UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.) |
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5 Canton Road |
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(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
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 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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
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☒ | Smaller reporting company |
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| Emerging growth company |
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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
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 14, 2025, there were
QDM INTERNATIONAL INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2025
TABLE OF CONTENTS
| Page | ||
| Cautionary Note Regarding Forward-Looking Statements | ii | |
| PART I – FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II – OTHER INFORMATION | 21 | |
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 21 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. | Defaults Upon Senior Securities | 22 |
| Item 4. | Mine Safety Disclosures | 22 |
| Item 5. | Other Information | 22 |
| Item 6. | Exhibits | 23 |
| SIGNATURES | 24 | |
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
| ● | the impact of political uncertainty and social unrest in Hong Kong and laws, rules and regulations of the Chinese government aimed at addressing such unrest; |
| ● | the market for our services in Hong Kong and Mainland China; |
| ● | our expansion and other plans and opportunities; |
| ● | our future financial and operating results, including revenues, income, expenditures, cash balances and other financial items; |
| ● | current and future economic and political conditions in Hong Kong and Mainland China; |
| ● | the future growth of the Hong Kong insurance industry as a whole and the professional insurance intermediary sector in particular; |
| ● | our ability to attract customers, further enhance our brand recognition; |
| ● | our ability to hire and retain qualified management personnel and key employees in order to enable them to develop our business; |
| ● | changes in applicable laws or regulations in Hong Kong related to or that could impact our business; |
| ● | our management of business through a U.S. publicly-traded and reporting company; and |
| ● | other assumptions regarding or descriptions of potential future events or circumstances described in this Report underlying or relating to any forward-looking statements. |
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
ii
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30 AND MARCH 31, 2025
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September 30,
2025 |
March 31,
2025 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ |
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$ |
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| Accounts receivable |
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| Prepaid expenses and deposits |
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| Due from related parties |
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| Deferred offering cost |
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| Total current assets |
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| Right of use assets – operating lease |
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| Long-term prepaid expenses and deposits |
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| Property and equipment, net |
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| Total assets | $ |
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$ |
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| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable & accrued liabilities | $ |
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$ |
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| Operating lease liabilities - current |
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| Income tax payable |
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| Total current liabilities |
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| Operating lease liabilities – non current |
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| Total liabilities |
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| Shareholders’ equity: | ||||||||
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Preferred stock, $
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Common stock, $
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Treasury stock,
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(
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(
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| Additional paid-in capital |
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| Accumulated deficit |
(
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) |
(
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) | ||||
| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity | $ |
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$ |
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| Retrospectively applied for effect of the forward stock split on April 5, 2024 and the 2025 Reverse Stock Split on September 19, 2025. |
See accompanying notes to condensed consolidated financial statements.
1
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue | $ |
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$ |
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$ |
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$ |
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| Cost of sales |
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| Gross profit (loss) |
(
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) |
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| Operating expenses | ||||||||||||||||
| General & administrative expenses | $ |
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$ |
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$ |
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$ |
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| Total operating expenses |
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| (Loss) income from operations |
(
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| Other income (expenses) | ||||||||||||||||
| Interest expenses |
(
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) |
(
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(
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(
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| Other income |
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| Total other income (expenses) |
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(
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| (Loss) income before income taxes |
(
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| Current income tax (recovery) expenses |
(
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) |
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| Net (loss) income | $ |
(
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) | $ |
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$ |
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$ |
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| Total comprehensive (loss) income | $ |
(
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) | $ |
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$ |
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$ |
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| (Loss) earnings per share of common stock: | ||||||||||||||||
| Basic (loss) earnings per share | $ |
(
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) | $ |
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$ |
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$ |
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| Diluted (loss) earnings per share | $ |
(
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) | $ |
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$ |
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$ |
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| Weighted average basic & diluted shares outstanding: | ||||||||||||||||
| Preferred |
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| Common |
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| Retrospectively applied for effect of the forward stock split on April 5, 2024 and the 2025 Reverse Stock Split on September 19, 2025. |
See accompanying notes to condensed consolidated financial statements.
2
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
For the three months ended
| Preferred Stock | Common Stock | Treasury Stock |
Preferred
Stock Amount |
Common
Stock Amount |
Treasury
Amount |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total | ||||||||||||||||||||||||||||
| June 30, 2024 (Unaudited) |
|
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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|||||||||||||||||||
| Net income | — | — | — |
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| September 30, 2024 (Unaudited) |
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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| June 30, 2025 (Unaudited) |
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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| Net loss | — | — | — |
(
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) |
(
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) | |||||||||||||||||||||||||||||
| Conversion of Preferred Stock into Common Stock |
(
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) |
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— |
(
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) |
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| September 30, 2025 (Unaudited) |
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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For the six months ended
| Preferred Stock | Common Stock | Treasury Stock |
Preferred
Stock Amount |
Common
Stock Amount |
Treasury
Amount |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total | ||||||||||||||||||||||||||||
| March 31, 2024 |
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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| Net income | — | — | — |
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| September 30, 2024 (Unaudited) |
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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| March 31, 2025 |
|
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(
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) | $ |
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$ |
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(
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) | $ |
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$ |
(
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) | $ |
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|||||||||||||||||||
| Net income | — | — | — |
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|||||||||||||||||||||||||||||||
| Conversion of Preferred Stock into Common Stock |
(
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) |
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— |
(
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) |
|
|||||||||||||||||||||||||||||
| September 30, 2025 (Unaudited) |
|
|
(
|
) | $ |
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$ |
|
(
|
) | $ |
|
$ |
(
|
) | $ |
|
|||||||||||||||||||
| Retrospectively applied for effect of the forward stock split on April 5, 2024 and the 2025 Reverse Stock Split on September 19, 2025. |
See accompanying notes to condensed consolidated financial statements.
3
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
|
September 30,
2025 |
September 30,
2024 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ |
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$ |
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| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation |
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| Non-cash lease expenses |
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| Changes in working capital: | ||||||||
| Accounts receivable |
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(
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) | |||||
| Prepaid expenses |
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(
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) | |||||
| Long-term prepaid expenses |
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| Accounts payable & accrued liabilities |
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| Income tax payable |
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| Operating lease liabilities |
(
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(
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| Net cash provided by operating activities |
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| Cash flows from investing activities: | ||||||||
| Net cash used in investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Advances to related parties |
(
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) | ||||||
| Proceeds borrowed from related parties |
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| Payment for offering cost |
(
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) |
(
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) | ||||
| Net cash (used in) provided by financing activities |
(
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) |
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| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | ||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
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| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | $ |
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$ |
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| CASH AND CASH EQUIVALENTS, END OF PERIOD |
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| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
4
QDM International Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 2025 and 2024
1. Organization and principal activities
QDM International Inc. (“QDM,” and collectively with its subsidiaries, the “Company”) was incorporated in Florida in March 2020 and is the successor to 24/7 Kid Doc, Inc. (“24/7 Kid”), which was incorporated in Florida in November 1998. The Company conducts its business through an indirectly wholly owned subsidiary, Hong Kong YeeTah Insurance Broker Limited (formerly known as YeeTah Insurance Consultant Limited, “YeeTah”), a licensed insurance brokerage company located in Hong Kong, China. YeeTah sells a wide range of insurance products, consisting of two major categories: (1) life and medical insurance, such as individual life insurance; and (2) general insurance, such as automobile insurance, commercial property insurance, liability insurance, homeowner insurance. In addition, as a Mandatory Provident Fund (“MPF”) Intermediary, YeeTah is also licensed to provide its customers with assistance on account opening and related services under the MPF and the Occupational Retirement Schemes Ordinance schemes (“ORSO”) in Hong Kong, both of which are retirement protection schemes set up for employees.
In 2022, 24/7 Kid was administratively dissolved with the State of Florida.
In March 2023, the Company consummated a public
offering of its common stock, par value $
On March 28, 2024, the Company filed an Articles
of Amendment to Articles of Incorporation of the Company (the “Amendment”) with the Florida Department of State to (i) increase
its authorized shares of common stock, par value $
As a result of the 2024 Forward Stock Split, each
issued and outstanding share of the Company’s common stock prior to the effective time of the 2024 Forward Stock Spilt were split
into
On September 16, 2025, the Company filed an Articles
of Amendment to Articles of Incorporation of the Company with the Florida Division of Corporation to effect a reverse split of the Company’s
issued and outstanding shares of common stock at a ratio of
As a result of the 2025 Reverse Stock Split, each
On September 22, 2025, Mr. Huihe Zheng, the Company’s
CEO, President and Chairman, converted
2. Summary of significant accounting policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2025, and for the three and six months ended September 30, 2025 and 2024. The results of operations for the three and six months ended September 30, 2025 are not necessarily indicative of the operating results for any subsequent quarterly period for the rest of the fiscal year ended on March 31, 2026, the full year ending March 31, 2026, or future periods. These unaudited condensed consolidated financial statements have been derived from the accounting records of the Company and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended March 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on July 10, 2025.
5
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with the U.S. GAAP requires the Company to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses may be affected by the estimates that management is required to make. Actual results could differ from those estimates.
Foreign Currency and Foreign Currency Translation
The Company’s reporting currency is the United States Dollar (“US$” or “$”). The Company’s operations are principally conducted in Hong Kong where Hong Kong dollar is the functional currency.
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency at the prevailing rates of exchange at the balance sheet date. The resulting exchange differences are reported in the statements of operations and comprehensive loss.
The exchanges rates used for translation from
Hong Kong dollar to US$ was
Measurement of credit losses on financial instruments
On April 1, 2022, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments,” for financial assets at amortized cost including accounts receivable, refundable deposits. This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.
Certain Risks and Concentration
The Company’s financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and receivables, and other assets. As of September 30, 2025, substantially all of the Company’s cash and cash equivalents were held in major financial institutions located in Hong Kong, which management considers to being of high credit quality.
Cash and Cash Equivalents
Cash and cash equivalents consist of petty cash
on hand and cash held in banks, which are highly liquid and have original maturities of three months or less and are unrestricted as to
withdrawal or use. The Company maintains all bank accounts in Hong Kong. Cash balances in bank accounts in Hong Kong are protected under
Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to HKD
6
Accounts Receivable
Accounts receivable represents trade receivable and are recognized initially at fair value and subsequently adjusted for any allowance for expected credit loss.
The Company evaluates the expected credit loss of accounts receivable based on historical collection experience, the financial condition of its customers and assumptions for the future movement of different economic drivers and how these drivers will affect each other. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less than the carrying value.
The Company historically did not have material bad debts in accounts receivable and management believed that there were no expected credit loss for doubtful accounts. There were no provision for credit loss for doubtful accounts for the three and six months ended September 30, 2025 and 2024 and there was no allowance for credit loss as of September 30, 2025 and March 31, 2025.
Deferred Offering Costs
Pursuant to ASC 340-10-S99-1, incremental offering costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related to the registration preparation, SEC filing and print related costs, exchange uplisting costs, and road show related costs. In the event the offering is unsuccessful or aborted, the costs will be expensed.
Revenue Recognition
The Company generates revenue primarily through insurance brokerage services and referral business in Hong Kong. The Company sells insurance products underwritten by insurance companies operating in Hong Kong to its individual customers and is compensated for its services by commissions paid by insurance companies, typically based on a percentage of the premium paid by the insured. In addition, the Company has entered into a collaborative partnership with a trust company in Hong Kong. Under this arrangement, the Company referred clients to the trust company for investment products and, in return, earned commissions based on a percentage of the value of the investment products purchased by the referred clients as revenue.
ASC 606 provides for a five-step model for recognizing revenue from contracts with customers. These five steps include:
| (i) | Identify the contract | |
| (ii) | Identify performance obligations | |
| (iii) | Determine transaction price | |
| (iv) | Allocate transaction price | |
| (v) | Recognize revenue |
The Company enters into insurance brokerage contracts with customers (insurance companies). Performance obligation for these insurance brokerage contracts is to help insurance company customers to promote, coordinate and complete subscriptions of insurance policies offered by customers.
Insurance brokerage services
Under ASC 606, revenue is recognized when the customer obtains control of a good or service. A customer obtains control of a good or service if it has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The transfer of control of the Company’s brokerage services generally occurs at a point in time on the effective date of the associated insurance contract when the policy transfers to the customer. The insurance policy entered between the insurance company and the insured customer generally contains a mandatory cooling-off period of 21 days, during which policy purchasers may cancel the policy at their discretion and receive refunds. The policy becomes effective only after the cooling-off period has lapsed and the insured customer has not withdrawn from the insurance policy. At this point, the transfer of control of the service occurs, and the Company has satisfied its insurance brokerage performance obligation. The Company then earns commissions, typically based on a percentage of the premium paid by the insured, and recognizes the related revenue.
Referral Business
Under ASC 606, revenue is recognized when the
customer obtains control of a good or service. A customer obtains control of a good or service if it has the ability to direct the use
of and obtain substantially all of the remaining benefits from that good or service. The transfer of control of the Company’s referral
services occurs at a point in time when the trust company confirms the referred client’s purchase of the investment product and
the receipt of the corresponding funds. At that point, the Company has satisfied its performance obligation and recognizes revenue. For
the three and six months ended September 30, 2025, there was
revenue generated from referral business. For the three and six months
ended September 30, 2024, the Company generated $
7
Fair Value Measurement
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value as follows:
| Level 1: | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| Level 2: | Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities. | |
| Level 3: | Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The Company’s financial instruments include cash and cash equivalents, accounts receivable, deposits, due from related parties, accounts payable and accrued liabilities and lease liabilities. The carrying amounts of these financial instruments approximate their fair values due to the short-term nature of these instruments. For lease liabilities, fair value approximates their carrying value at the year end as the interest rates used to discount the host contracts approximate market rates.
The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring basis as of September 30, 2025 and March 31, 2025.
Property and Equipment
Property and equipment are recorded at cost, less
accumulated depreciation and impairment. Depreciation of property and equipment is calculated on a straight-line basis, after consideration
of expected useful lives and estimated residual values.
| Category |
Depreciation
rate |
Estimated
residual value |
||||
| Office equipment |
|
|||||
| Leasehold improvements |
Expenditures for maintenance and repairs are expensed as incurred. Gains and losses on disposals are the differences between net sales proceeds and carrying amount of the relevant assets and are recognized in the statements of operations and comprehensive loss.
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amounts to the expected future undiscounted cash flows attributable to these assets. If it is determined that an asset is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the assets exceeds the expected discounted cash flows arising from those assets.
There were impairment losses for the three and six months ended September 30, 2025 and 2024.
8
Leases
Arrangements meeting the definition of a lease are classified as operating or finance leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.
In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components as permitted under ASC 842. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.
Taxation
Current income taxes are provided on the basis of net profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.
Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carryforwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations and comprehensive income in the period of the enactment of the change.
The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.
9
The Company recognizes a tax benefit associated
with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination
by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently
measures the tax benefit as the largest amount that the Company judges to have a greater than
General and administrative expenses
General and administrative expenses primarily include staff cost, consulting and professional fees, rent and rates, depreciation, travelling and transportation, insurance, and other miscellaneous administrative expenses.
Related party transactions
In general, related parties exist when there is
a relationship that offers the potential for transactions at less than arm’s-length, favorable treatment, or the ability to influence
the outcome of events different from that which might result in the absence of that relationship. A related party may be any of the following:
a) an affiliate, which is a party that directly or indirectly controls, is controlled by, or is under common control with another party;
b) a principle owner, owner of record or known beneficial owner of more than
Earnings per share
Basic earnings per share is computed by dividing net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the period using the two-class method. Under the two-class method, net income is allocated between shares of common stock and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to holders of common stock by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
Segment Reporting
FASB 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information of the Company’s business segments, geographical areas, and major customers. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker as the source for determining the Company’s reportable segments.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
In November 2024, FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). Under ASU 2024-03, a public entity would be required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. ASU 2024-03 allows for early adoption and requires either prospective adoption to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. The Company’s management does not believe the adoption of ASU 2024-03 will have a material impact on its financial statements and disclosures.
Management does not believe that any recently issued, but not effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
10
3. Equity
2024 Forward Stock Split
On April 5, 2024, the Company effected a forward
split of its issued and outstanding shares of common stock at a ratio of 10-for-1. As a result of the 2024 Forward Stock Split, each issued
and outstanding share of the Company’s common stock prior to the effective time of the Forward Stock Spilt are split into ten shares
of common stock and the total number of issued and outstanding shares of common stock increases from
2025 Reverse Stock Split
On September 19, 2025, the Company effected a
reverse split of its issued and outstanding shares of common stock at a ratio of
Preferred Stock
On October 4, 2024, the Company filed an Articles
of Amendment to Articles of Incorporation of the Company with the Florida Division of Corporation to increase the Company’s authorized
shares of Series B preferred stock, par value $
On October 9, 2024, the Company entered into a
securities subscription agreement (the “Securities Subscription Agreement”) with Huihe Zheng, the Company’s Chief Executive
Officer, President, and Chairman of the Board. Pursuant to the Securities Subscription Agreement, the Company issued
On September 22, 2025, Mr. Huihe Zheng, the Company’s
CEO and chairman, converted
The Company’s authorized capital stock consists
of
YeeTah is a licensed insurance broker
company in Hong Kong and subject to certain Hong Kong insurance broker requirements regarding its share capital and net assets. As
per the requirements, a licensed insurance broker company must at all times maintain a paid-up share capital of not less than
US$
4. Related Party Transaction
Related Parties
| Name of related parties | Relationship with the Company | |
| Huihe Zheng |
|
11
Related Party Transactions
| (i) |
During the three and six months ended September 30, 2025,
advances were made by Huihe Zheng to the Company. During the three and six months ended September 30, 2024, Huihe Zheng advanced
and $
|
| (ii) |
During the three and six months ended September 30, 2025, the Company
advanced $
|
Due from Related Party Balance
The Company’s due from related party balance is as follows:
|
September 30,
2025 |
March 31,
2025 |
|||||||
| (Unaudited) | ||||||||
| Huihe Zheng | $ |
|
$ | |||||
| Total |
|
|||||||
The due from related balance represented an advance to Huihe Zheng in connection with a proposed cash bonus for his leadership in achieving certain performance targets and improving the Company’s operational efficiency. The proposed cash bonus was subsequently cancelled, and Mr. Zheng repaid the full amount to the Company on November 5, 2025.
5. Income Taxes
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance,
the Company’s Hong Kong subsidiaries are subject to a
BVI
Under the current laws of the BVI, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no BVI withholding tax will be imposed.
US
Under the current Florida state and US federal
income tax, the Company does not need to pay income taxes as Florida state does not levy income tax. The federal income tax is based on
a flat rate of
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of September 30, 2025, the Company did not have any significant unrecognized uncertain tax positions.
6. Commitments and Contingencies
Other than two office leases both with a lease
term of
12
Operating lease
The 2023 Office Lease has a remaining lease term of the operating lease
of
The 2025 Office Lease has a remaining lease term
of the operating lease of
During the three months ended September 30, 2025 and 2024, the operating
lease expense recognized was $
During the six months ended September 30, 2025 and 2024, the operating
lease expense recognized was $
Contingencies
The Company is subject to legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome arising out of any such matter will have a material adverse effect on its business, financial position, cash flows or results of operations taken as a whole. As of September 30, 2025, the Company is not a party to any material legal or administrative proceedings.
7. Segment Information
The Company operates and manages its business as a operating segment. This is consistent with the manner in which the CODM reviews financial information and makes decisions about resource allocation.
The Company’s operations primarily consist of providing insurance brokerage services and referral business in Hong Kong.
Since the Company operates in only
8. Subsequent Events
On October 1, 2025, Mr. Zheng entered into a shareholder
agreement with the Company (the “Shareholder Agreement”), pursuant to which Mr. Zheng agreed not to sell, assign, or otherwise
transfer, or enter into any contract or arrangement to effect any such sale, assignment or transfer of any share of the Series B Preferred
Stock held by Mr. Zheng. Mr. Zheng has further agreed to waive any co-sales rights enjoyed by holders of Series B Preferred Stock pursuant
to the Articles of Incorporation, as amended. Pursuant to the agreement, upon the occurrence of (i) any merger, consolidation, stock sale,
asset sale, or other transaction or series of related transactions in which a person or group (other than Mr. Zheng) acquires, directly
or indirectly, ownership of more than
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is based on, and should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report. Certain capitalized terms used but not defined in the below discussion and elsewhere in this Report have the meanings ascribed to them in the footnotes to the accompanying financial statements included as part of this Report.
Overview
QDM International Inc. is a holding company incorporated in Florida with no material operations of its own, and conducts business through our indirectly wholly owned subsidiary, Hong Kong YeeTah Insurance Broker Limited (“YeeTah”), primarily in Hong Kong.
YeeTah sells a wide range of insurance products consisting of two major categories: (i) life and medical insurance, such as individual life insurance; and (ii) general insurance, such as automobile insurance, commercial property insurance, liability insurance and homeowner insurance. In addition, as a MPF intermediary, YeeTah is also licensed to provide customers with assistance on account opening and related services under the MPF and the ORSO schemes in Hong Kong, which are retirement protection schemes set up for employees who are Hong Kong residents.
YeeTah sells insurance products underwritten by insurance companies operating in Hong Kong to individual customers who are either Hong Kong residents or visitors from mainland China and is compensated for its services by commissions paid by insurance companies, typically based on a percentage of the premium paid by the insured. Commissions generally depend on the type and term of insurance products and the particular insurance company, and they are usually paid by the insurance companies the next month after the cooling off period of the policies sold, which is generally 21 days after the earlier of the delivery of the policy or the delivery of the cooling off notice to the policy holder, during which period policy purchasers may cancel the policy at their discretion and receive refunds.
In December 2023, we strategically expanded our business model by entering into a collaborative partnership with a trust company in Hong Kong. This partnership allows us to refer potential clients, who are part of our growing customer base, to the trust company for asset management services. In return for these referrals, we earn commissions based on a percentage of the value of the investment products purchased by the referred clients. This mutually beneficial arrangement enables us to diversify our revenue streams while providing additional value to our customers by connecting them with trusted investment opportunities.
Recent Developments
On October 4, 2024, we filed an Articles of Amendment to Articles of Incorporation of the Company with the Florida Division of Corporation to increase our authorized shares of Series B Preferred Stock from 2,000,000 shares to 10,000,000 shares, which became effective as of October 7, 2024. The foregoing amendment was approved by the Board, in accordance with our Articles of Incorporation and the Florida Business Corporation Act.
On October 9, 2024, we entered into the Securities Subscription Agreement with Huihe Zheng, our Chief Executive Officer, President, and Chairman of the Board. Pursuant to the Securities Subscription Agreement, we issued 6,000,000 shares of Series B Preferred Stock to Mr. Zheng at a purchase price of $0.10 per share, in exchange for the cancellation by Mr. Zheng of a portion of the currently outstanding principal amount of the debt owed by us to Mr. Zheng, in the amount of US$600,000, which was loaned by Mr. Zheng to us providing for our working capital and general corporate expenses. As a result of the issuance of Series B Preferred Stock to Mr. Zheng, Mr. Zheng beneficially owns 82.1% of the aggregate voting power of us as of the date of this report.
On September 16, 2025, we filed an Articles of Amendment to Articles of Incorporation of the Company with the Florida Division of Corporation to effect a reverse split of our issued and outstanding shares of common stock at a ratio of 1-for-34 (the “2025 Reverse Stock Split”), which was announced by the FINRA having an effective date of September 19, 2025. The foregoing amendments were approved by our board of directors and shareholders holding approximately 93.6% of the voting power of the Company.
As a result of the 2025 Reverse Stock Split, each 34 shares of the common stock issued and outstanding prior to the split were combined into one share of the common stock issued and outstanding after the 2025 Reverse Stock Split and the total number of issued and outstanding shares of common stock decreased from 291,563,930 shares to approximately 8,577,583 shares (with fractional shares rounded up). The 2025 Reverse Stock Split had no impact on our issued and outstanding shares of preferred stock other than that the conversion rate and voting rights of our Series C Preferred Stock were proportionately adjusted. On September 18, 2025, the 2025 Reverse Stock Split was announced by the Financial Industry Regulatory Authority with an effective date on September 19, 2025.
On September 22, 2025, Mr. Huihe Zheng, our CEO, President and Chairman, converted 531,886 shares of Series C Preferred Stock into 58,507 shares of common stock, at an adjusted conversion rate of 0.11 for 1. After the conversion, there were 8,636,090 shares of common stock issued and outstanding and no shares of Series C Preferred Stock issued and outstanding.
On October 1, 2025, Mr. Zheng entered into a shareholder agreement with the Company (the “Shareholder Agreement”), pursuant to which Mr. Zheng agreed not to sell, assign, or otherwise transfer, or enter into any contract or arrangement to effect any such sale, assignment or transfer of any share of the Series B Preferred Stock held by Mr. Zheng. Mr. Zheng further agreed to waive any co-sales rights enjoyed by holders of Series B Preferred Stock pursuant to the Articles of Incorporation, as amended. Pursuant to the agreement, upon the occurrence of (i) any merger, consolidation, stock sale, asset sale, or other transaction or series of related transactions in which a person or group (other than Mr. Zheng) acquires, directly or indirectly, ownership of more than 50% of the voting power of the Company or all or substantially all of the Company’s assets, or (ii) any transaction or series of related transactions that results in a change in the power to elect a majority of the Company’s board of directors, the Company shall repurchase all of the shares of Series B Preferred Stock held by Mr. Zheng for a purchase price of $0.001 per share.
14
Results of Operations
Three Months Ended September 30, 2025 and 2024
The following table presents an overview of our results of operations for the three months ended September 30, 2025 and 2024:
|
For The Three
Months Ended September 30, 2025 |
For The Three
Months Ended September 30, 2024 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Insurance brokerage services | $ | 3,970,674 | 975,501 | |||||
| Referral business | — | 18,416 | ||||||
| Total revenue | 3,970,674 | 993,917 | ||||||
| Cost of sales | 4,946,977 | 109,639 | ||||||
| Gross (loss) profit | (976,303 | ) | 884,278 | |||||
| Operating expenses: | ||||||||
| General & administrative expenses | 349,519 | 273,762 | ||||||
| Total operating expenses | 349,519 | 273,762 | ||||||
| (Loss) income from operations | (1,325,822 | ) | 610,516 | |||||
| Total other income (expenses) | 21,030 | (2,281 | ) | |||||
| Current income tax (recovery) expenses | (191,434 | ) | 119,529 | |||||
| Net (loss) income | $ | (1,113,358 | ) | $ | 488,706 | |||
Revenue
Revenue increased by approximately $3.0 million, or 299.5%, for the three months ended September 30, 2025 as compared to the same period of 2024. The increase was mainly due to: (i) the expansion of our collaboration with insurance partners during the three months ended September 30, 2025; (ii) an increase in the number of insurance policies that generate commissions for us; and (iii) an increase in commission rate.
Cost of sales
Cost of sales increased by approximately $4.8 million, or 4,412.1%, for the three months ended September 30, 2025 as compared to the same period of 2024. The increase was primarily due to higher referral fees paid to referrers. During the three months ended September 30, 2025, the Company experienced an increase in commission rates paid as requested by certain referrers in response to competitive market conditions. To maintain competitiveness and sales performance, we agreed to increase the referral fee rate to approximately 90% for the three months ended September 30, 2025 and applied the revised rate retroactively to business referred during the three months ended June 30, 2025. As a result, we recorded an incremental commission expense in the current period.
In light of recent circulars issued by the Hong Kong Insurance Authority, including the adoption of a 50% benchmark for referral fees, we expect that referral fee rates in the market will gradually normalize as industry participants adjust to these regulatory requirements. Consistent with these expectations and our intent to align with the Insurance Authority’s guidance, we have decreased our referral fee rates to a range of approximately 40% to 50%, at or below the benchmark level, since October 2025. This reduction is expected to lower our referral-related commission costs going forward, although it may also affect the volume of business generated through referrers, as discussed under “ Part II – Other Information – Item 1A. Risk Factors – If we fail to comply with Hong Kong regulations on referral arrangements and benchmark referral fees, we may be subject to regulatory sanctions, including suspension or revocation of our insurance broker license, and our business, financial condition and results of operations could be materially and adversely affected .”
15
Gross (loss) profit
Gross profit margin decreased by approximately 113.6% for the three months ended September 30, 2025 as compared to the same period of 2024, which was in line with the significant increase in cost of sales.
General and administrative expenses
General and administrative expenses generally are fixed and consist primarily of employee salaries, office rent, insurance costs, general office operating expenses (e.g., utilities, repairs and maintenance) and professional fees in engaging various service providers.
General and administrative expenses increased by approximately $76,000, or 27.7%, for the three months ended September 30, 2025 as compared to the same period of 2024. The change is primarily due to hiring of more employees and increased travelling and transportation expenses.
Other income (loss)
Other income increased by approximately $23,000, or 1,022.1%, for the three months ended September 30, 2025 as compared to the same period of 2024. For the three months ended September 30, 2025, other income was mainly attributable to interest income from time deposits. For the same period in 2024, other expenses were mainly attributable to the bank charges.
Current income tax (recovery) expenses
Current income tax expenses decreased by approximately $311,000, or 260.2%, for the three months ended September 30, 2025 as compared to the same period of 2024. The change is primarily due to the loss from operations recorded for the three months ended September 30, 2025, as compared to the income generated during the same period in 2024.
Net income (loss)
As a result of the factors described above, net loss was approximately $1.1 million for the three months ended September 30, 2025 , as compared to net income of approximately $489,000 for the same period of 2024.
Six Months Ended September 30, 2025 and 2024
The following table presents an overview of our results of operations for the six months ended September 30,2025 and 2024:
|
For The Six
Months Ended September 30, 2025 |
For The Six
Months Ended September 30, 2024 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Insurance brokerage services | $ | 7,565,671 | 1,939,766 | |||||
| Referral business | — | 18,416 | ||||||
| Total revenue | 7,565,671 | 1,958,182 | ||||||
| Cost of sales | 5,585,155 | 288,271 | ||||||
| Gross profit | 1,980,516 | 1,669,911 | ||||||
| Operating expenses: | ||||||||
| General & administrative expenses | 716,713 | 522,541 | ||||||
| Total operating expenses | 716,713 | 522,541 | ||||||
| Income from operations | 1,263,803 | 1,147,370 | ||||||
| Total other income | 71,718 | 6,526 | ||||||
| Current income tax expenses | 252,574 | 205,810 | ||||||
| Net income | $ | 1,082,947 | 948,086 | |||||
16
Revenue
Revenue increased by approximately $5.6 million, or 286.4%, for the six months ended September 30, 2025 as compared to the same period of 2024. The increase was mainly due to: (i) the expansion of our collaboration with insurance partners during the six months ended September 30, 2025; (ii) an increase in the number of insurance policies that generate commissions for us; and (iii) an increase in commission rate.
Cost of sales
Cost of sales increased by approximately $5.3 million, or 1,837.5%, for the six months ended September 30, 2025 as compared to the same period of 2024. The increase was primarily due to higher referral fees paid. During the six-month period ended September 30, 2025, the Company experienced an increase in commission cost rates as requested by certain referrers in response to market conditions. To align with market conditions and maintain competitiveness and sales performance, we agreed to increase the referral fee rates to approximately 90% for the period from July to September 2025 and applied the updated rate retroactively to the period from April to June 2025. As a result, the Company recorded an incremental commission expense in the current period.
Gross profit
Gross profit margin decreased by approximately 59.1% for the six months ended September 30, 2025 as compared to the same period of 2024, which was in line with the significant increase in cost of sales.
General and administrative expenses
General and administrative expenses generally are fixed and consist primarily of employee salaries, office rent, insurance costs, general office operating expenses (e.g., utilities, repairs and maintenance) and professional fees in engaging various service providers.
General and administrative expenses increased by approximately $194,000, or 37.2%, for the six months ended September 30, 2025 as compared to the same period of 2024. The change is primarily due to hiring of more employees, increase in professional fees paid to various service providers, and increased travelling and transportation expenses.
Other income
Other income increased by approximately $65,000, or 998.9%, for the six months ended September 30, 2025 as compared to the same period of 2024. For the six months ended September 30, 2025, other income was mainly attributable to interest income from time deposits. For the same period in 2024, other income were mainly attributable to a one-time gain, partially offset by bank charges. The change is primarily due to the interest income from time deposit recognized during the fiscal year of 2025, with no such income recognized in the same period of 2024.
Current income tax expenses
Current income tax expenses increased by approximately $47,000, or 22.7%, for the six months ended September 30, 2025 as compared to the same period of 2024. The change is primarily due to increase in profits in the six months ended September 30, 2025.
Net income
As a result of the factors described above, net income for the six months ended September 30, 2025 increased by approximately $135,000, or 14.2%, as compared to the same period of 2024.
Foreign Currency Translation
The Company’s reporting currency is the United States dollar (“US$”). The Company’s operations are principally conducted in Hong Kong where the Hong Kong dollar is the functional currency.
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency at the prevailing rates of exchange at the balance sheet date. The resulting exchange differences are reported in the statements of operations and comprehensive loss.
The exchanges rate used for translation from Hong Kong dollar to US$ was 7.8000, a pegged rate determined by the linked exchange rate system in Hong Kong. This pegged rate was used to translate Company’s balance sheets, income statement items and cash flow items for both the three and six months ended September 30, 2025 and 2024, and the year ended March 31, 2025.
17
Liquidity and Capital Resources
Our working capital requirements mainly comprise of commissions paid to technical representatives and referral fees, operating lease payments and employee salaries. We have financed our operations primarily through cash generated by operating activities, equity financings and advances from our principal shareholder. QDM is a holding company and conducts substantially all of its operations through YeeTah, which is its only entity that has operating cash inflows. Our expenses are paid by the cash provided by our operating activities. As of September 30, 2025 and March 31, 2025, we had $12,519,196 and $8,557,305, respectively, in cash and cash equivalents, which primarily consisted of cash deposited in banks.
YeeTah is a licensed insurance broker company in Hong Kong and subject to certain Hong Kong insurance broker requirements regarding its share capital and net assets. According to the requirements, a licensed insurance broker company must at all times maintain a paid-up share capital of not less than US$64,103 (HK$500,000) and net assets of not less than US$64,103 (HK$500,000), subject to the phase-in transitional arrangement applicable to specified insurance broker companies, including YeeTah, pursuant to which, YeeTah is required to maintain the amount of paid-up share capital and net assets of (i) not less than US$12,821 (HK$100,000) for the period from September 23, 2019 to December 31, 2021 and (ii) not less than US$38,462 (HK$300,000) for the period from January 1, 2022 to December 31, 2023. YeeTah was in compliance with the applicable minimum paid-up share capital and net assets requirements as of September 30, 2025.
The table below shows our cash flow for the periods indicated:
|
Six Months
Ended September 30, 2025 |
Six Months
Ended September 30, 2024 |
|||||||
| Net cash provided by operating activities | $ | 4,258,301 | $ | 1,049,090 | ||||
| Net cash used in investing activities | — | — | ||||||
| Net cash (used in) provided by financing activities | (296,410 | ) | 91,556 | |||||
| Effect of Exchange rate changes on cash | — | — | ||||||
| Net increase in cash, cash equivalents | 3,961,891 | 1,140,646 | ||||||
| Cash and cash equivalents at beginning of period | 8,557,305 | 5,158,223 | ||||||
| Cash and cash equivalents at end of period | $ | 12,519,196 | $ | 6,298,869 | ||||
18
Operating Activities:
Net cash generated from operating activities was approximately $4.3 million for the six months ended September 30, 2025, compared to net cash generated from operating activities of approximately $1.0 million for the same period in 2024, representing an increase of approximately $3.3 million in the net cash inflow in operating activities. The increase in net cash generated from operating activities was primarily due to an increase of net income of approximately $135,000 in the six months ended September 30, 2025 as compared to the same period of 2024. The increase in operating cash flow also reflects the following major working capital changes:
| (1) | Decrease in accounts receivable resulted in an approximately $983,000 cash inflow for the six months ended September 30, 2025 compared to an approximately $44,000 cash outflow for the same period of 2024, which led to an approximately $1.0 million increase in net cash inflow in operating activities. |
| (2) | Increase in accounts payable and accrued liabilities resulted in an approximately $1.8 million cash inflow for the six months ended September 30, 2025 compared to an approximately $58,000 cash inflow for the same period of 2024, which led to an approximately $1.7 million increase in net cash inflow from operating activities. |
| (3) | Decrease in short-term and long-term prepaid expenses resulted in an approximately $131,000 cash inflow for the six months ended September 30, 2025 compared to an approximately $128,000 cash outflow for the same period of 2024, which led to an approximately $259,000 increase in net cash inflow from operating activities. |
| (4) | Increase in income tax payable resulted in an approximately $253,000 cash inflow for the six months ended September 30, 2025 compared to an approximately $206,000 cash inflow for the same period of 2024, which led to an approximately $47,000 increase in net cash inflow from operating activities. |
Investing Activities:
No cash was used in investing activities during the six months ended September 30, 2025 and 2024.
Financing Activities:
Net cash used in financing activities was approximately $296,000 for the six months ended September 30, 2025, which was attributable to advances to related parties of approximately $256,000 and payment for certain fees incurred for the public offering of the shares of common stock on Nasdaq of $40,000. The advances to related parties were fully repaid to the Company on November 5, 2025.
Net cash provided by financing activities was approximately $92,000 for the six months ended September 30, 2024, which was derived from the proceeds borrowed from related parties of approximately $129,000, partially offset by payment for such fees incurred for the public offering and listing on Nasdaq of the Company’s shares of common stock of approximately $38,000.
Material Commitments
We have no material commitments for the next twelve months.
We had two office lease agreements and our lease commitments as of September 30, 2025, which are summarized as follows:
Operating lease
|
2023
Office Lease |
2025
Office Lease |
Total | ||||||||||
| 2026 | $ | 50,812 | $ | 38,128 | $ | 88,940 | ||||||
| 2027 | — | 38,128 | 38,128 | |||||||||
| 2028 | — | 12,709 | 12,709 | |||||||||
| Total future minimum lease payments | $ | 50,812 | $ | 88,965 | $ | 139,777 | ||||||
| Less: imputed interest | (1,682 | ) | (7,772 | ) | (9,454 | ) | ||||||
| Total operating lease liability | $ | 49,130 | $ | 81,193 | $ | 130,323 | ||||||
| Less: operating lease liability – current | 49,130 | 33,025 | 82,155 | |||||||||
| Total operating lease liability – non-current | $ | — | $ | 48,168 | $ | 48,168 | ||||||
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Critical Accounting Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases their estimates on historical experience and on various other factors that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.
While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our condensed consolidated financial statements, we believe that there were no critical accounting policies and estimates that affect the preparation of financial statements.
Off-balance Sheet Commitments and Arrangements
As of September 30, 2025, the Company did not have any material off-balance sheet arrangements that had or were reasonably likely to have any effect on their respective financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of September 30, 2025, due to the material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) lack of proper segregation of duties and risk assessment process; (ii) lack of formal documentation in internal controls over financial reporting; and (iii) lack an audit committee.
To remediate our identified material weaknesses, we plan to adopt measures to improve our internal controls over financial reporting, including, among others: (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen our financial reporting function and to set up a financial and system control framework; (ii) organizing regular training for our accounting staff, especially training related to U.S. GAAP and SEC reporting requirements, (iii) formulating U.S. GAAP accounting policies and a procedure manual, which will be maintained, reviewed and updated, on a regular basis, to the latest U.S. GAAP accounting standards, (iv) establishing assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; and (v) establishing an audit committee of the Board consisting of three committee members meeting independence requirements under the Nasdaq listing rules and SEC rules.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any material legal or administrative proceedings. We may from time to time be subject to legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.
Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, there have been no material changes with respect to those risk factors previously disclosed in our Annual Report on Form 10-K filed with the SEC on July 10, 2025, other than as set forth below.
If we fail to comply with Hong Kong regulations on referral arrangements and benchmark referral fees, we may be subject to regulatory sanctions, including suspension or revocation of our insurance broker license, and our business, financial condition and results of operations could be materially and adversely affected.
We rely on referrals as an important source of new clients, including visitors from Mainland China. As a licensed insurance broker company in Hong Kong, we are subject to the Insurance Ordinance (Cap. 41) and the supervision of the Insurance Authority (the “IA”), including its requirements on the use of referrers and on cross-border business. Under Hong Kong law and IA guidance, only licensed insurance intermediaries may carry on regulated activities such as advising on and arranging insurance policies. Business models that, in substance, shift selling or advisory activities to unlicensed persons or incentivize unlicensed selling are prohibited.
On May 22, 2024, the IA issued a circular addressing non-compliant business models that incentivize unlicensed selling of long-term insurance policies to Mainland China visitors. The IA indicated that it will not tolerate licensed insurance intermediaries who rely on or have arrangements with unlicensed persons to conduct regulated activities for them. These business models have features including engaging unlicensed persons to source Mainland China clients, paying inordinately high, sales-contingent referral fees that absorb most of the commission, received by the licensed broker for selling the insurance policy, referrers paying prohibited rebates to clients to induce them to buy long-term insurance policies, licensed technical representatives who, due to insufficient time or resources, are unable to perform their responsibilities beyond a superficial form-filling exercise, effectively reducing their role to that of a “rubber stamp” and requiring or encouraging clients to provide inaccurate statements about who performed the regulated activities and where they took place. The IA expects licensed broker companies that rely on referrers to ensure that any referral model is consistent with the relevant principles and that all regulated activities are performed by licensed personnel.
On September 1, 2025, the IA issued a further circular on referral fees in respect of certain participating policies. With effect from October 1, 2025, the IA adopted 50% of the total commission or other remuneration receivable by a licensed insurance broker company from an authorized insurer for introducing, arranging and servicing a participating policy as a benchmark for referral fees (the “Benchmark”) paid by licensed insurance broker companies to referrers. Licensed insurance brokers that pay referral fees above the Benchmark are expected to provide enhanced disclosures and explanations, and will be subject to on-site inspections, and off-site reviews of their corporate governance and internal controls to inform the license renewal process. The IA will also evaluate the strength of the intermediary management oversight exercised by the authorized insurers in working with licensed insurance broker companies to ensure that the Benchmark has been taken into account during their due diligence process. Historically, including in the quarter ended September 30, 2025, we paid referral fees to certain referrers at rates exceeding 50% of the commissions or other remuneration we received in respect of underlying policies. We intend to lower referral fees paid to referrers to levels not exceeding the Benchmark with effect from October 1, 2025 and to strengthen our internal controls to ensure that all regulated activities are performed by our licensed technical representatives.
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We cannot assure you, however, that our past referral practices, including the payment of referral fees above the Benchmark and referral business involving Mainland China visitors, will not be subject to review, investigation or enforcement action by the IA, or that the IA will not take the view that aspects of our referral model have incentivized or facilitated unlicensed selling or otherwise failed to meet its expectations. If the IA determines that we have not complied with applicable laws, regulations or regulatory guidance relating to referral arrangements, the Benchmark or our internal controls and governance over referral business, it may require remedial measures or changes to our business model, issue public sanctions or impose pecuniary penalties, impose conditions or restrictions on our license, or suspend or revoke our insurance broker license, and may also take action against our responsible officers, senior management or licensed technical representatives. Any such action could result in significant legal and compliance costs, diversion of management attention, damage to our reputation with clients, referrers and insurers, and the termination or reduction of distribution relationships with authorized insurers. In the most serious case, suspension or revocation of our insurance broker license would prevent us from continuing to operate as a licensed insurance broker company in Hong Kong. In addition, any person who, without reasonable excuse, carries on regulated activities without the requisite license commits a criminal offence and is subject to criminal liability, including fines and imprisonment.
In addition, our efforts to reduce referral fees and adjust our referral arrangements in order to comply with IA expectations may adversely affect the motivation and behavior of our referrers. Referrers may be less willing to refer clients to us, may divert business to competitors that offer more attractive economic arrangements (to the extent permitted) or may seek to renegotiate existing arrangements on terms that are less favorable to us. We may need to commit additional resources to developing alternative distribution channels, which may be costly and may not fully offset any loss of referral-based business. As a result, our revenue and profitability from referral-generated business, particularly business involving Mainland China visitors, could decline. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.
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.
Trading Arrangements
During the quarterly period ended September 30,
2025,
Other Information
On October 1, 2025, Mr. Zheng entered into the Shareholder Agreement, pursuant to which Mr. Zheng agreed not to sell, assign, or otherwise transfer, or enter into any contract or arrangement to effect any such sale, assignment or transfer of any share of the Series B Preferred Stock held by Mr. Zheng. Mr. Zheng further agreed to waive any co-sales rights enjoyed by holders of Series B Preferred Stock pursuant to the Articles of Incorporation, as amended. Pursuant to the agreement, upon the occurrence of (i) any merger, consolidation, stock sale, asset sale, or other transaction or series of related transactions in which a person or group (other than Mr. Zheng) acquires, directly or indirectly, ownership of more than 50% of the voting power of the Company or all or substantially all of the Company’s assets, or (ii) any transaction or series of related transactions that results in a change in the power to elect a majority of the Company’s board of directors, the Company shall repurchase all of the shares of Series B Preferred Stock held by Mr. Zheng for a purchase price of $0.001 per share.
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Report:
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| QDM International Inc. | ||
| Date: November 14, 2025 | By: | /s/ Huihe Zheng |
| Name: | Huihe Zheng | |
| Title: | President and Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2025 | By: | /s/ Wei Li |
| Name: | Wei Li | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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