DEF 14C: QDM International Plans Reverse Stock Split

QDM International Inc. announces a shareholder-approved reverse stock split to boost share price and facilitate Nasdaq uplisting.

Summary

• Shareholders of QDM International Inc. (QDMI), collectively holding approximately 93.6% of outstanding voting power, have approved an amendment to the Articles of Incorporation to effect a reverse stock split.
• The reverse stock split ratio will be set by the Board of Directors at a whole number between one-for-ten (1:10) and one-for-eighty (1:80).
• The primary objective of the reverse split is to increase the per share trading price of Common Stock to meet the minimum requirements for uplisting to The Nasdaq Stock Market LLC.
• The action was approved by written consent of the Voting Shareholders, including Huihe Zheng, Chairman, President, and CEO, who holds 87.8% of the Company's voting power, along with Morgan Capital Limited, Goldman Sachs Capital Limited, and Barclays Capital Limited.
• No meeting of shareholders was held, and no proxies were solicited, as sufficient shareholder approval was obtained via written consent.
• The reverse split will become effective upon filing the amendment with the Florida Secretary of State, but its effectiveness on the OTCQB Venture Market is subject to approval by the Financial Industry Regulatory Authority, Inc. (FINRA).
• No fractional shares will be issued; any fractional share resulting from the split will be rounded up to the nearest whole share.
• The par value of the Common Stock will remain $0.0001 per share, and the number of authorized shares will not change.

Sentiment

Score: 6

Explanation: The filing outlines a strategic move aimed at improving the company's market perception and access to capital markets (Nasdaq uplisting), which is generally positive. However, it explicitly details risks, particularly the potential for the split not to achieve its objectives and the significant increase in the CEO's already dominant voting power, which introduces a negative corporate governance aspect.

Positives

• Aims to increase the per share trading price of Common Stock to meet Nasdaq listing requirements, potentially enabling uplisting to a major exchange.
• Could encourage increased investor interest and promote greater liquidity for shareholders, particularly from institutional investors who may avoid low-priced stocks.
• May increase interest from analysts and brokers who have policies discouraging or prohibiting coverage of companies with low stock prices.
• Could result in individual shareholders paying lower transaction costs as a percentage of their total share value compared to low-priced stocks.
• The Board has flexibility to determine the exact reverse split ratio within the approved range (1:10 to 1:80) based on market conditions and company interests.

Negatives

• The reverse split will have a dilutive effect on the relative voting power of common shareholders due to the fixed voting power of Series B Preferred Stock.
• Huihe Zheng, the Chairman, CEO, and President, holds all outstanding Series B Preferred Stock, and a 1:10 reverse split, for example, would increase his voting power to 98.1% of the total.

Risks

• The reverse split may not increase the price of Common Stock over the long-term, or by a multiple of the reverse split ratio, and there is no assurance of a permanent or sustained increase.
• There is no assurance that the Company will be successful in listing its Common Stock on Nasdaq.
• The reverse split may decrease the liquidity of Common Stock due to a reduced total number of outstanding shares and potentially fewer market makers.
• The reverse split may be viewed negatively by the market, potentially leading to a decrease in overall market capitalization if the per share price does not increase proportionally.
• Effectiveness of the reverse split on the OTCQB is subject to FINRA approval, and there is no assurance on if and when this approval will be obtained.

Future Outlook

The company is seeking to list its Common Stock on The Nasdaq Stock Market LLC. The Board intends to effect the Reverse Split only if it believes that a decrease in the number of shares outstanding is in the best interests of the Company and shareholders and is likely to improve the trading price of Common Stock and improve the likelihood of uplisting to Nasdaq.

Management Comments

• "We are furnishing the accompanying Information Statement on Schedule 14C... to notify the shareholders that... the Board of Directors of the Company... and shareholders collectively holding approximately 93.6% of our outstanding voting power... have by written consent approved and adopted an amendment to our Articles of Incorporation... to effect a reverse stock split..."
• "The Board intends to effect the Reverse Split only if it believes that a decrease in the number of shares outstanding is in the best interests of the Company and our shareholders and is likely to improve the trading price of our Common Stock and improve the likelihood that we will have the ability to uplist to Nasdaq."

Industry Context

Reverse stock splits are a common corporate finance strategy employed by companies, particularly those trading on over-the-counter markets, to increase their per-share stock price. This action is typically undertaken to meet minimum bid price requirements for uplisting to major exchanges like Nasdaq, which can enhance a company's visibility, attract institutional investors, and potentially improve liquidity. This filing indicates QDM International's strategic alignment with this industry trend to improve its market standing.

Corporate Governance

Stakeholder Impact

• Shareholders: Common shareholders will hold fewer shares but the same percentage initially; however, their relative voting power will be diluted. There is potential for increased share price and liquidity if Nasdaq uplisting is successful, but also a risk of decreased liquidity and market capitalization if the split is not successful.
• Management/Board: The Board gains flexibility to meet Nasdaq listing requirements. CEO Huihe Zheng's voting power will significantly increase, consolidating his control over the company.

Next Steps

• Distribute the Information Statement to shareholders on or about August 4, 2025.
• The Reverse Split will not occur until at least twenty (20) calendar days after the distribution of this Information Statement.
• The Amendment to the Articles of Incorporation will be filed with the Secretary of State of Florida at the Board's discretion (within one year of shareholder approval).
• FINRA approval is required for the Reverse Split to be recognized for trading purposes on the OTCQB.
• Mail a letter of transmittal to each shareholder on or after the Effective Time for stock certificate exchange.

Key Dates

Recommendation

The reverse stock split is a strategic move aimed at uplisting to Nasdaq, which could be positive for liquidity and investor interest. However, the success of this move is not guaranteed, and explicit risks are mentioned, including the possibility of the stock price not sustaining the increase and a potential decrease in market capitalization. Furthermore, the significant increase in the CEO's already dominant voting power post-split raises corporate governance concerns regarding minority shareholder influence. Given the speculative nature of the uplisting success and the governance implications, a 'Hold' recommendation is appropriate for existing investors, while new investors might wait for clearer signs of uplisting success and sustained price performance.

Keywords

Reverse Stock Split, Nasdaq Uplisting, Shareholder Consent, Corporate Governance, Stock Price, Liquidity, QDM International Inc., QDMI, OTCQB, FINRA, Huihe Zheng