QDM International Inc. - Quarter Report: 2014 June (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 June 30, 2014

-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

August 14, 2014:   Common Stock – 26,338,852

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DALE JARRETT RACING ADVENTURE, INC.

FORM 10-Q

For the quarterly period ended June 30, 2014

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 Disclosures   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 Six Months Ended June 30, 2014 and 2013

(Unaudited)

5

Dale Jarrett Racing Adventure, Inc.

Condensed Statements of Cash Flows

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

6

DALE JARRETT RACING ADVENTURE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2014

(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 (including 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 June 30, 2014, 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  we will need to continue to generate  positive results of operations  to meet our obligations during such period. We have reduced numerous general and administrative expenses since June 30, 2013 and have implemented additional overhead reductions subsequent to June 30, 2014 that we believe will further reduce general and administrative expenses by approximately $100,000 on an annual basis. As such, and because we believe revenues for the next year will remain relatively consistent with the first six months of the year, we believe we will have the requisite resources to continue to pay our operating and other 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, 2013, including notes, filed with 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 either of the three month periods ended June 30, 2014 and 2013.

(4)

Spare Parts and Supplies

Spare parts and supplies include engine parts, tires, and other supplies used in the racecar operations 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.  Depreciation expense approximated $22,000 and $45,000, and $21,000 and $43,000, during the respective three and six month periods ended June 30, 2014 and 2013.

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

Trends and Uncertainties.  Demand for the Company’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 Company's activities are the receipt of revenues from its driving school services and products, the Company's business operations may be adversely affected by competitors and prolonged recessionary periods.  The Company currently has classes planned through December 2014.

Capital Resources and Source of Liquidity.  We used cash of $253,792 to finance our operating activities during the six months ended June 30, 2014.  The use of cash was primarily a result of us significantly reducing our balance of accounts payable and paying of expenses related to converting deferred revenue to earned revenue.

For the six months ended June 30, 2014 and 2013, we used cash of $0 and $3,866, respectively for the acquisition of property and equipment.

For the six months ended June 30, 2014, we used $13,408 to repay long-term debt.  For the six months ended June 30, 2013, we used $2,699 to repay long-term debt and received $100,000 from the issuance of stock.

Because we have minimal cash and a significant working capital deficit at June 30, 2014, we anticipate that we will need to generate additional capital (either through positive  results of operations or debt or equity infusions) to meet our obligations for the next year.

Results of Operations.

For the three months ended June 30, 2014, we had sales of $736,122.  Our cost of sales and services was $334,956, resulting in a gross profit of $401,166.  We incurred general and administrative expenses of $326,469.  We earned interest income of $22 and incurred interest expenses of $5,380.  As a result, we had a net income of $69,339 for the three months ended June 30, 2014.

Comparatively, for the three months ended June 30, 2013, we had sales of $948,478.  Our cost of sales and services was $412,683, resulting in a gross profit of $535,795.  We incurred $393,256 in general and administrative expenses.  We earned interest income of $45, and incurred interest expenses of $1,672.  As a result, we had a net income of $140,912 for the three months ended June 30, 2013.

The $71,573 reduction in net income for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 is primarily the result of decreased income during the three months ended June 30, 2014.  We earned $212,356, or 22.4%, less during the three months June 30, 2014 due to decreased class days and laps, and had a

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corresponding decrease in our cost of sales and services of $77,727, or 18.8%.  Our general and administrative expenses decreased by $66,787, or 17% largely due to decreased advertising costs.  As a result, we had a net income decrease of 50.8%.  

For the six months ended June 30, 2014, we had sales of $1,274,388.  Our cost of sales and services was $611,165, resulting in a gross profit of $663,223.  We incurred general and administrative expenses of $624,877.  We earned $689 in interest income, and incurred $9,584 in interest expenses.  As a result, we had a net income of $29,451 for the six months ended June 30, 2014.

Comparatively, for the six months ended June 30, 2013, we had sales of $1,411,730.  Our cost of sales and services was $642,833, resulting in a gross profit of $768,897.  We paid general and administrative expenses of $835,836.  We earned interest income of $122 and other income of $6,123.  We paid interest expenses of $3,256 and had a loss on disposal of assets of $842.  As a result, we had a net loss of $64,792 for the six months ended June 30, 2013.

The net income for the Company increased by $94,243 during the six months ended June 30, 2014 compared to the six months ended June 30, 2013.  This increase is primarily the result of reduced general and administrative expenses.  Our revenues decreased by $137,342, or 9.7%, and our cost of sales and services decreased by $31,668, or 4.9%.  Our general and administrative expenses decreased by $210,959, or 25.2%.  Our decreased sales revenue was primarily the result of a decrease in class days and laps during the period.  The decrease in general and administrative expenses is the result of cost cutting measures implemented by the Company in advertising, maintenance, payroll, professional fees and rent.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.

Item 4.  Controls and Procedures

During the three months ended June 30, 2014, 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 June 30, 2014.  Based on this evaluation, our chief executive officer and principal

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financial officers have concluded such controls and procedures to be effective as of June 30, 2014 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.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: August 14, 2014

DALE JARRETT RACING ADVENTURE, INC.

By:

/s/Timothy Shannon

Timothy Shannon

Chief Executive Officer

Principal Financial Officer

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