreciation expense for the three
months ended June 30, 2010 and 2009 were $305,883 and $308,075,
respectively.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
5-OTHER ASSETS
Other
assets as of June 30, 2010 and December 31, 2009 consist of the Company’s
investment in the membership certificates at Shanghai Diamond Exchange and
Shanghai Gold Exchange.
In
accordance with ASC 940-340, membership certificates at Shanghai Diamond
Exchange and Shanghai Gold Exchange owned by the Company are originally carried
at cost or, if another-than-temporary impairment in value has occurred, at
adjusted cost. In determining whether another-than-temporary decline
in value has occurred, the Company uses ASC 320, ASC 958 and Section M of Topic
5 of the SEC Staff Accounting Bulletin series (“SAB 59”) as analogous
guidance. There was no impairment of these assets as of June 30,
2010 and December 31, 2009.
NOTE
6 –INTANGIBLE ASSETS, NET
Intangible
assets as of June 30, 2010 and December 31, 2009 consist of land use rights and
computer software program acquired. The Company has the right to use the land
for fifty years and the right to use the software for five years and the Company
amortizes the assets on a straight line basis over its terms from the
acquisition date. Amortization expense was $5,538 and $5,532 for the six months
ended June 30, 2010 and 2009, and was $2,769 and $2,767 for the three months
ended June 30, 2010 and 2009, respectively.
NOTE
7 –SHORT TERM LOANS
The Short
term loans include the following:
|
|
|
As June 30,
|
|
|
As December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
Loan payable to Pufa Bank
|
|
$
|
5,898,452
|
|
|
$
|
5,850,348
|
|
|
|
|
|
|
|
|
|
|
|
|
b)
Loan payable to Xinye Bank
|
|
|
2,949,226
|
|
|
|
2,925,174
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Short Term Loan
|
|
$
|
8,847,678
|
|
|
$
|
8,775,522
|
|
a) Loan
payable to Pufa bank, Jiangan branch was originally one year term from May 2009
to May 2010 at the interest rate of 5.31% per year, the loan was paid off by the
due date and then, as customary to China, was, reborrowed for another one year
term from May 2010 to May 2011 at the interest rate of 5.5755% per year pursuant
to a new note. This loan has been guaranteed by buildings and plant and
machinery of the Company.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
7 –SHORT TERM LOANS (Continued)
b) Loan
payable to Xinye bank, Hanzhengjie branch was one year term from December 2009
to December 2010 at the interest rate of 4.425% per year. This loan has been
guaranteed by a non-related third party.
Interest
expense for the six months ended June 30, 2010 and 2009 was $269,536 and
$510,504, respectively and for the three months ended June 30, 2010 and 2009 was
$134,568 and $246,247, respectively.
NOTE
8 –INCOME TAX
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
was incorporated in the United States and has incurred net operating losses for
income tax purpose for the six months ended June 30, 2010 and for the years
ended 2009. Kingold had loss carry forwards of approximately $587,000 for U.S.
income tax purposes available for offset against future taxable U.S. income.
These carry forwards will expire, if not utilized, beginning in 2029 through
2030. Management believes that the realization of the benefits from these losses
appears uncertain due to the Company's limited operating history income and
continuing losses. Accordingly, the Company has provided a 100% valuation
allowance at June 30, 2010 and December 31, 2009 for the loss carry-forwards.
The valuation allowance as of June 30, 2010 and December 31, 2009 was
approximately $199,000 and $111,000, respectively. The net change in the
valuation allowance was an increase of approximately $88,000.
Dragon
Lead was incorporated in the BVI and under current laws of the BVI; income
earned is not subject to income tax.
Wuhan
Vogue-Show and Wuhan Kingold were incorporated in the PRC and are subject to PRC
income tax which is computed according to the relevant laws and regulations in
the PRC. The applicable tax rate is 25% for the six months ended June 30, 2010
and 2009.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
8 –INCOME TAX (Continued)
The
following table reconciles the U.S. statutory rates to the Company’s effective
rate for the six months ended June 30, 2010 and 2009:
|
|
|
For the Six Months
Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Statutory Rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
Foreign
Income not Recognized in USA
|
|
|
-34
|
%
|
|
|
-34
|
%
|
|
China
Income Tax
|
|
|
25
|
%
|
|
|
25
|
%
|
|
Non-deductible
Expenses
|
|
|
-
|
|
|
|
-
|
|
|
Effective
Tax Rate
|
|
|
25
|
%
|
|
|
25
|
%
|
NOTE
9 –EARNINGS PER SHARE
In
December 23, 2009, the Company entered into a reverse merger transaction with
Dragon Lead. The Company computes the weighted-average number of common shares
outstanding in accordance with ASC 805. ASC 805 states that in calculating the
weighted average shares when a reverse merger took place in the middle of the
year, the number of common shares outstanding from the beginning of that period
to the acquisition date shall be computed on the basis of the weighted-average
number of common shares of the legal acquiree (the accounting acquirer)
outstanding during the period multiplied by the exchange ratio established in
the merger agreement. The number of common shares outstanding from the
acquisition date to the end of that period will be the actual number of common
shares of the legal acquirer (the accounting acquiree) outstanding during that
period.
As of
June 30, 2010, the Company had outstanding warrants to acquire 6,670,482 shares
of common stock. 5,120,482 warrants have an excise price of $0.498, while
1,550,000 warrants have an exercise price of $0.598. As of June 30, 2010, all
the outstanding warrants were considered dilutive and were included in the
weighted average shares-diluted calculation using the treasury stock
method.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
9 –EARNINGS PER SHARE (Continued)
The
following table presents a reconciliation of basic and diluted net income per
share:
|
|
|
For the Six Months Ended
|
|
|
For the Three Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net
income attributable to Common stockholders
|
|
$
|
8,252,908
|
|
|
$
|
3,196,849
|
|
|
$
|
4,304,017
|
|
|
$
|
1,451,061
|
|
|
Weighted
average number of common shares outstanding - Basic
|
|
|
83,532,777
|
|
|
|
66,208,466
|
|
|
|
83,532,777
|
|
|
|
66,208,466
|
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised
warrants
|
|
|
5,406,155
|
|
|
|
-
|
|
|
|
5,406,155
|
|
|
|
-
|
|
|
Weighted
average number of common shares outstanding - Diluted
|
|
|
88,938,932
|
|
|
|
66,208,466
|
|
|
|
88,938,932
|
|
|
|
66,208,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share-Basic
|
|
$
|
0.10
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share-Diluted
|
|
$
|
0.09
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.02
|
|
Note
10 - STOCKHOLDERS’ EQUITY
(1)
Issuance of Common Stock for recapitalization
Before
the acquisition of Dragon Lead, the company had 6,250,010 shares of common stock
issued and outstanding. In addition, the Company has outstanding warrants issued
to former officers and consultants to purchase 1,550,000 shares of common stock,
which were amended to increase the exercise price changed to $0.598 per
share.
On
December 23, 2009, the Company issued 66,208,466 shares of common stock in the
acquisition of Dragon Lead for the recapitalization of Dragon Lead and
re-organization of Kingold.
On
December 23, 2009, 833,335 shares of common stock were issued to a consultant
for advisory services related to the acquisition of Dragon Lead. This expense is
recorded at fair value of $0.498 per share at the grant date for a total of
$415,001.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
10 - STOCKHOLDERS’ EQUITY (Continued)
(2)
Issuance of Common Stock in Private Placement
In
accordance with the Securities Purchase Agreement ("Securities Purchase
agreement") entered into between the Company and a group of accredited investors
("investors") on December 23, 2009, the Company received $5,100,000 (or
$4,472,482 net proceeds after deducting the offering expenses and reverse merger
service expense) from the investors (as defined under Rule 501 (a) of Regulation
D promulgated under the Securities Act) for an issuance of 10,240,966 shares of
restricted common stock at $0.498 by a private placement and warrants to
purchase 2,048,193 shares of Common stock at an exercise price of $0.498 per
share, exercisable within 5 years of the date of issue. The Company relied on an
exemption from registration pursuant to Section 4(2) under the Securities Act of
1933 in connection with the issuance of these shares.
In
connection with the private placement and pursuant to the Securities Purchase
Agreement, the placement agent and advisors received the following
compensation: (i) $368,518 cash as an engagement and documentation fee; (ii)
$200,000 as a placement commission; (iii) $59,000 cash as reverse merger service
fee, and (iv) warrants to purchase 3,072,289 shares of Common Stock with the
same term of the warrants issued to investors.
After the
reverse merger, the company has 83,532,777 shares of common stock issued and
outstanding and warrant to purchase of 6,670,482 shares of common
stock.
(3)
Appropriated retained earnings
The
Company is required to make appropriations to the statutory surplus reserve
based on the after-tax net income determined in accordance with the laws and
regulations of the PRC. Prior to January 1, 2006 the appropriation to the
statutory surplus reserve should be at least 10% of the after tax net income
determined in accordance with the laws and regulations of the PRC until the
reserve is equal to 50% of the entities' registered capital.
Appropriations to the statutory public welfare fund are at 5% to 10% of the
after tax net income determined by the Board of Directors. Effective January 1,
2006, the Company is only required to contribute to one statutory reserve fund
at 10 percent of net income after tax per annum, such contributions not to
exceed 50 percent of the respective company's registered capital.
The
statutory reserve funds cannot be used to set off against prior period losses,
expansion of production and operation or for the increase in the registered
capital of the Company. These reserves are not transferable to the Company in
the form of cash dividends, loans or advances. These reserves are therefore not
available for distribution except in liquidation.
For the
six months ended June 30, 2010 and 2009, the Company appropriated $36,856 and
$25,108, respectively to the reserves funds based on its net income in
accordance with the laws and regulations of the PRC.
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
11 – WARRANTS
In
October, 2008, prior to the acquisition of Dragon Lead, the Company issued
warrants to formers officers and consultants to purchase 1,550,000 shares of
common stock, the original exercise price was $0.16 per
share, exercisable within 5 years of the date of issue, in connection
with the acquisition, the exercise price changed to $0.598 per share with
all other terms the same.
The
Company has determined that the warrants meet the conditions for equity
classification pursuant to ASC 815. Therefore, these warrants were classified as
equity and included in Additional Paid-in Capital. The fair value of the
warrants was calculated using the Black-Scholes options pricing model using the
following assumptions: volatility 100%, risk free interest rate 1.51% (no
dividend yield) and expected term of four years. The fair value of those
warrants was recalculated at the reverse merge date at $1,119,172.
In
conjunction with the private placement, the warrants issued to investor and
placement agent to purchase total 5,120,482 shares of Common stock at an
exercise price of $0.498 per share, exercisable within five years of the
date of issue. No separate consideration was paid for such warrants. The
exercise price of the warrant is subject to adjustments under certain
circumstances and the warrants permit cashless exercise by the holders. This
expense directly related to private placement is recorded as additional paid-in
capital in the accompanying financial statements. The Company relied on the
exemption from registration provided by Section 4(2) of the Securities Act for
the issuance of common stock and warrants to the placement agent. The
warrants issued to the placement agent, qualify as permanent equity, the value
of which warrants has created offsetting debit and credit entries to additional
paid-in capital.
The
Company has determined that the warrants meet the conditions for equity
classification pursuant to ASC 815, “Derivatives and Hedging” . Therefore, these
warrants were classified as equity and included in Additional Paid-in Capital.
The fair value of the warrants was calculated using the Black-Scholes options
pricing model using the following assumptions: volatility 100%, risk free
interest rate 2.51% (no dividend yield) and expected term of five years. The
fair value of those warrants at the grant date was calculated at
$4,020,876.
Following
is a summary of the status of warrants activities as of June 30,
2010:
|
|
|
Warrants
|
|
|
Weighted Average
|
|
|
Average Remaining
|
|
|
Aggregate
|
|
|
|
|
Outstanding
|
|
|
Exercise Price
|
|
|
Life in Years
|
|
|
Intrinsic Value
|
|
|
Outstanding,
January 1, 2010
|
|
|
6,670,482
|
|
|
|
0.52
|
|
|
|
4.77
|
|
|
|
471,084
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
June 30, 2010
|
|
|
6,670,482
|
|
|
|
0.52
|
|
|
|
4.27
|
|
|
|
14,875,175
|
|
KINGOLD
JEWELRY, INC.
(FORMERLY
ACTIVEWORLDS CORP.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note
12 – COMMITMENTS AND CONTINGENCIES
Escrowed
share arrangement
In
accordance with the Securities Purchase Agreement, a majority stockholder of
Dragon Lead, immediately following the closing of the reverse acquisition,
entered into a make good escrow agreement with the investors, pursuant to which
a total of 3,791,218 of their beneficially owned shares of common stock were
delivered to an escrow agent in order to secure the Company's obligations
under the Securities Purchase Agreement to deliver additional common stock
to the private placement investors in the event the Company fails to achieve
certain after-PRC—tax net income of Wuhan Kingold targets for fiscal years
2009, 2010 and 2011 ("Make Good Escrow Shares"). Those targets are RMB65
million, RMB100 million and RMB150 million in after-tax net income for the
fiscal years ended December 31, 2009 and ending December 31, 2010 and 2011,
respectively. In the event the Company is not able to achieve the net income
target, the Company is obligated to transfer 3,791,218 shares of common stock to
the private placement investors on a pro-rata basis. Of the 66,208,466 shares of
common stock issued in the Share Exchange, 3,791,218 have been deposited by the
majority stockholder of Dragon Lead into escrow to secure these
obligations.
As the
performance threshold was met for fiscal year 2009, 1,263,739 escrowed shares
will be returned to stockholders in 2009, the remaining 2,527,479 shares will be
released in fiscal years 2010 and 2011 if the performance thresholds for fiscal
years 2010 and 2011 are also met.
Liquidated
damages
Pursuant
to the Securities Purchase Agreement entered into between the Company and a
group of accredited investors on December 23, 2009, the Company was obligated to
make efforts to file a registration statement with the SEC for the registration
of 10,240,966 shares of common stock offered by selling stockholders to be
declared effective by the SEC on or before June 23, 2010. After June 23, 2010
and for each monthly anniversary date thereafter in which the registration
statement fails to be declared effective, the Company shall pay liquidated
damages to investors equal to 1% of the funds raised, subject to a cap of 6% of
total funds raised. A majority of the group of accredited investors have waived
their registration rights and the Company will not pay for the penalty as the
result. Accordingly, the Company has not accrued for these liquidated
damages.
Note
13 – Subsequent Events
On August
10, 2010, the Company effected a 1-for-2 reverse split of its Common Stock. As
such, the total number of the Common shares outstanding after the reverse split
is 41,766,389.
|
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 in this Report. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those
anticipated in those forward-looking statements as a result of certain factors,
including, but not limited to, those contained in the discussion on
forward-looking statements that follows this section.
Our
Business
We are engaged in the production and
sales of 24 Karat gold jewelry and ornaments in the PRC under the Kingold brand
through a variable interest entity relationship with Wuhan Kingold Jewelry
Company Limited, a PRC corporation. All of our sales are made within the central
part of the PRC including Hubei, Hunan, Henan, Jiangxi, Anhui and Sichuan
Provinces.
We have historically sold our
products directly to distributors, retailers and other wholesalers, who then
sell our products to consumers through retail counters located 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 price of the base
material (24K gold), plus a mark-up reflecting our design fees and processing
fees. Typically this mark-up ranges from 4-6% of the price of the base
material.
We aim to become an increasingly
important participant in the PRC's gold jewelry design and manufacturing
sector. In addition to expanding our design and manufacturing
capabilities, our goal is to provide a large variety of gold products in unique
styles and superior quality under our nationwide well-known brand,
Kingold.
We have been a member of the Shanghai
Gold Exchange since 2003. Although the Chinese government eliminated the
absolute restriction on trading gold in general, the right to purchase gold
directly from the Shanghai Gold Exchange is limited. There were only
162 members of the Shanghai Gold Exchange throughout China in
2008. Non-members who want to purchase gold must deal with members at
a higher purchase price compared to that for members.
Results
of Operations
The
following table sets forth information from our statements of operations
(unaudited) for the three months and six months ended June 30, 2010 and 2009 in
U.S. dollars:
|
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
$
|
107,843,982
|
|
|
$
|
60,418,354
|
|
|
$
|
168,356,310
|
|
|
$
|
98,479,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(100,568,471
|
)
|
|
|
(57,277,251
|
)
|
|
|
(154,782,581
|
)
|
|
|
(91,939,064
|
)
|
|
Depreciation
|
|
|
(276,269
|
)
|
|
|
(278,334
|
)
|
|
|
(555,084
|
)
|
|
|
(556,603
|
)
|
|
Total
cost of sales
|
|
|
(100,844,740
|
)
|
|
|
(57,555,585
|
)
|
|
|
(155,337,665
|
)
|
|
|
(92,495,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
6,999,242
|
|
|
|
2,862,769
|
|
|
|
13,018,645
|
|
|
|
5,983,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
742,564
|
|
|
|
440,871
|
|
|
|
1,125,566
|
|
|
|
835,938
|
|
|
Depreciation
|
|
|
29,614
|
|
|
|
29,741
|
|
|
|
56,277
|
|
|
|
59,442
|
|
|
Amortization
|
|
|
2,769
|
|
|
|
2,767
|
|
|
|
5,538
|
|
|
|
5,532
|
|
|
Total
Operating Expenses
|
|
|
774,947
|
|
|
|
473,379
|
|
|
|
1,187,381
|
|
|
|
900,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
6,224,295
|
|
|
|
2,389,390
|
|
|
|
11,831,264
|
|
|
|
5,082,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
2,294
|
|
|
|
966
|
|
|
|
4,052
|
|
|
|
966
|
|
|
Interest
income
|
|
|
1,126
|
|
|
|
(273
|
)
|
|
|
2,307
|
|
|
|
24
|
|
|
Interest
expense
|
|
|
(134,568
|
)
|
|
|
(246,247
|
)
|
|
|
(269,536
|
)
|
|
|
(510,504
|
)
|
|
Total
Other Expenses, net
|
|
|
(131,148
|
)
|
|
|
(245,554
|
)
|
|
|
(263,177
|
)
|
|
|
(509,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS BEFORE TAXES
|
|
|
6,093,147
|
|
|
|
2,143,835
|
|
|
|
11,568,087
|
|
|
|
4,572,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
(1,590,197
|
)
|
|
|
(536,657
|
)
|
|
|
(2,946,095
|
)
|
|
|
(1,144,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
4,502,950
|
|
|
$
|
1,607,179
|
|
|
$
|
8,621,992
|
|
|
$
|
3,428,309
|
|
|
Less:
net income attribute to the noncontrolling interest
|
|
|
(198,934
|
)
|
|
|
(156,118
|
)
|
|
|
(369,084
|
)
|
|
|
(231,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
4,304,016
|
|
|
$
|
1,451,061
|
|
|
$
|
8,252,908
|
|
|
$
|
3,196,849
|
|
Three
Months and Six Months Ended June 30, 2010 Compared to Three Months and Six
Months Ended June 30, 2009
Net
Sales
Net sales
for the three months ended June 30, 2010 increased to $107.8 million, an
increase of $47.4 million, or 78.5%, from net sales of $60.4 million for the
three months ended June 30, 2009. The increase in net sales was primarily the
result of an increase in our production, continued success in marketing of our
products.
Net sales
for the six months ended June 30, 2010 increased to $168.4 million, an increase
of $69.9 million, or 71%, from net sales of $ 98.5 million for the six
months ended June 30, 2009. The increase in net sales was primarily the result
of an increase in our production, continued success in marketing of our
products.
Cost of sales
Cost of
sales for the three months ended June 30, 2010 increased to $100.6 million, an
increase of $43.3 million, or 75.6% from $57.3 million for the same period in
2009. The increase was primarily due to the increase in the cost of gold and the
increased amount of gold we needed to purchase in order to fulfill our increased
sales volume for the three months ended June 30, 2010.
Cost of
sales for the six months ended June 30, 2010 increased to $154.8 million, an
increase of $62.9 million, or 68.4% from $91.9 million for the same period in
2009. The increase was primarily due to the increase in the cost of gold and the
increased amount of gold we needed to purchase to fulfill our increased sales
volume for the six months ended June 30, 2010.
Gross profit
Gross
profit for the three months ended June 30, 2010 increased to $7 million, an
increase of $4.1 million, or 141%, from $2.9 million for the same period in
2009. Accordingly, gross margin for the three months ended June 30,
2010 was 6.49%, compared to 4.8% for the same period in 2009. The increase in
our gross profit and the increase in our gross margin were primarily due to the
increase in production and sales volume of gold, and processing fees. In
addition, since 2009, we have continued to focus on the production of gold
jewelry rather than other jewelry products, and to focus on production of our
proprietary brands rather than custom production for customers. Our increased
gross margin reflects this shift in focus.
Gross
profit for the six months ended June 30, 2010 increased to $13 million, an
increase of $7 million, or 117%, from $6 million for the same period in
2009.
Accordingly,
gross margin for the six months ended June 30, 2010 was 7.72%, compared to 6.09%
for the same period in 2009. The increase in our gross profit and the increase
in our gross margin were primarily due to the increase in production and sales
volume of gold, and processing fees. In addition, since 2009, we have continued
to focus on the production of gold jewelry rather than other jewelry products,
and to focus on production of our proprietary brands rather than custom
production for customers. Our increased gross margin reflects this shift in
focus.
Expenses
Total
operating expenses for the three months ended June 30, 2010 were $0.77 million,
an increase of $0.3 million or 63.8%, from $0.47 million for the same period in
2009. The increase in operating expenses was primarily due to increase
administration expenses associated with operating a public company in the United
States.
Total
operating expenses for the six months ended June 30, 2010 were $1.19 million, an
increase of $0.29 million or 32.2%, from $0.9 million for the same period in
2009. The increase in operating expenses was primarily due to increase
administration expenses associated with operating a public company in the United
States.
Interest
expenses were $0.13 million for three months ended June 30, 2010, a decrease of
$0.11 million or 45.4%, from $.24 million for same period in 2009. The
decrease in interest expense was primarily a result of a decrease of
average loan balance for the three months ended June 30, 2010.
Interest
expenses were $0.27 million for six months ended June 30, 2010, a decrease of
$0.24 million or 47%, from $0.51 million for same period in 2009. The
decrease in interest expense was primarily a result of a decrease of
average loan balance for the six months ended June 30, 2010.
Provision
for income tax expense was approximately $1.6 million for the three months ended
June 30, 2010, an increase of $1.1million, or 220%, from approximately
$0.5million for the same period in 2009. The increase was primarily due to our
increase in gross profit during the first three months of 2010.
Provision
for income tax expense was approximately $2.9 million for the six months ended
June 30, 2010, an increase of $1.8 million, or 163%, from approximately $1.1
million for the same period in 2009. The increase was primarily due to our
increase in gross profit during the first three months of 2010.
Net
income attributable to common stockholders increased to $4.3 million for the
three months ended June 30, 2010 from $1.5 million for the same period in 2009,
an increase of $2.8 million, or 197%.
Net
income attributable to common stockholders increased to $8.3 million for the six
months ended June 30, 2010 from $3.2 million for the same period in 2009, an
increase of $5.1 million, or 159%.
Net cash used in
operating activities.
Net cash used in operating activities
was $2.8 million for the six months ended June 30, 2010, compared to net cash
provided by operating activities of $16.6 million for the same period in 2009,
primarily because we had purchased a significant amount of gold
during the six month period ended June 30, 2010 anticipating a price
hike. Compared with our inventory balance as of December 31, 2009,
our inventory increase by $12.8 million by the end of June 30,
2010.
Net cash used in
investing activities.
Net cash used in investing activities
amounted to only $16,198 for the six months ended June 30, 2010, compared to net
cash used in investing activities of $9,906 for the six months ended June
30, 2009. The slight increase in net cash used in investing
activities was as a result of a small increase in the purchase of property and
equipment.
Net cash used in
financing activities.
Net cash provided by financing activities was
$1.5 million for the six months ended June 30, 2010, compared to net
cash provided by investing activities of $1.7 million for the six months
ended June 30, 2009. The small decrease in net cash provided by
financing activities was as a result of an increase in our payoff of bank
financing.
Off-Balance
Sheet Arrangements
We do not
have any material off-balance sheet transactions.
At June
30, 2010, we had outstanding bank loans in the amount of $8.8 million. Our loans
are secured by real property and/or guaranteed by a non-related third party
guarantor who charges us a commission.
Liquidity
and Capital Resources
At June
30, 2010, we had $6.6 million in cash and cash equivalents. We have historically
financed our operations with cash flows generated from operations, as well as
through the borrowing of short-term bank loans and contribution from
stockholders and investment from investors.
We
believe that our current cash and cash flow from operations will be sufficient
to meet our anticipated cash needs, including our cash needs for working
capital, for the next 12 months. We may, however, require additional cash
resources due to changing business conditions or other future developments,
including any investments or acquisitions we may decide to pursue. On December
23, 2009, we received gross proceeds of approximately $5.1 million in a private
placement transaction. Pursuant to subscription agreements entered into with the
investors, we sold an aggregate of 10,240,966 shares of common stock at a price
of $0.498 per share.
We are
required to contribute a portion of our employees’ total salaries to the Chinese
government’s social insurance funds, including pension insurance, medical
insurance, unemployment insurance, job injuries insurance, and maternity
insurance, in accordance with relevant regulations. We expect that the amount of
our contribution to the government’s social insurance funds will increase in the
future as we expand our workforce and operations and commence contributions to
an employee housing fund.
The
ability of Vogue-Show to pay dividends may be restricted due to the PRC's
foreign exchange control policies and our availability of cash. A majority of
our revenue being earned and currency received is denominated in RMB. We may be
unable to distribute any dividends outside of China due to PRC exchange 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 to satisfy
obligations which have been incurred outside the PRC, which could adversely
affect our business and prospects or our ability to meet our cash
obligations.
Our
ability to maintain sufficient liquidity depends partially on our ability to
achieve anticipated levels of revenue, while continuing to control costs. If we
do not have sufficient available cash, we would have to seek additional debt or
equity financing through other external sources, which may not be available on
acceptable terms, or at all. Failure to maintain financing arrangements on
acceptable terms would have a material adverse effect on our business, results
of operations and financial condition.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements
and related disclosures in conformity with accounting principles generally
accepted in the United States of America and the Company’s discussion and
analysis of its financial condition and operating results require the Company’s
management to make judgments, assumptions, and estimates that affect the amounts
reported in its condensed consolidated financial statements and accompanying
notes. Note 2, “Summary of Significant Accounting Policies” of this Form 10-Q
and in the Notes to Consolidated Financial Statements in the Company’s 2009 Form
10-K describes the significant accounting policies and methods used in the
preparation of the Company’s condensed consolidated financial statements.
Management bases its estimates on historical experience and on various other
assumptions it believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities. Actual results may differ from these estimates and such
differences may be material.
Management believes the Company’s
critical accounting policies and estimates are those related to revenue
recognition, allowance for doubtful accounts, inventory valuation and inventory
purchase commitments and provision for income taxes. Management considers these
policies critical because they are both important to the portrayal of the
Company’s financial condition and operating results, and they require management
to make judgments and estimates about inherently uncertain matters. Actual
results could differ from these estimates. Periodically, the Company’s senior
management will review all significant estimates and assumptions affecting the
financial statements and record the effect of any necessary
adjustments.
|
Item
3.
|
Quantitative
and Qualitative Disclosure about Market
Risk
|
Not required for Smaller Reporting
Companies
|
Item
4T.
|
Controls
and Procedures
|
Evaluation
of Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation required
by Rule 13a-15(b) of the Securities Exchange Act of 1934 under the supervision
and with the participation of our chief executive officer and chief financial
officer of the effectiveness of the design and operation of our “disclosure
controls and procedures” as of the end of the period covered by this
Report.
Disclosure controls and procedures are
designed with the objective of ensuring that (i) information
required to be disclosed in an issuer’s reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC rules and forms and (ii) information is
accumulated and communicated to management, including our Principal Executive
Officer and Principal Financial Officer, as appropriate to allow timely
decisions regarding required disclosures.
The evaluation of our disclosure
controls and procedures included a review of our objectives and processes and
effect on the information generated for use in this Report. This type of
evaluation will be done quarterly so that the conclusions concerning the
effectiveness of these controls can be reported in our periodic reports filed
with the SEC. We intend to maintain these controls as processes that may be
appropriately modified as circumstances warrant. Based on their
evaluation, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are
effective.
Management’s
Report on Internal Control Over Financial Reporting
Our management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a-15(f). Under the
supervision and with the participation of our Principal Executive Officer and
Principal Financial Officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting as of June 30, 2010, based on the
criteria set forth in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under that criteria, our management concluded that our internal
control over financial reporting was effective as of June 30, 2010.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal
control over financial reporting during the three months ended June 30, 2010
that have materially affected, or are reasonably likely to material affect, our
internal control over financial reporting.
PART
II – OTHER INFORMATION
|
Item
1.
|
Legal
Proceedings.
|
None
In
addition to the other information set forth in this Quarterly Report on Form
10-Q, you should carefully consider the risk factors and related discussion in
Part I, "Item 1A. Risk Factors" in our 2009 Annual Report filed on Form 10-K, as
amended.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
None
|
Item
3.
|
Defaults
Upon Senior Securities.
|
None
|
Item
4.
|
Removed
and Reserved.
|
|
Item
5.
|
Other
Information.
|
We have
no information to disclose that was required to be in a report on Form 8-K
during the period covered by this Report, but was not reported. There have been
no material changes to the procedures by which security holders may recommend
nominees to our board of directors.
|
Exhibit
|
|
|
|
Number
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification
of the Registrant’s Principal Executive Officer under Exchange Act Rule
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
31.2
|
|
Certification
of the Registrant’s Principal Financial Officer under Exchange Act Rule
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
32.1
|
|
Certification
of the Registrant’s Principal Executive Officer under 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
32.2
|
|
Certification
of the Registrant’s Principal Financial Officer under 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Pursuant
to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date:
August 11, 2010
|
|
KINGOLD
JEWELRY, INC.
|
|
|
|
|
|
|
By:
|
/s/ Jia Zhi Hong
|
|
|
|
Jia
Zhi Hong
|
|
|
|
Chairman
and Chief Executive
Officer
|
Kingold Jewelry (CE) (USOTC:KGJI)
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