DISCUSSION AND ANALYSIS BY THE MANAGEMENT OF ORANCO INC OF THE FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

On June 29, 2018, Oranco, Inc. completed and closed a share exchange transaction
(the "Share Exchange") under 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"); and (iii) the shareholders of Reliant ("Sellers"),
pursuant to which Reliant became a wholly owned subsidiary of ours. 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 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 Change") 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 Change 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 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 as an interest in an associate.



Results of Operations



Overview


For the three months ended September 30, 2021 and 2020:



                             Three months ended               Three months ended
                             September 31, 2020               September 31, 2019
                                (Unaudited)                      (Unaudited)                                      Variance
                            RMB              USD             RMB              USD             RMB              %             USD             %
Revenue                   26,115,339       3,846,374       25,667,997       3,591,085          447,342           1.7 %       225,289           7.1 %
Cost of sales              7,311,946       1,076,933        7,413,971       1,037,253         (102,025 )        (1.4 )%       39,680           3.8 %
Gross profit              18,803,393       2,769,441       18,254,026       2,553,832          549,367           3.0 %       215,609           8.4 %
Selling and
distribution expenses      1,231,658         181,404          877,871      
  122,819          353,787          40.3 %        58,585          47.7 %
Administrative
expenses                   1,925,114         283,539        3,412,079         477,367       (1,486,965 )       (43.6 )%     (193,828 )       (40.6 )%
Income from
operations                15,646,621       2,304,498       13,964,076       1,953,646        1,682,545          12.0 %       350,852          18.0 %
Other income                  66,288           9,763           45,852           6,415           20,436          44.6 %         3,348          52.2 %
Interest and other
financial charges                225              33           19,455           2,722          (19,230 )       (98.8 )%       (2,689 )       (98.8 )%
Income before income
taxes                     15,712,684       2,314,228       13,990,473       1,957,339        1,722,211          12.3 %       356,889          18.2 %
Income taxes               4,010,563         590,692        3,938,273         550,985           72,290           1.8 %        39,707           7.2 %
Net income                11,702,121       1,723,536       10,052,200       1,406,354        1,649,921          16.4 %       317,182          22.6 %




                                       21





Revenue



                         Three months ended  September 31, 2020 (Unaudited)         Three months ended  September 31, 2019
                                                                                                 (Unaudited)                                          Variance
                             RMB                USD                 %                RMB                USD               %           RMB           %           USD           %
Sales of Fenjiu
liquor products            23,019,648          3,390,428               88.1 %      22,755,962          3,183,676          88.7 %     263,686         1.2 %     206,752         6.5 %
Sales of imported
wine products               3,095,691            455,946               11.9 %       2,912,035            407,409          11.3 %     183,656         6.3 %      48,537        11.9 %
Total Amount               26,115,339          3,846,374              100.0 %      25,667,997          3,591,085         100.0 %     447,342         1.7 %     255,289         7.1 %




For the three months ended September 30, 2020, revenue generated from our Fenjiu
liquor business was RMB23,019,648 (USD3,390,428), representing a slight increase
of RMB263,686 or 1.2%, as compared to that of RMB22,755,962 (USD3,183,676) for
the three months ended September 30, 2019. The revenue generated from our Fenjiu
liquor business remained relatively stable as compared to the same period in
2019.



For the three months ended September 30, 2020, revenue generated from our
imported wine business was RMB3,095,691 (USD455,946), representing an increase
of RMB183,656 or 6.3%, as compared to that of RMB2,912,035 (USD407,409) for the
three months ended September 30, 2019. The increase was mainly due to the
increased sales volume as a result of change in product mix and customers'
increased demand for imported red wine.



Cost of Sales



                                  Three months ended                          Three months ended
                                  September 31, 2020                          September 31, 2019
                                      (Unaudited)                                 (Unaudited)                                       Variance
                            RMB             USD            %            RMB             USD            %           RMB            %           USD           %
Sales of Fenjiu
liquor products           6,578,514         968,910        90.0 %     6,773,234         947,610        91.4 %     (194,720 )      (2.9 )%     21,300         2.2 %
Sales of imported
wine products               733,432         108,023        10.0 %       640,737          89,643         8.6 %       92,695        14.5 %      18,380        20.5 %
Total Amount              7,311,946       1,076,933       100.0 %    
7,413,971       1,037,253       100.0 %     (102,025 )      (1.4 )%     39,680         3.8 %




For the three months ended September 30, 2020, cost of sales from our Fenjiu
liquor business was RMB6,578,514 (USD968,910), representing a decrease of
RMB194,720 or 2.9%, as compared to that of RMB6,773,234 (USD947,610) for the
three months ended September 30, 2019. The cost of sales from our Fenjiu liquor
business remained relatively stable as compared to the same period in 2019.



For the three months ended September 30, 2020, cost of sales from our imported
wine business was RMB733,432 (USD108,023), representing an increase of RMB92,695
or 14.5%, as compared to that of RMB640,737 (USD89,643) for the three months
ended September 30, 2019. The increase was in line with the increased sales
volume.



Gross Profit

                                   Three months ended                           Three months ended
                                   September 31, 2020                           September 31, 2019
                                      (Unaudited)                                  (Unaudited)                                       Variance
                            RMB              USD            %            RMB              USD            %           RMB           %           USD           %
Sales of Fenjiu
liquor products           16,441,134       2,421,518        87.4 %     15,982,728       2,236,066        87.6 %     458,406         2.9 %     185,452         8.3 %
Sales of imported
wine products              2,362,259         347,923        12.6 %      2,271,298         317,766        12.4 %      90,961         4.0 %      30,157         9.5 %
Total Amount              18,803,393       2,769,441       100.0 %     18,254,026       2,553,832       100.0 %     549,367         3.0 %     215,609         8.4 %




Gross profit from our Fenjiu liquor business increased slightly of RMB458,406 or
2.9% for the three months ended September 30, 2020, as compared to that of the
same period of 2019. The gross profit contribution percentage of Fenjiu liquor
business was 71.4% for the three months ended September 30, 2020, as compared to
that of 70.2% for the same period of 2019. The gross profit margin remained
relatively stable for the periods. The slight improvement in gross profit margin
is mainly caused by the change in product mix as the sales volume for several
white wine products with higher margin increased for the three months ended
September, 2020 as compared to the same period of 2019.



                                       22




Gross profit from our imported wine business increased by RMB90,961 or 4.0% for
the three months ended September 30, 2020, as compared to that of the same
period of 2019. The gross profit contribution percentage of imported wine
business was 76.3% for the three months ended September 30, 2020, as compared to
that of 78.0% for the same period of 2019. The decrease was primarily due to the
slight increase in unit costs for several imported red wine products.



Selling and distribution costs

For the three months ended September 30, 2020, our selling and distribution
expenses were RMB1,231,658 (USD181,404), representing an increase of RMB353,787
or 40.3%, as compared to that of the same period of 2019. The increase was
primarily due to the increase in freight costs during the three months ended
September 30, 2020 as higher rates were charged under the COVID-19 pandemic.



Administrative Expenses


For the three months ended September 30, 2020, our administrative expenses were
RMB1,925,114 (USD283,539), representing a decrease of RMB1,486,965 or 43.6%, as
compared to that of the same period of 2019. The decrease in administrative
expenses was mainly due to the higher costs incurred as a result of business
expansion for the three months ended September 30, 2019.



Other Income



For the three months ended September 30, 2020, our other income was RMB66,288
(USD9,763), representing an increase of RMB20,436 or 44.6%, as compared to that
of the same period of 2019. The increase was primarily due to the increased
income from bank interests.



Interest and other financial charges




For the three months ended September 30, 2020, our interest and other financial
charges were RMB225 (USD33), as compared to those of RMB19,455 (USD2,722) for
the same period of 2019. The decrease of RMB19,230 or 98.8% was primarily due to
the decrease in charges incurred on bank borrowings.



Income Taxes



For the three months ended September 30, 2020, our income taxes were
RMB4,010,563 (USD590,692), as compared to those of RMB3,938,273 (USD550,985) for
the same period of 2019. The increase of RMB72,290 or 1.8% in income taxes was
primarily due to the increased taxable income for the three months ended
September 30, 2020.



Liquidity and capital resources



Operating Activities



Operating activities generated cash of RMB6,860,150 (USD1,010,391) primarily
from net income for the three months ended September 30, 2020, when comparing
with RMB20,431,686 (USD2,788,544) for the same period in 2019.



Net income increased by RMB1,649,921 (317,183 USD) for the three months ended
September 30, 2020, comparing with the same period in 2019.

Inventory activities were a net decrease of 1,405,118 RMB (206,952 USD) for the three months ended September 30, 2020, compared to that of 73,503 RMB
(10,283 USD) for the same period of 2019.




Activities from other current assets provided a net increase of RMB7,485,044
(USD1,120,912) for the three months ended September 30, 2020, as compared to
that of RMB8,049,008 (USD1,126,098) for the same period of 2019.



Activities from accounts receivable, net provided a net decrease of
RMB15,390,289 (USD2,266,745) for the three months ended September 30, 2020, as
compared to that of RMB1,337,218 (USD187,084) for the same period of 2019. The
significant increase in accounts receivable is mainly due to the delay in
settlements from customers under the COVID-19 pandemic.



                                       23




Advance receipts, accrued liabilities and other current liabilities activities generated a net increase of 180 203 RMB ($ 26,541) for the three months ended September 30, 2020, compared to that of 1,371,624 RMB
($ 191,897) for the same period of 2019.

The activities from the amount owed to the director included a net decrease of 52,373 RMB
($ 7,714) for the three months ended September 30, 2020, compared to a net increase of RMB925,660 ($ 129,505) for the same period in 2019.



Investing Activities



Investing activities used of RMB347,155 (USD49,136) for the three months ended
September 30, 2019, which were mainly related to the payments for acquisition of
ROU assets. There were no investing activities for the three months ended
September 30, 2020.



Financing Activities



Financing activities provided RMB500,000 (USD69,953) for the three months ended
September 30, 2019, which were primarily related to proceeds of bank borrowings.
There were no financing activities for the three months ended September 30,
2020.

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