Notes to Condensed Financial Statements
June 30, 2020 and 2019
(Unaudited)
Note 1. Organization and liquidity
QDM International
Inc. (“we,” the “Company”
or similar terminology) was incorporated in Florida
in March 2020 and is the successor to 24/7 Kid Doc, Inc. (“24/7 Kid Doc”) which was incorporated under the laws of
the State of Florida on November 24, 1998 under the name Jarrett Favre Driving Adventure Inc. 24/7 Kid Doc operated a racing school
which provided entertainment based oval driving classes, rides and events. On November 21, 2002, 24/7 Kid Doc changed its name
to Dale Jarrett Racing Adventure, Inc. On November 18, 2015, 24/7 Kid Doc sold the assets and liabilities of the racing school
to Tim Shannon and changed its name to 24/7 Kid Doc, Inc. to more accurately reflect its proposed operations. Before the change
of control discussed below, 24/7 Kid Doc was a telemedicine company that provided Connect-a-Doc telemedicine kits to schools and
its services aimed to provide an effective and affordable alternative 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.
On March 3, 2020, a stock purchase agreement (the “Agreement”)
was entered into by and between Huihe Zheng and Tim Shannon, our then controlling stockholder as well as Chief Executive Officer,
Chief Financial Officer, President and director. Pursuant to the Agreement, Mr. Shannon sold to Mr. Zheng (i) 710,000 (71,000,000
shares before the Reverse Stock Split as defined below) shares of common stock of 24/7 Kid Doc, representing 42.6% of the total
issued and outstanding shares of common stock of 24/7 Kid Doc as of March 9, 2020 and (ii) 13,500 (1,350,000 shares before the
Reverse Stock Split as defined below) Series B Preferred Shares, each entitling the holder to 100 votes on all corporate matters
submitted for stockholder approval, in consideration of $500,000 in cash from Mr. Zheng’s personal funds. The shares of common
stock and Series B Preferred Shares acquired by Mr. Zheng, in the aggregate, represented 68.3% of the outstanding voting securities
of 24/7 Kid Doc as of March 9, 2020, and the acquisition of such shares resulted in a change in control of 24/7 Kid Doc.
On March 11, 2020, the Company was incorporated
in Florida as a wholly owned subsidiary of 24/7 Kid Doc and QDM Merger Sub, Inc. (“Merger
Sub”), a Florida corporation and a wholly owned subsidiary
of the Company, for the purposes of effectuating a name change by implementing a reorganization of the corporate structure of 24/7
Kid Doc through a merger (the “Merger”).
On March 13, 2020, an Agreement and Plan of Merger (the “Merger
Agreement”) was entered into by and among 24/7 Kid Doc,
the Company, and Merger Sub. On April 8, 2020, the Articles of Merger were filed 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 24/7 Kid Doc, with 24/7 Kid Doc being the surviving entity. As a result, the separate corporate existence
of Merger Sub ceased and 24/7 Kid Doc became a direct, wholly-owned subsidiary of the Company. 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 24/7 Kid Doc
were converted into shares of the Company’s common stock and Series B Preferred Shares, respectively, on a one-for-one basis,
with the Company securities having the same designations, rights, powers and preferences and the qualifications, limitations and
restrictions as the corresponding share of the securities of 24/7 Kid Doc being converted. As a result, upon consummation of the
Merger, all of the stockholders of 24/7 Kid Doc immediately prior to the Merger became stockholders of the Company.
Upon consummation of the Merger, the Company
became the successor issuer to 24/7 Kid Doc pursuant to 12g-3(a) and as a result shares of the Company’s common stock were
deemed to be registered under Section 12(g) of the Exchange Act.
After the change in control in 24/7 Kid Doc
and the Merger, the Company plans to conduct insurance brokerage business in Hong Kong. The Company plans to implement this business
plan through formation or acquisition of an existing insurance brokerage business. To implement its business plan, during the three
months ended June 30, 2020, the Company engaged professionals (legal counsel and accountants) to evaluate the optimal corporate
structure for its new business and conduct due diligence on a potential target. The Company expects to complete the formation or
acquisition of the insurance brokerage business in the second half of 2020 but its ability to execute on its business plan and
initiatives will depend upon, among others factors, the developments of the COVID -19 pandemic, including the duration and spread
of the COVID 19 and lockdown restrictions imposed by the respective various governments and oversight bodies in China.
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 June 30, 2020. Our primary liabilities as of June 30, 2020 consist
of short-term accounts payable and accrued liabilities that are due within 12 months. We recognize we will need to raise additional
funds either through debt or equity financing to sustain our operations. We plan to continue to closely monitor our general and
administrative expenses in 2020 and make adjustments when possible. 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.
Note 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 full year ending December 31, 2020. 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 December 31, 2019.
Cash and Cash Equivalents
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.
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. As at June 30, 2020, we did not have any long lived assets.
Revenue Recognition
On January 1, 2019, the Company adopted Accounting
Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers, which outlines a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue
recognition guidance. The updated guidance, and subsequent clarifications, collectively referred to as ASC 606, require an entity
to recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. Previously we recorded revenue based on ASC
Topic 605. Adoption of new accounting standard did not have any material impact on our reported revenue.
Revenue is recognized when the following criteria
are met:
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·
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Identification of the contract, or contracts,
with customer;
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Identification of the performance obligations
in the contract;
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Determination of the transaction price;
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Allocation of the transaction price to
the performance obligations in the contract; and
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Recognition of revenue when, or as, we
satisfy performance obligation.
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The Company did not generate any revenue during
the three and six months ended June 30, 2020 and 2019.
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 three and six months
ended June 30, 2020 and 2019.
Fair Value of Financial Instruments
At June 30, 2020, our short-term financial
instruments consist primarily of cash, accounts payable, accrued liabilities and advances from a shareholder. The carrying amounts
of these financial instruments approximate fair value because of their short-term maturities.
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 three and six months ended June 30, 2020. 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.
Basic Loss Per Share
We calculate basic 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.
Recent Accounting Pronouncements
We do not believe any recently issued accounting
standards will have a material impact on our financial statements.
Note 3. Property and Equipment
Property and equipment consist of the following
at June 30, 2020 and December 31, 2019:
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June 30,
2020
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December 31, 2019
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Office equipment
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$
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—
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$
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1,664
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Less accumulated depreciation
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—
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(1,043
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)
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$
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—
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$
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615
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Depreciation charged to operations was nil
and $72 for the three and six months ended June 30, 2020 and $72 and $143 for the three and six months ended June 30, 2019, respectively.
On April 1, 2020, the Company wrote off all
office equipment as a result of the change in control. These fixed assets were still in use by the former major shareholders after
change in control and were not transferred to the Company. The total book value of $543 of the office equipment therefore was wrote
off and recorded as a loss for the six months ended June 30, 2020.
Note 4. Notes Payable
Notes payable at December 31, 2019 represented
promissory notes issued during 2018 with aggregate principal amounts of $241,067. These notes bore a simple interest at 12.0% and
were due and payable for varying terms ranging from one to two years after their issuance. The notes were convertible to shares
of common stock of the Company at a conversion price per share of $0.8 per share ($0.008 per share before the Reverse Stock Split
as defined below), subject to adjustments for stock splits and combinations.
During the three
months ended March 31, 2020, these promissory notes were converted to shares of common stock. The balance of $271,642 in notes
payable with interest accrued was converted into shares of common stock (refer to Note 5 below).
Note 5. Equity
Reverse Stock Split
In May 2020, the Company effected a reverse
stock split whereby each 100 issued and outstanding shares of common stock were consolidated into one share of common stock and
each 100 issued and outstanding shares of preferred stock were consolidated into one share of preferred stock (the “Reverse
Stock Split”). As a result of the Reverse Stock Split, additional 391 shares were issued due to round-up effects.
Common Stock
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
339,553 (33,955,250 before the Reverse Stock Split) shares of common stock at a price of $0.8 per share ($0.008 per share before
the Reverse Stock Split).
In February 2020, the Company issued 710,000
(71,000,000 before the Reverse Stock Split) shares of common stock at the equivalent price of $0.1 per share ($0.001 per share
before the Reverse Stock Split) to its former Chief Executive Officer and President, Tim Shannon, to settle $33,000 accrued compensation
expenses at December 31, 2019 and $38,080 total compensation expenses and other expenses paid by Tim Shannon during the six months
ended June 30, 2020.
There were no
treasury stock transactions during the six months ended June 30, 2020. During the six months ended June 30, 2019, the Company redeemed
6,223 (622,300 before the Reverse Stock Split) shares of common stock at a cost of $19,622 .
Preferred Shares
In February 2020, 10,000 (1,000,000 before
the Reverse Stock Split) shares of Series A preferred shares were converted into 100,000 (10,000,000 before the Reverse Stock Split)
shares of common stock.
Additional Paid-in-capital
During the six months ended June 30, 2020,
the Company received capital contribution of $18,262 from its shareholder for working capital uses. The capital contribution was
recorded in additional paid-in-capital.
During the three months ended March 31, 2020,
Tim Shannon forgave the $19,443 shareholder advance balance that the Company owed to him. Since this was a forgiveness of related
party loan, the gain from the forgiveness of the loan was treated as a capital transaction and the amount was recorded in additional
paid-in-capital.
No compensation cost was recognized during
the six months ended June 30, 2020 or 2019 as a result of stock options. We had no exercisable options outstanding at June 30,
2020.
Note 6. Related Party Transaction
During
the fourth 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 were convertible to shares of common
stock at $0.8 per share ($0.008 per share before the Reverse Stock Split).
In February 2020, the Company issued 710,000
(71,000,000 before the Reverse Stock Split) shares of common stock at the equivalent price of $0.1 per share ($0.001 per share
before the Reverse Stock Split) to its former Chief Executive Officer and President, Tim Shannon, to settle $33,000 accrued compensation
expenses at December 31, 2019 and $38,080 total compensation expenses and other expenses paid by Tim Shannon on behalf of the Company
during 2020.
During the three months ended March 31, 2020,
Tim Shannon forgave the $19,443 shareholder advance balance that the Company owed to him and the amount forgiven was recorded in
additional paid-in capital.
During the three and six months ended June
30, 2020, the Company received $5,000 and $18,262 capital contributions, respectively, from Tim Shannon for working capital uses.
During the three and six months ended June
30, 2020, the Company received advances of nil and $67,224, respectively, from its current major shareholder, Huihe Zheng, to support
its operations. The total shareholder advance balance in the amount of $67,224 as of June 30, 2020 is a non-interest bearing loan
and due on demand.
Note 7. Subsequent Events
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to June 30, 2020 has determined that it does not have any material subsequent events to
disclose in these financial statements.