0001599916-20-000061.txt : 20200521 0001599916-20-000061.hdr.sgml : 20200521 20200521142338 ACCESSION NUMBER: 0001599916-20-000061 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 46 CONFORMED PERIOD OF REPORT: 20191231 FILED AS OF DATE: 20200521 DATE AS OF CHANGE: 20200521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Exceed World, Inc. CENTRAL INDEX KEY: 0001634293 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 981339955 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55377 FILM NUMBER: 20901183 BUSINESS ADDRESS: STREET 1: 1-23-38-6F, ESAKACHO, SUITA-SHI CITY: OSAKA STATE: M0 ZIP: 564-0063 BUSINESS PHONE: 81-6-6339-4177 MAIL ADDRESS: STREET 1: 1-23-38-6F, ESAKACHO, SUITA-SHI CITY: OSAKA STATE: M0 ZIP: 564-0063 FORMER COMPANY: FORMER CONFORMED NAME: Brilliant Acquisition,Inc. DATE OF NAME CHANGE: 20150218 10-Q 1 exceed_10q120.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 DECEMBER 31, 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 May 21, 2020 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 - 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

 

      As of   As of
      December 31, 2019   September 30, 2019
      (Unaudited)    
ASSETS 　 　 　 　
Current Assets        
　 Cash and cash equivalents $ 17,766,257 $ 20,198,362
  Marketable securities   1,364,372   1,156,108
　 Accounts receivable 　 2,738 　 2,344
  Prepaid expenses   776,346   865,274
　 Inventories 　 748,720 　 626,142
  Due from related party   92,073   92,524
　 Short-term loan receivable 　 276,218 　 -
  Other current assets   276,520   453,291
TOTAL CURRENT ASSETS   21,303,244   23,394,045
           
Non-current Assets 　 　 　 　
  Property, plant and equipment, net $ 780,527 $ 792,452
　 Software, net 　 864,408 　 1,051,398
  Operating lease right-of-use assets   565,480   -
　 Other intangible assets, net 　 175,416 　 176,897
  Long-term prepaid expenses   83,531   84,968
　 Deferred tax assets 　 73,223 　 134,936
  Long-term loan receivable from related party   230,995   232,128
　 Insurance funds 　 99,334 　 91,161
TOTAL NON-CURRENT ASSETS   2,872,914   2,563,940
　 　 　 　 　 　
TOTAL ASSETS $ 24,176,158 $ 25,957,985
           
LIABILITIES AND SHAREHOLDERS' EQUITY 　 　 　 　
Current Liabilities        
　 Accounts payable $ 613,587 $ 1,226,111
  Accrued expenses and other payables   363,342   565,506
　 Contingency liability 　 431,185 　 409,428
  Income tax payable   166,643   287,301
　 Deferred income 　 1,326,683 　 3,267,399
  Capital lease obligations, current   26,002   28,683
　 Operating lease liabilities, current 　 360,774 　 -
  Due to related parties   716,581   814,153
　 Due to director 　 741,111 　 741,133
  Other current liabilities   1,001,385   735,926
TOTAL CURRENT LIABILITIES   5,747,293  

 

8,075,640

           
Non-current Liabilities 　 　 　 　
  Capital lease obligations, long-term $ 87,070 $ 98,964
　 Operating lease liabilities, non-current 　 161,469 　 -
TOTAL NON-CURRENT LIABILITIES   248,539  

 

98,964

　 　 　 　 　 　
TOTAL LIABILITIES $ 5,995,832 $ 8,174,604
　 　 　 　 　 　
Shareholders' Equity        
　 Preferred stock ($0.0001 par value, 20,000,000 shares authorized; 　 　 　 　
　 none issued and outstanding as of December 31, 2019 and September 30, 2019) $ - $ -
  Common stock ($0.0001 par value, 500,000,000 shares authorized,        
  32,700,000 shares issued and outstanding as of December 31, 2019 and September 30, 2019)   3,270   3,270
　 Additional paid-in capital 　 261,516 　 261,516
  Accumulated earnings   17,254,035   16,764,282
　 Accumulated other comprehensive income 　 661,505 　 754,313
TOTAL SHAREHOLDERS' EQUITY $ 18,180,326 $ 17,783,381
　 　 　 　 　 　
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 24,176,158 $ 25,957,985
           
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

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EXCEED WORLD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

           
      Three Months Ended   Three Months Ended
      December 31, 2019   December 31, 2018
          (Restated)
Revenues $                                         5,832,608 $                                         7,892,164
Cost of revenues                                           2,819,884                                           4,494,705
Gross profit 　                                         3,012,724 　                                         3,397,459
           
OPERATING EXPENSE 　 　 　 　
  Selling and distribution expenses                                              198,825                                              214,513
　 Administrative expenses 　                                         2,289,472 　                                         3,150,123
Total operating expenses                                           2,488,297                                           3,364,636
　 　 　 　 　 　
Income from operations                                              524,427                                                32,823
　 　 　 　 　 　
Other income (expense)        
　 Other income 　                                                3,395 　                                              26,258
  Other expenses                                                        (23,734)                                               (56,688)
　 Change in fair value of marketable securities 　                                            213,709 　                                           (292,716)
  Interest expenses                                                    (556)                                                          -
Total other income (expense) 　                                            192,814 　                                           (323,146)
           
Net income (loss) before tax 　                                            717,241 　                                           (290,323)
Income tax expense                                              227,488                                                66,499
NET INCOME (LOSS) $                                            489,753 $                                           (356,822)
           
OTHER COMPREHENSIVE INCOME (LOSS) 　 　 　 　
  Foreign currency translation adjustment                                               (92,808)                                              678,844
　 　 　 　 　 　
TOTAL COMPREHENSIVE INCOME $                                            396,945 $                                            322,022
　 　 　 　 　 　
Income (loss) per common share        
　 Basic $                                                  0.01 $                                                 (0.01)
  Diluted                                                    0.01                                                   (0.01)
　 　 　 　 　 　
Weighted average common shares outstanding        
　 Basic 　                                       32,700,000 　                                       32,700,000
  Diluted                                         32,700,000                                         32,700,000
           
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

(Unaudited)

 

                       
          Additional   Other   Retained    
  Common Stock   Paid in   Comprehensive   Earnings    
  Number 　 Amount 　 Capital 　 Income 　 　 　 Total
                       
Balance – September 30, 2018 (Restated) 32,700,000 $ 3,270 $ 99,440 $ (171,988) $ 16,896,299 $ 16,827,021
                       
Disposal of subsidiary - 　 - 　 162,076 　 - 　 - 　 162,076
                       
Net loss (Restated) - 　 - 　 - 　 - 　 (356,822) 　 (356,822)
                       
Foreign currency translation (Restated) - 　 - 　 - 　 678,844  　 - 　 678,844
                       
Balance – December 31, 2018 (Restated) 32,700,000 $ 3,270 $ 261,516 $ 506,856 $ 16,539,477 $ 17,311,119
                       
Balance – September 30, 2019 32,700,000 $ 3,270 $ 261,516 $ 754,313 $ 16,764,282 $ 17,783,381
                       
Net income - 　 - 　 - 　 - 　 489,753 　 489,753
                       
Foreign currency translation - 　 - 　 - 　 (92,808) 　 - 　 (92,808)
                       
Balance – December 31, 2019 32,700,000 $ 3,270 $ 261,516 $ 661,505 $ 17,254,035 $ 18,180,326
                       
                       
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)

 

      Three Months Ended   Three Months Ended
      December 31, 2019   December 31, 2018
          (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES 　 　 　 　
  Net income (loss) $ 489,753 $  (356,822)
　 Adjustments to reconcile net income (loss) to net cash used in operating activities: 　 　 　 　
  Depreciation and amortization   193,122   259,300
　 Change in fair value of marketable securities 　  (213,709) 　 349,404
  Loss on company owned life insurance policies   61,582   -
　 Noncash lease expense 　 126,804 　 -
  Deferred tax asset   60,998   -
           
　 Changes in operating assets and liabilities: 　 　 　 　
  Accounts receivable    (404)   314
　 Income tax recoverable 　 - 　 207,272
  Prepaid expense   41,436                                 (86,426)
　 Inventories 　  (125,518) 　  (503,364)
  Other current assets   174,399    (67,143)
　 Long-term prepaid expenses 　 1,026 　 -
　 Accounts payable 　  (605,983) 　  (3,034,971)
  Accrued expenses and other payables    (191,070)   197,914
　 Deposit receipts 　 - 　 246
  Income tax payable    (119,145)   -
　 Deferred income 　  (1,149,182) 　  (3,775,219)
  Operating lease liabilities    (126,804)   -
  Other current liabilities    (481,024)    (455,378)
　 Net cash used in operating activities 　  (1,863,719) 　  (7,264,873)
           
CASH FLOWS FROM INVESTING ACTIVITIES 　 　 　 　
  Loan made to third party    (275,964)   -
　 Purchase of property, plant and equipment 　  (2,760) 　 -
  Purchase of company-owned life insurance policies    (70,191)   -
　 Disposal of a subsidiary 　 - 　  (79,876)
  Proceeds from sale of securities   -   87,636
　 Net cash provided by (used in) investing activities 　  (348,915) 　 7,760
      　   　
CASH FLOWS FROM FINANCING ACTIVITIES 　 　 　 　
  Repayment of capital lease obligation    (13,938)   -
  Repayment to related party   (105,209)    (7,686)
　 Net cash used in financing activities 　  (119,147) 　 (7,686)
           
Net effect of exchange rate changes on cash 　  (100,324) 　 925,802
      　   　
Net change in cash and cash equivalents 　 　 　 　
Cash and cash equivalents - beginning of period   20,198,362   22,737,755
Net increase (decrease) in cash 　  (2,432,105) 　 (6,338,997)
Cash and cash equivalents - end of period $ 17,766,257 $ 16,398,758
　 　 　 　 　 　
NON-CASH INVESTING AND FINANCING TRANSACTIONS        
　 Operating expense paid by related parties on behalf of the Company $　 8,900 $　 205,401
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 　 　 　 　
Interest paid $ - $ -
Income taxes paid $ 285,636 $ -
           
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 DECEMBER 31, 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 $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.

 

On December 6, 2018, the Company entered into a share contribution 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 Company's consolidated financial statements.

 

As of December 31, 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, 2019, included in our Form 10-K.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION 

 

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

 

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, sales allowance, useful lives and impairment of long-lived assets, and legal contingencies. 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.

 

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. Shareholders’ equity is translated at historical exchange rate at the time of transaction. 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:

 

  December 31, 2019   December 31, 2018
Current JPY: US$1 exchange rate 108.61   109.56
Average JPY: US$1 exchange rate 108.71   112.77
       
Current HK$: US$1 exchange rate 7.80   7.83
Average HK$: US$1 exchange rate 7.80   7.83

 

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.

 

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 three months ended December 31, 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 December 31, 2019 and September 30, 2019, the Company's deferred income was $1,326,683 and $3,267,399, respectively. During the three months ended December 31, 2019, the Company recognized $3,267,399 of deferred income in the opening balance.

 

The Company does not have any contract asset.

  

RECENT ACCOUNTING PRONOUNCEMENTS

 

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 was effective for the Company beginning October 1, 2019, with early adoption permitted. The Company adopted the standard on October 1, 2019 on a modified retrospective basis and will not restate comparable periods. The Company elected 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 also elected 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 primary impact of applying ASC Topic 842 is the initial recognition of approximately $652,000 of lease liabilities and corresponding right-of-use assets of approximately $696,000 on the Company’s consolidated balance sheet as of October 1, 2019, for leases classified as operating leases under ASC Topic 840, as well as enhanced disclosure of the Company’s leasing arrangements. There is no cumulative effect to retained earnings or other components of equity recognized as of October 1, 2019 and the adoption of this standard did not impact the consolidated statement of operations and comprehensive income or consolidated statement of cash flows of the Company.

 

On December 18, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation; (ii) the exception to accounting for basis differences when there are ownership changes in foreign investments; and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of entities not subject to tax; and (iv) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its consolidated financial statements and related disclosures.

 

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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 December 31, 2019 and September 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)		   Total Balance
Marketable Securities:                
Publicly held equity securities                
As of December 31, 2019 $ 1,364,372   -   -   1,364,372
As of September 30, 2019 $ 1,156,108   -   -   1,156,108

 

NOTE 4 - INCOME TAXES

 

For the three months ended December 31, 2019 and 2018, the Company incurred income tax expenses in the amount of $227,488 and $66,499, respectively. Effective tax rate was 31.72% and (22.91%) for the three months ended December 31, 2019 and 2018, respectively.

 

Japan

 

The Company conducts its major businesses in Japan and e-Learning and e-Communications (“Japanese Subsidiaries”) are subject to tax in this jurisdiction. As a result of its business activities, Japanese Subsidiaries file tax returns that are subject to examination by the local tax authority.

 

Japanese Subsidiaries are subject to a number of income taxes, which, in aggregate, represent a statutory tax rate approximately as follows:

 

    Company’s assessable profit
For the period ended December 31, 　 Up to JPY 4 million 　 Up to JPY 8 million 　 Over JPY 8 million
2019 　 21.42% 　 23.20% 　 33.80%
2020 　 21.42% 　 23.20% 　 33.80%

 

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 has not generated any estimated assessable profits in Hong Kong from its inception.

 

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 three months ended December 31, 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.

 

NOTE 5 - RELATED-PARTY TRANSACTIONS

 

As of December 31, 2019 and September 30, 2019, the Company’s due to related parties and directors are as follows:

 

    December 31, 2019   September 30, 2019
Due to director 　 　 　 　
Tomoo Yoshida, CEO, CFO, sole director and a shareholder of the Company $ 741,111 $ 741,133
Total due to director $ 741,111 $ 741,133
         
Due to related parties 　 　 　 　
Keiichi Koga, a shareholder of the Company and a director of certain subsidiaries of the Company $ 47,635 $ 47,635
Force Internationale, the Company’s majority shareholder. Tomoo Yoshida is a director of Force Internationale 　 536,655 　 633,578
School TV Co., Ltd., a wholly-owned subsidiary of Force Internationale   132,291   132,940
Total due to related parties $ 716,581 $ 814,153

 

The payable balances are unsecured, due on demand, and bear no interest. From time to time, these related parties have advanced to the Company or paid expenses on behalf of the Company, and the Company has also made repayments.

 

Tomoo Yoshida provided guarantee for the Company’s office leases during the three months ended December 31, 2019 and 2018.

 

Due from related parties

 

As of December 31, 2019 and September 30, 2019, the Company had a long-term loan of $230,995 and $232,128, respectively, due from School TV. The loan is unsecured, bears a 1% per annum interest, and is due on May 24, 2023.

 

As of December 31, 2019 and September 30, 2019, the Company had a short-term loan of $92,073 and $92,524, respectively, due from School TV included in due from related party. The loan is unsecured, due on demand, and bears a 1% interest per annum.

 

NOTE 6 – SHORT-TERM LOAN RECEIVABLE

 

On November 15, 2019, the Company entered into a loan agreement to lend JPY30,000,000 (approximately $276,000) to a third party, CAI Media Co., Ltd (“CAI”). The loan is secured by common shares of CAI. The loan charges an annual interest rate of 2% and matures on May 14, 2020.

 

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

  

    December 31, 2019   September 30, 2019
Building $ 299,587  $ 243,840
Leasehold improvement   -   57,217
Equipment   1,082,586   1,086,546
Vehicles   63,646   68,930
    1,445,819   1,456,533
         
Accumulated depreciation    (665,292)    (664,081)
         
Total net book value $ 780,527  $ 792,452

 

The aggregate depreciation expense of property, plant and equipment was $10,727 and $17,536 for the three months ended December 31, 2019 and 2018, respectively.

 

NOTE 8 – SOFTWARE

 

The book value of the Company’s software as of December 31, 2019 and September 30, 2019 was as follows:

 

    December 31, 2019   September 30, 2019
Software $ 3,898,802 $ 3,917,921
Accumulated amortization   (3,034,394)   (2,866,523)
    864,408   1,051,398

 

The aggregate amortization expense related to the software was $181,693 and $193,478 for the three months ended December 31, 2019 and 2018, respectively, included in cost of revenues.  

 

NOTE 9 – COMMITMENTS

 

As of December 31, 2019, the Company has three capital leases of equipment and vehicle with a gross value of $85,797 and $63,646, respectively, included in property, plant and equipment.

 

The Company also leases its offices under operating lease, and the rental expense is $129,590 for the three months ended December 31, 2019. Cash paid for amounts included in the measurement of operating lease liabilities is $129,590. The weighted-average remaining lease term for these leases is 1.68 years and the weighted-average discount rate is 1.84%.

 

The future minimum lease payments as of December 31, 2019 are as follows:

 

Year ending September 30   Capital lease   Operating lease
2020 (remaining) $                                                  20,924  $                                                 301,176
2021                                                     27,898                                                    161,377
2022 　                                                   39,154 　                                                    67,942
2023                                                     18,004                                                               -
2024 　                                                   10,503 　                                                             -
Thereafter    -                                                               -
Total $                                                116,483   $                                                    530,495
Less imputed interest                                                     (3,411)                                                                (8,252)
Total capital lease obligation 　                                                113,072 　 522,243
Less current portion                                                  (26,002)       (360,774)
Long-term lease obligation $                                                 87,070 $ 161,469

 

 

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. 

 

For the three months ended December 31, 2019, the Company did not settle any legal cases. From December 31, 2019 to the filing date, the Company has settled one case related to the cancellation of contracts with the amount of approximately JPY2.7 million (approximately $25,000), which has already been recorded in the net loss for the year ended September 30, 2019. As of the filing date, the Company had 25 pending legal cases, claiming a damage of approximately JPY165.7 million (approximately $1.5 million) under the same nature. Our legal counsel estimated a probable settlement of 24 of these cases with total settlement amount of approximately JPY44.1 million (approximately $406,000) with one pending legal case unable to estimate the likelihood of the loss with original claim of approximately JPY25.1million ($231,000). The Company has contingency liability in the amount of $431,185 and $409,428 as of December 31, 2019 and September 30, 2019, respectively. The change in the estimate was recorded in earnings during the three months ended December 31, 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 with e-Learning Laboratory Co., Ltd., a Japan corporation (“e-Learning”). Pursuant to the Agreement, Mr. DeNunzio transferred to e-Learning, 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. Also, 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 entered into stock purchase agreements with 7 Japanese individuals. 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 paid JPY0.215 per share. At the time of purchase the price paid per share by each was the equivalent of about $0.002. This 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 individuals. 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 paid JPY10 per share. At the time of purchase the price paid per share by each shareholder was the equivalent to 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, 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. e-Learning consented to 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.

 

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.

 

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, Force Internationale Limited, a Cayman Island limited company (“Force Internationale”) entered into a Share Purchase Agreement with its wholly-owned subsidiary, e-Learning and 74.5% owner of the Company. Under this Share Purchase Agreement, e-Learning transferred its 74.5% interest in the Company to Force Internationale. As consideration for this transfer, Force Internationale paid $26,000.00 to e-Learning. Immediately subsequent, the Company entered into a Share Purchase Agreement with Force Internationale, to acquire 100% of Force Holdings and 100% direct owner of e-Learning. In consideration of this agreement, the Company issued 12,700,000 common shares to Force Internationale. The result of these transaction is that Force Internationale is a 84.4% owner of the Company, the Company is a 100% owner of Force Holdings, and Force Holdings is a 100% owner of e-Learning. Prior to the Share Purchase Agreements, Force Internationale was an indirect owner of 74.5% of the Company and subsequent to the Share Purchase Agreements, Force Internationale is a direct owner of 84.4% of the Company. The Share Purchase Agreements were approved by the boards of directors of each of the Company, Force Internationale, Force Holdings, and e-Learning.

 

On December 6, 2018, the Company entered into a share contribution agreement (the “Contribution 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 Contribution 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 Company's consolidated financial statements.

 

Business Information

 

As of December 31, 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 December 31, 2019 and September 30, 2019, we had cash and cash equivalents in the amount of 17,766,257 and $20,198,362, respectively. The decrease in cash is attributed to decrease of deferred income and accounts 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 $5,832,608 for the three months ended December 31, 2019 as opposed to $7,892,164 for the three months ended December 31, 2018. The decrease in revenue, in our opinion, is attributed to a decrease in recruitment activities of premium force club members.

 

Net Income

 

We recorded net income of $489,753 for the three months ended December 31, 2019 and net loss of $356,822 for the three months ended December 31, 2018. The increase in net income is attributed to a decrease in operating expenses and increase of other income from 2018 to 2019.

 

Cash flow

 

For the three months ended December 31, 2019, we had negative cash flows from operations in the amount of $1,863,719. For the three months ended December 31, 2018, we had negative cash flows from operations in the amount of $7,264,873. The increase in operating cash flow, in our opinion, is attributed to increases in net income, accounts payable and deferred income.

 

Working capital

 

As of December 31, 2019 and September 30, 2019, we had working capital of $15,555,951 and $15,318,405, respectively. The increase in working capital, in our opinion, is attributed to decreases in accounts payable and deferred income.

 

Advertising

 

Advertising costs are expensed as incurred and included in selling and distributions expenses. Advertising expenses were $198,825 and $214,513 for the three months ended December 31, 2019 and 2018, 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, the Company intends to focus on expanding its sales network in order to strengthen its business activities. Currently, revenue is derived primarily from sales of the Company’s Force Club premium package. While it is the intention of the Company to maintain this revenue stream, and to further increase the number of premium users of the Force Club, the Company also intends to diversify its operations and develop additional business activities.

 

In order to do so, the Company 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.

 

Impact of COVID-19

 

For the three months ended December 31, 2019, we recorded negative growth compared to the same period of the last year. The slowdown in sales was mainly due to a hike in sales tax rate in Japan since October 2019. Despite revenue decreased, as a result of the Company’s cost cutting efforts, operating income and net income increased for the three months ended December 31, 2019.

 

However, since the beginning of 2020, the coronavirus disease (“Covid-19”) which first broke out in China, has spread to most countries across the globe including Japan. In April 2020, Japan declared a state of emergency to curb the spread of Covid-19. The economy rapidly declined due to limited economic activity caused by the outbreak of Covid-19. In response to the COVID-19 pandemic and the government’s request for self-restraint, the Company implemented some measures to prevent infection including shortening business hours and restricting movements of employees. Our Force Club Members’ activities, which is our main sales resources, have also been limited due to travel restrictions and social distance rules implemented nationwide and globally. Under such situation, it is expected that the operating results for 2020 will be adversely affected.

 

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 December 31, 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 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 ended December 31, 2019, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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Table of Contents

PART II-OTHER INFORMATION

 

ITEM 1 LEGAL PROCEEDINGS

For the three months ended December 31, 2019, the Company did not settle any legal cases. From December 31, 2019 to the filing date, the Company has settled one case related to the cancellation of contracts with the amount of approximately JPY2.7 million (approximately $25,000), which has already been recorded in the net loss for the year ended September 30, 2019. As of the filing date, the Company had 25 pending legal cases, claiming a damage of approximately JPY165.7 million (approximately $1.5 million) under the same nature. Our legal counsel estimated a probable settlement of 24 of these cases with total settlement amount of approximately JPY44.1 million (approximately $406,000) with one pending legal case unable to estimate the likelihood of the loss with original claim of approximately JPY25.1million ($231,000). The Company has contingency liability in an amount of $431,185 and $409,428 as of December 31, 2019 and September 30, 2019, respectively. The change in the estimate was recorded in earnings during the three months ended December 31, 2019.

 

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 an 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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Table of Contents

 

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: May 21, 2020 

 

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 EX-31 2 ex31.htm EX-31

 

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: May 21, 2020

 

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: May 21, 2020

 

By: /s/ Tomoo Yoshida

Tomoo Yoshida,

Chief Financial Officer

(Principal Financial Officer)

 

 EX-32 3 ex32.htm EX-32

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 quarter ended December 31, 2019 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: May 21, 2020

 

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 quarter ended December 31, 2019 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: May 21, 2020

 

By: /s/ Tomoo Yoshida

Tomoo Yoshida,

Chief Financial Officer

(Principal Financial Officer)

 

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The Company also elected 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The primary impact of applying ASC Topic 842 is the initial recognition of approximately $652,000 of lease liabilities and corresponding right-of-use assets of approximately $696,000 on the Company&#8217;s consolidated balance sheet as of October 1, 2019, for leases classified as operating leases under ASC Topic 840, as well as enhanced disclosure of the Company&#8217;s leasing arrangements. There is no cumulative effect to retained earnings or other components of equity recognized as of October 1, 2019 and the adoption of this standard did not impact the consolidated statement of operations and comprehensive income or consolidated statement of cash flows of the Company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 18, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (&#8220;ASU 2019-12&#8221;) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation; (ii) the exception to accounting for basis differences when there are ownership changes in foreign investments; and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of entities not subject to tax; and (iv) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. 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INCOME TAXES - JAPAN (Tables)
 3 Months Ended
Dec. 31, 2019
Income Taxes - Japan  
Income Taxes Japan

Japanese Subsidiaries are subject to a number of income taxes, which, in aggregate, represent a statutory tax rate approximately as follows:

 

    Company’s assessable profit
For the period ended December 31, 　 Up to JPY 4 million 　 Up to JPY 8 million 　 Over JPY 8 million
2019 　 21.42% 　 23.20% 　 33.80%
2020 　 21.42% 　 23.20% 　 33.80%

 
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COMMITMENTS (Tables)
 3 Months Ended
Dec. 31, 2019
Commitments Tables Abstract  
Commitments

The future minimum lease payments as of December 31, 2019 are as follows:

 

Year ending September 30   Capital lease   Operating lease
2020 (remaining) $                                                  20,924  $                                                 301,176
2021                                                     27,898                                                    161,377
2022 　                                                   39,154 　                                                    67,942
2023                                                     18,004                                                               -
2024 　                                                   10,503 　                                                             -
Thereafter    -                                                               -
Total $                                                116,483   $                                                    530,495
Less imputed interest                                                     (3,411)                                                                (8,252)
Total capital lease obligation 　                                                113,072 　 522,243
Less current portion                                                  (26,002)       (360,774)
Long-term lease obligation $                                                 87,070 $ 161,469

 

 
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - USD ($)
 3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]    
Revenues $ 5,832,608 $ 7,892,164
Cost of revenues 2,819,884 4,494,705
Gross profit 3,012,724 3,397,459
Operating Expense    
Selling and distributions expenses 198,825 214,513
Administrative expenses 2,289,472 3,150,123
Total operating expenses 2,488,297 3,364,636
Income from operations 524,427 32,823
Other income (expense)    
Other income 3,395 26,258
Other expenses (23,734) (56,688)
Change in fair value of marketable securities 213,709 (292,716)
Interest expenses (556)
Total Other Income (expense) 192,814 (323,146)
Net income (loss) before tax 717,241 (290,323)
Income tax expense 227,488 66,499
Net Income (Loss) 489,753 (356,822)
Other comprehensive income (loss)    
Foreign currency translation adjustment (92,808) 678,844
TOTAL COMPREHENSIVE INCOME $ 396,945 $ 322,022
Income (loss) per common share - Basic $ 0.01 $ (0.01)
Income (loss) per common share - Diluted $ 0.01 $ (0.01)
Weighted average common shares outstanding - Basic 32,700,000 32,700,000
Weighted average common shares outstanding - Diluted 32,700,000 32,700,000
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
 3 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION 

 

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

 

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, sales allowance, useful lives and impairment of long-lived assets, and legal contingencies. 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.

 

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. Shareholders’ equity is translated at historical exchange rate at the time of transaction. 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:

 

  December 31, 2019   December 31, 2018
Current JPY: US$1 exchange rate 108.61   109.56
Average JPY: US$1 exchange rate 108.71   112.77
       
Current HK$: US$1 exchange rate 7.80   7.83
Average HK$: US$1 exchange rate 7.80   7.83

 

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.

 

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 three months ended December 31, 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 December 31, 2019 and September 30, 2019, the Company's deferred income was $1,326,683 and $3,267,399, respectively. During the three months ended December 31, 2019, the Company recognized $3,267,399 of deferred income in the opening balance.

 

The Company does not have any contract asset.

  

RECENT ACCOUNTING PRONOUNCEMENTS

 

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 was effective for the Company beginning October 1, 2019, with early adoption permitted. The Company adopted the standard on October 1, 2019 on a modified retrospective basis and will not restate comparable periods. The Company elected 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 also elected 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 primary impact of applying ASC Topic 842 is the initial recognition of approximately $652,000 of lease liabilities and corresponding right-of-use assets of approximately $696,000 on the Company’s consolidated balance sheet as of October 1, 2019, for leases classified as operating leases under ASC Topic 840, as well as enhanced disclosure of the Company’s leasing arrangements. There is no cumulative effect to retained earnings or other components of equity recognized as of October 1, 2019 and the adoption of this standard did not impact the consolidated statement of operations and comprehensive income or consolidated statement of cash flows of the Company.

 

On December 18, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation; (ii) the exception to accounting for basis differences when there are ownership changes in foreign investments; and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of entities not subject to tax; and (iv) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its consolidated financial statements and related disclosures.
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SHORT TERM LOAN RECEIVALBE (Details)
Nov. 15, 2019
USD ($)
Short Term Loan Receivalbe  
Loan made to CAI Media Co., Ltd (loan charges an annual interest rate of two percent) $ 276,000
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M<>XF]B ?6H6&1N?W2CH72=+N//^,KG_(&UL4$L! A0#% @ \G*U4+DXW(H= M#0 OW4 !$ ( !T%D &5X9''-D4$L! M A0#% @ \G*U4 P/[J >" 0S8 !4 ( !'&< &5X M9'&1W+3(P,3DQ,C,Q7V1E9BYX;6Q02P$" M% ,4 " #R0 97AD M=RTR,#$Y,3(S,5]L86(N>&UL4$L! A0#% @ \G*U4% 9U;H7'@ ,)\! M !4 ( !;Z8 &5X9' XML 19 R12.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 6 - SHORT-TERM LOAN RECEIVABLE
 3 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Short Term Loan Receivable

NOTE 6 – SHORT-TERM LOAN RECEIVABLE

 

On November 15, 2019, the Company entered into a loan agreement to lend JPY30,000,000 (approximately $276,000) to a third party, CAI Media Co., Ltd (“CAI”). The loan is secured by common shares of CAI. The loan charges an annual interest rate of 2% and matures on May 14, 2020.
XML 20 R16.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 10 - CONTINGENCIES
 3 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Contingencies

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. 

 

For the three months ended December 31, 2019, the Company did not settle any legal cases. From December 31, 2019 to the filing date, the Company has settled one case related to the cancellation of contracts with the amount of approximately JPY2.7 million (approximately $25,000), which has already been recorded in the net loss for the year ended September 30, 2019. As of the filing date, the Company had 25 pending legal cases, claiming a damage of approximately JPY165.7 million (approximately $1.5 million) under the same nature. Our legal counsel estimated a probable settlement of 24 of these cases with total settlement amount of approximately JPY44.1 million (approximately $406,000) with one pending legal case unable to estimate the likelihood of the loss with original claim of approximately JPY25.1million ($231,000). The Company has contingency liability in the amount of $431,185 and $409,428 as of December 31, 2019 and September 30, 2019, respectively. The change in the estimate was recorded in earnings during the three months ended December 31, 2019.
XML 21 R31.htm IDEA: XBRL DOCUMENT v3.20.1
COMMITMENTS (Details)
 3 Months Ended
Dec. 31, 2019
USD ($)
Commitments Details Abstract  
Lease of Offices $ 129,590
Capital leases of equipment (gross value) 85,797
Capital lease of vehicle (gross value) $ 63,646
XML 22 R13.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
 3 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property, Plant, and Equipment

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

  

    December 31, 2019   September 30, 2019
Building $ 299,587  $ 243,840
Leasehold improvement   -   57,217
Equipment   1,082,586   1,086,546
Vehicles   63,646   68,930
    1,445,819   1,456,533
         
Accumulated depreciation    (665,292)    (664,081)
         
Total net book value $ 780,527  $ 792,452

 

The aggregate depreciation expense of property, plant and equipment was $10,727 and $17,536 for the three months ended December 31, 2019 and 2018, respectively.

 
XML 23 R17.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 3 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Principles of Consolidation

PRINCIPLES OF CONSOLIDATION 

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. Inter-company accounts and transactions have been eliminated.
Reclassifications

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

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, sales allowance, useful lives and impairment of long-lived assets, and legal contingencies. Operating results in the future could vary from the amounts derived from management's estimates and assumptions.
Related Party Transaction

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.
Foreign Currency Translation

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. Shareholders’ equity is translated at historical exchange rate at the time of transaction. 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:

 

  December 31, 2019   December 31, 2018
Current JPY: US$1 exchange rate 108.61   109.56
Average JPY: US$1 exchange rate 108.71   112.77
       
Current HK$: US$1 exchange rate 7.80   7.83
Average HK$: US$1 exchange rate 7.80   7.83

 
Revenue Recognition

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.

 

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 three months ended December 31, 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 December 31, 2019 and September 30, 2019, the Company's deferred income was $1,326,683 and $3,267,399, respectively. During the three months ended December 31, 2019, the Company recognized $3,267,399 of deferred income in the opening balance.

 

The Company does not have any contract asset.
Recently Issued Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

 

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 was effective for the Company beginning October 1, 2019, with early adoption permitted. The Company adopted the standard on October 1, 2019 on a modified retrospective basis and will not restate comparable periods. The Company elected 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 also elected 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 primary impact of applying ASC Topic 842 is the initial recognition of approximately $652,000 of lease liabilities and corresponding right-of-use assets of approximately $696,000 on the Company’s consolidated balance sheet as of October 1, 2019, for leases classified as operating leases under ASC Topic 840, as well as enhanced disclosure of the Company’s leasing arrangements. There is no cumulative effect to retained earnings or other components of equity recognized as of October 1, 2019 and the adoption of this standard did not impact the consolidated statement of operations and comprehensive income or consolidated statement of cash flows of the Company.

 

On December 18, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards. ASU 2019-12 removes certain exceptions from Topic 740, Income Taxes, including (i) the exception to the incremental approach for intra period tax allocation; (ii) the exception to accounting for basis differences when there are ownership changes in foreign investments; and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also simplifies GAAP in several other areas of Topic 740 such as (i) franchise taxes and other taxes partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of entities not subject to tax; and (iv) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual reporting periods and interim periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its consolidated financial statements and related disclosures.
XML 24 R30.htm IDEA: XBRL DOCUMENT v3.20.1
AMORTIZATION EXPENSE (Details) - USD ($)
 3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Amortization Expense    
Aggregate amortization expense related to software $ 181,693 $ 193,478
XML 25 R9.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 3 - FAIR VALUE MEASUREMENT
 3 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement

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 December 31, 2019 and September 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)		   Total Balance
Marketable Securities:                
Publicly held equity securities                
As of December 31, 2019 $ 1,364,372   -   -   1,364,372
As of September 30, 2019 $ 1,156,108   -   -   1,156,108

 
XML 26 R29.htm IDEA: XBRL DOCUMENT v3.20.1
DEPRECIATION OF PROPERTY, PLANT, EQUIPMENT (Details) - USD ($)
 3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Depreciation Of Property Plant Equipment    
Aggregate Depreciation Expense $ 10,727 $ 17,536
XML 27 R1.htm IDEA: XBRL DOCUMENT v3.20.1
Document and Entity Information - shares
 3 Months Ended
Dec. 31, 2019
May 21, 2020
Document And Entity Information    
Entity Registrant Name Exceed World, Inc.  
Entity Central Index Key 0001634293  
Document Type 10-Q  
Document Period End Date Dec. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Smaller Reporting Company true  
Entity Emerging Growth Company true  
Entity Current Reporting Status No  
Entity Well Known Seasoned Issuer No  
Entity Voluntary Filer No  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock Shares Outstanding   32,700,000
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
Transition Period false  
Entity Shell Company false  
Interactive Data Current No  
State of Incorporation DE  
Entity File Number 000-55377  
XML 28 R21.htm IDEA: XBRL DOCUMENT v3.20.1
RELATED PARTY TRANSACTIONS (Tables)
 3 Months Ended
Dec. 31, 2019
Related Party Transactions Tables Abstract  
Related Party Transactions

As of December 31, 2019 and September 30, 2019, the Company’s due to related parties and directors are as follows:

 

    December 31, 2019   September 30, 2019
Due to director 　 　 　 　
Tomoo Yoshida, CEO, CFO, sole director and a shareholder of the Company $ 741,111 $ 741,133
Total due to director $ 741,111 $ 741,133
         
Due to related parties 　 　 　 　
Keiichi Koga, a shareholder of the Company and a director of certain subsidiaries of the Company $ 47,635 $ 47,635
Force Internationale, the Company’s majority shareholder. Tomoo Yoshida is a director of Force Internationale 　 536,655 　 633,578
School TV Co., Ltd., a wholly-owned subsidiary of Force Internationale   132,291   132,940
Total due to related parties $ 716,581 $ 814,153

 

The payable balances are unsecured, due on demand, and bear no interest. From time to time, these related parties have advanced to the Company or paid expenses on behalf of the Company, and the Company has also made repayments.
XML 29 R25.htm IDEA: XBRL DOCUMENT v3.20.1
DEFERRED INCOME (Details) - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Deferred Income    
Deferred Income $ 1,326,683 $ 3,267,399
XML 30 R5.htm IDEA: XBRL DOCUMENT v3.20.1
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Unaudited) - USD ($)
Common Stock
Additional Paid-In Capital
Other Comprehensive Income
Retained Earnings
Total
Beginning Balance (Value) at Sep. 30, 2018 $ 3,270 $ 99,440 $ (171,988) $ 16,896,299 $ 16,827,021
Beginning Balance (Shares) at Sep. 30, 2018 32,700,000        
Disposal of subsidiary 162,076 162,076
Net Income (loss) (356,822) (356,822)
Foreign currency translation 678,844 678,844
Ending Balance (Value) at Dec. 31, 2018 $ 3,270 261,516 506,856 16,539,477 17,311,119
Ending Balance (Shares) at Dec. 31, 2018 32,700,000        
Beginning Balance (Value) at Sep. 30, 2019 $ 3,270 261,516 754,313 16,764,282 17,783,381
Beginning Balance (Shares) at Sep. 30, 2019 32,700,000        
Net Income (loss) 489,753 489,753
Foreign currency translation (92,808) (92,808)
Ending Balance (Value) at Dec. 31, 2019 $ 3,270 $ 261,516 $ 661,505 $ 17,254,035 $ 18,180,326
Ending Balance (Shares) at Dec. 31, 2019 32,700,000        
XML 31 R32.htm IDEA: XBRL DOCUMENT v3.20.1
LEGAL CLAIMS (Details) - USD ($)
 5 Months Ended
May 21, 2020
Dec. 31, 2019
Sep. 30, 2019
Pending Legal Claims      
Legal Settlements (dollar value) related to cancellation of contracts $ 25,000    
Pending Legal Claims which may be settled at lesser amounts (Approximate Value of Claims As of May 21, 2020) $ 1,500,000    
Contingency Liability   $ 431,185 $ 409,428
XML 32 R11.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 5 - RELATED PARTY TRANSACTIONS
 3 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 5 - RELATED-PARTY TRANSACTIONS

 

As of December 31, 2019 and September 30, 2019, the Company’s due to related parties and directors are as follows:

 

    December 31, 2019   September 30, 2019
Due to director 　 　 　 　
Tomoo Yoshida, CEO, CFO, sole director and a shareholder of the Company $ 741,111 $ 741,133
Total due to director $ 741,111 $ 741,133
         
Due to related parties 　 　 　 　
Keiichi Koga, a shareholder of the Company and a director of certain subsidiaries of the Company $ 47,635 $ 47,635
Force Internationale, the Company’s majority shareholder. Tomoo Yoshida is a director of Force Internationale 　 536,655 　 633,578
School TV Co., Ltd., a wholly-owned subsidiary of Force Internationale   132,291   132,940
Total due to related parties $ 716,581 $ 814,153

 

The payable balances are unsecured, due on demand, and bear no interest. From time to time, these related parties have advanced to the Company or paid expenses on behalf of the Company, and the Company has also made repayments.

 

Tomoo Yoshida provided guarantee for the Company’s office leases during the three months ended December 31, 2019 and 2018.

 

Due from related parties

 

As of December 31, 2019 and September 30, 2019, the Company had a long-term loan of $230,995 and $232,128, respectively, due from School TV. The loan is unsecured, bears a 1% per annum interest, and is due on May 24, 2023.

 

As of December 31, 2019 and September 30, 2019, the Company had a short-term loan of $92,073 and $92,524, respectively, due from School TV included in due from related party. The loan is unsecured, due on demand, and bears a 1% interest per annum.
XML 33 R15.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 9 - COMMITMENTS
 3 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments

NOTE 9 – COMMITMENTS

 

As of December 31, 2019, the Company has three capital leases of equipment and vehicle with a gross value of $85,797 and $63,646, respectively, included in property, plant and equipment.

 

The Company also leases its offices under operating lease, and the rental expense is $129,590 for the three months ended December 31, 2019. Cash paid for amounts included in the measurement of operating lease liabilities is $129,590. The weighted-average remaining lease term for these leases is 1.68 years and the weighted-average discount rate is 1.84%.

 

The future minimum lease payments as of December 31, 2019 are as follows:

 

Year ending September 30   Capital lease   Operating lease
2020 (remaining) $                                                  20,924  $                                                 301,176
2021                                                     27,898                                                    161,377
2022 　                                                   39,154 　                                                    67,942
2023                                                     18,004                                                               -
2024 　                                                   10,503 　                                                             -
Thereafter    -                                                               -
Total $                                                116,483   $                                                    530,495
Less imputed interest                                                     (3,411)                                                                (8,252)
Total capital lease obligation 　                                                113,072 　 522,243
Less current portion                                                  (26,002)       (360,774)
Long-term lease obligation $                                                 87,070 $ 161,469

 

 
XML 34 R19.htm IDEA: XBRL DOCUMENT v3.20.1
FAIR VALUE MEASUREMENT (Tables)
 3 Months Ended
Dec. 31, 2019
Fair Value Measurement Tables Abstract  
Fair Value Measurement Table

The following table presents information about the Company’s assets that are measured at fair value as of December 31, 2019 and September 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)		   Total Balance
Marketable Securities:                
Publicly held equity securities                
As of December 31, 2019 $ 1,364,372   -   -   1,364,372
As of September 30, 2019 $ 1,156,108   -   -   1,156,108

 
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BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2019
Sep. 30, 2019
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 32,700,000 32,700,000
Common Stock Shares Outstanding 32,700,000 32,700,000
XML 37 R23.htm IDEA: XBRL DOCUMENT v3.20.1
SOFTWARE (Tables)
 3 Months Ended
Dec. 31, 2019
Intangible Assets Values  
Software

 

The book value of the Company’s software as of December 31, 2019 and September 30, 2019 was as follows:

 

    December 31, 2019   September 30, 2019
Software $ 3,898,802 $ 3,917,921
Accumulated amortization   (3,034,394)   (2,866,523)
    864,408   1,051,398

 

The aggregate amortization expense related to the software was $181,693 and $193,478 for the three months ended December 31, 2019 and 2018, respectively, included in cost of revenues.  

 
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.20.1
RELATED-PARTY TRANSACTIONS (Details) - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Related-party Transactions    
Total due to Director (Tomoo Yoshida) $ 741,111 $ 741,133
Amount owed to Keiichi Koga (who is a shareholder of the Company and a director of certain subsidiaries of the Company) 47,635 47,635
Amount owed to Force Internationale (Force Internationale is the Company’s majority shareholder. Tomoo Yoshida is a director of Force Internationale) 536,655 633,578
Amount owed to School TV (School TV Co., Ltd., a wholly-owned subsidiary of Force Internationale) 132,291 132,940
Total due to related parties 716,581 814,153
Short-term loan due from School TV 92,073 92,524
Long-term loan due from School TV $ 230,995 $ 232,128
XML 39 R7.htm IDEA: XBRL DOCUMENT v3.20.1
NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION
 3 Months Ended
Dec. 31, 2019
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. (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 $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.

 

On December 6, 2018, the Company entered into a share contribution 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 Company's consolidated financial statements.

 

As of December 31, 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, 2019, included in our Form 10-K.
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CONSOLIDATED BALANCE SHEETS (December 31, 2019 Unaudited) - USD ($)
Dec. 31, 2019
Sep. 30, 2019
Current Assets    
Cash and cash equivalents $ 17,766,257 $ 20,198,362
Marketable securities 1,364,372 1,156,108
Accounts receivable 2,738 2,344
Prepaid expenses 776,346 865,274
Inventories 748,720 626,142
Due from related party 92,073 95,524
Short-term loan receivable 276,218
Other current assets 276,520 453,291
Total Current Assets 21,303,244 23,394,045
Non-current Assets    
Property, plant and equipment, net 780,527 792,452
Software, net 864,408 1,051,398
Operating lease right-of-use assets 565,480
Other intangible assets, net 175,416 176,897
Long-term prepaid expenses 83,531 84,968
Deferred tax assets 73,223 134,936
Long-term loan receivable from related party 230,995 232,128
Insurance Funds 99,334 91,161
Total Non-Current Assets 2,872,914 2,563,940
Total Assets 24,176,158 25,957,985
Current Liabilities    
Accounts payable 613,587 1,226,111
Accrued expenses and other payables 363,342 565,506
Contingency liability 431,185 409,428
Income tax payable 166,643 287,301
Deferred income 1,326,683 3,267,399
Capital lease obligations-current 26,002 28,683
Operating lease liabilities, current 360,774
Due to related parties 716,581 814,153
Due to director 741,111 741,133
Other accounts payable 1,001,385 735,926
Total Current Liabilities 5,747,293 8,075,640
Non-current Liabilities    
Capital lease obligations, long-term 87,070 98,964
Operating lease liabilities, non-current 161,469
Total Non-Current Liabilities 248,539 98,964
Total Liabilities 5,995,832 8,174,604
Shareholders' Equity    
Preferred stock ($0.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of December 31, 2019 and September 30, 2019)
Common stock ($.0001 par value, 500,000,000 shares authorized, 32,700,000 and 32,700,000 shares issued and outstanding as of December 31, 2019 and September 30, 2019) 3,270 3,270
Additional Paid In Capital 261,516 261,516
Accumulated earnings 17,254,035 16,764,282
Accumulated other comprehensive income 661,505 754,313
TOTAL SHAREHOLDERS' EQUITY 18,180,326 17,783,381
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 24,176,158 $ 25,957,985
XML 42 R22.htm IDEA: XBRL DOCUMENT v3.20.1
PROPERTY, PLANT AND EQUIPMENT VALUES (Tables)
 3 Months Ended
Dec. 31, 2019
Property Plant And Equipment Values  
Property, plant and equipment

Property, plant and equipment consist of the following:

  

    December 31, 2019   September 30, 2019
Building $ 299,587  $ 243,840
Leasehold improvement   -   57,217
Equipment   1,082,586   1,086,546
Vehicles   63,646   68,930
    1,445,819   1,456,533
         
Accumulated depreciation    (665,292)    (664,081)
         
Total net book value $ 780,527  $ 792,452

 

The aggregate depreciation expense of property, plant and equipment was $10,727 and $17,536 for the three months ended December 31, 2019 and 2018, respectively.
XML 43 R26.htm IDEA: XBRL DOCUMENT v3.20.1
INCOME TAXES (Details) - USD ($)
 3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Taxes    
Income tax expense $ 227,488 $ 66,499
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unadited) - USD ($)
 3 Months Ended
Dec. 31, 2019
Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES    
Net Income (loss) $ 489,753 $ (356,822)
Depreciation and amortization 193,122 259,300
Change in fair value of marketable securities (213,709) 349,404
Loss on company owned life insurance policies 61,582
Noncash lease expense 126,804
Deferred tax asset 60,998
Changes in operating assets and liabilities:    
Accounts receivable (404) 314
Income tax recoverable 207,272
Prepaid expense 41,436 (86,426)
Inventories (125,518) (503,364)
Other current assets 174,399 (67,143)
Long-term prepaid expenses 1,026
Accounts payable (605,983) (3,034,971)
Accrued expenses and other current payables (191,070) 197,914
Deposit receipts 246
Income tax payable (119,145)
Deferred income (1,149,182) (3,775,219)
Operating lease liabilities (126,804)
Other current liabilities (481,024) (455,378)
Net cash used in operating activities (1,863,719) (7,264,873)
CASH FLOWS FROM INVESTING ACTIVITIES    
Loan made to third party (275,964)
Purchase of property, plant and equipment (2,760)
Purchase of company-owned life insurance policies (70,191)
Disposal of Subsidiary (79,876)
Proceeds from sale of securities 87,636
Net cash provided by (used in) investing activities (348,915) 7,760
CASH FLOWS FROM FINANCING ACTIVITIES    
Repayment of capital lease obligation (13,938)
Repayment to related party (105,209) (7,686)
Net cash used in financing activities (119,147) (7,686)
Net effect of exchange rate changes on cash (100,324) 925,802
Net increase (decrease) in cash (2,432,105) (6,338,997)
Cash and cash equivalents - beginning of period 20,198,362 22,737,755
Cash and cash equivalents - end of period 17,766,257 16,398,758
NON-CASH INVESTING AND FINANCING TRANSACTIONS    
Operating expense paid by related parties and director 8,900 205,401
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Interest paid
Income taxes paid $ 285,636
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FOREIGN CURRENCY TRANSLATION (Tables)
 3 Months Ended
Dec. 31, 2019
Foreign Currency Translation Tables Abstract  
Foreign Currency Translation

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

 

  December 31, 2019   December 31, 2018
Current JPY: US$1 exchange rate 108.61   109.56
Average JPY: US$1 exchange rate 108.71   112.77
       
Current HK$: US$1 exchange rate 7.80   7.83
Average HK$: US$1 exchange rate 7.80   7.83

 
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NOTE 4 - INCOME TAXES
 3 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Income taxes

NOTE 4 - INCOME TAXES

 

For the three months ended December 31, 2019 and 2018, the Company incurred income tax expenses in the amount of $227,488 and $66,499, respectively. Effective tax rate was 31.72% and (22.91%) for the three months ended December 31, 2019 and 2018, respectively.

 

Japan

 

The Company conducts its major businesses in Japan and e-Learning and e-Communications (“Japanese Subsidiaries”) are subject to tax in this jurisdiction. As a result of its business activities, Japanese Subsidiaries file tax returns that are subject to examination by the local tax authority.

 

Japanese Subsidiaries are subject to a number of income taxes, which, in aggregate, represent a statutory tax rate approximately as follows:

 

    Company’s assessable profit
For the period ended December 31, 　 Up to JPY 4 million 　 Up to JPY 8 million 　 Over JPY 8 million
2019 　 21.42% 　 23.20% 　 33.80%
2020 　 21.42% 　 23.20% 　 33.80%

 

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 has not generated any estimated assessable profits in Hong Kong from its inception.

 

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 three months ended December 31, 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.

 
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NOTE 8 - SOFTWARE
 3 Months Ended
Dec. 31, 2019
Research and Development [Abstract]  
Software

NOTE 8 – SOFTWARE

 

The book value of the Company’s software as of December 31, 2019 and September 30, 2019 was as follows:

 

    December 31, 2019   September 30, 2019
Software $ 3,898,802 $ 3,917,921
Accumulated amortization   (3,034,394)   (2,866,523)
    864,408   1,051,398

 

The aggregate amortization expense related to the software was $181,693 and $193,478 for the three months ended December 31, 2019 and 2018, respectively, included in cost of revenues.