Attached files
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EX-32.1 - KINGOLD JEWELRY, INC. | v203298_ex32-1.htm |
EX-31.2 - KINGOLD JEWELRY, INC. | v203298_ex31-2.htm |
EX-32.2 - KINGOLD JEWELRY, INC. | v203298_ex32-2.htm |
EX-31.1 - KINGOLD JEWELRY, INC. | v203298_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
(Amendment
No. 1)
þ
|
|
For the
quarterly period ended:
September
30, 2010
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
|
For the
transition period from: _____________ to _____________
KINGOLD
JEWELRY, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
001-15819
|
13-3883101
|
(State
or Other Jurisdiction
|
(Commission
|
(I.R.S.
Employer
|
of
Incorporation)
|
File
Number)
|
Identification
No.)
|
15
Huangpu Science and Technology Park
Jiang’an
District
Wuhan,
Hubei Province, PRC 430023
(Address
of Principal Executive Office) (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 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 ¨ 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 ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
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
October 15, 2010, there were 42,343,073 shares of common stock outstanding, par
value $0.001.
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. ¨ Yes ¨ No
Explanatory
Note
Kingold Jewelry, Inc. (which may be
referred to herein as we, us or the Company) is filing this Amendment No. 1 to
its Quarterly Report on Form 10-Q (this “Form 10-Q/A”) for the three month
period ended September 30, 2010 (the “Quarterly Report”) to (a) replace the
Consolidated Statements of Cash Flows contained in Item 1 with an updated
Consolidated Statements of Cash Flows which reclassifies certain deferred
offering costs under financing activity rather than under operating activity,
(b) to replace that portion of Item 2 which contains management’s discussion of
the three and nine months ended September 30, 2010 results which have been
revised to reflect the updated Consolidated Statements of Cash Flows described
above, and (c) to revise the Certifications of the Company’s Chief Executive
Officer and Chief Financial Officer, which pursuant to Rule 12b-15 under the
Securities Exchange Act of 1934 (the “Exchange Act”) are currently
dated.
The
remainder of the Quarterly Report filed with the Securities and Exchange
Commission on November 12, 2010 remains unchanged and this Form 10-Q/A should be
read in conjunction with the Form 10-Q.
2
KINGOLD
JEWELRY INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 9,484,044 | $ | 7,964,120 | ||||
Restricted
cash
|
- | 1,462,587 | ||||||
Accounts
receivable
|
334,749 | 485,399 | ||||||
Inventories
|
50,660,556 | 31,756,009 | ||||||
Other
current assets and prepaid expenses
|
455,536 | 101,189 | ||||||
Deferred
offering costs
|
125,994 | - | ||||||
Value
added tax recoverable
|
4,287,164 | 5,792,014 | ||||||
Total
Current Assets
|
65,348,044 | 47,561,318 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
13,525,483 | 14,126,950 | ||||||
OTHER
ASSETS
|
||||||||
Other
assets
|
144,280 | 141,198 | ||||||
Intangible
assets, net
|
499,958 | 497,572 | ||||||
Total
other assets
|
644,238 | 638,770 | ||||||
TOTAL
ASSETS
|
$ | 79,517,765 | $ | 62,327,038 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Short
term loans
|
$ | 8,967,055 | $ | 8,775,522 | ||||
Other
payables and accrued expenses
|
1,375,197 | 368,196 | ||||||
Income
tax payable
|
2,004,715 | 1,347,295 | ||||||
Other
taxes payable
|
61,757 | 192,415 | ||||||
Total
Current Liabilities
|
12,408,723 | 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,
42,343,073 and 41,766,404 shares issued and outstanding
|
||||||||
as
of September 30, 2010 and December 31, 2009, respectively
|
42,343 | 41,766 | ||||||
Additional
paid-in capital
|
31,076,541 | 31,077,118 | ||||||
Retained
earnings
|
||||||||
Unappropriated
|
29,108,122 | 15,669,257 | ||||||
Appropriated
|
940,528 | 878,911 | ||||||
Accumulated
other comprehensive income
|
4,476,027 | 3,156,305 | ||||||
Total
Stockholders' Equity
|
65,643,561 | 50,823,356 | ||||||
Noncontrolling
interest
|
1,465,482 | 820,254 | ||||||
Total
Equity
|
67,109,042 | 51,643,610 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 79,517,765 | $ | 62,327,038 |
The
accompanying notes are an integral part of these unaudited Condensed
Consolidated Financial Statements
3
KINGOLD
JEWELRY INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(IN
US DOLLARS)
(UNAUDITED)
For the three months ended September 30,
|
For the nine months ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
NET
SALES
|
$ | 169,706,497 | $ | 93,703,615 | $ | 338,062,808 | $ | 192,036,951 | ||||||||
COST
OF SALES
|
||||||||||||||||
Cost
of sales
|
(160,792,165 | ) | (89,797,397 | ) | (315,574,745 | ) | (181,600,448 | ) | ||||||||
Depreciation
|
(277,204 | ) | (278,001 | ) | (832,288 | ) | (833,781 | ) | ||||||||
Total
cost of sales
|
(161,069,369 | ) | (90,075,398 | ) | (316,407,033 | ) | (182,434,229 | ) | ||||||||
GROSS
PROFIT
|
8,637,128 | 3,628,217 | 21,655,775 | 9,602,722 | ||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Selling,
general and administrative expenses
|
1,007,909 | 376,917 | 2,133,475 | 1,107,683 | ||||||||||||
Depreciation
|
30,665 | 31,799 | 86,942 | 91,153 | ||||||||||||
Amortization
|
2,792 | 2,762 | 8,330 | 8,286 | ||||||||||||
Total
Operating Expenses
|
1,041,366 | 411,478 | 2,228,747 | 1,207,122 | ||||||||||||
INCOME
FROM OPERATIONS
|
7,595,762 | 3,216,739 | 19,427,028 | 8,395,600 | ||||||||||||
OTHER
INCOME (EXPENSES)
|
||||||||||||||||
Other
income
|
14,881 | 3,328 | 18,933 | 4,292 | ||||||||||||
Interest
income
|
926 | 1,492 | 3,232 | 2,471 | ||||||||||||
Interest
expense
|
(135,638 | ) | (175,340 | ) | (405,174 | ) | (589,256 | ) | ||||||||
Other
expenses
|
(1,469 | ) | (83,993 | ) | (1,469 | ) | (183,767 | ) | ||||||||
Total
Other Expenses, net
|
(121,300 | ) | (254,513 | ) | (384,477 | ) | (766,260 | ) | ||||||||
INCOME
FROM OPERATIONS BEFORE TAXES
|
7,474,462 | 2,962,226 | 19,042,551 | 7,629,340 | ||||||||||||
PROVISION
FOR INCOME TAXES
|
(1,979,290 | ) | (730,493 | ) | (4,925,385 | ) | (1,873,422 | ) | ||||||||
NET
INCOME
|
$ | 5,495,172 | $ | 2,231,733 | $ | 14,117,166 | $ | 5,755,918 | ||||||||
Less:
net income attribute to the noncontrolling interest
|
(247,601 | ) | - | (616,684 | ) | - | ||||||||||
NET INCOME
ATTRIBUTABLE TO COMMON
STOCKHOLDERS
|
$ | 5,247,571 | $ | 2,231,733 | $ | 13,500,482 | $ | 5,755,918 | ||||||||
OTHER
COMPREHENSIVE INCOME
|
||||||||||||||||
Total
foreign currency translation gains
|
895,091 | 34,589 | 1,348,265 | 72,366 | ||||||||||||
Less:
foreign currency translation gains
|
||||||||||||||||
attributable
to noncontrolling interest
|
(19,388 | ) | - | (28,543 | ) | - | ||||||||||
Foreign
currency translation gains
|
||||||||||||||||
attributable
to common stockholders
|
875,703 | 34,589 | 1,319,722 | 72,366 | ||||||||||||
COMPREHENSIVE
INCOME
|
$ | 6,123,274 | $ | 2,266,322 | $ | 14,820,204 | $ | 5,828,284 | ||||||||
Earnings
per share
|
||||||||||||||||
Basic
|
$ | 0.13 | $ | 0.07 | $ | 0.32 | 0.17 | |||||||||
Diluted
|
$ | 0.12 | $ | 0.07 | $ | 0.31 | 0.17 | |||||||||
Weighted
average number of shares
|
||||||||||||||||
Basic
|
41,861,457 | 33,104,234 | 41,798,205 | 33,104,234 | ||||||||||||
Diluted
|
44,222,499 | 33,104,234 | 43,932,055 | 33,104,234 |
The
accompanying notes are an integral part of these unaudited Condensed
Consolidated Financial Statements
4
KINGOLD
JEWELRY INC.
(FORMERLY
ACTIVEWORLDS CORP.)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN
US DOLLARS)
(UNAUDITED)
For the nine months ended September 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 14,117,166 | $ | 5,755,918 | ||||
Adjusted
to reconcile net income to cash provided by (used in)
|
||||||||
operating
activities:
|
||||||||
Depreciation
and amortization
|
919,230 | 924,934 | ||||||
Amortization
of intangible assets
|
8,330 | 8,286 | ||||||
Changes
in operating assets and liabilities
|
||||||||
(Increase)
decrease in:
|
||||||||
Accounts
receivable
|
158,509 | 1,053,595 | ||||||
Inventories
|
(17,902,549 | ) | 540,624 | |||||
Other
current assets and prepaid expenses
|
(348,268 | ) | 75,044 | |||||
Value
added tax recoverable
|
1,603,596 | (3,649,907 | ) | |||||
Increase
(decrease) in:
|
||||||||
Other
payables and accrued expenses
|
997,823 | (39,907 | ) | |||||
Income
tax payable
|
678,071 | (756,856 | ) | |||||
Value
added tax payable
|
- | (910,936 | ) | |||||
Other
taxes payable
|
(193,280 | ) | 124,722 | |||||
Net
cash provided by (used in) operating activities
|
38,627 | 3,125,517 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of property and equipment
|
(24,862 | ) | (5,979 | ) | ||||
Net
cash used in investing activities
|
(24,862 | ) | (5,979 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Restricted
cash
|
1,469,160 | (6,553 | ) | |||||
Deferred
offering costs
|
(125,994 | ) | - | |||||
Proceeds
from bank loans
|
5,876,639 | 5,845,808 | ||||||
Repayments
of bank loans
|
(5,876,639 | ) | (11,253,180 | ) | ||||
Capital
Contribution by stockholders
|
- | 9,360,009 | ||||||
Net
cash provided by financing activities
|
1,343,166 | 3,946,084 | ||||||
EFFECT
OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS
|
162,992 | 5,581 | ||||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,519,924 | 7,071,203 | ||||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
7,964,120 | 281,994 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 9,484,044 | $ | 7,353,197 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid for interest expense
|
$ | 357,198 | $ | 589,256 | ||||
Cash
paid for income tax
|
$ | 4,267,965 | $ | 2,630,279 |
The
accompanying notes are an integral part of these unaudited Condensed
Consolidated Financial Statements
5
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Three
and Nine Months Ended September 30, 2010
Net
Sales
Net sales
for the three months ended September 30, 2010 increased to $169.7 million, an
increase of $76.0 million, or 81.1%, from net sales of $93.7 million for the
three months ended September 30, 2009. The increase in net sales was primarily
driven by the increased amount of products sold as well as by the increase in
the price of gold. Of the $76.0 million increase, $51 million was attributable
to increases in production and $25 million was attributable to the increase in
the price of gold.
Net sales
for the nine months ended September 30, 2010 increased to $338.1 million, an
increase of $146.0 million, or 76%, from net sales of $192.0 million for the
nine months ended September 30, 2009. The increase in net sales was primarily
driven by the increased amount of products sold as well as by the increase in
the price of gold. Of the $146.0 million increase, $88 million was attributable
to increases in production and $58 million was attributable to the increase in
the price of gold.
The
increase in revenue was mainly attributable to the following factors: (1) for
the three months ended September 30, 2009, we were still privately held, had
relatively lower brand name recognition than we currently do, and our market
coverage was smaller than is currently the case, which is in direct contract to
the fact that for the three months ended September 30, 2010, we were a public
company in the US, and have experienced greater brand recognition, which, in
turn, has helped us to enhance our market coverage and attract more customers;
(2) our increased working capital has allowed us to take advantage of the
increase in demand for the items that we manufacture; (3) we have expanded our
business operations into additional geographic areas which, in turn, has
broadened sales opportunities, thus allowing us to gain market share in new
geographical areas by securing relationships with regional jewelry wholesalers
and distributors, such as Shenyang Xinglong Jewelry, Fuzhou Xingfulong Jewelry
and Hangzhou Junhao Jewelry; and. (4) we have also made efforts to grow our
business in the 24K gold ornament market.
Cost
of sales
Cost of
sales for the three months ended September 30, 2010 increased to $160.8 million,
an increase of $70.9 million, or 79.1% from $89.8 million for the same period in
2009. The increase was primarily due to the increased price of gold and the
increased amount of gold required to fulfill our increased sales volume for the
three months ended September 30, 2010. Of the $70.9 million increase, the
increased cost attributable to increased gold price was $24.2 million, and the
increased cost attributable to the increase in the amount of gold purchased for
expanded production was $46.7 million during the three months ended September
30, 2010 as compared to the corresponding 2009 period. Cost of sales as a
percentage of revenue decreased to 94.7% for the three months ended September
30, 2010 as compared to 95.8% for the corresponding period in 2009, mainly
because of economic of scale.
Cost of
sales for the nine months ended September 30, 2010 increased to $315.6 million,
an increase of $134 million, or 73.8% from $181.6 million for the same period in
2009. The increase was primarily attributable to the increased price of gold and
the increased amount of gold required to fulfill our increased sales volume for
the nine months ended September 30, 2010. Of the $134 million increase, the
increased cost due to increased gold price was $50 million, and the increased
cost due to increased amount of gold purchased for expanded production was $84
million during the nine months ended September 30, 2010 as compared to the
corresponding 2009 period. Cost of sales as a percentage of revenue decreased to
93.3% for the nine months ended September 30, 2010 as compared to 94.6% for the
corresponding period in 2009, mainly because of economic of
scale.
6
Gross
profit
Gross
profit for the three months ended September 30, 2010 increased to $8.6 million,
an increase of $5.0 million, or 138.1%, from $3.6 million for the same period in
2009. Gross margin as a percentage of sales for the three months ended September
30, 2010 increased to 5.1%, compared to 3.9% 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, as well as
lower cost of sales attributable to economics of scale. In addition, we have
continued to focus on production of our proprietary brands (MGold in particular)
that have higher profit margins as compared to our other products. Our increased
gross margin reflects this shift in focus.
Gross
profit for the nine months ended September 30, 2010 increased to $21.7 million,
an increase of $12.1 million, or 125.5%, from $9.6 million for the same period
in 2009. Gross margin for the nine months ended September 30, 2010 increased to
6.4%, compared to 5.0% 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, as well as lower cost of sales stemming
from our increase realization of economics of scale. In addition, we have
continued to focus on production of our proprietary brands (MGold in particular)
that have higher profit margins as compared to our other products. Our increased
gross margin reflects this shift in focus.
Expenses
Total
operating expenses for the three months ended September 30, 2010 were $1.04
million, an increase of $0.63 million or 151.3%, from $0.41 million for the same
period in 2009. The increase in operating expenses during the 2010 period was
primarily due to increased sales and administration expenses of $0.33 million
and expenses of $0.3 million related to operating a public company in the United
States.
Total
operating expenses for the nine months ended September 30, 2010 were $2.23
million, an increase of $1.02 million or 84.6%, from $1.21 million for the same
period in 2009. The increase in operating expenses during the 2010 period was
primarily due to increased sales and administration expenses of $0.52 million
and expenses of $0.5 million related to operating a public company in the United
States.
Interest
expenses were $0.135 million for three months ended September 30, 2010, a
decrease of $0.04 million or 22.6%, from $0.175 million for same period in 2009.
The decrease in interest expense was primarily a result of a decrease of the
average loan balance for the three months ended September 30, 2010.
Interest
expenses were $0.405 million for nine months ended September 30, 2010, a
decrease of $0.184 million or 31.2%, from $0.589 million for same period in
2009. The decrease in interest expense was primarily a result of a decrease of
the average loan balance for the nine months ended September 30,
2010.
Our
provision for income tax expense was $1.98 million for the three months ended
September 30, 2010, an increase of $1.25 million, or 171%, from $0.73 million
for the same period in 2009. The increase was primarily due to our increased
income from operations during these three months ended September 30,
2010.
Our
provision for income tax expense was $4.93 million for the nine months ended
September 30, 2010, an increase of $3.05 million, or 162.9%, from $1.87 million
for the same period in 2009. The increase was primarily due to our increased
income from operations during these nine months ended September 30,
2010.
Net
Income
Net
income attributable to common stockholders increased to $5.25 million for the
three months ended September 30, 2010 from $2.23 million for the same period in
2009, an increase of $3.02 million, or 135.1% as result of the matters described
above.
7
Net
income attributable to common stockholders increased to $13.5 million for the
nine months ended September 30, 2010 from $5.76 million for the same period in
2009, an increase of $7.74 million, or 134.5% as result of the matters described
above.
Cash
Flow
Net cash provided
by (used in) operating activities. Net cash provided by
operating activities was $38,627 for the nine months ended September 30, 2010,
compared to net cash provided by operating activities of $3.1 million for the
same period in 2009. This decrease was primarily because we purchased a
comparatively higher amount of gold at comparatively higher prices during the
nine month period ended September 30, 2010 to meet the growing demand for our
products. Additionally, as compared to our inventory balance as of December 31,
2009, our inventory increased by $17.9 million over the nine months ending
September 30, 2010.
Analysis and
Expectations.
Our net cash from operating activities can fluctuate significantly due to
changes in our inventories. Other factors that may vary significantly include
our accounts payable, purchases of gold and income taxes. Looking forward, we
expect the net cash that we generate from operating activities to continue to
fluctuate as our inventories, receivables, accounts payables and the other
factors described above change with increased production and the purchase of
larger quantities of raw materials. These fluctuations could cause net cash from
operating activities to fall, even if, as we expect, our net income grows as we
continue to expand. Although we expect that 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 amounted to $24,862 for the nine months ended September 30, 2010,
compared to net cash used in investing activities of $5,979 for the nine months
ended September 30, 2009. The increase in net cash used in investing activities
resulted from an increase in the purchase of property and
equipment.
Analysis and
Expectations.
Our net cash used in investing activities did not fluctuate significantly in the
comparable periods. We do not expect that cash used in investing activities will
increase significantly in the short term future.
Net cash provided
by financing activities. Net cash provided by
financing activities was $1.34 million for the nine months ended September 30,
2010, compared to net cash provided by financing activities of $3.9 million for
the nine months ended September 30, 2009. The change reflects our repayment of
bank loans and the release of a bank loan guarantee, as well as new capital
contributions from three institutional investors and one individual investor in
September 2009.
Analysis and
Expectations. We
expect that cash generated from financing activities may increase significantly
as a result of additional financing being obtained.
8
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 undersigned thereunto duly
authorized.
Date:
November 18, 2010
|
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
|
9