S-1/A: QDM International Inc. Files for $7.5 Million Nasdaq Uplisting

QDM International Inc., a Florida-based holding company with operations in Hong Kong, is seeking to raise $7.5 million through a public offering to facilitate its uplisting to the Nasdaq Stock Market.

Summary

• QDM International Inc., a Florida holding company, is planning a firm commitment public offering of common stock to raise $7.5 million.
• The company intends to use the proceeds for service expansion, marketing, new hires, and general corporate purposes.
• QDM's common stock is currently quoted on the OTCQB Venture Market under the ticker symbol QDMI, with a last reported price of $2.71 per share as of December 13, 2024.
• The company plans to list its common stock on the Nasdaq Stock Market under the same symbol, QDMI.
• QDM operates primarily through its Hong Kong subsidiary, YeeTah, an insurance brokerage firm.
• YeeTah sells life and medical insurance, general insurance, and provides MPF services.
• The offering price will be determined between the underwriters and the company, and may be at a discount to the current market price.
• The company is a smaller reporting company and has elected to comply with reduced reporting requirements.
• Huihe Zheng, the President, CEO, and Chairman, holds approximately 81.0% of the voting power of the company.
• The company's Hong Kong operations are subject to risks associated with the Chinese government and its policies.
• The company's auditor, ZH CPA, LLC, is headquartered in Denver, Colorado, and has been inspected by the PCAOB.

Sentiment

Score: 6

Explanation: The document presents a balanced view, highlighting both the growth opportunities and the risks associated with the company's operations and the offering. While the company is pursuing a Nasdaq uplisting and has growth strategies, it also faces significant regulatory and operational risks, particularly related to its Hong Kong operations and dependence on a limited number of insurance partners. The sentiment is neutral to slightly positive, reflecting the potential for growth but acknowledging the challenges.

Positives

• The company intends to expand its distribution network and capitalize on the growth potential of Hong Kong's insurance industry.
• The company has a strong commitment to rigorous training and development for its technical representatives.
• The company has good relationships with insurance companies in Hong Kong.
• The company has an experienced management team in the insurance industry.
• The company offers a range of quality services covering insurance policy application, customer information collection, analysis of policy selection, and after -sale services.

Negatives

• The company's operating subsidiary derives a significant portion of revenues from a limited number of insurance company partners.
• The company's business is subject to concentration risks arising from dependence on a single or limited number of insurance company partners.
• The company's commission revenue is subject to quarterly fluctuations due to seasonality and other factors.
• The company's management has determined that its disclosure controls and procedures are not effective and has identified material weaknesses in its internal control over financial reporting.
• The company may be subject to restrictions on paying dividends or making other payments to the holding company, which may restrict its ability to satisfy liquidity requirements, conduct business and pay dividends to holders of common stock.

Risks

• The company's business is subject to political and economic instability in Hong Kong and changes in policies of the PRC government.
• The company may face legal and operational risks associated with being based in Hong Kong.
• The company may be subject to the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB cannot inspect its auditor.
• The company may rely on dividends from its Hong Kong subsidiary, and any restrictions on cash transfers could adversely affect its operations.
• The company's CEO has substantial influence over the company, and his interests may not align with other shareholders.
• The company may be unable to list its common stock on Nasdaq.
• The company may be subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection.
• The company may face potential liability, loss of customers and damage to its reputation for any failure to protect the confidential information of its customers.
• The company may be unable to attract and retain highly productive technical representatives, which could materially and adversely affect its business.
• The company may face potential liability, loss of customers and damage to its reputation for any failure to protect the confidential information of its customers.

Future Outlook

The company intends to grow its business by offering premium services, recruiting talent, and expanding its distribution network through partnerships in Hong Kong and mainland China.

Management Comments

• The company intends to grow its business by offering premium services and recruiting talent to join our professional team and sales force, expanding our distribution network through building more connections with business partners in Hong Kong and mainland China, such as wealth management companies, funds, trust companies, and overseas immigration agencies.

Industry Context

The Hong Kong insurance intermediary market is experiencing rapid growth due to increasing demands for insurance products by the Chinese population, especially visitors from mainland China.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it notes that Hong Kong has one of the most developed insurance markets in Asia, with a high per capita insurance premium.
• The document also mentions that Hong Kong has the highest insurance penetration rate globally, with a 20.0% penetration rate in 2022, compared to 3.9% in the PRC.

Related Party Transactions

• Huihe Zheng, the President, CEO and Chairman, advanced $129,056 to the Company during the six months ended September 30, 2024.
• Huihe Zheng advanced $244,313 to the Company during the year ended March 31, 2024.
• Huihe Zheng advanced $220,350 to the Company during the year ended March 31, 2023.
• Ouya Properties Group Ltd., a company controlled by Mr. Zheng, advanced $3,202 to the Company during the year ended March 31, 2023.
• YeeTah Financial Group Co., Ltd. charged YeeTah $43,586 and $67,878 in commissions for insurance referral services during the year ended March 31, 2023.
• The company issued 6,000,000 shares of Series B Preferred Stock to Mr. Zheng in exchange for the cancellation of $600,000 of debt owed to him.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Shareholders may be subject to risks associated with the company's Hong Kong operations and dependence on a limited number of insurance partners.
• Employees may benefit from the company's growth and expansion plans.
• Customers may benefit from the company's focus on premium customer service and a wide range of insurance products.
• Suppliers may benefit from the company's expansion and increased business activity.

Next Steps

• The company intends to apply to list its common stock on Nasdaq.
• The company will determine the offering price with the underwriters.
• The company will use the net proceeds from the offering for expansion, marketing, new hires, and working capital.

Key Dates

Keywords

insurance brokerage, Hong Kong, Nasdaq uplisting, public offering, life insurance, general insurance, MPF, financial services, OTC, China