S-1/A: QDM International Files for Nasdaq Listing, Public Offering

QDM International Inc., a Hong Kong-based insurance brokerage, filed an amended registration statement for a public offering of 1.25 million shares and plans to list on Nasdaq.

Summary

• QDM International Inc. (QDM) is a Florida holding company that conducts its insurance brokerage business primarily in Hong Kong through its indirectly wholly-owned subsidiary, YeeTah.
• The company is offering 1,250,000 shares of common stock in a firm commitment public offering, with an estimated price range of $4.00 to $5.00 per share.
• Net proceeds from the offering are estimated at approximately $4.4 million, or $5.2 million if the underwriters' over-allotment option is fully exercised.
• Proceeds are intended for expansion of service offerings (40%), marketing and branding (20%), new hires and training (10%), and working capital and general corporate purposes (30%).
• YeeTah sells life and medical insurance (99.95% of net revenues for the six months ended September 30, 2025) and general insurance products, and also provides Mandatory Provident Fund (MPF) and Occupational Retirement Schemes Ordinance (ORSO) services.
• The company expanded its business model in December 2023 by entering a referral partnership with a Hong Kong trust company for asset management services, generating $540,616 in revenue for the fiscal year ended March 31, 2025.
• For the six months ended September 30, 2025, total revenue increased by 286.4% to $7,565,671 compared to $1,958,182 in the same period of 2024.
• Net income for the six months ended September 30, 2025, increased by 14.2% to $1,082,947 from $948,086 in the prior year period.
• However, gross profit margin significantly decreased by 59.1% for the six months ended September 30, 2025, due to higher referral fees, which increased to approximately 90% for July-September 2025, retroactively applied.
• For the fiscal year ended March 31, 2025, total revenue increased by 23.2% to $8,381,274 compared to $6,366,154 in 2024.
• Net income for the fiscal year ended March 31, 2025, increased by 208.3% to $4,823,338 compared to $1,564,538 in 2024, primarily driven by a substantial reduction in cost of sales due to lower referral fees (from ~52.5% to ~10%) following a May 2024 IA circular.
• The company's CEO, President, and Chairman, Mr. Huihe Zheng, holds approximately 99.2% of the voting power prior to the offering and 99.0% after the offering, making QDM a controlled company under Nasdaq rules.
• Material weaknesses in internal control over financial reporting were identified, including lack of proper segregation of duties, formal documentation, and independent directors/audit committee, though remediation efforts are underway.

Sentiment

Score: 4

Explanation: While the company shows strong revenue and net income growth in recent periods, the drastic decline in gross profit margin in the most recent interim period due to increased referral fees, coupled with significant internal control weaknesses, high customer concentration, and the CEO's overwhelming control, presents substantial risks for investors. The dilution for new investors is also considerable.

Positives

• Strong revenue growth for the six months ended September 30, 2025, increasing by 286.4% to $7,565,671.
• Significant net income growth for the fiscal year ended March 31, 2025, increasing by 208.3% to $4,823,338.
• Expansion into referral business in December 2023, generating $540,616 in revenue for FY2025.
• Company maintains good relationships with 23 insurance companies in Hong Kong, offering approximately 582 insurance products.
• Experienced management team in the insurance industry, with the responsible officer having over ten years of experience.
• Commitment to rigorous training and development for technical representatives, covering regulatory requirements, product knowledge, and sales skills.
• Hong Kong's insurance market is experiencing rapid growth, driven by increasing disposable income, a rising geriatric population, and strong demand from mainland China visitors.
• The company's auditor, ZH CPA, LLC, is headquartered in Denver, Colorado, and has been inspected by the PCAOB, mitigating some HFCA Act risks.

Negatives

• Gross profit margin significantly decreased by 59.1% for the six months ended September 30, 2025, due to a substantial increase in referral fees to approximately 90% for July-September 2025, retroactively applied.
• High customer concentration, with one insurance company accounting for 67.4% of total commissions for the six months ended September 30, 2025, and 96.5% for the fiscal year ended March 31, 2024.
• Material weaknesses in internal control over financial reporting were identified, including lack of proper segregation of duties, formal documentation, and an independent audit committee.
• The CEO, Mr. Huihe Zheng, holds approximately 99.0% of the voting power after the offering, giving him substantial influence and making the company a 'controlled company' under Nasdaq rules, which could reduce protections for public shareholders.
• New investors in the offering will experience immediate and substantial dilution of $3.06 per share.
• The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain all earnings for business expansion.

Risks

• Dependence on a single or limited number of insurance company partners creates concentration risk, with potential negative impacts from loss of partners or adverse changes in relationships.
• Inability to attract and retain highly productive licensed technical representatives could materially and adversely affect business and operating results.
• Misconduct by technical representatives could lead to regulatory sanctions, litigation, or reputational and financial harm.
• Extensive and evolving regulations in Hong Kong for insurance brokerage and MPF intermediary businesses, with failure to comply potentially resulting in fines, license revocation, or business limitations.
• Risk of non-compliance with Hong Kong regulations on referral arrangements and benchmark referral fees, potentially leading to regulatory sanctions, including suspension or revocation of the insurance broker license.
• Intense competition in the Hong Kong insurance intermediary industry from in-house sales forces, commercial banks, and other brokerages, with many competitors having greater financial and marketing resources.
• Commission revenue is subject to quarterly fluctuations due to seasonality, timing of policy renewals, and the net effect of new and lost business, with regulatory changes to product design also causing volatility.
• Future success depends on the continuing efforts of senior management and key personnel, particularly Mr. Huihe Zheng, and loss of their services could harm the business.
• Potential for inaccurate or incomplete product information and ineffective recommendations of insurance products by technical representatives, leading to reputational damage and loss of customers or partners.
• Risk of potential liability, loss of customers, and damage to reputation for failure to protect confidential customer information, including cybersecurity breaches or inadvertent disclosures.
• Reliance on dividends and other distributions from the Hong Kong operating subsidiary for cash and financing requirements, with potential limitations or restrictions by the PRC government on cash/asset transfers out of Hong Kong.
• Trading in securities may be prohibited under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB determines it cannot inspect the company's auditor for two consecutive years.
• Difficulty for shareholders to enforce U.S. judgments against the company or its officers/directors in Hong Kong or mainland China due to jurisdictional differences and lack of reciprocal enforcement treaties.
• Uncertainties regarding the interpretation, application, and enforcement of current and future PRC laws and regulations, which could become applicable to the company's Hong Kong operations and materially affect its business or ability to offer securities.
• The Hong Kong National Security Law and the U.S. Hong Kong Autonomy Act could impact the Hong Kong operating subsidiary, leading to adverse effects on business operations, financial position, and results.
• The market price for securities could be adversely affected by increased tensions between the United States and China.
• The company may be affected by the currency peg system in Hong Kong if the Hong Kong dollar devalues.
• The Series B Preferred Stock, controlled by Mr. Zheng, has super voting rights (100 votes per share), diluting the voting rights of common stock holders.
• The common stock may be considered 'penny stock,' subjecting it to additional sale and trading regulations that could make it more difficult to sell and limit capital raising ability.
• Provisions in the company's Bylaws and Florida law may delay or prevent a takeover that may not be in the best interests of shareholders.
• Future equity offerings could lead to additional dilution for existing shareholders.
• Sales of substantial amounts of common stock by existing shareholders after lock-up periods could adversely affect prevailing market prices.

Future Outlook

The company intends to use the net proceeds from this offering to expand service offerings, enhance marketing and branding, make new hires, and for general working capital. It expects to continue generating revenue from its referral business and anticipates faster growth in Hong Kong's life and medical insurance sector due to an aging population, high savings rates, economic development, rising incomes, and increased risk protection awareness.

Management Comments

• Mr. Huihe Zheng, President, CEO, and Chairman, entered into an employment agreement effective December 11, 2025, with an annual salary of $300,000, a one-time special bonus of $700,000 for past performance, and another $300,000 bonus upon Nasdaq uplisting.
• Ms. Wei Li, Chief Financial Officer and Secretary, entered into an employment agreement effective August 5, 2024, with an annual salary of $120,000, increasing to $150,000 upon Nasdaq listing.

Industry Context

Hong Kong boasts one of Asia's most developed insurance markets, with a high insurance penetration rate (20.0% in 2022, significantly higher than the PRC's 3.9%). The market is projected to grow from $72.3 billion in 2023 to $127.0 billion in 2032 (6.6% CAGR). Key drivers include increasing disposable income, a rising geriatric population, and strong demand for health and risk protection from mainland China visitors. Challenges include limited online insurance penetration and complex regulatory changes like IFRS 17. Opportunities arise from resumed cross-border travel and regional integration within the Greater Bay Area, fueling demand for Hong Kong's tax-free life and health insurance policies.

Comparison to Industry Standards

• Hong Kong's insurance penetration rate was 20.0% in 2022, significantly higher than the United States (11.6%), South Korea (11.1%), the United Kingdom (10.5%), and mainland China (3.9%), indicating a mature and highly insured market.
• The Hong Kong insurance industry's projected Compound Annual Growth Rate (CAGR) of 6.6% from 2024 to 2032 (to $127.0 billion) suggests robust growth compared to global averages, driven by specific regional factors.

Management Changes

Corporate Governance

Legal Proceedings

• No material legal proceedings are currently ongoing or threatened against the company, nor is the company aware of any legal proceedings involving directors or officers with adverse interests.

Related Party Transactions

• Huihe Zheng, CEO and Chairman, advanced $129,056 to the company in FY2025 and was repaid $812,277 in the same period.
• On October 9, 2024, 6,000,000 Series B Preferred Stock shares were issued to Huihe Zheng at $0.10 per share, canceling $600,000 of debt owed to him.
• The company advanced $256,410 to Huihe Zheng for a proposed cash bonus during the six months ended September 30, 2025; this amount was fully repaid on November 5, 2025.
• On October 1, 2025, Mr. Zheng entered into a Shareholder Agreement, agreeing not to sell Series B Preferred Stock and waiving co-sales rights, with provisions for company repurchase upon a change of control.

Stakeholder Impact

• Shareholders: New investors will experience immediate and substantial dilution. Existing shareholders, particularly the CEO, retain significant control. All shareholders face risks related to PRC government intervention and internal control weaknesses.
• Employees: Plans for new hires and training indicate potential growth opportunities. Employment agreements for key executives provide compensation and severance terms.
• Customers: The company aims to expand service offerings and distribution networks, potentially leading to a broader range of products and improved services.
• Regulators: The company is subject to extensive Hong Kong regulations and is taking steps to remediate internal control weaknesses and comply with new referral fee guidelines, which could lead to increased compliance costs.

Next Steps

• Complete the public offering of common stock.
• List common stock on The Nasdaq Stock Market LLC under the symbol QDMI.
• Implement remediation plans for identified material weaknesses in internal control over financial reporting, including hiring qualified accounting personnel, establishing a financial and system control framework, formulating U.S. GAAP accounting policies, assessing Sarbanes-Oxley compliance, and establishing an audit committee.
• Expand service offerings, marketing and branding efforts, and recruit new hires and training.
• Continue to strengthen relationships with leading insurance companies and expand the distribution network through strategic partners in Hong Kong and mainland China.

Key Dates

Recommendation

Despite recent revenue and net income growth, the company faces significant headwinds. The drastic 59.1% decline in gross profit margin in the most recent interim period due to soaring referral fees (to ~90%) indicates severe pressure on profitability. Coupled with identified material weaknesses in internal controls, high customer concentration, and the CEO's overwhelming voting control (99.0% post-offering), the investment carries substantial governance and operational risks. New investors will also experience immediate and significant dilution. The uncertainties surrounding PRC government intervention in Hong Kong further compound these risks, making the stock a high-risk proposition with a deteriorating profitability trend.

Keywords

Insurance brokerage, Hong Kong, Nasdaq listing, Public offering, QDM International, QDMI, SEC filing, Financial services, Life insurance, General insurance, MPF, ORSO, Referral business, Corporate governance, Risk management, Internal controls, PRC regulation, HFCA Act