UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): July 6, 2018 (June 29, 2018)

 

ORANCO, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada   000-28181   87-0574491
(State or Other Jurisdiction
of Incorporation)
  (Commission File Number)   (IRS Employer
Identification No.)

 

One Liberty Plaza, Suite 2310 PMB# 21, New York, NY 10006
(Address, including zip code, of principal executive offices)

 

Registrant’s telephone number, including area code (646) 7593614

 
 
(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company      ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ii
   
EXPLANATORY NOTE iii
   
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT 1
   
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS 1
   
THE SHARE EXCHANGE AND RELATED TRANSACTIONS 1
   
DESCRIPTION OF BUSINESS 2
   

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

13
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13
   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 18
   
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 19
   
EXECUTIVE COMPENSATION 20
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 20
   
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 21
   
DESCRIPTION OF SECURITIES 21
   
LEGAL PROCEEDINGS 23
   
INDEMNIFICATION OF DIRECTORS AND OFFICERS 23
   
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES 24
   
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR 24
   
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS 25
   
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS 25

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Current Report (the “Report”) contains forward-looking statements, including, without limitation, in the sections captioned “ Description of Business ,” “ Risk Factors ,” and “ Management’s Discussion and Analysis of Financial Condition and Plan of Operations ,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:

 

  Market acceptance of our products and services;

 

  Competition from existing products or new products that may emerge;

 

  The implementation of our business model and strategic plans for our business and our products;

 

  Estimates of our future revenue, expenses, capital requirements and our need for financing;

 

  Our financial performance;

 

  Current and future government regulations;

 

  Developments relating to our competitors; and

 

  Other risks and uncertainties, including those listed under the section title “ Risk Factors .”

 

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise, except as required by law.

 

Readers should read this Report in conjunction with the discussion under the caption “ Risk Factors ,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the SEC.

 

ii

 

 

EXPLANATORY NOTE

 

We were incorporated as Oranco, Inc. under the laws of the State of Nevada, on June 10, 1977. Prior to the Share Exchange (as defined below), we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended). As a result of the Share Exchange, we have ceased to be a “shell company” and will continue the existing business operations of Reliant as a publicly traded company under the name “Oranco Inc.”

 

On June 29, 2018 (the “Closing Date”), we completed and closed a share exchange (the “Share Exchange”) under a Share Exchange Agreement (the “Share Exchange Agreement”), entered into by and among by and among (i) Oranco, Inc.(“ORNC”); (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 ours. Pursuant to the Share Exchange Agreement, ORNC 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 of the Company to Sellers, of which 28,000,000 were issued at the closing date of June 29, 2018, and the remaining 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares (the “Common Stock”). 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 of accounting.

 

As used in this Report henceforward, unless otherwise stated or the context clearly indicates otherwise, the terms the “Registrant,” “we,” “us” and “our” refer to the consolidated Company and its subsidiaries at and after the Closing, giving effect to the Share Exchange.

 

This Current Report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.

 

This Current Report responds to the following Items in Form 8-K:

 

  Item 1.01 Entry into a Material Definitive Agreement

 

  Item 2.01

Completion of Acquisition or Disposition of Assets

 

Item 2.02 Results of Operations and Financial Condition

 

  Item 3.02

Unregistered Sales of Equity Securities

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

 

Item 5.06 Change in Shell Company Status

 

  Item 9.01 Financial Statements and Exhibits

 

iii

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.

 

Item 2.01 Completion of Acquisition or Disposition of Assets

   

THE SHARE EXCHANGE AGREEMENT AND RELATED TRANSACTIONS

 

Share Exchange Agreement

 

On June 29, 2018, ORNC, Reliant, and the shareholders of Reliant entered into the Share Exchange Agreement, which closed on June 29, 2018. Pursuant to the terms of the Share Exchange Agreement, we will issue an aggregated 349,296,000 new shares of our common stock, par value $0.001 per share, of which 28,000,000 were issued at the closing date of June 29, 2018, and the remaining 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares, for all of the outstanding capital stock of Reliant with the result that Reliant became a wholly owned subsidiary of ours.

 

Pursuant to the Share Exchange, we acquired the business of Reliant, which is to engage in the sell and distribution of wine products in China and Hong Kong. As a result, we have ceased to be a shell company.

 

At the closing of the Share Exchange, 10,000 shares of Reliant capital stock issued and outstanding immediately prior to the closing of the Share Exchange were exchanged for 28,000,000 new shares of our Common Stock, and an additional 321,296,000 new shares which will be issued at the completion of the increase of the Company’s authorized shares.

 

The Share Exchange Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions.

 

The Share Exchange is intended to be treated as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.

 

The issuance of shares of our Common Stock to holders of Reliant’s capital stock in connection with the Share Exchange was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act,   which exempts transactions by an issuer not involving any public offering, Regulation D promulgated by the SEC under that section and/or Regulation S promulgated by the SEC. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement, and some of these securities are subject to further contractual restrictions on transfer as described below.

 

The form of the Share Exchange Agreement is filed as an exhibit 2.1 to this Report.

  

  1  

 

 

Pro Forma Ownership

 

Immediately after giving effect to the Share Exchange, there were 98,191,480 issued and outstanding shares of our Common Stock, which will become a total of 419,487,480 after the remaining 321,296,000 shares to be issued at the completion of the increase of the Company’s authorized shares, as follows:

 

The stockholders of Reliant prior to the Share Exchange hold 28,000,000 shares of our Common Stock, and an additional 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares, to make the total of 349,296,000 shares; and

 

The stockholders of the Company prior to the Share Exchange hold the remaining 70,191,480 shares of our Common Stock.

 

No other securities convertible into or exercisable or exchangeable for our Common Stock are outstanding. Our Common Stock is quoted on the OTCQB Markets under the symbol “ORNC”.

 

Accounting Treatment; Change of Control

 

The Share Exchange was accounted for under the business combination under common control of accounting. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Share Exchange will be those of Reliant and ORNC combined and will be recorded at the historical cost basis and the consolidated financial statements after completion of the Share Exchange will include the combined assets and liabilities of Reliant and ORNC from the closing date of the Share Exchange.

 

As a result of the issuance of the shares of our Common Stock pursuant to the Share Exchange, a change in control of the Company occurred as of the date of consummation of the Share Exchange. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.

 

We continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Share Exchange.

 

Following the Share Exchange, the Company will no longer be designated as a shell company.

 

Form 10 Information

 

Prior to the Share Exchange, the Company had nominal operations. We were deemed a “shell company,” as defined in Rule 12b-2 of the Exchange Act, and in light of the lack of operations prior to the completion of the Share Exchange.

 

Immediately following the Share Exchange, the business of Reliant became our business. Reliant is engaged in the business of retail and wholesale of a wide spectrum of wine products in China and Hong Kong.

 

With the resulting change in our business, we are voluntarily providing the information as is required pursuant to Item 2.01(f) of Form 8-K as if we were filing a general form for registration of securities on Form 10 under the Exchange Act for our Common Stock, which is the only class of our securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation of the Share Exchange.

 

DESCRIPTION OF BUSINESS

 

Prior to the Share Exchange, we were a shell company with no substantive operations. The purpose of the Company was to seek and investigating potential assets, properties or businesses to acquire while complying with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

 

Immediately following the Share Exchange, the businesses of Reliant became our businesses. Reliant is engaged in alcohol wholesale in China through its operating subsidiary, Fenyang Huaxin Wine Industry Development Co., Ltd. (“Huaxin”).

 

  2  

 

 

Overview

 

Huaxin is committed to alcohol wholesale business in China. We currently anchor our business in Chinese Fenjiu liquor market and imported wines market. We run a consistently growing alcoholic beverage business guided by a core purpose: to promote premium alcoholic beverages to China’s population. We aim to achieve this purpose by catering to the ever-evolving preferences of tastes in alcohols through our creative marketing strategies and innovative product designs that target different age groups of China’s population. Through our commitment to this purpose, we have hired marketing talents who have decades of experience in effective alcohol brand building. As a result, we have managed to create significant sales of Chinese Fenjiu liquors and imported wines in the Chinese marketplace. Our creatively designed and promoted products enter Chinese market through wholesales to downstream distributors.

 

Corporate History and Structure of our PRC Operation

 

Corporate Organization Chart

 

The following is an organizational chart setting forth our corporate structure, immediately following the Closing:

 

 

 

 

  3  

 

 

History

 

On December 26, 2017, Million Success Business Limited, a British Virgin Islands corporation (“Buyer”) entered into a Share Purchase Agreement (“Purchase Agreement”) with the then largest shareholder of the Company, Mr. Claudio Gianascio, who owned 90.4% of the total outstanding shares of the Company (“Seller”). Pursuant to the terms of the Purchase Agreement, the Seller sold to the Buyer all of his shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), or 38,121,530 shares of the Common Stock for $340,000 (such transaction, the “Share Purchase”). The Share Purchase closed on December 29, 2017.

 

At the closing of the Share Purchase, there was a change in our board and executive officers. Mr. Claudio Gianascio, sole director, President, Treasurer and Secretary of the Company appointed Mr. Peng Yang to serve as sole director, President, Treasurer and Secretary of the Company, with such appointment effective on January 5, 2018, being ten days from the date the Information Statement on Schedule 14F-1 (the “Schedule 14F-1”) reporting the change in control as a result of the Share Purchase was mailed to all the stockholders of the Company. Mr. Gianascio resigned from all his positions with the Company effective on January 5, 2018.

 

Current Business

 

The popularity behind Chinese Fenjiu liquor is its unique combination of light alcohol fragrance and its soft and subtle sweetness. This combination has been one of the predominant taste preference amongst Chinese drinkers. Our Chinese Fenjiu product is a 53-proof clear spirit with long lasting clean after taste. Our strategic partner, Shanxi Xinghuacun Fenjiu Group Co., Ltd. (“Fenjiu Group”), produces our Chinese Fenjiu product. Its brewing process is guided by the principle of “clean” and “pure”, and such standard is achieved by double fermentation and double distillation process in order to increase the yield of ethanol and expel any unfavorable flavors. The fermented grains, usually sorghum and barley, will be distilled; the distilled grains will be fermented once more; the re-fermented grains will be distilled again.

 

Modern competition among different types of Chinese hard liquor is largely dependent on brand recognition that was built upon decades of customer goodwill and unique marketing strategies. Fenjiu liquor has a brand name may be said to have high brand recognition. It has long been a common liquor choice for traditional Chinese festivities, thus enjoying a deep cultural recognition amongst Chinese drinkers.

 

We believe that Fenjiu liquor presents great business opportunities for us to utilize creative product designs and marketing strategies to attract Chinese populations. Collaborating with Fenjiu Group, the sole producer of Chinese Fenjiu liquor, we have made been focusing on the product designs that instill a modern feel to our products while maintaining Fenjiu liquors’ historical elegance. Our designer packaging stands out from our competitors’, symbolized by its bright coloring and prominently fat-bellied jars. With creative designs and stylized name, our registered trademarks such as Dagangjiu (translated as “Big Jar Liquor”) are effective in capturing young and older Chinese populations’ attention.

   

   

  

  4  

 

  

   

 

Established in 2017, our imported wine distribution business will likely maintain its growth potential. Such growth potential is evident from the marked prices of the imported wines from Spain and New Zealand in the current Chinese market. A great majority of competitive players have priced their 750mL bottles imported from Spain and New Zealand well above RMB 200, an equivalent of $31. This price falls within the premium range in the general Chinese wine market, indicating good high-growth price tier potential. Based on general Chinese wine market growth, the premium range enjoyed the highest year-on-year growth compared to other price tiers of wine in 2017. It is likely that the pricing trend for premium wines are also applicable to imported wine from Spain and New Zealand, which means that our imported wine business will enjoy continued growth in 2018. Accordingly, our strategy is to continue pricing our products at premium levels to generate potential high margins. Though marketing and brand identity are still integral part of wine business in China, wine sales are highly driven by the origin of the wines. Since Spanish and New Zealand are considered prime origins for wine productions, our wine products will continue grab the attention of Chinese drinkers, ensuring the sustainable growth of our imported wine business.

 

We have strategically planned our wholesale and marketing channels. We sell directly to our six major distributers who then retail our products to over 300 store fronts and outlets. Even though we do not retail our products online, we believe internet is a great way to market our products. Aside from promoting our products through traditional TV platforms, we have established our reputation on existing major Chinese e-commerce platforms such as Taobao.com and further enhanced our business goodwill through our marketing on online-to-offline (“O2O”), business-to-business (“B2B”) and business-to-consumer (“B2C”) platforms. We promote our Fenjiu and imported wine through WeChat and other social media apps to strengthen our marketing efforts and to educate general public on Chinese liquor tasting and history of Chinese Fenjiu liquor.

 

  5  

 

 

 

 

We believe that effective marketing strategies and creative product designs are two major contributing factors to our success. To improve and maintain the effectiveness of our marketing strategies, we have established integrated and collaborative processes to drive coordinated operations across our marketing efforts and sales. Our effective marketing strategies enable us to promote multiple sales concepts across two major alcohol categories, effectively attracting different age and cultural groups of Chinese populations. Our marketing plans are well organized and strategically thought-out, designed to be efficiently executed and are tailored to meet unique taste and evolving demands of Chinese people. As a result, our company’s innovative and highly-customized designs draw consideration public attention that maximizes sales. As an example, in May 2015, we introduced a new line of product, “Qishierbian” (translated as “72 Earthly Transformations”), which brings modern visuals, ancient stories and new interpretations of Chinese culture to traditional Fenjiu liquor. This has helped creating acceptance of Fenjiu liquor from younger generations and its success reflects the changing needs and preferences of the Chinese populations. Over the past three years, we have generated approximately $2,395,120 in revenue under “Qishierbian”. We believe it is essential to improve the overall business sustainability through focusing on marketing strategies and creative product designs to support our success.

 

For the year ended June 30, 2017, we generated revenue of approximately 84.8% from Fenjiu liquor wholesale and approximately 15.2% from imported wine wholesale. For the year ended June 30, 2016 100% of our revenue was generated from Fenjiu liquor. We have not experienced any seasonality in our business.

 

Industry Overview

 

Chinese Fenjiu Liquor Market

 

The long-term demand for Chinese hard liquor, especially Fenjiu liquor, will continue to grow in China. The overall business environment has been optimistic, due to the continuous economic growth evidenced by significant growth of Chinese nominal gross domestic product (“GDP”). This has led to an ever-increasing growth in China’s per capita expenditures on food, tobacco, and alcoholic beverages, indicating increased consumers’ disposable income and willingness to spend money on alcoholic beverages in general. According to the National Bureau of Statistics of China, the sales ratio of Chinese liquor in China has remained relatively flat over the past five years. Given the increasing purchasing power and improving living standards, the sales volume of Chinese liquor increased from 11,267.0 million liters in 2012 to 13.057.1 million liters in 2016, with a compound annual growth rate (“CAGR”) of 3.8%. Overall, consumers are increasingly interested in drinking better quality liquor. Thus, the consumption of Chinese liquor is expected to shift to higher quality products and Chinese liquor market is expected to experience a stable growth in the near future. There are approximately 1,578 Chinese liquor producers in China with annual revenue above RMB 20 million. These producers mainly concentrated in southwest, northeast and central China. Given the Chinese government’s implementation of policies designed to control and limit spending on “the three public consumptions,” the high-end Chinese liquor market in China has undergone extensive restructuring since 2012. However, due to increasing demand for mid- to low-end Chinese liquors, the sales revenue of in the Chinese liquor market have grown markedly, growing from RMB 446.6 billion in 2012 to RMB 612.6 billion in 2016, representing a CAGR of 8.2%. With consumers’ increasing purchasing power and changing consumption patterns, the Chinese liquor market in China is expected to maintain a stable level of growth in the near future.

 

  6  

 

 

Fenjiu Group and its subsidiaries are the sole suppliers of Fenjiu liquor in China. Fenjiu liquor has a relatively long history, and is one of the world-famous Chinese liquor brands. Due to the Chinese government’s implementation of policies meant to control and limit spending on “the three public consumptions”, sales revenue in the Fenjiu liquor market have followed a downward trend since 2012. However, with increasing per capita incomes and rising demand for mid- to high-range products, the Fenjiu liquor market started to rebound in 2015, the market having expanded in terms of sales revenue to reach RMB5,117.9 million in 2016. In Shanxi, the cradle of Fenjiu liquor, it is also the preferred Chinese liquor of choice and maintains a stable customer base. Approximately 55% of Fenjiu liquor in terms of sales revenue was achieved in Shanxi in 2016. Fenjiu Group will continuously expend distribution channels and gain more market share in outside Shanxi market. It is expected that sales revenue of Fenjiu liquor will reach a further RMB10,532.0 million by 2022, increasing at a CAGR of 12.8% between 2016 and 2022.

 

Fenjiu liquor distributors are primarily previous stated-owned sugar and liquor enterprises, privately-owned companies, chained supermarkets, and convenience stores. Most of these companies have maintained their business relationship with Fenjiu Group and its subsidiaries over a long period of time. Fenjiu Group employs two different distribution models in China. Within Shanxi Province, the Group utilizes a direct distribution network, whereby sales managers of the Group are in direct contact with distributors on all levels and even end-consumers themselves. In other parts of China, the Group uses a traditional indirect distribution network. Key competitive factors include product and brand reputation, sales and marketing efforts, relationship status with Fenjiu Group, etc. There is a myriad of Fenjiu brands on the market and each enjoys a different degree of popularity. Product variety and brand reputation are key factors when consumers make their selection. Having an established relationship and added bargaining power with Fenjiu Group will ultimately affect the costs of distributors.

 

The developer model was prevalent throughout the first decade of the 21st century. The Group culled the developers by eliminating those who had less than RMB 5 million in revenue in 2009 and less than RMB 10 million in 2010. The total number of developers was reduced significantly. At the end of 2016, the total number of distributors reached 987. The Fenjiu liquor distribution market is highly competitive with no single distributor occupying a lion’s share of the market. At present, the market is saturated with a wide variety of types and brands of Fenjiu liquor products. Reliant currently accounts for less than 1% of the market share.

 

There are relatively high entry barriers for new competitors in Fenjiu liquor distribution market. Firstly, it is important for new entrants to get an authorization from Fenjiu Group, which is the sole provider of Fenjiu liquor products, to distribute the Group’s products. The Group has started placing stricter requirements on its distributors, including, for example, new sales target, rich experience in the industry, good past performance in cooperation with the Group, etc. Thus, it has become increasingly difficult for new players to enter the market. Fenjiu liquor enjoys widespread popularity in and around Shanxi Province, with markets in other parts of China being significantly smaller. It is therefore important for new entrants to have an pre-existing distribution network in certain regions of China in order to be successful. It remains risky for new entrants to enter into new areas where Fenjiu liquor is not yet fully established and where the distribution market is already saturated. By the end of 2016, there were nearly 1,000 distributors of Fenjiu liquor in China. Distributors range from mom-and-pop stores in Shanxi Province to larger companies with years of experience in the Fenjiu liquor industry, each competing for a fair share of the market. Intense competition arises between distributors within the same region, selling the same or different Fenjiu brands. Fenjiu liquor includes a variety of products, differing in terms of ABV, vintage, recipe, etc. Although there are no dominant varieties in the market, some are preferred by end consumers more than others. However, almost all of these popular varieties have already been taken up by exclusive distributors. Thus, new entrants might find it difficult to source popular products directly from Fenjiu Group or will be left to source them from existing distributors, which entails lower profit margins.

 

  7  

 

 

Chinese Wine Market

 

According to the data from International Organization of Vine and Wine (“OIV”), the per capita wine consumption in China is much lower than US average level. After the reduction on “three public consumptions” in 2013, China’s per capita consumption showed a further decrease. However, the consumption pattern has changed and the wine consumption has grown into a mass consumption accompanied with the wine price decreasing. Compared with the world average condition, China’s per capita wine consumption has been around one-third of the world’s average since 2010. The relatively low per capita wine consumption in China indicates great growth potential of future China’s wine market.

 

During the forecasted period from 2012 to 2022, Chinese consumers will develop the habit of drinking wine rather than other alcoholic beverages for the consideration of their health. In addition, the O2O platforms for wine will encourage the purchase. Since importers can act directly as retailers, the increasing trend of imported wine consumption is likely to continue in the forecasted period.

 

There are four market drivers of China’s wine market. Firstly, China’s per capita disposable income has been increasing rapidly mainly due to the increasing wage level. The rising disposable income indicates the increasing purchasing power of Chinese people, as well as that they pay more attention to the quality of life, thus stimulating the further growth of wine consumption. Secondly, China’s urbanization rate has been improving greatly during the past decades and Chinese government sets up the goal of 60% by 2020. With the further improvement of urbanization rate in China, the retail sales market is experiencing a rapid growth in urban regions in China. Along with the adoption of two-child policy, more couples will give birth to two child and they will grow into the potential customers of wine in the future, increasing the purchasing power of China in wine market. Thirdly, there are favorable national and international policies for imported wine. According to bilateral trade agreement signed by PRC government with New Zealand, Chile and Australia, imported goods from the three countries will benefit from low tariff rate. By 2019, the tariff will be totally eliminated. The favorable policy will reduce the wine retailing price and contribute to the sales. Fourthly, as the living standard improves, PRC people grow more concerned about their health problems and focus on eating healthy food as well as taking exercises. They pay more attention to drinking for health rather than drinking abusively. The functions of drinking wine, such as beautification and antioxidation, play an important role in contributing to its consumption, especially for female customers.

 

Our Strengths

 

Our Company has a high brand recognition in Chinese Fenjiu liquor market

 

Our prominent “Dagangjiu” brand Fenjiu liquor is one of the Chinese Fenjiu liquor market’s popular brands. We believe that we have built a reputation among Chinese drinkers as a reliable destination to meet their needs and preferences when choosing Fenjiu liquor. Our customers chooses our Fenjiu products for personal enjoyment, gifts for loved ones or good quality alcohol for special occasions such as weddings and other traditional Chinese festivities. We have also leveraged the strength of the Fenjiu Group to become one of the leading Fenjiu brand in international alcohol festivals such as the World Wine Culture Expo held in Shanxin, China in 2017. We believe our high brand recognition anchors our packaging and distribution business with strong customer goodwill in Shanxi province and beyond, providing us with a competitive advantage.

 

Our Marketing Experts’ Extensive Experience and Superior Reputation in our Industry

 

We believe that our competitors’ marketing team cannot match our marketing experts’ extensive industry experience and their superior reputation. We believe our commercial campaigns build strong credibility with consumers and potential liquor distribution partners and shape the market trends of consumer preferences and business evolutions in the industry.

 

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Additionally, we believe our marketing expertise and design proficiency required to successfully attract new customers combined with our ability to generate a range of business concepts and capability to customize each sales opportunity according to customers’ need are advantages when competing in Chinese Fenjiu market. Our combined expertise also allows us to successfully manage the numerous regional and cultural complexities involved in operating a traditional liquor business in China.

 

A Reliable and Flexible Business Model

 

Our current business model is very reliable and very flexible. It can be diversified in terms of the product flavors we serve and producers we sign commissions with. While operating a mix of marketing campaigns and business concepts under our own registered trademarks “Dagangjiu” and “Dagang Jiufang”, we entrust the liquor production to reputed large-scale producers. Currently, we are in a strategic partnership with Fenjiu Group; such partnership not only ensure the quality and product specifications of our product, but also guarantees our ample cost advantages and generous supply capacities.

 

Although our current business strategy emphasizes on the marketing, packaging and distribution of Fenjiu liquor and imported wines, should we want to change our business strategy to cater to more popular product types such as Luzhou-flavor liquor and Maotai-flavor liquor, we can quickly adjust our marketing concepts and product packaging to meet customers’ evolving needs and preferences. Due to our ownership of trademarks, we can change our strategic partnerships to address new product preferences while maintaining our accumulated goodwill. This approach enables us to update marketing concepts and product mix any time and allows us to be flexible in our marketing approach.

 

This reliable and flexible business model has contributed to the marketing resilience of our business performance.

 

Service-driven and Cohesive Management Team

 

Our talented and dedicated senior management team has guided our organization through its expansion and positioned us for continued growth. Our team has an average of 20 years of their respective expertise. Additionally, our management team possesses extensive experience across a broad range of disciplines, including Chinese liquor marketing, sales, E-Commerce, finance, franchising and business management. Our management team embraces our core purpose to “promote premium alcoholic beverages to Chinese population of all ages” and exemplifies our passionate and customer-oriented culture, which is shared by our employees throughout our company. We believe this results in a service-driven and cohesive management team focused on long-term business growth.

 

Our Strengths

 

Principal Products and Services

 

For the year ended June 30, 2017, we generated revenue of approximately 84.8% from Fenjiu liquor wholesale and approximately 15.2% from imported wine wholesale. For the year ended June 30, 2016, 100% of our revenue was generated from Fenjiu liquor wholesale. We have not experienced any seasonality in our business.

 

Fenjiu Liquor Wholesale

 

For our Fenjiu liquor wholesale business, we secure strategic partnership with dealers that we sought after based on our market survey data, market positioning data, sales channels data, sales capabilities data and sales potential evaluation. We further evaluate dealers according to their geographical and administrative area and categorize them into provincial, municipal and county agents. We establish cooperative relationships and strategic sales partnership amongst them to further facilitate the sales of our products. We wholesale our Fenjiu liquor products directly to these dealers.

 

In addition, we target dealers with sales access to retail stores and outlets. We sell our Fenjiu retail products with simple and bulk packaging to these dealers. The main idea is to achieve profitable margins through the reduction of high-end designs and packaging while maintaining a relatively low-price of our Fenjiu liquor products. In this way, we reach more Chinese customers through the cost-effectiveness of our products. We sell our products to our dealers using vessels with 30 kg, 50 kg or even larger holding capacities. Our dealers then resell these products to retail stores and outlets.

 

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Revenue generated from our Fenjiu liquor wholesale business accounted for 84.8% and 100%, respectively, of the total revenue derived from our general business in 2016 and 2017.

 

Imported Wine Wholesale

 

For our imported wine wholesale business, we secure strategic partnership with dealers that we sought after based on our market survey data, market positioning data, sales channels data, sales capabilities data and sales potential evaluation. We further evaluate dealers according to their geographical and administrative area and categorize them into provincial, municipal and county agents. We establish cooperative relationships and strategic sales partnership amongst them to further facilitate the sales of our products. We wholesale our imported wines directly to these dealers.

 

Revenue generated from our imported wine wholesale business accounted for 15.2% of the total revenue derived from our general business in 2017.

 

Competition

 

There are intense competitions in the Chinese liquor market. As a result, customers face a tremendous number of choices when deciding which brand or product to choose from.

 

Fenjiu Group has nearly 1,000 multi-layered distributors, with these distributors often serving as Fenjiu brand co-builders. Although the Fenjiu brand is now widely known as a Chinese liquor brand throughout the market, Fenjiu liquor distributors will continue working to co-build and enhance their brand image alongside Fenjiu Group so as to buffer the intense competition and capture additional market share from competitors. By the end of 2016, there were nearly 1,000 distributors of Fenjiu liquor in China. Distributors range from mom-and-pop stores in Shanxi Province to larger companies with years of experience in the Fenjiu liquor industry, each competing for a fair share of the market. Competitions are even more intense amongst the distributors within the same region.

 

Customers

 

We rely upon several of our large customers from whom we generated substantial revenue each year, and the composition of our largest customers has changed from year to year. For the year ended June 30, 2017, five of our customers represented approximately 20%, 24%, 14%, 18% and 7% of the Huaxin’s revenue, respectively. For the year ended June 30, 2016, four of our customers represented approximately 35%, 31%, 18% and 5% of Huaxin’s revenue, respectively. While we believe that one or more of our major customers could account for a significant portion of our sales for at least the year 2018, we anticipate that our customer base will continue to expand and that in the future we will be less dependent on major customers.

 

Suppliers

 

We primarily rely upon two of our large suppliers from whom we generated substantial revenue each year, and the composition of our largest customers has not changed in the past two years. In general, for the year ended June 30, 2017, two of our suppliers together accounted for 85% of the total purchases. For the year ended June 30, 2016, they accounted for 100% of the total purchases.

 

In general, we enter into procurement agreements in the ordinary course of business with our suppliers, pursuant to a form of supply order typically on a “deal by deal” basis. However, we have a stable strategic partnership with Fenjiu Group, with which we renew our partnership agreements annually.

 

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Intellectual Property

 

Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements, to establish and protect our proprietary rights. We do not rely on third-party licenses of intellectual property for use in our business.

 

As of the date of this prospectus, we had obtained 2 patents for liquor-making devices that can change proofs of various liquors, both of which were registered in 2015. Our issued PRC patents will expire in 2025. As of the date of this prospectus, we had registered 10 trademarks and had submitted 11 additional trademark applications. Our registered PRC trademarks will expire between 2024 and 2028 but can be renewed before the trademarks’ respective expiration date. As of the date of this prospectus, we had obtained 2 registered domain names.

 

In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through the use of internal and external controls, such as use of confidentiality agreement with our employees and outside consultants.

 

Properties

 

Prior to the change in control, the Company’s office is located at One Liberty Plaza, Suite 2310 PMB# 21, New York, NY 10006. Because the Company has had no business, its activities will be limited to keeping itself in good standing in the State of Nevada, seeking out acquisitions, reorganizations or mergers and preparing and filing the appropriate reports with the SEC. These activities have consumed an insubstantial amount of management’s time.

 

After the change in control, ORNC adopts the business of Reliant. Reliant’s corporate office is located at Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

 

Huaxin’s headquarters are located at Building 22, Baihui Shoufu, Xinghuacun Town, Fenyang City, Shanxi Province, China, where we own the property with an aggregate floor area of approximately 1561.6 square meters. This includes Huaxin’s sales and marketing office, communication and business development office and our management and operations facilities.

 

Huaxin currently lease from Fenyang Baihui Real Estate Co., Ltd. on an arm’s length basis, approximately 50 square meters of office space at No.2, 1 st Floor, Block A4, Baihui Shoufu, Xinghuacun Town, Fenyang City, Shanxi Province, China under a lease that expires on September 6, 2018 and can be renewed subject to mutual agreements by both parties.

 

Huaxin also currently lease from Taiyuan Xiangyu Enterprise Management Consulting Co. Ltd. on an arm’s length basis, approximately 100 square meters of office space at No.5, Unit 1, Building 2, No. 343, Fenyang Road, Xiaodian District, Taiyuan City, Shanxi Province, China under a lease that expires on November 9, 2018 and can be renewed subject to mutual agreements by both parties.

 

Huaxin also currently lease from Shanxi Zhanpeng Metal Products Co., Ltd. on an arm’s length basis, approximately 1000   square meters of office space at No. 2, South Hero Road, Fenyang City, Shanxi Province, China under a lease that expires on March 9, 2021 and can be renewed subject to mutual agreements by both parties.

 

Huaxin also currently lease from Ms. Jiangmei Guo on an arm’s length basis, approximately 140 square meters of office space at No. 1011, Unit 2, Unit 1, Wenxingyuan, Xiaodian District, Fenyang City, Shanxi Province, China under a lease that expires on December 8, 2018 and can be renewed subject to mutual agreements by both parties.  

 

Huaxin also currently lease from Mr. Genshan Zhao on an arm’s length basis, approximately 60 square meters of office space at Room 915, Wufeng International, No. 11 Zhenxing Street, High-Tech Zone, Taiyuan City, Shanxi Province, China under a lease that expires on September 30, 2018 and can be renewed subject to mutual agreements by both parties.

 

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Huaxin also currently lease from Mr. Jianhong Zhang on an arm’s length basis, approximately 50 square meters of office space at Room 903, 9th Floor, Wufeng International Building, High-tech Development Zone, Taiyuan City, Shanxi Province, China under a lease that expires on September 20, 2018 and can be renewed subject to mutual agreements by both parties.

 

In addition, Huaxin currently lease from Fenyang City Jiudu Xinhua Liquor Trading Center Co., Ltd. on an arm’s length basis, approximately 1200 square meters of warehouse space at South District if Shudao Avenue, High-Speed Exit, Xinghua Village, Fenyang City, Shanxi Province, China under a lease that expires on January 11, 2019 and can be renewed subject to mutual agreements by both parties.

 

We believe that our current facilities are adequate and suitable for our operations.

 

Employees

 

As of the date of this report, we had 41 employees throughout our operations in 4 offices and 3 warehouses. None of our employees are covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relations with our employees to be good.

 

Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company’s common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

 

WHERE YOU CAN FIND MORE INFORMATION

 

The registrant is subject to the requirements of the Exchange Act, and files reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the public reference room maintained by the SEC at its Public Reference Room, located at 100 F Street, N.E. Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at (800) SEC-0330. In addition, we are required to file electronic versions of those materials with the SEC through the SEC’s EDGAR system. The SEC also maintains a web site at http://www.sec.gov, which contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

 

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RISK FACTORS

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

Item 2.02 Results of Operations and Financial Condition.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The statements in this discussion that are not historical facts are “forward-looking statements.” The words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “continue,” the negative forms thereof, or similar expressions, are intended to identify forward-looking statements, although not all forward-looking statements are identified by those words or expressions. Forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by forward-looking statements depending on a variety of important factors, including, but not limited to, weather, local, regional, national and global coke and coal price fluctuations, levels of coal and coke production in the region, the demand for raw materials such as iron and steel which require coke to produce, availability of financing and interest rates, competition, changes in, or failure to comply with, government regulations, costs, uncertainties and other effects of legal and other administrative proceedings, and other risks and uncertainties. We are not undertaking to update or revise any forward-looking statement, whether as a result of new information, future events or circumstances or otherwise.

 

Factors Affecting Financial Performance

 

We believe that the following factors will affect our financial performance:

 

Increasing demand for our products - The increasing demand for our Fenjiu liquor products and our imported wines products, will have a positive impact on our financial position. We plan to expand our distribution network, aimed at increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our continuous growth. As of the date of this Report however, we do not have any agreements, undertakings or understandings to expand our distribution network and there can be no guarantee that we ever will.

 

Expansion of our sales network - To meet the increasing demand for our products, we need to expand our sales network. In the short-run, we intend to increase our investment in personnel training, information technology applications and logistic system upgrades.

 

Maintaining effective control of our costs and expenses - We will focus on improving our long-term cost control strategies including establishing long-term alliances with certain suppliers. We will carry forward the economies of scale and advantages from our nationwide distribution network and diversified offerings. Moreover, we will step up our efforts in improvements over quality management, procurement processes and cost control, and give full play to the trustworthy sales teams to maximize our profit and bring better long-term return for our shareholders.

 

Economic and Political Risks

 

Our operations are conducted primarily in the PRC. Accordingly, our business, financial conditions and results may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

 

Our operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks with, among others, the political, economic and legal environment and foreign currency exchange. Our Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions, remittances abroad, and rates and methods of taxation, among other things.

 

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Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our consolidated financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see our consolidated financial statements included elsewhere in this Report.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, the recoverability of long-lived assets and the valuation of accounts receivable, accrued expenses and taxes payable and inventories. Actual results could differ from those estimates.

 

Accounts Receivable

 

Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. Accounts are written off against the allowance after efforts at collection prove unsuccessful.

 

Inventories

 

Inventories, which are stated at the lower of cost or current market value, consist of raw materials, work-in-progress, and finished goods related to the Company’s products. Cost is determined using the first in first out (“FIFO”) method. Market is the lower of replacement cost or net realizable value. Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development cost. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its inventory and records an inventory reserve for certain inventories that may not be saleable.

 

Revenue Recognition

 

The Company recognizes revenue from sales of wine products. Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold. This is usually taken as the time when the goods are delivered and the customers have accepted the goods.

 

Fair Value of Financial Instruments

 

The Company follows the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

 

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Results of Operations

 

Overview

 

    Years Ended June 30,     Variance  
    2017     2016     Amount     %  
Revenue     91,144,666       24,249,106       66,895,560       275.9 %
Cost of sales     24,065,113       6,125,410       17,939,703       292.9 %
Gross profit     67,079,553       18,123,696       48,955,857       270.1 %
Selling and distribution expenses     2,521,950       352,887       2,169,063       614.7 %
Administrative expenses     5,505,952       2,897,075       2,608,877       90.1 %
Income from operations     59,051,651       14,873,734       44,177,917       297.0 %
Other income     227,552       135,833       91,719       67.5 %
Interest and other financial charges     3,431,027       1,976,614       1,454,413       73.6 %
Income before income taxes     55,848,176       13,032,953       42,815,223       328.5 %
Income taxes     14,121,343       3,441,782       10,679,561       310.3 %
Net income     41,726,833       9,591,171       32,135,662       335.1 %

 

Revenue

 

    Years Ended June 30,     Variance  
    2017     %     2016     %     Amount     %  
Sales of Fenjiu liquor products     81,973,982       89.9 %     24,249,106       100.0 %     57,724,876       239.3 %
Sales of imported wine products     9,170,684       10.1 %     0       0.0 %     9,170,684       N/A  
Total Amount     91,144,666       100.0 %     24,249,106       100.0 %     66,895,560       275.9 %

 

Currently we have two types of revenue streams deriving for our wine wholesale business. First, revenue generated from our Fenjiu liquor wholesale business. And second, revenue generated from our imported wine wholesale business, which commenced during the year ended June 30, 2017.

 

For the year ended June 30, 2017 and 2016, revenue generated from our Fenjiu liquor wholesale business was RMB81,973,982 and RMB24,249,106, respectively, which represented an increase of RMB57,724,876 or 239.3%. The increase of revenue generated from our Fenjiu liquor wholesale business was mainly due to the increased sales volume of our Fenjiu liquor products. For the nine months ended March 31, 2018, the revenue generated from our Fenjiu liquor wholesale business was RMB71,061,243.

 

For the year ended June 30, 2017 and 2016, revenue generated from our imported wine wholesale business was RMB9,170,684 and Nil, respectively, which represented an increase of RMB9,170,684. The increase of revenue generated from our imported wine wholesale business was mainly due to the increased sales volume of our imported wine products. For the nine months ended March 31, 2018, the revenue generated from our imported wine wholesale business was RMB12,196,994.

 

Cost of Sales

 

    Years Ended June 30,     Variance  
    2017     %     2016     %     Amount     %  
Sales of Fenjiu liquor products     21,645,410       89.9 %     6,125,410       100.0 %     15,520,000       253.4 %
Sales of imported wine products     2,419,703       10.1 %     0       0.0 %     2,419,703       N/A  
Total Amount     24,065,113       100.0 %     6,125,410       100.0 %     17,939,703       292.9 %

 

For the year ended June 30, 2017 and 2016, cost of sales from our Fenjiu liquor wholesale business was RMB21,645,410 and RMB6,125,410, respectively, which represented an increase of RMB15,520,000 or 253.4%. The increase of cost of sales from our Fenjiu liquor wholesale business was mainly due to the increased sales volume of our Fenjiu liquor products. For the nine months ended March 31, 2018, the cost of sales from our Fenjiu liquor wholesale business was RMB18,339,861.

 

For the year ended June 30, 2017 and 2016, cost of sales from our imported wine wholesale business was RMB2,419,703 and Nil, respectively, which represented an increase of RMB2,419,703. The increase of cost of sales from our imported wine wholesale business was mainly due to the increased sales volume of our imported wine products. For the nine months ended March 31, 2018, the cost of sales from our imported wine wholesale business was RMB3,662,916.

 

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Gross Profit

 

    Years Ended June 30,     Variance  
    2017     %     2016     %     Amount     %  
Sales of Fenjiu liquor products     60,328,572       89.9 %     18,123,696       100.0 %     42,551,030       232.9 %
Sales of imported wine products     6,750,981       10.1 %     0       0.0 %     6,750,981       N/A  
Total Amount     67,079,553       100.0 %     18,123,696       100.0 %     48,955,857       270.1 %

 

Gross profit from our Fenjiu liquor wholesale business increased by RMB42,551,030 or 232.9% for the year ended June 30, 2017, as compared to the same period of 2016. The Company adopted its strategy to sell products with fairly stable profit margins that gross profit contribution percentage was 73.6% for the year ended June 30, 2017, as comparted to 74.7% for the same period of 2016. For the nine months ended March 31, 2018, the gross profit was RMB52,721,382 and gross profit contribution percentage was 74.2%.

 

Gross profit from our imported wine wholesale business increased by RMB6,750,981 and the gross profit contribution percentage was 73.6% for the year ended June 30, 2017. For the nine months ended March 31, 2018, the gross profit was RMB8,534,078 and gross profit contribution percentage was 70.0%.

 

Selling and Distribution Expenses

 

For the year ended June 30, 2017, our selling and distribution expenses were RMB2,521,950, representing an increase of RMB2,169,063, or 614.7%, as compared to the same period of 2016. The increase was primarily due to increased advertising expenses, packaging expenses, freight charges and salaries during the year ended June 30, 2017 compared to the same period of 2016. For the nine months ended March 31, 2018, our selling and distribution expenses were RMB3,338,043.

 

Administrative Expense

 

For the year ended June 30, 2017, our administrative expenses were $5,516,707, representing an increase of RMB2,619,632 or 90.4%, as compared to the same period of 2016. The increase was primarily due to increased travelling expenses, hospitality expenses, office expenses, rental expenses and salaries for the years ended June 30, 2017 as compared to the same period of 2016. For the nine months ended March 31, 2018, our administrative expenses were RMB3,686,062.

 

Other Income

 

For the year ended June 30, 2017, our other income was RMB227,552 as compared to other income of RMB135,833 in the same period of 2016. The increase in other interest income was primarily due to increased interest income from bank deposits. For the nine months ended March 31, 2018, our other income was RMB131,447.

 

Interest and Other Financial Charges

 

For the year ended June 30, 2017, our interest and other financial charges were RMB3,420,272 as compared to interest and other financial charges of RMB1,976,614 in the same period of 2016. The increase in interest and other financial charges was primarily due to bank borrowings. For the nine months ended March 31, 2018, our interest and other financial charges were RMB1,768,720.

 

Income Taxes

 

For the years ended June 30, 2017 and 2016, the Company’s income taxes increased by RMB10,679,561 or 310.3% to RMB14,121,343 for the year ended June 30, 2017 from RMB3,441,782 for the year ended June 30, 2016. The increase in the Company’s income taxes was primarily due to increased taxable income of the Company for the period indicated. For the nine months ended March 31, 2018, our income taxes were RMB12,623,911.

 

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Liquidity and Capital Resources

 

We currently finance our business operations primarily through cash flows from operations and from banks loans. Our current cash primarily consists of cash on hand and cash in bank, which is unrestricted as to withdrawal and use and is deposited with banks in China.

 

Management believes that our current cash, cash flows from current and future operations, and access to loans will be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue to carefully execute our growth plans and manage market risk.

 

Treasury Policies

 

We have established treasury policies with the objectives of achieving effective control of treasury operations and of lowering cost of funds. Therefore, funding for all operations and foreign exchange exposure have been centrally reviewed and monitored from the top level.

 

Our policy precludes us from entering into any derivative contracts purely for speculative activities. Through our treasury policies, we aim to:

 

(a) Minimize interest risk

 

We will continue to closely monitor the borrowing interest rates under different currencies and new offers from banks.

 

(b) Minimize currency risk

 

In view of the current volatile currency market, we will closely monitor the foreign currency borrowings at the company level. As of March 31, 2018, June 30, 2017 and 2016, we do not engage in any foreign currency borrowings or loan contracts.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares of our Common Stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our Common Stock indicated as beneficially owned by them.

 

Pre-Share Exchange

 

The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of July 6, 2018, prior to the Share Exchange, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only classes of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. Unless otherwise indicated, the persons named in the table below had sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.

 

 

Name and address of beneficial owner

  Amount and nature of beneficial ownership     Percent of
class (1)
 
Peng Yang (2)
One Liberty Plaza, Suite 2310 PMB# 21, New York, NY 10006
    53,121,530 shares (indirect)       75.7 %
                 
All directors and executive officers as a group (1 person)     53,121,530       75.7 %

 

(1) Percentage is calculated upon the 70,191,480 shares outstanding as of July 6, 2018
(2) 53,121,530 shares of common stock held in record by Million Success Business Limited, 100% controlled by Peng Yang.

 

Post-Share Exchange

 

The following table sets forth information with respect to the beneficial ownership of our Common Stock as of June 29, 2018, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only class of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Share Exchange, to our knowledge, there is no arrangement, including any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.

 

 

Name and address of beneficial owner

  Amount and nature of beneficial ownership     Percent of
class (1)
 
Peng Yang (2)
One Liberty Plaza, Suite 2310 PMB# 21, New York, NY 10006
    322,079,450 shares       76.78 %
                 
All directors and executive officers as a group (1 person)     322,079,450       76.78 %

 

  (3) Percentage is calculated upon the 419,487,480 shares outstanding post Share Exchange
  (4) Includes 53,121,530 shares of common stock held in record by Million Success Business Limited, 100% controlled by Peng Yang.

 

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DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS

   

Prior to the Share Exchange, Mr. Yang Peng served as Director, President, Secretary, and Treasurer of the Company. Upon the closing of the aforementioned Share Exchange, Mr. Peng Yang remains to serve as sole director, president, treasurer and secretary of the Company.

 

Upon closing of the Share Purchase, our executive officers and directors are:

 

NAME   AGE     POSITION(S)   DATE ELECTED OR APPOINTED
                 
Peng Yang     26     Director, President, Secretary, and Treasurer   Appointed 01/05/2018
Ronald Zhang     46     Chief Financial Officer   Appointed 04/16/2018

 

Mr. Yang, age 26, has international business and management experience from his positions working with Reliant Wines, a company engaged in wine trading and Reliant Investment (Group) Limited, an investment company. He has served as the general manager assistant and overseas affairs manager of Reliant Wines since 2015 and as limited director of Reliant Investment (Group) Limited since 2016. Mr. Yang holds a bachelors of engineering degree, with honors, from the University of Auckland in New Zealand.

 

Mr. Zhang, age 46, has ample experience in corporate finance, financial planning, financial risks and financial reporting. He has served as the executive director of Guangzhou Double 3D Technology Limited since June 2017. Mr. Zhang received his GAAP Certificate from American Institute of Certified Public Accountants in October 1999. 

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” None of our directors are independent directors under the applicable standards of the SEC and the NASDAQ stock market.

 

Family Relationships

 

There are no family relationships among our directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has been involved in any of the following events during the past ten years:

 

  any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

  being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or

 

  being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

  19  

 

 

Board Committees

 

The Company currently has not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.

 

Audit Committee Financial Expert

 

We have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. Neither of our directors is an “audit committee financial expert” within the meaning of Item 407(d)(5) of SEC regulation S-K.

 

Compensation Committee

 

We have no separate compensation committee at this time. The entire Board of Directors oversees the functions which would be performed by a compensation committee.

 

Code of Ethics

 

The Company has adopted a code of ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller which was attached as Exhibit 99.1 to the March 29, 2004 10KSB for the period of 12/31/2003.

 

EXECUTIVE COMPENSATION

 

No current or prior officer or director has received any remuneration or compensation from the Company in the past three years, nor has any member of the Company’s management been granted any option or stock appreciation right. Accordingly, no tables relating to such items have been included within this Item. None of our employees is subject to a written employment agreement nor has any officer received a cash salary since our founding. The Company has no agreement or understanding, express or implied, with any director, officer or principal stockholder, or their affiliates or associates, regarding compensation in the form of salary, bonuses, stocks, options, warrants or any other form of remuneration, for services performed on behalf of the Company. Nor are there compensatory plans or arrangements, including payments to any officer in relation to resignation, retirement, or other termination of employment, or any change in control of the Company, or a change in the officer’s responsibilities following a change in control of the Company.

 

Employment Agreements

 

None of the Company’s executive officers have employment agreements directly with the Company, although they may enter into such agreements in the future.

 

Director Compensation

 

We have not compensated our directors, in their capacities as such, since our respective formations.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons.

 

  20  

 

 

The descriptions set forth above under the captions “The Share Exchange and Related Transactions—Share Exchange Agreement,” “Executive Compensation—Employment Agreements” and “Director Compensation” and below under “Description of Securities—Options” are incorporated herein by reference.

 

During the nine months ending March 31, 2018, the Company had an amount $13,145,949 due from director Mr. Claudio Gianascio and an amount $13,395,233 due to director Mr. Claudio Gianascio.

 

During the nine months ending March 31, 2018, the Company had an amount $14,394,218 as revenue generated from trade transactions with Fuqing Jing Hong Trading Co., Ltd, the director of which is a family member of Mr. Yang, a director of the Company. Management is of the opinion that these related party transactions were conducted in the normal course of business of the Group with standard sales terms and conditions.

 

We currently do not have a policy in place for dealing with related party matters.

 

DESCRIPTION OF SECURITIES

 

Common Stock

 

Our authorized capital stock consists of 100,000,000 shares of common stock, with a par value of $0.001 per share. As dictated by our Articles of Incorporation, all shares of common stock have equal rights and privileges with respect to (i) one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders; (ii) to participate equally and to receive any and all such dividends as may be declared by the Board of Directors out of funds legally available therefor; and (iii) to participate pro rata in any distribution of assets available for distribution upon liquidation of the Company. Stockholders of the Company have no pre-emptive rights to acquire additional shares of common stock or any other securities. The common stock is not subject to redemption and carries no subscription or conversion rights. All outstanding shares of common stock are fully paid and non-assessable. The Articles of Incorporation may only be amended by a majority vote of the stockholders holding at least a majority of each class of stock outstanding and entitled to vote. A quorum of outstanding shares for voting on an Amendment to the Articles of Incorporation shall not be met unless 51% or more of the issued and outstanding shares are present at a properly called and noticed meeting of the Stockholders.

 

In the event of any merger or consolidation with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities or property (including cash) a general or special shareholder’s meeting should be called for such purpose, wherein all shareholder’s would be entitled to vote in person or by proxy. In the notice of such a shareholder’s meeting and proxy statement, the Company will provide shareholders complete disclosure documentation concerning a potential acquisition of merger candidate, including financial information about the target and all material terms of the acquisition or merger transaction.

 

As of the date of this report, there were 70,191,480 shares of common stock issued and outstanding.

 

MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

 

Our common stock trades in the OTC Pink marketplace under the symbol “ORNC”. The OTC Pink marketplace is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTC Pink equity security generally is any equity that is not listed or traded on a national securities exchange.

 

Price Range of Common Stock

 

The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC Pink quotation service. These bid prices represent prices quoted by broker-dealers on the OTC Pink quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

 

  21  

 

 

    High     Low  
Fiscal Year 2018   Bid     Bid  
First Quarter   $ 0.4     $ 0.2  

 

Fiscal Year 2017   Bid     Bid  
First Quarter   $ 0.21     $ 0.21  
Second Quarter   $ 0.21     $ 0.21  
Third Quarter   $ 1     $ 1  
Fourth Quarter   $ 0.25     $ 0.25  

 

Fiscal Year 2016   Bid     Bid  
First Quarter   $ 0.6015     $ 0.6015  
Second Quarter   $ 0.425     $ 0.425  
Third Quarter   $ 0.425     $ 0.425  
Fourth Quarter   $ 0.3     $ 0.3  

 

There is no “public market” for shares of common stock of the Company. Although the Company’s shares are quoted on the OTC Markets OTCQB, the Company is aware of only a few transactions that have taken place in the previous ten years. In any event, no assurance can be given that any market for the Company’s common stock will develop or be maintained.

 

Stockholders of Record

 

As of July 6, 2018 there were approximately 20 stockholders of record of our common stock.

 

Preferred Stock

 

The Company does not have any preferred stock, authorized or issued.

 

Warrants

 

There are currently no outstanding warrants.

 

Options

 

There are currently no outstanding options.

 

Penny Stock Regulations

 

The ability of an individual shareholder to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, the Company has no plans to register its securities in any particular state. Further, most likely the Company’s shares will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or exempted from the definition by the SEC. If the Company’s shares are deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker- dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

 

  22  

 

 

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker- dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in the Company’s Common stock and may affect the ability of shareholders to sell their shares.

 

Dividends

 

The Company has not declared any cash dividends with respect to its common stock and does not intend to declared dividends in the foreseeable future. The future dividend policy of the Company cannot be ascertained with any certainty, and until the Company completes any acquisition, reorganization or merger, as to which no assurance may be given, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, the Company’s ability to pay dividends on its common stock.

 

Securities authorized for issuance under equity compensation plans .

 

None; not applicable 

 

Purchase of Equity Securities By the Issuer and Affiliated Purchasers.

 

None.

 

Transfer Agent and Registrar

 

Issuer Direct Corporation (formerly known as “Interwest Transfer Company, Inc.”) has been appointed as our Transfer Agent and Registrar for our common stock. Its mailing address is 1981 Murray Holladay Road, Suite 100 Salt Lake City, UT 84117 and their phone number is 801-272-9294.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

The Nevada Private Corporation Law and our Articles of Incorporation allow us to indemnify our officers and directors from certain liabilities and our By-Laws state that we shall indemnify every present or former director or officer of ours or one of our subsidiaries (each an “Indemnitee”).

 

Our By-Laws provide for indemnification for liability, including expenses incurred in connection with a claim of liability arising from having been an officer or director of the Company for any action alleged to have been taken or omitted by any such person acting as an officer or director, not involving gross negligence or willful misconduct by such person.

 

Other than discussed above, none of our By-Laws, or Articles of Incorporation includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

  23  

 

 

Item 3.02 Unregistered Sales of Equity Securities

 

Shares Issued in Connection with the Share Exchange

 

On June 29, 2018, pursuant to the terms of the Share Exchange, all of the shares of Reliant were exchanged for 349,296,000 newly-issued shares of common stock of the Company to Sellers, of which 28,000,000 were issued at the closing date of June 29, 2018, and the remaining 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares. This transaction was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation S under the Securities Act. None of the shares were sold through an underwriter and accordingly, there were no discounts or commissions involved.

 

Sales of Unregistered Securities of ORNC

 

Set forth below is information regarding shares of ordinary shares granted by ORNC within the past three years that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Also included is information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed. Share and per share stock numbers below in this Item do not give effect to the Share Exchange on June 29, 2018, in which each share of ORNC stock outstanding at the time of the Share Exchange was automatically converted into shares of our Reliant at the applicable conversion ration described elsewhere herein.

 

The Company issued four notes to Claudio Gianascio, a former director and officer of the Company until December 26, 2017 on the following dates and in the following amounts, on August 5, 2016 in the amount of $10,000; on April 6, 2017 in the amount of $7,500; on April 27, 2017 in the amount of $10,000; and on November 2, 2017 in the amount of $9,500. All four notes were convertible into common stock at $0.001 per share.  Claudio Gianascio converted the four notes on November 9, 2017 and December 27, 2017 to 28,374,680 and 9,546,850 shares of common stock, respectively.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Yea r.

 

On June 29, 2018, the Board of Directors of ORNC approved a change in the fiscal year end from a fiscal year ending December 31 to a fiscal year ending June 30. The Company expects to make the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change to the Company’s fiscal year will not impact the Company’s calendar year results for the year ended December 31, 2017. However, the change will impact the prior year comparability of each of the fiscal quarters and annual period in 2018 in future filings. The Company believes this change will provide numerous benefits, including aligning its reporting periods to be more consistent with Reliant.

 

The new fiscal year commenced July 1, 2018.

 

The reporting periods and applicable reports for fiscal year 2018 are expected to be as follows:

 

FISCAL PERIOD     REPORTING PERIOD     REPORT TO BE FILED
Fiscal year 2017     June 30, 2016 to June 30, 2017     Annual Report on Form 10-K
First quarter of fiscal 2018     July 1, 2018 to September 30, 2018     Quarterly Report on Form 10-Q
Second quarter of fiscal 2018     October 1, 2018 to December 31, 2018     Quarterly Report on Form 10-Q
Third quarter of fiscal 2018     January 1, 2018 to March 31, 2018     Quarterly Report on Form 10-Q
Fiscal year 2018     June 30, 2018 to June 30, 2019     Annual Report on Form 10-K

 

Financial Impact

 

The Company expects the change in fiscal year end to have no financial impact on the 2018 quarterly and annual financial results.

 

  24  

 

 

Item 5.06 Change in Shell Company Status

 

Prior to the closing of the Share Purchase, the Company was a “shell company” as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act. As described above in Item 2.01, which is incorporated herein by reference into this Item 5.06, the Company ceased being a shell company upon the completion of the Share Purchase on July 2, 2018.

 

Item 9.01 Financial Statements and Exhibits

 

(a) Financial statements of businesses acquired.

 

In accordance with Item 9.01(a), Reliant’s audited financial statements as of, and for the years ended June 30, 2017 and 2016, Reliant’s unaudited financial statements as of, and for the nine months ended March 31, 2018, and the accompanying notes, are included in this Report beginning on Page F-1.

 

(b) Pro forma financial information.

 

In accordance with Item 9.01(c), the following unaudited pro forma financial information with respect to the Share Exchange reported in Item 2.01 of this Current Report on Form 8-K are included in this Report beginning on page F-24.

 

  Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2018
     
  Notes to the Unaudited Pro Forma Consolidated Financial Statements.

 

(c) Exhibits

 

In reviewing the agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

 

  should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

  have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

  may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

  were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

  25  

 

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Current Report on Form 8-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

 

(d) Exhibits:

 

Exhibit
Number
  Description
     
2.1*   Share Exchange Agreement, dated as of June 29, 2018, by and among the Registrant, Reliant and the shareholders of Reliant
     
3.1   Initial Articles of Incorporation (incorporated by reference to our Form 10-K  exhibit 3.1 filed with the SEC on November 18, 1999)
     
3.2   Articles of Amendment to the Articles of Incorporation (incorporated by reference to our Form 10-K  exhibit 3.2 filed with the SEC on November 18, 1999)
     
3.3   By-Laws (incorporated by reference to our Form 10-K  exhibit 3.2 filed with the SEC on November 18, 1999)
     
21.1*   Subsidiaries of the Registrant

 

* Filed herewith.

 

  26  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: July 6, 2018 ORANCO INC.
     
  By: /s/ Peng Yang
  Name:  Peng Yang
  Title: President, Secretary,
    Treasurer and Director

 

  27  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SURE RICH INVESTMENT (GROUP) LIMITED

 

CONSOLIDATED FINANCIAL STATEMENTS

 

WITH

 

INDEPENDENT AUDITOR’S REPORT

 

JUNE 30, 2017 AND 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SURE RICH INVESTMENT (GROUP) LIMITED

 

TABLE OF CONTENTS

 

  Page
Report of Independent Registered Public Accounting Firm F-2
   
Financial Statements:  
   
Consolidated Statements of Operations F-3
   
Consolidated Balance Sheets F-4
   
Consolidated Statements of Shareholders’ Equity F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements F-7 - F-29

 

  F- 1  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of Sure Rich Investment (Group) Limited

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Sure Rich Investment (Group) Limited (the “Company”) as of June 30, 2017 and 2016, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for each of the two years in the period ended June 30, 2017 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the Company’s auditor since March 7, 2018.

 

  /s/ PKF Littlejohn LLP

 

PKF Littlejohn LLP

London, UK

July 6, 2018

 

  F- 2  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED 

CONSOLIDATED STATEMENTS OF OPERATIONS 

( Chinese Renminbi )

 

    Unaudited     Unaudited          
    March 31,
2018
    March 31,
2017
    June 30,
2017
    June 30,
2016
 
Revenue     83,258,237       73,856,595       91,144,666       24,249,106  
      83,258,237       73,856,595       91,144,666       24,249,106  
                                 
Cost of sales     23,002,777       19,569,924       24,065,113       6,125,410  
Selling and distribution expenses     3,338,043       1,691,153       2,521,950       352,887  
Administrative expenses     3,686,062       3,795,211       5,516,707       2,897,075  
      30,026,882       25,056,288      

32,103,770

      9,375,336  
                                 
Other income     131,447       63,541       227,552       135,833  
Interest and other financial charges     1,768,720       2,566,004       3,420,272       1,976,614  
Income before income taxes     51,594,082       46,297,844       55,848,176       13,032,953  
                                 
Income taxes     12,623,911       11,784,144       14,121,343       3,441,782  
Net Income     38,970,171       34,513,700       41,726,833       9,591,171  
                                 
Attributable to:                                
Equity holders of the Company     37,862,781       27,905,749       34,091,734       6,428,743  
Non-controlling interests     1,107,390       6,607,951       7,635,099       3,162,464  
      38,970,171       34,513,700       41,726,833       9,591,171  

 

The accompanying notes are an integral part of the consolidated financial statements. 

 

  F- 3  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED 

CONSOLIDATED BALANCE SHEETS 

( Chinese Renminbi )

 

   

Unaudited

Nine months

Ended

   

Year ended

   

Year ended

 
   

March 31,

2018

   

June 30,

2017

   

June 30,

2016

 
ASSETS:                  
Current assets                  
Cash and cash equivalents     23,857,239       6,607,407       427,691  
Inventories     8,581,472       8,597,710       5,226,421  
Trade receivables     48,745,286       47,517,200       20,844,588  
Deposits, prepayments and other receivables     28,303,405       31,404,225       42,371,128  
Prepaid land lease     109,680       109,680       109,680  
      109,597,082       94,236,222       68,979,508  
                         
Non-current assets                        
Property, plant and equipment     3,340,057       3,120,166       3,321,635  
Prepaid land lease     4,936,840       5,019,100       5,128,780  
      8,276,897       8,139,266       8,450,415  
Total assets     117,873,979       102,375,488       77,429,923  
                         

LIABILITIES AND SHAREHOLDERS’ EQUITY

                       
Current liabilities                        
Trade payables     528,608       118,115       2,303,656  
Receipts in advance, accruals and other payables     18,463,215       17,493,902       21,482,787  
Current tax liabilities     4,775,793       2,627,279       534,121  
Bank borrowings     -       27,000,000       10,650,000  
      23,767,616       47,239,296       34,970,564  
                         
Non-current liabilities                        
Bank borrowings     -       -       27,000,000  
      -       -       27,000,000  
                         
Share capital     1       1       1  
Statutory reserve     4,249,871       4,249,871       1,325,763  
Acquisition reserve     12,151,843       12,151,843       -  
Retained earnings     73,714,502       35,851,721       4,684,095  
Equity attributable to equity holders of the Company     90,116,217       52,253,436       6,009,859  
Non-controlling interest     3,990,146       2,882,756       9,449,500  
Total equity     94,106,363       55,136,192       15,459,359  
Total liabilities and shareholders’ equity     117,873,979       102,375,488       77,429,923  

 

The accompanying notes are an integral part of the consolidated financial statements. 

 

  F- 4  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 

( Chinese Renminbi )

 

Audited   Share
capital
    Statutory
reserve
    Acquisition
reserve
    Retained
Earnings/
(loss)
    Attributable
to the
Company
    Non-
controlling
interests
    Total
Equity
 
Balance at June 30, 2015     1       438,786       -       (857,635 )     (418,848 )     6,287,036       5,868,188  
Total comprehensive income for the year     -       -       -       6,428,707       6,428,707       3,162,464       9,591,171  
Appropriation     -       886,977       -       (886,977 )     -       -       -  
Balance at June 30, 2016     1       1,325,763       -       4,684,095       6,009,859       9,449,500       15,459,359  
                                                         
Total comprehensive income for the year     -       -       -       34,091,734       34,091,734       7,635,099       41,726,833  
Acquisition reserve     -       -       12,151,843       -       12,151,843       (14,201,843 )     (2,050,000 )
Appropriation     -       2,924,108       -       (2,924,108 )     -       -       -  
Balance at June 30, 2017     1       4,249,871       12,151,843       35,851,721       52,253,436       2,882,756       55,136,192  
 Unaudited                                                        
Balance at June 30, 2016     1       1,325,763       -       4,684,095       6,009,859       9,449,500       15,459,359  
Total comprehensive income for the period     -       -       -       27,905,749       27,905,749       6,607,951       34,513,700  
Appropriation     -       1,475,796       -       (1,475,796 )     -       -       -  
Balance at March 31, 2017     1       2,801,559       -       31,114,048       33,915,608       16,057,451       49,973,059  
                                                         
Balance at June 30, 2017     1       4,249,871       12,151,843       35,851,721       52,253,436       2,882,756       55,136,192  
Total comprehensive income for the period     -       -       -       37,862,781       37,862,781       1,107,390       38,970,171  
Appropriation     -       -       -       -       -       -       -  
Balance at March 31, 2018     1       4,249,871       12,151,843       73,714,502       90,116,217       3,990,146       94,106,363  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 5  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

( Chinese Renminbi )

 

    Unaudited Nine months ended     Unaudited Nine months ended     Year ended     Year ended  
    March 31,     March 31,     June 30,     June 30,  
    2018     2017     2017     2016  
Operating activities                        
Net income     38,970,171       34,513,700       41,726,833       9,591,171  
Adjustments to reconcile net income to cash generated by operating activities:                                
Depreciation and amortization     255,635       174,949       342,042       278,854  
Changes in working capital:                                
Inventories     16,238       (3,085,809 )     (3,371,289 )     (138,286 )
Trade receivables     103,664       (24,906,295 )     (17,615,855 )     (11,381,535 )
Deposits, prepayments and other receivables     3,100,820       369,350       (2,428,130 )     (10,030,823 )
Trade payables     410,493       (1,232,097 )     (2,185,541 )     854,641  
Receipts in advance, accruals and other payables     3,117,827       14,862,154       11,499,306       (21,977,874 )
Cash generated by/(used in) operating activities     45,974,848       20,695,952       27,967,366       (32,803,852 )
                                 
Investing activities                                
Acquisition of additional interest in subsidiary     -       -       (2,050,000 )     -  
Payments for acquisition of property, plant and equipment     (393,266 )     -       (30,893 )     (143,781 )
Cash used in investing activities     (393,266 )     -       (2,080,893 )     (143,781 )
                                 
Cash flows from financing activities                                
Proceeds from bank borrowings     -       -       -       32,950,000  
Repayment of bank borrowings     (27,000,000 )     (4,650,000 )     (10,650,000 )     -  
Loans made to related party     (1,331,750 )     (8,657,619 )     (9,056,757 )     (721,653 )
Cash (used in)/generated from financing activities     (28,331,750 )     (13,307,619 )     (19,706,757 )     32,228,347  
                                 
Increase/(decrease) in cash and cash equivalents     17,249,832       7,388,333       6,179,716       (719,286 )
Cash and cash equivalents, beginning of the period     6,607,407       427,691       427,691       1,146,977  

Cash and cash equivalents, end of the period

    23,857,239       7,816,024       6,607,407       427,691  
                                 
Supplemental disclosure of cash flows information                                
Cash paid during the year for interest     (1,768,720 )     (2,566,004 )     (3,431,027 )     (1,976,614 )
Cash paid during the year for income taxes     (10,475,397 )     (5,871,420 )     (12,028,185 )     (3,035,941 )

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 6  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

( Chinese Renminbi )

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

  (a) Description of Business

 

The Company was incorporated in Hong Kong with limited liability on February 8, 2007. The Company is an investment holding company. The Company and its subsidiaries (the “Group”) are principally engaged in the trading of spirits in the People’s Republic of China (the “PRC”).

 

Details of the subsidiaries are set out in note 21 to the consolidated financial statements.

 

  (b) Basis of consolidation and presentation

 

The accompanying financial statements consolidate all of our subsidiaries in which we have a controlling financial interest because we hold a majority voting interest. Intercompany balances and transactions between consolidated entities are eliminated.

 

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles or GAAP. The Company operates in one reportable segment and solely within the PRC. Accordingly, no segment or geographic information has been presented.

 

Non-controlling interests are shown as a component of equity on the consolidated balance sheet and the share of the net income attributable to non-controlling interests is shown as a component of profit in the consolidated statements of operations.

 

Statement of revenue and certain expenses for the nine month periods ended 31 March 2018 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of revenue and certain expenses in accordance with the SEC Rule 3-14. All such adjustments are of a normal recurring nature.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts reported in these consolidated financial statements and the accompanying notes. Actual results could differ materially from those estimates.

 

  (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.

 

  F- 7  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

( Chinese Renminbi )

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

(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.

 

(e) Revenue recognition

 

The Group’s revenues are derived from sales of products recorded net of value added tax (“VAT”). Revenue is recognized when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery of the products has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. These criteria are related to each of the following major revenue generating activities described below.

 

(i) Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold. This is usually taken as the time when the goods are delivered and the customers have accepted the goods.

 

(ii) Interest income is recognized on an accrual basis using the effective interest method.

 

  (f) Trade receivables and allowance for doubtful accounts

 

Trade receivables are stated at the amount the Group expects to collect. The Group maintains allowances for doubtful accounts for estimated losses. Management considers the following factors when determining the collectability of specific accounts: historical experience, credit worthiness 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 aging of trade receivables and on any specifically identified Trade 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. There is a time lag between when the Company estimates a portion of or the entire account balances to be uncollectible and when a write off of the account balances is taken. 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.

 

  F- 8  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

  (g) Inventories

 

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The components of inventories include raw materials, processing cost of finished goods and purchase cost of products. We 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.

 

  (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     10 %
  Office equipment   3 years     5-10 %

 

Repairs and maintenance are expensed as incurred and asset improvements are capitalized. Consideration is given at each balance sheet date to determine whether there is any indication of impairment of the carrying amounts of the property, plant and equipment. Indication could be unfavorable development of a business or severe economic slowdown as well as reorganization of the operation. In assessing value in use, the estimated future cash flows are discounted to their present value, based on the time value of money and the risks specific to the country where the assets are located.

 

  (i) VAT and VAT refund

 

VAT on sales is charged at 17% on revenue from product sales and is subsequently paid to the PRC tax authorities after netting input VAT on purchases. The excess of output VAT over input VAT is recognized in other payables, and the excess of input VAT over output VAT is recognized in other receivables in the consolidated balance sheets.

 

  (j) Operating leases

 

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the lease periods.

 

  F- 9  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

  (k) Foreign currency translation

 

The functional and reporting currency of the Company and the Group is 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.

 

For 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.

 

  (l) Income taxes

 

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 applies fair value accounting for all financial assets and liabilities. 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.

 

  F- 10  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

 

  (m) Fair value measurement-continued

 

The Group’s financial instruments include cash and cash equivalents, restricted cash, term deposits, notes receivable, trade receivables, and trade payables. We consider the carrying amounts approximate fair value because of the short maturity of these financial instruments.

 

  (n) Business combinations

 

Business combinations are recorded using the acquisition method of accounting. The purchase price of the acquisition is allocated to the tangible assets, liabilities, identifiable intangible assets acquired and non-controlling interest, if any, based on their estimated fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. If the purchase price is less than those fair values, the difference is recognized directly in the consolidated statements of operations. Acquisition-related expenses and restructuring costs are expensed as incurred.

 

In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in earnings.

 

  (o) Transactions between entities under common control

 

When accounting for a transfer of assets or exchange of shares between entities under common control of the Company, 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 Company’s consolidated statements of operations.

 

  (p) Commitments and contingencies

 

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

 

  F- 11  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

  

  (q) Recently issued accounting pronouncements not yet adopted

 

In August 2016, FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The standard provides new authoritative guidance addressing eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain transactions are presented and classified in the statement of cash flows. The standard is effective for the Company in the first quarter of fiscal year 2019. The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

 

In February 2016, FASB issued ASU No. 2016-02, Leases. The standard increases transparency and comparability among organizations by requiring companies to recognize leased assets and related liabilities on the balance sheet and disclose key information about leasing arrangements. This standard is effective for the Company in the first quarter of fiscal year 2020. The Company is evaluating the impact the adoption of this standard will have on its consolidated financial statements.

 

In May 2014, FASB issued ASU, 2014-09, Revenue from Contracts with Customers. The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, Revenue from Contracts with Customers, to defer the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, but permits entities to adopt the original effective date if they choose.

 

Based on the Company’s preliminary assessment, it does not expect the adoption of the standard to result in material changes in revenue. Further, deferred costs to obtain contracts, which will be recognized in sales and marketing expense in future periods, are not expected to be material.

 

The adoption of the standard in the consolidated financial statements for the financial year ended 30 June 2019 will have no significant impact to the provision for income taxes and will have no impact to the net cash used in, or generated by, operating, investing, or financing activities in the Group’s consolidated statements of cash flows.

 

The Company is finalizing the impact of the standard on its consolidated financial statements and disclosures, as well as changes to its systems, processes, and internal controls. The Company’s preliminary assessments are subject to change.

 

  F- 12  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

2. REVENUE AND OTHER INCOME

 

Revenue represents the invoiced spirits products sold to the external customers less discounts, returns, and surcharges.

 

      Unaudited     Unaudited              
      March 31,
2018
    March 31,
2017
    June 30,
2017
    June 30,
2016
 
                           
  Revenue     83,258,237       73,856,595       91,144,666       24,249,106  
  Other income     131,447       63,541       227,552       135,833  
        83,389,684       73,920,136       91,372,218       24,384,939  

 

An analysis of other income is as follows:

 

      Unaudited     Unaudited              
      March 31,
2018
    March 31,
2017
    June 30,
2017
    June 30,
2016
 
                           
  Sundry income     -       -       25       10,318  
  Bank interest income     53,947       747       13,481       107  
  Bank interest from fixed term deposit     -       10,105       -       2,735  
  Interest from the director     -       52,689       214,046       122,655  
  Written back of trade receivables     77,500       -       -       18  
        131,447       63,541       227,552       135,833  

 

  3. SELLING AND DISTRIBUTION EXPENSES

 

The following expenses are included in the selling and distribution expenses:

 

      Unaudited     Unaudited              
      March 31,
2018
    March 31,
2017
    June 30,
2017
    June 30,
2016
 
                           
  Freight     36,303       84,802       114,539       1,372  
  Packaging cost     931,652       609,161       846,298       3,162  
        967,955       693,963       960,837       4,534  

 

  F- 13  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

4. PROPERTY, PLANT AND EQUIPMENT, NET

 

Property, plant and equipment, net, consist of the following:

 

      March 31,
2018
    June 30,
2017
    June 30,
2016
 
      Unaudited     Audited     Audited  
                     
  Computer and office equipment     260,510       221,868       190,975  
  Building     3,754,624       3,400,000       3,400,000  
        4,015,134       3,621,868       3,590,975  
  Less: accumulated depreciation     (675,077 )     (501,702 )     (269,340 )
  Property, plant and equipment, net,     3,340,057       3,120,166       3,321,635  

 

5. PREPAID LAND LEASE, NET

 

Prepaid land lease, net, consists of the following:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Prepaid land lease     5,412,120       5,412,120       5,412,120  
  Less: accumulated amortization     (365,600 )     (283,340 )     (173,660 )
  Prepaid land lease, net     5,046,520       5,128,780       5,238,460  

 

The carrying amounts of the prepaid land lease are analyzed as:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Current assets     109,680       109,680       109,680  
  Non-current assets     4,936,840       5,019,100       5,128,780  
        5,046,520       5,128,780       5,238,460  

 

Prepaid land lease represents cost of the rights of the use of the land, under medium term lease, in respect of leasehold land in the People’s Republic of China, on which the Group’s buildings are situated.

 

The lease periods are 70 years to 2082.

 

  F- 14  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

6. INVENTORIES

 

Inventories consist of the following:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Raw materials     4,943,756       5,924,514       3,222,709  
  Finished goods     3,365,581       2,203,370       2,003,712  
  Packaging material     272,135       469,826       -  
        8,581,472       8,597,710       5,226,421  

 

7 . TRADE RECEIVABLES, NET

 

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 director.

 

An ageing analysis of the trade receivables presented based on the date of delivery of the goods to the customers, which approximated the respective dates on which revenue was recognized:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  0 - 30 days     8,326,849       4,949,786       4,572,400  
  31 - 90 days     18,898,588       14,888,570       517,400  
  91 - 120 days     12,363,455       9,764,472       2,578,240  
  121 - 150 days     8,670,394       9,875,113       1,500,631  
  151 - 180 days     486,000       8,039,259       4,730,417  
  Over 180 days     -       -       6,945,500  
                           
        48,745,286       47,517,200       20,844,588  

 

  F- 15  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

8 . DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

 

     

Unaudited

March 31,
2018

    June 30,
2017
    June 30,
2016
 
                     
  Prepaid expenses     14,288,800       17,808,559       650,168  
  Deposits     -       330,000       882,833  
  Other receivables     868,656       1,451,467       24,195,651  
  Amount due from director     13,145,949       11,814,199       16,642,476  
        28,303,405       31,404,225       42,371,128  

 

The amount due from a director is interest-free, unsecured and repayable on demand.

 

9 . CASH AND CASH EQUIVALENTS

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Cash on hand     364,760       183,119       144,433  
  Cash held in banks     23,492,479       6,424,288       283,258  
        23,857,239       6,607,407       427,691  

 

The Group’s cash and cash equivalents at the end of each reporting period were denominated in Chinese Renminbi.

 

Cash held in banks earns interest at floating rates based on daily bank deposit rates.

 

10. TRADE PAYABLES

 

The Group normally obtains credit terms ranging from 30 to 90 days from its suppliers.

 

An ageing analysis of the trade payables at the end of each reporting period, based on the date of receipt of goods purchased, is as follows:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  0-90 days     528,608       -       467,415  
  91-180 days     -       118,115       -  
  Over 1 year     -       -       1,836,241  
        528,608       118,115       2,303,656  

 

  F- 16  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

11. RECEIPT IN ADVANCE, ACCRUALS AND OTHER PAYABLES

 

Receipts in advance, accruals and other payables consist of the following:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Accrued expenses     909,299       1,853,366       1,245,131  
  Accrued payroll and bonus     271,576       181,334       626,050  
  Other payables     683,787       626,167       2,325,059  
  Other tax payables     1,104,861       377,257       687,771  
  Receipt in advance     2,098,459       1,060,545       653,743  
  Amount due to director     13,395,233       13,395,233       13,395,033  
  Amount due to previous shareholder     -       -       2,550,000  
        18,463,215       17,493,902       21,482,787  

 

The amount due to a director and the amount due to immediate holding company are interest-free, unsecured and repayable on demand.

 

The amount due to previous shareholder as at June 30, 2016 relates to the amount owed to Glorywise Trading Ltd, which has been settled subsequently.

 

  F- 17  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

12. BANK BORROWINGS

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Unsecured - at amortized cost                  
  Bank loans – Note (i)               -       -       4,650,000  
  Loans from financial institution – Note (ii)     -       -       6,000,000  
        -       -       10,650,000  
                           
  Secured - at amortized cost                        
  Loans from financial institution – Note (ii)     -       27,000,000       27,000,000  
        -       27,000,000       37,650,000  
                           
  Classified as:                        
  Current liabilities     -       -       10,650,000  
  Non-current liabilities     -       27,000,000       27,000,000  
        -       27,000,000       37,650,000  

 

Note:

 

(i) Unsecured bank loans were bearing fixed interest rates ranging from 6.16% to 8.10%, 9.00% and 6.53% per annum respectively and guaranteed by the shareholder of the Company, Yang Peng.

 

(ii) Loans from financial institution are bearing a fixed interest rate ranging from 10% to 10.5% per annum.

 

  F- 18  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

13. SHARE CAPITAL AND CAPITAL MANAGEMENT

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Issued and fully paid:                        
  1 ordinary share     1       1       1  

 

The Company authorized, issued and fully paid share capital of 1 at RMB 1 each. There are no outstanding shares.

 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balances. The Group’s overall strategy remains unchanged during the relevant periods.

 

The capital structure of the Group consists of net debts (total debts less cash and cash equivalents) and equity attributable to equity holders of the Company, comprising share capital and reserves.

 

The management of the Group reviews the capital structure periodically. The management considers the cost of capital and the risks associated with the capital. The Group manages its overall capital structure through the payment of dividends and raising of new capital as well as obtaining new debt or redemption of existing debt.

 

14. INCOME TAXES

 

The Company is subject to Hong Kong Profits Tax on its activities conducted in Hong Kong. No provision for Hong Kong Profits tax has been made in the consolidated financial statements as the Company has no assessable profits for the financial periods presented.

 

The Company’s PRC subsidiaries file tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Enterprise Income Tax Law which was passed by the National People’s Congress on March 16, 2007 and amended on February 24, 2017.

 

  F- 19  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

14. INCOME TAXES-CONTINUED

 

A reconciliation between the income tax expenses and income before income taxes at applicable tax rates is set out below:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Profit before income tax     51,594,082       55,848,177       13,032,953  
                           
  Taxation at the applicable tax rate of 25%     12,898,521       13,962,061       3,258,391  
  Tax effect on non-taxable income     -       (53,512 )     (36,174 )
  Tax effects of expense that are not deductible     15,469       190,212       219,565  
  (Over)/under-provision in respect of previous year     (290,079 )     22,582       -  
  Income taxes     12,623,911       14,121,343       3,441,782  

 

15. CONTRIBUTION PLAN IN THE PRC

 

As stipulated by the PRC state regulations, the subsidiaries in the PRC participate in the state run defined contribution retirement scheme. All employees are entitled to an annual pension payment equal to a fixed proportion of the average basic salary of the geographical area of their last employment at their retirement date. The PRC subsidiaries are required to make contributions to the local social security bureau at 29.4% to 37.4% of the previous year’s average basic salary amount of the geographical area where the employees are under employment with the PRC subsidiaries. The Group has no obligation for the payment of pension benefits beyond the annual contributions as set out above.

 

According to the relevant rules and regulations of the PRC, the PRC subsidiaries and their employees are each required to make contributions to an accommodation fund at 9% of the salaries and wages of the employees which is 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.

 

  F- 20  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

  

16. OPERATING LEASE ARRANGEMENT

 

The Group has total future minimum lease payments under non-cancellable operating lease payable as follows: 

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
                     
  Within 1 year     232,869       115,211       142,667  
  After 1 year but within 5 years     31,500       -       350,800  
        264,369       115,211       493,467  

 

The Group is the lessee of a few office premises and staff residence held under operating leases. The leases typically run for an initial period of one to five years.

 

As at June 30, 2016, the leases would end on September 6, 2016, November 11, 2016, November 20, 2016 and December 15, 2017 respectively. As at June 30, 2017, the leases would end on September 6, 2017, November 9, 2017, November 20, 2017, December 14, 2017 and June 8, 2018 respectively.

 

17. RELATED PARTY BALANCES AND TRANSACTIONS

 

The Group had the following transactions with related parties during the financial periods:

 

      Unaudited March 31,
2018
    June 30,
2017
    June 30,
2016
 
  Revenue generated from related party     14,394,218       25,110,022       12,052,239  
  Interest income from director     -       214,046       122,655  
  Trade receivables from related party     8,785,121       15,000,875       13,175,067  

 

      July 1,
2015
    Settlement     Repayment     New Loans     June 30,
2016
 
  Amount due to director     (13,395,233 )             -       -       -       (13,395,233 )
  Amount due from director     16,692,476       -       (4,700,000 )     4,650,000       16,642,476  

 

      July 1,
2016
    Settlement     Repayment     New Loans     June 30,
2017
 
  Amount due to director     (13,395,233 )     -       -                -       (13,395,233 )
  Amount due from director     16,642,476       (178,277 )     (4,650,000 )     -       11,814,199  

 

      July 1,
2017
    Settlement     Repayment     New Loans     March 31,
2018
 
  Amount due to director     (13,395,233 )                 -                      -       -       (13,395,233 )
  Amount due from director     11,814,199       -       -       1,331,750       13,145,949  

 

  F- 21  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

17. RELATED PARTY BALANCES AND TRANSACTIONS - CONTINUED

 

The Group had trade transactions with Fuqing Jing Hong Trading Co., Ltd, the director of which is a family member of Mr. Yang, a director of the Company.

 

      Unaudited     Unaudited              
      March 31, 2018    

March 31,

2017

   

June 30,

2017

    June 30, 2016  
                           
  Revenue     14,394,218       13,990,340       25,110,022       12,052,239  
        14,394,218       13,990,340       25,110,022       12,052,239  

 

Management is of the opinion that these related party transactions were conducted in the normal course of business of the Group with standard sales terms and conditions.

 

18. STATUTORY RESERVES AND RESTRICTED NET ASSETS

 

Pursuant to the Company Law of the PRC and the Articles of Association of the PRC subsidiaries, companies are required to appropriate 10% of each year’s net profit of each PRC subsidiary according to the PRC accounting standard and regulations (after offsetting previous years’ losses) to statutory reserve until such reserve reached 50% of its registered capital. Companies are allowed to continue building up its statutory reserve after the 50% benchmark, although not mandatory. Non-PRC subsidiaries are not required to make appropriation for statutory reserve.

 

  Subsidiary   Registered capital     Maximum statutory reserves     Statutory reserves at June 30,
2017
   

Statutory reserves at

June 30,
2016

 
  Fujian Jinou Trading Co., Ltd.     13,383,333       6,691,666       -       -  
  Fenyang Huaxin Spirit Development Co., Ltd.     1,000,000       500,000       1,000,000       378,442  
  Fenyang Jinqiang Spirit Co., Ltd.     5,000,000       2,500,000       4,249,871       947,321  
  Beijing Huaxin Tianchuang Enterprise Management Consulting Co., Ltd.     1,000,000       500,000       -       -  

 

The appropriation to statutory reserves must be made before distribution of dividends to owners. This reserve is strictly allowed to be used to make up for previous years’ losses, to expand production operations, or to increase the capital of the PRC subsidiaries. The statutory reserve can be transferred to paid-in capital of the PRC subsidiaries, provided that the balance of the statutory reserve after such transfer is not less than 25% of their registered capital.

 

  F- 22  

 

 

SURE RICH INVESTMENT (GROUP) LIMITED  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

( Chinese Renminbi)

 

19. CONTINGENT LIABILITIES

 

At the end of each reporting periods, 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
                   
  Fujian Jinou Trading Co., Ltd.   Established in the PRC   Registered and   100%   Investment
      on July 5,2004   paid-in capital of RMB       holding
           13,383,833        
                   
  Fenyang Huaxin Spirit Development Co., Ltd.  

Established in the PRC

on November 7, 2013

 

Registered and

Paid-in capital of RMB

1,000,000

Note (i)

  100%   Trading of spirit
                   
  Fenyang Jinqiang Spirit Co., Ltd.  

Established in the

PRC

on November 7, 2013

 

Registered and

Paid-in capital of RMB

5,000,000

 

92%

Note (ii)

  Trading of spirit
                   
  Beijing Huaxin Tianchuang Enterprise Management Consulting Co., Ltd.  

Established in the

PRC

on April 14, 2017

 

Registered and

issued capital of

RMB1,000,000

 

51%

Note (iii)

  Dormant

 

Notes:

 

(i) The subsidiary’s original registered and paid-in capital was RMB 300,000. The Company made further capital injection on 19 May 2016 in the amount of RMB 700,000.

 

(ii) The Company initially acquired 51% of the subsidiary; it subsequently acquired further shareholding of 41% in the amount of RMB 2,050,000 on May 31, 2017.

 

(iii) 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 30 March 2037. The amount due to the subsidiary is interest-free and unsecured.

  

21. SUBSEQUENT EVENT

 

On 7 May 2018, the Company, acquired the remaining 8% of the 92% owned subsidiary Fenyang Jinqiang Spirit Co., Ltd, which has become a direct wholly-owned subsidiary of the Company.

 

On 20 June 2018, the Company was sold to Reliant Galaxy International Limited for 1 share of Reliant Galaxy International Limited for RMB 94,596,363 each.

 

  F- 23  

 

 

 

 

 

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

  F- 24  

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On June 29, 2018, Oranco Inc. (the “Company”) completed and closed a share exchange under a Share Exchange Agreement, entered into with the shareholders of Reliant Galaxy International Limited (“Reliant Galaxy”) to acquire their 100% of the issued and outstanding common shares in Reliant Galaxy by issuance of 349,296,000 shares of the Company’s common stock with par value of $0.001 each.

 

To rationalize the group structure for the purpose of share exchange with the Company, on 20 June 2018, Reliant Galaxy acquired 100% equity interest in Sure Rich Investment (Group) Limited (“Sure Rich”). Upon completion of this acquisition, Reliant Galaxy became the holding company of Sure Rich.

 

No financial information of Reliant Galaxy is filed on this Form 8-K as Reliant Galaxy is only an investment holding company with immaterial administrative costs incurred and the management considered that they have no material impacts on the unaudited pro forma condensed combined financial statements.

 

The following unaudited pro forma condensed combined financial statements are based on our historical financial statements and Sure Rich’s historical consolidated financial statements as adjusted to give effect to Oranco Inc.’s acquisition of Sure Rich Investment (Group) Limited and the related financing transactions.

 

The audited pro forma condensed combined statements of operations for the 9 months ended March 31, 2018 and the year ended June 30, 2017 give effect to these transactions as if they had occurred on July1, 2016. The unaudited pro forma condensed combined balance sheet as of March 31, 2018 gives effect to these transactions as if they had occurred on March 31, 2018.

 

The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read together with the pro forma condensed combined financial statements.

 

The unaudited pro forma condensed combined financial statements should be read together with Oranco Inc.’s historical financial statements, which are included in Oranco Inc.’s latest annual report on Form10-K and quarterly report on Form 10-Q, and Sure Rich Investment (Group) Limited’s historical information included herein.

 

  F- 25  

 

 

Unaudited Pro Forma Condensed Combined Statements of Operations

Nine Months Ended March 31, 2018

( Chinese Renminbi )

 

   

 

Oranco Inc.

Historical

    Sure Rich Investment (Group) Limited Historical    

 

Pro forma adjustments

    Notes   Pro forma Combined  
Revenue     -       83,258,237       -           83,258,237  
      -       83,258,237       -           83,258,237  
                                     
Cost of sales     -       23,002,777       -           23,002,777  
Selling and distribution expenses     -       3,338,043       -           3,338,043  
Administrative expenses     201,380       3,686,062       1,041,803     2     4,929,245  
      201,380       30,026,882       1,041,803           30,867,306  
                                     
Other income     -       (131,447 )     -           (131,447 )
Interest and other financial charges     2,781       1,768,720       -           1,771,501  
Income before income taxes     (204,161 )     51,594,082       (1,041,803 )         50,348,118  
                                     
Income taxes     -       12,623,911       -           12,623,911  
Net Income/(Loss)     (204,161 )     38,970,171       -           37,724,207  

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

  F- 26  

 

 

Unaudited Pro Forma Condensed Combined Balance Sheets

As of March 31, 2018

( Chinese Renminbi )

 

    Oranco Inc.
Historical
    Sure Rich Investment (Group) Limited Historical     Pro forma adjustments     Notes   Pro forma Combined  
Cash and cash equivalents   25,245     23,857,239     (1,041,803 )   2     22,840,681  
Inventories     -       8,581,472       -           8,581,472  
Trade receivables     -       48,745,286       -           48,745,286  
Deposits, prepayments and other receivables     162,352       27,093,069       -           28,465,512  
Prepaid land lease     -       109,680       -           109,680  
Total current assets     187,352       108,386,746       (1,634,092 )         109,784,434  
                                  -  
Property, plant and equipment     -       3,340,057       -           3,340,057  
Prepaid land lease     -       4,936,840       -           4,936,840  
Amount due from a shareholder     -       490,000       -           490,000  
Total assets     187,352       117,153,643       (1,634,092 )         118,363,979  
                                     
Trade payables     26,356       528,608       -           554,940  
Receipts in advance, accruals and other payables     255,457       18,463,215       -           18,718,440  
Current tax liabilities     -       4,775,793       -           4,775,793  
Total liabilities     281,813       23,767,616       -           24,049,173  
                                     
Common stock     264,763       1       (1 )         264,763  
Additional paid-in capital     2,195,680       -       -           2,195,680  
Statutory reserve     -       4,249,871       (4,249,871 )         -  
Acquisition reserve     -       12,151,843       4,652,171           16,804,014  
Accumulated (deficit)/surplus     (2,554,904 )     78,194,648       (589,651 )         75,050,093  
Total shareholders’ equity     (94,461 )     94,596,363       (187,352 )         94,314,550  
Total liabilities and shareholders’ equity     187,182       117,153,643       (1,634,092 )        

115,706,733

 

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

  F- 27  

 

 

Unaudited Pro Forma Condensed Combined Statements of Operations

year ended JUNE 30, 2017

( Chinese Renminbi )

 

    Oranco Inc.
Historical
    Sure Rich Investment (Group) Limited Historical     Pro forma adjustments     Notes   Pro forma Combined  
Revenue   -     91,144,666     -         91,144,666  
      -       91,144,666       -           91,144,666  
                                     
Cost of sales     -       24,065,113       -           24,065,113  
Selling and distribution expenses     -       2,521,950       -           2,521,950  
Administrative expenses     200,916       5,516,707       2,050,023     2     7,767,646  
      200,916       32,103,770       2,050,023           34,354,709  
                                     
Other income     (20 )     (227,552 )     -           (227,572 )
Interest and other financial charges     3,446       3,420,272       -           3,423,718  
Income/(Loss) before income taxes     (204,342 )     55,848,176       (2,050,023 )         53,593,811  
                                     
Income taxes     -       14,121,343       -           14,121,343  
Net Income/(Loss)     (204,342 )     41,726,833       (2,050,023 )         39,472,468  

 

See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

  F- 28  

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

( Chinese Renminbi )

 

1. Basis of presentation

 

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.

 

The business combination was accounted for under the business combination under common control of accounting in accordance with ASC Topic 805, Business Combinations. All the assets and liabilities of the Company and Sure Rich were combined using their book values.

 

The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of Sure Rich Investment (Group) Limited as a result of restructuring activities and other planned cost savings initiatives following the completion of the business combination.

 

2. Pro forma adjustments

 

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The adjustments for acquisition costs have been reflected in the unaudited pro forma condensed combined financial information.

 

 

F-29

 

Exhibit 2.1

 

SHARE EXCHANGE AGREEMENT

 

This SHARE EXCHANGE AGREEMENT (“ Agreement ”) is entered into as of this June 29, 2018, by and among Oranco, Inc. (“ ORNC ”), a Nevada corporation, Reliant Galaxy International Limited, a British Virgin Islands company (“ Reliant ”), and the shareholders of Reliant set forth in Schedule A hereof (each, a Stockholder ”, and collectively, the “ Stockholders” ). ORNC, Reliant, and the Stockholders are referred to herein individually as a “ Party ” and, collectively, as the “ Parties ” to this Agreement.

 

WHEREAS , ORNC is a publicly reporting company organized under the laws of Nevada with no significant operations;

 

WHEREAS , Reliant owns 100% of Sure Rich Investment Group Ltd, Co., (“ Sure Rich ”), a limited liability company incorporated in Hong Kong, the People’s Republic of China; Sure Rich owns 100% of the issued and outstanding capital stock of Fujian Jinou Trading Co, Ltd. (“ FJT ”), a PRC limited liability company, which owns 100% capital stock of Huaxin Wine Industry Development Co., Ltd (“ HWID ”), a PRC limited liability company. Sure Rich, FJT, and HWID are collectively referred to as the group (the “ Group ”).

 

WHEREAS , ORNC desires to acquire 100% of the issued and outstanding equity securities of Reliant (the “ Reliant Shares ”) from the Stockholders in exchange (the “ Exchange ”) for the issuance by ORNC to the Stockholders in the aggregate of 349,296,000 newly issued shares of ORNC, of which 28,000,000 shares shall be issued at the Closing Date (as defined below), and 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares. The Stockholders desire to exchange the 349,296,000 shares for such newly issued shares of ORNC under the terms described herein;

 

WHEREAS , on the date of the closing (the “ Closing Date ”), and as a result of the transactions contemplated hereby, Reliant will become a wholly-owned subsidiary of ORNC;

 

NOW THEREFORE , on the basis of the foregoing stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the expected mutual benefits to the Parties here, and intending to be legally bound, it is agreed as follows:

 

ARTICLE I

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF RELIANT

 

As an inducement to, and to obtain the reliance of ORNC, except as set forth in the Schedules of Reliant attached hereto (the “ Reliant Disclosure Schedules ”), Reliant hereby represents and warrants to ORNC as of the Closing Date, as follows. As used herein, the term “ knowledge of the Group ” or similar language refers to the actual knowledge of the executive officers of Reliant.

 

 

 

 

Section 1.01 Incorporation . Each member of the Group is organized under the laws of the jurisdiction set forth in Schedule 1.01(b) of the Reliant Disclosure Schedules, is duly formed or organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being or currently planned by each member of the Group to be conducted. Each member of the Group is in possession of all governmental or third-party approvals necessary to own, lease and operate the properties it purports to own, operate or lease, to carry on its business as it is now being conducted, to consummate the transactions contemplated by this Agreement. No member of the Group is in violation of any of the provisions of their respective charter or organization documents. The ownership records, which have been delivered to Reliant, of each Group member’s registered capital, are true, complete and accurate records of such ownership as of the date of such records and contain all transfers of such registered capital since the time of their respective organization. No member of the Group is required to qualify to do business as a foreign corporation in any other jurisdiction, except where the failure to do so would not have a material adverse effect on: (i) the assets, liabilities, results of operations, condition (financial or otherwise) or business of the Group taken as a whole; or (ii) the ability of Reliant to perform its obligations hereunder, but, to the extent applicable, shall exclude any circumstance, change or effect to the extent resulting or arising from: (a) any change in general economic conditions in the industries or markets in which the Group operates so long as the Group is not disproportionately (in a material manner) affected by such changes; (b) national or international political conditions, including any engagement in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack so long as the Group is not disproportionately (in a material manner) affected by such changes; (c) changes in United States generally accepted accounting principles, or the interpretation thereof; or (d) the entry into or announcement of this Agreement, actions contemplated by this Agreement, or the consummation of the transactions contemplated hereby (a “ Reliant Material Adverse Effect ”).

 

Section 1.02 Authorized Shares . The number of shares which Reliant is authorized to issue consists of 50,000 shares of a single class, no par value per share. There are 1 shares currently of Reliant issued and outstanding. The issued and outstanding shares of Reliant are validly issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person.

 

Section 1.03 Subsidiaries . Except as set forth on Schedule 1.03 to the Reliant Disclosure Schedules (which sets forth the corporate structure of the Group), Reliant does not have any subsidiaries, and does not own, beneficially or of record, any shares of any other entity.

 

Section 1.04 Financial Statements .

 

(a) Included in the Schedule A are: (i) the audited balance sheets of Sure Rich and the related audited statements of operations, stockholder’s equity and cash flows for the fiscal years ended June 30, 2016 and June 30, 2017 together with the notes to such statements and the opinion of PKF Littlejohn LLP, independent certified public accountants (the “ Financial Statements ”).

 

(b) The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved. The Sure Rich balance sheets included as part of the Financial Statements are true and accurate and present fairly as of their respective dates the financial condition of Sure Rich. As of the date of such balance sheets, except as and to the extent reflected or reserved against therein, Sure Rich had no liabilities or obligations (absolute or contingent) which should be reflected in the balance sheets or the notes thereto prepared in accordance with generally accepted accounting principles, and all assets reflected therein are properly reported and present fairly the value of the assets of Sure Rich, in accordance with generally accepted accounting principles. The statements of operations, stockholder’s equity and cash flows included as part of the Financial Statements reflect fairly the information required to be set forth therein by generally accepted accounting principles.

 

Section 1.05 Information . The information concerning the Group set forth in this Agreement and the Reliant Disclosure Schedules is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading.

 

Section 1.06 Options or Warrants . Except as set forth in Schedule 1.06 , there are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued stock of any member of the Group.

 

Section 1.07 Absence of Certain Changes or Events . Except as disclosed in the Reliant Disclosure Schedules or the Financial Statements, since December 31, 2017:

 

(a) There has not been any material adverse change in the business, operations, properties, assets, or condition (financial or otherwise) of the Group;

 

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(b) No member of the Group has: (i) amended its memorandum of association or articles of association or other organizational documents; (ii) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to the Stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its shares; (iii) made any material change in its method of management, operation or accounting, (iv) entered into any other material transaction other than sales in the ordinary course of its business; or (v) made any increase in or adoption of any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with its officers, directors, or employees; and

 

(c) No member of the Group has: (i) granted or agreed to grant any options, warrants or other rights for its stocks, bonds or other corporate securities calling for the issuance thereof, (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except as disclosed herein and except liabilities incurred in the ordinary course of business; (iii) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights or canceled, or agreed to cancel, any debts or claims; or (iv) issued, delivered, or agreed to issue or deliver any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock) except in connection with this Agreement and the transaction contemplated hereby.

 

Section 1.08 Litigation and Proceedings . Except as disclosed on Schedule 1.08 to the Reliant Disclosure Schedules, there are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Group after reasonable investigation, threatened by or against the Group or affecting the Group or their respective properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. No member of the Group has any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality or of any circumstances, which, after reasonable investigation, would result in the discovery of such a default.

 

Section 1.09 Material Contracts .

 

(a) All “material” contracts, agreements, franchises, license agreements, debt instruments or other commitments to which any member of the Group is a party or by which it or any of its assets, products, technology, or properties are bound, other than those incurred in the ordinary course of business, are set forth on Schedule 1.09 to the Reliant Disclosure Schedules (the “ Material Contracts ”). Such schedule contains any oral or written: (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation; (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of members of the Group.

 

(b) The Material Contracts are valid and enforceable by the applicable members of the Group party thereto in all respects, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

Section 1.10 No Conflict With Other Instruments . The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of any Material Contract a member of the Group is a party or to which any of their respective assets, properties or operations are subject.

 

Section 1.11 Compliance with Laws and Regulations . To the best of its knowledge, each member of the Group has complied with all applicable statutes and regulations of any federal, state, or other governmental entity or agency thereof, except to the extent that noncompliance would not have a Reliant Material Adverse Effect.

 

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Section 1.12 Approval of Agreement . The Board of Directors of Reliant has authorized the execution and delivery of this Agreement by Reliant and has approved this Agreement and the transactions contemplated hereby.

 

Section 1.13 Valid Obligation . This Agreement and all agreements and other documents executed by Reliant in connection herewith constitute the valid and binding obligation of Reliant, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

ARTICLE II

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ORNC

 

As an inducement to, and to obtain the reliance of Reliant and the Stockholders, except as set forth in the Schedules of ORNC attached hereto (the “ ORNC Disclosure Schedules ”), ORNC hereby represents and warrants to Reliant and the Stockholders, as of the date hereof and as of the Closing Date, as follows. As used herein, the term “ knowledge of ORNC ” or similar language refers to the knowledge of Peng Yang, the Chairman of the Board of the Directors of ORNC prior to the closing of this Agreement.

 

Section 2.01 Organization . ORNC is a corporation duly organized, validly existing, and in good standing under the laws of Nevada and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted. Attached as Schedule 2.01 to the ORNC Disclosure Schedules are complete and correct copies of the certificate of incorporation and bylaws of ORNC as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of ORNC’s certificate of incorporation or bylaws. ORNC has taken all action required by law, its certificate of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement, and ORNC has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation, bylaws, or otherwise to consummate the transactions herein contemplated.

 

Section 2.02 Capitalization .

 

(a) ORNC’s authorized capitalization consists of 100,000,000 shares of Common Stock, of which 70,191,480 shares are issued and outstanding as of June 29, 2018, prior to the transactions. All issued and outstanding shares of Common Stock are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person or entity. As of the Closing Date, no shares of Common Stock were reserved for issuance upon the exercise of outstanding options or warrants to purchase the Common Stock or other equity-linked securities of ORNC and no shares of preferred stock were reserved for issuance to any party. All outstanding Common Stock have been issued and granted in compliance with: (i) all applicable securities laws and (in all material respects) other applicable laws and regulations, and (ii) all requirements set forth in any material contracts, agreements, franchises, license agreements, debt instruments or other commitments to which ORNC is a party or by which it or any of its assets or properties are bound, all of which are set forth on Schedule 2.02 to the ORNC Disclosure Schedules (the “ ORNC Material Contracts ”).

 

(b) There are no equity securities, partnership interests or similar ownership interests of any class of any equity security of ORNC, or any securities exchangeable or convertible into or exercisable for such equity securities, partnership interests or similar ownership interests, issued, reserved for issuance or outstanding. Except as contemplated by this Agreement or as set forth in Schedule 2.02 to the ORNC Disclosure Schedules, there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which ORNC is a party or by which it is bound obligating ORNC to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of capital stock, partnership interests or similar ownership interests of ORNC or obligating ORNC to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement. There is no plan or arrangement to issue Common Stock or preferred stock of ORNC except as set forth in this Agreement and in the Memorandum.

 

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(c) Except as contemplated by this Agreement and except as set forth in Schedule 2.02 to the ORNC Disclosure Schedules, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which ORNC is a party or by which it is bound with respect to any equity security of any class of ORNC, and there are no agreements to which ORNC is a party, or which ORNC has knowledge of, which conflict with this Agreement or the transactions contemplated herein or otherwise prohibit the consummation of the transactions contemplated hereunder.

 

Section 2.03 Subsidiaries and Predecessor Corporations . ORNC does not have any predecessor corporation(s) or subsidiaries, and does not own, beneficially or of record, any shares of any other entity.

 

Section 2.04 SEC Filings; Financial Statements .

 

(a) ORNC has made available to the Stockholders a correct and complete copy, or there has been available on the EDGAR system maintained by the U.S. Securities and Exchange Commission (the “ SEC ”), copies of each report, registration statement and definitive proxy statement filed by ORNC with the SEC for the 10 years prior to the date of this Agreement (the “ ORNC SEC Reports ”), which, to ORNC’s knowledge, are all the forms, reports and documents filed by ORNC with the SEC for the 10 years prior to the date of this Agreement. As of their respective dates, to ORNC’s knowledge, the ORNC SEC Reports: (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), or the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such ORNC SEC Reports, and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(b) Each set of financial statements (including, in each case, any related notes thereto) contained in the ORNC SEC Reports comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. generally accepted accounting principles, applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, do not contain footnotes as permitted by Form 10-Q promulgated under the Exchange Act) and each fairly presents in all material respects the financial position of ORNC at the respective dates thereof and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal adjustments which were not or are not expected to have a material adverse effect on: (i) the assets, liabilities, results of operations, condition (financial or otherwise) or business of ORNC; or (ii) the ability of ORNC to perform its obligations hereunder, but, to the extent applicable, shall exclude any circumstance, change or effect to the extent resulting or arising from: (1) any change in general economic conditions in the industries or markets in which ORNC operates, so long as ORNC is not disproportionately (in a material manner) affected by such changes; (2) national or international political conditions, including any engagement in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack so long as ORNC is not disproportionately (in a material manner) affected by such changes; (3) changes in United States generally accepted accounting principles, or the interpretation thereof; or (4) the entry into or announcement of this Agreement, actions contemplated by this Agreement, or the consummation of the transactions contemplated hereby (a “ ORNC Material Adverse Effect ”).

 

(c) As of the date of all balance sheets included in the ORNC SEC Reports, except as and to the extent reflected or reserved against therein, ORNC had no liabilities or obligations (absolute or contingent) which should be reflected in the balance sheets or the notes thereto prepared in accordance with U.S. generally accepted accounting principles, and all assets reflected therein are properly reported and present fairly the value of the assets of ORNC, in accordance with U.S. generally accepted accounting principles. All statements of operations, stockholders’ equity and cash flows included in the ORNC SEC Reports reflect fairly the information required to be set forth therein by U.S. generally accepted accounting principles.

 

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(d) For the 36 month period prior to the date of this Agreement, ORNC has maintained a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(e) ORNC has no liabilities with respect to the payment of any federal, state, county, local or other taxes (including any deficiencies, interest or penalties), except for taxes accrued but not yet due and payable.

 

(f) ORNC has timely filed all state, federal or local income and/or franchise tax returns required to be filed by it from inception to the date hereof. Each of such income tax returns reflects the taxes due for the period covered thereby, except for amounts which, in the aggregate, are immaterial.

 

(g) The books and records, financial and otherwise, of ORNC are in all material aspects complete and correct and have been maintained in accordance with good business and accounting practices.

 

Section 2.05 Exchange Act Compliance . ORNC is in compliance with, and current in, all of the reporting, filing and other requirements under the Exchange Act, the Common Stock is registered under Section 12(g) of the Exchange Act, and ORNC is in compliance with all of the requirements under, and imposed by, Section 12(g) of the Exchange Act.

 

Section 2.06 Information . The information concerning ORNC set forth in this Agreement, the ORNC Schedules and the ORNC SEC Reports is complete and accurate in all material respects and does not contain any untrue statements of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. In addition, ORNC has fully disclosed in writing to the Stockholders (through this Agreement or the ORNC Schedules) all information relating to matters involving ORNC or its assets or its present or past operations or activities which: (i) indicated or may indicate, in the aggregate, the existence of a greater than $1,000 liability, (ii) have led or may lead to a competitive disadvantage on the part of ORNC or (iii) either alone or in aggregation with other information covered by this Section, otherwise have led or may lead to ORNC Material Adverse Effect, including, but not limited to, information relating to governmental, employee, environmental, litigation and securities matters or proceedings and transactions with affiliates.

 

Section 2.07 Absence of Certain Changes or Events . Since the date of the most recent ORNC balance sheet included in the ORNC SEC Reports:

 

(a) there has not been: (i) any material adverse change in the business, operations, properties, assets or condition of ORNC or (ii) any damage, destruction or loss to ORNC (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of ORNC;

 

(b) ORNC has not: (i) amended its certificate of incorporation or bylaws except as required by this Agreement; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of business or material considering the business of ORNC; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements of any kind or nature; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for or with its officers, directors, or employees;

 

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(c) ORNC has not: (i) granted or agreed to grant any options, warrants, or other rights for its stock, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent); (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent ORNC balance sheet and current liabilities incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights, or canceled, or agreed to cancel, any debts or claims; (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of ORNC; or (vi) issued, delivered or agreed to issue or deliver, any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection with this Agreement; and

 

(d) to its knowledge, ORNC has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of the Group.

 

Section 2.08 Litigation and Proceedings . There are no actions, suits, proceedings or investigations pending or, to the knowledge of ORNC after reasonable investigation, threatened by or against ORNC or affecting ORNC or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind except as disclosed in the Schedule 2.08 to the ORNC Schedules. ORNC has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance which after reasonable investigation would result in the discovery of such default.

 

Section 2.09 Material Contracts . Except for the ORNC Material Contracts:

 

(a) ORNC is not a party to, and its assets or properties are not bound by, any contract, franchise, agreement, debt instrument or other commitments whether such agreement is in writing or oral;

 

(b) ORNC is not a party to or bound by, and the properties of ORNC are not subject to any contract, agreement, other commitment or instrument; any charter or other corporate restriction; or any judgment, order, writ, injunction, decree, or award; and

 

(c) ORNC is not a party to any oral or written: (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation, (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of ORNC.

 

Section 2.10 No Conflict With Other Instruments . The execution of this Agreement and the consummation of the transactions contemplated hereby and thereby will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any ORNC Material Contracts or otherwise have a ORNC Material Adverse Effect.

 

Section 2.11 Filings, Consents and Approvals . ORNC is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other foreign, federal, state, local or other governmental authority or other person or entity in connection with the execution, delivery and performance by ORNC of this Agreement or any document or instrument contemplated hereby or thereby, except as expressly contemplated herein.

 

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Section 2.12 Compliance with Laws and Regulations . To the best of its knowledge, ORNC has complied with all applicable statutes and regulations of any federal, state, or other applicable governmental entity or agency thereof. This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities.

 

Section 2.13 Approval of Agreement . The Board of Directors and the holders of at least a majority of the issued and outstanding voting stock of ORNC have duly authorized the execution and delivery of this Agreement by ORNC and the transactions contemplated hereby.

 

Section 2.14 Material Transactions or Affiliations . Except as disclosed in the ORNC SEC Reports or on Schedule 2.14 to the ORNC Disclosure Schedules, there exists no contract, agreement or arrangement between ORNC and any predecessor and any person or entity who was at the time of such contract, agreement or arrangement an officer, director, or person owning of record or known by ORNC to own beneficially, 5% or more of the issued and outstanding Common Stock of ORNC and which is to be performed in whole or in part after the date hereof or was entered into not more than three years prior to the date hereof. Neither any officer, director, nor 5% stockholders of ORNC has, or has had since inception of ORNC, any known interest, direct or indirect, in any such transaction with ORNC which was material to the business of ORNC. ORNC has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person.

 

Section 2.15 Bank Accounts; Power of Attorney . Set forth on Schedule 2.15 to the ORNC Disclosure Schedules is a true and complete list of: (a) all accounts with banks, money market mutual funds or securities or other financial institutions maintained by ORNC within the past twelve (12) months, the account numbers thereof, and all persons authorized to sign or act on behalf of ORNC, (b) all safe deposit boxes and other similar custodial arrangements maintained by ORNC within the past twelve (12) months, (c) the check ledger for the last 12 months, and (d) the names of all persons holding powers of attorney from ORNC or who are otherwise authorized to act on behalf of ORNC with respect to any matter, other than its officers and directors, and a summary of the terms of such powers or authorizations.

 

Section 2.16 Valid Obligation . This Agreement and other documents executed by ORNC in connection herewith and therewith constitute the valid and binding obligation of ORNC, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

Section 2.17 Title to Property. ORNC does not own or lease any real property or personal property. There are no options or other contracts under which ORNC has a right or obligation to acquire or lease any interest in real property or personal property.

 

Section 2.18 Questionable Payments . Neither ORNC nor, to ORNC’s knowledge, any of its current or former stockholders, directors, officers, employees, agents or other persons or entities acting on behalf of ORNC, has on behalf of ORNC or in connection with ORNC’s business: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of ORNC; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

 

Section 2.19 Solvency . ORNC has not: (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets; (d) suffered the attachment or other judicial seizure of all, or substantially all, of its assets; (e) admitted in writing its inability to pay its debts as they come due; or (f) made an offer of settlement, extension or composition to its creditors generally.

 

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Section 2.20 Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) . None of ORNC nor, to the knowledge of ORNC, any director, officer, agent, employee, affiliate or person acting on behalf of ORNC, is currently subject to any U.S. sanctions administered by the OFAC; and ORNC has not heretofore engaged in any transaction to lend, contribute or otherwise make available it funds or the funds of any joint venture partner or other person or entity towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any person or entity currently subject to any U.S. sanctions administered by OFAC.

 

Section 2.21 Intellectual Property . ORNC does not own, license or otherwise have any right, title or interest in any intellectual property.

 

Section 2.22 Employees; Consultants, etc . Except as disclosed in the ORNC SEC Reports, ORNC has no employees, officers, directors, agents or consultants. ORNC maintains no employee benefit plans or programs of any kind or nature.

 

Section 2.23 Insurance . ORNC does not hold or maintain, nor is ORNC obligated to hold or maintain, any insurance on behalf for itself or its assets or for any officer, director, employee or stockholder of ORNC.

 

ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE STOCKHOLDERS

 

As an inducement to ORNC, each of the Stockholders hereby jointly and severally represents and warrants to ORNC as follows.

 

Section 3.01 Reliant Shares . The Reliant Shares represent 100% of the issued and outstanding capital stock of Reliant. The Stockholders are the record and beneficial owners, and have good title to, all of the Reliant Shares. The Stockholders have the right and authority to sell and deliver their Reliant Shares, free and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the Reliant Shares as herein contemplated and/or upon registering of ORNC as the new owner of the Reliant Shares in the share register of Reliant, ORNC will receive good title to the Reliant Shares owned by the Stockholders.

 

Section 3.02 Power and Authority . The Stockholders have the legal power, capacity and authority to execute and deliver this Agreement to consummate the transactions contemplated by this Agreement, and to perform their obligations under this Agreement. This Agreement constitutes a legal, valid and binding obligation of the Stockholders, enforceable against the Stockholders in accordance with the terms hereof, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought..

 

Section 3.03 No Conflicts. The execution and delivery of this Agreement by the Stockholders and the performance by the Stockholders of their obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or governmental entity under any laws; (b) will not violate any laws applicable to the Stockholders and (c) will not violate or breach any contractual obligation to which either Stockholder is a party.

 

Section 3.04 Purchase Entirely for Own Account . The Exchange Shares (as defined in Section

4.01 herein) proposed to be acquired by the Stockholders pursuant to the terms hereof will be acquired for investment for the Stockholders’ own accounts, and not with a view to the resale or distribution of any part thereof.

 

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Section 3.05 Acquisition of Exchange Shares for Investment .

 

(a) Each Stockholder is acquiring the Exchange Shares for investment purposes and for each Stockholder’s own accounts and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Stockholder has no present intention of selling, granting any participation in, or otherwise distributing the same. Each Stockholder further represents that they do not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Exchange Shares.

 

(b) Each Stockholder represents and warrants that he, she or it: (i) can bear the economic risk of their respective investments, and (ii) possesses such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the investment in ORNC and its securities.

 

(c) Each Stockholder is not a “U.S. Person” as defined in Rule 902(k) of Regulation S of the Securities Act (“ Regulation S ”) and understands that the Exchange Shares are not registered under the Securities Act and that the issuance thereof to the Stockholder is intended to be exempt from registration under the Securities Act pursuant to Regulation S.

 

(d) Each Stockholder acknowledges that neither the SEC, nor the securities regulatory body of any state or other jurisdiction, has received, considered or passed upon the accuracy or adequacy of the information and representations made in this Agreement.

 

(e) Each Stockholder understands that the Exchange Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Exchange Shares or any available exemption from registration under the Securities Act, the Exchange Shares may have to be held indefinitely.

 

ARTICLE IV PLAN OF EXCHANGE

 

Section 4.01 The Exchange .

 

(a) Under the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined in Section 4.03), each Stockholder shall assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, all of the Reliant Shares owned by the Stockholder to ORNC, with the objective of such Exchange being the acquisition by ORNC of 100% of the issued and outstanding shares of capital stock of Reliant.

 

(b) In consideration of the transfer of the Reliant Shares to ORNC by the Stockholder, ORNC shall issue to the Stockholder in an aggregate amount of 349,296,000 newly issued shares of Common Stock (the “ Exchange Shares ”), of which 28,000,000 shares shall be issued at the Closing, and 321,296,000 shares shall be issued at the completion of the increase of the Company’s authorized shares, as set forth in Schedule A hereof

 

(c) At the Closing Date, the Stockholders shall, on surrender of its certificate or certificates representing the Reliant Shares owned by the Stockholders to ORNC or its registrar or transfer agent, be entitled to receive the Exchange Shares.

 

Section 4.02 Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”), and Closing Date, shall occur and shall be deemed to be effective immediately on June 29, 2018. Such Closing shall take place at a mutually agreeable time and place, and be conditioned upon all of the conditions to Closing set forth in this Agreement being met.

 

Section 4.03 Closing Events . At the Closing, ORNC and the Stockholders shall execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged, and delivered), any and all certificates, opinions, financial statements, schedules, agreements, resolutions, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the Parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby.

 

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Section 4.04 Termination . This Agreement may be terminated by the Parties only in the event that the Parties do not meet the conditions precedent set forth in Articles VI and VII. If this Agreement is terminated pursuant to this section, this Agreement shall be of no further force or effect, and no obligation, right or liability shall arise hereunder.

 

ARTICLE V

OTHER AGREEMENTS AND COVENANTS

 

Section 5.01 Legends . Stockholders acknowledges and agrees that each certificate representing the Exchange Shares shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”

 

“THE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

 

“TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

Section 5.02 Delivery of Books and Records . At the Closing, Reliant shall deliver to ORNC the originals of the corporate minute books, books of account, contracts, records, and all other books or documents of Reliant which are now in the possession of Reliant or its representatives.

 

Section 5.03 Third Party Consents and Certificates . ORNC and the Stockholders agree to cooperate with each other in order to obtain any required third-party consents to this Agreement and the transactions herein contemplated.

 

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Section 5.04 Sales of Securities Under Rule 144, If Applicable .

 

(a) ORNC will use its best efforts at all times to satisfy the current public information requirements of Rule 144 promulgated under the Securities Act so that its shareholders can sell restricted securities that have been held for the applicable restricted period as required by Rule 144 as it is amended from time to time.

 

(b) Upon being informed in writing by any person holding restricted securities of ORNC that such person intends to sell any shares under rule 144 promulgated under the Securities Act (including any rule adopted in substitution or replacement thereof), ORNC will certify in writing to such person that it is in compliance with Rule 144’s current public information disclosure requirement to enable such person to sell such person’s restricted stock under Rule 144, as may be applicable under the circumstances.

 

(c) If any certificate representing any such restricted stock is presented to ORNC’s transfer agent for registration or transfer in connection with any sales theretofore made under Rule 144, provided such certificate is duly endorsed for transfer by the appropriate person(s) or accompanied by a separate stock power duly executed by the appropriate person(s) in each case with reasonable assurances that such endorsements are genuine and effective, and is accompanied by a legal opinion that such transfer has complied with the requirements of Rule 144, as the case may be, ORNC will promptly instruct its transfer agent to register such transfer and to issue one or more new certificates representing such shares to the transferee and, if appropriate under the provisions of Rule 144, as the case may be, free of any stop transfer order or restrictive legend.

 

Section 5.06 Assistance with Post-Closing SEC Reports and Inquiries Upon the reasonable request of the Stockholders, after the Closing Date, ORNC shall cause its controlling stockholders to use their reasonable best efforts to provide such information available, including information, filings, reports, financial statements or other circumstances of ORNC occurring, reported or filed prior to the Closing, as may be necessary or required by ORNC for the preparation of the reports that ORNC is required to file after Closing with the SEC to remain in compliance and current with its reporting requirements under the Exchange Act.

 

ARTICLE VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF ORNC

 

The obligations of ORNC under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

Section 6.01 Accuracy of Representations and Performance of Covenants . The representations and warranties made by Reliant and the Stockholders in this Agreement were true when made and shall be true at the Closing Date. ORNC and the Stockholders shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing.

 

Section 6.02 Officer’s Certificate . ORNC shall have been furnished with a certificate dated the Closing Date and signed by a duly authorized officer of Reliant to the effect that to the best knowledge of Reliant, no litigation, proceeding, investigation or inquiry, is pending or threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement, or, to the extent not disclosed in the Reliant Disclosure Schedules, which might result in any material adverse change in any of the assets, properties, business, or operations of the Group.

 

Section 6.03 Good Standing . ORNC shall have received a certificate of good standing from the Registrar of Companies of PRC, dated as of no less than fifteen (15) business days prior the Closing Date, certifying that Reliant is in good standing as a company in PRC.

 

Section 6.04 No Governmental Prohibition . No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

Section 6.05 Consents . All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of Reliant and the Group after the Closing Date on the basis as presently operated shall have been obtained.

 

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ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF RELIANT AND THE STOCKHOLDERS

 

The obligations of Reliant and the Stockholders under this Agreement are subject to the satisfaction, on or before the Closing Date, of the following conditions:

 

Section 7.01 Accuracy of Representations and Performance of Covenants . The representations and warranties made by ORNC in this Agreement were true when made and shall be true as of the Closing Date with the same force and effect as if such representations and warranties were made at and as of the Closing Date. Additionally, ORNC shall have performed and complied with all covenants and conditions required by this Agreement to be performed or complied with by ORNC.

 

Section 7.02 Officer’s Certificate . The Stockholders shall have been furnished with certificates dated the Closing Date and signed by duly authorized executive officers of ORNC, certifying that there are no existing liabilities as of the Closing Date and that each representations and warranties of ORNC contained in this Agreement shall be true and correct on and as of the Closing Date.

 

Section 7.03 Secretary’s Certificate . The Stockholders shall have been furnished with a certificate dated the Closing Date and signed by the secretary of ORNC, certifying to the Stockholders the resolutions adopted by the Board of Directors of ORNC approving, as applicable, the transactions contemplated by this Agreement and the issuance of the Exchange Shares, certifying the current versions of its certificate(s) of incorporation and bylaws or other organizational documents and certifying as to the signatures and authority of persons signing this Agreement and related documents on its behalf.

 

Section 7.04 Good Standing . The Stockholders shall have received a certificate of good standing from the Secretary of State of Nevada, dated as of a date within ten days prior to the Closing Date, certifying that ORNC is in good standing as a corporation in the State of Nevada and has filed all tax returns required to have been filed by it to date and has paid all taxes reported as due thereon.

 

Section 7.05 No Governmental Prohibition . No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

Section 7.06 Consents . All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of ORNC after the Closing Date on the basis as presently operated shall have been obtained.

 

ARTICLE VIII MISCELLANEOUS

 

Section 8.01 Brokers . The Parties agree that there were no finders or brokers involved in bringing the Parties together or who were instrumental in the negotiation, execution or consummation of this Agreement. ORNC and the Stockholders each agree to indemnify the other against any claim(s) by any third person for any commission, brokerage, or finder’s fee arising from the transactions contemplated hereby based on any alleged agreement or understanding between the indemnifying party and such third person, whether express or implied from the actions of the indemnifying party.

 

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Section 8.02 Governing Law; Venue . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO (INCLUDING ITS AFFILIATES, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 8.03 Notices . All notices, requests, demands and other communications provided in connection with this Agreement shall be in writing and shall be deemed to have been duly given at the time when hand delivered, delivered by express courier, or sent by facsimile (with receipt confirmed by the sender’s transmitting device) in accordance with the contact information provided below or such other contact information as the Parties may have duly provided by notice.

 

If to ORNC:

 

Peng, Yang

One Liberty Plaza

Suite 2310

New York, NY 10006

 

If to Reliant or the Stockholders, to:

 

Peng, Yang

One Liberty Plaza

Suite 2310

New York, NY 10006

  

Any such notice or communication shall be deemed to have been given: (i) upon receipt, if personally delivered, (ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by facsimile and receipt is confirmed by printed receipt and (iv) three (3) days after mailing, if sent by registered or certified mail.

 

Section 8.04 Confidentiality . Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except: (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement. In the event of the termination of this Agreement, each party shall return to the other party all documents and other materials obtained by it or on its behalf and shall destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein.

 

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Section 8.05 Schedules; Knowledge . Each party is presumed to have full knowledge of all information set forth in the other party’s schedules delivered pursuant to this Agreement.

 

Section 8.06 No Third-Party Beneficiaries . This Agreement is intended for the benefit of the Parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.

 

Section 8.07 Expenses . Whether or not the Exchange is consummated, each of the Parties hereto will bear their own respective expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby.

 

Section 8.08 Entire Agreement . This Agreement represents the entire agreement between the Parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.

 

Section 8.09 Survival; Termination . The representations, warranties, and covenants of the respective Parties shall survive the Closing Date and the consummation of the transactions herein contemplated for a period of two years.

 

Section 8.10 Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

 

Section 8.01 Amendment or Waiver . Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the Closing Date, this Agreement may by amended by a writing signed by all Parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance may be extended by a writing signed by the party or Parties for whose benefit the provision is intended.

 

Section 8.02 Best Efforts . Subject to the terms and conditions herein provided, each party shall use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby shall be consummated as soon as practicable. Each party also agrees that it shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein, both prior to and following the Closing.

 

[Signature Page Follow]

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IN WITNESS WHEREOF , the corporate Parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first-above written.

 

  ORNC, Inc.
   
  /s/ Peng Yang
  Peng Yang
  CEO
   
  Reliant Galaxy International Limited
   
  /s/ Peng Yang
  Peng Yang
  Director

 

 

 

 

  SHAREHOLDERS:
   
  /s/ Peng Yang  
  Peng Yang
   
  /s/ Wong Ying
  Wong Ying
   
  /s/ Lam Man Hung
  Lam Man Hung
   
  /s/ Lam Fung
  Lam Fung
   
  /s/ Chan Man Kuen
  Chan Man Kuen
   
  /s/ Zhen Huang
  Zhen Huang
   
  /s/ Stephen Zhu
  Stephen Zhu

  

 

 

 

Schedule A

 

Name of the Shareholder   Amount of the Reliant Shares prior to the Closing Date     Amount of Exchange Shares to be issued at Closing     Amount of Exchange Shares to be issued post Closing  
Peng Yang     7,700       21,560,000       247,397,920  
Wong Ying     300       840,000       9,638,880  
Lam Man Hung     350       980,000       11,245,360  
Lam Fung     350       980,000       11,245,360  
Chan Man Kuen     350       980,000       11,245,360  
Zhen Huang     475       1,330,000       15,261,560  
Stephen Zhu     475       1,330,000       15,261,560