Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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.

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."

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

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.

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

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

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.