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.



                                       24





Results of Operations



Overview

For the three months ended March 31, 2020 and 2019:





                                     Three months ended               Three months ended
                                       March 31, 2020                   March 31, 2019
                                        (Unaudited)                      (Unaudited)                                      Variance
                                    RMB              USD             RMB              USD              RMB             %              USD             %
Revenue                           13,774,340       1,945,308       32,654,876       4,865,728       (18,880,536 )        (58 )%     (2,920,420 )        (60 )%
Cost of sales                      3,980,504         562,155        8,801,480       1,311,461        (4,820,976 )        (55 )%       (749,307 )        (57 )%
Gross profit                       9,793,836       1,383,154       23,853,396       3,554,267       (14,059,560 )        (59 )%     (2,171,113 )        (61 )%
Selling and distribution
expenses                             671,687          94,860          884,727         131,828          (213,040 )        (24 )%        (36,968 )        (28 )%
Administrative expenses            3,101,937         438,077        1,338,458         199,436        (1,763,479 )        132 %         238,641          120 %
Income from operations             6,020,212         850,216       21,630,211       3,223,002       (15,609,999 )        (72 )%     (2,372,786 )        (74 )%
Other income                          40,650           5,741           32,471           4,838             8,179           25 %             903           19 %
Interest and other financial
charges                                2,572             363            7,198           1,073            (4,626 )        (64 )%           (709 )        (66 )%
Income before income taxes         6,058,290         855,594       21,655,485       3,226,768        (1,555,181 )        (72 )%     (2,371,174 )        (73 )%
Income taxes                       1,774,454         250,601        5,432,298         809,438          (280,975 )        (67 )%       (558,837 )        (69 )%
Net income                         4,283,836         604,993       16,223,187       2,417,330        (1,274,206 )        (74 )%     (1,812,337 )        (75 )%




Revenue



                                              Three months ended                          Three months ended
                                                March 31, 2020                              March 31, 2019
                                                  (Unaudited)                                 (Unaudited)                                         Variance
                                        RMB              USD           %            RMB              USD           %             RMB            %             USD            %

Sales of Fenjiu liquor products 11,513,593 1,626,030 84 % 28,977,713 4,317,814 89 % (17,464,120 ) (60 )%

     (2,691,784 )      (62 )%
Sales of imported wine products        2,260,747         319,278         16 %      3,677,163         547,914         11 %      (1,416,416 )      (39 )%       (228,636 )      (42 )%
Total Amount                          13,774,340       1,945,308        100 %     32,654,876       4,865,728        100 %      18,880,536        (58 )%     (2,920,420 )       60 %




For the three months 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.



                                       25





Cost of Sales



                                            Three months ended                         Three months ended
                                              March 31, 2020                             March 31, 2019
                                                (Unaudited)                                (Unaudited)                                        Variance
                                       RMB            USD           %            RMB             USD            %            RMB            %            USD           %

Sales of Fenjiu liquor products 3,437,531 485,473 86 %

7,809,057 1,163,586 94 % (4,371,526 ) (56 )% (678,113 ) (58 )% Sales of imported wine products 542,973 76,682 14 %


     992,423         147,876           6 %       (449,450 )      (45 )%      (71,194 )      (48 )%
Total Amount                         3,980,504       562,155       100.0 %     8,801,480       1,311,461       100.0 %     (4,820,976 )      (55 )%     (749,306 )      (57 )%




For the three months 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                         Three months ended
                                                March 31, 2020                             March 31, 2019
                                                 (Unaudited)                                 (Unaudited)                                         Variance
                                        RMB             USD           %            RMB              USD           %             RMB            %             USD            %

Sales of Fenjiu liquor products 8,076,062 1,140,558 83 % 21,168,656 3,154,228 95 % (13,092,594 ) (62 )%

     (2,013,670 )      (64 )%
Sales of imported wine products       1,717,774         242,596         17 %      2,684,740         400,039          5 %        (966,966 )      (36 )%       (157,443 )       39 %
Total Amount                          9,793,836       1,383,154        100 %     23,853,396       3,554,267        100 %     (14,059,560 )      (59 )%     (2,171,113 )      (61 )%




Gross profit from our Fenjiu liquor business decreased 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.



                                       26





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                 Nine months ended
                                       March 31, 2020                    March 31, 2019
                                         (Unaudited)                       (Unaudited)                                      Variance
                                    RMB              USD              RMB              USD               RMB             %              USD             %
Revenue                           80,961,250       11,433,913       96,037,641       14,310,055       (15,076,391 )        (16 )%     (2,876,142 )        (20 )%
Cost of sales                     23,589,080        3,331,415       24,395,247        3,635,005          (806,167 )         (3 )%       (303,591 )         (8 )%
Gross profit                      57,372,170        8,102,498       71,642,394       10,675,050       (14,270,224 )        (20 )%     (2,572,551 )        (24 )%
Selling and distribution
expenses                           2,895,820          408,968        3,020,324          450,042          (124,504 )         (4 )%        (41,074 )         (9 )%
Administrative expenses            9,173,102        1,295,489        6,159,429          917,784         3,013,673           49 %         377,706           41 %
Income from operations            45,303,248        6,398,041       62,462,641        9,307,224       (17,159,393 )        (28 )%     (2,909,183 )        (31 )%
Other income                         138,095           19,503           90,807           13,531            47,288           52 %           5,972           44 %
Interest and other financial
charges                              144,189           20,363           41,238            6,145           102,951          250 %          14,219          231 %
Income before income taxes        45,297,154        6,397,181       62,512,210        9,314,610       (17,215,056 )        (28 )%     (2,917,430 )        (31 )%
Income taxes                      11,855,983        1,674,385       16,024,012        2,387,652        (4,168,029 )        (26 )%       (713,268 )        (30 )%
Net income                        33,441,171        4,722,796       46,488,198        6,926,958       (13,047,027 )        (28 )%     (2,204,162 )        (32 )%




                                       27





Revenue



                                               Nine months ended                            Nine months ended
                                                 March 31, 2020                               March 31, 2019
                                                  (Unaudited)                                  (Unaudited)                                          Variance
                                        RMB              USD            %            RMB              USD            %             RMB            %             USD            %
Sales of Fenjiu liquor products       71,714,536       10,128,028         89 %     87,738,861       13,073,498         93 %     (16,024,325 )      (18 )%     (2,945,470 )      (23 )%
Sales of imported wine products        9,246,714        1,305,885         11 %      8,298,780        1,236,557          7 %         947,934         11 %          69,328          6 %
Total Amount                          80,961,250       11,433,913        100 %     96,037,641       14,310,055        100 %     (15,076,391 )      (16 )%     (2,876,142 )      (20 )%




For the nine months 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                           Nine months ended
                                              March 31, 2020                               March 31, 2019
                                                (Unaudited)                                 (Unaudited)                                        Variance
                                      RMB              USD           %            RMB              USD            %           RMB           %            USD           %

Sales of Fenjiu liquor products 21,476,598 3,033,075 91 %

22,157,376 3,301,552 92 % (680,778 ) (3 )% (268,477 ) (8 )% Sales of imported wine products 2,112,482 298,340 9 %


     2,237,871          333,453          8 %     (125,389 )       (6 )%      (35,113 )      (10 )%
Total Amount                        23,589,080       3,331,415        100 %     24,395,247       14,310,055        100 %     (806,167 )       (3 )%     (303,590 )       (8 )%




For the nine months 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.



                                       28





Gross Profit



                                               Nine months ended                           Nine months ended
                                                March 31, 2020                               March 31, 2019
                                                  (Unaudited)                                 (Unaudited)                                          Variance
                                        RMB              USD           %            RMB              USD            %             RMB            %             USD            %

Sales of Fenjiu liquor products 50,237,938 7,094,952 88 % 65,581,485 9,771,946 92 % (15,343,547 ) (23 )% (2,676,994 ) (27 )% Sales of imported wine products 7,134,232 1,007,546 12 % 6,060,909 903,104 8 % 1,073,323 18 %

         104,442         12 %
Total Amount                          57,372,170       8,102,498        100 %     71,642,394       10,675,050        100 %      14,270,224         20 %       2,572,552         24 %




Gross profit from our Fenjiu liquor business decreased 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.



                                       29





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.



                                       30

© Edgar Online, source Glimpses