3 | PageItem 1. Financial statements.

LEPOTA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)(In U.S. Dollars, except share data or otherwise stated)

AS OF THE PERIOD ENDED JANUARY 31, 2021 AND THE YEAR ENDED JULY 31, 2020

⁽¹⁾ Par value of shares, additional paid-in capital and share data have been retroactively restated to give effect to the share exchange effected on August 12, 2020. See Note 1. “Description of the Business and Organization.”

See accompanying notes to the condensed consolidated financial statements.

4 | PageMU YAN TECHNOLOGY GROUP CO., LIMITED (fka “LEPOTA INC.”)

AND ITS SUBSIDIARIES

LEPOTA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSINCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(unaudited)(In U.S. Dollars, except share data or otherwise stated)

FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2021

AND

JANUARY 31, 2020

(Unaudited)

⁽¹⁾ Share and per share data have been retroactively restated to give effect to the share exchange effected on August 12, 2020. See Note 1. “Description of the Business and Organization.”

*denotes a loss of less than $(0.01) per share.

See accompanying notes to the condensed consolidated financial statements.

5 | PageMU YAN TECHNOLOGY GROUP CO., LIMITED (fka “LEPOTA INC.”)

AND ITS SUBSIDIARIES

LEPOTA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN EQUITY (DEFICIT)

(unaudited)(In U.S. Dollars, except share data or otherwise stated)

FOR THE SIX MONTHS ENDED JANUARY 31, 2021 AND THE YEAR ENDED JULY 31, 2020

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

6 | PageMU YAN TECHNOLOGY GROUP CO., LIMITED (fka “LEPOTA INC.”)

AND ITS SUBSIDIARIES

LEPOTACONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars, except share data or otherwise stated)

FOR THE SIX MONTHS ENDED JANUARY 31, 2021

AND

THE SIX MONTHS ENDED JANUARY 31, 2020

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

MU YAN TECHNOLOGY GROUP CO., LIMITED (fka “LEPOTA INC.”)

AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBERFOR THE SIX MONTHS ENDED JANUARY 31, 20172021 AND THE SIX MONTHS ENDED JANUARY 31, 2020

(UNAUDITED)

NOTE 1 –1. DESCRIPTION OF THE BUSINESS AND ORGANIZATION AND NATURE OF BUSINESS

Mu Yan Technology Group Co., Limited, formerly Lepota Inc. (the "Company"(“MYTG” or “Lepota”the “Company”) was, is a US holding company incorporated under the laws of the State ofin Nevada on December 9, 2013.

Our primary business isoriginally was in the import of cosmetics into the Russian Federation and distribution of the products through shops and drugstores. WeHowever, since August 12, 2020, we have concluded agreements with InterBeauty, LLC and South Distribution Company for distributionbeen engaged in the mobile advertisement backpack business. The Company’s current address is Room 1703B, Zhongzhou Building, No. 3088, Jintian Road, Futian District, Shenzhen City, Guangdong Province, People’s Republic of China 518000.

On February 18, 2020, as a result of a private transaction, 5,000,000 shares of our common stock (the “Shares”) were transferred from Rene Lawrence to certain purchasers, including Zhao Lixin who became a 53.8% holder of the products.voting rights of the Company at the time. The consideration paid for the Shares, which represented 67.3% of the issued and outstanding share capital of the Company on a fully-diluted basis, was $257,160. The source of the cash consideration for the Shares was personal funds of the Purchasers.

On April 14, 2020, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to amend the Articles of Incorporation of the Company by increasing the authorized common stock of the Company from 75,000,000 shares to 500,000,000 shares.

Mu Yan Technology Holding Co., Ltd (“Mu Yan Samoa”) was incorporated in the Independent State of Samoa on April 2, 2020. Mu Yan Samoa, together with its subsidiaries, is engaged in the mobile advertisement backpack business.

Mu Yan (Hong Kong) Technology Co., Limited, (“Mu Yan HK”), a wholly-owned subsidiary of Mu Yan Samoa, was incorporated in Hong Kong on January 10, 2020. On June 1, 2020, Mu Yan Samoa entered into an equity transfer agreement with the shareholder of Mu Yan HK, under which Mu Yan Samoa agreed to pay total consideration of HKD 1,000 (approximately $128.21) in cash in exchange for a 100% ownership interest in Mu Yan HK.

Mu Yan (Shenzhen) Media Technology Co., Ltd. (“Mu Yan WFOE”), a wholly-owned subsidiary of Mu Yan HK, was incorporated in the PRC on June 10, 2020.

Mu Yan (Shenzhen) Digital Technology Co., Ltd. (“Mu Yan Shenzhen”) was incorporated in the PRC on September 30, 2019 and became a wholly-owned subsidiary of Mu Yan WFOE on July 1, 2020. Mu Yan Shenzhen sells its mobile advertisement backpacks to consumers in the PRC and worldwide and operates primarily out of the PRC. Mu Yan Shenzhen was controlled by the same owner immediately prior to its acquisition by Mu Yan HK. As these transactions are between entities under common control, the Company has reported the results of operations for the periods in a manner similar to a pooling of interests and has consolidated financial results since the initial date in which the above companies were under common control. Assets and liabilities were combined on their carrying values and no recognition of goodwill was made.

On August 12, 2020, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Mu Yan Samoa and shareholders who together own shares constituting 100% of the issued and outstanding shares of Mu Yan Samoa and who are listed in Annex I to the Exchange Agreement (the “Sellers”). Pursuant to the terms of the Exchange Agreement, the Sellers transferred to the Company all of their shares of Mu Yan Samoa in exchange for the issuance of 300,000,000 shares (the “Shares”) of the Company’s contact addresscommon stock (representing approximately 98% of the Company’s outstanding common stock upon issuance) (the “Acquisition”). The Acquisition is 5348 Vegas Dr. Las Vegas, NV 89108.accounted for as a reverse merger because on a post-merger basis, the former shareholders of Mu Yan Samoa held a majority of our outstanding ordinary shares on a voting and fully diluted basis.

NOTE 2 –2. SUMMARY OF SIGNIFCANTSIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities”.  The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP.  In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively.  The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements for the Company.

Basis of Presentation

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.  The Company has elected a July 31 fiscal year end.

Fair Value of Financial Instruments

In accordance with ASC 820, the Company’s financial instruments consist of cash and cash equivalents and amounts due to related parties. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Income Taxes

The Company accounts for income taxes under the asset/liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

In October 31, 2017, the FASB issued ASC 740, “Accounting for Uncertainty in Income Taxes”, which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest

7 | Page

and penalties.  Under this pronouncement, the Company recognizes the financial statement benefit of a tax position only after determining that a position would more likely than not be sustained based upon its technical merit if challenged by the relevant taxing authority and taken by management to the court of the last resort. For tax positions meeting the more-likely-than-not threshold, the amount recognized in theaccompanying condensed consolidated financial statements isinclude the largest benefit that has a greater than 50% likelihoodbalances and results of being realized upon settlement withoperations of the relevant tax authority. ASC 740 became effective forCompany. The condensed consolidated financial statements have been prepared pursuant to the Company asrules and regulations of October 1, 2008the U.S. Securities and had no material impact on the Company’s financial statements.

The Company’s policy is to recognize both interestExchange Commission (“SEC”) and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“US GAAP”).

The accompanying condensed consolidated financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Basis of Consolidation

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are all entities over which the Company has control. Control exists when the Company has the power over the entity, exposure or rights to variable returns from involvement in the entity and the ability to use power over the entity to affect returns through its power over the entity. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the condensed consolidated financial statements from the date that control commences until the date that control ceases.

Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic, and legal environment in the PRC and by the general state of the PRC economy.

The Company’s 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 associated with, among others, the political, economic and legal environment and foreign currency exchange. The 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 conversion, remittances abroad and rates and methods of taxation.

Foreign Currency Translation

The Company’s reporting currency is the U.S. dollar and the functional currency is the Chinese Renminbi (“RMB”). All assets and liabilities are translated at exchange rates at the balance sheet date, revenue and expenses are translated at the average yearly exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.

Transactions in currencies other than the functional currencies during the period are converted into the applicable functional currencies at the applicable rates of exchange prevailing at the dates of the transactions. Exchange gains and losses are recognized in the statements of operations. The exchange rates utilized are as follows:

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosurerelated disclosures of contingent assets and liabilities at the balance sheet date and revenue and expenses in the condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the reported amountCompany’s financial statements include the valuation allowance for deferred tax assets, economic lives and impairment of revenuesproperty, plant and expenses during the reporting period.equipment, allowance for doubtful accounts, etc. Actual results could differ from those estimates.estimates and such differences could affect the results of operations reported in future periods.

Revenue RecognitionFair Value Measurement

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and that market participant assumptions include assumptions about risk and effect of a restriction on the sale or use of an asset.

This ASC establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At January 31, 2021, the Company has no financial assets or financial liabilities subject to recurring fair value measurements. The Company’s financial instruments include cash, accounts receivable, advances to suppliers, other receivables, held for sale assets, accounts payable, other payables, taxes payable and related party receivables or payables. Management estimates that the carrying amounts of financial instruments approximate their fair values due to their short-term nature. The fair value of amounts with related parties is not practicable to estimate due to the related party nature of the underlying transactions.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. All cash and cash equivalents relate to cash on hand and cash at the bank as of January 31, 2021 and July 31, 2020.

The RMB is not freely convertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Company is permitted to exchange RMB for foreign currencies through banks that are authorized to conduct foreign exchange business.

Accounts Receivable

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company extends credit to its customers in the normal course of business and generally does not require collateral. The Company’s credit terms are dependent upon the segment, and the customer. The Company assesses the probability of collection from each customer at the outset of the arrangement based on a number of factors, including the customer’s payment history and its current creditworthiness. If in management’s judgment collection is not probable, the Company does not record revenue until the uncertainty is removed.

Management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. The allowance for doubtful accounts is the Company’s best estimate of the amount of credit losses in existing accounts receivable. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of trade receivables. In the analysis, management primarily considers the age of the customer’s receivable, and also considers the creditworthiness of the customer, the economic conditions of the customer’s industry, general economic conditions and trends, and the business relationship and history with its customers, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of receivables were incorrect, adjustments to the allowance may be required, which would reduce profitability.

Accounts receivable are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts receivable is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. No allowance for doubtful accounts was made as of January 31, 2021 and July 31, 2020.

Inventories

Inventories consist of raw materials and finished goods and are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. When inventories are sold, their carrying amount is charged to expense in the period in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized as an expense in the period the impairment or loss occurs. The Company made no allowance for obsolete finished goods for the six months ended January 31, 2021 and the year ended July 31, 2020.

Held for sale assets

Held for sale assets are stated at the lower of their cost or fair value less cost to sell. A gain is recognized for any subsequent increase in fair value less cost to sell, but recognized gains may not exceed the cumulative losses previously recognized.

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over the assets’ estimated useful lives, using the straight-line method. Estimated useful lives of the property, plant and equipment are as follows:

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to the statement of income as incurred, whereas significant renewals and betterments are capitalized.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Whenever there is an indication showing a permanent decrease in the amount of property, plant and equipment, such as an evidence of obsolescence or physical damage of an asset or significant changes in the manner in which an asset is used or is expected to be used, the Company shall recognize loss on decrease in value of property, plant and equipment in the statement of income where the carrying amount of the asset is higher than the recoverable amount. The Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the fair value of the assets. The Company did not record any impairment losses on long-lived assets during the six months ended January 31, 2021 and the year ended July 31, 2020.

Operating leases

The Company determines if an arrangement contains a lease at inception. The Company elected the practical expedient, for all asset classes, to account for each lease component of a contract and its associated non-lease components as a single lease component, rather than allocating a standalone value to each component of a lease. For purposes of calculating operating lease obligations under the standard, the Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. The Company’s leases do not contain material residual value guarantees or material restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease terms. The discount rate used to measure a lease obligation is usually the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate that represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments.

Revenue recognition

Recognition of revenue

Revenue is generated through the sale of goods and rendering services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligations when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

Contract liabilities

A contract liability is the obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). The Company’s contract liabilities comprise advances from customers, which are recognized as revenue when productsthe Company performs under the contract. The balances of advances from customers as of January 31, 2021 and July 31, 2020 are fully delivered$nil and $1,539,343 respectively.

For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all service revenue contracts with an original expected length of one year or servicesless, which is an optional exemption that is permitted under the adopted rules.

Other income and other expenses

Other income and other expenses are recognized on an accrual basis in accordance with the substance of the relevant agreements.

Research and development expenses

Research and development expenses include payroll, employee benefits and other operating expenses associated with research and platform development. To date, expenditures incurred between when the application has reached the development stage and when it is substantially complete and ready for its intended use have been providedinconsequential and, collection is reasonably assured.as a result, the Company did not capitalize any qualifying development costs in the accompanying condensed consolidated financial statements.

Earnings per share

Stock-Based Compensation

Stock-based compensation is accounted for at fair valueThe Company reports earnings per share in accordance with ASC Topic 718.  To date,260 “Earnings Per Share,” which requires presentation of basic and diluted earnings per share in conjunction with the Company has not adopteddisclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the reporting period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Further, if the number of common shares outstanding increases as a result of a stock option plandividend or stock split or decreases as a result of a reverse stock split, the computations of a basic and has not granted any stock options.diluted earnings per share shall be adjusted retrospectively for all periods presented to reflect that change in capital structure.

Basic Income (Loss) Per Share

Basic income (loss)The Company’s basic earnings per share is calculatedcomputed by dividing the Company’s net loss applicableincome available to common shareholdersholders by the weighted average number of commonthe Company’s ordinary shares during the period.outstanding. Diluted earnings per share is calculated by dividingreflects the Company’samount of net income available to common shareholders by the diluted weighted average number of shareseach ordinary share outstanding during the year. The diluted weighted averageperiod plus the number of additional shares that would have been outstanding isif potentially dilutive securities had been issued. The Company had no potentially dilutive shares as of January 31, 2021.

Share capital

Incremental costs directly attributable to the basic weighted numberissue of shares adjusted forare recognized as a deduction from equity.

Related party balances and transactions

A related party is generally defined as:

(i) any potentially dilutive debtperson that holds the Company’s securities, including such person’s immediate family,

(ii) the Company’s management,

(iii) someone that directly or equity. There are no suchindirectly controls, is controlled by or is under common stock equivalents outstanding ascontrol with the Company, or

(iv) anyone who can significantly influence the consolidated financial and operating decisions of October 31, 2017.the Company.

Comprehensive A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Income taxes

The Company has which established standardsaccounts for income taxes using the asset and liability method prescribed by ASC 740 “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial reporting and displaytax bases of comprehensive income, its componentsassets and accumulated balances.  When applicable,liabilities using enacted tax rates that will be in effect in the Company would disclose this information on its Statement of Stockholders’ Equity.  Comprehensive income comprises equity except those resulting from investments by owners and distributionsyear in which the differences are expected to owners.reverse. The Company hasrecords a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not hadbe realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company does not have any significant transactionsmaterial unrecognized tax benefits.

The Company is governed by the Income Tax Laws of the PRC. The PRC federal statutory tax rate is 25%. The Company files income tax returns with the relevant government authorities in the PRC. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the six months ended January 31, 2021 and the six months ended January 31, 2020. The Company’s effective tax rate differs from the PRC federal statutory rate primarily due to non-deductible expenses, temporary differences and preferential tax treatment.

Recently issued and adopted accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company leased an office in Shenzhen, PRC, under an operating lease that terminates in June 2022, hence as of January 31, 2021, the Company adopted this standard, resulting in the recognition of right-of-use assets of $419,584 and operating lease liabilities of $419,584.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements.” This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be reportedpresented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This Accounting Standards Update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables and any other comprehensive income.

Recent Accounting Pronouncements

Lepota Inc. doesfinancial assets not expectexcluded from the scope that have the contractual right to receive cash. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. All entities may adopt the amendments in this Update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is in the process of evaluating the impact of the adoption of recently issuedthis pronouncement on its financial statements.

The Company reviews new accounting pronouncements tostandards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s resultsfinancial statements.

NOTE 3. OTHER RECEIVABLES

Other receivables consisted of operations, financial position or cash flow.the following:

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The resultsCompany leases an office and paid an amount equal to two months’ rent as a security deposit.

Between August 20, 2020 and November 10, 2020, the Company’s bank account was subjected to restricted use by the People’s Bank of China. The amount due from third parties relates to collections of sales for the threesaid period by third parties on behalf of the Company. On November 10, 2020, the bank account was no longer subjected to any restrictions and the Company expects to receive the full amount by end of April 15, 2021.

NOTE 4. INVENTORIES

Inventories consist of the following:

There is no inventory allowance for the six months ended OctoberJanuary 31, 2017 are not necessarily indicative of the results of operations for the full year. These financial statements2021 and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10K for the year ended July 31, 2017, filed with2020.

NOTE 5. HELD FOR SALE ASSETS

Held for sale assets relate to IT servers acquired during the Securitiesyear ended July 31, 2020. Management plans to sell these IT servers by the end of April 2021.

NOTE 6. DOWN PAYMENTS TO SUPPLIERS

The Company has made advances to third-party suppliers. These advances are down payments according to the purchase agreements made to expedite the delivery and Exchange Commission. Inpreferential prices for the opinionmaterials and the parts for the goods that the Company sells.

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

During the six months ended January 31, 2021, the Company acquired 1 motor vehicle costing $156,219 and office equipment consisting of management all adjustments necessary2 notebook computers, costing an aggregate of $2,665 and 7 cell phones, costing an aggregate of $3,596, for a fair statementtotal cost of $162,480. Depreciation expense for the six months ended January 31, 2021 and the year ended July 31, 2020 was $62,481 and $28,803, respectively.

NOTE 8. INCOME TAXES

Enterprise income tax (“EIT”)

The Company was incorporated under the laws of the resultsState of Nevada and is subject to the United States federal income tax. No provision for the interim periods have been made, and a statement that all adjustments are of a normal recurring nature or a description of the nature and amount of any adjustments other than normal recurring adjustments.

NOTE 3 – GOING CONCERN

The Company's financial statements are prepared using accounting principles generally acceptedincome taxes in the United States has been made as the Company had no United States taxable income for the six months ended January 31, 2021 and the year ended July 31, 2020.

The Company operates in the PRC and files tax returns in PRC jurisdictions.

The Company’s subsidiary formed in the Independent State of America applicableSamoa is not subject to tax on its income or capital gains. In addition, upon payment of dividends by the Company to its shareholders, no withholding tax is imposed.

The Company’s subsidiary formed in Hong Kong is subject to a going concern which contemplatesprofits tax rate of 16.5% for income generated and operation in the special administrative region.

The Company operates in the PRC and files tax returns in PRC jurisdictions. Income generated and operations in the PRC are subject to a tax rate of 25%.

The full realization of the tax benefit associated with a carry forward depends predominantly upon the Company’s ability to generate taxable income during the carry forward period.

In assessing the realization of deferred tax assets, and liquidation of liabilities in the normal course of business.  The Company hasmanagement considers whether it is more likely than not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.  The abilitythat some portion or all of the Company to continue as a going concerndeferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent onupon the Company obtaining adequate capital to fund operating losses untilgeneration of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance is provided for deferred tax assets if it becomes profitable.  Ifis more likely than not these items will either expire before the Company is unableable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management's plans to obtain such resources for the Company include (1) obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing mergers with existing operating companies.  However, management cannot provide any assurancesrealize their benefits, or that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concernfuture deductibility is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 – DIRECTOR’S LOANuncertain.

In supportThe reconciliation of income taxes computed at the PRC federal statutory tax rate applicable in the PRC, to income tax expenses are as follows:

Value added tax (“VAT”)

Pursuant to the Provisional Regulations on Value-Added Tax of the Company’s effortsPRC and cash requirements, it may rely on advances from related parties until such time thatits implementation regulations, unless otherwise stipulated by relevant laws and regulations, any entity or individual engaged in the Company can support its operations or attains adequate financing through sales of its equitygoods, provision of processing, repairs and replacement services and importation of goods into China is generally required to pay a value-added tax, or traditional debt financing. There is no formal written commitmentVAT, for continued support by shareholders.  Amounts represent advances or amountsrevenues generated from sales of products, while qualified input VAT paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.  

As of October 31, 2017, the Company had a loan outstanding with the Company’s sole director in the amount of $ 5,475. The loan is non-interest bearing, due upon demand and unsecured. 

NOTE 5 – RELATED PARTY TRANSACTIONSon taxable purchases can be offset against such output VAT.

 As of October 31, 2017 Company had loan outstanding owing $4,210According to the presidentAnnouncement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Chinese Ministry of Finance, the company IURII IURTAEVState Administration of Taxation and the General Administration of Customs, which became effective on April 1, 2019, the taxable goods previously subject to VAT rates of 16% and 10%, respectively, become subject to lower VAT rates of 13% and 9% respectively starting from April 1, 2019. Our sales of goods are subject to VAT rates of 13%.

NOTE 9. RELATED PARTIES TRANSACTIONS

NOTE 6 – COMMON STOCK

The Company has 75,000,000, $0.001 par value shares of common stock authorized.had the following balances with related parties:

(a) Amount due from related parties

9 | Page

The Company issued 5,000,000 common shares at par value of $0.001balances with related parties are unsecured, non-interest bearing and repayable on demand.

(b) Amount due to our director, IURII IURTAEV, for a total price of $5,000.related party

As of July 31, 2016 there were 240,000 shares of common stock issued at $0.01 per share for a total price of $2,400.

The company issued 50,000 additional shares at $0.01 to a shareholder Vesna Pujic as per Stock Subscription Receivablebalance with related party is unsecured, non-interest bearing and repayable on July 15, 2016. The amount of $500 as per Stock Subscription Receivable was collected by the company as of October 31, 2017.demand.

During the quarter ended January 31, 2017, the company issued 680,000 common shares at $0.01 for a total price of $6,800.

As of October 31, 2017, there were total of 5,970,000 shares of common stock issued and outstanding.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. An officer has provided office services without charge.  There is no obligation for the officer to continue this arrangement.  Such costs are immaterial to the financial statements and accordingly are not reflected herein.  The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

 The Company was not subject to any legal proceedings during the period from December 9, 2013 to October 31, 2017 and no proceedings are threatened or pending to the best of our knowledge and belief.

NOTE 8 – INCOME TAXES

As of October 31, 2017, the Company had net operating loss carry forwards of approximately $19,454 that may be available to reduce future years’ taxable income in varying amounts through 2032. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

The provision for Federal income tax consists of the following:(c) Transactions

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

10 | PageNOTE 10. RESERVES

Statutory reserve

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $19,454 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. An officer has provided office services without charge.  There is no obligation for the officer to continue this arrangement.  Such costs are immaterial to the financial statements and accordingly are not reflected herein.  The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

NOTE 10 – SUBSEQUENT EVENTS

In accordance with ASC 855-10 we have analyzed our operations subsequentthe relevant laws and regulations of the PRC, the company established in the PRC is required to February 5, 2018transfer 10% of its annual profit after taxation prepared in accordance with the accounting regulations of the PRC to the date thatstatutory reserve until the reserve balance reaches 50% of the company’s paid-up capital. Such reserves may be used to offset accumulated losses or increase the registered capital of the company, subject to the approval from the PRC authorities, and are not available for dividend distribution to the shareholders. There is no such reserve provided for the six months ended January 31, 2021 and the year ended July 31, 2020.

Currency translation reserve

The currency translation reserve represents translation differences arising from translation of foreign currency financial statements wereinto the Company’s functional currency.

NOTE 11. LEASES

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and have determined that we dolease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Effective July 1, 2020, the Company adopted this standard resulting in the recognition of right-of-use assets of $419,584 and operating lease liabilities of $419,584 as of January 31, 2021.

The adoption of the new lease guidance did not have anya material subsequent eventsimpact on the Company’s results of operations or liquidity, but resulted in the recognition of operating lease liabilities and operating lease right-of-use assets on its balance sheets. Right-of-use (“ROU”) assets represent the right to disclose.use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company has a lease for the office in Shenzhen, PRC, under an operating lease expiring in June 2022, which is classified as an operating lease. There are no residual value guarantees and no restrictions or covenants imposed by the lease. Rent expense for the six months ended January 31, 2021 and the six months ended January 31, 2020 were $144,306 and $nil, respectively. Cash paid for the operating lease was included in the operating cash flows.

There are no residual value guarantees and no restrictions or covenants imposed by the lease. As of January 31, 2021, the Company has $419,584 of right-of-use assets, $291,606 in current operating lease liabilities and $127,978 in non-current operating lease liabilities.

FORWARD LOOKING STATEMENTS

StatementsSignificant assumptions and judgments made inas part of the adoption of this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuantnew lease standard include determining (i) whether a contract contains a lease, (ii) whether a contract involves an identified asset, and (iii) which party to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified bycontract directs the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subjectasset. The discount rates used to calculate the present value of lease payments were determined based on hypothetical borrowing rates available to the safe harbors for such statements. We wishCompany over terms similar to caution readers not to place undue reliance on any such forward-looking statements, which speak onlythe lease terms.

The Company’s future minimum payments under long-term non-cancelable operating leases are as offollows:

Other information:

NOTE 12. CONSOLIDATED SEGMENT DATA

Segment information is consistent with how the date made. Any forward-looking statements represent management's best judgment as to what may occurchief operating decision-maker reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance. The segment data presented reflects this segment structure. The Company reports financial and operating information in the future. However, forward-looking statementsfollowing two segments:

Selected information in the segment structure is presented in the following tables:

Revenues by segment for the three and six months ended January 31, 2021 and 2020 are subject to risks, uncertaintiesas follows:

Income from operations by segment for the three and important factors beyond our control that could cause actual resultssix months ended January 31, 2021 and events to differ materially from historical results of operations2020 are as follows:

Total assets by segment as at January 31, 2021 and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipatedJuly 31, 2020 are as follows:

NOTE 13. SUBSEQUENT EVENTS

No subsequent events.

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ITEMItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONManagement’s discussion and analysis of financial condition and results of operation

EMPLOYEES AND EMPLOYMENT AGREEMENTS

At present, we have no employees other thanThe following discussion and analysis of our officerfinancial condition and director.  We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plansresults of operations should be read in conjunction with our consolidated financial statements and the future.  There are presently no personal benefits available to any officers, directors or employees.

Results of Operation

related notes included elsewhere in this report. Our consolidated financial statements have been prepared assumingin accordance with U.S. GAAP. In addition, our consolidated financial statements and the financial data included in this Quarterly Report reflect our reorganization and have been prepared as if our current corporate structure had been in place throughout the relevant periods. The following discussion and analysis contain forward-looking statements that we will continueinvolve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.

Overview

The Company was originally incorporated in Nevada under the name “Lepota Inc.” on December 9, 2013. It maintains its principal executive offices at Room 1703B, Zhongzhou Building, No. 3088 Jintian Road, Futian District, Shenzhen City, Guangdong Province, People’s Republic of China 518000. The Company was formed for the purpose of importing and distributing cosmetics into the Russian Federation.

The Company filed a registration statement on Form S-1 with the SEC on September 18, 2014, which was declared effective on May 4, 2016. However, because the Company did not identify a viable business model or engage in any business prior to the share exchange discussed below, it was a shell company until August 12, 2020.

On February 18, 2020, as a going concernresult of a private transaction, 5,000,000 shares of the Company’s Common Stock were transferred from Rene Lawrence, its controlling shareholder, to certain purchasers (the “Purchasers”), with Zhao Lixin, the Company’s current CEO, becoming a 53.8% holder of the voting rights of the Company, and accordingly, do not include adjustments relatingthe Purchasers becoming the controlling shareholders. As a result of the change of control, Iurii Iurtaev resigned as the Company’s president, chief executive officer, chief financial officer and director and Rene Lawrence resigned as the Company’s secretary. Zhao Lixin was then named President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Chairman of the Board of Directors of the Company.

On August 12, 2020 (the “Closing Date”), the Company closed on a share exchange (the “ Share Exchange”) with Mu Yan Technology Holding Co., Limited, a limited liability company incorporated in Samoa (“Mu Yan Samoa”), and the holders of 100% of the outstanding shares of Mu Yan Samoa’s common stock (the “Mu Yan Shareholders”). As a result, Mu Yan Samoa is now a wholly owned subsidiary of the Company. Under the Share Exchange Agreement, the Mu Yan Shareholders exchanged 100% of the outstanding shares of Mu Yan Samoa’s common stock for 300,000,000 shares of the Company’s Common Stock. As a result of the Share Exchange, effective September 22, 2020, the Company’s name was changed to Mu Yan Technology Group Co., Limited.

For accounting purposes, the Share Exchange was treated as a recapitalization of the Company with Mu Yan Samoa as the acquirer. When we refer in this Quarterly Report to business and financial information for periods prior to the recoverabilityconsummation of the Share Exchange, we are referring to the business and realizationfinancial information of assetsMu Yan Samoa unless the context suggests otherwise.

As a result of the closing of the Share Exchange, the Mu Yan Shareholders own approximately 98% of the total outstanding common shares of the Company and classificationthe former shareholders of liabilitiesthe Company own approximately 2%. The shares issued to the Mu Yan Shareholders in connection with the Share Exchange were 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. These securities may not be offered or sold absent registration or an applicable exemption from the registration requirement.

As a result of the recapitalization described above, management of the Company believes that might be necessary shouldthe Company is no longer a shell company. The Company’s operations now consist of the operations of Mu Yan Samoa and its subsidiaries.

An outbreak of respiratory illness caused by a novel coronavirus (“COVID-19”) first emerged in Wuhan city, Hubei province, China in late 2019 and has continued to expand within the PRC and globally. Since our operating subsidiary, Mu Yan Shenzhen, was formed in September 2019 and did not commence sales of our products until January 2020, we be unablehave no comparable revenue data for the prior six month period ended January 31, 2020, making it impossible to continue in operation.quantify or accurately assess the impact of the COVID-19 pandemic on our revenues for the six month period ended January 31, 2021. However, management believes that the pandemic did negatively impact our results of operations and anticipates that the ongoing pandemic will also have a negative effect on the Company’s results of operations for the 2021 fiscal year, and possibly longer.

We expect

Throughout the remainder of this Quarterly Report, when we will require additional capitaluse phrases such as “we,” “our,” “Company” and “us,” we are referring to meet our long term operating requirements. We expect to raise additional capital through, among other things, the saleCompany and all of equity or debt securities.its subsidiaries, as a combined entity.

Three Months Period Ended October 31, 2017 and 2016

Our net lossResults of Operations for the three months periods ended OctoberJanuary 31, 20172021 and 2016 were $2,8502020

The following summarizes our results of operations for the three months ended January 31, 2021 and $880.2020. The table and the discussion below should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this Quarterly Report.

Revenue

Revenue generated from selling our mobile advertisement backpack contributed $1,290,676 and $3,089,571 to our total revenue for the three months ended January 31, 2021 and 2020, respectively. The decrease in revenue generated by mobile advertisement backpack sales resulted from a suspension of sales during the quarter while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack. . During the three months period ended OctoberJanuary 31, 20162021, we have generated $5,730 in revenue from consulting services andsold 3,423 backpacks, whereas during the three months period ended OctoberJanuary 31, 20172020, we have notsold 5,729. The hardware and software improvements are expected to be completed in May of 2021

Revenue generated any revenue.  

The weighted average number of shares outstanding was 5,249,972from advertising services contributed $317,037 and $Nil to our total revenue for the three months periods ended OctoberJanuary 31, 20172021 and 2016.2020, respectively. The increase in revenue from advertising services was due to the fact that the Company did not commence operations in this business segment until December 2020.

Total revenue for the three months ended January 31, 2021 and 2020 were $1,607,713 and $3,089,571, respectively.

LiquidityCost of Revenue

Cost of revenue for our mobile advertisement backpack for the three months ended January 31, 2021 and Capital Resources2020 was $565,913 and $1,196,521 respectively. The significant decrease in cost of revenue for our mobile advertisement backpack was due to the fact that the Company sold only 3,423 mobile advertisement backpacks during the three months ended January 31, 2021, compared to 5,729 mobile advertisement backpacks sold during the three months ended January 31, 2020 and, therefore, needed to purchase commensurately fewer components for assembly into backpacks.

Three Months Period Ended October 31, 2017  

As at October 31, 2017,For our total assets were $4,931. Total assets were comprisedmobile advertisement backpack business, we outsourced the assembly processes of $4,931 in cashour products to subcontractors, and cash equivalents.  As at October 31, 2017we maintained stable relationships with them. We outsource our current liabilities were $9,685. Stockholders’ equity was $(4,754) asdelivery services to two courier companies. Delivery fees are paid by the ultimate customers upon delivery of October 31, 2017.   

Cash Flows from Operating Activities

the products. We have not generated positive cash flows from operating activities. Forexperienced difficulty in obtaining inventory for our business, and we believe we maintain good relationships with our suppliers.

Inventory costs for our mobile advertisement backpack business were 44.2% of our total mobile advertisement backpack business revenue in the three months period ended OctoberJanuary 31, 2017, net2021, compared with 38.7% in the three months ended January 31, 2020. The increased percentage was mainly due to an increase in the purchase cost of the inventory.

Cost of revenue for advertising services for the three months ended January 31, 2021 and 2020 was $70,952 and $Nil, respectively. The increase in cost of revenue for advertising services resulted from the fact that the Company did not commence operations in this business segment until December 2020.

Total cost of revenue for the three months ended January 31, 2021 was $636,865 compared with the amount of $1,196,521 for the three months ended January 31, 2020. Total cost of revenue as a percentage for the three months ended January 31, 2021 was 39.6%, compared with 38.7% for the three months ended January 31, 2020. Gross profit for the three months ended January 31, 2021 was 60.4% compared with 61.3% for the three months ended January 31, 2020.

Net Profit

Gross profit from our mobile advertisement backpack for the three months ended January 31, 2021 and the three months ended January 31, 2020 was $715,493 and $1,893,050, respectively. The decrease in gross profit was primarily due to the reduction in revenue that resulted from reduced sales while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack. Gross profit margins for the mobile advertisement backpack for the three months ended January 31, 2021 and the three months ended January 31, 2020 were 55.8% and 61.3%, respectively. The decrease in gross profit margin was mainly because of a promotion in which the selling price was reduced by 50% for 8,491 mobile advertisement backpacks from September 2020 to November 2020. Inventory decreased from December 2020 as sales were suspended during the quarter ended January 321, 2021, to work on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack. Management believes that when the upgrades and updates are completed the Company’s dependence upon third party suppliers will decrease and unit savings in production will be realized.

Net (loss) profit for the three months ended January 31, 2021 and the three months ended January 31, 2020 were $(95,667) and $1,044,911, respectively.

Selling and Marketing Expenses

Our selling and marketing expenses for the three months ended January 31, 2021 and 2020 were $474,317 and $292,380, respectively. Selling and marketing expenses during the three months ended January 31, 2021 were comprised primarily of marketing expenses.

General and Administrative Expenses

Our general and administrative expenses for the three months ended January 31, 2021 and 2020 were $488,901 and $328,034, respectively. General and administrative expenses consisted primarily of administrative payroll, office expense, depreciation charges and other office expenses that are not directly attributable to our revenues.

Research and Development Expenses

Our research and development expenses for the three months ended January 31, 2021 and 2020 were $83,694 and $27,676, respectively. Research and development expenses consist primarily of researchers’ payroll and IT services expenses.

Income Taxes

Income tax for the three months ended January 31, 2021 and 2020 were $13,172 and $224,738, respectively.

Results of Operations for the six months ended January 31, 2021 and 2020

The following summarizes our results of operations for the six months ended January 31, 2021 and 2020. The table and the discussion below should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this Quarterly Report.

Revenue

Revenue generated from selling our mobile advertisement backpack contributed $5,832,660 and $3,089,571 to our total revenue for the six months ended January 31, 2021 and 2020, respectively. The increase in mobile advertisement backpack revenue is due to the fact that the Company’s operating subsidiary was not formed until September 30, 2019 and sold 5,729 backpacks between then and January 31, 2020, whereas it sold 15,239 backpacks during the six months ended January 31, 2021. The hardware and software improvements are expected to be completed in May of 2021.

Revenue generated from advertising services contributed $326,307 and $Nil to our total revenue for the six months ended January 31, 2021 and 2020, respectively. The increase in revenue from advertising services was due to the fact that the Company did not commence operations in this business segment until December 2020.

Total revenue for the six months ended January 31, 2021 and 2020 were $6,158,967 and $3,089,571, respectively.

Cost of Revenue

Cost of revenue for our mobile advertisement backpack for the six months ended January 31, 2021 and 2020 was $2,521,848 and $1,196,521 respectively. The significant increase in cost of revenue was a result of our having sold 15,239 mobile advertisement backpacks during the six months ended January 31, 2021 compared to 5,729 backpacks having been sold during the six months ended January 31, 2020.

For our mobile advertisement backpack business, we outsourced the assembly processes of our products to subcontractors, and we maintained stable relationships with them. We outsource our delivery services to two courier companies. Delivery fees are paid by the ultimate customers upon delivery of the products. We have not experienced difficulty in obtaining inventory for our business, and we believe we maintain good relationships with our suppliers.

Inventory costs for our mobile advertisement backpack business were 43.2% of our total mobile advertisement backpack business revenue in the six months ended January 31, 2021, compared to 38.7% in the six months ended January 31, 2020. The increased percentage was mainly due to a 50% reduction in the selling price of our mobile advertisement backpacks due to a promotion from September 2020 to November 2020.

Cost of revenue for advertising services for the six months ended January 31, 2021 and 2020 was $70,952 and $Nil, respectively. The increase in cost of revenue for advertising services was due to the fact that the Company did not commence sales in this business segment until December 2020.

For our advertising services business, we outsource some of the business to our contractors. The labor fees represented approximately 2.1% and Nil of total cost of revenues for our advertising services segment for the six months ended January 31, 2021 and 2020, respectively. The marketing fees represented approximately 19.6% and Nil of total cost of revenues for our advertising services segment for the six months ended January 31, 2021 and 2020, respectively.

Labor costs for our advertising services business for the six months ended January 31, 2021 were $6,764 compared with $Nil for the six months ended January 31, 2020. Labor costs for our service business accounted for 2.1% of our total service revenue for the six months ended January 31, 2021, compared with Nil for the six months ended January 31, 2020.

Marketing costs for our advertising services business for the six months ended January 31, 2021 were $64,188 compared with $Nil for the six months ended January 31, 2020. Marketing costs for our service business accounted for 19.6% of our total service revenue for the six months ended January 31, 2021, compared with Nil for the six months ended January 31, 2020.

Total cost of revenue for the six months ended January 31, 2021 was $2,592,800 compared to $1,196,521 for the six months ended January 31, 2020. Total cost of revenue as a percentage for the six months ended January 31, 2021 was 42.1%, compared to 38.7% for the six months ended January 31, 2020. Gross profit for the six months ended January 31, 2021 was 57.9% compared to 61.3% for the six months ended January 31, 2020.

Net Profit

Gross profits for our mobile advertisement backpack for the six months ended January 31, 2021 and the six months ended January 31, 2020 were $3,310,812 and $1,893,050, respectively. Gross profit margin for our mobile advertisement backpack for the six month ended January 31, 2021 and the six months ended January 31, 2020 were 57% and 61%, respectively. The decrease in gross profit margin was principally due to a promotion in which the selling price of the backpacks was reduced by 50% from September 2020 to November 2020, and a further reduction in revenue that resulted from reduced sales while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack. Management believes that when the upgrades and updates are completed the Company’s dependence upon third party suppliers will decrease and unit savings in production will be realized.

Gross profit for advertising services for the six months ended January 31, 2021 and the six months ended January 31, 2020 were $255,355 and $Nil , respectively. Gross profit margin for advertising services for the six month ended January 31, 2021 and the six months ended January 31, 2020 were 78% and Nil , respectively. The increase in gross profit margin for advertising services was due to the fact that the Company did not commence sales in this business segment until December 2020.

Net profit for the six months ended January 31, 2021 and the six months ended January 31, 2020 were $1,399,336 and $1,019,790, respectively.

Selling and Marketing Expenses

Our selling and marketing expenses for the six months ended January 31, 2021 and 2020 were $615,322 and $292,380, respectively. Selling and marketing expenses during the six months ended January 31, 2021 were comprised primarily of marketing expenses.

General and Administrative Expenses

Our general and administrative expenses for the six months ended January 31, 2021 and 2020 were $815,133 and $353,155, respectively. General and administrative expenses consisted primarily of administrative payroll, office expense, depreciation charges and other office expenses that are not directly attributable to our revenues.

Research and Development Expenses

Our research and development expenses for the six months ended January 31, 2021 and 2020 were $170,476 and $27,676, respectively. Research and development expenses consist primarily of researchers’ payroll and IT services expenses.

Income Taxes

Income tax for the six months ended January 31, 2021 and 2020 were $519,989 and $224,738, respectively.

Summary of Cash Flows

Summary cash flows information for the six months ended January 31, 2021 and 2020 are as follow:

Net cash used in or provided by operating activities was $(214,155) and $1,136,604 for the six months ended January 31, 2021 and 2020, respectively. Cash used in operating activities during the six months ended January 31, 2021 was $(2,85). For the three months period ended October 31, 2016, netprimarily attributable to other receivables and advances from customers.

Net cash flows used in operating activities was $(880).

Cash Flows from Investing Activities

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We have not generated cash flows from investing activities forduring the period ninesix months ended OctoberJanuary 31, 20172021 was $(157,836), consisting entirely from the acquisition of property, plant and 2016.

Cash Flows from Financing Activities

We have generated $3,450equipment. Net cash flows from financingused in investing activities forduring the period threesix months ended OctoberJanuary 31, 2016.  For the three months period ended October 31, 2017, net2020 was $(226,649).

Net cash flowsprovided by or used in financing activities during the six months ended January 31, 2021 was $0.$Nil. Net cash provided by financing activities during the six months ended January 31, 2020 was $5,600 and was derived entirely from the sale of common shares.

PlanFinancial Condition, Liquidity and Capital Resources

As of OperationJanuary 31, 2021, we had cash on hand of $515,925, total current assets of $5,682,659 and Funding

current liabilities of $1,515,964. The Company had revenues of $6,158,967 and generated a net profit of $1,399,336 for the six months ended January 31, 2021. We expectbelieve that working capital requirements will continueour business can generate sufficient cash flows to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line withsupport the growth of our business.

Existing working capital, further advancesConcentration of Credit Risk

Financial instruments that potentially expose the Company to significant concentration of credit risk consist primarily of cash and debt instruments,cash equivalents and anticipatedamount due from related parties. As of January 31, 2021 and January 31, 2020, substantially all of the Company’s cash flow are expected to be adequate to fund our operations overand cash equivalents were deposited with financial institutions with high-credit ratings and quality. The Company did not have any clients constituting 10% or more of its net revenues for the next three months. six month period ended January 31, 2021 and the six month period ended January 31, 2020.

Off-Balance Sheet Arrangements

We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of January 31, 2021 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources thatresources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are materialnot required to investors.respond to this item.

Going Concern

The independent auditors' review report accompanying our October 31, 2016 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assetsItem 4. Controls and satisfy our liabilities and commitments in the ordinary course of business.