Company Quick10K Filing
Quick10K
Exceed World
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-08-31 Quarter: 2016-08-31
10-Q 2016-05-31 Quarter: 2016-05-31
10-Q 2016-02-29 Quarter: 2016-02-29
10-K 2015-11-30 Annual: 2015-11-30
10-Q 2015-08-31 Quarter: 2015-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
8-K 2019-07-12 Accountant, Exhibits
8-K 2018-12-06 Enter Agreement, M&A, Exhibits
8-K 2018-10-02 Enter Agreement, M&A, Sale of Shares, Exhibits
8-K 2018-09-13 Accountant, Exhibits
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EVSI Envision Solar 26
HMMR Hammer Fiber Optics Holdings 24
BLYQ Bally 12
GRVE Groove Botanicals 3
BOXS Boxscore Brands 2
HEYU Heyu Biological Technology 0
IGMB Igambit 0
TAQR Traqer 0
REBL Rebel Group 0
EXDW 2019-06-30
Part I - Financial Information
Item 1 Financial Statements
Note 1 - Organization, Description of Business and Basis of Presentation
Note 2 - Significant Accounting Policies
Note 3 - Fair Value Measurement
Note 4 - Income Taxes
Note 5 - Related-Party Transactions
Note 6 - Short-Term Loan Receivable
Note 7 - Property, Plant and Equipment
Note 8 - Intangible Assets
Note 9 - Disposal of Subsidiary
Note 10 - Contingencies
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Item 4 Controls and Procedures
Part Ii-Other Information
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Mine Safety Disclosures
Item 5 Other Information
Item 6 Exhibits
EX-31 ex31.htm
EX-32 ex32.htm

Exceed World Earnings 2019-06-30

EXDW 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 exceed_10q319.htm 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED June 30, 2019

OR

 

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

COMMISSION FILE NUMBER: 000-55377

  

Exceed World, Inc.

(Exact name of registrant as specified in its charter)

 

  Delaware 98-1339955   
 

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification No.)  
       
 

1-23-38-8F, Esakacho, Suita-shi,

Osaka Japan

564-0063

(Zip Code)

 
   (Address of Principal Executive Offices)    

 

  Issuer's telephone number: +81-6-6339-4177

Fax number: +81-6-6339-4180 

Email: ceo.exceed.world@gmail.com

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. [X] Yes [ ] 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). [X] Yes [ ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a small reporting company. See definition of large accelerated filer, accelerated filer and small reporting company in Rule 12b-2 of the Securities Exchange Act of 1934.

 

Large accelerated filer     Accelerated filer     Non-accelerated filer  
Smaller reporting company     Emerging growth company      

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 [ ] Yes [X] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of September 25, 2019 there were approximately 32,700,000 shares of common stock and no shares of preferred stock issued and outstanding.

 

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Table of Contents

 

INDEX

      Page 
PART I - FINANCIAL INFORMATION 
     
ITEM 1 FINANCIAL STATEMENTS - UNAUDITED   F1
  CONSOLIDATED BALANCE SHEETS - UNAUDITED   F1
  CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - UNAUDITED    F2
  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED   F3
  CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED   F4
  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS    F5-F6
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS   3
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   3
ITEM 4 CONTROLS AND PROCEDURES   4
 
PART II-OTHER INFORMATION
 
ITEM 1 LEGAL PROCEEDINGS   5
ITEM 1A RISK FACTORS    
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   5
ITEM 3 DEFAULTS UPON SENIOR SECURITIES   5
ITEM 4 MINE SAFETY DISCLOSURES   5
ITEM 5 OTHER INFORMATION   5
ITEM 6 EXHIBITS   5
   
SIGNATURES   6

 

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Table of Contents 

 

PART I - FINANCIAL INFORMATION

  

ITEM 1 FINANCIAL STATEMENTS

  

EXCEED WORLD, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited) 

 

      As of   As of
      June 30, 2019   September 30, 2018
      (Unaudited)    
           
ASSETS        
Current Assets        
  Cash and cash equivalents $ 17,423,173 $ 22,737,755
  Marketable securities   963,685   830,331
  Accounts receivable   -   1,032
  Short-term loan receivable   -   395,848
  Income tax recoverable   -   425,303
  Prepaid expenses   934,647   295,510
  Inventories   930,475   380,925
  Due from related party   95,888   -
  Other current assets   360,282   255,030
           
TOTAL CURRENT ASSETS   20,708,150   25,321,734
           
Non-current Assets        
  Property, plant and equipment, net $ 399,844 $ 343,991
  Other intangible assets, net   2,102,152   3,228,655
  Long-term prepaid expenses   80,939   58,341
  Deferred tax assets   302,596   287,157
  Long-term loan receivable from related party   231,739   -
           
TOTAL NON-CURRENT ASSETS   3,117,270   3,918,144
           
TOTAL ASSETS $ 23,825,420 $ 29,239,878
           
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current Liabilities        
  Accounts payable $ 485,154 $ 4,572,204
  Accrued expenses and other payables   203,247   166,468
  Income tax payable   685,356   -
  Deferred income   225,451   4,460,652
  Capital lease obligations, current   9,829   9,327
  Due to related parties   1,353,565   934,784
  Other current liabilities   1,338,832   1,741,639
           
TOTAL CURRENT LIABILITIES   4,301,434   11,885,074
           
Non-current Liabilities        
  Long-term note payable $ - $ 483,814
  Long term deferred income   -   2,183
  Capital lease obligations, long-term   36,942   41,786
           
TOTAL NON-CURRENT LIABILITIES   36,942   527,783
           
TOTAL LIABILITIES $ 4,338,376 $ 12,412,857
           
Shareholders' Equity        
  Preferred stock ($0.0001 par value, 20,000,000 shares authorized;        
  none issued and outstanding  as of June 30, 2019 and September 30, 2018) $ - $ -
  Common stock ($0.0001 par value, 500,000,000 shares authorized,        
  32,700,000 shares issued and outstanding as of June 30, 2019 and September 30, 2018)   3,270   3,270
  Additional paid-in capital   261,516   99,440
  Accumulated earnings   18,425,020   16,896,299
  Accumulated other comprehensive income (loss)   797,238    (171,988)
           
TOTAL SHAREHOLDERS' EQUITY $ 19,487,044 $ 16,827,021
           
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,825,420 $ 29,239,878
           
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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Table of Contents

 

EXCEED WORLD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

      Three Months Ended   Three Months Ended   Nine Months Ended   Nine Months Ended
      June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
          Restated       Restated
                   
Revenues $ 8,101,607 $ 8,850,448 $ 21,902,288 $ 19,795,079
                   
Cost of revenues   3,836,269   5,238,558   10,906,629   11,459,004
                   
Gross profit   4,265,338   3,611,890   10,995,659   8,336,075
                   
Operating expenses                
  Selling and distribution expenses   783,576   241,223   1,422,496   1,073,667
  Administrative expenses   2,170,782   2,240,801   8,383,166   8,408,361
Total operating expenses   2,954,358   2,482,024   9,805,662   9,482,028
                   
Income (loss) from operations   1,310,980   1,129,866   1,189,997    (1,145,953)
                   
Other income (expenses)                
  Other income   754,529   24,470   774,623   137,281
  Gain on disposal of a subsidiary   -   15,031   -   15,031
  Change in fair value of marketable securities   341,412   126,490   230,373   (50,994)
Total other income   1,095,941   165,991   1,004,996   101,318
                   
Net income (loss) before tax   2,406,921   1,295,857   2,194,993    (1,044,635)
                   
Income tax expense (benefit)   513,190    (155,979)   666,272    (68,045)
                   
NET INCOME (LOSS) $ 1,893,731 $ 1,451,836 $ 1,528,721 $  (976,590)
                   
OTHER COMPREHENSIVE INCOME (LOSS)                
  Foreign currency translation adjustment   492,360    (488,263)   969,226   233,251
                   
TOTAL COMPREHENSIVE INCOME (LOSS) $ 2,386,091 $ 963,573 $ 2,497,947 $  (743,339)
                   
EARNINGS (LOSS) PER COMMON SHARE, BASIC AND DILUTED                
$ 0.06 $ 0.07 $ 0.05 $  (0.05)
                   
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED                
  32,700,000   20,000,000   32,700,000   20,000,000
                   
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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EXCEED WORLD, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS JUNE 30, 2018 AND 2019 

(Unaudited)

 

          ADDITIONAL   ACCUMUALTED OTHER        
  COMMON STOCK   PAID IN   COMPREHENSIVE   RETAINED    
  NUMBER   AMOUNT   CAPITAL   INCOME (LOSS)   EARNINGS   TOTALS
                       
Balance - September 30, 2017 20,000,000 $ 2,000 $ 59,679 $ 72,746 $ 14,520,667 $ 14,655,092
                       
Net loss -   -   -   -    (1,896,066)    (1,896,066)
                       
Foreign currency translation -   -   -    (27,506)   -    (27,506)
                       
Balance – December 31, 2017 20,000,000 $ 2,000 $ 59,679 $ 45,240 $ 12,624,601 $ 12,731,520
                       
Net loss -   -   -   -    (532,360)    (532,360)
                       
Foreign currency translation -   -   -   749,020   -   749,020
                       
Balance – March 31, 2018 20,000,000 $ 2,000 $ 59,679 $ 794,260 $ 12,092,241 $ 12,948,180
                       
Net Income -   -   -   -   1,451,836   1,451,836
                       
Foreign currency translation -   -   -    (488,263)   -    (488,263)
                       
Balance – June 30, 2018 20,000,000 $ 2,000 $ 59,679 $ 305,997 $ 13,544,077 $ 13,911,753
                       
                       
Balance - September 30, 2018 32,700,000 $ 3,270 $ 99,440 $  (171,988) $ 16,896,299 $ 16,827,021
                       
Net loss -   -   -   -    (356,822)    (356,822)
                       
Disposal of subsidiary -   -   162,076   -   -   162,076
                       
Foreign currency translation -   -   -   678,844   -   678,844
                       
Balance – December 31, 2018 32,700,000 $ 3,270 $ 261,516 $ 506,856 $ 16,539,477 $ 17,311,119
                       
Net loss -   -   -   -    (8,188)    (8,188)
                       
Foreign currency translation -   -   -    (201,978)   -    (201,978)
                       
Balance – March 31, 2019 32,700,000 $ 3,270 $ 261,516 $ 304,878 $ 16,531,289 $ 17,100,953
                       
Net loss -   -   -   -   1,893,731   1,893,731
                       
Foreign currency translation -   -   -   492,360   -   492,360
                       
Balance – June 30, 2019 32,700,000 $ 3,270 $ 261,516 $ 797,238 $ 18,425,020 $ 19,487,044
                       
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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Table of Contents 

EXCEED WORLD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

      Nine Months Ended   Nine Months Ended
      June 30, 2019   June 30, 2018
          Restated
           
CASH FLOWS FROM OPERATING ACTIVITIES        
  Net Income (loss) $ 1,528,721 $  (976,590)
  Adjustments to reconcile net income (loss) to net cash used in operating activities:        
  Depreciation and amortization   775,125   825,314
  Loss on sale of marketable securities   108,396   -
  Change in fair value of investments     (1,678,440)   50,994
  Loss on written off of intangible asset   -   8,584
  Changes in operating assets and liabilities:        
  Accounts receivable   275    (79)
  Prepaid expenses    (608,046)    (752,871)
  Inventories    (518,952)   806,919
  Other current assets    (86,109)   136,061
  Long-term prepaid expenses    (22,010)   -
  Accounts payable    (4,201,387)    (214,769)
  Accrued expenses and other current liabilities    (112,842)    (248,018)
  Income tax payable   664,379    (360,607)
  Income tax recoverable   446,329   -
  Deferred income    (4,345,918)   1,229,524
  Net cash provided by (used in) operating activities    (8,050,479)   504,462
           
CASH FLOWS FROM INVESTING ACTIVITIES        
  Collection of short-term loan receivable   405,515   -
  Purchase of property, plant and equipment    (103,111)   -
  Proceeds from sale of marketable securities   89,159   -
  Purchase of intangible assets    (80,396)    (341,696)
  Proceeds from surrender of company-owned life insurance policies   1,448,067   -
  Advances to related party   (3,192)   (24,076)
  Disposal of a subsidiary, net of cash disposed of    (79,875)   -
  Net cash provided by (used in) investing activities   1,676,167    (365,772)
           
CASH FLOWS FROM FINANCING ACTIVITIES        
  Repayment of capital lease obligation    (6,894)    (7,029)
  Advances from related parties   185,481   289,422
  Repayment to related parties   (45,874)   (59,330)
  Net cash provided by financing activities    132,713   223,063
           
Net effect of exchange rate changes on cash   927,017   184,583
           
Net change in cash and cash equivalents $  (5,314,582) $ 546,336
Cash and cash equivalents - beginning of period   22,737,755   13,226,698
Cash and cash equivalents - end of period $ 17,423,173 $ 13,773,034
           
NON-CASH INVESTING AND FINANCING TRANSACTIONS        
Operating expense paid by related parties on behalf of the Company  $ 307,734  $ -
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
Interest paid $ - $ 3,055
Income taxes paid (refunded) $  (297,998) $ 356,736
           
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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Table of Contents

EXCEED WORLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(UNAUDITED)

 

NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Exceed World, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on November 25, 2014.

 

On September 26, 2018, e-Learning Laboratory Co., Ltd. (“e-Learning”), a direct wholly owned subsidiary of Force International Holdings Limited, which was incorporated in Hong Kong with limited liability (“Force Holdings”), entered into a share purchase agreement with Force Internationale Limited (“Force Internationale”), the holding company of Force Holdings, in which e-Learning agreed to sell and Force Internationale agreed to purchase 74.5% equity interest of the Company at a consideration of US$26,000.

 

On September 26, 2018, the same date, Force Internationale entered into a share purchase agreement with the Company, in which Force Internationale agreed to sell and the Company agreed to purchase 100% equity interest of Force Holdings. In consideration of the agreement, the Company issued 12,700,000 common stock at US$1 each to Force Internationale. The results of these transactions are that Force Internationale is an 84.4% owner of the Company and the Company is a 100% owner of Force Holdings (the “Reorganization”).

 

On December 6, 2018, the Company entered into a share contribution agreement (the “Agreement”) with Force Internationale. Under this Agreement, the Company transferred 100% of the equity interest of School TV Co., Ltd. ("School TV"), to Force Internationale without consideration. This Agreement was approved by the board of directors of the Company, Force Internationale and School TV. Upon the completion of the disposal, School TV was deconsolidated from the Group's consolidated financial statements.

 

As of June 30, 2019, the Company operates through our wholly owned subsidiaries, which are engaged in provision of the educational services through an internet platform called “Force Club”.

 

The Company has elected September 30th as its fiscal year end.

 

The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms "Company", "we", "us" or "our" mean the Company. Certain information and note disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America has been omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our consolidated financial statements for the year ended September 30, 2018, included in our Form 10-K/A.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION 

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries (the “Group”). Inter-company accounts and transactions have been eliminated.

 

Name of Subsidiary Place of Organization

Percentage of

Effective

Ownership

Force International Holdings Limited (“Force Holdings”) Hong Kong 100%
e-Learning Laboratory Co., Ltd. (“e-Learning”) Japan 100% (*1)
e-Communications Co., Ltd. (“e-Communications”) Japan 100% (*2)

 

(*1) Wholly owned subsidiary of Force Holdings

(*2) Wholly owned subsidiary of e-Learning

 

RECLASSIFICATIONS

 

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position.

 

USE OF ESTIMATES 

 

The presentation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as the date of the financial statements and the reported amounts of revenue and expenses reported in those financial statements. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to going concern, allowance for doubtful accounts, valuation allowance on deferred income tax, write-down in value of inventory and sales allowance. Operating results in the future could vary from the amounts derived from management's estimates and assumptions.

 

RELATED PARTY TRANSACTION

 

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business.

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

CASH EQUIVALENTS

 

The Company considers all highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents.

 

ACCOUNTS RECEIVABLE AND ALLOWANCE

 

Accounts receivable are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are recorded corresponding to the allowance when identified.

 

INVESTMENTS

 

The Company's investments in marketable securities are reported at their fair values as quoted by market exchanges in the consolidated balance sheets with changes in fair value recognized in earnings. The Company regularly reviewed its investments in marketable securities for impairments. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other than temporary, the Company would record an impairment charge and establish a new carrying value.

 

The Company also has investments in corporate-owned life insurance policies recorded at their cash surrender values in the consolidated balance sheets with change in the cash surrender value during the period recorded in earnings. Company-owned life insurance policies with carrying value of approximately $1.4 million were surrendered during the period ended June 30, 2019.

 

INVENTORIES

 

Inventories, consisting of mainly educational products accounted for using the weighted average method and health related products accounted for using the first-in, first-out method, are valued at the lower of cost and market value.

 

PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are stated at cost less depreciation and impairment loss. Depreciation is calculated using the straight-line method or reducing balance method at the following estimated useful life:

 

Building 10 years on straight-line method
Equipment 2 to 15 years on declining balance method or straight-line method
Vehicle 3 years on declining balance method

 

Assets held under capital lease obligation are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

 

INTANGIBLE ASSETS

 

The Company amortizes its intangible assets with finite useful life over their estimated useful lives and periodically evaluated for recoverability, and those evaluations take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

 

The intangible assets with finite useful life are amortized using the straight-line basis over the following estimated useful life:

 

Software 5 years
Membership   15 years – 30 years

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

The carrying value of property, plant and equipment and intangible assets subject to depreciation and amortization is evaluated whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset.

 

FOREIGN CURRENCY TRANSLATION 

 

The Company maintains its books and records in its local currencies, Japanese YEN (“JPY”) and Hong Kong Dollars (“HK$”), which are the functional currencies as being the primary currencies of the economic environment in which their operations are conducted. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statements of operations and comprehensive income.

 

The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, Translation of Financial Statement, assets and liabilities of the Group whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other comprehensive income within the consolidated statements of shareholders’ equity.

 

Translation of amounts from the local currency of the Group into US$1 has been made at the following exchange rates:

 

  June 30, 2019   June 30, 2018
Current JPY: US$1 exchange rate 107.88   110.66
Average JPY: US$1 exchange rate 110.97   110.13
       
Current HK$: US$1 exchange rate 7.81   7.81
Average HK$: US$1 exchange rate 7.84   7.81

 

REVENUE RECOGNITION

 

The Company operates and manages multilevel marketing (“MLM”) in operating its businesses as the Force Club Membership and generates revenues primarily by providing the rights to access the Company’s educational content and to recruit new members.

 

On October 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605, Revenue Recognition. The adoption had no material impact on the Company’s consolidated financial statements and there was no adjustment to the beginning retained earnings on October 1, 2018.

 

The Company recognizes revenue by applying the following steps in accordance with ASC 606 - Revenue from contracts with Customers. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services.

 

- Identification of the contract, or contracts, with a customer

- Identification of the performance obligations in the contract

- Determination of the transaction price

- Allocation of the transaction price to the performance obligations in the contract

- Recognition of revenue when (or as) we satisfy the performance obligation

 

Force Club Membership fee

 

Nature of operation

 

Our revenue generated from Force Club Membership arrangements accounted for substantially all of our revenues during the nine months ended June 30, 2019. Generally, the Company grants Force Club members the rights to access the Company’s educational content. There are two tiers of members, namely standard members and premium members.

 

The premium members are granted full access to the Company’s educational contents and the right to recruit prospect customers to become the Company’s members. Each premium member needs to purchase a premium pack, containing promotional materials aiding the recruiting process, from the Company. The standard members are granted limited access to the Company’s educational content.

 

Revenue from the premium pack is recognized at a point in time upon delivery. Revenue from the right to access the Company’s educational contents is recognized over a period of time ratably over the effective period.

 

The Company's chief operating decision make reviews results analyzed by customers and the analysis is only presented at the revenue level with no allocation of direct or indirect costs. The Company determines that it has only one operating segment. Consequently, the Company does not disaggregate revenue recognized from contracts with customers

 

Contract asset and liability

 

Deferred income is recorded when consideration is received from a member prior to the goods were delivered or the access was granted. As of June 30, 2019 and September 30, 2018, the Company's deferred income was $225,451 and $4,460,652, respectively. During the nine months ended June 30, 2019, the Company recognized $4,460,652 of deferred income in the opening balance.

 

The Company does not have any contract asset.

 

ADVERTISING

 

Advertising costs are expensed as incurred and included in selling and distributions expenses. Advertising expense was $1,422,496 and $1,073,667 for the nine months ended June 30, 2019 and 2018, respectively.

 

EARNINGS PER SHARE

 

The Company computes basic and diluted earnings per share in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income by the weighted average number of common stock outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

 

The Company does not have any potentially dilutive instruments as of June 30, 2019 and September 30, 2018 and, thus, anti-dilution issues are not applicable.

 

INCOME TAXES

 

The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Group’s income tax provision and net income or loss in the period the determination is made.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)” and issued subsequent amendments to the initial guidance or implementation guidance between August 2015 and November 2017 within ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-13, and ASU 2017-14 (collectively, including ASU 2014-09, “ASC 606”). Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective October 1, 2018, the Company adopted the standard using the modified retrospective method, the adoption of ASC 606 did not have a material impact on our consolidated financial statements. See Note 2 – Revenue Recognition for further discussion.

 

In January 2016, the FASB issued ASU 2016-01 “Financial Instruments – Overall.” The amendments in ASU 2016-01 are intended to improve the recognition, measurement, presentation and disclosure of financial assets and liabilities to provide users of financial statements with information that is more useful for decision-making purposes. Among other changes, ASU 2016-01 would require equity securities to be measured at fair value with changes in fair value recognized through net income, but would allow equity securities that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments would simplify the impairment assessment of such equity securities and would require enhanced disclosure about these investments. ASU 2016-01 would also require separate presentation of financial assets and liabilities by measurement category and type of instrument, such as securities or loans, on the balance sheet or in the notes, and would eliminate certain other disclosures relating to the methods and assumptions used to estimate fair value. For public entities, the amendments in ASU 2016-01 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2016-01 on October 1, 2018 with no impact to the Company’s beginning retained earnings.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and issued subsequent amendments to the initial guidance or implementation guidance including ASU 2017-13, 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, including ASU 2016-02, “ASC 842”). Under ASC 842, lessees will be required to recognize all leases at the commencement date including a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

 

The standard will be effective for the Company beginning October 1, 2019, with early adoption permitted. The Company will adopt the standard on October 1, 2019 on a modified retrospective basis and will not restate comparable periods. The Company will elect the package of practical expedients permitted under the transition guidance, which allows the Company to carry forward the historical lease classification, the assessment whether a contract is or contains a lease and initial direct costs for any leases that exist prior to adoption of the new standard. The Company will also elect the practical expedient not to separate lease and non-lease components for certain classes of underlying assets and the short-term lease exemption for contracts with lease terms of 12 months or less. The Company anticipates this standard will have a material impact on the Company’s consolidated balance sheets. However, the Company does not expect adoption will have a material impact on the consolidated statements of operations and comprehensive income. While the Company is continuing to assess potential impacts of the standard, the Company currently expects the most significant impact will be the recognition of ROU assets and lease liabilities for the ongoing leases.

 

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Table of Contents

 

NOTE 3 - FAIR VALUE MEASUREMENT

 

FASB ASC 820, Fair Value Measurements and Disclosures, ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into three levels:

 

Level 1:   Quoted prices in active markets for identical assets or liabilities.      

 

Level 2:   Significant other inputs that are directly or indirectly observable in the marketplace.    

 

Level 3:   Significant unobservable inputs which are supported by little or no market activity.

  

The following table presents information about the Company’s assets that are measured at fair value as of June 30, 2019 and indicates the fair value hierarchy of the valuation.

 

    Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Balance as of

June 30, 2019

Marketable Securities:                
Publicly held equity securities $ 963,685   -   -   963,685

 

NOTE 4 - INCOME TAXES

 

For the nine months ended June 30, 2019 and 2018, the Company incurred income tax expenses (benefit) in the amount of $666,272 and $(68,045), respectively.

 

Japan

 

The Group conducts its major businesses in Japan and is subject to tax in this jurisdiction. As a result of its business activities, the Group files tax returns that are subject to examination by the local tax authority.

 

The Company’s subsidiaries, e-Learning and e-Communications (“Japanese Subsidiaries”), were incorporated in Japan and are subject to a number of income taxes, which, in aggregate, represent a statutory income tax rate of approximately 30%. Effective tax rate of Japanese subsidiaries is 27.78% for the nine months ended June 30, 2019.

 

Hong Kong

 

Force Holdings, a direct wholly owned subsidiary of the Company in Hong Kong, is engaged in investment holding. Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit arising in Hong Kong. No provision for the Hong Kong profits tax has been made as Force Holdings did not generate any estimated assessable profits in Hong Kong during the periods ended June 30, 2019 and June 30, 2018.

 

United States

 

Exceed World, Inc., which acts as a holding company on a non-consolidated basis, does not plan to engage any business activities and current or future loss will be fully allowed. For the nine months ended June 30, 2019 and 2018, respectively, Exceed World, Inc., as a holding company registered in the state of Delaware, has incurred net loss and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry forward has been fully reserved.

 

The Company is a Delaware corporation that is subject to U.S. corporate income tax on its taxable income at a rate of up to 21% for taxable years beginning after December 31, 2017 and U.S. corporate income tax on its taxable income of up to 35% for prior tax years. Recent U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Act”), was signed into law on December 22, 2017. The 2017 Act significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years or in a single lump sum.

 

The 2017 Act also includes provisions for a new tax on the Global Intangible Low-taxed Income (“GILTI”) effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”), subject to the possible use of foreign tax credits and a deduction equal to 50 percent to offset the income tax liability, subject to some limitations. The Company elected to account for GILTI tax in the period the tax is incurred, and no provision is made during the nine months period ended Jun 30, 2019.

 

To the extent that portions of the Company’s U.S. taxable income, such as Subpart F income or GILTI, are determined to be from sources outside of the U.S., subject to certain limitations, the Company may be able to claim foreign tax credits to offset its U.S. income tax liabilities. If dividends that the Company receives from its subsidiaries are determined to be from sources outside of the U.S., subject to certain limitations, the Company will generally not be required to pay U.S. corporate income tax on those dividends. Any liabilities for U.S. corporate income tax will be accrued in the Company’s consolidated statements of operations and comprehensive income and estimated tax payments will be made when required by U.S. law.

 

The Company and its subsidiaries file a U.S. federal consolidated income tax return as well as returns in State of Delaware, Japan and Hong Kong. As of June 30, 2019, the Company’s earliest open tax year for U.S. federal income tax purposes is its fiscal year ended September 30, 2017. The Company's tax attributes from prior periods remain subject to adjustment. Open tax years in state and foreign jurisdictions generally range from three to six years.

 

NOTE 5 - RELATED-PARTY TRANSACTIONS

 

For the nine months ended June 30, 2019, Tomoo Yoshida, CEO and sole director, paid the Company’s expense of $297,564, and the Company repaid $364. As of June 30, 2019 and September 30, 2018, the total amount due to the director was $740,796 and $596,059, respectively. The balance is unsecured, due on demand and bears no interest.

 

For the nine months ended June 30, 2018, Tomoo Yoshida advanced $218,327 to the Company, and the Company repaid $1,391. The advance is unsecured, due on demand and bears no interest.

 

For the nine months ended June 30, 2019, Force Internationale paid the Company’s expense of $10,170, advanced $185,481 to the Company, and the Company repaid $45,251. As of June 30, 2019 and September 30, 2018, the total amount due to this related party was $429,010 and $291,015, respectively. The balance is unsecured, due on demand and bears no interest.

 

For the nine months ended June 30, 2018, Force Internationale advanced $23,506 to the Company, and the Company repaid $57,939. The advance is unsecured, due on demand and bears no interest.

 

For the nine months ended June 30, 2019, the Company repaid $259 to Keiichi Koga, the director of Force Holdings and e-Learning. As of June 30, 2019 and September 30, 2018, the total amount due to this related party was $47,562 and $47,710, respectively. The balance is unsecured, due on demand and bears no interest.

 

For the nine months ended June 30, 2018, Keiichi Koga advanced to the Company of $47,589. The advance is unsecured, due on demand and bears no interest.

 

As of June 30, 2019, the Company had $136,197 owed to School TV. The balance due to this related party is unsecured, due on demand and bears no interest. 

 

As of June 30, 2019, the Company had a short-term loan of $92,696 to School TV included in due from related party as a result of the deconsolidation (also see Note 1). The loan is unsecured, due on demand and bears 1% interest per annum. As of June 30, 2019, the interest receivable was $1,349 and included in other current assets. 

 

For the nine months ended June 30, 2019, the Company advanced $3,192 to School TV. As of June 30, 2019, the advance to School TV was $3,192 included in due from related party. The advance is unsecured, due on demand and bears no interest. 

 

As of June 30, 2019, the Company had a long-term loan of $231,739 to School TV as a result of the deconsolidation (also see Note 1). The loan is unsecured, mature on May 24, 2023 with an interest rate 1% per annum. As of June 30, 2019, the interest receivable was $3,136 included in other current assets.

 

For the nine months ended June 30, 2018, the Company advanced $204,265 to Universe Incorporation Limited (“UIL”), a related party company controlled by Tomoo Yoshida and Keiichi Koga. The advance is unsecured, due on demand and bears no interest. The balance was repaid by September 30, 2018.

 

NOTE 6 – SHORT-TERM LOAN RECEIVABLE

 

On September 14, 2018, the Company entered into a loan agreement to lend JPY45,000,000 ($405,991) to a third party, Star Gate Investment Holdings Limited. The loan was unsecured with the maturity date on June 30, 2019 with an interest of JPY 400,000 ($3,577) per quarter. The loan was collected in full on April 24, 2019.

 

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

  June 30, 2019 September 30, 2018 
  US$ US$
Buildings 57,323 54,984
Equipment 788,559 741,083
Vehicles 124,371 119,296
Construction in process 89,011                                                                               -
  1,059,264 915,363
     
Accumulated depreciation (659,420) (569,650)
  399,844 345,713
Net effect of exchange rate - (1,722)
Total net book value 399,844 343,991

 

The aggregate depreciation expense of property, plant and equipment were $66,763 and $78,340 for the nine months ended June 30, 2019 and 2018, respectively.

 

NOTE 8 – INTANGIBLE ASSETS

 

Intangible assets consist of the following:

 

  June 30, 2019 September 30, 2018 
  US$ US$
Software 4,455,033 5,121,311
Franchise right                                                                               - 667,378
Membership 446,037 450,285
  4,901,070 6,238,974
     
Accumulated depreciation (2,798,918) (2,978,171)
                                                                 2,102,152 3,260,803
Net effect of exchange rate - (32,148)
Total net book value 2,102,152 3,228,655

 

The aggregate amortization expense related to the intangible assets was $708,362 and $746,974 for the nine months ended June 30, 2019 and 2018, respectively.  

 

NOTE 9 - DISPOSAL OF SUBSIDIARY

 

On December 6, 2018, School TV was deconsolidated from the Company's consolidated financial statements. The Company recorded the additional paid in capital of $162,076 at this deconsolidation. This disposal does not constitute a strategic shift of the Company’s operation and business after Reorganization.

 

NOTE 10 - CONTINGENCIES

 

The Company is subject to various claims and legal proceedings in the course of conducting the business related to Force Club Membership and, from time to time, the Company may become involved in additional claims and lawsuits incidental to the businesses. The Company’s legal counsel and the management routinely assess the likelihood of adverse judgments and outcomes to these matters, as well as ranges of probable losses; to the extent losses are reasonably estimable. Accruals are recorded for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonable estimable.

 

In the opinion of management, appropriate and adequate accruals for legal matters have been made, and management believes that the probability of a material loss beyond the amounts accrued is remote. Nevertheless, the Company cannot predict the impact of future developments affecting our pending or future claims and lawsuits. The Company expenses legal costs as incurred, and all recorded legal liabilities are adjusted as required as better information becomes available to the Company. The factors the Company considers when recording an accrual for contingencies include, among others: (i) the opinions and views of the Company’s legal counsel; (ii) the Company’s previous experience; and (iii) the decision of our management as to how we intend to respond to the complaints. 

 

In 2019, the Company settled seven legal cases in total amount of JPY35,052,800 (approximately $325,000) related to the cancellation of contracts. As of the filing date, the Company has five pending legal cases whose total amount of claim was JPY35,544,500 (approximately $329,000) under the same nature. Our legal counsel has estimated the loss to be probable, and the total amount of the settlements approximates JPY10,000,000 (approximately $90,000). The Company has recorded JPY10,000,000 as an accrued expense as of June 30, 2019.

 

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ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

 

Any references to “the Company” refer to Exceed World, Inc., which operates through its wholly owned subsidiaries.

 

Company Overview

 

Corporate History

 

The Company was originally incorporated with the name Brilliant Acquisition, Inc., under the laws of the State of Delaware on November 25, 2014, with an objective to acquire, or merge with, an operating business.

 

On January 12, 2016, Thomas DeNunzio of 780 Reservoir Avenue, #123, Cranston, RI 02910, the sole shareholder of the Company, entered into a Share Purchase Agreement (the “Agreement”) with e-Learning Laboratory Co., Ltd. (“e-Learning”), with an address at 1-23-38-6F, Esakacho, Suita-shi, Osaka 564-0063 Japan. Pursuant to the Agreement, Mr. DeNunzio transferred to e-Learning, 20,000,000 shares of our common stock which represented all of our issued and outstanding shares at the time of sale.

 

Following the closing of the share purchase transaction, e-Learning gained a 100% interest in the issued and outstanding shares of our common stock and became the controlling shareholder of the Company.

 

On January 12, 2016, the Company changed its name to Exceed World, Inc. and filed with the Delaware Secretary of State, a Certificate of Amendment.

 

On January 12, 2016, Mr. Thomas DeNunzio resigned as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. The resignation was not the result of any disagreement with us on any matter relating to our operations, policies or practices.

 

On January 12, 2016, Mr. Tomoo Yoshida was appointed as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer.

 

On February 29, 2016, the Company entered into a Stock Purchase Agreement with Tomoo Yoshida, our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. Pursuant to this Agreement, Tomoo Yoshida transferred to Exceed World, Inc., 10 shares of the common stock of E&F Co., Ltd., a Japan corporation (“E&F”), which represented all of its issued and outstanding shares in consideration of $4,835 (JPY 500,000). Following the effective date of the share purchase transaction on February 29, 2016, Exceed World, Inc. gained a 100% interest in the issued and outstanding shares of E&F’s common stock and E&F became a wholly owned subsidiary of Exceed World.  On August 4, 2016, the E&F changed its name to School TV Co., Ltd. (“School TV”) and filed such amendment with the Legal Affairs Bureau in Osaka, Japan. 

 

On April 1, 2016, e-Learning entered into stock purchase agreements with 7 Japanese shareholders. Pursuant to these agreements, e-Learning sold 140,000 shares of common stock in total to these individuals and received $270 as aggregate consideration. Each shareholder paid JPY0.215 per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about $0.002. 

 

The aforementioned sale of shares was exempt from registration in accordance with Regulation S of the Securities Act of 1933, as amended ("Regulation S") because the above sales of the stock were made to non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to offshore transactions, and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing.

 

On August 1, 2016, the Company changed its fiscal year end from November 30 to September 30. 

 

On August 9, 2016, e-Learning entered into stock purchase agreements with 33 Japanese shareholders. Pursuant to these agreements, e-Learning sold 3,300 shares of common stock in total to these individuals and received $330 as aggregate consideration. Each shareholder paid JPY10 per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about $0.1. 

 

These shares were sold pursuant to the Company’s effective S-1 Registration Statement deemed effective on July 20, 2016 at 4pm EST. 

 

On October 28, 2016, Exceed World, Inc., a Delaware corporation, (the “Company” or “Exceed”), with the approval of its board of directors and its majority shareholders by written consent in lieu of a meeting, authorized the cancellation of shares owned by e-Learning. e-Learning has provided consent for the cancellation of shares. The total number of shares cancelled was 19,000,000 shares which was comprised of 16,500,000 restricted common shares and 2,500,000 free trading shares.

 

Shareholder’s name: e-Learning Laboratory Co., Ltd.

Total amount of shares cancelled 19,000,000 Shares
  Restricted shares 16,500,000 Shares
  Free trading shares 2,500,000 Shares

  

On October 28, 2016, every one (1) share of common stock, par value $.0001 per share, of the Company issued and outstanding was automatically reclassified and changed into twenty (20) shares fully paid and non-assessable shares of common stock of the Company, par value $.0001 per share ("20-for-1 Forward Stock Split"). No fractional shares were issued. The authorized number of shares, and par value per share, of Common Stock are not affected by the 20-for-1 Forward Stock Split.

 

On October 28, 2016, we filed a Certificate of Amendment with the Delaware Secretary of State. The effective date of the 20-for-1 Forward Stock Split was upon the acceptance of the Certificate of Amendment with the Secretary of State of Delaware. The Certificate of Amendment can be found as Exhibit 3.1 to Form 8-K filed November 1, 2016.

 

During July 2017 and August 2017, e-Learning entered into stock purchase agreements with 24 Japanese individuals. Pursuant to these agreements, e-Learning sold 2,240,000 shares of its common stock in total to these individuals and received $38,263 as aggregate consideration.

 

On September 26, 2018, e-Learning, a direct wholly owned subsidiary of Force International Holdings Limited, a Hong Kong limited company (“Force Holdings”), which was incorporated in Hong Kong with limited liability, entered into a share purchase agreement with Force Internationale Limited, a Cayman Island limited company (“Force Internationale”), the sole shareholder of Force Holdings, in which e-Learning agreed to sell and Force Internationale agreed to purchase 74.5% equity interest of the Company at a consideration of US$26,000.

 

On September 26, 2018, the Company entered into, and consummated, a share purchase agreement with Force Internationale to acquire 100% of Force Holdings. Force Holdings is the 100% owner of e-Learning. In consideration of this agreement, the Company issued 12,700,000 common shares to Force Internationale.

 

On December 6, 2018, the Company entered into a share contribution agreement with Force Internationale, a 84.4% owner of the Company. Under this agreement, the Company transferred 100% of the equity interest of School TV, to Force Internationale without consideration. This Agreement was approved by the boards of directors of each of the Company, Force Internationale and School TV. Upon the completion of the disposal, School TV was deconsolidated from the Group's consolidated financial statements.

 

Business Information

 

As of June 30, 2019, we operate through our wholly owned subsidiaries, which are engaged in provision of the educational services through an internet platform called “Force Club”.

 

Our principal executive offices are located at 1-1-36, 1-23-38-6F, Esaka-cho, Suita-shi, Osaka 564-0063, Japan. Our phone number is +81-6-6339-4177.

 

Liquidity and Capital Resources 

 

As of June 30, 2019 and September 30, 2018, we had cash and cash equivalents in the amount of $17,423,173 and $22,737,755, respectively. The decrease in cash is attributed to the decrease of deferred income and account payable. These accounts payable were mainly unpaid commissions to Force Club premium members and these payments were completed as of the date of this report. Currently, our cash balance is sufficient to fund our operations without the need for additional funding.

 

Revenues

 

We recorded revenue of $8,101,607 and $8,850,448 for the three months ended June 30, 2019 and 2018, respectively. We recorded revenue of $21,902,288 and $19,795,079 for the nine months ended June 30, 2019 and 2018, respectively. The increase in revenue, in our opinion, is attributed to an increase in recruitment activities of Force Club premium members.

 

Net Income (Loss)

 

We recorded net income of $1,893,731 and $1,451,836 for the three months ended June 30, 2019 and 2018, respectively. We recorded net income of $1,528,721 and net loss of $976,590 for the nine months ended June 30, 2019 and June 30, 2018, respectively. The increase in net income is attributed to an increase in revenue.

 

Cash flow

 

For the nine months ended June 30, 2019, we recorded negative cash flows from operations in the amount of $8,050,479. For the nine months ended June 30, 2018, we recorded cash flows from operations in the amount of $504,462.

 

Working capital

 

As of June 30, 2019 and September 30, 2018, we had working capital of $16,406,716 and $13,436,660, respectively.

 

Advertising

 

Advertising costs are expensed as incurred and included in selling and distributions expenses. For the three months ended June 30, 2019 and 2018, advertising expenses were $783,576 and $241,223, respectively. For the nine months ended June 30, 2019 and 2018, advertising expenses were $1,422,496 and $1,073,667, respectively. Advertising expenses were comprised of, but not limited to, sales events hosted for sales agents, exhibitions to promote and display company product offerings, signboards, and public relations activities.

 

Future Plans

 

Over the course of the next twelve months, we the "Group" (which is comprised of the Company, Force International Holdings Limited, a Hong Kong limited company, and its subsidiaries) intend to focus on expanding our sales network in order to strengthen our business activities. Currently, revenue is derived primarily from sales of the Group's Force Club premium package. While it is the intention of the Group to maintain this revenue stream, and to further increase the number of premium members of the Force Club, the Group also intends to diversify its operations and develop additional business activities.

 

In order to do so, the Group intends to focus on development of an online educational platform on which additional advertising income can be generated. At present, there are no definitive plans that have been made regarding the implementation or direction of this future online educational platform. However, we intend to begin efforts to hire additional personnel with extensive experience in web marketing in order to assist in the development of our future platform.

 

Further, it is the intention of the Group to begin development of a plan to set up after-school care facilities within Japan. Our exact plan has not been finalized in any capacity, as we will need to hire additional personnel in order to assist with the formulation of such plans with any level of specificity.

 

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

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ITEM 4 CONTROLS AND PROCEDURES

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer (who is acting as our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

 

As of June 30, 2019, the end of the fiscal period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our chief financial officer, of the effectiveness of the design and the operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below. 

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: domination of management by a limited individuals without adequate compensating controls, lack of a majority of outside directors on board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives, lack of well-established procedures to identify, approve and report related party transactions, lack of an audit committee, and lack of sufficient accounting and finance personnel or written policies and procedures with respect to the understanding and application of US GAAP and SEC requirement. These material weaknesses were identified by our Chief Executive Officer who also serves as our Chief Financial Officer in connection with the above annual evaluation.

 

Inherent limitations on effectiveness of controls

 

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal controls over financial reporting that have occurred for the three months ending June 30, 2019, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II-OTHER INFORMATION

 

ITEM 1 LEGAL PROCEEDINGS

In 2019, the Company settled seven legal cases in total amount of JPY 35,052,800 (approximately $325,000) related to the cancellation of contracts. As of the filing date, the Company has five pending legal cases whose total amount of claim is JPY 35,544,500 (approximately $329,000) under the same nature. Our legal counsel has estimated the loss to be probable, and the total amount of settlements approximates JPY 10,000,000 (approximately $90,000).

 

During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listen in Item 401 (f) of Regulation S-K.

 

ITEM 1A RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 26, 2018, Force Internationale Limited, a Cayman Island limited company ("Force Internationale") entered into a Share Purchase Agreement with its wholly-owned subsidiary, e-Learning Laboratory Co., Ltd., a Japan corporation ("e-Learning") which, at the time, owned 74.5% of the Company. Under this Share Purchase Agreement, e-Learning transferred its 74.5% equity interest in the Company (14,894,000 shares of common stock of Exceed World, Inc.) to Force Internationale. As consideration for this transfer, Force Internationale paid $26,000.00 to e-Learning. Immediately thereafter, the Company entered into a Share Purchase Agreement with Force Internationale, to acquire 100% of Force International Holdings Limited, a Hong Kong limited company ("Force Holdings"), which is the 100% beneficial owner of e-Learning. In consideration of this agreement, the Company issued 12,700,000 common shares to Force Internationale. The result of these transactions is that Force Internationale became a 84.4% owner of the Company, the Company (a 100% owner of Force Holdings), became 100% beneficial owner of e-Learning. Prior to the Share Purchase Agreements, Force Internationale, through its subsidiaries, was an indirect owner of 74.5% of the Company and subsequent to the Share Purchase Agreements, Force Internationale is a direct beneficial owner of 84.4% of the Company. The Share Purchase Agreements were approved by the board of directors of each of the Company, Force Internationale, Force Holdings, and e-Learning. Copies of the Share Purchase Agreements are included as Exhibit 2.1 and Exhibit 2.2 to the Form 8-K filed on October 2, 2018 and is hereby incorporated by reference.

 

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

 

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5 OTHER INFORMATION

None

 

ITEM 6 EXHIBITS

 

Exhibit No.

Description

3.1 Certificate of Incorporation (1)
   
3.2 By-laws (1)
   
3.3 Amendment to the Articles of Incorporation of the Company (2)
   
3.4 Amendment to the Articles of Incorporation of the Company (3)
   
3.5 Articles of Association of Force Holdings (4)
   
3.6 Articles of Incorporation of e-Learning (4)
   
10.1 Share Purchase Agreement dated September 26, 2018 by and among Force Internationale and e-Learning (4)
   
10.2 Share Purchase Agreement dated September 26, 2018 by and among Force Internationale and Exceed World (4)
   
10.3 Share Contribution Agreement dated December 6, 2018 by and among Force Internationale and Exceed World (5)
   
31 Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s report on Form 10-K (6)
   
32 Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)
   
101.INS XBRL Instance Document (7)
   
101.SCH XBRL Taxonomy Extension Schema (7)
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase (7)
   
101.DEF XBRL Taxonomy Extension Definition Linkbase (7)
   
101.LAB XBRL Taxonomy Extension Label Linkbase (7)
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase (7)

 

(1) Filed as an exhibit to the Company's Registration Statement on Form 10, as filed with the SEC on February 19, 2015, and incorporated herein by this reference.
(2) Filed as an exhibit to the Company's Current Report on Form 8-K as filed with the SEC on January 12, 2016, and incorporated herein by this reference.
(3) Filed as an exhibit to the Company's Current Report on Form 8-K as filed with the SEC on November 1, 2016, and incorporated herein by this reference.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K as filed with the SEC on October 2, 2018, and incorporated herein by this reference.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K as filed with the SEC on December 12, 2018, and incorporated herein by this reference.
(6) Filed herewith.
(7) Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or Annual Report for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

Exceed World, Inc.

(Registrant)

 

By: /s/ Tomoo Yoshida 

Name: Tomoo Yoshida

CEO, President, Director

Dated: September 25, 2019 

 

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