The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this report. Our consolidated financial statements have been prepared in accordance withU.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 involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Overview The Company was originally incorporated inNevada under the name "Lepota Inc. " onDecember 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 theRussian Federation . The Company filed a registration statement on Form S-1 with theSEC onSeptember 18, 2014 , which was declared effective onMay 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. OnFebruary 18, 2020 , as a result of a private transaction, 5,000,000 shares of the Company's Common Stock were transferred fromRene Lawrence , its controlling shareholder, to certain purchasers (the "Purchasers"), withZhao Lixin , the Company's current CEO, becoming a 53.8% holder of the voting rights of the Company, and the 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 andRene 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. OnAugust 12, 2020 (the "Closing Date"), the Company closed on a share exchange (the "Share Exchange") withMu Yan Technology Holding Co., Limited , a limited liability company incorporated inSamoa ("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, effectiveSeptember 22, 2020 , the Company's name was changed toMu 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 consummation of the Share Exchange, we are referring to the business and financial information of Mu Yan Samoa unless the context suggests otherwise. 21 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 the former shareholders of the 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 the 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 inWuhan 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 inSeptember 2019 and did not commence sales of our products untilJanuary 2020 , we have no comparable revenue data for the prior nine month period endedApril 30, 2020 , making it impossible to quantify or accurately assess the impact of the COVID-19 pandemic on our revenues for the nine month period endedApril 30, 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. Throughout the remainder of this Quarterly Report, when we use phrases such as "we," "our," "Company" and "us," we are referring to the Company and all of its subsidiaries, as a combined entity.
Results of Operations for the three months ended
The following summarizes our results of operations for the three months endedApril 30, 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$53,456 and$1,709,292 to our total revenue for the three months endedApril 30, 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 endedApril 30, 2021 , we sold 13 backpacks, whereas during the three months endedApril 30, 2020 , we sold 9,149. The hardware and software improvements are expected to be completed in July of 2021. Revenue generated from advertising services contributed$6,313 and $Nil to our total revenue for the three months endedApril 30, 2021 and 2020, respectively. The increase in revenue from advertising services was due to the fact that the Company did not commence operations in this business segment untilDecember 2020 .
Total revenue for the three months ended
22 Cost of Revenue Increase Three months ended April 30, (decrease) in 2021 2020 2021 compared to 2020 (In U.S. dollars, except for percentages) Net revenue for mobile advertisement backpack$ 53,456 100.0 %$ 1,709,292 100.0 %$ (1,655,836 ) (96.9 )% Inventory$ 21,474 40.2 %$ 556,013 32.5 %$ (534,539 ) (96.1 )% Total cost of revenue for mobile advertisement backpack$ 21,474 40.2 %$ 556,013 32.5 %$ (534,539 ) (96.1 )% Gross profit for mobile advertisement backpack$ 31,982 59.8 %$ 1,153,279 67.5 %$ (1,121,297 ) (97.2 )% Net revenue for advertising services$ 6,313 100.0 % $ - - $ 6,313 N/A Labor$ 1,709 27.1 % $ - - $ 1,709 N/A Marketing$ 512 8.1 % $ - - $ 512 N/A Total cost of revenue for advertising services$ 2,221 35.2 % $ - - $ 2,221 N/A Gross Profit for advertising services$ 4,092 64.8 % $ - - $ 4,092 N/A Total cost of revenue$ 23,695 39.6 %$ 556,013 32.5 %$ (532,317 ) (95.7 )% Gross profit$ 36,074 60.4 %$ 1,153,279 67.5 %$ (1,117,206 ) (96.9 )% Cost of revenue for mobile advertisement backpack for the three months endedApril 30, 2021 and 2020 was$21,474 and$556,013 respectively. The significant decrease in cost of revenue for our mobile advertisement backpack was due to the fact that the Company sold only 13 mobile advertisement backpacks during the three months endedApril 30, 2021 , compared to 9,149 mobile advertisement backpacks sold during the three months endedApril 30, 2020 and, therefore, needed to purchase commensurately fewer components for assembly into backpacks.
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 40.2% of our total mobile advertisement backpack business revenue in the three months endedApril 30, 2021 , compared with 32.5% in the three months endedApril 30, 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 endedApril 30, 2021 and 2020 was$2,221 and $Nil respectively. The increase in cost of revenue for advertising services reflects that the Company did not commence operations in this business segment untilDecember 2020 . Total cost of revenue for the three months endedApril 30, 2021 was$23,695 compared with the amount of$556,013 for the three months endedApril 30, 2020 . Total cost of revenue as a percentage for the three months endedApril 30, 2021 was 39.6%, compared with 32.5% for the three months endedApril 30, 2020 . Gross profit for the three months endedApril 30, 2021 was 60.4% compared with 67.5% for the three months endedApril 30, 2020 . The reasons for the decrease in the total cost of revenue as a percentage of the revenue for three months endedApril 30, 2021 , compared to the comparable period in the prior year are described above. 23 Net Profit Three months ended 2021 compared to 2020 April 30, April 30, Amount of % of 2021 2020 Increase Increase Gross Profit for mobile advertisement backpack$ 31,982 $ 1,153,279 $ (1,121,297 ) (97 )% Gross Profit for advertising services$ 4,092 $ - $ 4,092 N/A Additional Tax$ (415 ) $ (4,552 ) $ 4,137 (91 )% Gross Profit$ 35,659 $ 1,148,727 $ (1,113,068 ) (97 )% Operating Expenses: Selling and Marketing Expenses$ (4,904 ) $ (186,885 ) $ 181,981 (97 )% General and Administrative Expenses$ (465,150 ) $ (157,276 ) $ (307,874 ) 196 % Research and Development Expenses$ (74,509 ) $ (218,193 ) $ 143,684 ) (66 % Operating Expenses$ (544,563 ) $ (562,354 ) $ 17,791 ) (3 % Other Income, net$ (21,334 ) $ 336,097 $ (357,431 ) (106 )% Income from Operations$ (530,238 ) $ 922,470 $ (1,452,708 ) (157 )% Revenue Related Tax$ (11,141 ) $ (326,330 ) $ 315,189 (97 )% Net Profit$ (541,379 ) $ 596,140 $ (1,137,519 ) (191 )% Gross profit from our for mobile advertisement backpack for the three months endedApril 30, 2021 and the three months endedApril 30, 2020 was$31,982 and$1,153,279 , 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 margin for the mobile advertisement backpack for the three months endedApril 30, 2021 and the three months endedApril 30, 2020 were 59.8% and 67.5%, respectively. Inventory decreased fromDecember 2020 as sales were suspended during the quarter endedApril 30, 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
Selling and Marketing Expenses
Our selling and marketing expenses for the three months endedApril 30, 2021 and 2020 were$4,904 and$186,885 , respectively. Selling and marketing expenses during the three months endedApril 30, 2021 were comprised primarily of marketing expenses. The selling and marketing expenses decrease during the three months endedApril 30, 2021 was primarily attributable to sales have been suspended meanwhile the Company worked on upgrading and updating the appearance and application program of the mobile advertisement backpack. 24
General and Administrative Expenses
Our general and administrative expenses for the three months endedApril 30, 2021 and 2020 were$465,150 and$157,276 , 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. The general and administrative expenses increase during the three months endedApril 30, 2021 was primarily attributable to business entertainment expense that is used to maintain business relationship with cooperative partners on mobile advertisement backpack while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack.
Research and Development Expenses
Our research and development expenses for the three months endedApril 30, 2021 and 2020 were$74,509 and$218,193 , respectively. Research and development expenses consist primarily of researchers' payroll and IT services expenses. The research and development expenses decrease during the three months endedApril 30, 2021 was primarily attributable to IT services expenses that is used to run research and development projects. Some of them have been completed while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack. The hardware and software improvements are expected to be completed in July of 2021. Income Taxes
Income tax for the three months ended
Results of Operations for the nine months ended
The following summarizes our results of operations for the nine months endedApril 30, 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$5,886,116 and$4,798,863 to our total revenue for the nine months endedApril 30, 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 untilSeptember 30, 2019 and sold 9,149 backpacks between then andApril 30, 2020 , whereas it sold 15,252 backpacks during the nine months endedApril 30, 2021 . The hardware and software improvements are expected to be completed in July of 2021. Revenue generated from advertising services contributed$332,620 and $Nil to our total revenue for the nine months endedApril 30, 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 untilDecember 2020 . Total revenue for the nine months endedApril 30, 2021 and 2020 were$6,218,736 and$4,798,863 , respectively. 25 Cost of Revenue Increase (decrease) in Nine months ended April 30, 2021 compared to 2021 2020 2020 (In U.S. dollars, except for percentages) Net revenue for mobile advertisement backpack$ 5,886,116 100.0 %$ 4,798,863 100.0 %$ 1,087,253 22.7 % Inventory$ 2,543,322 43.2 %$ 1,752,534 36.5 %$ 790,788 45.1 % Total cost of revenue for mobile advertisement backpack$ 2,543,322 43.2 %$ 1,752,534 36.5 %$ 790,788 45.1 % Gross profit for mobile advertisement backpack$ 3,342,794 56.8 %$ 3,046,329 63.5 %$ 296,465 9.7 % Net revenue for advertising services$ 332,620 100.0 % $ - -$ 332,620 N/A Labor$ 8,472 2.5 % $ - -$ 8,472 N/A Marketing$ 64,700 19.5 % $ - -$ 64,700 N/A Total cost of revenue for advertising services$ 73,172 22.0 % $ - -$ 73,172 N/A Gross profit for advertising services$ 259,448 78.0 % $ - -$ 259,448 N/A Total cost of revenue$ 2,616,494 42.1 %$ 1,752,534 36.5 %$ 863,961 49.3 % Gross profit$ 3,602,242 57.9 %$ 3,046,329 63.5 %$ 555,912 18.2 %
Cost of revenue for mobile advertisement backpack for the nine months endedApril 30, 2021 and 2020 was$2,543,322 and$1,752,534 respectively. The significant increase in cost of revenue was a result of our having sold 15,252 mobile advertisement backpacks during the nine months endedApril 30, 2021 compared to 9,149 backpacks having been sold during the nine months endedApril 30, 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 nine months endedApril 30, 2020 , compared with 36.5% in the nine months endedApril 30, 2020 . The increased percentage was mainly due to a 50% reduction in the selling price of our mobile advertisement backpacks due to a promotion fromSeptember 2020 toNovember 2020 . 26 Cost of revenue for advertising services for the nine months endedApril 30, 2021 and 2020 was$73,172 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 untilDecember 2020 . For our advertising services business, we outsource some of the business to our contractors. The labor fees represented approximately 2.5% and Nil of total cost of revenues for our advertising services segment for the nine months endedApril 30, 2021 and 2020, respectively. The marketing fees represented approximately 19.5% and Nil of total cost of revenues for our advertising services segment for the nine months endedApril 30, 2021 and 2020, respectively. Labor costs for our advertising services business for the nine months endedApril 30, 2021 were$8,472 compared with $Nil for the nine months endedApril 30, 2020 . Labor costs for our service business accounted for 2.5% of our total service revenue for the nine months endedApril 30, 2021 , compared with Nil for the nine months endedApril 30, 2020 . Marketing costs for our advertising services business for the nine months endedApril 30, 2021 were$64,700 compared with $Nil for the nine months endedApril 30, 2020 . Marketing costs for our service business accounted for 19.5% of our total service revenue for the nine months endedApril 30, 2021 , compared with Nil for the nine months endedApril 30, 2020 . Total cost of revenue for the nine months endedApril 30, 2021 was$2,616,494 compared with the amount of$1,752,534 for the nine months endedApril 30, 2020 . Total cost of revenue as a percentage for the nine months endedApril 30, 2021 was 42.1%, compared with 36.5% for the nine months endedApril 30, 2020 . Gross profit for the nine months endedApril 30, 2021 was 57.9% compared with 63.5% for the nine months endedApril 30, 2020 . Net Profit Nine months ended 2021 compared to 2020 April 30, April 30, Amount of % of 2021 2020 Increase Increase Gross Profit for mobile advertisement backpack$ 3,342,794 $ 3,046,329 $ 296,465 10 % Gross Profit for advertising services$ 259,448 $ -$ 259,448 N/A Additional Tax$ (51,888 ) $ (13,620 ) $ (38,268 ) 281 % Gross Profit$ 3,550,354 $ 3,032,709 $ 517,645 17 % Operating Expenses: Selling and Marketing Expenses$ (620,226 ) $ (479,265 ) $ (140,961 ) 29 % General and Administrative Expenses$ (1,280,283 ) $ (510,431 ) $ (769,852 ) 151 % Research and Development Expenses$ (244,985 ) $ (245,869 ) $ 884 (0 )% Operating Expenses$ (2,145,494 ) $ (1,235,565 ) $ (909,929 ) 74 % Other Income, net$ (15,772 ) $ 369,854 $ (385,626 ) (104 )% Income from Operations$ 1,389,088 $ 2,166,998 $ (777,910 ) (36 )% Revenue Related Tax$ (531,130 ) $ (551,068 ) $ 19,938 (4 )% Net Profit$ 857,958 $ 1,615,930 $ (757,972 ) (47 )% 27 Gross profit for mobile advertisement backpack for the nine months endedApril 30, 2021 and the nine months endedApril 30, 2020 were$3,342,794 and$3,046,329 , respectively. Gross profit margin for our mobile advertisement backpack for the nine months endedApril 30, 2021 and the nine months endedApril 30, 2020 were 56.8% and 63.5% , 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% fromSeptember 2020 toNovember 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 nine months endedApril 30, 2021 and the nine months endedApril 30, 2020 were$259,448 and $Nil , respectively. Gross profit margin for advertising services for the nine months endedApril 30, 2021 and the nine months endedApril 30, 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 untilDecember 2020 .
Net profit for the nine months ended
Selling and Marketing Expenses
Our selling and marketing expenses for the nine months endedApril 30, 2021 and 2020 were$620,226 and$479,265 , respectively. Selling and marketing expenses during the nine months endedApril 30, 2021 were comprised primarily of marketing expenses. The selling and marketing expenses increase during the nine months endedApril 30, 2021 was primarily attributable to marketing expenses that is used for business publicity on mobile advertisement backpack. During the nine months endedApril 30, 2021 , we sold 15,252 backpacks, whereas during the nine months endedApril 30, 2020 , we sold 9,149.
General and Administrative Expenses
Our general and administrative expenses for the nine months endedApril 30, 2021 and 2020 were$1,280,283 and$510,431 , 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. The general and administrative expenses increase during the nine months endedApril 30, 2021 was primarily attributable to business entertainment expense that is used to maintain business relationship with cooperative partners on mobile advertisement backpack while the Company worked on upgrading and updating the hardware and the software utilized in the mobile advertisement backpack.
Research and Development Expenses
Our research and development expenses for the nine months ended
Income Taxes
Income tax for the nine months ended
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