OnJune 29, 2018 ,Oranco, Inc. completed a share exchange transaction (the "Share Exchange") pursuant to a share exchange agreement (the "Share Exchange Agreement") entered into by (i)Oranco, Inc. ("the Company"); (ii)Reliant Galaxy International Limited , aBritish Virgin Islands company with limited liability ("Reliant"); (ii) and the shareholders of Reliant ("Sellers"), pursuant to which Reliant became a wholly owned subsidiary of the Company. Pursuant to the Share Exchange Agreement, the Company acquired from the Sellers all of the issued and outstanding equity interests of Reliant in exchange for 349,296,000 newly issued shares of the Company's common stock; 28,000,000 were issued at the closing date ofJune 29, 2018 , and the remaining 321,296,000 shares were issued to the Sellers onMay 29, 2019 . As a result of the Share Exchange, the Sellers, as the former shareholders of Reliant, became the controlling shareholders of the Company. The Share Exchange was accounted for under the business combination under common control method of accounting. As disclosed in the Form 8-K filed with theSecurities and Exchange Commission onAugust 7, 2019 , the Company filed a Certificate of Change Pursuant to NRS 78.209 (the "Certificate of Amendment") with the Secretary ofState of Nevada to effect a ten-for-one reverse stock split of the issued and outstanding shares of the Company's common stock, par value$0.001 per share (the "Reverse Split"). The Certificate of Amendment was filed onJuly 22, 2019 and the Reverse Split became effective onAugust 7, 2019 . The Company's shares of common stock began trading on a reverse stock split adjusted basis on the OTC Market onAugust 7, 2019 . The trading symbol for the Company's common stock remains as "ORNC". OnSeptember 1, 2018 ,Fenyang Huaxin Spirit Development Co. Ltd. , a subsidiary of the Company, acquired a 20% equity interest inGuangzhou Silicon Technology Co., Ltd. , a company established inthe People's Republic of China . The acquisition of 20% equity interest inGuangzhou Silicon Technology Co., Ltd. was accounted for as an interest in an associate. The outbreak of the novel coronavirus, commonly referred to as "COVID-19", first found in mainlandChina , then inAsia and eventually throughout the world, has significantly affected business and manufacturing activities withinChina , including travel restrictions, widespread mandatory quarantines, and suspension of business activities withinChina . These government mandates may cause severe business disruptions to our customers and suppliers, and may also lead to postponement of payment from these parties. Our business operation was suspended until early March of 2020. Further, our manufacturing and branding business activities depend on reliable sources of raw materials such as bulk packaged Fenjiu liquor fromShanxi Province and bulk packaged imported wines from foreign countries. We have experienced substantive diminutions in raw material supplies due to the COVID-19 outbreak and ensuing lockdowns, which have negatively impacted our business. Accordingly, our business, results of operations and financial condition were adversely affected. In light of the current situation, we estimate that our revenues and net income for the fiscal quarter ended onMarch 31, 2020 would decrease due to the COVID-19 outbreak. As of the date of this quarterly report,China has shown signs of COVID-19 slowdown and Chinese industries have partially resumed businesses as government officials started to ease the restrictive measures. We believe that the impact of the COVID-19 outbreak on our business is both temporary and limited, and we expect our revenue to start growing again once our business becomes fully operational again. Our management expects that our financial performance will recover during the fiscal quarter ofJune 30, 2020 . 24 Results of Operations Overview
For the three months ended
Three months ended Three months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD RMB USD RMB % USD % Revenue 13,774,340 1,945,308 32,654,876 4,865,728 (18,880,536 ) (58 )% (2,920,420 ) (60 )% Cost of sales 3,980,504 562,155 8,801,480 1,311,461 (4,820,976 ) (55 )% (749,307 ) (57 )% Gross profit 9,793,836 1,383,154 23,853,396 3,554,267 (14,059,560 ) (59 )% (2,171,113 ) (61 )% Selling and distribution expenses 671,687 94,860 884,727 131,828 (213,040 ) (24 )% (36,968 ) (28 )% Administrative expenses 3,101,937 438,077 1,338,458 199,436 (1,763,479 ) 132 % 238,641 120 % Income from operations 6,020,212 850,216 21,630,211 3,223,002 (15,609,999 ) (72 )% (2,372,786 ) (74 )% Other income 40,650 5,741 32,471 4,838 8,179 25 % 903 19 % Interest and other financial charges 2,572 363 7,198 1,073 (4,626 ) (64 )% (709 ) (66 )% Income before income taxes 6,058,290 855,594 21,655,485 3,226,768 (1,555,181 ) (72 )% (2,371,174 ) (73 )% Income taxes 1,774,454 250,601 5,432,298 809,438 (280,975 ) (67 )% (558,837 ) (69 )% Net income 4,283,836 604,993 16,223,187 2,417,330 (1,274,206 ) (74 )% (1,812,337 ) (75 )% Revenue Three months ended Three months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD %
Sales of Fenjiu liquor products 11,513,593 1,626,030 84 % 28,977,713 4,317,814 89 % (17,464,120 ) (60 )%
(2,691,784 ) (62 )% Sales of imported wine products 2,260,747 319,278 16 % 3,677,163 547,914 11 % (1,416,416 ) (39 )% (228,636 ) (42 )% Total Amount 13,774,340 1,945,308 100 % 32,654,876 4,865,728 100 % 18,880,536 (58 )% (2,920,420 ) 60 % For the three months endedMarch 31, 2020 , revenue generated from our Fenjiu liquor business wasRMB11,513,593 (USD1,626,030 ), representing a decrease ofRMB17,464,120 (USD2,691,784 ), or -60% (-62%), as compared to that ofRMB28,977,713 (USD4,317,814 ) for the three months endedMarch 31, 2019 . The overall decrease in revenue generated from the Company's Fenjiu business was mainly due to the outbreak of COVID-19. The Company suspended its business operation frommid-January 2020 to earlyMarch 2020 according to government mandates. For the three months endedMarch 31, 2020 , revenue generated from our imported wine business wasRMB2,260,747 (USD319,278 ), representing a decrease ofRMB1,416,416 (USD228,636 ), or -39% (-42%), as compared to that ofRMB3,677,163 (USD547,914 ) for the three months endedMarch 31, 2019 . The overall decrease in revenue generated from the Company's imported wine business was mainly due to the outbreak of COVID-19. The Company suspended its business operation frommid-January 2020 to earlyMarch 2020 according to government mandates. 25 Cost of Sales Three months ended Three months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD %
Sales of Fenjiu liquor products 3,437,531 485,473 86 %
7,809,057 1,163,586 94 % (4,371,526 ) (56 )% (678,113 ) (58 )% Sales of imported wine products 542,973 76,682 14 %
992,423 147,876 6 % (449,450 ) (45 )% (71,194 ) (48 )% Total Amount 3,980,504 562,155 100.0 % 8,801,480 1,311,461 100.0 % (4,820,976 ) (55 )% (749,306 ) (57 )% For the three months endedMarch 31, 2020 , cost of sales from our Fenjiu liquor business wasRMB3,437,531 (USD485,473 ), representing a decrease ofRMB4,371,526 (USD678,113 ), or -56% (-58%), as compared to that ofRMB7,809,057 (USD1,163,586 ) for the three months endedMarch 31, 2019 . For the three months endedMarch 31, 2020 , cost of sales from our imported wine business wasRMB542,973 (USD76,682 ), representing a decrease ofRMB449,450 (USD71,194 ), or 45% (48%), as compared to that ofRMB992,423 (USD147,876 ) for the three months endedMarch 31, 2019 . The decrease in the cost of sales was due to a corresponding decrease in revenue generated by the Company for the three months endedMarch 31, 2020 . Such decrease was due the Company's suspension of its business frommid-January 2020 to earlyMarch 2020 , as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. Gross Profit Three months ended Three months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD %
Sales of Fenjiu liquor products 8,076,062 1,140,558 83 % 21,168,656 3,154,228 95 % (13,092,594 ) (62 )%
(2,013,670 ) (64 )% Sales of imported wine products 1,717,774 242,596 17 % 2,684,740 400,039 5 % (966,966 ) (36 )% (157,443 ) 39 % Total Amount 9,793,836 1,383,154 100 % 23,853,396 3,554,267 100 % (14,059,560 ) (59 )% (2,171,113 ) (61 )% Gross profit from our Fenjiu liquor business decreased byRMB13,092,594 (USD2,013,670 ), or -62% (-64%), for the three months endedMarch 31, 2020 , as compared to that of the same period of 2019. The gross profit percentage contributed by our Fenjiu liquor business was 70.1% for the three months endedMarch 31, 2020 , as compared to that of 73.1% for the same period of 2019. The decrease in gross profit ratio was primarily due to the Company's strategy of focusing on products with relatively higher per-unit costs, which outweighed the higher profit margins brought by these products. Gross profit from our imported wine business decreased byRMB966,966 (USD157,443 ), or -36% (-39%), for the three months endedMarch 31, 2020 , as compared to the same period of 2019. The gross profit percentage contributed by our imported wine business was 76.0% for the three months endedMarch 31, 2020 , as compared to 73.0% for the same period of 2019. The decrease in gross profit ratio was primarily due to the Company's strategy of focusing on products with relatively higher profit margins, which outweighed the higher per-unit costs brought by these products.
Selling and Distribution Expenses
For the three months endedMarch 31, 2020 , our selling and distribution expenses wereRMB671,687 (USD94,860 ), representing a decrease ofRMB213,040 (USD36,968 ), or -24% (-28%), as compared to those of the same period of 2019. The decrease was primarily due to the Company's suspension of its business frommid-January 2020 to earlyMarch 2020 , as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. 26 Administrative Expenses
For the three months ended
Other Income
For the three months ended
Interest and Other Financial Charges
For the three months endedMarch 31, 2020 , our interest and other financial charges wereRMB144,189 (USD20,363 ), as compared toRMB41,238 (USD6,145 ) for the same period of 2019. The increase was primarily due to additional interest and other financial charges incurred in relation to the Company's increased average repayment of bank borrowings during the period endedMarch 31, 2020 . Income Taxes For the three months endedMarch 31, 2020 , our income taxes wereRMB1,774,454 (USD250,601 ), as compared toRMB5,432,298 (USD809,438 ) for the same period of 2019. The decrease in the income taxes was primarily due to the Company's decreased taxable income for the three months endedMarch 31, 2020 .
For the nine months ended
Nine months ended Nine months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD RMB USD RMB % USD % Revenue 80,961,250 11,433,913 96,037,641 14,310,055 (15,076,391 ) (16 )% (2,876,142 ) (20 )% Cost of sales 23,589,080 3,331,415 24,395,247 3,635,005 (806,167 ) (3 )% (303,591 ) (8 )% Gross profit 57,372,170 8,102,498 71,642,394 10,675,050 (14,270,224 ) (20 )% (2,572,551 ) (24 )% Selling and distribution expenses 2,895,820 408,968 3,020,324 450,042 (124,504 ) (4 )% (41,074 ) (9 )% Administrative expenses 9,173,102 1,295,489 6,159,429 917,784 3,013,673 49 % 377,706 41 % Income from operations 45,303,248 6,398,041 62,462,641 9,307,224 (17,159,393 ) (28 )% (2,909,183 ) (31 )% Other income 138,095 19,503 90,807 13,531 47,288 52 % 5,972 44 % Interest and other financial charges 144,189 20,363 41,238 6,145 102,951 250 % 14,219 231 % Income before income taxes 45,297,154 6,397,181 62,512,210 9,314,610 (17,215,056 ) (28 )% (2,917,430 ) (31 )% Income taxes 11,855,983 1,674,385 16,024,012 2,387,652 (4,168,029 ) (26 )% (713,268 ) (30 )% Net income 33,441,171 4,722,796 46,488,198 6,926,958 (13,047,027 ) (28 )% (2,204,162 ) (32 )% 27 Revenue Nine months ended Nine months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD % Sales of Fenjiu liquor products 71,714,536 10,128,028 89 % 87,738,861 13,073,498 93 % (16,024,325 ) (18 )% (2,945,470 ) (23 )% Sales of imported wine products 9,246,714 1,305,885 11 % 8,298,780 1,236,557 7 % 947,934 11 % 69,328 6 % Total Amount 80,961,250 11,433,913 100 % 96,037,641 14,310,055 100 % (15,076,391 ) (16 )% (2,876,142 ) (20 )% For the nine months endedMarch 31, 2020 and 2019, revenue generated from our Fenjiu liquor business wasRMB71,714,536 (USD10,128,028 ) andRMB87,738,861 (USD13,073,498 ), respectively, which represented a decrease ofRMB16,024,325 (USD2,945,470 ), or -18% (-23%). The decrease in revenue generated from our Fenjiu liquor business was mainly due to the Company's suspension of business frommid-January 2020 to earlyMarch 2020 as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. For the nine months endedMarch 31, 2020 and 2019, revenue generated from our imported wine business wasRMB9,246,714 (USD1,305,885 ) andRMB8,298,780 (USD1,236,557 ), respectively, which represented an increase ofRMB947,934 (USD69,328 ), or 11% (6%). The increase was due to the Company's strategy of focusing on products with relatively higher profit margins, which outweighed the higher per-unit costs brought by these products and negative impact on revenue caused by COVID-19 during the first half of the Company's fiscal year. Cost of Sales Nine months ended Nine months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD %
Sales of Fenjiu liquor products 21,476,598 3,033,075 91 %
22,157,376 3,301,552 92 % (680,778 ) (3 )% (268,477 ) (8 )% Sales of imported wine products 2,112,482 298,340 9 %
2,237,871 333,453 8 % (125,389 ) (6 )% (35,113 ) (10 )% Total Amount 23,589,080 3,331,415 100 % 24,395,247 14,310,055 100 % (806,167 ) (3 )% (303,590 ) (8 )% For the nine months endedMarch 31, 2020 and 2019, cost of sales from our Fenjiu liquor business wasRMB21,476,598 (USD3,033,075 ) andRMB22,157,376 (USD3,301,552 ), respectively, which represented a decrease ofRMB680,778 (USD268,477 ) or -3% (-8%). The overall decrease in costs of sales of the Company's Fenjiu business was mainly due to the outbreak of COVID-19. The Company suspended its business operation frommid-January 2020 to earlyMarch 2020 according to government mandates. For the nine months endedMarch 31, 2020 and 2019, cost of sales from our imported wine business wasRMB2,112,482 (USD298,340 ) andRMB2,237,871 (USD333,453 ), respectively, which represented a decrease ofRMB125,389 (USD35,113 ), or -6% (-10%). The overall decrease in costs of sales of the Company's imported wine business was mainly due to the outbreak of COVID-19. The Company suspended its business operation frommid-January 2020 to earlyMarch 2020 according to government mandates. 28 Gross Profit Nine months ended Nine months ended March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) Variance RMB USD % RMB USD % RMB % USD %
Sales of Fenjiu liquor products 50,237,938 7,094,952 88 % 65,581,485 9,771,946 92 % (15,343,547 ) (23 )% (2,676,994 ) (27 )% Sales of imported wine products 7,134,232 1,007,546 12 % 6,060,909 903,104 8 % 1,073,323 18 %
104,442 12 % Total Amount 57,372,170 8,102,498 100 % 71,642,394 10,675,050 100 % 14,270,224 20 % 2,572,552 24 % Gross profit from our Fenjiu liquor business decreased byRMB15,343,547 (USD2,676,994 ), or 23% (27%), for the nine months endedMarch 31, 2020 , as compared to the same period of 2019. The gross profit ratio of Fenjiu liquor business was 70.0% for the nine, months endedMarch 31, 2020 , as compared to 74.7% for the same period of 2019. The decrease in gross profit ratio was due to the Company's strategy of focusing on products with relatively higher per-unit costs, which outweighed the higher profit margins brought by these products. Gross profit from our imported wine business increased byRMB1,073,323 (USD104,442 ), or 18% (12%), for the nine months endedMarch 31, 2020 , as compared to that of the same period of 2019. The gross profit ratio of imported wine business was 77.2% for the nine months endedMarch 31, 2020 , as compared to that of 73.0% for the same period of 2019. The increase in gross profit ratio was due to the Company's strategy of focusing on products with relatively higher profit margins, which outweighed the higher per-unit costs brought by these products.
Selling and Distribution Expenses
For the nine months endedMarch 31, 2020 , our selling and distribution expenses wereRMB2,895,820 (USD408,968 ), representing a decrease ofRMB124,504 (USD41,074 ), or -4% (-9%), as compared to those of the same period of 2019. The decrease was primarily due to the Company's suspension of its business frommid-January 2020 to earlyMarch 2020 as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. Administrative Expense
For the nine months ended
Other Income
For the nine months ended
Interest and Other Financial Charges
For the nine months endedMarch 31, 2020 , our interest and other financial charges wereRMB144,189 (USD20,363 ), as compared toRMB41,238 (USD6,145 ) for the same period of 2019. The increase in interest and other financial charges was primarily due to additional financial charges incurred in relation to repayment of certain bank borrowings during the period endedMarch 31, 2020 . 29 Income Taxes For the nine months endedMarch 31, 2020 , our income taxes wereRMB11,855,983 (USD1,674,385 ), as compared to that ofRMB16,024,012 (USD2,387,652 ) for the same period of 2019. The decrease in the income taxes was primarily due to the Company's decreased taxable income for the nine months endedMarch 31, 2020 .
Liquidity and Capital Resources
Operating Activities Operating activities generated cash ofRMB 16,065,030 (USD 2,268,815 ) andRMB28,889,057 (USD4,304,603 ) in 2020 and 2019, respectively. The decrease ofRMB15,821,446 (USD2,459,104 ) in 2020 was primarily due to the temporary closure of operation from mid ofJanuary 2020 to earlyMarch 2020 as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. Activities from inventories resulted a net decrease ofRMB4,618,727 (USD652,289 ) for the nine months endedMarch 31, 2020 , as compared toRMB325,080 (USD48,438 ) for same period of 2019. The decrease in the Company's inventory level for the nine months endedMarch 31, 2020 was greater than for same period in 2019 because the Company suspended its business operations frommid-January 2020 to earlyMarch 2020 as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak. Activities from trade receivables resulted a net decrease ofRMB25,553,854 (USD3,608,894 ) for the nine months endedMarch 31, 2020 , as compared toRMB33,352,881 (USD4,969,734 ) for the nine months endedMarch 31, 2019 . The decrease in trade receivables level for the nine months endedMarch 31, 2020 was less than for the same period in 2019. Such changes represented the Company's increased cash flows from operating activities during the nine months endedMarch 31, 2020 due to the Company's increased payment collection efforts, which outweighed the negative impact on the Company's cash flows caused by the COVID-19 outbreak.
Activities from deposits, prepayments and other receivables resulted a net
increase of
Activities from receipts in advance, accruals, and other payables resulted in a net decrease ofRMB1,927,933 (USD46,000 ) for the nine months endedMarch 31, 2020 , as compared to a net increase ofRMB743,376 (USD110,766 ) for the same period in 2019.
Activities from current tax liabilities resulted a net decrease of
Activities from amount due to a director included a net increase of
Investing Activities
The Company's investing activities used
The Company used cash amounted to
The cash used for investing activities in during the nine months endedMarch 31,2019 wasRMB250,000 (USD37,251 ) and was primarily related to the acquisition of interests in an associate. Financing Activities
Financing activities generated
The Company received cash amounted toRMB370,000 (USD52,254 ) during the nine months endedMarch 31, 2020 primarily from net proceeds of bank borrowings. The Company received cash amounted toRMB2,250,000 (USD335,260 ) during the nine months endedMarch 31, 2019 primarily from net proceeds of bank borrowings. 30
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