QDMI 10-Q
QDM International Inc. (QDMI)
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)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5 Canton Road | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
| N/A |
(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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 August 14, 2026, there were
QDM INTERNATIONAL INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2026
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 | 17 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 22 |
| Item 4. | Controls and Procedures | 22 |
| PART II – OTHER INFORMATION | 23 | |
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 24 |
| SIGNATURES | 25 | |
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 JUNE 30 AND MARCH 31, 2026
| June 30, 2026 | March 31, 2026 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of credit loss allowance of $ and $ | ||||||||
| Prepaid expenses and deposits | ||||||||
| Total current assets | ||||||||
| Right of use assets – operating lease | ||||||||
| Long-term prepaid expenses and deposits | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable & accrued liabilities | $ | $ | ||||||
| Operating lease liabilities - current | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities – non current | ||||||||
| Total liabilities | ||||||||
| Temporary equity: | ||||||||
| Redeemable Series B preferred stock, $ | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities, temporary equity and shareholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
1
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
| For the Three Months Ended June 30, 2026 | For the Three Months Ended June 30, 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| General & administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income (expenses) | ||||||||
| Finance costs | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Total other income | ||||||||
| Income before income taxes | ||||||||
| Current income tax expenses | ||||||||
| Net income | $ | $ | ||||||
| Total comprehensive income | $ | $ | ||||||
| Earnings per share of common stock: | ||||||||
| Basic earnings per share | $ | |||||||
| Diluted earnings per share | $ | |||||||
| Weighted average basic & diluted shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to condensed consolidated financial statements.
2
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY AND TEMPORARY EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
| Temporary equity | ||||||||||||||||||||||||||||||||||||||||||||
| Series
B Preferred Stock | Series
B Preferred Stock Amount | Preferred Stock | Common Stock | Treasury Stock | Preferred Stock Amount | Common Stock Amount | Treasury Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total | ||||||||||||||||||||||||||||||||||
| March 31, 2025 | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2025 (Unaudited) | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| March 31, 2026 | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 (Unaudited) | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
| June 30, 2026 | June 30, 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Non-cash lease expenses | ( | ) | ||||||
| Changes in working capital: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Long-term prepaid expenses | ||||||||
| Accounts payable & accrued liabilities | ||||||||
| Income tax payable | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Prepayment in connection with MCM Acquisition | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Payment for offering cost | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | ||||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | $ | $ | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | ||||||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||
| 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
June 30, 2026 and 2025
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, YeeTah Insurance Consultant Limited, which changed its name to Hong Kong YeeTah Insurance Broker Limited (“YeeTah”) in December 2022, 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 also assists its customers with their investment through the MPF and the Occupational Retirement Schemes Ordinance (“ORSO”) schemes 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
5
On September 22, 2025, Mr. Huihe Zheng, the Company’s
CEO, President and Chairman, converted
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 $
On May 22, 2026, the Company’s Board approved
the QDM International Inc. 2026 Equity Incentive Plan (the “2026 Plan”), which was subsequently registered through Form S-8
filed on June 2, 2026. The 2026 Plan is designed to attract, retain, and motivate directors, consultants, and key employees to exert their
best efforts on behalf of the Company and align their interests with those of the Company’s stockholders. Under the 2026 Plan, the
Company has authorized the issuance of up to
On May 13, 2026, the Company incorporated Yau
Tat Holding Limited (“Yau Tat BVI”), a BVI company
On July 9, 2026, the Company acquired MCM Wealth Management (Hong Kong)
Limited (the “MCM”), a Hong Kong insurance brokerage company for a purchase price of HK$
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 June 30, 2026, and for the three months ended June 30, 2026 and 2025. The results of operations for the three months ended June 30, 2026 are not necessarily indicative of the operating results for any subsequent quarterly period for the rest of the fiscal year ending March 31, 2027, 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, 2026, filed with the Securities and Exchange Commission (“SEC”) on June 29, 2026.
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.
6
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 income.
The exchanges rates used for translation from
Hong Kong dollar to US$ was
Measurement of credit losses on financial instruments
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 June 30, 2026, 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
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 months ended June 30, 2026 and 2025 and there was no allowance for credit loss as of June 30, 2026 and March 31, 2026.
7
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 Company generates revenue from referral services
provided in connection with investment and insurance products. For investment product referral services, the transfer of control 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. For insurance product referral services, the transfer of control occurs at a point in time upon the expiration of
the 21-day insurance policy cool-off period. Once the transfer of control of the referral services occurs, the Company has satisfied its
performance obligation and recognizes revenue. In connection with its referral services, the Company acts as an agent and, accordingly,
recognizes revenue on a net basis. For the three months ended June 30, 2026 and 2025, the Company generated $
8
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, 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 June 30, 2026 and March 31, 2026.
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 income.
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 months ended June 30, 2026 and 2025.
9
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.
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 generally consist primarily of employee salaries, bonus to employees, office rent, insurance costs, general office operating expenses (e.g., utilities, repairs and maintenance) and professional fees in engaging various service providers.
10
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
Temporary Equity
The Company accounts for its preferred stock subject to possible redemption in accordance with the guidance in ASC 480 “Distinguishing Liability from Equity”. Preferred stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable preferred stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’ control) is classified as temporary equity.
The redeemable shares are initially recorded at their fair value at date of issuance. Subsequent measurement of the redeemable shares is evaluated in accordance with ASC 480-10-S99. Because the redemption feature is contingent upon the occurrence of a future event that is not currently probable of occurring, the Company has not adjusted the carrying amount of the redeemable shares to the redemption amount.
In addition, the contractual redemption amount
of $6,031.5 is less than the initial carrying amount of $
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. The Company’s Series B (non-convertible) and Series C (convertible) preferred shares do not carry dividend or participation rights. Consequently, they are not considered participating securities, they have been excluded from the computation of basic and diluted EPS. Furthermore, as the redemption value of the Series B Preferred Stock is less than its current carrying amount, no accretion was recognized that would reduce the net income available to ordinary shareholders. Therefore, The Company computes earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period.
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.
11
Recently Issued Accounting Standards
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 adopted ASU 2023-09 during the fiscal year ended March 31, 2026 and the adoption did not 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.
In May 2025, FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (VIE),” which requires an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business to consider specific factors to determine the accounting acquirer and removes the requirement that the primary beneficiary always is the acquirer for certain transactions. Under the amendments, acquisition transactions in which the legal acquiree is a VIE will, in more instances, result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest entity. The amendments do not change the accounting for a transaction determined to be a reverse acquisition or a transaction in which the legal acquirer is not a business and is determined to be the accounting acquiree. The new guidance is required to be applied prospectively to any acquisition transaction that occurs after the initial application date. Early adoption is permitted. The Company is evaluating the impact of the adoption of this guidance.
In September 2025, FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Scope Refinements. This update clarifies the application of derivative accounting to certain contracts and refines the guidance for share-based noncash consideration received from customers. Specifically, ASU 2025-07 introduces a scope exception for contracts that are not exchange-traded and whose underlying is tied to operations or activities specific to one party. It also clarifies that share-based noncash consideration from a customer should initially be accounted for under Topic 606 until the right to receive or retain such consideration becomes unconditional, at which point financial instruments guidance may apply. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-07 on its consolidated financial statements and related 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.
3. Equity
The Company’s authorized capital stock consists
of
Series B 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 $
12
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 October 1, 2025, Mr. Zheng entered into the Shareholder Agreement
relating to his shares of Series B Preferred Stock, pursuant to which he agreed to restrictions on the sale, assignment, or transfer of
such shares and waived any co-sales rights. The agreement also provides for the Company’s repurchase of all shares of Series B Preferred
Stock held by Mr. Zheng upon the occurrence of change-of-control events. Such redemption shall be effected at a per share price of $
Upon execution of the Shareholder Agreement, because
the Series B preferred stock is contingently redeemable upon the occurrence of events that are not solely within the Company’s control,
the Company reclassified all
Pursuant to the Shareholder Agreement, upon the
occurrence of a qualifying change in control event, the Company is required to repurchase the Series B preferred stock held by Mr. Zheng
at the repurchase price. As of June 30, 2026, the aggregate redemption value based on shares outstanding would have been less than the
carrying amount of the redeemable Series B preferred stock; therefore, the Company recorded no accretion and continued to present the
redeemable Series B preferred stock at its carrying amount of $
Series C Preferred Stock
The holders of Series C Preferred Stock are entitled to receive any dividends or distributions paid in respect of the common stock on an as-converted basis. Except as provided in the Certificate of Designation or as otherwise required by law, holders of Series C Preferred Stock are entitled to vote, together with the holders of common stock, on an as-converted basis on all matters submitted to a vote of the holders of common stock. Each share of Series C Preferred Stock is convertible into common stock at a conversion rate of 30-for-374 or approximately 0.11-for-1. The conversion rate is subject to proportionate adjustments for stock splits, reverse stock splits and similar events. However, holders of Series C Preferred Stock do not have redemption rights.
On September 22, 2025, Mr. Huihe Zheng, the Company’s
CEO and chairman, converted
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
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$
13
4. Prepaid Expenses and Deposits
Prepaid expenses and deposits as of June 30, 2026 and March 31, 2026 consisted of the following:
| June 30, 2026 | March 31, 2026 | |||||||
| US$ | US$ | |||||||
| Current assets: | ||||||||
| Prepaid referral fees | ||||||||
| Prepaid professional fees | ||||||||
| Prepayment in connection with MCM Acquisition | ||||||||
| Other prepaid expenses | ||||||||
| Total prepaid expenses and deposits | ||||||||
| Non-current assets: | ||||||||
| Lease deposits | ||||||||
| Total long-term prepaid expenses and deposits | ||||||||
Prepaid expenses and
deposits consisted primarily of prepaid referral fees, professional fees and lease deposits. Prepaid referral fees represent amounts paid
to third-party referral partners in advance of services to be rendered. Prepayment related to the MCM Acquisition pertains to the acquisition
completed on July 9, 2026, whereby the Company acquired MCM at a total purchase price of HK$
As of June 30, 2026 and
March 31, 2026, outstanding prepaid referral fees balances were approximately HK$
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 June 30, 2026, the Company did not have any significant unrecognized uncertain tax positions.
Since April 1, 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures on a prospective basis for the first annual period beginning after December 15, 2024. Adoption did not affect the recognized amounts of income tax expense or related tax balances; it expanded the income tax disclosures presented below. Prior comparative periods are not restated (prospective application).
14
Components of income (loss) before income taxes
The following table presents the components of income (loss) before income taxes by geographic region for the three months ended June 30, 2026, in accordance with the updated requirements of ASU 2023-09:
| June 30, 2026 |
||||
| US$ | ||||
| United States | ( |
) | ||
| Foreign (Hong Kong) | ||||
| Total income (loss) before income taxes | ||||
The following tables present the provision for benefit from income taxes for the three months ended June 30, 2026, in accordance with the updated requirements of ASU 2023-09:
| June 30, 2026 | ||||
| Current income taxes: | US$ | |||
| U.S. Federal | ||||
| U.S. State & local (net) | ||||
| Foreign (Hong Kong) | ||||
| Total current | ||||
| Deferred income taxes: | ||||
| U.S. Federal | ||||
| U.S. State & local (net) | ||||
| Foreign (Hong Kong) | ||||
| Total deferred | ||||
| Income tax expenses | ||||
During the three months ended June 30, 2026, the Company adopted ASU 2023-09. As a result of the adoption, the effective income tax rate for the three months ended June 30, 2026 as follows:
| For the three months ended June 30, 2026 | ||||||||
| US$ | % | |||||||
| US Federal Statutory Tax Rate | % | |||||||
| State and local income taxes, net of federal income tax effect | % | |||||||
| Foreign tax effects: | ||||||||
| Hong Kong | ( | ) | - | % | ||||
| Effect of rates different than statutory | ( | ) | - | % | ||||
| Non-deductible items | % | |||||||
| Hong Kong two-tier tax regime benefit and exempt interest income | ( | ) | - | % | ||||
| Change in valuation allowance of deferred income tax assets | % | |||||||
| Total income tax expenses and effective tax rate | % | |||||||
Income Taxes Paid
The amount of cash paid for income taxes (net of refunds) for the three months ended June 30, 2026 is as follows:
| For the three months ended June 30, 2026 |
||||
| US$ | ||||
| United States | ||||
| Foreign (Hong Kong) | ||||
| Total income taxes paid, net of refunds | ||||
15
6. Commitments and Contingencies
Other than the two office leases that the Company
entered into in February 2025 (the “2025 Office Lease”) and in April 2026 (the “2026 Office Lease”), with a lease
term of
Operating lease
The 2025 Office Lease has a remaining lease term of the operating lease
of
The 2026 Office Lease has a remaining lease term of the operating lease
of
During the three months ended June 30, 2026 and 2025, the operating
lease expense recognized was $
Contingencies
The Company is subject to legal proceedings and regulatory actions in the ordinary course of business. As of June 30, 2026, the Company is not a party to any material legal or administrative proceedings.
7. Earnings Per Share
Basic and diluted net earnings per share for each of the periods presented are calculated as follows:
| For the three months ended June 30, 2026 | For the three months ended June 30, 2025 | |||||||
| US$ | US$ | |||||||
| Numerator: | ||||||||
| Net income attributable to ordinary shareholders – basic and diluted | ||||||||
| Denominator: | ||||||||
| Weighted average number of ordinary shares outstanding – basic and diluted | ||||||||
| Earnings per share attributable to ordinary shareholders – basic and diluted | ||||||||
Basic earnings per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. No securities were anti-dilutive for diluted earnings per share for the periods presented.
8. Segment Information
The Company operates and manages its business as a single operating segment. This is consistent with the manner in which the chief operating decision maker (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 one reportable segment, all financial information required by ASC 280 is presented in the accompanying condensed consolidated financial statements. Substantially all of the Company’s revenues are derived from customers located in Hong Kong and all of its long-lived assets are located in the same geographic areas.
The Company operates as
9. Subsequent Events
On July 9, 2026, the Company acquired MCM for a purchase price of HK$
16
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, 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.
Since December 2023, we have expanded our business model by entering into collaborative relationships with trust companies and other insurance brokerage companies in Hong Kong. Leveraging our existing customer resources, we refer customers to these partners, who will sell their applicable products to the referred customers based on their needs. In return for these referrals, we earn commissions based on a percentage of the transaction amount of products purchased by such customers referred by us. In the course of such business cooperation, we act solely as an intermediary providing referral services and are not involved in the issuance of financial products or the management of investment funds. Specifically, the provision of investment product referral services is deemed completed upon the confirmation of successful customer subscription and full receipt of relevant funds by the partnering trust companies. For insurance product referral services, the services are fully completed only after the expiry of the 21-day insurance policy cooling-off period.
Recent Developments
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 99.2% 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 8,577,679 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 8,636,186 shares of common stock issued and outstanding and no shares of Series C Preferred Stock issued and outstanding.
17
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.
On May 22, 2026, the Company’s Board approved the QDM International Inc. 2026 Equity Incentive Plan (the “2026 Plan”), which was subsequently registered through Form S-8 filed on June 2, 2026. The 2026 Plan is designed to attract, retain, and motivate directors, consultants, and key employees to exert their best efforts on behalf of the Company and align their interests with those of the Company’s stockholders. Under the 2026 Plan, the Company has authorized the issuance of up to 1,295,427 shares of common stock for awards, subject to an automatic annual increase beginning January 1, 2027. As of the date of this Report, the Company has not issued or granted any shares under the 2026 Plan.
On May 13, 2026, the Company incorporated Yau Tat BVI. On June 3, 2026, through Yau Tat BVI, the Company incorporated Yau Tat HK.
On July 9, 2026, the Company acquired MCM for a purchase price of HK$2,200,000 (approximately US$280,000). After the MCM Acquisition, MCM became a wholly owned subsidiary of Yau Tat HK. On August 11, 2026, MCM changed its name to Hong Kong Wintah Insurance Broker Limited.
Results of Operations
Three Months Ended June 30, 2026 and 2025
The following table presents an overview of our results of operations for the three months ended June 30, 2026 and 2025:
| For The Three Months Ended June 30, 2026 | For The Three Months Ended June 30, 2025 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Insurance brokerage services | $ | 8,391,843 | $ | 3,562,197 | ||||
| Referral business | 540 | 32,800 | ||||||
| Total revenue | 8,392,383 | 3,594,997 | ||||||
| Cost of sales | 4,128,106 | 1,050,746 | ||||||
| Gross profit | 4,264,277 | 2,544,251 | ||||||
| Operating expenses: | ||||||||
| General & administrative expenses | $ | 484,497 | $ | 367,194 | ||||
| Total operating expenses | 484,497 | 367,194 | ||||||
| Income from operations | 3,779,780 | 2,177,057 | ||||||
| Total other income | 16,079 | 50,688 | ||||||
| Current income tax expenses | 644,075 | 375,933 | ||||||
| Net income | $ | 3,151,784 | $ | 1,851,812 | ||||
Revenue
Revenue increased by approximately $4.8 million, or 133.4%, for the three months ended June 30, 2026 as compared to the same period of 2025. The increase was mainly due to (i) addition of insurance companies that offer more insurance products, and (ii) the increase of the number of our referral partners.
18
Cost of sales
Cost of sales increased by approximately $3.1 million, or 292.9%, for the three months ended June 30, 2026 as compared to the same period of 2025. The increase was primarily due to higher referral fees paid. During the three months ended June 30, 2026, the Company had higher referral fee rates. Effective October 1, 2025, the Company adjusted its standard referral fee rate to approximately 50% to align with market conditions, maintain competitiveness, and comply with the referral commission regulations issued by the Hong Kong Insurance Authority (the “IA”), which establishes a 50% benchmark rate. This compares to the three months ended June 30, 2025, when the Company applied a referral fee rate of approximately 15% and supplemented payments with additional discretionary bonuses to certain partners. The shift to the higher fixed benchmark rate drove the incremental commission expense recorded in the current period.
Gross profit
Gross profit margin decreased by approximately 20.0%, from 70.8% for the three months ended June 30, 2025 to 50.8% for the three months ended June 30, 2026, 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 $117,000, or 31.9%, for the three months ended June 30, 2026 as compared to the same period of 2025. The change is primarily due to hiring of more employees, and an increase in payroll expenses related to the Company’s Chief Executive Officer, Mr. Zheng, whose employment agreement became effective in December 2025.
Other income
Other income decreased by approximately $35,000, or 68.3%, for the three months ended June 30, 2026 as compared to the same period of 2025. The change is primarily due to the Company not maintaining any time deposits during the three month ended June 30, 2026, while the Company earned interest income from time deposits during the same period of 2025.
Current income tax expenses
Current income tax expenses increased by approximately $268,000, or 71.3%, for the three months ended June 30, 2026 as compared to the same period of 2025. The change is primarily due to increase in profits in the three months ended June 30, 2026.
Net income
As a result of the factors described above, net income for three months ended June 30, 2026 increased by approximately $1,300,000, or 70.2%, as compared to the same period of 2025.
Foreign Currency Translation
The Company’s reporting currency is the United States dollar (“US$”). 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 income.
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 months ended June 30, 2026 and 2025, and the year ended March 31, 2026.
19
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 June 30, 2026 and March 31, 2026, we had $10,162,351 and $10,328,590, 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). YeeTah was in compliance with the applicable minimum paid-up share capital and net assets requirements as of June 30, 2026 and March 31, 2026.
The table below shows our cash flow for the periods indicated:
| Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | |||||||
| Net cash provided by operating activities | $ | 115,812 | $ | 3,892,380 | ||||
| Net cash used in investing activities | (282,051 | ) | — | |||||
| Net cash used in financing activities | — | (40,000 | ) | |||||
| Net (decrease) increase in cash, cash equivalents | (166,239 | ) | 3,852,380 | |||||
| Cash and cash equivalents at beginning of period | 10,328,590 | 8,557,305 | ||||||
| Cash and cash equivalents at end of period | $ | 10,162,351 | $ | 12,409,685 | ||||
Operating Activities:
Net cash generated from operating activities was approximately $116,000 for the three months ended June 30, 2026, compared to net cash generated from operating activities of approximately $3.9 million for the same period in 2025, representing an decrease of approximately $3.8 million in the net cash inflow in operating activities. The decrease in net cash generated from operating activities was primarily attributable to changes in working capital, partially offset by an increase in net income of approximately $1.3 million for the three months ended June 30, 2026, compared to the same period of 2025. The significant changes in working capital were as follows:
| (1) | Decrease in accounts receivable resulted in an approximately $2.0 million cash inflow for the three months ended June 30, 2026 compared to an approximately $1.0 million cash inflow for the same period of 2025, which led to an approximately $1.0 million increase in net cash inflow from operating activities. |
| (2) | Increase in accounts payable and accrued liabilities resulted in an approximately $42,000 cash inflow for the three months ended June 30, 2026 compared to an approximately $605,000 cash inflow for the same period of 2025, which led to an approximately $563,000 decrease in net cash inflow from operating activities. |
| (3) | Increase in short-term and long-term prepaid expenses resulted in an approximately $5.5 million cash outflow for the three months ended June 30, 2026 compared to an approximately $25,000 cash inflow for the same period of 2025, which led to an approximately $5.5 million increase in net cash outflow from operating activities. During the period, the Company made several prepayments to newly contracted referrers for future referral fees. As of June 30, 2026, the outstanding prepaid balance was approximately HK$74.2 million (US$9.5 million), with the remainder having been applied against referral fees incurred. Subsequent to June 30, 2026, approximately HK$6.2 million (US$0.8 million) of the outstanding prepaid balance was applied against referral fees during July 2026. Management of the Company expects the prepaid amount to be fully credited against the referral fees payable to the referrer by the end of March 31, 2027. |
20
Investing Activities:
Net cash used in investing activities was approximately $282,000 for the three months ended June 30, 2026, which was attributable to prepayments of approximately HK$2.2 million (approximately US$0.28 million) in connection with the MCM Acquisition.
No cash was used in investing activities during the three months ended June 30, 2025.
Financing Activities:
No cash was used in financing activities during the three months ended June 30, 2026.
Net cash used in financing activities was approximately $40,000 for the three months ended June 30, 2025, which was attributable to payment for certain fees incurred for the proposed public offering of the shares of common stock on Nasdaq of $40,000.
Material Commitments
We have no material commitments for the next twelve months.
We had two office lease agreements and our lease commitments as of June 30, 2026, which are summarized as follows:
Operating lease
| 2025 Office Lease | 2026 Office Lease | Total | ||||||||||
| 2027 | $ | 38,128 | $ | 86,055 | $ | 124,183 | ||||||
| 2028 | 22,241 | 53,661 | 75,902 | |||||||||
| Total future minimum lease payments | $ | 60,369 | $ | 139,716 | $ | 200,085 | ||||||
| Less: imputed interest | (3,706 | ) | (5,656 | ) | (9,362 | ) | ||||||
| Total operating lease liability | $ | 56,663 | $ | 134,060 | $ | 190,723 | ||||||
| Less: operating lease liability – current | 34,982 | 80,399 | 115,381 | |||||||||
| Total operating lease liability – non-current | $ | 21,681 | $ | 53,661 | $ | 75,342 | ||||||
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 June 30, 2026, 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.
21
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 June 30, 2026, 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 June 30, 2026 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 June 29, 2026.
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 June 30, 2026,
Other Information
On July 9, 2026, the Company acquired MCM for a purchase price of HK$2,200,000 (approximately US$280,000). After the MCM Acquisition, MCM became a wholly owned subsidiary of Yau Tat HK. On August 11, 2026, MCM changed its name to Hong Kong Wintah Insurance Broker Limited.
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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: August 14, 2026 | By: | /s/ Huihe Zheng |
| Name: | Huihe Zheng | |
| Title: | President and Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 14, 2026 | By: | /s/ Wei Li |
| Name: | Wei Li | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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