Item 1. Financial Statements
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, AND MARCH 31, 2021
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
March 31,
2021
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
29,242
|
|
|
$
|
35,605
|
|
Accounts receivable
|
|
|
5,557
|
|
|
|
2,250
|
|
Prepaid expenses
|
|
|
21,925
|
|
|
|
42,526
|
|
Deferred assets
|
|
|
—
|
|
|
|
70,673
|
|
Total current assets
|
|
|
56,724
|
|
|
|
151,054
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
56,724
|
|
|
$
|
151,054
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable & accrued liabilities
|
|
$
|
19,308
|
|
|
$
|
5,055
|
|
Due to related parties
|
|
|
526,250
|
|
|
|
556,497
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
545,558
|
|
|
|
561,552
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 545,386 and 913,500 issued and outstanding
|
|
|
54
|
|
|
|
91
|
|
Common stock, $0.0001 par value, 200,000,000 shares authorized, 208,084 and 56,268 shares issued and 207,611 and 55,796 shares outstanding
|
|
|
624
|
|
|
|
169
|
|
Subscription receivable
|
|
|
(48,718
|
)
|
|
|
(48,718
|
)
|
Treasury stock, 473 and 473 shares at cost
|
|
|
(60,395
|
)
|
|
|
(60,395
|
)
|
Additional paid-in capital
|
|
|
9,443,219
|
|
|
|
9,337,310
|
|
Accumulated deficit
|
|
|
(9,823,618
|
)
|
|
|
(9,638,955
|
)
|
Total stockholders’ deficit
|
|
|
(488,834
|
)
|
|
|
(410,498
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
56,724
|
|
|
$
|
151,054
|
|
See accompanying notes to
condensed consolidated financial statements.
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
September 30,
|
|
For the Six Months
Ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenue
|
|
$
|
18,608
|
|
|
$
|
46,020
|
|
|
$
|
30,218
|
|
|
$
|
66,900
|
|
Cost of sales
|
|
|
18,608
|
|
|
|
46,419
|
|
|
|
30,218
|
|
|
|
65,997
|
|
Gross profit
|
|
|
—
|
|
|
|
(399
|
)
|
|
|
—
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General & administrative expenses
|
|
$
|
75,580
|
|
|
$
|
59,740
|
|
|
$
|
183,703
|
|
|
$
|
142,449
|
|
Total operating expenses
|
|
|
75,580
|
|
|
|
59,740
|
|
|
|
183,703
|
|
|
|
142,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(75,580
|
)
|
|
|
(60,139
|
)
|
|
|
(183,703
|
)
|
|
|
(141,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
64
|
|
|
|
(77
|
)
|
|
|
960
|
|
|
|
—
|
|
Other (income) expense, net
|
|
|
|
|
|
|
231
|
|
|
|
|
|
|
|
(3,290
|
)
|
Total other expense (income)
|
|
|
64
|
|
|
|
154
|
|
|
|
960
|
|
|
|
(3,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
|
$
|
(75,644
|
)
|
|
$
|
(60,293
|
)
|
|
$
|
(184,663
|
)
|
|
$
|
(138,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.36
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.08
|
)
|
|
$
|
(2.51
|
)
|
Diluted
|
|
|
(0.36
|
)
|
|
|
(1.09
|
)
|
|
$
|
(1.08
|
)
|
|
|
(2.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic & diluted shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
545,386
|
|
|
|
13,500
|
|
|
|
548,080
|
|
|
|
13,500
|
|
Common stock
|
|
|
207,553
|
|
|
|
55,129
|
|
|
|
170,831
|
|
|
|
55,126
|
|
See accompanying notes to
condensed consolidated financial statements.
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
DEFICIT
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
Six months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
Preferred
Stock Amount
|
|
Common
Stock Amount
|
|
Treasury Amount
|
|
Additional
Paid-in Capital
|
|
Subscription Receivable
|
|
Accumulated Deficit
|
|
Total
|
Balance March 31, 2020
|
|
|
13,500
|
|
|
|
55,589
|
|
|
|
(473
|
)
|
|
$
|
1
|
|
|
$
|
167
|
|
|
|
(60,395
|
)
|
|
$
|
9,503,807
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,331,253
|
)
|
|
$
|
63,609
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(138,256
|
)
|
|
|
(138,256
|
)
|
Contribution from stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,747
|
|
|
|
|
|
|
|
—
|
|
|
|
19,747
|
|
Share issuance due to reverse stock split rounding up
|
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Balance September 30, 2020 (Unaudited)
|
|
|
13,500
|
|
|
|
55,602
|
|
|
|
(473
|
)
|
|
$
|
1
|
|
|
$
|
167
|
|
|
|
(60,395
|
)
|
|
$
|
9,523,554
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,469,509
|
)
|
|
$
|
(54,900
|
)
|
Three months ended September 30, 2020
Balance June 30, 2020 (Unaudited)
|
|
|
13,500
|
|
|
|
55,602
|
|
|
|
(473
|
)
|
|
$
|
1
|
|
|
$
|
167
|
|
|
|
(60,395
|
)
|
|
$
|
9,508,807
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,409,216
|
)
|
|
$
|
(9,354
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(60,293
|
)
|
|
|
(60,293
|
)
|
Contribution from stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,747
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,747
|
|
Balance September 30, 2020 (Unaudited)
|
|
|
13,500
|
|
|
|
55,602
|
|
|
|
(473
|
)
|
|
$
|
1
|
|
|
$
|
167
|
|
|
|
(60,395
|
)
|
|
$
|
9,523,554
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,469,509
|
)
|
|
$
|
(54,900
|
)
|
Six months ended September 30, 2021
Balance March 31, 2021
|
|
|
913,500
|
|
|
|
56,268
|
|
|
|
(473
|
)
|
|
$
|
91
|
|
|
$
|
169
|
|
|
|
(60,395
|
)
|
|
$
|
9,337,310
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,638,955
|
)
|
|
$
|
(410,498
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(184,663
|
)
|
|
|
(184,663
|
)
|
Share issuance due to reverse stock split rounding up
|
|
|
—
|
|
|
|
132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share offering costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(94,173
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(94,173
|
)
|
Conversion to common stock
|
|
|
(368,114
|
)
|
|
|
134,976
|
|
|
|
—
|
|
|
|
(37
|
)
|
|
|
405
|
|
|
|
—
|
|
|
|
(368
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock
|
|
|
—
|
|
|
|
16,708
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50
|
|
|
|
—
|
|
|
|
200,450
|
|
|
|
—
|
|
|
|
—
|
|
|
|
200,500
|
|
September 30, 2021 (Unaudited)
|
|
|
545,386
|
|
|
|
208,084
|
|
|
|
(473
|
)
|
|
$
|
54
|
|
|
$
|
624
|
|
|
|
(60,395
|
)
|
|
$
|
9,443,219
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,823,618
|
)
|
|
$
|
(488,834
|
)
|
Three months ended September 30, 2021
Balance June 30, 2021 (Unaudited)
|
|
|
545,386
|
|
|
|
207,952
|
|
|
|
(473
|
)
|
|
$
|
54
|
|
|
$
|
624
|
|
|
|
(60,395
|
)
|
|
$
|
9,443,219
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,747,974
|
)
|
|
$
|
(413,190
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(75,644
|
)
|
|
|
(75,644
|
)
|
Share issuance due to reverse stock split rounding up
|
|
|
—
|
|
|
|
132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance
September 30, 2021 (Unaudited)
|
|
|
545,386
|
|
|
|
208,084
|
|
|
|
(473
|
)
|
|
$
|
54
|
|
|
$
|
624
|
|
|
|
(60,395
|
)
|
|
$
|
9,443,219
|
|
|
$
|
(48,718
|
)
|
|
$
|
(9,823,618
|
)
|
|
$
|
(488,834
|
)
|
See accompanying notes to
condensed consolidated financial statements.
QDM INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
|
|
|
|
|
|
|
|
|
|
|
September
30,
2021
|
|
September
30,
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(184,663
|
)
|
|
$
|
(138,256
|
)
|
Adjustments to reconcile net loss
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
—
|
|
|
|
167
|
|
Net (gain)/loss from write-off
of fixed assets
|
|
|
—
|
|
|
|
543
|
|
Changes in working capital:
|
|
|
|
|
|
|
|
|
Accounts receivable & other
receivable
|
|
|
(3,037
|
)
|
|
|
(7,277
|
)
|
Prepaid expenses
|
|
|
20,601
|
|
|
|
(19,925
|
)
|
Accounts payable & accrued
liabilities
|
|
|
14,253
|
|
|
|
(11,785
|
)
|
Due to a
related party
|
|
|
(40,738
|
)
|
|
|
13,574
|
|
Net cash
used in operating activities
|
|
|
(193,854
|
)
|
|
|
(162,959
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Deferred
costs related to reverse acquisition
|
|
|
—
|
|
|
|
(115,000
|
)
|
Net cash
provided by (used) in investing activities
|
|
|
—
|
|
|
|
(115,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds borrowed from related
parties
|
|
|
210,991
|
|
|
|
259,957
|
|
Payments to related parties
|
|
|
(200,500
|
)
|
|
|
(10,009
|
)
|
Share issuance proceeds
|
|
|
200,500
|
|
|
|
—
|
|
Costs related to equity financing
|
|
|
(23,500
|
)
|
|
|
—
|
|
Contribution
from stockholders
|
|
|
—
|
|
|
|
19,747
|
|
Net cash
provided by (used) in financing activities
|
|
|
187,491
|
|
|
|
269,695
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF
EXCHANGE RATE CHANGES ON CASH
|
|
|
—
|
|
|
|
—
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(6,363
|
)
|
|
|
(8,264
|
)
|
CASH, BEGINNING OF PERIOD
|
|
$
|
35,605
|
|
|
$
|
62,780
|
|
CASH, END OF PERIOD
|
|
|
29,242
|
|
|
|
54,516
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
Cash paid
for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash paid
for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
See accompanying notes to condensed consolidated financial
statements.
QDM International Inc.
Notes to Condensed Consolidated Financial Statements
Six Months Ended September 30, 2021 and 2020
1. Organization and principal activities
QDM International Inc. (“we,” the “Company”
or “QDM”) was incorporated in Florida in March 2020 and is the successor to 24/7 Kid Doc, Inc. (“24/7 Kid”), which
was incorporated in Florida in November 1998. The Company is a holding company with no material operations and conducts its insurance
brokerage business through an indirect wholly owned subsidiary, YeeTah Insurance Consultant Limited (“YeeTah”), a licensed
insurance brokerage company located in Hong Kong, China. YeeTah sells a wide range of insurance products, consisting of two major categories:
(1) life and medical insurance, such as individual life insurance; and (2) general insurance, such as automobile insurance, commercial
property insurance, liability insurance, homeowner insurance. In addition, as a Mandatory Provident Fund (“MPF”) Intermediary,
YeeTah also assists its customers with their investment through the MPF and the Occupational Retirement Schemes Ordinance schemes (“ORSO”)
in Hong Kong, both of which are retirement protection schemes set up for employees.
On October 21, 2020, the Company entered into a share
exchange agreement (the “Share Exchange Agreement”) with QDM Holdings Limited, a British Virgin Islands (“BVI”)
company (“QDM BVI”), and Huihe Zheng, the sole shareholder of QDM BVI (“Mr. Zheng”), who is also the Company’s
principal stockholder, Chairman and Chief Executive Officer, to acquire all the issued and outstanding capital stock of QDM BVI in exchange
for the issuance to Mr. Zheng of 900,000 shares of a newly designated Series C Convertible Preferred Stock, par value $0.0001 per share,
with each Series C Convertible Preferred Stock initially being convertible into 11 shares of the Company’s common stock, par value
$0.0001 per share, subject to certain adjustments and limitations (the “Share Exchange”). The Share Exchange closed on October
21, 2020.
As a result of the consummation of the Share Exchange,
the Company acquired all the issued and outstanding capital stock of QDM BVI and its subsidiaries, QDM Group Limited, a Hong Kong corporation
and wholly owned subsidiary of QDM BVI (“QDM HK”) and YeeTah.
The Company was a shell company prior to the reverse
acquisition which occurred as a result of the consummation of the transaction contemplated by the Share Exchange Agreement, and QDM BVI
was a private operating company. The reverse acquisition by a non-operating public shell company by a private operating company typically
results in the owners and management of the private company having actual or effective voting and operating control of the combined company.
Therefore, the reverse acquisition is considered a capital transaction in substance. In other words, the transaction is a reverse recapitalization,
equivalent to the issuance of stock by the private company for the net monetary assets of the shell company accompanied by a recapitalization.
Therefore, the acquisition was accounted for as a recapitalization and QDM BVI is considered the acquirer for accounting and financial
reporting purposes. The assets and liabilities of QDM BVI have been brought forward at their book value and no goodwill has been recognized.
Accordingly, the reverse acquisition has been treated
as a corporate restructuring (reorganization) of entities under common control and thus the current capital structures of QDM BVI and
its wholly-owned subsidiary QDM HK and its wholly-owned subsidiary, YeeTah, have been retrospectively presented in prior periods as if
such structures existed at that time and in accordance with ASC 805-50-45-5.
As a result of the Share Exchange, the Company ceased
to be a shell company.
Unless the context specifically requires otherwise,
the term “Company” used herein means QDM International Inc. together with its direct and indirect subsidiaries described above.
Going Concern
The consolidated financial statements have been prepared
on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course
of business for the foreseeable future. The Company has incurred a loss since inception resulting in an accumulated deficit as of September
30, 2021. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
The ability to continue as a going concern is dependent
upon the Company generating revenue and profit in the future and/or to obtain necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve
months primarily through financings from the Company’s major stockholder, although the Company may seek other sources of funding,
including public and private offerings of securities.
These consolidated financial statements do not reflect
adjustments that would be necessary if the Company were unable to continue as a “going concern.” While management believes
that the actions already taken or planned, including adjusting its operating expenditures and obtaining financial supports from its principal
stockholder, will mitigate the adverse conditions and events which raise doubt about the validity of the “going concern” assumption
used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable
to continue as a “going concern,” then substantial adjustments would be necessary to the reported amounts of its liabilities,
the reported expenses and the consolidated balance sheet classifications used.
2. Summary of significant accounting policies
Basis of Presentation
The Company’s unaudited condensed financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”). The accompanying unaudited condensed financial statements reflect all adjustments, consisting of only normal recurring items,
which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not
necessarily indicative of the results to be expected for the fiscal year ending March 31, 2022. These unaudited condensed financial statements
should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K
for the year ended March 31, 2021, which was originally filed with the Securities and Exchange Commission on July 12, 2021 and was amended
on October 22, 2021.
Use of Estimates
The preparation of the Company’s consolidated
financial statements in conformity with the U.S. GAAP requires the Company to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported
amounts of revenues and expenses may be affected by the estimates that management is required to make. Actual results could differ from
those estimates.
Foreign Currency and Foreign Currency Translation
The Company’s reporting currency is the United
States Dollar (“US$” or “$”). The Company’s operations are principally conducted in Hong Kong where Hong
Kong dollar is the functional currency.
Transactions denominated in other than the functional
currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency
at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported in the statements of operations
and comprehensive loss.
The exchanges rates used for translation from Hong Kong dollar to US$ 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 2021 and 2020.
Certain Risks and Concentration
The Company’s financial instruments that potentially
subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and receivables, and other
assets. As of September 30, 2021, substantially all of the Company’s cash and cash equivalents were held in major financial institutions
located in Hong Kong, which management considers to being of high credit quality.
Cash and Cash Equivalents
Cash and cash equivalents consist of petty cash on
hand and cash held in banks, which are highly liquid and have original maturities of three months or less and are unrestricted as to withdrawal
or use.
Accounts Receivable
Accounts receivable represents trade receivable and
are recognized initially at fair value and subsequently adjusted for any allowance for doubtful accounts and impairment.
The Company makes impairment loss for bad and doubtful
debts based on assessments of the recoverability of the trade and other receivables based on individual account analysis, including the
current creditworthiness and the past collection history of each debtor. Impairments arise when there is an objective evidence indicate
that the balances may not be collectible. The identification of bad and doubtful debts, in particular of a loss event, requires the use
of judgment and estimates, which involve the estimates of specific losses on individual exposures, as well as a provision on historical
trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any
balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision
is recorded against accounts receivables balances, with a corresponding charge recorded in the statements of operations. Delinquent account
balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable.
The Company historically did not have material bad
debts in accounts receivable. There were no bad debt expenses for the three and six months ended September 30, 2021 and 2020 and there
was no provision for doubtful accounts as of September, 2021 and March 31, 2021.
Revenue Recognition
The Company generates revenue primarily by providing
insurance brokerage services in Hong Kong. The Company sells insurance products underwritten by insurance companies operating in Hong
Kong to its individual customers and is compensated for its services by commissions paid by insurance companies, typically based on a
percentage of the premium paid by the insured.
FASB
Accounting Standards Codification (“ASC”) Topic 606 provides for a five-step model for recognizing revenue from contracts
with customers. These five steps include:
|
(i)
|
Identify the contract
|
|
(ii)
|
Identify performance obligations
|
|
(iii)
|
Determine transaction price
|
|
(iv)
|
Allocate transaction price
|
The Company enters into insurance brokerage contracts
with our customers (insurance companies) primarily through written contracts. Performance obligation for these insurance brokerage
contracts is to help the Company’s insurance company customers to promote, coordinate and complete subscriptions of insurance policies
and products offered by our customers.
Under ASC 606, revenue is recognized when the customer
obtains control of a good or service. A customer obtains control of a good or service if it has the ability to direct the use of and obtain
substantially all of the remaining benefits from that good or service. The transfer of control of the Company’s brokerage services
generally occurs at a point in time on the effective date of the associated insurance contract when the policy transfers to the customer.
The insurance policy entered between the insurance company and the insured customer generally contains a cool-off period of one to two
months. When the cool-off period elapses and the insured customer does not withdraw from the insurance policy, the policy becomes effective.
Once the transfer of control of a service occurs, the Company has satisfied its insurance brokerage performance obligation and recognizes
revenue.
Fair Value Measurement
Fair value is the price that would be received from
selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining
the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal
or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the
asset or liability.
The established fair value hierarchy requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The three levels of inputs that may be used to measure fair value as follows:
|
Level 1:
|
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
|
|
Level 2:
|
|
Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
|
|
|
|
|
Level 3:
|
|
Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
|
The Company’s financial instruments include
cash and cash equivalents, accounts receivable, due from related parties, accounts payable and accrued liabilities, and due to related
party. The carrying amounts of these financial instruments approximate their fair values due to the short-term nature of these instruments.
The Company noted no transfers between levels during
any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring
basis as of September 30, 2021.
Leases
A lease for which substantially all the benefits and
risks incidental to ownership remain with the lessor is classified by the lessee as an operating lease. When a lease contains rent holidays,
the Company records the total expenses on a straight-line basis over the lease term.
Leases that substantially transfer to the Company
all the risks and rewards of ownership of assets are accounted for as capital leases. At the commencement of the lease term, a capital
lease is capitalized at the lower of the fair value of the leased asset and the present value of the minimum lease payments, each determined
at the inception of the lease.
The corresponding liability to the lessor is included
in the balance sheets as capital lease obligation. Lease payments are apportioned between the finance charge and the reduction of the
outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate
of interest on the remaining balance of the liability.
Assets under capital leases are depreciated the same
as owned assets over the shorter of the lease term and their estimated useful lives.
Taxation
Current income taxes are provided on the basis of
net profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax
purposes, in accordance with the regulations of the relevant tax jurisdictions.
Deferred income taxes are recognized for temporary
differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss
carryforwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with
the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to
taxable income in which temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities
of changes in tax rates is recognized in the statement of operations and comprehensive income in the period of the enactment of the change.
The Company considers positive and negative evidence
when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers,
among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration
of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate
realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward
periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization
of deferred tax assets, the Company has considered possible sources of taxable income including (i) future reversals of existing
taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future
taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected
within the industry.
The Company recognizes a tax benefit associated with
an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a
taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently
measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate
settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due
to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments
are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of
changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company
classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.
Stock-Based Compensation
The Company recognizes stock-based compensation in
accordance with FASB ASC 718, Stock Compensation. ASC 718 requires that the cost resulting from all share-based transactions be recorded
in the financial statements. It establishes fair value as the measurement objective in accounting for share-based payment arrangements
and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. ASC
718 also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees
in share-based payment transactions.
Earnings per share
Basic earnings per share is computed by dividing net
income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the period
using the two-class method. Under the two-class method, net income is allocated between shares of common stock and other participating
securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual
terms they are not obligated to share in the losses. Diluted earnings per share is calculated by dividing net income attributable to holders
of common stock by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent
shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
Recently Issued Accounting Standards
The Company has reviewed all the recent accounting
pronouncements issued to date of the issuance of these financial statements, and does not believe any of these pronouncements will have
a material impact on the Company.
3. Deferred Asset
Deferred asset of $70,673 as of March 31, 2021 represented
prepaid transaction costs in relation to the public offering completed on April 29, 2021.
4. Equity
Common Stock
On April 29, 2021, the Company consummated an initial
closing of a “best efforts” self-underwritten public offering of its common stock, par value $0.0001 per share (the “Offering”),
in which the Company issued and sold an aggregate of 16,798 shares (501,250 shares before the Reverse Split (as defined below)) of its
common stock at a price of $12 per share ($0.40 before the Reverse Split) to certain investors, generating gross proceeds to the Company
of $200,500. Share offering costs of $94,173 were offset against the share capital in relation to the Offering.
On August 10, 2021, the Company effected a reverse
stock split, without changing the par value per share, whereby each 30 issued and outstanding shares of common stock were consolidated
into one share of common stock (the “Reverse Split”). The Company has retrospectively accounted for the change in the current
and prior period financial statements that are presented in the condensed interim financial statements.
Preferred Stock
On May 17, 2021, upon receipt of a conversion notice
from Mr. Zheng, the Company issued 134,975 shares (4,049,254 shares before the Reverse Split) of the Company’s common stock, par
value $0.0001 per share, upon conversion of an aggregate of 368,114 shares of Series C Convertible Preferred Stock, par value $0.0001
per share, at a conversion ratio of 1-for-11, pursuant to the terms of the Certification of Designation for the Series C Convertible Preferred
Stock.
Additional Paid-in Capital
During the six months ended September 30, 2020 ,
the Company received capital contribution of $19,747 from its principal stockholder for working capital uses. The capital contribution
was recorded in additional paid-in capital.
5. Related Party Transaction
Related Parties
Name of related parties
|
|
Relationship with the Company
|
Siu Ping Lo
|
|
Responsible officer of YeeTah and former director of YeeTah (resigned on December 31, 2019)
|
Huihe Zheng
|
|
Principal Stockholder, Chief Executive Officer and Chairman of the Company
|
YeeTah Financial Group Co., Ltd.
|
|
A company controlled by Siu Ping Lo
|
Tim Shannon
|
|
Chief Financial Officer of the Company
|
Related Party Transactions
|
(i)
|
During the six months ended September 30, 2021 , YeeTah Financial Group Co., Ltd. (“YeeTah Financial”) charged YeeTah US$30,218 (2020: US$65,997) commission expenses in relation to insurance referral services rendered by YeeTah Financial.
|
|
|
|
|
(ii)
|
During the six months ended September 30, 2021, the Company received 0nil (2020: US$19,747) in capital contributions from Tim Shannon for working capital uses.
|
|
|
|
|
(ii)
|
During the six months ended September 30, 2021, the Company received $210,991 (2020: US$259,957) in stockholder advances from Mr. Zheng for working capital uses. The Company repaid Mr. Zheng $200,500 during the six months ended September 30, 2021.
|
Due to Related Party Balance
The Company’s due to related party balance as
of September 30 and March 31, 2021 is as follows:
Schedule of Related Party Transactions
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
March 31,
2021
|
|
|
US$
|
|
US$
|
Huihe Zheng
|
|
|
526,250
|
|
|
|
533,590
|
|
YeeTah Financial
|
|
|
—
|
|
|
|
22,907
|
|
Total
|
|
|
526,250
|
|
|
|
556,497
|
|
The due to related party balance is unsecured, interest-free
and due on demand.
Due from a Stockholder
The due from a stockholder balances as of September
30, 2021 and March 31, 2021 are as follows:
|
|
September 30,
2021
|
|
March 31,
2021
|
|
|
US$
|
|
US$
|
Huihe Zheng
|
|
|
48,718
|
|
|
|
48,718
|
|
The due from a stockholder balances represent the
purchase price for shares of QDM BVI to be paid by Mr. Zheng. These due from a stockholder balances are unsecured, interest-free and due
on demand.
6. Income Taxes
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance,
the Company’s Hong Kong subsidiaries are subject to a 16.5% income tax on their taxable income generated from operations in Hong
Kong. On December 29, 2017, Hong Kong government announced a two-tiered profit tax rate regime. Under the two-tiered tax rate regime,
the first HK$2.0 million assessable profits will be subject to a lower tax rate of 8.25% and the excessive taxable income will continue
to be taxed at the existing 16.5% tax rate. The two-tiered tax regime becomes effective from the assessment year of 2018/2019, which was
on or after April 1, 2018. The application of the two-tiered rates is restricted to only one nominated enterprise among connected entities.
The Company did not have current income tax expenses
for the three months and six months ended September 30, 2021 and 2020 since it did not have taxable incomes in these two periods.
BVI
Under the current laws of the BVI, the Company is
not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no BVI withholding tax will
be imposed.
US
Under the current Florida state and US federal income
tax, the Company does not need to pay income taxes as Florida state does not levy income tax. The federal income tax is based on a flat
rate of 21% for the calendar year of 2021 (2020: 21%).
Uncertain tax positions
The Company evaluates each uncertain tax position
(including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated
with the tax positions. As of September 30 and March 31, 2021 the Company did not have any significant unrecognized uncertain tax positions.
7. Commitments and Contingencies
The Company did not have other significant commitments, long-term obligations,
or guarantees as of September 30, 2021.
Contingencies
The Company is subject to legal proceedings and regulatory
actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not
anticipate that the final outcome arising out of any such matter will have a material adverse effect on our business, financial position,
cash flows or results of operations taken as a whole. As of September 30, 2021, the Company is not a party to any material legal or administrative
proceedings.
8. Subsequent Events
In accordance with ASC 855-10, the Company has analyzed
its operations subsequent to September 30, 2021 has determined that it does not have any other material subsequent events to disclose
in these financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion should be read in conjunction
with our interim financial statements, including the notes thereto, appearing elsewhere in this Report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed
in the forward- looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed
below and elsewhere in this Report. Our interim financial statements are stated in United States Dollars and are prepared in accordance
with United States Generally Accepted Accounting Principles.
Overview
From 2016 to 2020, we were a telemedicine company
that provides Connect-a-Doc telemedicine kits to schools. Our services aimed to provide alternatives to schools that desire to provide
a higher level of healthcare to their students but are unable to keep a full-time school nurse available. In 2020 this business was discontinued
and we became a non-operating “shell” company.
Following the change in control in March 2020, we
planned to conduct insurance brokerage business in Hong Kong, through either formation or acquisition of an existing insurance brokerage
business. To implement our business plan, during 2020, we engaged professionals (legal counsel and accountants) to evaluate the optimal
corporate structure for our new business and conduct due diligence on a potential target.
On October 21, 2020, we entered into the Share Exchange
Agreement with QDM BVI, and Huihe Zheng, the sole shareholder of QDM BVI, who is also our principal stockholder and serves as our Chairman
and Chief Executive Officer, to acquire all the issued and outstanding capital stock of QDM BVI in exchange for the issuance to Mr. Zheng
of 900,000 shares of a newly designated Series C Preferred Stock. The Share Exchange closed on October 21, 2020.
As a result of the consummation of the Share Exchange,
we acquired QDM BVI and its indirect subsidiary, YeeTah, an insurance brokerage company primarily engaged in the sales and distribution
of insurance products in Hong Kong. Following the closing of the transaction, we have assumed the business operations of QDM BVI and its
subsidiaries.
Impact of COVID-19 and Protests
Impact of COVID-19
An outbreak of a novel strain of the coronavirus,
COVID-19, was identified in China and has subsequently been recognized as a pandemic by the World Health Organization. The COVID-19 pandemic
has severely restricted the level of economic activity around the world. In response to this pandemic, the governments of many countries,
states, cities and other geographic regions, including Hong Kong, have taken preventative or protective actions, such as imposing restrictions
on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes.
With social distancing measures having been implemented
to curtail the spread of COVID-19, insurance brokers in Hong Kong, such as YeeTah, which relied primarily on storefront and in-person
consultations for new business production faced an immediate slowdown. In addition, Hong Kong has suspended mainland tourists’ free
travel and Hong Kong’s current boarding requirements vary based on where the traveler has visited in the past 14 or 21 days and
whether the traveler is vaccinated.
Customers from mainland China contributed to a large
part of YeeTah’s commissions. Regulations require their physical presence in Hong Kong to complete the policy contract. However,
due to the political turmoil and travel restrictions related to the COVID-19 epidemic, mainland Chinese customers have dropped sharply.
As a result, YeeTah’s revenue from commissions on new business has decreased significantly. YeeTah’s commissions from renewal
premiums have also been materially affected since the mainland Chinese customers have been late in making the renewal payments due to
inability to visit Hong Kong to make the payments. Most of YeeTah’s mainland customers do not have Hong Kong bank account and used
to pay their premiums through credit card or in cash in person.
Impact of Protests in Hong Kong
Since early 2019, a number of political protests and
conflicts have occurred in Hong Kong in connection with proposed legislation that would allow local authorities to detain and extradite
people who are wanted in territories that Hong Kong does not have extradition agreements with, including mainland China and Taiwan. On
June 30, 2020, China’s National People’s Congress Standing Committee passed a national security law for the Hong Kong Special
Administrative Region (HKSAR). Hong Kong’s Chief Executive promulgated it in Hong Kong later the same day. Among other things, it
criminalizes separatism, subversion, terrorism and foreign interference in Hong Kong. The economy of Hong Kong has been negatively impacted,
including the retail market, property market, stock market, and tourism, from such protests.
Under the Basic Law of the Hong Kong Special Administrative
Region of the People’s Republic of China, Hong Kong is exclusively in charge of its internal affairs and external relations, while
the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and
develops relations with foreign states and regions. We cannot assure you that the Hong Kong protests will not affect Hong Kong’s
status as a Special Administrative Region of the People’s Republic of China and thereby affecting its current relations with foreign
states and regions.
Our revenue is susceptible to Hong Kong protests as
well as any other incidents or factors which affect the stability of the social, economic and political conditions in Hong Kong. For example,
as a result of the Hong Kong protests, we experienced a drop in new customers from mainland China beginning in June 2019, which impacted
our revenue for the period from June 2019 to June 30, 2020.
It is unclear whether there will be other political
or social unrest in the near future or that there will not be other events that could lead to the disruption of the economic, political
and social conditions in Hong Kong. If such events persist for a prolonged period of time or that the economic, political and social conditions
in Hong Kong are to be disrupted, our overall business and results of operations may be adversely affected.
Recent Regulatory Development
We are a holding company incorporated in Florida with substantially all
of our operation conducted by the operating entity in Hong Kong. Although we conduct limited administrative activities in our principal
executive offices located in China, we currently do not have or intend to set up any subsidiary or enter into any contractual arrangements
to establish a variable interest entity structure with any entity in mainland China. Hong Kong is a special administrative region of the
PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’s constitutional document,
which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicial powers, including that of
final adjudication under the principle of “one country, two systems”. Accordingly, we believe the laws and regulations of
the PRC do not currently have any material impact on our business, financial condition or results of operations. However, there is no
assurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. If there is
significant change to current political arrangements between mainland China and Hong Kong, companies operated in Hong Kong may face similar
regulatory risks as those operated in PRC, including its ability to offer securities to investors, list its securities on a U.S. or other
foreign exchange, conduct its business or accept foreign investment. In light of China’s recent expansion of authority in Hong Kong,
there are risks and uncertainties which we cannot foresee for the time being, and rules and regulations in China can change quickly with
little or no advance notice. The Chinese government may intervene or influence our current and future operations in Hong Kong at any time,
or may exert more control over offerings conducted overseas and/or foreign investment in issuers likes ourselves. See “Item 1A.
Risk Factors – Risks Related to Doing Business in Hong Kong.” in our Annual Report on Form 10-K for the year ended March
31, 2021, which was originally filed with the Securities and Exchange Commission on July 12, 2021 and was amended on October 22, 2021.
We are aware that, recently, the PRC government initiated a series of regulatory
actions and statements to regulate business operations in certain areas in China with little advance notice, including cracking down on
illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest
entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
For example, on July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State
Council jointly issued a document to crack down on illegal activities in the securities market and promote the high-quality development
of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight
of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve
the system of extraterritorial application of the PRC securities laws. Also, on July 10, 2021, the Cyberspace Administration of China
(“CAC”) issued a revised draft of the Measures for Cybersecurity Review for public comments, or the Revised Draft, which required
that, among others, in addition to “operator of critical information infrastructure”, any “data processor” controlling
personal information of no less than one million users (which to be further specified) which seeks to list in a foreign stock exchange
should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security
risks of the relevant activities.
Except for the Basic Law, national laws of the PRC do not apply in Hong
Kong unless they are listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. National laws that
may be listed in Annex III are currently limited under the Basic Law to those which fall within the scope of defense and foreign affairs
as well as other matters outside the limits of the autonomy of Hong Kong. National laws and regulations relating to data protection, cybersecurity
and the anti-monopoly have not been listed in Annex III and so do not apply directly to Hong Kong.
We do not believe that we are currently required to obtain any permission
or approval from the China Securities Regulatory Commission, CAC or any other regulatory authority in the PRC for our operations, the
trading of our securities on the OTC Markets and the issuance of our securities to foreign investors.
Nevertheless, the laws and regulations in the
PRC are evolving, and their enactment timetable, interpretation and implementation involve significant uncertainties. To the extent any
PRC laws and regulations become applicable to us, we may be subject to the risks and uncertainties associated with the legal system in
the PRC, including with respect to the enforcement of laws and the possibility of changes of rules and regulations with little or no advance
notice.
Results of Operations
Three Ended September 30, 2021 and 2020
The following table presents an overview of the results
of operations for the three months ended September 30, 2021 and 2020:
|
|
For The Three Months
Ended
|
|
For The Three Months
Ended
|
|
|
September 30,
2021
|
|
September 30,
2020
|
Revenue
|
|
$
|
18,608
|
|
|
$
|
46,020
|
|
Cost of sales
|
|
|
18,608
|
|
|
|
46,319
|
|
Gross profit
|
|
|
—
|
|
|
|
(399
|
)
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
75,580
|
|
|
|
59,740
|
|
Total operating costs and expenses
|
|
|
75,580
|
|
|
|
59,740
|
|
Loss from operations
|
|
|
(75,580
|
)
|
|
|
(60,139
|
)
|
Total other income (expenses)
|
|
|
(64
|
)
|
|
|
(154
|
)
|
Net loss
|
|
$
|
(75,644
|
)
|
|
$
|
(60,293
|
)
|
Revenue
Revenue decreased by approximately $27,000 or 59.6%
for the three months ended September 30, 2021 as compared to the same period of 2020. The decrease was mainly due to the decrease in the
number of customers from mainland China resulting from the prolonged COVID-19 travel restriction and quarantine measures imposed by Hong
Kong government during three months ended September 30, 2021.
Cost of sales
Cost of sales represented commissions paid to individuals
or companies who referred customers to us. The amount decreased by approximately $28,000 or 59.9% for the three months ended September
30, 2021 as compared to the same period of 2020. The decrease was in line with the decrease of revenue.
Gross margin
Gross margin was 0% for the three months ended September
30, 2021 as compared to the 0% for the same period of last year. The gross margin is consistent for both periods.
General and administrative expenses
General and administrative expenses consist primarily
of stock-based payments, employee salaries, office rents, insurance costs, general office operating expenses (e.g. utilities, repairs
and maintenance) and professional fees. General and administrative expenses increased by approximately $16,000 or 26.5% for the three
months ended September 30, 2021 as compared to the same period of 2020. The increase was primarily due to additional legal fees incurred
in connection with the Reverse Split in the three months ended September 30, 2021.
Net loss
As a result of the factors described above, net loss
for the three months ended September 30, 2021 increased by approximately 15,000 or 25.0% as compared to the same period of 2020.
Six Ended September 30, 2021 and 2020
The following table presents an overview of the results
of operations for the six months ended September 30, 2021 and 2020:
|
|
For The Six Months
Ended
|
|
For The Six Months
Ended
|
|
|
September 30,
2021
|
|
September 30,
2020
|
Revenue
|
|
$
|
30,218
|
|
|
$
|
66,900
|
|
Cost of sales
|
|
|
30,218
|
|
|
|
65,997
|
|
Gross profit
|
|
|
—
|
|
|
|
903
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
183,703
|
|
|
|
142,449
|
|
Total operating costs and expenses
|
|
|
183,703
|
|
|
|
142,449
|
|
Loss from operations
|
|
|
(183,703
|
)
|
|
|
(141,546
|
)
|
Total other income (expenses)
|
|
|
(960
|
)
|
|
|
3,290
|
|
Net loss
|
|
$
|
(184,663
|
)
|
|
$
|
(138,256
|
)
|
Revenue
Revenue decreased by approximately $37,000 or 54.8%
for the six months ended September 30, 2021 as compared to the same period of 2020. The decrease was mainly due to the decrease in the
number of customers resulting from the prolonged COVID-19 travel restriction and quarantine measures imposed by Hong Kong government during
the six months ended September 30, 2021.
Cost of sales
Cost of sales represented commissions paid to individuals
or companies who referred customers to us. The amount decreased by approximately $36,000 or 54.2% for the six months ended September 30,
2021 as compared to the same period of 2020. The decrease was in line with the decrease of revenue.
Gross margin
Gross margin was 0% for the six months ended September
30, 2021 as compared to the 1.3% for the same period of last year. The lower gross margin in 2021 compared to 2020 was because our commission
costs for the six months ended September 30, 2020 were relatively lower. During the six months ended September 30, 2021, we slightly increased
our commissions for renewals for clients referred by YeeTah Financial from the previous year.
General and administrative expenses
General and administrative expenses increased by approximately
$41,000 or 29.0% for the three months ended September 30, 2021 as compared to the same period of 2020. The increase was primarily due
to additional legal fees incurred for the Reverse Split in the six months ended September 30, 2021.
Net loss
As a result of the factors described above, net loss
for the six months ended September 30, 2021 increased by approximately $46,000 or 34% as compared to the same period of 2020.
Foreign Currency Translation
Our reporting currency is the United States dollar.
Our operations are principally conducted in Hong Kong where the Hong Kong dollar is the functional currency.
Transactions denominated in other than the functional
currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Monetary
assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currency
at the prevailing rates of exchange at the balance date. The resulting exchange differences are reported in the statements of operations
and comprehensive income.
The exchanges rate used for translation from Hong
Kong dollar to US$ was 7.8000, a pegged rate determined by the linked exchange rate system in Hong Kong. This pegged rate was used to
translate our balance sheets, income statement items and cash flow items for both the three and six months ended September 30, 2021 and
2020.
Liquidity and Capital Resources
We have financed our operations primarily through
cash generated by operating activities, equity financings and advances from our principal stockholder. We are a holding company and conduct
substantially all of our operations through YeeTah, which is our only entity that has cash inflows and outflows. Our expenses are paid
directly either by YeeTah or our principal stockholder. There have been no cash and any asset transactions between us and our subsidiaries
since the Share Exchange. As of September 30, 2021 and March 31, 2021, we had $29,242 and 35,605, respectively, in cash and cash equivalents,
which primarily consisted of cash deposited in banks.
|
|
September 30,
2021
|
|
September 30,
2020
|
Net cash used in operating activities
|
|
$
|
(193,854
|
)
|
|
$
|
(162,959
|
)
|
Net cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
(115,000
|
)
|
Net cash provided by (used in) financing activities
|
|
|
187,491
|
|
|
|
269,695
|
|
Net increase (decrease) in cash, cash equivalents
|
|
|
(6,363
|
)
|
|
|
(8,264
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
35,605
|
|
|
|
62,780
|
|
Cash and cash equivalents at end of year
|
|
$
|
29,242
|
|
|
$
|
54,516
|
|
Our working capital requirements mainly comprise of
commissions paid to technical representatives and referral fees, office administrative costs and employee salaries. Historically, our
capital requirements were generally met by cash generated from our operations, equity financings and funding from our principal stockholder.
In light of impact on our operations from the civilian protests in Hong Kong and the COVID-19 epidemic in China and Hong Kong, we undertook
certain cost cutting measures, including but not limited to, relocating to a new office with a much lower rent and reducing the number
of employees. Discretionary expenditures are also curtailed or reduced to save costs. In addition to adjusting our operating expenditures,
we will continue to seek opportunities of equity financings and financial supports from our principal stockholder. Although historically
we were successful in obtaining equity financings through the sales of our securities and obtaining loans from our principal stockholder,
the availability of such financings when required is dependent on many factors beyond our control, such as the unforeseeable impact from
COVID-19 and the recovery of the Hong Kong economy following the civilian protests.
Operating Activities:
Net cash used in operating activities was approximately
$194,000 for the six months ended September 30, 2021, compared to net cash used in operating activities of approximately $163,000 for
the same period of 2020, representing an increase of approximately $31,000 in the net cash outflow in operating activities. The increase
in net cash used in operating activities was primarily due to an increase of net loss of $46,000 in the six months ended September 30,
2021 as compared to the same period of 2020 and the following major working capital changes:
|
(1)
|
Change in prepaid expenses resulted in an approximately $21,000 cash inflow for the six months ended September 30, 2021, while for the same period of 2020, change in prepaid expenses resulted in a cash outflow of approximately $20,000, which led to an approximately $41,000 decrease in net cash outflow from operating activities.
|
|
(2)
|
Change in accounts payable and accrued liabilities resulted in an approximately $14,000 cash inflow for the six months ended September 30, 2021, while for the same period of 2020, change in accounts payable and accrued liabilities generated a cash outflow of approximately $12,000, which led to an approximately $26,000 increase in net cash inflow from operating activities.
|
|
(3)
|
Change in due to related parties resulted in an approximately $41,000 cash outflow for the six months ended September 30, 2021, while for the same period of 2020, change in due to related parties generated a cash inflow of approximately $13,000, which led to an approximately $54,000 increase in net cash outflow from operating activities.
|
Investing Activities:
There were no investing activities for the six months
ended September 30, 2021.
Net cash used in investing activities was approximately
$115,000 for the six months ended September 30, 2020, which was attributable to the cash used in the Share Exchange.
Financing Activities:
Net cash generated from financing activities was approximately
$187,000 for the six months ended September 30, 2021, which was attributable to the net results of: (i) stockholder advances of approximately
$211,000; (ii) share issuance proceeds of $200,500; (iii) repayment of related party of $200,500 and payment of $24,000 issuance
costs for share issued in the period.
Net cash generated from financing activities was approximately
$270,000 for the six months ended September 30, 2020, which was attributable to the net results of: (i) stockholder advances of approximately
$260,000; (ii) repayment of stockholder advances of approximately $10,000; and (iii) capital contribution of $19,747 from a stockholder.
Material Commitments
We have no material commitments for the next twelve
months. We will, however, require additional capital to meet our liquidity needs.
Critical Accounting Policies
Please refer to the notes to the Company’s condensed
consolidated financial statements included in this Report for details of critical accounting policies. There were no areas requiring significant
management judgments and estimates for the periods covered by this Report.
Off-balance Sheet Commitments and Arrangements
As of September 30, 2021, 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.