ITEM 1. FINANCIAL STATEMENTS
ORANCO,
INC.
CONSOLIDATED
FINANCIAL STATEMENTS
THREE
MONTHS ENDED MARCH 31, 2020
ORANCO,
INC.
TABLE
OF CONTENTS
ORANCO,
INC.
CONSOLIDATED
BALANCE SHEETS
(Amounts
in RMB and US$, except for number of shares and per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
69,594,118
|
|
|
|
9,828,567
|
|
|
|
53,163,966
|
|
|
|
7,744,205
|
|
Trade receivables
|
|
|
57,607,753
|
|
|
|
8,135,769
|
|
|
|
32,053,899
|
|
|
|
4,669,177
|
|
Inventories
|
|
|
11,519,715
|
|
|
|
1,626,895
|
|
|
|
6,900,988
|
|
|
|
1,005,242
|
|
Deposits, prepayments and other receivables
|
|
|
33,532,335
|
|
|
|
4,735,669
|
|
|
|
45,610,523
|
|
|
|
6,643,922
|
|
Prepaid land lease and other lease
|
|
|
998,555
|
|
|
|
141,023
|
|
|
|
547,180
|
|
|
|
79,706
|
|
|
|
|
173,252,476
|
|
|
|
24,467,923
|
|
|
|
138,276,556
|
|
|
|
20,142,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1,000,000
|
|
|
|
141,227
|
|
|
|
1,000,000
|
|
|
|
145,666
|
|
Property, plant and equipment
|
|
|
2,949,208
|
|
|
|
416,508
|
|
|
|
3,124,224
|
|
|
|
455,095
|
|
Prepaid land lease and other lease
|
|
|
8,884,147
|
|
|
|
1,254,682
|
|
|
|
9,362,240
|
|
|
|
1,363,764
|
|
|
|
|
12,833,355
|
|
|
|
1,812,417
|
|
|
|
13,486,464
|
|
|
|
1,964,525
|
|
Total assets
|
|
|
186,085,831
|
|
|
|
26,280,340
|
|
|
|
151,763,020
|
|
|
|
22,106,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
573,401
|
|
|
|
80,980
|
|
|
|
247,685
|
|
|
|
36,079
|
|
Receipts in advance, accruals and other payables
|
|
|
4,618,819
|
|
|
|
652,303
|
|
|
|
5,698,168
|
|
|
|
830,032
|
|
Amount due to Director
|
|
|
18,671,556
|
|
|
|
2,566,314
|
|
|
|
13,392,777
|
|
|
|
1,950,878
|
|
Current tax liabilities
|
|
|
1,792,682
|
|
|
|
253,175
|
|
|
|
3,406,187
|
|
|
|
496,167
|
|
Bank borrowings
|
|
|
220,000
|
|
|
|
101,683
|
|
|
|
2,250,000
|
|
|
|
327,749
|
|
|
|
|
25,876,458
|
|
|
|
3,654,455
|
|
|
|
24,994,817
|
|
|
|
3,640,905
|
|
Non-Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due to Director
|
|
|
81,781,805
|
|
|
|
11,549,797
|
|
|
|
81,781,805
|
|
|
|
11,912,863
|
|
|
|
|
107,658,263
|
|
|
|
15,204,252
|
|
|
|
106,776,622
|
|
|
|
15,553,768
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of authorized shares with par value US$0.001
|
|
|
50,000,000
|
|
|
|
50,000,000
|
|
|
|
50,000,000
|
|
|
|
50,000,000
|
|
Number of issued and outstanding shares
|
|
|
41,948,748
|
|
|
|
41,948,748
|
|
|
|
41,948,748
|
|
|
|
41,948,748
|
|
Number of fully paid shares to be issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
2,765,228
|
|
|
|
390,525
|
|
|
|
2,765,228
|
|
|
|
402,801
|
|
Retained earnings
|
|
|
75,662,340
|
|
|
|
10,685,563
|
|
|
|
42,221,170
|
|
|
|
6,150,208
|
|
Total shareholders’ equity
|
|
|
78,427,568
|
|
|
|
11,076,088
|
|
|
|
44,986,398
|
|
|
|
6,553,009
|
|
Total liabilities and shareholders’ equity
|
|
|
186,085,831
|
|
|
|
26,280,340
|
|
|
|
151,763,020
|
|
|
|
22,106,777
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
ORANCO,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(Amounts
in RMB and US$, except for number of shares and per share data)
|
|
Nine Months
Ended
March 31,
2020
|
|
|
Three Months
Ended
March 31,
2020
|
|
|
Nine Months
Ended
March 31,
2019
|
|
|
Three Months
Ended
March 31,
2019
|
|
|
|
RMB
|
|
|
USD
|
|
|
RMB
|
|
|
USD
|
|
|
RMB
|
|
|
RMB
|
|
Revenue
|
|
|
80,961,250
|
|
|
|
11,433,913
|
|
|
|
13,774,340
|
|
|
|
1,945,308
|
|
|
|
96,037,641
|
|
|
|
32,654,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
23,589,080
|
|
|
|
3,331,415
|
|
|
|
3,980,504
|
|
|
|
562,155
|
|
|
|
24,395,247
|
|
|
|
8,801,480
|
|
Selling and distribution expenses
|
|
|
2,895,820
|
|
|
|
408,968
|
|
|
|
671,687
|
|
|
|
94,860
|
|
|
|
3,020,324
|
|
|
|
884,727
|
|
Administrative expenses
|
|
|
9,173,102
|
|
|
|
1,295,489
|
|
|
|
3,101,937
|
|
|
|
438,077
|
|
|
|
6,159,429
|
|
|
|
1,338,458
|
|
|
|
|
35,658,002
|
|
|
|
5,035,872
|
|
|
|
7,754,128
|
|
|
|
1,095,092
|
|
|
|
33,575,000
|
|
|
|
11,024,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
138,095
|
|
|
|
19,503
|
|
|
|
40,650
|
|
|
|
5,741
|
|
|
|
90,807
|
|
|
|
32,471
|
|
Interest and other financial charges
|
|
|
144,189
|
|
|
|
20,363
|
|
|
|
2,572
|
|
|
|
363
|
|
|
|
41,238
|
|
|
|
7,198
|
|
Income before income taxes
|
|
|
45,297,154
|
|
|
|
6,397,181
|
|
|
|
6,058,290
|
|
|
|
855,594
|
|
|
|
62,512,210
|
|
|
|
21,655,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
11,855,983
|
|
|
|
1,674,385
|
|
|
|
1,774,454
|
|
|
|
250,601
|
|
|
|
16,024,012
|
|
|
|
5,432,298
|
|
Net Income
|
|
|
33,441,171
|
|
|
|
4,722,796
|
|
|
|
4,283,836
|
|
|
|
604,993
|
|
|
|
46,488,198
|
|
|
|
16,223,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
|
33,441,171
|
|
|
|
4,722,796
|
|
|
|
4,283,836
|
|
|
|
604,993
|
|
|
|
46,488,198
|
|
|
|
16,223,186
|
|
Former non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
33,441,171
|
|
|
|
4,722,796
|
|
|
|
4,283,836
|
|
|
|
604,993
|
|
|
|
46,488,198
|
|
|
|
16,223,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
|
0.80
|
|
|
|
0.11
|
|
|
|
0.10
|
|
|
|
0.01
|
|
|
|
0.11
|
|
|
|
0.04
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
ORANCO,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(Amounts
in RMB and US$, except for number of shares and per share data)
|
|
Share
Capital
|
|
|
Retained
Earnings
|
|
|
Total
Shareholders’
Equity
|
|
Balance at June 30, 2018
|
|
|
2,765,228
|
|
|
|
2,240,740
|
|
|
|
5,005,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
-
|
|
|
|
9,885,671
|
|
|
|
9,885,671
|
|
balance at September 30, 2018
|
|
|
2,765,228
|
|
|
|
12,126,411
|
|
|
|
14,891,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
20,379,341
|
|
|
|
20,379,341
|
|
balance at December 31, 2019
|
|
|
2,765,228
|
|
|
|
32,505,752
|
|
|
|
35,270,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
16,223,186
|
|
|
|
16,223,186
|
|
balance at March 31, 2019
|
|
|
2,765,228
|
|
|
|
48,728,938
|
|
|
|
51,494,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
2,765,228
|
|
|
|
42,221,170
|
|
|
|
44,986,398
|
|
Total comprehensive income for the period
|
|
|
-
|
|
|
|
10,052,200
|
|
|
|
10,052,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019
|
|
|
2,765,228
|
|
|
|
52,273,370
|
|
|
|
55,038,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
|
|
|
|
19,105,135
|
|
|
|
19,105,135
|
|
balance at December 31, 2020
|
|
|
2,765,228
|
|
|
|
71,378,505
|
|
|
|
74,143,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period
|
|
|
-
|
|
|
|
4,283,835
|
|
|
|
4,283,835
|
|
balance at March 31, 2020
|
|
|
2,765,228
|
|
|
|
75,662,340
|
|
|
|
78,427,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020 (US$)
|
|
|
390,525
|
|
|
|
10,685,563
|
|
|
|
11,076,088
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
ORANCO,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts
in RMB and US$, except for number of shares and per share data)
|
|
(unaudited)
Nine months ended
March 31,
2020
|
|
|
(unaudited)
Nine months ended
March 31,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
33,441,171
|
|
|
|
4,722,795
|
|
|
|
46,488,198
|
|
Adjustments to reconcile net income to cash generated from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,055,195
|
|
|
|
149,022
|
|
|
|
246,248
|
|
Changes in working capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
(25,553,854
|
)
|
|
|
(3,608,894
|
)
|
|
|
(33,352,881
|
)
|
Inventories
|
|
|
(4,618,727
|
)
|
|
|
(652,289
|
)
|
|
|
(325,080
|
)
|
Deposits, prepayments and other receivables
|
|
|
12,078,188
|
|
|
|
1,705,766
|
|
|
|
11,945,528
|
|
Trade payables
|
|
|
325,716
|
|
|
|
46,000
|
|
|
|
99,457
|
|
Receipts in advance, accruals and other payables
|
|
|
(2,427,933
|
)
|
|
|
(272,276
|
)
|
|
|
743,376
|
|
Current tax liabilities
|
|
|
(1,613,505
|
)
|
|
|
(227,870
|
)
|
|
|
2,598,923
|
|
Amount due to Director
|
|
|
3,378,779
|
|
|
|
406,561
|
|
|
|
445,288
|
|
Cash generated from operating activities
|
|
|
16,065,030
|
|
|
|
2,268,815
|
|
|
|
28,889,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for acquisition of property, plant and equipment
|
|
|
(4,878
|
)
|
|
|
(689
|
)
|
|
|
-
|
|
Acquisition of interest in an associate
|
|
|
-
|
|
|
|
-
|
|
|
|
(250,000
|
)
|
Cash used in investing activities
|
|
|
(4,878
|
)
|
|
|
(689
|
)
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of bank borrowings
|
|
|
(130,000
|
)
|
|
|
(18,360
|
)
|
|
|
-
|
|
Proceeds from bank borrowings
|
|
|
500,000
|
|
|
|
70,613
|
|
|
|
2,250,000
|
|
Cash used in financing activities
|
|
|
370,000
|
|
|
|
52,254
|
|
|
|
2,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash
|
|
|
-
|
|
|
|
(236,019
|
)
|
|
|
-
|
|
(Decrease)/increase in cash and cash equivalents
|
|
|
16,430,152
|
|
|
|
2,320,381
|
|
|
|
30,889,057
|
|
Cash and cash equivalents, beginning of the period
|
|
|
53,163,966
|
|
|
|
7,744,205
|
|
|
|
26,504,962
|
|
Cash and cash equivalents, end of the period
|
|
|
69,594,118
|
|
|
|
9,828,567
|
|
|
|
57,394,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
|
(19,455
|
)
|
|
|
(2,748
|
)
|
|
|
(34,040
|
)
|
Cash paid during the period for income taxes
|
|
|
13,468,094
|
|
|
|
1,902,058
|
|
|
|
13,427,680
|
|
The
non-cash transactions have been disclosed in Note 23.
The
accompanying notes are an integral part of the consolidated financial statements.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
|
|
(a)
|
Description
of Business
|
Oranco,
Inc. (the “Company”) was incorporated under the laws of the State of Nevada on June 16, 1977. The Company had been
in the business of developing mineral deposits. During the year 1983, all activities were abandoned, and the Company 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 marketing and wholesaling of self-branded
spirits and imported wines 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)
|
Basis
of consolidation and presentation
|
The
Consolidated Financial Statements include the Financial Statements of Oranco, Inc. and 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 United States (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.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
(b)
|
Basis
of consolidation and presentation – continued
|
Business
Combinations
The
acquisition of subsidiaries that meet the criteria for business combinations is accounted for using the acquisition method of
accounting. The considerations transferred for the acquisition are 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
considerations transferred include 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 the identifiable net assets acquired and liabilities assumed.
|
(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.
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), to update the financial reporting
requirements for revenue recognition. Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. It supersedes most current revenue recognition guidance, including industry-specific guidance.
The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and
cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from
costs incurred to fulfil a contract. This guidance became effective for the Group beginning on July 1, 2018, and the Group has
the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. We
adopted this standard using the modified retrospective approach on July 1, 2018.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
(e)
|
Revenue
recognition – continued
|
In
preparation for adoption of the standard, we have completed our impact assessment of implementing this guidance. We have evaluated
each of the five steps in Topic 606, which are as follows: 1) identify the contract with the customer; 2) identify the performance
obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations;
and 5) recognize revenue when (or as) performance obligations are satisfied.
Revenue
was not affected materially in any period due to the adoption of ASC Topic 606 because: (1) we identified similar performance
obligations under ASC Topic 606 as compared with deliverables and separate units of account previously identified; our performance
obligation is to deliver the spirits and wine; (2) we determined the transaction price to be consistent; and (3) we recorded revenue
at the same point in time, upon delivery under both ASC Topic 605 and ASC Topic 606, as applicable under the terms of the contract
with the customer. Additionally, the accounting for fulfilment costs or costs incurred to obtain a contract were not affected
materially in any period due to the adoption of Topic 606.
There
are also certain considerations related to accounting policies, business processes and internal control over financial reporting
that are associated with implementing Topic 606. We have evaluated our policies, processes, and control framework for revenue
recognition, and identified and implemented the changes needed in response to the new guidance.
Lastly,
disclosure requirements under the new guidance in Topic 606 have been significantly expanded in comparison to the disclosure requirements
under the current guidance, including disclosures related to disaggregation of revenue into appropriate categories, performance
obligations, the judgments made in revenue recognition determinations, adjustments to revenue which relate to activities from
previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfil contracts.
We
conclude that the adoption of the standard has no material impact on our revenue recognition policy.
|
(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 the 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)
(Amounts
in RMB and US$, except for number of shares and per share data)
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%
|
Leasehold
improvement
|
|
Over
the shorter of lease term or the estimated useful lives of the assets
|
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 unfavourable 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 13% 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.
Right-of-use
(ROU) Assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange
for consideration, and Lease Liabilities represent its obligation to make lease payments arising from the aforementioned right.
The
Company determines if an arrangement is, or contains, a lease at the inception date, and the Company measures and records a non-current
ROU Asset and corresponding Lease Liabilities, classified as current and non-current, on its consolidated balance sheet at the
lease commencement date for all leases except for short-term leases with a term of 12 months or less. ROU Assets and Lease Liabilities
are initially recorded based on the present value of lease payments over the lease term, which may include options to extend or
terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit
for each of the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate, based on
the information available at the lease commencement date in determining the present value of its expected lease payments. The
ROU Asset also includes any initial direct costs and any lease payments made prior to the lease commencement date and is reduced
by any lease incentives received. The ROU Asset is amortized on a straight-line basis as the operating lease cost over the lease
term on the consolidated statements of income. ROU Asset amortization, referred to as noncash lease expense, along with the change
in the operating lease liabilities are separately presented within the cash flows from operating activities on the consolidated
statements of cash flows.
ASC
842 provides various optional transition practical expedients. Upon transition to ASC 842, the Company elected the use of the
package of practical expedients to not reassess: whether a contract is or contains a lease, lease classification and indirect
costs. The Company did not elect the hindsight practical expedient in transition. The Company has elected to not separate lease
and non-lease components. See Note 17—Operating Lease Arrangements for additional information.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
(k)
|
Foreign
currency translation
|
Substantially
all of the Group’s operations are conducted in China and as a result, the functional and reporting currency of the Group
is the Chinese Renminbi.
Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional
currencies at the prevailing rates of exchange at the balance sheet date. Transactions in currencies other than the functional
currency are converted into the functional currency at the applicable rates of exchange prevailing at the transaction dates. Transaction
gains and losses are recognized in the consolidated statements of operations.
In
translating the financial statements of the Company’s subsidiaries outside the PRC into the reporting currency, assets and
liabilities are translated from the subsidiaries’ functional currencies to the reporting currency at the exchange rate at
the balance sheet date. Equity amounts are translated at historical exchange rates; revenues, expenses, and other gains and losses
are translated using the average rate for the period. Translation adjustments are reported as cumulative translation adjustments
and are shown as a separate component of other comprehensive income/(loss) in the consolidated statements of operations. During
2019 and 2018, such translation adjustments were not material.
The
Group uses the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results
and financial position, respectively. Translation differences are recorded in accumulated other comprehensive loss, a component
of shareholders’ deficits.
Convenience
translation
Amounts
in US$ are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 to RMB 7.0808 on
March 31, 2020, representing the noon buying rate set forth in the H.10 statistical release of the US Federal Reserve Board. No
representation is made that the RMB amounts could have been, or could be converted, realized or settled into US$ at such rate
or at any other rate.
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.
|
(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.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
(m)
|
Fair
value measurement – continued
|
The
Group’s financial instruments include cash and cash equivalents, term deposits, trade and other receivables, trade and other
payables, and bank borrowings. The Group considers the carrying amounts approximate fair value because of the short maturity of
these financial instruments.
|
(n)
|
Transactions
between entities under common control
|
When
accounting for a transfer of assets or exchange of shares between entities under common control of the Group, the carrying amounts
of the assets and liabilities transferred shall remain unchanged subsequent to the transaction, and no gain or loss shall be recorded
in the Group’s consolidated statements of operations.
|
(o)
|
Commitments
and contingencies
|
In
the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of
its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and
non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred
and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably
possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, is disclosed.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
1.
|
SUMMARY
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
|
|
(p)
|
Adoption
of new accounting standards
|
In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets
and liabilities on the balance sheet for the rights and obligations created by all leases with a term of more than one year. Accounting
by lessors remains similar to pre-existing US GAAP. Subsequent accounting standards updates have been issued, which
amend and/or clarify the application of ASU 2016-02. The Company adopted Topic 842 effective January 1, 2019. See
“Note 17, operating leases arrangement” for further details.
The
adoption of the standard in the consolidated financial statements for the financial period ended March 31, 2020 had no significant
impact to the provision for income taxes and had 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.
|
(q)
|
Recently
issued accounting pronouncements not yet adopted
|
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), amending existing guidance on
the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for
estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale
debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance
is effective for the Company beginning after December 15, 2020. The Company is currently evaluating the impact of the adoption
of this guidance on its condensed consolidated financial statements.
In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework. The purpose of the update
is to improve the effectiveness of the fair value measurement disclosures that allow for clear communication of information that
is most important to the users of financial statements. There were certain required disclosures that have been removed or modified.
In addition, the update added the following disclosures: (i) changes in unrealized gains and losses for the period included in
other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and (ii)
the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The standard
became effective for the Company for its periods beginning after December 15, 2019; early adoption is permitted. The Company is
currently evaluating the impact of ASU 2018-13 on its condensed consolidated financial statements.
Other
pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not
applicable or not significant to the condensed consolidated financial statements of the Company.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
2.
|
REVENUE
AND OTHER INCOME
|
Revenue
represents the invoiced spirits and wine products sold to customers less discounts, returns, and surcharges.
|
|
Nine months ended
March 31, 2020
|
|
|
Nine months
ended
March 31,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
80,961,250
|
|
|
|
11,433,913
|
|
|
|
96,037,641
|
|
Other income
|
|
|
138,095
|
|
|
|
19,503
|
|
|
|
90,807
|
|
|
|
|
81,099,345
|
|
|
|
11,453,416
|
|
|
|
96,128,448
|
|
All
revenue is derived in China.
A
concentration analysis of the revenue is as follows:
|
|
Nine months
ended
March 31,
2020
|
|
|
Nine months
ended
March 31,
2019
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
17
|
%
|
|
|
13
|
%
|
Customer B
|
|
|
16
|
%
|
|
|
12
|
%
|
Customer C
|
|
|
14
|
%
|
|
|
12
|
%
|
Customer D
|
|
|
11
|
%
|
|
|
11
|
%
|
Customer E
|
|
|
11
|
%
|
|
|
11
|
%
|
Customer F
|
|
|
11
|
%
|
|
|
10
|
%
|
Others
|
|
|
20
|
%
|
|
|
31
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
3.
|
SELLING
AND DISTRIBUTION EXPENSES
|
The
following expenses are included in the selling and distribution expenses:
|
|
Nine months ended
March 31, 2020
|
|
|
Nine months
ended
March 31,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Freight
|
|
|
138,095
|
|
|
|
19,503
|
|
|
|
16,209
|
|
Packaging cost
|
|
|
-
|
|
|
|
-
|
|
|
|
147,716
|
|
|
|
|
138,095
|
|
|
|
19,503
|
|
|
|
163,925
|
|
4.
|
PROPERTY,
PLANT AND EQUIPMENT, NET
|
Property,
plant and equipment, net, consist of the following:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer and office equipment
|
|
|
334,631
|
|
|
|
47,259
|
|
|
|
268,550
|
|
|
|
39,119
|
|
Building
|
|
|
3,754,625
|
|
|
|
530,254
|
|
|
|
3,754,625
|
|
|
|
546,923
|
|
Add: Computer and office equipment
|
|
|
4,878
|
|
|
|
689
|
|
|
|
66,081
|
|
|
|
9,626
|
|
|
|
|
4,094,134
|
|
|
|
578,202
|
|
|
|
4,089,256
|
|
|
|
595,668
|
|
Less: accumulated depreciation
|
|
|
(1,144,926
|
)
|
|
|
(161,694
|
)
|
|
|
(965,032
|
)
|
|
|
(140,573
|
)
|
Property, plant and equipment, net,
|
|
|
2,949,208
|
|
|
|
416,508
|
|
|
|
3,124,224
|
|
|
|
455,095
|
|
5.
|
PREPAID
LAND LEASE AND OTHER LEASE, NET
|
Prepaid
land lease and other lease, net, consists of the following:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid land lease and other lease
|
|
|
11,134,369
|
|
|
|
1,572,473
|
|
|
|
5,412,120
|
|
|
|
788,364
|
|
Less: accumulated amortization
|
|
|
(1,378,003
|
)
|
|
|
(194,611
|
)
|
|
|
(502,700
|
)
|
|
|
(73,227
|
)
|
Add: other lease asset-ROU – note 17
|
|
|
126,336
|
|
|
|
17,842
|
|
|
|
5,000,000
|
|
|
|
728,333
|
|
Prepaid land lease and other lease, net
|
|
|
9,882,702
|
|
|
|
1,395,705
|
|
|
|
9,909,420
|
|
|
|
1,443,470
|
|
The
carrying amounts of the prepaid land lease and other lease are analysed as:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
998,555
|
|
|
|
141,023
|
|
|
|
547,180
|
|
|
|
79,706
|
|
Non-current assets
|
|
|
8,884,147
|
|
|
|
1,254,682
|
|
|
|
9,362,240
|
|
|
|
1,363,764
|
|
|
|
|
9,882,702
|
|
|
|
1,395,705
|
|
|
|
9,909,420
|
|
|
|
1,443,470
|
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
5.
|
PREPAID
LAND LEASE AND OTHER LEASE, NET – CONTINUED
|
Prepaid
land lease represents the costs of the land use rights in respect of leasehold land in the People’s Republic of China, on
which the Group’s buildings are situated. Prepaid other lease represents the lease of the Company’s warehouse in the
PRC.
The
prepaid land lease’ terms are 70 years, ending in 2082 and other leases terms are 10 years, ending in 2029.
Inventories
consist of the following:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
5,971,079
|
|
|
|
843,277
|
|
|
|
4,500,125
|
|
|
|
655,517
|
|
Finished goods
|
|
|
5,371,938
|
|
|
|
758,663
|
|
|
|
2,216,931
|
|
|
|
322,932
|
|
Packaging material
|
|
|
176,698
|
|
|
|
24,955
|
|
|
|
183,932
|
|
|
|
26,793
|
|
|
|
|
11,519,715
|
|
|
|
1,626,895
|
|
|
|
6,900,988
|
|
|
|
1,005,242
|
|
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
57,607,753
|
|
|
|
8,135,769
|
|
|
|
32,053,899
|
|
|
|
4,669,177
|
|
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
|
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
32,877,565
|
|
|
|
4,643,199
|
|
|
|
45,054,919
|
|
|
|
6,562,989
|
|
Other receivables
|
|
|
654,770
|
|
|
|
92,470
|
|
|
|
555,604
|
|
|
|
80,933
|
|
|
|
|
33,532,335
|
|
|
|
4,735,669
|
|
|
|
45,610,523
|
|
|
|
6,643,922
|
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
9.
|
CASH
AND CASH EQUIVALENTS
|
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash on hand
|
|
|
475,750
|
|
|
|
67,189
|
|
|
|
419,446
|
|
|
|
61,099
|
|
Cash held in banks
|
|
|
69,118,368
|
|
|
|
9,761,378
|
|
|
|
52,744,520
|
|
|
|
7,683,106
|
|
|
|
|
69,594,118
|
|
|
|
9,828,567
|
|
|
|
53,163,966
|
|
|
|
7,744,205
|
|
Cash
held in banks earns interest at floating rates based on daily bank deposit rates.
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
573,401
|
|
|
|
80,980
|
|
|
|
247,685
|
|
|
|
36,079
|
|
For
larger suppliers, the Group makes payment in advance for the inventories. For 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 year is as follows:
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
|
|
|
|
|
|
Supplier A
|
|
|
54
|
%
|
|
|
56
|
%
|
Supplier B
|
|
|
24
|
%
|
|
|
22
|
%
|
Supplier C
|
|
|
18
|
%
|
|
|
10
|
%
|
Supplier D
|
|
|
3
|
%
|
|
|
3
|
%
|
Supplier E
|
|
|
1
|
%
|
|
|
3
|
%
|
Supplier F
|
|
|
-
|
%
|
|
|
1
|
%
|
Others
|
|
|
-
|
%
|
|
|
5
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
11.
|
RECEIPTS
IN ADVANCE, ACCRUALS AND OTHER PAYABLES
|
Receipts
in advance, accruals and other payables consist of the following:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payroll and bonus
|
|
|
270,244
|
|
|
|
38,166
|
|
|
|
301,894
|
|
|
|
43,976
|
|
Accrued and other payables
|
|
|
2,831,500
|
|
|
|
399,884
|
|
|
|
3,430,703
|
|
|
|
499,738
|
|
Other tax payables
|
|
|
629,225
|
|
|
|
88,864
|
|
|
|
466,538
|
|
|
|
67,959
|
|
Receipts in advance
|
|
|
887,850
|
|
|
|
125,389
|
|
|
|
1,499,033
|
|
|
|
218,359
|
|
|
|
|
4,618,819
|
|
|
|
652,303
|
|
|
|
5,698,168
|
|
|
|
830,032
|
|
12.
|
AMOUNT
DUE TO DIRECTOR
|
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current-liabilities
|
|
|
18,171,556
|
|
|
|
2,566,314
|
|
|
|
13,392,777
|
|
|
|
1,950,878
|
|
Non-Current-liabilities
|
|
|
81,781,805
|
|
|
|
11,549,797
|
|
|
|
81,781,805
|
|
|
|
11,912,863
|
|
|
|
|
99,953,361
|
|
|
|
14,116,111
|
|
|
|
95,174,582
|
|
|
|
13,863,741
|
|
The
amount due to director is interest-free, unsecured and repayable on demand.
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from a financial institution – Note (i)
|
|
|
220,000
|
|
|
|
31,070
|
|
|
|
2,250,000
|
|
|
|
327,749
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
220,000
|
|
|
|
31,070
|
|
|
|
2,250,000
|
|
|
|
327,749
|
|
Note:
(i)
|
A
loan from financial institution bears fixed interest rates at approximately 5.59% per annum and will mature on April 1, 2020.
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
14.
|
SHARE
CAPITAL AND CAPITAL MANAGEMENT
|
|
|
Issued and fully paid
|
|
|
Shares to be issued
|
|
|
Total share
capital
|
|
|
|
Number of
shares
|
|
|
Value
US$
|
|
|
Value
RMB
|
|
|
Number of
shares
|
|
|
Value
US$
|
|
|
Value
RMB
|
|
|
value
RMB
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2018
|
|
|
98,191,40
|
|
|
|
98,191
|
|
|
|
638,708
|
|
|
|
321,296,000
|
|
|
|
321,296
|
|
|
|
2,126,520
|
|
|
|
2,765,228
|
|
Shares reverse split on August 7, 2019
|
|
|
(88,372,332
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(289,166,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restated at June 30, 2018 and March 31, 2019
|
|
|
9,819,148
|
|
|
|
98,191
|
|
|
|
638,708
|
|
|
|
32,129,600
|
|
|
|
321,296
|
|
|
|
2,126,520
|
|
|
|
2,765,228
|
|
Shares were issued as consideration for business acquisition note 1
|
|
|
32,129,600
|
|
|
|
321,296
|
|
|
|
2,126,520
|
|
|
|
(32,129,600
|
)
|
|
|
(321,296
|
)
|
|
|
(2,126,520
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at June 30, 2019 and March 31, 2020
|
|
|
41,948,748
|
|
|
|
419,487
|
|
|
|
2,765,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,765,228
|
|
Each
share has a nominal value of US$0.001 per share.
Notes:
1.
|
The
321,296,000 new shares, at $0.001 per share, were part of the consideration of the acquisition of Reliant Galaxy International
Limited by the Company. The aggregated nominal value of the shares is US$321,296.
|
2.
|
On
July 22, 2019, the Company filed a Certificate of Amendment with the Secretary of State of Nevada to effect a reverse stock
split of its then issued and outstanding shares of common stock at a ratio of 10-for-1. All current and historical information
contained herein related to the per share information for the Company’s common stock reflects the 1-for-10 reverse stock
split that became market effective on August 7, 2019.
|
3.
|
On
August 7, 2019, the Company effected a decrease in the number of its authorized common stock from 500,000,000 to 50,000,000,
with its common stock’s par value unchanged at $0.001 per share.
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
The
Company is subject to taxes in the United States (the “US”). The Company has had no taxable income under Federal or
State tax laws. The Company has loss carry forwards totalling $24,581 that may be offset against future federal income taxes.
If not used, the carry forwards will expire 20 years after they are incurred.
The
Company’s British Virgin Islands subsidiary is not subject to taxation.
The
Company’s Hong Kong subsidiary is subject to taxes in Hong Kong. However, the Hong Kong subsidiary has had no taxable income.
The
Company’s PRC subsidiaries are subject to taxes in China. The applicable PRC statutory income tax rate is 25% according
to the Enterprise Income Tax Law.
A
reconciliation of the income tax expenses in China is set out below:
|
|
Nine months ended
March 31, 2020
|
|
|
Nine months
ended
March 31,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax
|
|
|
45,297,154
|
|
|
|
6,397,181
|
|
|
|
62,512,210
|
|
Taxation at the applicable tax rate of 25%
|
|
|
11,324,289
|
|
|
|
1,599,295
|
|
|
|
15,768,870
|
|
Tax effect on non-taxable income
|
|
|
(34,524
|
)
|
|
|
(4,876
|
)
|
|
|
(285,732
|
)
|
Tax effects of expense that are not deductible
|
|
|
1,249,976
|
|
|
|
176,530
|
|
|
|
540,874
|
|
(Over)/under-provision in respect of previous year
|
|
|
683,758
|
|
|
|
96,564
|
|
|
|
-
|
|
Income taxes
|
|
|
11,855,983
|
|
|
|
1,674,385
|
|
|
|
16,024,012
|
|
16.
|
CONTRIBUTION
PLAN IN THE PRC
|
As
stipulated by the PRC State regulations, the Company’s PRC subsidiaries should 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 Company’s PRC subsidiaries and their employees are each required to
make contributions to an accommodation fund at 9% of the employees’ salaries and wages, 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)
(Amounts
in RMB and US$, except for number of shares and per share data)
17.
|
OPERATING
LEASE ARRANGEMENT
|
On
September 30, 2019, the Company adopted ASU 2016-02 using the modified retrospective method as of the effective
date of September 30, 2019 (the “effective date method”). Under the effective date method, financial results
reported prior to 2019 are unchanged. In transition to the new lease guidance, the Company elected the package of practical expedients
permitted under the transition guidance within the new standard that allowed the Company to not reassess whether a contract is
or contains a lease, lease classification and initial direct costs; however, the Company did not elect the hindsight transitional
practical expedient. The Company has also elected the practical expedient to not account for lease components (e.g., fixed payments
including rent, real estate taxes and insurance costs) separately from the nonlease components. After assessment of the cumulative
impact of adopting ASU 2016-02, it was determined that the cumulative effect adjustment required under the new guidance
was immaterial and therefore the Company did not record a retrospective adjustment to the opening balance of retained earnings
at September 30, 2020. The Company recognized additional operating lease right-of-use assets and lease
liabilities of $0.126 million as of March 31, 2020.
The
Company is currently a lessee under a number of operating leases for offices and a warehouse. The Company’s leases generally
have remaining lease terms of 1 year to 5 years and some of which include options to terminate within 1 year. These leases do
not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses.
Further, the leases do not contain contingent rent provisions.
Supplemental
information related to leases and the Company’s Consolidated Financial Statements is as follows:
|
|
March 31,
2020
|
|
Components of lease costs:
|
|
|
|
Total operating lease costs
|
|
|
388,875
|
|
|
|
March 31,
2020
|
|
|
|
|
|
Weighted average remaining lease term (years) of operating leases:
|
|
|
1.25
|
|
|
|
|
|
|
Weighted average discount rate of operating leases:
|
|
|
2.9
|
%
|
|
|
March 31,
2020
|
|
|
|
|
|
Other - right-of-use assets
|
|
|
388,875
|
|
|
|
|
|
|
Lease liabilities included in:
|
|
|
|
|
Accrued expenses - current portion of lease liabilities
|
|
|
(372,776
|
)
|
Total lease liabilities
|
|
|
(372,776
|
)
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
17.
|
OPERATING
LEASE ARRANGEMENT – CONTINUED
|
The
Group has total future minimum lease payments under non-cancellable operating lease payable as follows:
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
|
RMB
|
|
|
RMB
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
|
409,110
|
|
|
|
216,000
|
|
After 1 year but within 2 years
|
|
|
-
|
|
|
|
54,000
|
|
After 2 years but within 3 years
|
|
|
-
|
|
|
|
-
|
|
After 3 years
|
|
|
-
|
|
|
|
-
|
|
Total lease payments
|
|
|
409,110
|
|
|
|
270,000
|
|
|
|
|
|
|
|
|
|
|
Less: Interest
|
|
|
(10,604
|
)
|
|
|
-
|
|
Present value of lease liabilities
|
|
|
398,506
|
|
|
|
-
|
|
The
Group is a lessee under a number of operating leases for offices and a warehouse. The Company’s leases generally have remaining
lease terms of 1 year to 5 years and some of which include options to terminate within 1 year.
18.
|
RELATED
PARTY BALANCES AND TRANSACTIONS
|
The
Group had the following transactions with related party balance during the financial periods:
|
|
March 31,
2020
|
|
|
June 30,
2019
|
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current-liabilities
|
|
|
18,671,556
|
|
|
|
2,636,927
|
|
|
|
13,392,777
|
|
|
|
1,950,878
|
|
Non-Current-liabilities
|
|
|
81,781,805
|
|
|
|
11,549,797
|
|
|
|
81,781,805
|
|
|
|
11,912,863
|
|
|
|
|
100,453,361
|
|
|
|
14,186,724
|
|
|
|
95,174,582
|
|
|
|
13,863,741
|
|
The
balance represented the amount due to our director, Mr. Peng Yang, for the three months ended as at March 31, 2020.
At
the end of each reporting period, neither the Group nor the Company had any other related party transaction.
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
19.
|
CONTINGENT
LIABILITIES
|
At
the end of each reporting period, neither the Group nor the Company had any significant contingent liabilities.
20.
|
DETAILS
OF SUBSIDIARIES
|
Company
name
|
|
Place
and date of
incorporation
|
|
Capital
|
|
Attributable
Equity
interest
|
|
|
Principal
activities
|
|
|
|
|
|
|
|
|
|
|
Reliant
Galaxy International Limited
|
|
Established
in the British Virgin Islands on January 3, 2017
|
|
Registered
and paid-in capital of RMB 69,100
|
|
100
|
%
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
Sure
Rich Investment
|
|
Established
in
|
|
Share
capital
|
|
100
|
%
|
|
Investment
holding
|
(Group)
Limited
|
|
Hong
Kong
On February 1, 2007
|
|
RMB
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fujian
Jinou Trading Co., Ltd.
|
|
Established
in the PRC on July 5, 2004
|
|
Registered
and paid-in capital of US$ 1,650,000
|
|
100
|
%
|
|
Investment
holding and marketing self-owned brand and wholesaling of spirits
|
|
|
|
|
|
|
|
|
|
|
Fenyang
Huaxin Spirit Development Co., Ltd.
|
|
Established
in the PRC on November 7, 2013
|
|
Registered
and Paid-in capital of RMB 1,000,000
|
|
100
|
%
|
|
Marketing
self-owned brand and wholesaling of spirits and wines
|
|
|
|
|
|
|
|
|
|
|
Fenyang
Jinqiang Spirit Co., Ltd.
|
|
Established
in the PRC on November 7, 2013
|
|
Registered
capital 10,000,000 and Paid-in capital of RMB 5,000,000
|
|
100
|
%
|
|
Marketing
self-owned brand and wholesaling of spirits
|
|
|
|
|
|
|
|
|
|
|
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
|
%(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, 2037, which is 20 years from the date of incorporation as permitted by the PRC’s
regulations on company registration. The amount due to the subsidiary is interest-free and unsecured.
|
ORANCO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (UNAUDITED)
(Amounts
in RMB and US$, except for number of shares and per share data)
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
|
%
|
|
Development,
sale and provision of software solutions
|
Notes:
(i)
|
On
September 1, 2018, Fenyang Huaxin Spirit Development Co., Ltd acquired 20% of Guangzhou Silicon Technology Co., Ltd..
|
On
June 29, 2018, Oranco, Inc. acquired 100% of the issued capital of Reliant in a share exchange transaction with the then shareholders
of Reliant. Due to the relative size of the companies, the shareholders of Reliant became the majority shareholders in the consolidated
group.
Pursuant
to the share exchange, Oranco issued an aggregate of 349,296,000 new shares of common stock, with par value of $0.001 per share,
of which 28,000,000 were issued on June 29, 2018. The remaining 321,296,000 shares were issued on May 29, 2019 following the completion
of the increase of the Company’s authorized shares on February 15, 2019.
At
the date of the share exchange transaction, Oranco, Inc. was a shell company with minimal assets and operations. The transaction
has been treated as a group reconstruction and has been accounted for using the reverse merger accounting method. Accordingly,
the consolidated financial statements have been treated as being a continuation of the consolidated financial statements of Reliant,
with Oranco, Inc. being treated as the acquired entity for accounting purposes. Accordingly, the financial information for the
previous period and comparatives reflects the consolidated operations of Reliant.
23.
|
NOTE
TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
|
Disclosure
of non-cash item:
(i)
|
Mr.
Peng Yang, the director of the Company, settled a bank loan in the amount of RMB2,400,000 on behalf of the Company for the
period ended March 31, 2020.
|
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
On June 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, a British
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 of June 29, 2018, and the remaining 321,296,000
shares were issued to the Sellers on May 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
the Securities and Exchange Commission on August 7, 2019, the Company filed a Certificate of Change Pursuant to NRS 78.209 (the
“Certificate of Amendment”) with the Secretary of State 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 on July 22, 2019 and the Reverse Split became effective on August 7, 2019. The Company’s
shares of common stock began trading on a reverse stock split adjusted basis on the OTC Market on August 7, 2019. The trading symbol
for the Company’s common stock remains as “ORNC”.
On September 1, 2018, Fenyang Huaxin Spirit
Development Co. Ltd., a subsidiary of the Company, acquired a 20% equity interest in Guangzhou Silicon Technology Co., Ltd., a
company established in the People’s Republic of China. The acquisition of 20% equity interest in Guangzhou 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 mainland China, then in Asia and eventually throughout the world,
has significantly affected business and manufacturing activities within China, including travel restrictions, widespread mandatory
quarantines, and suspension of business activities within China. 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 from Shanxi 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 on March 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 of June 30, 2020.
Results of Operations
Overview
For the three months ended March 31, 2020 and 2019:
|
|
Three months ended
March 31, 2020
(Unaudited)
|
|
|
Three months ended
March 31, 2019
(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
March 31, 2020
(Unaudited)
|
|
|
Three months ended
March 31, 2019
(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 ended March 31, 2020,
revenue generated from our Fenjiu liquor business was RMB11,513,593 (USD1,626,030), representing a decrease of RMB17,464,120 (USD2,691,784),
or -60% (-62%), as compared to that of RMB28,977,713 (USD4,317,814) for the three months ended March 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 from mid-January 2020 to early March 2020 according to government mandates.
For the three months ended March 31, 2020,
revenue generated from our imported wine business was RMB2,260,747 (USD319,278), representing a decrease of RMB1,416,416 (USD228,636),
or -39% (-42%), as compared to that of RMB3,677,163 (USD547,914) for the three months ended March 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 from mid-January 2020 to early March 2020 according to government mandates.
Cost of Sales
|
|
Three months ended
March 31, 2020
(Unaudited)
|
|
|
Three months ended
March 31, 2019
(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 ended March 31, 2020,
cost of sales from our Fenjiu liquor business was RMB3,437,531 (USD485,473), representing a decrease of RMB4,371,526 (USD678,113),
or -56% (-58%), as compared to that of RMB7,809,057 (USD1,163,586) for the three months ended March 31, 2019.
For the three months ended March 31, 2020,
cost of sales from our imported wine business was RMB542,973 (USD76,682), representing a decrease of RMB449,450 (USD71,194), or
45% (48%), as compared to that of RMB992,423 (USD147,876) for the three months ended March 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 ended March 31, 2020. Such decrease was due the
Company’s suspension of its business from mid-January 2020 to early March 2020, as a result of the lockdown imposed by the
authorities in response to the COVID-19 outbreak.
Gross Profit
|
|
Three
months ended
March 31, 2020
(Unaudited)
|
|
|
Three
months ended
March 31, 2019
(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 by RMB13,092,594 (USD2,013,670), or -62% (-64%), for the three months ended March 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 ended
March 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 by RMB966,966
(USD157,443), or -36% (-39%), for the three months ended March 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 ended March 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 ended March 31, 2020,
our selling and distribution expenses were RMB671,687 (USD94,860), representing a decrease of RMB213,040 (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
from mid-January 2020 to early March 2020, as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak.
Administrative Expenses
For the three months ended March 31, 2020, our administrative
expenses were RMB3,101,937 (USD438,077), representing an increase of RMB1,763,479 (USD238,641), or 132% (120%), as compared to
the same period of 2019. The increase was primarily caused by the increase in consulting fees for maintaining a public company
status, and depreciation in our property, plant, and equipment.
Other Income
For the three months ended March 31, 2020,
our other income was RMB40,650 (USD5,741), representing an increase of RMB8,179 (USD903), or 25% (19%), as compared to the same
period of 2019. The increase was primarily due to the Company’s increased income from bank interests.
Interest and Other Financial Charges
For
the three months ended March 31, 2020, our interest and other financial charges were RMB144,189 (USD20,363), as compared to RMB41,238
(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 ended March 31, 2020.
Income Taxes
For the three months ended March 31, 2020,
our income taxes were RMB1,774,454 (USD250,601), as compared to RMB5,432,298 (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 ended March 31, 2020.
For the nine months ended March 31,
2020 and 2019:
|
|
Nine months ended
March 31, 2020
(Unaudited)
|
|
|
Nine months ended
March 31, 2019
(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
|
)%
|
Revenue
|
|
Nine months ended
March 31, 2020
(Unaudited)
|
|
|
Nine months ended
March 31, 2019
(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 ended March 31, 2020
and 2019, revenue generated from our Fenjiu liquor business was RMB71,714,536 (USD10,128,028) and RMB87,738,861 (USD13,073,498),
respectively, which represented a decrease of RMB16,024,325 (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 from mid-January 2020 to early March 2020
as a result of the lockdown imposed by the authorities in response to the COVID-19 outbreak.
For the nine months ended March 31, 2020 and 2019, revenue generated
from our imported wine business was RMB9,246,714 (USD1,305,885) and RMB8,298,780 (USD1,236,557), respectively, which represented
an increase of RMB947,934 (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
March 31, 2020
(Unaudited)
|
|
|
Nine months ended
March 31, 2019
(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 ended March 31, 2020
and 2019, cost of sales from our Fenjiu liquor business was RMB21,476,598 (USD3,033,075) and RMB22,157,376 (USD3,301,552), respectively,
which represented a decrease of RMB680,778 (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 from mid-January 2020
to early March 2020 according to government mandates.
For the nine months ended March 31, 2020
and 2019, cost of sales from our imported wine business was RMB2,112,482 (USD298,340) and RMB2,237,871 (USD333,453), respectively,
which represented a decrease of RMB125,389 (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 from mid-January
2020 to early March 2020 according to government mandates.
Gross Profit
|
|
Nine months ended
March 31, 2020
(Unaudited)
|
|
|
Nine months ended
March 31, 2019
(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 by RMB15,343,547 (USD2,676,994), or 23% (27%), for the nine months ended March 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 ended March 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 by RMB1,073,323
(USD104,442), or 18% (12%), for the nine months ended March 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 ended March 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 ended March 31, 2020,
our selling and distribution expenses were RMB2,895,820 (USD408,968), representing a decrease of RMB124,504 (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 from mid-January 2020 to early March 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 March 31, 2020, our administrative
expenses were RMB9,173,102 (USD1,295,489), representing an increase of RMB3,013,673 (USD377,706), or 49% (41%), as compared to
that of the same period of 2019. The increase was primarily due to the decrease in RMB’s exchange rate, and depreciation
in our property, plant, and equipment.
Other Income
For the nine months ended March 31, 2020,
our other income was RMB138,095 (USD19,503), representing an increase of RMB47,288 (USD5,972), or 52% (44%), as compared to the
same period of 2019. The increase was primarily due to the Company’s increased income from bank interests.
Interest and Other Financial Charges
For the nine months ended March 31, 2020,
our interest and other financial charges were RMB144,189 (USD20,363), as compared to RMB41,238 (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 ended March 31, 2020.
Income Taxes
For the nine months ended March 31, 2020,
our income taxes were RMB11,855,983 (USD1,674,385), as compared to that of RMB16,024,012 (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 ended
March 31, 2020.
Liquidity and Capital Resources
Operating Activities
Operating activities generated cash of
RMB 16,065,030 (USD 2,268,815) and RMB28,889,057 (USD4,304,603) in 2020 and 2019, respectively. The decrease of RMB15,821,446 (USD2,459,104)
in 2020 was primarily due to the temporary closure of operation from mid of January 2020 to early March 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 of RMB4,618,727 (USD652,289) for the nine months ended March 31, 2020, as compared to RMB325,080 (USD48,438) for same
period of 2019. The decrease in the Company’s inventory level for the nine months ended March 31, 2020 was greater than for
same period in 2019 because the Company suspended its business operations from mid-January 2020 to early March 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 of
RMB25,553,854 (USD3,608,894) for the nine months ended March 31, 2020, as compared to RMB33,352,881 (USD4,969,734) for the nine
months ended March 31, 2019. The decrease in trade receivables level for the nine months ended March 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 ended March 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 RMB12,078,188 (USD1,705,766) for the nine months ended March 31, 2020, as compared
to RMB11,945,528 (USD1,779,939) for the same period in 2019.
Activities from receipts in advance, accruals,
and other payables resulted in a net decrease of RMB1,927,933 (USD46,000) for the nine months ended March 31, 2020, as compared
to a net increase of RMB743,376 (USD110,766) for the same period in 2019.
Activities from current tax liabilities
resulted a net decrease of RMB1,613,505 (USD227,870) for the nine months ended March 31, 2020, as compared to a net increase of
RMB2,598,923 (USD387,252) for the same period in 2019.
Activities from amount due to a director
included a net increase of RMB3,378,779 (USD561) for the nine months ended March 31, 2020, as compared to that of RMB445,288 (USD66,350)
for the same period in 2019.
Investing Activities
The Company’s investing activities
used RMB4,878(USD689) and RMB250,000 (USD37,251) for the nine months ended March 31, 2020 and 2019, respectively.
The Company used cash amounted to RMB4,878
(USD689) for acquiring properties, plant and equipment during the nine months ended March 31, 2020.
The
cash used for investing activities in during the nine months ended March 31,2019 was RMB250,000 (USD37,251) and was primarily related
to the acquisition of interests in an associate.
Financing Activities
Financing activities generated RMB 370,000
(USD 52,254) and RMB2,250,000 (USD335,260) for the nine months ended on March 31, 2020 and 2019, respectively.
The Company received cash amounted to RMB370,000
(USD52,254) during the nine months ended March 31, 2020 primarily from net proceeds of bank borrowings. The Company received cash
amounted to RMB2,250,000 (USD335,260) during the nine months ended March 31, 2019 primarily from net proceeds of bank borrowings.