Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)

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. Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. Actual results could differ materially because of the factors discussed in "Risk Factors" elsewhere in this Report, and other factors that we may not know.

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.

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 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 99.2% 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 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. 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.

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.

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, 2026, the Company has not issued or granted any shares under the 2026 Plan.

On May 13, 2026, the Company incorporated Yau Tat Holding Limited ("Yau Tat BVI"), a BVI company 100% owned by the Company. On June 3, 2026, through Yau Tat BVI, the Company incorporated Yau Tat Group Limited ("Yau Tat HK"), a Hong Kong corporation 100% owned by Yau Tat BVI.

Results of Operations

Years Ended March 31, 2026 and 2025

The following table presents an overview of the results of operations for the years ended March 31, 2026 and 2025:

		For the Year Ended March 31,
		2026				2025
Revenue:
Insurance brokerage services		$	19,903,300			$	7,128,301
Referral business			1,572,446				1,252,973
Total revenue			21,475,746				8,381,274
Cost of sales			9,964,867				1,064,039
Gross profit			11,510,879				7,317,235
Operating expenses
General & administrative expenses		$	2,361,443			$	1,411,945
Total operating expenses			2,361,443				1,411,945
Income from operations			9,149,436				5,905,290
Total other income			111,920				4,423
Current income tax expenses			1,728,035				1,086,375
Net income		$	7,533,321			$	4,823,338

Revenue

Revenue from insurance brokerage services increased by approximately $12.8 million, or 179.2% for the year ended March 31, 2026 as compared to the same period of 2025. The increase was mainly due to: (i) the expansion of our collaboration with existing insurance partners during the year ended March 31, 2026; (ii) the addition of new insurance partners; (iii) an increase in the number of insurance policies that generated commissions for us; and (iv) an increase in commission rates.

Revenue from referral business increased by approximately $319,000, or 25.5% for the year ended March 31, 2026, as compared to the year ended March 31, 2025. The increase was mainly due to our new cooperation with insurance brokerage agents.

Cost of sales

Cost of sales increased by approximately $8.9 million, or 836.5%, for the year ended March 31, 2026 as compared to the same period of 2025. The increase was primarily due to higher referral fees paid. During the year ended March 31, 2026, the Company experienced an increase in referral fee rates as requested by certain referrers in response to the market conditions. To align with the market conditions and maintain competitiveness and sales performance, from April 2025 to September 2025, the Company implemented incentive arrangements under which referral agents were compensated through increased referral commission rates, with the majority of such rates raised to 90%, or through the payment of performance-based bonuses. In comparison, the referral fee rates during the year ended March 31, 2025 were approximately 10%.

In light of circulars issued by the IA in 2024 and 2025, 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 our expectations and compliance with the IA's guidance, we have adjusted our referral fee rates to approximately 50%, at or below the benchmark level, for the period from October 2025 to March 2026. As a result, we recorded an incremental commission expense in the year ended March 31, 2026.

Gross profit

Gross profit margin decreased by approximately 33.7% for the year ended March 31, 2026 as compared to the same period of 2025, 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, 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 $949,000, or 67.2%, for the year ended March 31, 2026 as compared to the same period of 2025. The change is primarily due to hiring of more employees, increases in employee salaries, increased travelling and transportation expenses, and the payment of a cash bonus to our Chief Executive Officer.

Other income

Other income increased by approximately $107,000, or 2,430.4%, for the year ended March 31, 2026 as compared to the same period of 2025. For the year ended March 31, 2026, other income was mainly attributable to interest income from time deposits. For the same period in 2025, other income was mainly attributable to a one-time gain, partially offset by bank charges. The change is primarily due to the interest income from time deposits recognized during the fiscal year of 2026, with no such income recognized in the same period of 2025.

Current income tax expenses

Current income tax expenses increased by approximately $642,000, or 59.1%, for the year ended March 31, 2026 as compared to the same period of 2025. The change is primarily due to increase in profits in the year ended March 31, 2026.

Net income

As a result of the factors described above, net income for the year ended March 31, 2026 increased by approximately $2.7 million, or 56.22%, as compared to the same period of 2025.

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 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 years ended March 31, 2026 and 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 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). YeeTah was in compliance with the applicable minimum paid-up share capital and net assets requirements as of March 31, 2026.

The table below shows our cash flow for the periods indicated:

		Year Ended March 31, 2026				Year Ended March 31, 2025
Net cash provided by operating activities		$	1,771,285			$	4,082,303
Net cash used in investing activities			-				-
Net cash used in financing activities			-				(683,221	)
Effect of Exchange rate changes on cash			-				-
Net increase in cash, cash equivalents			1,771,285				3,399,082
Cash and cash equivalents at beginning of period			8,557,305				5,158,223
Cash and cash equivalents at end of period		$	10,328,590			$	8,557,305

Operating Activities:

Net cash generated from operating activities was approximately $1.8 million for the year ended March 31, 2026, compared to net cash generated from operating activities of approximately $4.1 million for the same period in 2025, representing a decrease of approximately $2.3 million in the net cash inflow in operating activities. The decrease in net cash generated from operating activities was primarily due to changes in working capital, partially offset by an increase in net income of approximately $2.7 million for the year ended March 31, 2026, compared to the same period of 2025. The significant changes in working capital were as follows:

	(1)	Increase in accounts receivable resulted in an approximately $1.2 million cash outflow for the year ended March 31, 2026 compared to an approximately $1.5 million cash outflow for the same period of 2025, which led to an approximately $324,000 decrease in net cash outflow from operating activities.
	(2)	Decrease in accounts payable and accrued liabilities resulted in an approximately $204,000 cash outflow for the year ended March 31, 2026 compared to an approximately $281,000 cash outflow for the same period of 2025, which led to an approximately $77,000 decrease in net cash outflow from operating activities.
	(3)	Increase in short-term and long-term prepaid expenses resulted in an approximately $3.9 million cash outflow for the year ended March 31, 2026 compared to an approximately $68,000 cash outflow for the same period of 2025, which led to an approximately $3.8 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 March 31, 2026, the outstanding prepaid balance was approximately HK$31.2 million (US$4.0 million), with the remainder having been applied against referral fees incurred. Subsequent to March 31, 2026, approximately HK$9.67 million (US$1.24 million) of the outstanding prepaid balance was applied against referral fees during April 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.

(4)

Decrease in income tax payable resulted in an approximately $480,000 cash outflow for the year ended March 31, 2026 compared to an approximately $1.1 million cash inflow for the same period of 2025, which led to an approximately $1.6 million increase in net cash outflow from operating activities.

Investing Activities:

No cash was used in investing activities during the year ended March 31, 2026 and 2025.

Financing Activities:

No cash was used in financing activities during the year ended March 31, 2026.

Net cash used in financing activities was approximately $683,000 for the year ended March 31, 2025, which was primarily attributable to the repayment to related parties of approximately $1.3 million, partially offset by proceeds from the issuance of Series B preferred stock for $600,000.

Material Commitments

We have no material commitments for the next twelve months.

We had two office lease agreements and our lease commitments as of March 31, 2026 are summarized as follows:

Operating lease

		2023 Office Lease				2025 Office Lease				Total
2027			6,441				38,128				44,569
2028			-				31,773				31,773
Total future minimum lease payments		$	6,441			$	69,901			$	76,342
Less: imputed interest			(55	)			(4,904	)			(4,959	)
Total operating lease liability		$	6,386			$	64,997			$	71,383
Less: operating lease liability - current			6,386				34,317				40,703
Total operating lease liability - non current		$	-			$	30,680			$	30,680

Critical Accounting Estimates

The preparation of 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 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 March 31, 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.