Accountant s Compilation Report

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Nano Labs Corp. (together with its wholly owned subsidiary, the “Company”) was incorporated in Colorado in March 1995 as “Colorado Ceramic Tile, Inc.” In April 2012, the Company changed its name to “Nano Labs Corp. On March 21, 2019, the Company re-domesticated its state of incorporation from Colorado to Wyoming. On December 4, 2019, the Company reinstated its state of incorporation back to Colorado. On February 29, 2020, the Company completed a share exchange with Promotora Mexicana De Vehiculos S.A. de C.V. (Promotora”), which was incorporated in Mexico on March 11, 2014. As a result of the share exchange, and through Promotora, the Company’s activities include the production and sale of asphalt derivative products, sand and gravel mining for construction, and cargo transport services.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reverse Acquisition

On February 29, 2020, the Company completed a Share Exchange pursuant to which, the shareholders of Promotora exchanged 100% of the capital stock of Promotora for 50 shares of Series A Preferred Stock, resulting in the Promotora’s shareholders obtaining control of Nano Labs Corp. and Promotora becoming a wholly owned subsidiary of the Nano Labs Corp. The transaction was recoded as a reverse merger, which designates the Promotora as the accounting acquirer, and Nano Labs Corp. as the accounting acquiree. Accordingly, these consolidated financial statements include the historical financial statements of Promotora for all period presented and the accounts of Nano Labs. Corp. beginning February 29, 2020. The Company’s historical stockholders’ equity accounts have been adjusted to reflect the capital structure of Nano Labs. Corp. On February 29, 2020, Nano Labs Corp. had no assets, and total liabilities of $6,035,244, consisting of convertible debt with principal outstanding of $1,061,500, accrued interest of $131,744, and derivative liabilities of $4,842,000.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include the fair value of derivative liabilities, and the collectability of accounts receivable.

Cash

Cash includes all cash deposits and highly liquid financial instruments with an original maturity of three months or less.

Accounts Receivable

The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of December 31, 2020 and December 31, 2019, the Company has not recorded an allowance for bad debt as all amounts were deemed collectible.

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Notes to the Consolidated Financial Statements

Years Ended December 31, 2020 and 2019

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory

Inventory consisting of finished products is stated at the lower of cost or net realizable value. The Company evaluates its ending inventories for excess quantities and obsolescence and establishes allowance to reduce excess or obsolete inventories to their estimated net realizable values, if necessary. As of December 31, 2020 and December 31, 2019, the Company there was no provision for obsolescence.

Derivative Liabilities

The Company bifurcates options embedded in its convertible debt that contain variable conversion rates and presents them as derivative liabilities equal to their fair value as of each balance sheet date with changes in fair value reflected in the Company’s consolidated statements of operations.

Revenue Recognition

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Revenues from product sales are recognized when the customer obtains control of the Company's product, which occurs at a point in time, typically upon delivery to the customer.

Foreign Currency Translation

The assets, liabilities and results of operations of Promotora are measured using their functional currency which is the Mexican Peso, the primary foreign economic environment in which the Company operates. The applicable assets and liabilities are translated to US dollars at currency exchange rates as of the applicable dates and their revenues and expenses are translated at the weighted average currency exchange rates during the applicable reporting periods. Translation adjustments resulting from the process of translating the financial statements are reported in other comprehensive loss in the accompanying consolidated statements of comprehensive income. Net Income Per Share

The Company computes basic net income per share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share gives effect to all dilutive potential common shares outstanding during the period consisting of convertible notes using the if-converted method. In computing diluted net income per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted net income per share excludes all dilutive potential common shares if their effect is anti-dilutive. There were no potentially dilutive securities outstanding during the year ended December 31, 2019.

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Nano Labs Corp.

Notes to the Consolidated Financial Statements

Years Ended December 31, 2020 and 2019

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following summarizes the computation of basic and diluted income per share for the year ended December 31, 2020:

Fair Value

The carrying values of the Company’s notes payables, convertible notes, and accounts payable and accrued expenses approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The fair value of derivative liabilities is determined using level 3 inputs.

For the year ended December 31, 2020, the Company recognized a gain of $2,045,000 on the change in fair value of its derivative liabilities, which were reported at fair value on a recurring basis as of December 31, 2020 There were not assets or liabilities measure at fair value as of December 31, 2019. During the year ended December 31, 2020, the Company used a Monte Carlo option-pricing model and the following assumptions to estimate the fair value of derivative liabilities: annual dividend – 0%, expected life (years) .25 years, risk-free interest rate – 0.11% to $1.27%, and expected volatility – 478-791%

Income Taxes

The Company is subject to income tax at a rate of 35% in Mexico. The Company accounts for income taxes under the asset and liability method of FASB ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. The Company has no significant tax assets or liabilities as of December 31, 2020 and December 31, 2019.

Net Income Weighted Average Shares Basic $ 2,336,857 5,793,428,004 Convertible debt (2,021,518) 12,730,341,802 Diluted $ 315,339 18,523,769,806

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Notes to the Consolidated Financial Statements

Years Ended December 31, 2020 and 2019

NOTE 3: PROPERTY AND EQUIPMENT,NET

Property and equipment consisted of the following as of December 31, 2020 and December 31, 2019:

2020 2019

Transportation equipment $ 1,217,251 $ 683,375 Computer and office equipment 8,749 2,938

1,226,000 686,313

Less: Accumulated depreciation 333,672 312,470 Property and equipment, net $ 892,328 $ 372,938

Depreciation expense totaled $69,854 and $2,000 for the years ended December 31, 2020 and 2019, respectively. NOTE 4: FINANCING LEASES PAYABLE

In 2019, the Company enter into two financing leases for company vehicles. The leases require monthly payments of approximately 250,000 pesos, through October 2023 and accrue interest at an annual rate of 11.95%.

In July 2020, the Company entered into financing leases for 4 new trucks and related equipment and fixtures. The leases required an initial down payment of 2.4 million pesos and required monthly payments of 242,732 pesos for the trucks over 72 months and 127,199 pesos over 60 months for the related equipment and fixtures. At the end of the lease terms, the ownership of the trucks and related equipment and fixtures are transferred to the Company. Future maturities of financing leases are as follows:

2020 (Remainder of Year) $ 0 2021 169,584 2022 203,101 2023 220,322 2024 138,975 Thereafter 212,056 $ 943,884 NOTE 5: CONVERTIBLE NOTES PAYABLE

The following summarizes the principal balances of the notes and relate accrued interest and derivative liabilities as of December 31, 2020:

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Nano Labs Corp.

Notes to the Consolidated Financial Statements

Years Ended December 31, 2020 and 2019

NOTE 6: STOCKHOLDERS’ EQUITY

During the year ended, the Company issued 50 shares of Series A Preferred stock to the shareholders of Promotora pursuant to the share exchange. The following are key provisions of the Series A Preferred Stock:

• Automatically convert into 90% of the Company’s issued and outstanding common stock on the date a reverse split becomes effective.

• Ranks equal with common stockholders in rights to dividends, distributions, and liquidations.

• Provides the holders with the right to vote as if converted into 90% of the outstanding common stock.

NOTE 7: COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of its operations.

NOTE 8: CONCENTRATION OF CREDIT RISK

Purchases

Substantially all of the Company’s raw materials are purchased from one supplier. Management believes there are other suppliers available.

During the year ended December 31, 2020, three customers accounted for 98% of the Company’s revenue as follows: Accounts Receivable at % of Revenues December 31, 2020 Customer A 53% $ 43,307 Customer B 23% $ 47,267 Customer C 22% $ 6,330

Holder Issue date Maturity Date Interest Rate Conversion Feature Principal

Accrued

Interest Total

Derivative Liability

ASUS 3/31/2013 On Demand None $ 350,000 $ - $ 350,000 $ 350,000 ASUS 9/17/2013 On Demand None 275,000.00 - 275,000 275,000

Black Mountain Equities,

Inc. 1/8/2015 1/8/2017 10%

Lesser of $0.02 or 60% of the lowest trading price during the 10 days prior to

conversion 27,500.00 16,455 43,955 116,000 Iconic Holdings 5/12/2015 5/12/2016 0% 157,000.00 - 157,000

Iconic Holdings 5/12/2015 5/12/2016 10% 55,000.00 31,041 86,041

JMJ Financial 5/28/2015 8/28/2015 12%

Lesser of $0.01 or 60% of the lowest trade price during the 25 days prior to

conversion 100,000.00 67,200 167,200 862,000 Adar 2/27/2015 2/27/2016 8% 30,000.00 14,032 44,032 LG Capital Funding LLC 7/1/2016 7/1/2017 8% 42,000.00 15,134 57,134 Union Capital 4/28/2015 4/28/2016 8% 25,000.00 11,364 36,364 1,061,500 $ $ 155,226 $ 1,216,726 $ 3,600,000 60% of the lowest closing bid price of the

last 20 trading days prior to conversion 50% discount to trading price on date of

conversion

55% of the lowest trading price during the 25 consecutive prior to conversion

Balances at December 31, 2020

602,000

1,395,000

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Notes to the Consolidated Financial Statements

Years Ended December 31, 2020 and 2019

NOTE 9: SUBSEQUENT EVENTS

Management has evaluated subsequent events through January 14, 2021, which the date these financials were available for issuance.

Accountant s Compilation Report

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