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, 2018
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 ☐ (Do not check if a smaller reporting company) | ||
| 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 August 20, 2018 there were approximately 20,000,000 shares of common stock and no shares of preferred stock issued and outstanding.
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PART I - FINANCIAL INFORMATION
| ITEM 1 | FINANCIAL STATEMENTS |
|
EXCEED WORLD, INC. (Unaudited) |
| As of | As of | ||||
| June 30, 2018 | September 30, 2017 | ||||
| ASSETS | |||||
| Current Assets | |||||
| Cash and cash equivalents | $ | 31,839 | $ | 46,295 | |
| Accounts receivable | 1,107 | 1,011 | |||
| Inventories, net | 78,570 | 78,268 | |||
| Prepaid expenses | 1,634 | 9,652 | |||
| Total current assets | 113,150 | 135,226 | |||
| Intangible assets, net | 633,656 | 656,828 | |||
| Total assets | $ | 746,806 | $ | 792,054 | |
| LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||
| Current Liabilities | |||||
| Accounts payable | $ | 5,470 | $ | 5,382 | |
| Due to related parties | 252,214 | 159,243 | |||
| Accrued expenses | 995 | 2,475 | |||
| Deferred income | 807 | - | |||
| Total current liabilities | 259,486 | 167,100 | |||
| Long-term note payable | 497,018 | 489,019 | |||
| Long-term note payable – related party | 225,917 | 222,281 | |||
| Long-term accrued interest | 5,799 | 2,037 | |||
| Long-term deferred income | 2,396 | - | |||
| Total non-current liabilities | 731,130 | 713,337 | |||
| Total liabilities | 990,616 | 880,437 | |||
| Shareholders' Deficit | |||||
| Preferred stock ($.0001 par value, 20,000,000 shares authorized; | |||||
| none issued and outstanding as of June 30, 2018 and September 30, 2017) | - | - | |||
| Common stock ($.0001 par value, 500,000,000 shares authorized, | |||||
| 20,000,000 shares issued and outstanding as of June 30, 2018 and September 30, 2017) | 2,000 | 2,000 | |||
| Additional paid-in capital | 12,847 | 10,517 | |||
| Accumulated deficit | (259,565) | (102,543) | |||
| Accumulated other comprehensive income | 908 | 1,643 | |||
| Total shareholders' deficit | (243,810) | (88,383) | |||
| Total liabilities and shareholders' deficit | $ | 746,806 | $ | 792,054 | |
| The accompanying notes are an integral part of these unaudited consolidated financial statements. | |||||
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EXCEED WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine months | Nine months | ||||
| Ended | Ended | ||||
| June 30, 2018 | June 30, 2017 | ||||
| Cash flows from operating activities | |||||
| Net loss | $ | (157,022) | $ | (31,376) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||
| Amortization of intangible assets | 34,078 | - | |||
| Write-down of inventory value | 639 | - | |||
| Changes in operating assets and liabilities: | |||||
| Accounts receivable | (80) | (5,170) | |||
| Inventories, net | 343 | 15,448 | |||
| Prepaid expenses | 8,215 | 421 | |||
| Accrued expenses | 774 | (59) | |||
| Deferred income | 811 | - | |||
| Long-term accrued interest | 3,746 | - | |||
| Long-term deferred income | 2,407 | - | |||
| Income tax payables | - | 186 | |||
| Net cash used in operating activities | (106,089) | (20,550) | |||
| Cash flows from investing activities | |||||
| Payment for acquisition of intangible assets | - | (674,333) | |||
| Net cash used in investing activities | - | (674,333) | |||
| Cash flows from financing activities | |||||
| Advance from related party | 90,547 | - | |||
| Proceeds from related party loan | - | 223,534 | |||
| Proceeds from long-term loan | - | 492,346 | |||
| Net cash provided by financing activities | 90,547 | 715,880 | |||
| Effect of exchange rate changes on cash and cash equivalents | 1,086 | (1,186) | |||
| Net Change in cash and cash equivalents | $ | (14,456) | $ | 19,811 | |
| Cash and cash equivalents, beginning of period | 46,295 | 38,410 | |||
| Cash and cash equivalents, end of period | $ | 31,839 | $ | 58,221 | |
| Supplemental cash flow information | |||||
| Interest paid | $ | 2,270 | $ | - | |
| Income taxes paid | $ | - | $ | 823 | |
| Non-cash investing and financing activities | |||||
| Stock cancellation | $ | - | $ | 38,000 | |
| Interest concession | $ | 2,330 | $ | - | |
| The accompanying notes are an integral part of these unaudited consolidated financial statements. | |||||
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EXCEED WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2018
(UNAUDITED)
NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION
Exceed World, Inc., formerly known as Brilliant Acquisition, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on November 25, 2014.
As of June 30, 2018, we operate through our wholly owned subsidiary, School TV Co., Ltd. (“School TV”), which is engaged in various business activities and industries including:
- The sale and distribution of health related products;
- The promotion of third party consumer goods and services;
- RE/MAX business in Kanagawa, Okinawa and Tokyo.
The accompanying unaudited consolidated financial statements of Exceed World, Inc. have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine months ended June 30, 2018, have been made. 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, 2017, included in our Form 10-K.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of its wholly-owned subsidiary, School TV. Intercompany transactions are eliminated.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates and assumptions made by management include 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.
FOREIGN CURRENCY TRANSLATION
The Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is 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 statements of operations.
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 Company 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 statements of shareholders’ equity.
Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:
| June 30, 2018 | |
| Current JPY: US$1 exchange rate | 110.66 |
| Average JPY: US$1 exchange rate | 110.13 |
RECLASSIFICATION
Certain prior year amounts have been classified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. This ASU adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act was signed into law. The amendments are effective upon addition to the FASB Accounting Standards Codification. The Company is currently evaluating the impact of the adoption of this guidance on the Consolidated Financial Statements.
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. ASC 606 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted for periods beginning after December 15, 2016. The Company elected to adopt the new standard effective October 1, 2018.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company elected adopting the standard using the modified retrospective method. The Company has identified its revenue streams and assessed each for the impacts. The Company anticipates the adoption of Topic 606 will not have a material impact in the timing or amount of revenue recognized, including the presentation of revenues in the Company’s consolidated statements of income and comprehensive loss. The Company continues to assess all potential impacts of the standard.
NOTE 3 - INCOME TAXES
The Company conducts its major businesses in Japan and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the local tax authority.
National income tax in Japan is charged at 15% of a company’s assessable profit. The Company’s subsidiary, School TV, was incorporated in Japan and is subject to Japanese national income tax and city income tax at the applicable tax rates on the taxable income as reported in their Japanese statutory accounts in accordance with the relevant enterprises income tax laws applicable to foreign enterprises.
School TV’s operation during the nine months ended June 30, 2018 has resulted a net taxable loss, as such School TV was not subject to income tax for the nine months ended June 30, 2018. The effective income tax rate of School TV is 0%. Deferred tax assets arise from net operating loss carried forward of $132,288 are fully allowed as the Company is not able to estimate future operating results due to limited operating history. The net operating loss carry forward will start to expire in the year 2026.
For the nine months ended June 30, 2017, income tax for School TV is $946. The effective tax rate of School TV is 15%.
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, 2018 and 2017, 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.
United States
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 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’s management is still evaluating the effect of the 2017 Act on the Company. Management may update its judgment of that effect based on its continuing evaluation and on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.
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 comprehensive income and estimated tax payments will be made when required by U.S. law.
One-Time Transition Tax Related to the 2017 Act
The Company estimated the amount of U.S. corporate income tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries of the Company mandated by the 2017 Act. The Company retained an accumulated deficit as of December 31, 2017 and therefore did not recognize any one-time transition tax. The actual impact of the 2017 Act on the Company may differ from management’s estimates, and management may update its judgments based on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.
NOTE 4 - GOING CONCERN
The accompanying consolidated financial statements are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended June 30, 2018, the Company had generated net loss of $157,022 and negative cash flows from operations of $106,089. As of June 30, 2018, the Company had working deficit of $146,336. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As a first priority, we plan to increase sufficient revenues for necessary working capital from our business. If we cannot generate sufficient revenues, we plan to borrow working capital from the director or parent company.
NOTE 5 - RELATED-PARTY TRANSACTIONS
As of June 30, 2018 and September 30, 2017, the Company had $161,847 and $159,243, respectively, owed to Tomoo Yoshida, Chief Executive Officer and Chief Financial Officer of the Company. The advance is due on demand and bears no interest.
As of June 30, 2018 and September 30, 2017, the Company had $90,367 and $0, respectively, owed to e-Communications Co., Ltd. Tomoo Yoshida, our CEO, is also the CEO of e-Communications Co., Ltd. The advance is due on demand and bears no interest. For the nine months ended June 30, 2018 and 2017, the Company borrowed $90,547 and $0, respectively, from e-Communications Co., Ltd..
On May 24, 2017, the Company borrowed JPY25,000,000, or $223,534 from e-Learning Laboratory Co., Ltd., the beneficial owner of the Company (“e-Learning”), primarily for the payment to lease the regional franchise rights of the RE/MAX System. The loan matures on May 24, 2023. On May 29, 2018, e-Learning agreed to decrease the interest rate from 2% to 1% retroactively from the issuance date of the loan, which granted a concession on previous interest accrued at the reduced rate. As a result $2,330 additional paid-in capital was recognized in relation to the concession. The interest expense related to this note payable was $3,203 and $0 during the nine months ended June 30, 2018 and 2017, respectively.
For the nine months ended June 30, 2018, e-Learning Laboratory Co. Ltd. provided 10 square meters of office space and 2 square meters of storage space to the Company free of charge.
NOTE 6 - LONG-TERM NOTE PAYABLE
On May 22, 2017, the Company entered into a loan agreement to borrow JPY55,000,000, or $492,346 from Mr. Toshihiro Hirai, the CEO of Actcall Inc., the 100% owner of Kidding Co., for the initial payment required upon the execution of the RE/MAX Regional Franchise Agreement entered on July 7, 2017. The loan matures on May 31, 2022 with an interest rate of 1% per annum due on maturity. For the nine months ended June 30, 2018 and 2017, the interest expense related to this note payable was $3,746 and $0, respectively, recorded as long-term accrued interest.
NOTE 7 - INTANGIBLE ASSETS, NET
The following table presents the detail of intangible assets:
| 6/30/2018 | 9/30/2017 | |||||
| Franchise rights | ||||||
| Gross carrying value | $ | 678,294 | $ | 667,378 | ||
| Less: accumulated amortization total | 44,638 | 10,550 | ||||
| Franchise rights, net | $ | 633,656 | $ | 656,828 |
NOTE 8 – COMMITMENTS
Under the lease of franchise rights, the Company is subjected to the following potential payment commitments: (1) membership fee in the amount of JPY42,000 (approximately $400) per year per sales associate operating under the RE/MAX brokerage office franchised from the Company (“RE/MAX Office”); (2) monthly ongoing fees comprised of monthly fixed fees, in the amount of JPY60,000 (approximately $500) per RE/MAX Office, and monthly percentage fees, in the amount of 3% of the commission the Company charges from the RE/MAX Office; (3) monthly advertising fee of JPY10,000 (approximately $100) per RE/MAX Office; and (4) unconditional monthly fixed technology fee of JPY10,000 (approximately $100) per leased franchise right. The membership fee and monthly fixed fee are subjected to increase in every two years, and the monthly advertising fee is subjected to increase upon request and negotiation.
As of June 30, 2018, the Company granted RE/MAX franchise to one RE/MAX Office and had one sales associate under the franchise.
NOTE 9 – CONCENTRATIONS
Concentration of revenues
For the nine months ended June 30, 2018, the Company generated revenues of $11,633, $2,943 and $6,930, accounting for 25% and 60% of the total revenues, were generated from two customers in relation to its RE/MAX business, respectively.
For the nine months ended June 30, 2017, the Company sold health products in the amount of $22,689 to a major customer which accounts for 95.1% of its total revenue.
NOTE 10 – SUBSEQUENT EVENTS
On July 27, 2018, e-Learning, the beneficial owner of the Company, agreed to acquire significant majority of the remaining health beauty equipment, “Becker”, at cost from the Company. The Company completed the delivery subsequently on July 31, 2018.
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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 subsidiary School TV Co., Ltd.
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 Laboratory Co., Ltd., 20,000,000 shares of our common stock which represents all of our issued and outstanding shares.
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 represents 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 with the Legal Affairs Bureau in Osaka, Japan.
On April 1, 2016, e-Learning Laboratory Co., Ltd. entered into stock purchase agreements with 7 Japanese shareholders. Pursuant to these agreements, e-Learning Laboratory Co., Ltd. sold 140,000 shares of common stock in total to these individuals and received $270 as aggregate consideration. Each shareholder paid ..215 Japanese Yen per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about .002 USD.
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 Laboratory Co., Ltd. entered into stock purchase agreements with 33 Japanese shareholders. Pursuant to these agreements, e-Learning Laboratory Co., Ltd. sold 3,300 shares of common stock in total to these individuals and received $330 as aggregate consideration. Each shareholder paid 10 Japanese Yen per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about 0.1 USD.
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”), 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 Laboratory Co, Ltd. e-Learning Laboratory Co, Ltd. 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 Corporation issued and outstanding was automatically reclassified and changed into twenty (20) shares fully paid and non-assessable shares of Common Stock of the Corporation, 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 the State of Delaware. The Certificate of Amendment can be found as Exhibit 3.1 to Form 8-K filed November 1, 2016.
Business Information
The Company is a start-up stage company operates through our wholly owned subsidiary, School TV Co., Ltd. (“School TV”), which is engaged in various business activities and industries including:
- The sale and distribution of health related products;
- The promotion of third party consumer goods and services;
- RE/MAX business in Kanagawa, Okinawa and Tokyo.
Our principal executive offices are located at 1-2-38-8F, Esaka-cho, Suita-shi, Osaka 564-0063, Japan. Our phone number is +81-6-6339-4117.
Liquidity and Capital Resources
Our cash balance is $31,839 as of June 30, 2018. Our cash balance is not sufficient to fund our limited levels of operations for any period of time. We have been utilizing and may utilize funds from Tomoo Yoshida, our sole Officer and Director who has informally agreed to advance funds to allow us to pay for filing fees and professional fees. Tomoo Yoshida, however, has no formal commitment, arrangement or legal obligation to advance or loan funds to the company. In order to implement our plan of operations for the next twelve-month period, we require further funding. Being a start-up stage company, we have very limited operating history. After a twelve-month period we may need additional financing but currently do not have any arrangements for such financing.
As of June 30, 2018, the company has a due to the related party of Mr. Tommo Yoshida, our sole Officer and Director, in the amount of $161,847.
As of June 30, 2018, the Company had $90,367 owed to e-Communications Co., Ltd. Tomoo Yoshida, our CEO, is also the CEO of e-Communications Co., Ltd.
As of June 30, 2018, the Company had $225,917 owed to e-Learning Laboratory Co., Ltd., the beneficial owner of the Company.
As of June 30, 2018, the Company had $497,018 owed to Mr. Toshihiro Hirai.
If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash we need, or cease operations entirely.
Inventory
As of June 30, 2018, we have $78,570 in inventory which primarily consists of a health beauty equipment. Any goods that are purchased from our supply of physical inventory are sent out to the purchaser. We are responsible for any shipping and or related costs.
On July 27, 2018, e-Learning, the beneficial owner of the Company, agreed to acquire significant majority of the remaining health beauty equipment, "Becker", at cost from the Company. The Company completed the delivery subsequently on July 31, 2018.
Net Loss
For the three months ended June 30, 2018 and 2017, we have recorded a net loss of $38,702 and $1,901, respectively. For the nine months ended June 30, 2018 and 2017, we have recorded a net loss of $157,022 and $31,376, respectively. The larger net loss we experienced for the three months and nine months ended June 30, 2018 is attributed to the fact that we have increased our level of our operations and thus experienced increased expenses to operate our business.
Going Concern
The accompanying consolidated financial statements are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended June 30, 2018, the Company had generated net loss of $157,022 and negative cash flows from operations of $106,089. As of June 30, 2018, the Company had working deficit of $146,336. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As a first priority, we plan to increase sufficient revenues for necessary working capital from our business. If we cannot generate sufficient revenues, we plan to borrow working capital from the director or parent company.
| 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.
-3-
| 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, 2018, 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, and lack of an audit committee. 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, 2018, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
-4-
PART II-OTHER INFORMATION
| ITEM 1 | LEGAL PROCEEDINGS |
There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.
| 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 |
None.
| 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 | Articles of Incorporation of E&F - translated (2) | |
| 10.1 | Stock Purchase Agreement (2) | |
| 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-Q for the period ended June 30, 2018 (3) | |
| 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 (3) | |
| 99.1 | Resolutions Approving Acquisition (2) | |
| 101.INS | XBRL Instance Document (4) | |
| 101.SCH | XBRL Taxonomy Extension Schema (4) | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase (4) | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase (4) | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase (4) | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase (4) | |
| (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 Form 8-K, as filed with the SEC on March 4, 2016, and incorporated herein by this reference. |
| (3) | Filed herewith. |
| (4) | 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. |
-5-
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: August 20, 2018
-6-
EXHIBIT 31.1
Exceed World, INC.
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Tomoo Yoshida, certify that:
1. I have reviewed this report on Form 10-Q of Exceed World, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The small business owner’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small issuer's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Dated: August 20, 2018
By: /s/ Tomoo Yoshida
Tomoo Yoshida,
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
Exceed World, INC.
OFFICER'S CERTIFICATE PURSUANT TO SECTION 302
I, Tomoo Yoshida, certify that:
1. I have reviewed this report on Form 10-Q of Exceed World, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The small business owner’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small issuer's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Dated: August 20, 2018
By: /s/ Tomoo Yoshida
Tomoo Yoshida,
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
Exceed World, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Exceed World, Inc. (the Company) on Form 10-Q for the nine months ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Tomoo Yoshida, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Tomoo Yoshida and will be retained by Exceed World, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: August 20, 2018
By: /s/ Tomoo Yoshida
Tomoo Yoshida,
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
Exceed World, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Exceed World, Inc. (the Company) on Form 10-Q for the nine months ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Tomoo Yoshida, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to Tomoo Yoshida and will be retained by Exceed World, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: August 20, 2018
By: /s/ Tomoo Yoshida
Tomoo Yoshida,
Chief Financial Officer
(Principal Financial Officer)
Document and Entity Information - USD ($) |
9 Months Ended | |
|---|---|---|
Jun. 30, 2018 |
Aug. 20, 2018 |
|
| Document And Entity Information | ||
| Entity Registrant Name | Exceed World, Inc. | |
| Entity Central Index Key | 0001634293 | |
| Document Type | 10-Q | |
| Document Period End Date | Jun. 30, 2018 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --09-30 | |
| Entity Well Known Seasoned Issuer | No | |
| Entity Voluntary Filers | No | |
| Entity Current Reporting Status | Yes | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Public Float | $ 1,383,600 | |
| Entity Common Stock Shares Outstanding | 20,000,000 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2018 |
BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Sep. 30, 2017 |
|---|---|---|
| StockholdersEquity | ||
| Preferred Stock Par Or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
| Preferred Stock Shares Authorized | 20,000,000 | 20,000,000 |
| Preferred Stock Shares Issued | 0 | 0 |
| Preferred Stock Shares Outstanding | 0 | 0 |
| Common Stock Par Or Stated Value Per Share | $ 0.0001 | $ .0001 |
| Common Stock Shares Authorized | 500,000,000 | 500,000,000 |
| Common Stock Shares Issued | 20,000,000 | 20,000,000 |
| Common Stock Shares Outstanding | 20,000,000 | 20,000,000 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 475 | $ 10,018 | $ 11,633 | $ 23,867 |
| Cost of revenues | 29,990 | 6,506 | 89,021 | 15,449 |
| Gross profit (loss) | (29,515) | 3,512 | (77,388) | 8,418 |
| Selling, general and administrative expenses | 6,984 | 4,933 | 72,685 | 38,848 |
| Total operating expenses | 6,984 | 4,933 | 72,685 | 38,848 |
| Loss from operations | (36,499) | (1,421) | (150,073) | (30,430) |
| Interest expense | 2,203 | 6,949 | ||
| Total other expense | 2,203 | 6,949 | ||
| Loss before tax | (38,702) | (1,421) | (157,022) | (30,430) |
| Income tax expense | 480 | 946 | ||
| Net loss | (38,702) | (1,901) | (157,022) | (31,376) |
| Net loss | (38,702) | (1,901) | (157,022) | (31,376) |
| Other comprehensive income (loss) | ||||
| Foreign Currency Translation Adjustment | 9,287 | 558 | (735) | 3,239 |
| Total comprehensive loss | $ (29,415) | $ (1,343) | $ (157,757) | $ (28,137) |
| Basic and diluted net loss per common share | $ (0.00) | $ (0.00) | $ (0.01) | $ (0.00) |
| Weighted Average Number of Common Shares Outstanding-Basic and Diluted | 20,000,000 | 20,000,000 | 20,000,000 | 53,529,412 |
NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Description of Business | NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION
Exceed World, Inc., formerly known as Brilliant Acquisition, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on November 25, 2014.
As of June 30, 2018, we operate through our wholly owned subsidiary, School TV Co., Ltd. (“School TV”), which is engaged in various business activities and industries including: - The sale and distribution of health related products; - The promotion of third party consumer goods and services; - RE/MAX business in Kanagawa, Okinawa and Tokyo.
The accompanying unaudited consolidated financial statements of Exceed World, Inc. have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine months ended June 30, 2018, have been made. 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, 2017, included in our Form 10-K. |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||
| Accounting Policies [Abstract] | |||||||
| Significant Accounting Policies |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of its wholly-owned subsidiary, School TV. Intercompany transactions are eliminated.
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates and assumptions made by management include 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.
FOREIGN CURRENCY TRANSLATION
The Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is 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 statements of operations.
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 Company 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 statements of shareholders’ equity.
Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:
RECLASSIFICATION
Certain prior year amounts have been classified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. This ASU adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act was signed into law. The amendments are effective upon addition to the FASB Accounting Standards Codification. The Company is currently evaluating the impact of the adoption of this guidance on the Consolidated Financial Statements.
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. ASC 606 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted for periods beginning after December 15, 2016. The Company elected to adopt the new standard effective October 1, 2018.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company elected adopting the standard using the modified retrospective method. The Company has identified its revenue streams and assessed each for the impacts. The Company anticipates the adoption of Topic 606 will not have a material impact in the timing or amount of revenue recognized, including the presentation of revenues in the Company’s consolidated statements of income and comprehensive loss. The Company continues to assess all potential impacts of the standard. |
NOTE 3 - INCOME TAXES |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Equity [Abstract] | |
| Income taxes |
nOTE 3 - INCOME TAXES
The Company conducts its major businesses in Japan and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the local tax authority.
National income tax in Japan is charged at 15% of a company’s assessable profit. The Company’s subsidiary, School TV, was incorporated in Japan and is subject to Japanese national income tax and city income tax at the applicable tax rates on the taxable income as reported in their Japanese statutory accounts in accordance with the relevant enterprises income tax laws applicable to foreign enterprises.
School TV’s operation during the nine months ended June 30, 2018 has resulted a net taxable loss, as such School TV was not subject to income tax for the nine months ended June 30, 2018. The effective income tax rate of School TV is 0%. Deferred tax assets arise from net operating loss carried forward of $132,288 are fully allowed as the Company is not able to estimate future operating results due to limited operating history. The net operating loss carry forward will start to expire in the year 2026.
For the nine months ended June 30, 2017, income tax for School TV is $946. The effective tax rate of School TV is 15%.
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, 2018 and 2017, 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.
United States
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 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’s management is still evaluating the effect of the 2017 Act on the Company. Management may update its judgment of that effect based on its continuing evaluation and on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.
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 comprehensive income and estimated tax payments will be made when required by U.S. law.
One-Time Transition Tax Related to the 2017 Act
The Company estimated the amount of U.S. corporate income tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries of the Company mandated by the 2017 Act. The Company retained an accumulated deficit as of December 31, 2017 and therefore did not recognize any one-time transition tax. The actual impact of the 2017 Act on the Company may differ from management’s estimates, and management may update its judgments based on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.
|
NOTE 4 - GOING CONCERN |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Going Concern | |
| Going Concern |
NOTE 4 - GOING CONCERN
The accompanying consolidated financial statements are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and satisfaction of liabilities in the normal course of business. For the nine months ended June 30, 2018, the Company had generated net loss of $157,022 and negative cash flows from operations of $106,089. As of June 30, 2018, the Company had working deficit of $146,336. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
As a first priority, we plan to increase sufficient revenues for necessary working capital from our business. If we cannot generate sufficient revenues, we plan to borrow working capital from the director or parent company. |
NOTE 5 - RELATED PARTY TRANSACTIONS DISCLOSURE |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
NOTE 5 - RELATED-PARTY TRANSACTIONS
As of June 30, 2018 and September 30, 2017, the Company had $161,847 and $159,243, respectively, owed to Tomoo Yoshida, Chief Executive Officer and Chief Financial Officer of the Company. The advance is due on demand and bears no interest.
As of June 30, 2018 and September 30, 2017, the Company had $90,367 and $0, respectively, owed to e-Communications Co., Ltd. Tomoo Yoshida, our CEO, is also the CEO of e-Communications Co., Ltd. The advance is due on demand and bears no interest. For the nine months ended June 30, 2018 and 2017, the Company borrowed $90,547 and $0, respectively, from e-Communications Co., Ltd..
On May 24, 2017, the Company borrowed JPY25,000,000, or $223,534 from e-Learning Laboratory Co., Ltd., the beneficial owner of the Company (“e-Learning”), primarily for the payment to lease the regional franchise rights of the RE/MAX System. The loan matures on May 24, 2023. On May 29, 2018, e-Learning agreed to decrease the interest rate from 2% to 1% retroactively from the issuance date of the loan, which granted a concession on previous interest accrued at the reduced rate. As a result $2,330 additional paid-in capital was recognized in relation to the concession. The interest expense related to this note payable was $3,203 and $0 during the nine months ended June 30, 2018 and 2017, respectively.
For the nine months ended June 30, 2018, e-Learning Laboratory Co. Ltd. provided 10 square meters of office space and 2 square meters of storage space to the Company free of charge.
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NOTE 6 - LONG-TERM NOTES PAYABLE |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Debt Disclosure [Abstract] | |
| Long Term Notes Payable |
NOTE 6 - LONG-TERM NOTE PAYABLE
On May 22, 2017, the Company entered into a loan agreement to borrow JPY55,000,000, or $492,346 from Mr. Toshihiro Hirai, the CEO of Actcall Inc., the 100% owner of Kidding Co., for the initial payment required upon the execution of the RE/MAX Regional Franchise Agreement entered on July 7, 2017. The loan matures on May 31, 2022 with an interest rate of 1% per annum due on maturity. For the nine months ended June 30, 2018 and 2017, the interest expense related to this note payable was $3,746 and $0, respectively, recorded as long-term accrued interest. |
NOTE 7 - INTANGIBLE ASSETS, NET |
9 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| Intangible Assets, Net |
NOTE 7 - INTANGIBLE ASSETS, NET
The following table presents the detail of intangible assets:
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NOTE 8 - COMMITMENTS |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments |
NOTE 8 – COMMITMENTS
Under the lease of franchise rights, the Company is subjected to the following potential payment commitments: (1) membership fee in the amount of JPY42,000 (approximately $400) per year per sales associate operating under the RE/MAX brokerage office franchised from the Company (“RE/MAX Office”); (2) monthly ongoing fees comprised of monthly fixed fees, in the amount of JPY60,000 (approximately $500) per RE/MAX Office, and monthly percentage fees, in the amount of 3% of the commission the Company charges from the RE/MAX Office; (3) monthly advertising fee of JPY10,000 (approximately $100) per RE/MAX Office; and (4) unconditional monthly fixed technology fee of JPY10,000 (approximately $100) per leased franchise right. The membership fee and monthly fixed fee are subjected to increase in every two years, and the monthly advertising fee is subjected to increase upon request and negotiation.
As of June 30, 2018, the Company granted RE/MAX franchise to one RE/MAX Office and had one sales associate under the franchise. |
NOTE 9 - CONCENTRATIONS |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Risks and Uncertainties [Abstract] | |
| Concentrations |
NOTE 9 – CONCENTRATIONS
Concentration of revenues For the nine months ended June 30, 2018, the Company generated revenues of $11,633, $2,943 and $6,930, accounting for 25% and 60% of the total revenues, were generated from two customers in relation to its RE/MAX business, respectively.
For the nine months ended June 30, 2017, the Company sold health products in the amount of $22,689 to a major customer which accounts for 95.1% of its total revenue. |
NOTE 10 - SUBSEQUENT EVENTS |
9 Months Ended |
|---|---|
Jun. 30, 2018 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
NOTE 10 – SUBSEQUENT EVENTS
On July 27, 2018, e-Learning, the beneficial owner of the Company, agreed to acquire significant majority of the remaining health beauty equipment, “Becker”, at cost from the Company. The Company completed the delivery subsequently on July 31, 2018.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||
| Accounting Policies [Abstract] | |||||||
| Principles of Consolidation |
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of its wholly-owned subsidiary, School TV. Intercompany transactions are eliminated.
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| Use of Estimates |
USE OF ESTIMATES
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates and assumptions made by management include 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.
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| Foreign Currency Translation |
FOREIGN CURRENCY TRANSLATION
The Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is 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 statements of operations.
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement”, assets and liabilities of the Company whose functional currency is not US$ 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 statements of shareholders’ equity.
Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:
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| Reclassification | RECLASSIFICATION
Certain prior year amounts have been classified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position. |
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| Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. This ASU adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act was signed into law. The amendments are effective upon addition to the FASB Accounting Standards Codification. The Company is currently evaluating the impact of the adoption of this guidance on the Consolidated Financial Statements.
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. ASC 606 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted for periods beginning after December 15, 2016. The Company elected to adopt the new standard effective October 1, 2018.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company elected adopting the standard using the modified retrospective method. The Company has identified its revenue streams and assessed each for the impacts. The Company anticipates the adoption of Topic 606 will not have a material impact in the timing or amount of revenue recognized, including the presentation of revenues in the Company’s consolidated statements of income and comprehensive loss. The Company continues to assess all potential impacts of the standard.
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