NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Chinese Renminbi)
|
|
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
|
|
|
(a)
|
Description
of Business
|
The
Company was incorporated under the laws of the State of Nevada on June 16, 1977. The Company has been in the business of the development
of mineral deposits. During 1983 all activities were abandoned, and the Company had remained inactive until June 29, 2018 when
it acquired the business of Reliant Galaxy International Limited (“Reliant”). The Company and its subsidiaries (the
“Group”) are principally engaged in the trading of spirits in the People’s Republic of China (the “PRC”).
As
disclosed in the Form 8-K filed with the Securities and Exchange Commission on October 19, 2018, the Company entered into a business
agreement with Guangzhou Silicon Technology Co., Ltd. on August 20, 2018 to have Guangzhou Silicon Technology Co., Ltd. develop
an anti-counterfeiting laser recognition proprietary system using blockchain technology.
Details
of the subsidiaries are set out in note 20 to the consolidated financial statements.
|
|
(b)
|
The
basis of consolidation and presentation
|
The
Consolidated Financial Statements include the Financial Statements of Oranco, Inc. and the Financial Statements of its wholly-owned
subsidiaries.
Subsidiaries
are all entities over which the Group has control. The Group controls an entity when the Group is exposed to or has rights to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The
accompanying financial statements have been prepared in accordance with the U.S. generally accepted accounting principles or GAAP.
The Company operates in one reportable segment and solely within the PRC. Accordingly, no segment or geographic information has
been presented.
Non-controlling
interests are shown as a component of shareholders’ equity on the consolidated balance sheet and the share of the net income
attributable to non-controlling interests is shown as a component of net income in the consolidated statements of operations.
Business
Combinations
The
acquisition of other subsidiaries that meet the criteria for business combinations is accounted for using the acquisition method
of accounting. The consideration transferred for the acquisition is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the Group.
The
consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree at the non-controlling
interest’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Acquisition-related
costs are expensed as incurred.
Any
contingent consideration to be transferred by the Group are recognized at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized, either in the Statement
of Operations or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured,
and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of
the consideration transferred and the fair value of non-controlling interest over the identifiable net assets acquired and liabilities
assumed.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
|
(c)
|
Financial
instruments
|
Financial
instruments of the Group primarily consist of cash and cash equivalents, trade receivables, deposits, prepayments and other receivables,
prepaid land lease, trade payables, receipts in advance, accruals and other payables, and bank borrowings. The carrying values
of the Group’s financial instruments approximate their fair values, principally because of the short-term maturity of these
instruments or their terms.
The
Group has no derivative financial instruments.
|
|
(d)
|
Cash
and cash equivalents
|
Cash
and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and
which have maturities of three months or less when purchased.
The
Group’s revenues are derived from sales of products recorded net of value added tax (“VAT”). Revenue is recognized
when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery of the products has occurred
or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. These criteria are
related to each of the following major revenue generating activities described below.
|
|
(i)
|
Revenue
from the sale of goods is recognized when the significant risks and rewards of ownership
have been transferred to the buyer, provided that the Group maintains neither managerial
involvement to the degree usually associated with ownership nor effective control over
the goods sold. This is usually taken as the time when the goods are delivered and the
customers have accepted the goods.
|
|
|
|
|
|
|
|
The Company adopted ASU 2014-09, Revenue from Contracts with
Customers, on July 1, 2018. The Company recognizes revenue when (or as) services are transferred to clients. Revenue is
recognized based on the amount of consideration that management expects to receive in exchange for these services in
accordance with the client. To determine the amount and timing of revenue recognition, the Company must (1) identify the
contract with the client, (2) identify the performance obligations in the contracts, (3) determine the transaction price, (4)
allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the
Company satisfies a performance obligation.
|
|
|
(ii)
|
interest
income is recognized on an accrual basis using the effective interest method.
|
|
|
(f)
|
Trade
receivables and allowance for doubtful accounts
|
Trade
receivables are stated at the amount the Group expects to collect. The Group maintains allowances for doubtful accounts for estimated
losses. Management considers the following factors when determining the collectability of specific accounts: historical experience,
creditworthiness of the clients, aging of the receivables and other specific circumstances related to the accounts. Allowance
for doubtful accounts is made and recorded into general and administrative expenses based on the aging of trade receivables and
on any specifically identified receivables that may become uncollectible. Trade receivables which are deemed to be uncollectible
are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote. The Company takes a write off of the account balances when the Company can demonstrate all means of collection on the
outstanding balances have been exhausted. There is no allowance for doubtful accounts in these consolidated financial statements.
Inventories
are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The components
of inventories include raw materials, processing cost of finished goods and purchase cost of products. The Group routinely evaluate
the net realizable value of the inventories in light of current market conditions and market trends and record a write-down against
the cost of inventories should the net realizable value falls below the cost.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
|
(h)
|
Property,
plant and equipment and depreciation
|
Property,
plant and equipment are carried at cost less accumulated depreciation and any recorded impairment. Depreciation is calculated
on a straight-line basis over the following estimated useful lives:
|
|
Category
|
|
Estimated
useful life
|
|
Estimated
residual values
|
|
|
Building
|
|
20
years
|
|
0-10%
|
|
|
Computer and office
equipment
|
|
3
years
|
|
0-10%
|
Repairs
and maintenance are expensed as incurred and asset improvements are capitalized. Consideration is given at each balance sheet
date to determine whether there is any indication of impairment of the carrying amounts of the property, plant and equipment.
The indication could be an unfavorable development of a business or severe economic slowdown as well as reorganization of the
operation. In assessing value in use, the estimated future cash flows are discounted to their present value, based on the time
value of money and the risks specific to the country where the assets are located.
VAT
on sales is charged at 17% on revenue from product sales and is subsequently paid to the PRC tax authorities after netting input
VAT on purchases. The excess of output VAT over input VAT is recognized in other payables, and the excess of input VAT over output
VAT is recognized in other receivables in the consolidated balance sheets.
Leases
where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases.
Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the
lease periods.
|
|
(k)
|
Foreign
currency translation
|
Substantially
all of the Group’s operations are conducted in China and as a result, the functional and reporting currency of the Group
is the Chinese Renminbi.
Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional
currencies at the prevailing rates of exchange at the balance sheet date. Transactions in currencies other than the functional
currency are converted into the functional currency at the applicable rates of exchange prevailing at the transaction dates. Transaction
gains and losses are recognized in the consolidated statements of operations.
In
translating the financial statements of the Company’s subsidiaries outside the PRC into the reporting currency, assets and
liabilities are translated from the subsidiaries’ functional currencies to the reporting currency at the exchange rate at
the balance sheet date. Equity amounts are translated at historical exchange rates; revenues, expenses, and other gains and losses
are translated using the average rate for the period. Translation adjustments are reported as cumulative translation adjustments
and are shown as a separate component of other comprehensive income/(loss) in the consolidated statements of operations. During
2018 and 2017, such translation adjustments were not material.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
Income
taxes are provided for in accordance with the laws and regulations applicable to the Group as enacted by the relevant tax authorities.
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not
to be sustained upon audit of the related tax authority. An uncertain income tax position will not be recognized if it has less
than a 50% likelihood of being sustained. Changes in recognition or measurement are reflected in the period in which the change
in judgment occurs. The Group records interest and penalties related to unrecognized tax benefits (if any) in interest expenses
and general and administrative expenses, respectively.
On
December 22, 2017, the United States enacted TCJA which instituted fundamental changes to the taxation of multinational corporations,
including a reduction the U.S. corporate income tax rate to 21% beginning in 2018. The TCJA also requires a one-time transition
tax on the mandatory deemed repatriation of the cumulative earnings of the Company’s foreign subsidiary as of December 31,
2017. To determine the amount of this transition tax, the Company must determine the amount of earnings generated since inception
by the relevant foreign subsidiary, as well as the amount of non-U.S. income taxes paid on such earnings, in addition to potentially
other factors. The Company acquired the foreign operations on 29 June 2018, hence the Company does not have any qualifying earnings
or profits from its foreign subsidiary under the transition tax calculation thus no transition tax is payable.
|
|
(m)
|
Fair
value measurement
|
The
Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
When
determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group
considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants
would use when pricing the asset or liability.
The
Group’s financial instruments include cash and cash equivalents, term deposits, trade and other receivables, and trade and
other payables. The Group considers the carrying amounts approximate fair value because of the short maturity of these financial
instruments.
|
|
(n)
|
Business
combinations
|
In
a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquire immediately
before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in earnings.
|
|
(o)
|
Transactions
between entities under common control
|
When
accounting for a transfer of assets or exchange of shares between entities under common control of the Group, the carrying amounts
of the assets and liabilities transferred shall remain unchanged subsequent to the transaction, and no gain or loss shall be recorded
in the Group’s consolidated statements of operations.
|
|
(p)
|
Commitments
and contingencies
|
In
the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of
its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and
non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred
and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, is disclosed.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
|
(q)
|
Adoption
of new accounting standards
|
On
July 1, 2018, we adopted ASU No. 2014-09, “Revenue from Contracts with Customers” and the related amendments using the
modified retrospective method. The adoption of ASC 606 had no impact on total reported revenues, costs and net income.
In
January 2017, the FASB issued ASU No. 2017-01, “Business Combinations: Clarifying the Definition of a Business” (“ASU
2017-01”). ASU 2017-01 clarifies the definition of a business for determining whether transactions should be accounted for
as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for annual periods and interim periods within
those annual periods beginning after December 15, 2017, and early adoption is permitted. The Company adopted this standard on
July 1, 2018 and will apply the standard to any future business combinations.
The
adoption of the standard in the consolidated financial statements for the financial year ended June 30, 2019 will have no significant
impact to the provision for income taxes and will have no impact to the net cash used in, or generated by, operating, investing,
or financing activities in the Group’s consolidated statements of cash flows.
|
|
(r)
|
Recently
issued accounting pronouncements not yet adopted
|
In
August 2016, FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The standard provides new
authoritative guidance addressing eight specific cash flow issues with the objective of reducing the existing diversity in practice
in how certain transactions are presented and classified in the statement of cash flows. The standard is effective for the Group
in the first quarter of the fiscal year 2019. The Company does not expect the adoption of this standard to have a significant
impact on its consolidated financial statements.
In
February 2016, FASB issued ASU No. 2016-02, Leases. The standard increases transparency and comparability among organizations
by requiring companies to recognize leased assets and related liabilities on the balance sheet and disclose key information about
leasing arrangements. This standard is effective for the Group in the first quarter of the fiscal year 2020. The Group is evaluating
the impact the adoption of this standard will have on its consolidated financial statements.
The
Group is finalizing the impact of the standard on its consolidated financial statements and disclosures, as well as changes to
its systems, processes, and internal controls. The Company’s preliminary assessments are subject to change.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
2.
|
REVENUE
AND OTHER INCOME
|
Revenue
represents the invoiced spirits products sold to the external customers less discounts, returns, and surcharges.
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
(unaudited)
Six
months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
63,382,765
|
|
|
|
57,172,844
|
|
|
|
Other
income
|
|
|
58,336
|
|
|
|
120,158
|
|
|
|
|
|
|
63,441,101
|
|
|
|
21,799,329
|
|
All
revenue is derived in China.
A
concentration analysis of the revenue is as follows:
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
(unaudited)
Six
months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
13
|
%
|
|
|
19
|
%
|
|
|
Customer
B
|
|
|
12
|
%
|
|
|
19
|
%
|
|
|
Customer
C
|
|
|
12
|
%
|
|
|
11
|
%
|
|
|
Customer
D
|
|
|
11
|
%
|
|
|
11
|
%
|
|
|
Customer
E
|
|
|
11
|
%
|
|
|
10
|
%
|
|
|
Customer
F
|
|
|
10
|
%
|
|
|
8
|
%
|
|
|
Others
|
|
|
32
|
%
|
|
|
21
|
%
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
An
analysis of other income is as follows:
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
(unaudited)
Six
months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
interest income
|
|
|
58,336
|
|
|
|
42,658
|
|
|
|
Written
back of other payables
|
|
|
-
|
|
|
|
77,500
|
|
|
|
|
|
|
58,336
|
|
|
|
120,158
|
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
3.
|
SELLING
AND DISTRIBUTION EXPENSES
|
The
following expenses are included in the selling and distribution expenses:
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
(unaudited)
Six
months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
16,209
|
|
|
|
34,861
|
|
|
|
Packaging
cost
|
|
|
147,716
|
|
|
|
582,814
|
|
|
|
|
|
|
163,925
|
|
|
|
617,675
|
|
|
|
4.
|
PROPERTY,
PLANT AND EQUIPMENT, NET
|
Property,
plant and equipment, net, consist of the following:
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer
and office equipment
|
|
|
268,550
|
|
|
|
268,550
|
|
|
|
Building
|
|
|
3,754,625
|
|
|
|
3,754,625
|
|
|
|
|
|
|
4,023,175
|
|
|
|
4,023,175
|
|
|
|
Less:
accumulated depreciation
|
|
|
(837,643
|
)
|
|
|
(727,029
|
)
|
|
|
Property,
plant and equipment, net,
|
|
|
3,185,532
|
|
|
|
3,296,146
|
|
|
|
5.
|
PREPAID
LAND LEASE, NET
|
Prepaid
land lease, net, consists of the following:
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
land lease
|
|
|
5,412,120
|
|
|
|
5,412,120
|
|
|
|
Less:
accumulated amortization
|
|
|
(447,860
|
)
|
|
|
(393,020
|
)
|
|
|
Prepaid
land lease, net
|
|
|
4,964,260
|
|
|
|
5,019,000
|
|
The
carrying amounts of the prepaid land lease are analyzed as:
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
109,680
|
|
|
|
109,680
|
|
|
|
Non-current
assets
|
|
|
4,854,580
|
|
|
|
4,909,420
|
|
|
|
|
|
|
4,964,260
|
|
|
|
5,019,000
|
|
Prepaid
land lease represents the cost of the rights of the use of the land in respect of leasehold land in the People’s Republic
of China, on which the Group’s buildings are situated.
The
lease term is 70 years, ending in 2082.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
Inventories
consist of the following:
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
1,942,490
|
|
|
|
4,451,541
|
|
|
|
Finished
goods
|
|
|
7,540,742
|
|
|
|
2,622,873
|
|
|
|
Packaging
material
|
|
|
183,933
|
|
|
|
272,135
|
|
|
|
|
|
|
9,667,165
|
|
|
|
7,346,549
|
|
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
62,719,063
|
|
|
|
33,933,857
|
|
|
|
|
|
|
62,719,063
|
|
|
|
33,933,857
|
|
The
Group normally allows credit terms to well-established customers ranging from 30 to 150 days. The Group seeks to maintain strict
control over its trade receivables. Overdue trade receivables are reviewed regularly by the Board of Directors.
|
8.
|
DEPOSITS,
PREPAYMENTS AND OTHER RECEIVABLES
|
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
19,948,523
|
|
|
|
23,571,363
|
|
|
|
Deposits
|
|
|
-
|
|
|
|
9,000,000
|
|
|
|
Other
receivables
|
|
|
1,025,269
|
|
|
|
678,227
|
|
|
|
|
|
|
20,973,792
|
|
|
|
33,249,590
|
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
9.
|
CASH
AND CASH EQUIVALENTS
|
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
on hand
|
|
|
71,815
|
|
|
|
394,082
|
|
|
|
Cash
held in banks
|
|
|
45,957,499
|
|
|
|
26,110,880
|
|
|
|
|
|
|
46,029,314
|
|
|
|
26,504,962
|
|
Cash
held in banks earns interest at floating rates based on daily bank deposit rates.
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
|
461,178
|
|
|
|
44,636
|
|
|
|
|
|
|
461,178
|
|
|
|
44,636
|
|
For
the larger suppliers, the Group makes payment in advance for the inventories. For the smaller suppliers, the Group obtains credit
terms ranging from 30 to 90 days.
A
concentration analysis of the suppliers based on the purchases made during the six-month periods is as follows:
|
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier
A
|
|
|
57
|
%
|
|
|
26
|
%
|
|
|
Supplier
B
|
|
|
24
|
%
|
|
|
16
|
%
|
|
|
Supplier
C
|
|
|
4
|
%
|
|
|
13
|
%
|
|
|
Supplier
D
|
|
|
3
|
%
|
|
|
13
|
%
|
|
|
Supplier
E
|
|
|
2
|
%
|
|
|
13
|
%
|
|
|
Supplier
F
|
|
|
2
|
%
|
|
|
10
|
%
|
|
|
Others
|
|
|
6
|
%
|
|
|
8
|
%
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
11.
|
RECEIPTS
IN ADVANCE, ACCRUALS AND OTHER PAYABLES
|
Receipts
in advance, accruals and other payables consist of the following:
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
payroll and bonus
|
|
|
2,059,655
|
|
|
|
2,560,883
|
|
|
|
Other
payables
|
|
|
850,000
|
|
|
|
734,122
|
|
|
|
Other
tax payables
|
|
|
1,884,348
|
|
|
|
623,868
|
|
|
|
Receipt
in advance
|
|
|
2,581,415
|
|
|
|
1,221,152
|
|
|
|
|
|
|
7,375,418
|
|
|
|
5,140,025
|
|
|
|
12.
|
AMOUNT
DUE TO A DIRECTOR
|
|
|
|
|
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
due to a director
|
|
|
96,541,957
|
|
|
|
96,231,368
|
|
|
|
|
|
|
96,541,957
|
|
|
|
96,231,368
|
|
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
84,781,805
|
|
|
|
-
|
|
|
|
Current
liabilities
|
|
|
11,760,152
|
|
|
|
96,231,368
|
|
|
|
|
|
|
96,541,957
|
|
|
|
96,231,368
|
|
The
amount due to a director is interest-free, unsecured and not repayable on demand.
Renminbi
94,051,934 of the amount due to a director relates to Reliant’s acquisition of Sure Rich Investment (Group) Limited. The
amount is due to the seller of Sure Rich Investment (Group) Limited, who is also a director of Reliant and the Company.
|
|
|
|
December 31,
2018
|
|
|
June 30,
2018
|
|
|
|
Secured - at amortized cost
|
|
|
|
|
|
|
|
|
Loans from bank – Note (i)
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
|
|
|
2,000,000
|
|
|
|
-
|
|
Note:
|
|
(i)
|
Loan
from the bank is bearing a fixed interest rate ranging from 5.44% per annum.
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
14.
|
SHARE
CAPITAL AND CAPITAL MANAGEMENT
|
|
|
|
|
Issued
and fully paid
|
|
|
Shares
to be issued
|
|
|
|
Company
|
|
Number
of shares
|
|
|
value
US$
|
|
|
value
RMB
|
|
|
Number
of shares
|
|
|
value
US$
|
|
|
value
RMB
|
|
|
|
At
June 30, 2018
|
|
|
98,191,480
|
|
|
|
98,191
|
|
|
|
638,708
|
|
|
|
321,296,000
|
|
|
|
321,296
|
|
|
|
2,126,520
|
|
|
|
Common
stock conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of amount due to a director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued as consideration for business acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
to be issued as consideration for business acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse
merger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2018
|
|
|
98,191,480
|
|
|
|
98,191
|
|
|
|
638,708
|
|
|
|
321,296,000
|
|
|
|
321,296
|
|
|
|
2,126,520
|
|
Each
share has a nominal value of US$0.001 per share.
The
shares to be issued as consideration for business acquisition are the 321,296,000 new shares at $0.001 per share as part of the
consideration of the acquisition of Reliant Galaxy International Limited. The aggregated nominal value of the shares is US$321,296.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
The
Company is subject to taxes in the USA. The Company has had no taxable income under Federal or State tax laws. The Company has
loss carryforwards totaling $359,065 that may be offset against future federal income taxes. If not used, the carryforwards will
expire 20 years after they are incurred.
The
Company’s subsidiary in the BVI is not subject to taxation.
The
Company’s Hong Kong subsidiary is subject to taxes in Hong Kong. The Hong Kong subsidiary has had no taxable income.
The
Company’s PRC subsidiaries are subject to taxes in China. The applicable PRC statutory income tax rate is 25% according
to the Enterprise Income Tax Law.
A
reconciliation of the income tax expenses in China is set out below:
|
|
|
|
(unaudited)
Six months ended
December 31,
2018
|
|
|
(unaudited)
Six months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax
|
|
|
40,856,726
|
|
|
|
34,201,300
|
|
|
|
Taxation at the applicable tax rate of 25%
|
|
|
10,350,322
|
|
|
|
8,550,326
|
|
|
|
Tax effect on non-taxable income
|
|
|
(14,581
|
)
|
|
|
(30,040
|
)
|
|
|
Tax effects of expense that are not deductible
|
|
|
255,973
|
|
|
|
11,076
|
|
|
|
(Over)/under-provision in respect of previous year
|
|
|
-
|
|
|
|
(683,243
|
)
|
|
|
Income taxes
|
|
|
10,591,714
|
|
|
|
7,848,119
|
|
|
|
16.
|
CONTRIBUTION
PLAN IN THE PRC
|
As
stipulated by the PRC state regulations, the subsidiaries in the PRC participate in the state-run defined contribution retirement
scheme. All employees are entitled to an annual pension payment equal to a fixed proportion of the average basic salary of the
geographical area of their last employment at their retirement date. The PRC subsidiaries are required to make contributions to
the local social security bureau at 29.4% to 37.4% of the previous year’s average basic salary amount of the geographical
area where the employees are under employment with the PRC subsidiaries. The Group has no obligation for the payment of pension
benefits beyond the annual contributions as set out above.
According
to the relevant rules and regulations of the PRC, the PRC subsidiaries and their employees are each required to make contributions
to an accommodation fund at 9% of the salaries and wages of the employees which are administered by the Public Accumulation Funds
Administration Centre. There is no further obligation for the Group except for such contributions to the accommodation fund. The
Group had no significant obligation apart from the contributions as stated above.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
17.
|
OPERATING
LEASE ARRANGEMENT
|
The
Group has total future minimum lease payments under non-cancellable operating lease payable as follows:
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
June
30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Within
1 year
|
|
|
463,103
|
|
|
|
134,294
|
|
|
|
After
1 year but within 2 years
|
|
|
61,811
|
|
|
|
18,000
|
|
|
|
After
2 years but within 3 years
|
|
|
-
|
|
|
|
9,000
|
|
|
|
After
3 years
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
524,914
|
|
|
|
161,294
|
|
The
Group is the lessee of a few office premises and staff residence held under operating leases. The leases typically run for an
initial period of one to five years.
|
|
18.
|
RELATED
PARTY BALANCES AND TRANSACTIONS
|
The
Group made sales to Fuqing Jing Hong Trading Co., Ltd, the director of which was a family member of the CEO Mr. Yang Peng. The
family resigned from Fuqing Jing Hong Trading Co., Ltd on June 28, 2018, hence Fuqing Jing Hong ceased to be a related party on
June 28, 2018.
|
|
|
|
(unaudited)
Six
months ended
December 31,
2018
|
|
|
(unaudited)
Six
months ended
December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
-
|
|
|
|
10,865,132
|
|
|
|
|
|
|
-
|
|
|
|
10,865,132
|
|
Management
is of the opinion that these related party transactions were conducted in the normal course of business of the Group with standard
sales terms and conditions.
|
|
19.
|
CONTINGENT
LIABILITIES
|
At
the end of each reporting period, neither the Group nor the Company had any significant contingent liabilities.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
20.
|
DETAILS
OF SUBSIDIARIES
|
|
|
Company
name
|
|
Place
and date of incorporation
|
|
Capital
|
|
Attributable
Equity
interest
|
|
|
Principal
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reliant
Galaxy International
Limited
|
|
Established
in British Virgin Islands on January 3, 2017
|
|
Registered
and
paid-in capital of
RMB 69,100
|
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sure
Rich Investment
|
|
Established
in
|
|
Share capital
|
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Group)
Limited
|
|
Hong Kong
On February 1, 2007
|
|
RMB 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fujian
Jinou Trading Co., Ltd.
|
|
Established
in the PRC
on July 5, 2004
|
|
Registered
and
paid-in capital of US$
1,650,000
|
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fenyang
Huaxin Spirit Development Co., Ltd.
|
|
Established
in the PRC
on November 7, 2013
|
|
Registered
and
Paid-in capital of RMB
1,000,000
Note (i)
|
|
|
100
|
%
|
|
Trading of spirit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fenyang
Jinqiang Spirit Co., Ltd.
|
|
Established
in the PRC
on November 7, 2013
|
|
Registered
and
Paid-in capital of RMB
5,000,000
|
|
|
100
|
%
|
|
Trading of spirit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beijing
Huaxin Tianchuang Enterprise Management Consulting Co., Ltd.
|
|
Established
in the PRC
on April 14, 2018
|
|
Registered
and
issued capital of
RMB1,000,000
|
|
|
51
Note
|
%
(i)
|
|
Dormant
|
Notes:
|
|
(i)
|
The
subsidiary was registered with payable share capital and the Company committed to pay
up its share of the issued capital in the amount of RMB 510,000 on March 31, 2038, which
is 20 years from the date of incorporation permitted by the Regulation of the People’s
Republic of China on Company Registration. The amount due to the subsidiary is interest-free
and unsecured.
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (Unaudited)
(Chinese Renminbi)
|
|
21.
|
DETAILS
OF AN ASSOCAITE
|
|
|
Company
name
|
|
Place
and date of incorporation
|
|
Capital
|
|
Attributable
Equity
interest
|
|
|
Principal
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guangzhou
Silicon Technology Co., Ltd
|
|
Established
in the PRC
on September 8, 2015
|
|
Registered
and
issued capital of
RMB5,000,000
|
|
|
20
Note
|
%
(i)
|
|
Development,
sale and provision of software solutions
|
Notes:
|
|
(i)
|
On
September 1, 2018, Fenyang Huaxin Spirit Development Co., Ltd acquired shares of 20%
of the associate Guangzhou Silicon Technology Co., Ltd which then became an associate
of the Company. The associate’s results were not material to the Group in the period
to December 31, 2018.
|