QDMI 10-K & 10-Q changes, risk factors and insider trading

We derive a significant portion of revenues from selling insurance products supplied by our major insurance company partners. For the fiscal year ended March 31, 2026, approximately 31.3%, 26.1% and 11.6% of our total commissions were attributable to three insurance company, respectively For the fiscal year ended March 31, 2025, approximately 68.1% and 12.4% of our total commissions were attributed to onetwo insurance company.company, For the fiscal year ended March 31, 2024, approximately 96.5% of our total commissions were attributed to one insurance company.respectively.

As of March 31, 2025,2026, we had 1623 technical representatives, seven 8 of whom are our full-time employees. Competition for technical representatives is intense and there can be no assurance that we will be able to attract and retain such personnel. If we are unable to attract and retain highly productive technical representatives, our business could be materially and adversely affected.

We are required to obtain applicable licenses, permits and approvals from different Hong Kong regulatory authorities in order to conduct or expand our business. The Insurance Authority of Hong Kong (“IA”) has promulgated various regulations on the insurance business, including regulations requiring an insurance broker company license. We obtained, renewed and maintained our insurance broker company license as required by the IA. However, there is no assurance that the IA will not issue new regulations governing the insurance product and service industry that might require us to obtain additional licenses, permits or approvals for our current or future business operations. Our failure to obtain any such additional licenses, permits or approvals may adversely affect our business operations and financial condition.

Our commission revenue is subject to quarterly fluctuations as a result of the seasonality of our business, the timing of policy renewals and the net effect of new and lost business. DuringIn anythe giveninsurance year,industry ourin Hong Kong, the commission revenue derived from distribution of life and medical insurance products is generally the highest during the fourth quarter of a calendar year because of the fourth quarterinsurance companies’ drive to meet year end targets, and is generally lowest during the first quarter of a calendar year because itbusiness isactivities customaryusually forslow insurancedown companies in Hong Kong to launch promotions induring the fourthChinese quarterNew inYear pursuitholiday, ofwhich higher sales by year end. The factors that cause the quarterly variations are not falls within ourthis control. Specifically,time period. Additionally, regulatory changes to product design may result in cessation of products from time to time and cause quarterly fluctuation in the results of our operations. In addition,Moreover, consumer demand for insurance products can influence the timing of renewals, new business and lost business, which generally includes policies that are not renewed, and cancellations, and many of our insurance products last more than one year, contributing to the annual fluctuations in sales. However, our initiatives to mitigate the seasonal trends and growth strategy to expand our business may also affect our seasonal performances. For example, we recorded our best performing quarter in the fourth quarter of our fiscal year ended March 31, 2026 (i.e., the first quarter of the calendar year), different from the general industry trend. As a result,result of the factors discussed above, quarterly or annual comparisons of our operating results may not be used as an indication of our future performance.

Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by our Hong Kong subsidiaries to us. See “Item 1. Business – Regulation —- Regulations Related to Hong Kong Taxation.” Any limitation on the ability of our Hong Kong Kong subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

On June 30, 2020, the Standing Committee of the PRC National People’s Congress passed the Hong Kong National Security Law. Hong Kong’s chief executive promulgated it in Hong Kong later the same day. This law defines the duties and government bodies of the Hong Kong for safeguarding national security and four categories of offences —- secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security —- and their corresponding penalties. On July 14, 2020, the former U.S. President Donald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Hong Kong operating subsidiary is determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, the business operations, our financial position and results of operations could be materially and adversely affected.

Recently there have been heightened tensions in the economic and political relations between the United States and China. On June 30, 2020, the Standing Committee of the PRC National People’s Congress issued the Hong Kong National Security Law. This law defines the duties and government bodies of Hong Kong for safeguarding national security and four categories of offences—secession,offences-secession, subversion, terrorist activities and collusion with a foreign foreign country or external elements to endanger national security—andsecurity-and their corresponding penalties. On July 14, 2020, former U.S. President President Donald Trump signed the Hong Kong Autonomy Act, or HKAA, into law, authorizing the U.S. administration to impose blocking sanctions against against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 7, 2020, the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including then Hong Kong chief executive Carrie Lam. Lam. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law”. On March 16, 2021, the U.S. State Department submitted a report listing an additional 24 foreign persons determined to meet the HKAA criteria. This report is an update to the October 2020 and March 2021 reports, consistent with section 5(e) of the HKAA. In July 2021, President Joe Biden warned investors about the risks of doing business in Hong Kong and on July 16, 2021, the U.S. Departments of State, Commerce, Homeland Security and the Treasury issued an advisory saying China’s push to exert more control over Hong Kong threatens the rule of law and endangers employees and data. The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions such as those provided in the HKAA is in practice discretionary and highly political, especially in a relationship as extensive and complex as that between the United States and China. It is difficult to predict the full impact of the HKAA on Hong Kong and companies like us. Furthermore, legislative or administrative actions in respect of Sino-U.S. relations could cause investor uncertainty for affected issuers, including us, and the market price of our securities could be adversely affected.

An active market for our common stock may never develop.develop, and we are under no obligation to seek out a more active market for our common stock.

If thereThere is a thin trading market or “float” for our common stock,stock the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In addition, in the absence of an active public trading market, investors may be unable to liquidate their investment in us. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including, but not limited to:

TheShares of Series B Preferred Stock, which are are controlledheld by our Chairman of the Board, Chief Executive Officer, have super voting rights that may adversely affect our holders of common stock.

Except as required by law, holdersshares of Series B Preferred Stock (which isare currently controlledheld by Huihe Zheng, our Chairman of the Board, Chief Executive Officer) are entitled to super voting voting rights. Each share of Series B Preferred Stock is entitled to 100 votes.votes Holders of Series B Preferred Stockand will vote on all matters upon which common stock holders are entitled to vote. The voting rights of holders of our common stock will be diluted as a result of these super voting rights.

Our articles of incorporation allow our Board to create a new series of preferred stock without approval by our shareholders, which could adversely affect the rights of the holders of our common stock.

Gross profit margin increaseddecreased by approximately 48.8%33.7% for the year ended March 31, 20252026 as compared to the same period of 2024,2025, which was in line with the significant decreaseincrease in cost of sales.

General and administrative expenses generally are fixed and 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.

General and administrative expenses increased by approximately $759,000, $949,000, or 116.3%,67.2%, for the year ended March 31, 20252026 as compared to the same period of 2024.2025. The change is primarily due to hiring of more employeesemployees, increases in employee salaries, increased travelling and technicaltransportation representativesexpenses, and increasethe inpayment professionalof a feescash paidbonus to variousour serviceChief providers.Executive Officer.

Other income decreasedincreased by approximately $69,000, $107,000, or 93.9%,2,430.4%, for the year ended March 31, 20252026 as compared to the same period of 2024.2025. TheFor the year ended March 31, 2026, other income was mainly attributable to interest income from time deposits. For the receiptsame of referral fees from introducing clients to sub-brokersperiod in Macao,2025, other income was mainly attributable to a one-time gain, partially offset by the payment of bank charges. The change is primarily due to the recognition ofinterest a gainincome from thetime disposaldeposits of subsidiaries recognized during the fiscal year of 2024,2026, with no such income recognized in the same period of 2025, as well as a reduction in referral fees received from sub-brokers.2025.

As a result of the factors described above, net income for the year ended March 31, 20252026 increased by approximately $3.3$2.7 million, or 208.3%,56.22%, as compared to a net income of approximately $1.6 million for the same period forof 2024.2025.

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.income.

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 March 31, 2026 and March 31, 2025, we had $10,328,590 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 March 31, 2025.2026.

Net cash generated from operating activities was approximately $4.1$1.8 million for the year ended March 31, 2025,2026, compared to net cash generated from operating activities of approximately $2.2$4.1 million for the same period in 2024,2025, representing ana increasedecrease of approximately $1.9$2.3 million in the net cash inflow in operating activities. The increasedecrease in net cash generated from operating activities was primarily due to changes in working capital, partially offset by an increase of in net income of approximately $3.3$2.7 million in for the year ended March 31, 2025 as2026, compared to the same period of 2024.2025. The significant increase changes in net income was primarily driven by a substantial reduction in cost of sales, which was mainly attributable to lower referral fees paid to the referrers. The increase in operating cash flow also reflects the following major working capital changeswere as follows:

NetNo cash was used in financing activities was approximately $683,000 forduring the year ended March 31, 2025, which was solely attributable to the net repayment to related parties.2026.

Net cash generatedused fromin financing activities was approximately approximately $333,000$683,000 for the year ended March 31, 2024,2025, which was fullyprimarily attributable to shareholderthe advancesrepayment to related parties of approximately $1.3 million, partially offset by proceeds from the Companyissuance duringof the period.Series B preferred stock for $600,000.

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 JulyJune 10,29, 2025 and the Quarterly Report on Form 10-Q filed with the SEC on November 14, 2025.2026.

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”),YeeTah, primarily in Hong Kong.

On October 1, 2025, Mr. Zheng entered into a shareholder agreement with the Company (the “Shareholder Agreement”),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.

Three Months Ended DecemberJune 31,30, 20252026 and 20242025

The following table presents an overview of our results of operations for the three months ended DecemberJune 31,30, 20252026 and 20242025:

Revenue increased by approximately $3.2$4.8 million, or 201.3%,133.4%, for the three months ended DecemberJune 31,30, 20252026 as compared to the same period of 2024.2025. The increase was mainly due to: (i) the expansion addition of our collaboration with insurance partnerscompanies duringthat theoffer threemore monthsinsurance endedproducts, December 31, 2025;and (ii) anthe increase in of the number of insuranceour policiesreferral that generate commissions for us; and (iii) an increase in commission rate.partners.

Cost of sales increased by approximately $1.9$3.1 million, or 875.5%,292.9%, for the three months ended DecemberJune 31,30, 20252026 as compared to the same period of 2024.2025. The increase was primarily due to higher referral fees paid. During the three months ended DecemberJune 31,30, 2026, the Company had higher referral fee rates. Effective October 1, 2025, the Company experiencedadjusted anits increase instandard referral fee rates as requested by certain referrers in responserate to marketapproximately conditions.50% Toto align with the market conditions, maintain competitivenesscompetitiveness, and sales performance, and comply with the insurance referral commission regulations issued by the Hong Kong Insurance Authority (the “IA”), ofwhich Hong Kong adopting of establishes a 50% benchmark raterate. forThis referralcompares fees, we adjustedto 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 approximatelycertain 50%partners. forThe shift to the higher fixed benchmark rate threedrove months ended December 31, 2025. As a result, we recorded anthe incremental commission expense recorded in the current period.

Gross profit margin decreased by approximately 31.4%20.0%, from 70.8% for the three months ended December 31, June 30, 2025 as compared to 50.8% for the samethree periodmonths ofended 2024, June 30, 2026, which was in line with the significant increase in cost of sales.

General and administrative expenses generally are fixed and 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.

General and administrative expenses increased by approximately $637,000,$117,000, or 140.8%,31.9%, for the three months ended DecemberJune 31,30, 20252026 as compared to the same period of 2024.2025. The change is primarily due to hiring of more employees, increased travelling and transportationan expenses,increase andin payroll expenses related to the payment of a cash bonus to ourCompany’s Chief Executive Officer.Officer, Mr. Zheng, whose employment agreement became effective in December 2025.

Other income increaseddecreased by approximately $43,000,$35,000, or 3,580.9%,68.3%, for the three months ended DecemberJune 31,30, 20252026 as compared to the same period of 2024.2025. ForThe change is primarily due to the Company not maintaining any time deposits during the three monthsmonth ended December 31,June 2025,30, other2026, incomewhile wasthe mainlyCompany attributable toearned interest income from time deposits. Fordeposits during the same period inof 2024, other expenses were mainly attributable to the bank charges.2025.

Current income tax expenses increased by approximately $86,000,$268,000, or 43.1%,71.3%, for the three months ended DecemberJune 31,30, 20252026 as compared to the same period of 2024.2025. The change is primarily due to increase in profits in the three months ended DecemberJune 31,30, 2025.2026.

As a result of the factors described above, net income for three months ended DecemberJune 31,30, 20252026 increased by approximately $562,000,$1,300,000, or 79.6%,70.2%, as compared to the same period of 2024.2025.

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.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 and nine months ended DecemberJune 31,30, 2026 2025 and 2024,2025, and the year ended March 31, 2025.2026.

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 DecemberJune 31,30, 20252026 and March 31, 2025,2026, we had $10,162,351 $12,353,326 and $8,557,305,$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), 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 DecemberJune 30, 2026 and March 31, 2025.2026.

Net cash generated from operating activities was approximately $3.8 million $116,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, compared to net cash generated from operating activities of approximately $1.5$3.9 million for the same period in 2024,2025, representing an increasedecrease of approximately $2.3$3.8 million in the net cash inflow in operating activities. The increase decrease in net cash generated from operating activities was primarily dueattributable to changes in working capital, partially offset by an increase ofin net income of approximately $697,000$1.3 inmillion for the ninethree months ended DecemberJune 31,30, 2025 as2026, compared to the same period of 2024. 2025. The increasesignificant changes in operating cash flow also reflects the following major working capital changeswere as follows:

No cash was used in investing activities during the ninethree months ended DecemberJune 31,30, 2025 and 2024.2025.

Net cash used in financing activities was approximately $40,000 for the ninethree months ended DecemberJune 31,30, 2025, which was attributable to payment for certain fees incurred for the proposed public offering offering of the shares of common stock on Nasdaq of $40,000.

We had two office lease agreements and our lease commitments as of DecemberJune 31,30, 2025,2026, which are summarized as follows:

As of DecemberJune 31,30, 2025,2026, 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, condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.