Notes
to Financial Statements
December
31, 2019 and 2018
Note
1. Organization, Significant Accounting Policies and Liquidity
We (the “Company”
or similar terminology) were incorporated under the laws of the State of Florida on November 24, 1998 under the name Jarrett
Favre Driving Adventure Inc. We operated a racing school which provided entertainment based oval driving classes, rides and events.
On November 21, 2002, we changed our name to Dale Jarrett Racing Adventure, Inc. On November 18, 2015, we sold the assets and liabilities
of the racing school to Tim Shannon, our Chief Financial Officer and director, due to our inability to sustain profitable operations.
Shortly thereafter, our name was changed to 24/7 Kid Doc, Inc. to more accurately reflect our proposed operations. On April 8,
2020, we effected a name change to QDM International Inc. by implementing a reorganization of our corporate structure through a
merger.
We
are a telemedicine company that offers telemedicine access to K-12 schools at no cost to those schools and bill the patient’s
insurance or Medicaid for the consultation.
Beginning
in January of 2016, we marketed our services within Florida and Georgia. Once these markets have been successfully captured, we
will proceed to expand to other states limited only by the capital available to support our expansion. Our sales model features
a no-cost entry point for school districts.
Going
Concern
Our
accompanying financial statements contemplate the realization of assets and liquidation of liabilities in the normal course of
business. We have suffered recurring losses from operations and have stockholder and working capital deficits at December 31,
2019. Our primary liabilities as of December 31, 2019 consist of short-term notes payable that are due in 2019. We recognize we
will ultimately either need to increase revenues and/or raise additional debt or equity capital to sustain our operations. We
plan to continue close monitoring of general and administrative expenses in 2020 and may seek to reduce such expenses and we are
also investigating the possibility of investing in an alternative business model. Absent our ability to be successful in such
endeavors, we may seek to raise capital from existing shareholders. While we believe we will obtain adequate cash to meet our
commitments in 2020, there can be no assurance that our beliefs will come to fruition in which case we would most likely have
continuing as a going concern. The accompanying financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we
be unable to continue as a going concern
Revenue
Recognition
The
Company recognizes revenue from the sale of products and services in accordance with ASC 606, “Revenue Recognition”
following the five steps procedure:
Step
1: Identify the contract(s) with customers
Step
2: Identify the performance obligations in the contract
Step
3: Determine the transaction price
Step
4: Allocate the transaction price to performance obligations
Step
5: Recognize revenue when the entity satisfies a performance obligation
The
Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A
performance obligation is satisfied over time if one of the following criteria are met:
a.
the customer simultaneously receives and consumes the benefits as the entity performs;
b.
the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
c.
the entity’s performance does not create an asset with an alternative use to the entity, and the entity has an enforceable
right to payment for performance completed to date.
Cost
of services include all expenses directly incurred to generate revenue, which include costs such as products purchases, processing
fees, chargebacks and disputes, and shipping costs.
For
purposes of the statements of cash flows, we consider all highly liquid instruments purchased with a maturity of three months
or less to be cash equivalents.
Accounts
Receivable
Accounts
receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customer, net
of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated and specific
issues are reviewed to arrive at appropriate allowances. There was no allowance at December 31, 2019 and 2018.
Property
and Equipment
Property
and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the respective
assets, ranging from 3 to 10 years. Major additions are capitalized, while minor additions and maintenance and repairs, which
do not extend the useful life of an asset, are expensed as incurred.
Long
Lived Assets
We
review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from
the use of the asset and its eventual disposition is less than its carrying amount. No such impairment losses have been identified
by the Company for the years ended December 31, 2019 and 2018.
Use
of Estimates
The
preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United
States of America requires us 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 management is required to make. Actual results could differ from those estimates.
Advertising
Costs
Advertising
costs are charged to operations when the advertising first takes place. We did not have any advertising costs charged to operations
for the years ended December 31, 2019 and 2018.
Fair
Value of Financial Instruments
At
December 31, 2019, our short-term financial instruments consist primarily of cash, accrued expenses, shareholder advance and short-term
notes payable. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities.
We also believe the carrying values of our note payable obligations approximates its fair value because the terms on such obligation
approximate the terms at which similar obligations could currently be negotiated.
We
do not hold or issue financial instruments for trading purposes nor do we hold or issue interest rate or leveraged derivative
financial instruments.
Segment
Information
The
Company follows Financial Accounting Standards Board (FASB) ASC 280-10, Segment Reporting. Under ASC 280-10, certain information
is disclosed based on the way management organizes financial information for making operating decisions and assessing performance.
We currently operate in a single segment and will evaluate additional segment disclosure requirements if we expand our operations.
Income
Taxes
We
compute income taxes in accordance with FASB ASC Topic 740, Income Taxes. Under ASC-740, deferred tax assets and liabilities are
computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses
or benefits are based on the changes in the asset or liability each period. Also, the effect on deferred taxes of a change in
tax rates is recognized in income in the period that included the enactment date. If available evidence suggests that it is more
likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change.
We
follow guidance in FASB ASC Topic 740-10, Accounting for Uncertainty in Income Taxes, which prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely
of being realized upon ultimate settlement.
We
do not believe we have taken any uncertain tax positions on any of our open income tax returns filed through the year ended December
31, 2019. Our methods of tax accounting are based on established income tax principles in the Internal Revenue Code and are properly
calculated and reflected within our income tax returns. Due to the carryforwards of net operating losses, all of our federal and
state income tax returns remain subject to audit.
Stock-Based
Compensation
We
recognize 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. The Statement 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.
Net
Loss Per Share
We
calculate net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic loss per share is calculated by dividing
net loss by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share is calculated
by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding.
During periods in which we incur losses, common
stock equivalents, if any, are not considered, as their effect would be anti-dilutive. At December 31, 2019 and 2018, we had 85,143,452
and 68,158,002 shares of common stock outstanding on a fully diluted basis, respectively. At December 31, 2019 and 2018, we had
1,000,000 and 1,000,000 dilutive preferred shares outstanding, respectively. These preferred shares were convertible into 10,000,000
shares of common stock.
Recent
Accounting Pronouncements
We
do not believe any recently issued accounting standards will have a material impact on our financial statements.
Note
2. Cash in attorney trust accounts
At
December 31, 2019 and 2018, the Company has $0 and $11,834 held in attorney trust accounts. The accounts do not bear interest
and the Company may withdraw funds any time at its discretion.
Note
3. Property and Equipment
Property
and equipment consist of the following at December 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Office equipment
|
|
$
|
1,664
|
|
|
$
|
1,664
|
|
Less accumulated depreciation
|
|
|
(1,043
|
)
|
|
|
(761
|
)
|
|
|
$
|
615
|
|
|
$
|
902
|
|
Depreciation
charged to operations was $287 and $287 for the years ended December 31, 2019 and 2018, respectively.
Note
4. Notes Payable
For
the year ended December 31, 2018, the Company received cash proceeds the issuance of promissory notes in the aggregate principal
amount of $241,067. These notes bear a simple interest at 12.0% and are due and payable for varying terms ranging from one to
two years after their issuance. The notes are convertible to shares of common stock of the Company at a conversion price per share
is $0.008, subject to adjustments for stock splits and combinations.
Note
5. Long-term Debt
At
December 31, 2019 and 2018, we were not obligated for any long-term debt.
Note
6. Stockholders’ Deficit
No
compensation cost was recognized during 2019 or 2018 as a result of stock options. We had no exercisable options outstanding at
December 31, 2019.
On
July 11, 2018, we sold 1,000,000 shares of common stock in exchange for $5,000 of cash.
On
September 12, 2018, the Company issued 1,000,000 shares of preferred stock to Tim Shannon, our then Chief Executive Officer, President
and sole employee, in exchange for $40,000 of compensation that had been accrued but not paid to him. Each preferred share was
convertible, after one year, to ten shares of common stock. At the time of the preferred shares issuance, there was no market
value of preferred shares as these were the first issued by the Company.
On
October 30, 2018, Tim Shannon sold these shares to an unrelated third party for a cash payment of $40,000.
Recognizing
that the convertibility of the preferred shares was not until September 12, 2019 and that a sale to an unrelated third party occurred
on October 30, 2018, the Company has valued the issuance of these shares at $40,000.
On
June 20, 2019, the Company issued an aggregate of 1,350,000 shares of Preferred Series B stock to its Board of Directors for services
rendered. These shares were subsequently sold in March of 2020 with 71 million shares of common stock. The 1,350,000 shares of
TVMD Preferred Series B stock represented $212,985 of the $500,000 purchase price. Therefore, this value was used to value the
issuance of the preferred shares on issuance date as the subsequent sale represented an independent, third party arms-length transaction
creating a fair value for these shares.
Note
8. Income Taxes
We
have not provided for income taxes in 2019 or 2018 as a result of operating losses. We have net operating loss carryforwards at
December 31, 2019 of approximately $3,950,000 that expire in various years through 2039. We have fully reserved our net deferred
income tax asset since we are uncertain as to whether future income from operations will be available to utilize it. The approximate
deferred tax assets and liabilities, assuming a blended state and federal rate of 26% and the related allowance are as follows:
|
|
2019
|
|
|
2018
|
|
Non-current deferred tax assets (liabilities), net:
|
|
|
|
|
|
|
|
|
Tax benefit of net operating loss carryforwards
|
|
$
|
1,027,000
|
|
|
$
|
962,000
|
|
Less valuation allowance
|
|
|
(1,027,000
|
)
|
|
|
(962,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
valuation reserve increased by $65,000 in 2019 and by $26,000 in 2018.
The
provision (benefit) for income taxes differs from the amount computed by applying the statutory federal income tax rate to our
loss before income taxes for the years ended December 31, 2019 and 2018. Our combined federal and state effective tax rate as
a percentage before taxes for the years ended December 31, 2019 and 2018, approximated 26%. The following are reconciliations
of the income tax at the effective tax rate with the income tax at the U.S. federal and state statutory tax rate for the years
ended December 31, 2019 and 2018:
|
|
2018
|
|
|
2017
|
|
Income tax provision at the federal and state statutory rate
|
|
|
26
|
%
|
|
|
26
|
%
|
Effect of operating losses and other temporary differences
|
|
|
(26
|
)%
|
|
|
(26
|
)%
|
Effective tax rates
|
|
|
0
|
%
|
|
|
0
|
%
|
Note
9. Extinguishment of Debt
In
October 2018, our then Chief Executive Officer and President and two shareholders agreed to forgive their notes receivable and
related accrued interest. The total of this extinguished debt was $53,703. The amount of the extinguished debt was added to additional
paid in capital as the noteholders were related parties.
In
October 2018, our then Chief Executive Officer and President agreed to forego accrued officer compensation in the amount of $20,000.
The amount of the extinguished debt was added to additional paid in capital as our Chief Executive Officer and President is a
related party.
Note
10. Related Party Transaction
During
the 4th quarter of 2018 and first quarter of 2019, certain shareholders and affiliates of shareholders provided funds
in the aggregate principal amount of $241,067 to the Company in exchange for promissory notes bearing a simple interest at 12%
per annum and varying maturity dates ranging from one to two years from the date of issuance. These notes are convertible to shares
of common stock at $0.008 per share, subject to certain adjustments, during the term on the note at the option of the holders.
In
September 2018, the Board approved the issuance of 1,000,000 shares of the Company’s preferred shares to our then President
in exchange for services rendered.
In
October 2018, our then Chief Executive Officer and President and two shareholders agreed to forgive their notes receivable and
related accrued interest. The total of this extinguished debt was $53,703.
In
October 2018, our then Chief Executive Officer and President agreed to forego accrued officer compensation in the amount of $20,000.
Note
11. Subsequent Events
In
January 2020, the Company converted its outstanding convertible notes into shares of common stock. The $271,642 in notes payable
with interest accrued was converted into 33,955,250 shares of common stock at a price of $0.008 per share.
In
February 2020, the Company issued 104,000,000 shares of common stock at the equivalent price of $.001 per share in lieu of accrued
compensation to our then Chief Executive Officer and President. The Company also converted 1,000,000 shares of Series A preferred
shares into 10,000,000 shares of its common stock.
In
February 2020, the Board approved the cancellation of 33,000,000 shares of common stock to our then Chief Executive Officer and
President which were issued earlier in the month. This cancellation was necessary to keep the Company in compliance with the public
float requirement of the OTCQB marketplace.
In
February 2020, Timothy Shannon forgave $71,000 of debt owed to him from the Company in connection with the change of control.
On March 11, 2020, we incorporated QDM International
Inc. (“QDM”),
a Florida corporation and a wholly owned subsidiary and QDM Merger Sub, Inc. (“Merger
Sub”), a Florida corporation and a wholly owned subsidiary
of QDM, for the purposes of effectuating a name change by implementing a reorganization of our corporate structure through a merger
(the “Merger”).
On March 13, 2020, we entered into an Agreement and Plan of Merger (the “Merger
Agreement”) by and among our company, QDM, and Merger Sub.
On April 8, 2020, we filed the Articles of Merger with the State of Florida to effect the Merger as stipulated by the Merger Agreement.
Pursuant
to the Merger Agreement, Merger Sub merged with and into the Company being the surviving entity. As a result, the separate corporate
existence of Merger Sub ceased and the Company became a direct, wholly-owned subsidiary of QDM. Pursuant to the Merger Agreement
and as a result of the Merger, all issued and outstanding shares of common stock and Series B Preferred Shares of the Company
were converted into shares of QDM Common Stock and Series B Preferred Shares of QDM, respectively, on a one-for-one basis, with
QDM securities having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions
as the corresponding share of the Company’s securities being converted. As a result, upon consummation of the Merger, all
of our stockholders immediately prior to the Merger became stockholders of QDM.
Upon
consummation of the Merger, QDM became the successor issuer to the Company pursuant to 12g-3(a) and as a result shares of QDM
Common Stock was deemed to be registered under Section 12(g) of the Exchange Act.