QDM International Inc. - Quarter Report: 2013 September (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x]     Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended September 30, 2013

-OR-

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transaction period from _________ to________

Commission File Number  000-27251

Dale Jarrett Racing Adventure, Inc.

 (Exact name of registrant as specified in its charter)

FLORIDA		59-3564984
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

116 3rd Street NW, Suite 302, Hickory, NC		28601
(Address of principal executive offices)		(Zip Code)

(888) 467-2231

 (Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  [x]   No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [x]   No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):

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Large accelerated filer        [  ]		Non-accelerated filer             [  ]
Accelerated filer                 [  ]		Smaller reporting company   [x]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  [ ]      No [x]

The number of outstanding shares of the registrant's common stock as of

November 14, 2013:   Common Stock – 26,338,852

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DALE JARRETT RACING ADVENTURE, INC.

FORM 10-Q

For the quarterly period ended September 30, 2013

INDEX

PART I – FINANCIAL INFORMATION

		Page
Item 1.  Financial Statements (Unaudited)		4
Item 2.  Management's Discussion and Analysis of   Financial Condition and Results of Operations		9
Item 3.  Quantitative and Qualitative Disclosure   About Market Risk		10
Item 4.  Controls and Procedures		10

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings		12
Item 1A.  Risk Factors		12
Item 2.  Unregistered Sales of Equity Securities and   Use of Proceeds		12
Item 3.  Defaults upon Senior Securities		12
Item 4.  Mine Safety Disclosures		12
Item 5.  Other Information		12
Item 6.  Exhibits		12
SIGNATURES		13

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Dale Jarrett Racing Adventure, Inc.

Condensed Balance Sheets

4

Dale Jarrett Racing Adventure, Inc.

Condensed Statements of Operations

For the Three and Nine Months Ended September 30, 2013 and 2012

(Unaudited)

5

Dale Jarrett Racing Adventure, Inc.

Condensed Statements of Cash Flows

For the Nine Months Ended September 30, 2013 and 2012

(Unaudited)

6

DALE JARRETT RACING ADVENTURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED)

(1)

Basis of Presentation and Liquidity

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and Rule 8.03 of Regulation SX.   As such, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.

In addition, such financial statements contemplate the realization of assets and liquidation of liabilities in the normal course of business.  At September 30, 2013, we have stockholder and working capital deficits, as well as minimal cash.   Although a portion of our liabilities (i.e. the shareholder advance and approximately one half of our deferred revenues) are not expected to result in the outlay of cash in the next year we anticipate that we will l need to generate capital, either through positive results of operations and/or equity or debt infusions, to meet our obligations during such period. We are implementing a new advertising strategy and are also planning to purchase certain video equipment which will allow us to retain a higher percentage of the revenues associated with videos. Finally, if the need arises, we anticipate that we may be able to raise additional funds from existing shareholders.  However there can be no assurance that our plans will be successful in which case we would have difficulty meeting our obligations.  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

The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.  For further information, refer to the financial statements of the Company as of and for the year ended December 31, 2012, including notes included in the Company’s Form 10-K.

(2)

Recent Accounting Pronouncements

There are no new accounting pronouncements for which adoption is expected to have a material effect on our financial statements in future accounting periods.

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(3)

Basic and Diluted Income (Loss) Per Share

The Company calculates basic and diluted income (loss) per share as required by the FASB Accounting Standards Codification. Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods when we report a net loss, anti-dilutive common stock equivalents are not considered in the computation.  We did not have any dilutive common stock equivalents during any of the three or nine month periods ended September 30, 2013 and 2012.

(4)

Spare Parts and Supplies

Spare parts and supplies include engine parts, tires, and other supplies used in the racecar operation and are recorded at the lower of cost or market, on a first-in, first-out basis.

(5)

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.

(6)

Sale of Common Stock

On May 14, 2013 we sold 2,500,000 shares of common stock to an accredited investor who owned 5% of our common shares prior to the sale.  The sale occurred at $0.04 per share for total proceeds of $100,000.  

(7)

Long-term Debt

During July 2013 the Company purchased an exotic race vehicle with a $16,000 down payment and the remaining $125,000 financed over 60 months at an interest rate of 4.99%.

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Trends and Uncertainties.  Demand for the Corporation's services and products are dependent on, among other things, general economic conditions that are cyclical in nature.  Inasmuch as a major portion of the Corporation's activities are the receipt of revenues from its driving school services and products, the Corporation's business operations may be adversely affected by competitors and prolonged recessionary periods.  The Corporation currently has classes planned through December 2013.

Capital Resources and Source of Liquidity.  Because of our net loss in the first nine months ended September 30, 2013, we used cash of approximately $414,000 to finance our operations.   

For the nine month periods ended September 30, 2013 and 2012, we spent $20,129 and $37,483, respectively for the acquisition of property and equipment.

For the nine month periods ended September 30, 2013 and 2012, we repaid $7,861 and $29,419, respectively of long-term debt.  In addition, in May 2013, we received $100,000 from the issuance of stock under a private placement with an existing stockholder.

Because we have minimal cash and a significant working capital deficit at September 30, 2012, we anticipate that we will need to generate additional capital (either through positive  results of operations or debt or equity infusion(s)) to meet our obligations for the next year.

Results of Operations.

For the three months ended September 30, 2013, we earned sales revenues of $600,153.  Our cost of sales and services was $344,147, resulting in a gross profit of $256,006.  We paid general and administrative expenses of $376,724 and interest expenses of $2,796.  We earned interest income of $12 and other income of $631.  As a result, we had a net loss of $122,871 for the three months ended September 30, 2013.

Comparatively, for the three months ended September 30, 2012, we earned sales revenues of $1,001,125.  Our cost of sales and services was $542,607, resulting in a gross profit of $458,518.  We paid general and administrative expenses of $382,887 and paid interest expenses of $226.  We earned interest income of $47 and other income of $22,453.  As a result, we had net income of $97,905 for the three months ended September 30, 2012.

The $220,776 decrease in net income for the three months ended September 30, 2013 compared to the same period of 2012 was primarily the result of decreased sales and other income.  The ratio of cost of sales and services to our sales has increased slightly, with a ratio of 57.3% for the three months ended September 30, 2013, and a ratio of

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54.2% for the three months ended September 30, 2012, due to a decrease in revenue and certain fixed costs remaining consistent.  Our sales decreased by $400,972, or 40.1%, between the three months ended September 30, 2013 and 2012.  This sales decrease is due to fewer track days in the three months ended September 30, 2013 compared to the same period of 2012.

For the nine months ended September 30, 2013, we had sales revenue of $2,011,883.  Our cost of sales and services was $986,980, resulting in a gross profit of $1,024,903.  We paid general and administrative expenses of $1,212,560, interest expenses of $6,052, and recorded a loss on the disposal of assets of $842.  We earned interest income of $134 and other income of $6,754.  As a result, we had a net loss of $187,663 for the nine months ended September 30, 2013.

Comparatively, for the nine months ended September 30, 2012, we had sales revenue of $2,677,824.  Our cost of sales and services was $1,428,445, resulting in a gross profit of $1,249,379.  We paid general and administrative expenses of $1,307,630 and an interest expense of $1,131.  We earned interest income of $379 and other income of $22,453.  As a result, we had a net loss of $36,550 for the nine months ended September 30, 2012.

The decrease in revenue of $665,941, or 24.9%, resulted from fewer race days.  Our ratio of cost of sales and services to sales decreased slightly to 49.1% for the nine months ended September 30, 2013 compared to 53.3% for the nine months ended September 30, 2012.  Our general and administrative expenses decreased by $95,070, or 7.3%, for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.  This decrease is due to reduced expenses relating to Las Vegas operations as such operations were discontinued in late 2012.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.

Item 4.  Controls and Procedures

During the period ended September 30, 2013, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2013.  Based on this evaluation, our chief executive officer and

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principal financial officers have concluded such controls and procedures to be effective as of September 30, 2013 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

None

Item 1A.  Risk Factors  

Not applicable for smaller reporting companies

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.   Defaults Upon Senior Securities.

None

Item 4.   Mine Safety Disclosures

Not Applicable

Item 5.   Other Information

None

Item 6.   Exhibits

Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**   XBRL Instance Document

101.SCH**   XBRL Taxonomy Extension Schema Document

101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**.  XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**   XBRL Taxonomy Extension Label Linkbase Document

101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

*  Filed herewith

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: November 14, 2013

DALE JARRETT RACING ADVENTURE, INC.

By:

/s/Timothy Shannon

Timothy Shannon

Chief Executive Officer

Principal Financial Officer

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