QLY Biotech Group Corp. - Quarter Report: 2023 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended February 28, 2023

or

For the transition period from _________ to _________

Commission File Number 333-234137

5348 VEGAS DRIVE, LAS VEGAS, Nevada 89108

(Address of principal executive offices, including zip code)

(+86) 18678961296

Registrant’s phone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐     No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐     No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).

Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐     No ☒

The aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the registrant as of April 13, 2023 was approximately $0.9 million.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial statements

QLY BIOTECH GROUP CORP.

CONDENSED BALANCE SHEETS

AS OF FEBRUARY 28, 2023 AND AUGUST 31, 2022 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

See accompanying notes to the unaudited condensed financial statements.

QLY BIOTECH GROUP CORP.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED FEBRUARY 28, 2023 AND 2022 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

See accompanying notes to the unaudited condensed financial statements.

QLY BIOTECH GROUP CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND SIX MONTHS ENDED February 28, 2023 AND 2022 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

For the three and six months ended February 28, 2023

For the three and six months ended February 28, 2022

See accompanying notes to the unaudited condensed financial statements.

QLY BIOTECH GROUP CORP.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED FEBRUARY 28, 2023 AND 2022 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

See accompanying notes to the unaudited condensed financial statements.

QLY BIOTECH GROUP CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED FEBRUARY 28, 2023 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND

QLY Biotech Group Corp., a Nevada corporation (“the Company” or “QLY”) was incorporated under the laws of the State of Nevada on September 20, 2018.

The Company used to engaged in the tourism. The company used to organize individual and group sailing tours in the Dominican Republic. Services and itineraries used to be provide by our company include custom packages according to the client’s specifications. And we used to develop and offer our own sailing tours in the North part of Dominican Republic as well as third-party suppliers.

On July 8, 2022, as a result of a private transactions, 3,000,000 shares of common stock, $0.001 par value per share (the “Shares”) of QLY Biotech Group Corp. (Former name: Azar International Corp.)., were transferred from Hilario Lopez Vargas to Lixue Yang. As a result, Lixue Yang became holders of approximately 77% of the voting rights of the issued and outstanding share capital of the Company and became the controlling shareholder. The consideration paid for the Shares was $350,000. The source of the cash consideration for the Shares was personal funds of Lixue Yang. In connection with the transaction, Hilario Lopez Vargas released the Company from all debts owed to him, and the Company agreed to assign the Computer and Designer (that were acquired by the Company on September 30, 2019 and November 1, 2019, respectively) to him.

On July 8, 2022, the existing director and officer resigned immediately. Accordingly, Hilario Lopez Vargas, serving as a director and an officer, ceased to be the Company’s Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and a Director. At the effective date of the transfer, Lixue Yang consented to act as the new Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and a Director of the Company.

NOTE 2 - GOING CONCERN UNCERTAINTIES

As of February 28, 2023, the Company suffered an accumulated deficit of $70,713 and incurred a net loss of $20,788. The continuation of the Company as a going concern through February 28, 2023 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide additional cash to meet the Company’s obligations as they become due.

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying financial statements and notes.

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. The Company’s fiscal year end is August 31. The Company’s financial statements are presented in U.S. dollars.

In preparing these condensed financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

The company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

QLY BIOTECH GROUP CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2023 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

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

The cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized.

Intangible assets with definite lives are stated at cost less accumulated amortization.

Amortization is calculated on the straight-line basis over the following estimated useful lives:

The Company assesses and follows the guidance of ASC 606, revenue from contracts with customers is recognized using the following five steps:

The Company had generated zero revenue during the three months ended February 28, 2023 and 2022, respectively.

The Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company recorded 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 be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.

The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognizable tax benefit recognized in accordance with ASC 740 are classified in the statements of comprehensive loss as income tax expense.

The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Any potential common shares in 2023 and 2022 that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

QLY BIOTECH GROUP CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2023 (Unaudited)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

NOTE 4 – ACCRUED LIABILITIES

As of February 28, 2023, the balance of accrued liabilities was $4,851 that including the audit fee and stock agency expenses. As of August 31, 2022, the balance of accrued liabilities was $0.

NOTE 5 - AMOUNT DUE TO A DIRECTOR

As of February 28, 2023 and August 31, 2022, the director of the Company, Mr. Lixue Yang, advanced $14,817 and $0 to the Company, respectively, which is unsecured, interest-free with no fixed payment term, for working capital purpose.

NOTE 6 – COMMON STOCK

As of February 28, 2023 and August 31, 2022, the Company has 1,000,000,000 shares authorized, 3,895,000 shares issued and outstanding, respectively. There are no shares of preferred stock issued and outstanding.

NOTE 7 – ADDITIONAL PAID-IN CAPITAL – CAPITAL CONTRIBUTION

As of February 28, 2023 and August 31, 2022, the Company has a total additional paid-in capital - capital contribution balance of $47,150 and $46,030 respectively. Such increase was due to the satisfaction of amount of $1,120 due to current shareholder.

NOTE 8 – SUBSEQUENT EVENT

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before condensed financial statements are issued, the Company has evaluated all events or transactions that occurred up to April 13, 2023, the date the financial statements were available to issue. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward- looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. 

Going Concern

As of February 28, 2023, the Company suffered an accumulated deficit of $70,713 and incurred a net loss of $20,788. The continuation of the Company as a going concern through February 28, 2023 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide additional cash to meet the Company’s obligations as they become due.

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

Company Overview

QLY Biotech Group Corp. (“the Company” or “QLY”), was incorporated in the State of Nevada on September 20, 2018. The Company used  to engaged in the tourism. The company used to organize individual and group sailing tours in the Dominican Republic. Services and itineraries used  to be provide by our company include custom packages according to the client’s specifications. And we used to develop and offer our own sailing tours in the North part of Dominican Republic as well as third-party suppliers. 

The Company has no operations or revenue for the six months ended February 28, 2023 and  as of the date of this Report due to the current director had not perform similar service. We are currently in the process of developing a business plan. Management intends to explore and identify viable business opportunities within the U.S. including seeking to acquire a business in a reverse merger. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. 

Results of Operation

Operation Results for the Three Months Ended February 28, 2023 and 2022

Revenues

The Company generated revenue of $0 and $0 for the three months ended February 28, 2023 and 2022, respectively. The management intends to explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our Chief Executive Officer has experience in business consulting, although no assurances can be given that he can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. 

Cost of revenues

Cost of revenues of $0 and $0 for the three months ended February 28, 2023 and 2022, respectively.

Operating Expenses

Operating expenses of $11,620 and $1,755 for the three months ended February 28, 2023 and 2022, respectively that were mainly consist of professional fees such as audit fees, consulting fee and taxation service etc. Such increase was mainly derived from consulting fee and taxation service fee.

Net Loss

The net loss of $11,620 and $1,755 for the three months ended February 28, 2023 and 2022, respectively. Such increase was mainly derived from consulting fee and taxation service fee.

Operation Results for the Six Months Ended February 28, 2023 and 2022

Revenues

The Company generated revenue of $0 and $0 for the six months ended February 28, 2023 and 2022, respectively. The management intends to explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity through a reverse merger, asset purchase or similar transaction. Our Chief Executive Officer has experience in business consulting, although no assurances can be given that he can identify and implement a viable business strategy or that any such strategy will result in profits. Our ability to effectively identify, develop and implement a viable plan for our business may be hindered by risks and uncertainties which are beyond our control, including without limitation, the continued negative effects of the coronavirus pandemic on the U.S. and global economies. 

Cost of revenues

Cost of revenues of $0 and $0 for the six months ended February 28, 2023 and 2022, respectively.

Operating Expenses

Operating expenses of $20,788 and $5,967 for the six months ended February 28, 2023 and 2022, respectively that were mainly consist of professional fees such as audit fees, consulting fee and taxation service etc. Such increase was mainly derived from consulting fee and taxation service fee.

Net Loss

The net loss of $20,788 and $5,967 for the six months ended February 28, 2023 and 2022, respectively. Such increase was mainly derived from consulting fee and taxation service fee.

Liquidity and Capital Resources

As of February 28, 2023 and August 31, 2022, we had working capital deficit of $19,668 and $0, respectively. The increase in working capital deficit was reflected in the accrued liabilities and advanced from director. The Company’s net loss of $20,788 and $5,967 for the six months ended February 28, 2023 and 2022, respectively.

Cash Flow from Operating Activities

Net cash used in operating activities for the six months ended February 28, 2023 was $15,937 as compared to net cash used in operating activities of $6,636 for the six months ended February 28, 2022, reflecting an increase of $9,301 on net cash used in operating activities. Such increase was due to the Company incurred a higher net loss in current  period.

Cash Flow from Investing Activities

Net cash generated from investing activities for the six months ended February 28, 2023 and 2022, was $0 and $0, respectively.

Cash Flow from Financing Activities

Net cash generated from financing activities for the six months ended February 28, 2023 was $15,937 as compared to net cash generated from financing activities of $2,590 for the six months ended February 28, 2022, reflecting an increase of $13,347 on net cash generated from financing activities. Such increase was mainly due to the director that paid the Company’s operating expenses on behalf of the Company, such as audit fee, annual list and stock agency fee etc.

Credit Facilities

We do not have any credit facilities or other access to bank credit.

Contractual Obligations, Commitments and Contingencies

We currently have no lease agreement or any other contractual obligations, commitments or contingencies.

 Off-balance Sheet Arrangements

As of February 28, 2023, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Item 3 Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4 Controls and Procedures.

Evaluation of Disclosure Controls and Procedures:

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of February 28, 2023. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 28, 2023, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of February 28, 2023, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Changes in Internal Control over Financial Reporting:

There were no changes in our internal control over financial reporting during the quarter ending February 28, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

ITEM 6. Exhibits

* Filed herewith.

SIGNATURES

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