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EX-31 - 302 CERTIFICATION - QDM International Inc.dalejarrett10q2q10ex31.txt
EX-32 - 906 CERTIFICATION - QDM International Inc.dalejarrett10q2q10ex32.txt

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, 2010
-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             333-39942

Dale Jarrett Racing Adventure, Inc.
--------------------------------------------
(Exact name of registrant as specified in its charter)

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

1313 10th Avenue Lane SE, Hickory, NC                           28602
     (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 [ ]   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):

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,
July 31, 2010:

  Common Stock  -  24,510,502


2 DALE JARRETT RACING ADVENTURE, INC. FORM 10-Q For the quarterly period ended June 30, 2010 INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosure About Market Risk 13 Item 4T. Controls and Procedures 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings 15 Item 1A. Risk Factors 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15 Item 3. Defaults upon Senior Securities 15 Item 4. Removed and Reserved 15 Item 5. Other Information 15 Item 6. Exhibits 15 SIGNATURES
3 PART I Item I - FINANCIAL STATEMENTS Dale Jarrett Racing Adventure, Inc. Condensed Balance Sheets June 30, December 31, 2010 2009 ------- ----------- (Unaudited) ASSETS Current assets: Cash $ 394,094 $ 544,563 Accounts receivable 114,267 58,484 Spare parts and supplies 152,350 149,844 Prepaid expenses and other current assets 54,914 64,494 ----------- ----------- Total current assets 715,625 817,385 ----------- ----------- Property and equipment, net of accumulated depreciation of $816,930 and $757,747 509,389 574,368 ----------- ----------- Other assets 11,630 3,600 ----------- ----------- $ 1,236,644 $ 1,395,353 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current portion of long-term debt $ 24,129 $ 23,627 Accounts payable 106,916 152,422 Accrued expenses 24,262 34,026 Deferred revenue 1,197,383 1,153,313 ----------- ----------- Total current liabilities 1,352,690 1,363,388 ----------- ----------- Long-term debt 37,935 48,182 ----------- ----------- Stockholders' deficit: Preferred stock, $.0001 par value, 5,000,000 shares authorized - - Common stock, $.0001 par value, 200,000,000 shares authorized, 24,510,502 shares issued and 23,886,752 and 24,216,002 shares outstanding at June 30, 2010 and December 31, 2009, respectively 2,451 2,451
4 Additional paid-in capital 6,184,480 6,184,480 Treasury stock, 623,750 and 294,500 shares, at cost (36,711) (17,867) Accumulated (deficit) (6,304,201) (6,185,281) ----------- ----------- (153,981) (16,217) ----------- ----------- $ 1,236,644 $ 1,395,353 =========== =========== See accompanying notes to unaudited condensed financial statements.
5 Dale Jarrett Racing Adventure, Inc. Condensed Statements of Operations For The Three Months and Six Months Ended June 30, 2010 and 2009 (Unaudited) Three Months Six Months Ended June 30, Ended June 30, 2010 2009 2010 2009 ---- ---- ---- ---- (Restated) (Restated) Sales $687,582 $847,166 $1,286,219 $1,294,653 Cost of sales and services 288,963 338,411 574,849 584,751 ---------- ---------- ---------- ---------- Gross profit 398,619 508,755 711,370 709,902 ---------- ---------- ---------- ---------- Expenses General and administrative - non cash stock compensation 990 66,000 990 66,000 General and administrative 441,422 417,858 807,960 784,585 ---------- ---------- ---------- ---------- 442,412 483,858 808,950 850,585 ---------- ---------- ---------- ---------- Income (loss) from operations (43,793) 24,897 (97,580) (140,683) Other income and (expense): Interest income 448 200 1,001 748 Loss on disposal of assets (18,252) - (18,252) - Interest expense (2,917) (1,413) (4,089) (2,949) ---------- ---------- ---------- ---------- (20,721) (1,213) (21,340) (2,201) ---------- ---------- ---------- ---------- Income (loss) before taxes (64,514) 23,684 (118,920) (142,884) Income taxes - - - - ---------- ---------- ---------- ---------- Net income (loss) $ (64,514) $ 23,684 $ (118,920) $ (142,884) ========== ========== ========== ========== Per share information: Basic and diluted income (loss) per share $ (0.00) $ 0.00 $ (0.00) $ (0.01) ========== ========== ========== ========== Weighted average shares outstanding - basic and diluted 23,978,851 24,310,502 24,008,741 24,410,502 ========== ========== ========== ========== See accompanying notes to unaudited condensed financial statements.
6 Dale Jarrett Racing Adventure, Inc. Condensed Statements of Cash Flows For The Six Months Ended June 30, 2010 and 2009 (Unaudited) 2010 2009 ---- ---- (Restated) Net cash used in operating activities $ (78,266) $(143,125) --------- --------- Cash flows from investing activities: Acquisition of plant and equipment (42,624) (49,960) --------- --------- Net cash used in financing activities (42,624) (49,960) --------- --------- Cash flows from financing activities: Repayment of notes payable (9,745) (15,754) Purchase of treasury stock (19,834) - --------- --------- Net cash used in financing activities (29,579) (15,754) --------- --------- Decrease in cash (150,469) (208,839) --------- --------- Cash, beginning of period 544,563 522,695 --------- --------- Cash, end of period $ 394,094 $ 313,856 ========= ========= See accompanying notes to unaudited condensed financial statements.
7 DALE JARRETT RACING ADVENTURE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 2010 (UNAUDITED) (1) Basis Of Presentation 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. 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. 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, 2009, including notes thereto included in the Company's Form 10-K. (2) Recent Accounting Pronouncements The following Accounting Standards Codification Updates have been issued, or became effective, since the beginning of the current period covered by these financial statements: Pronouncement Issued Title ASU No. 2010-01 January 2010 Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash - a consensus of the FASB Emerging Issues Task Force ASU No. 2010-02 January 2010 Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification ASU No. 2012-03 January 2010 Extractive Activities - Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures ASU No. 2010-04 January 2010 Accounting for Various Topics: Technical Corrections to SEC Paragraphs ASU No. 2010-05 January 2010 Compensation - Stock Compensation (Topic718): Escrowed Share Arrangements and the Presumption of Compensation
8 DALE JARRETT RACING ADVENTURE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 2010 (UNAUDITED) (2) Recent Accounting Pronouncements (Continued) ASU No. 2010-06 January 2010 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ASU No. 2010-07 January 2010 Not-for-Profit Entities (Topic 958): Not-for-Profit Entities - Mergers and Acquisitions ASU No. 2010-08 February 2010 Technical Corrections to Various Topics ASU No. 2010-09 February 2010 Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements ASU No. 2010-10 February 2010 Consolidation (Topic 810): Amendments for Certain Investment Funds ASU No. 2010-11 March 2010 Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives ASU No. 2010-12 April 2010 Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts (SEC Update) ASU No. 2010-13 April 2010 Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades-a consensus of the FASB Emerging Issues Task Force ASU No. 2010-14 April 2010 Accounting for Extractive Activities-Oil & Gas-Amendments to Paragraph 932-10-S99-1 (SEC Update) ASU No. 2010-15 April 2010 Financial Services-Insurance (Topic 944): How Investments Held through Separate Accounts Affect an Insurer's Consolidation Analysis of Those Investments-a consensus of the FASB Emerging Issues Task Force
9 DALE JARRETT RACING ADVENTURE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 2010 (UNAUDITED) (2) Recent Accounting Pronouncements (Continued) ASU No. 2010-16 April 2010 Entertainment-Casinos (Topic 924): Accruals for Casino Jackpot Liabilities-a consensus of the FASB Emerging Issues Task Force ASU No. 2010-17 April 2010 Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition-a consensus of the FASB Emerging Issues Task Force ASU No. 2010-18 April 2010 Receivables (Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset-a consensus of the FASB Emerging Issues Task Force ASU No. 2010-19 May 2010 Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates ASU No. 2010-20 July 2010 Receivables (Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses ASU No. 2010-21 August 2010 Accounting for Technical Amendments to Various SEC Rules and Schedules Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies (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 commons stock equivalents are not considered in the computation. We did not have any dilutive common stock equivalents for the three months ended June 30, 2009.
10 DALE JARRETT RACING ADVENTURE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 2010 (UNAUDITED) (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 cost. (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) Stockholders' Deficit During the six months ended June 30, 2010, the Company purchased a total of 329,250 shares of its common stock for cash aggregating $19,834, which is classified as treasury stock in the accompanying condensed balance sheet as of June 30, 2010 and recorded at cost. Further, the Company reissued 20,000 shares of treasury stock with a fair value of $990 to an employee for services during the period then ended. During July 2010, the company purchased an additional 35,900 shares of its common stock for cash aggregating $1,701. (7) Legal Proceedings On June 28, 2010, the Company paid $20,000 to settle litigation related to an alleged breach of contract in the circuit court of Talladega County, Alabama. The Company had previously accrued $17,500 related to this proceeding and expensed a further $2,500 during the three months ended June 30, 2010.
11 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 which 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 the Corporation's competitors and prolonged recessionary periods. There are no known trends, events or uncertainties that have or are reasonably likely to have a material impact on the corporation's short term or long term liquidity. Sources of liquidity both internal and external will come from the sale of the corporation's services and products as well as the private sale of the Corporation's stock. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. There are no significant elements of income or loss that do not arise from the Corporation's continuing operations. There are no known causes for any material changes from period to period in one or more line items of the corporation's financial statements. The Corporation currently has classes planned through December 2010. Capital Resources and Source of Liquidity. The Corporation currently has no material commitments for capital expenditures. The Corporation has no plans for future capital expenditures, such as additional race cars, at this time. The Corporation believes that there will be sufficient capital from revenues to conduct operations for the next twelve (12) months. Presently, the Corporation's revenue and cash comprises one hundred (100) percent of the total cash necessary to conduct operations. Future revenues from classes and events will determine the amount of additional financing necessary to continue operations. The board of directors has no immediate offering plans in place. The board of directors shall determine the amount and type of financing as the Corporation's financial situation dictates. For the six months ended June 30, 2010, the Corporation acquired plant and equipment of $42,624 resulting in net cash used in investing activities of $42,624. Comparatively, for the six months ended June 30, 2009, the Corporation acquired plant and equipment of $49,960 resulting in net cash used in investing activities of $49,960.
12 For the six months ended June 30, 2010, the Corporation reduced its outstanding debt by repaying notes payable of $9,745 and purchased treasury stock of $19,834. As a result, the Corporation had net cash used in financing activities of $29,579 for the six months ended June 30, 2010. Comparatively, for the six months ended June 30, 2009, the Corporation reduced its outstanding debt by repaying notes payable of $15,754. As a result, the Corporation had net cash used in financing activities of $15,754 for the six months ended June 30, 2009. On a long term basis, liquidity is dependent on continuation of operation and receipt of revenues. Results of Operations. For the three months ended June 30, 2010, the registrant had sales of $687,582 with cost of sales of $288,963 for a gross profit of $398,619. Comparatively, for the three months ended June 30, 2009, the registrant had sales of $847,166 with cost of sales of $338,411 for a gross profit of $508,755. The decrease in revenue of $159,584, or 18.8%, resulted in a decrease in cost of sales of $49,448, or 14.6%, due to decreased customers and decreased costs to service less customers. The gross profit percentage decreased from 60.0% to 58.0% because of decreased sales and relatively fixed track and race equipment costs. For the three months ended June 30, 2010, the registrant had general and administrative expenses of $411,422 and non cash stock compensation of $990. Comparatively, for the three months ended June 30, 2009, the registrant had general and administrative expenses of $417,858 and non cash stock compensation of $66,000. The percentage of general and administrative expenses to revenues for the three months ended June 30, 2010 increased to 64.34% from 57.11% for the three months ended June 30, 2009 due to decreased revenues. For the six months ended June 30, 2010, the registrant had sales of $1,286,219 with cost of sales of $574,849 for a gross profit of $711,370. Comparatively, for the six months ended June 30, 2009, the registrant had sales of $1,294,653 with cost of sales of $584,751 for a gross profit of $709,902. The decrease in revenue of $8,434, or 0.65%, resulted in a decrease in cost of sales of $9,902, or 1.69%, due to decreased customers and decrease costs to service less customers. The gross profit percentage increased slightly from 54.83% to 55.31% because of decreased sales with relatively fixed track and race equipment costs. For the six months ended June 30, 2010, the registrant had general and administrative expenses of $807,960 with non cash stock compensation of $990. Comparatively, for the six months ended June 30, 2009, the registrant had general and administrative expenses of $784,585 and non cash stock compensation of $66,000. The percentage of general and
13 administrative expenses to revenues for the six months ended June 30, 2010 decreased to 62.89% from 65.70% for the three months ended June 30, 2009 due to decreased revenues. Plan of Operation. The Corporation may experience problems; delays, expenses and difficulties sometimes encountered by an enterprise in the Corporation's stage, many of which are beyond the Corporation's control. These include, but are not limited to, unanticipated problems relating to additional costs and expenses that may exceed current estimates and competition. The Corporation is not delinquent in any of its obligations even though the Corporation has generated limited operating revenues. The Corporation intends to market its products and services utilizing cash made available from operations. The Corporation's management is of the opinion that future revenues will be sufficient to pay its expenses for the next twelve months. The Corporation is not currently pursuing financing for its operations. The Corporation is seeking to expand its revenue base. Failure to expand its revenue base may result in the Corporation depleting its available funds and not being able pay its obligations. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable for smaller reporting companies. Item 4T. Controls and Procedures During the three months ended June 30, 2010, 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 chief 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, 2010. Based on this evaluation, our chief executive officer and chief principal financial officers have concluded such controls and procedures to be effective as of June 30, 2010 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
14 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.
15 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. Removed and Reserved 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 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 13, 2010 DALE JARRETT RACING ADVENTURE, INC. By: /s/Timothy Shannon --------------------------- Timothy Shannon, Principal Executive Officer