UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM S-1/A
AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 CURRENT REPORT
EXCEED WORLD, INC.
(Exact name of registrant as specified in
its charter)
Date: June 30, 2020
Delaware
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8200
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98-1339955
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(State or Other Jurisdiction
of Incorporation)
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(Primary
Standard Classification Code)
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(IRS Employer
Identification No.)
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1-2-38-6F, Esaka-cho,
Suita-shi, Osaka 564-0063, Japan
ceo.exceed.world@gmail.com
Telephone: +81-6-6339-4177
(Address, including zip code, and telephone
number,
including area code, of registrant’s principal executive offices)
Please send copies of all correspondence to:
NewRev General Counsel, LLC
8547 E. Arapahoe Road #J453
Greenwood Village, CO 80112
TELEPHONE: (303) 953-4245
Email: conn.flanigan@newrevgc.com
(Name, address, including zip code, and telephone
number,
including area code, of agent for service)
Approximate date of commencement of proposed
sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. |X|
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the
Securities Act registration Statement number of the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. |_|
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large
accelerated filer |_|
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Accelerated
filer |_|
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Non-accelerated
filer |X|
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Smaller reporting company |X|
Emerging Growth company [X]
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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 7(a)(2)(B) of the Securities Act.
CALCULATION OF REGISTRATION FEE
Title of Each
Class of
Securities
to be Registered
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Amount to be
Registered
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Proposed
Maximum
Offering Price
Per Share (1)
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Proposed
Maximum
Aggregate Offering Price
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Amount of
Registration
Fee (2)
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|
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|
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Common Stock,
$0.0001 par value
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3,000,000
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$0.09
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$270,000
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$35.046
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(1) The offering price has been arbitrarily
determined by the Company and affiliated parties and bears no relationship to assets, earnings, or any other valuation criteria.
No assurance can be given that the shares offered hereby will have a market value or that they may be sold at this, or at any
price.
(2) Estimated solely for purposes of calculating
the registration fee in accordance with Rule 457(o) of the Securities Act of 1933.
THE INFORMATION IN THIS PROSPECTUS IS NOT
COMPLETE AND MAY BE CHANGED. THE SECURITIES BEING REGISTERED HEREIN MAY NOT BE SOLD UNTIL THIS REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING
AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THERE IS NO MINIMUM PURCHASE REQUIREMENT
FOR THE OFFERING TO PROCEED.
PRELIMINARY PROSPECTUS
EXCEED WORLD, INC.
3,000,000 SHARES OF COMMON STOCK
$0.0001 PAR VALUE PER SHARE
As of the date of this Prospectus, our
shares are quoted on the OTC Pink under the stock symbol “EXDW”.
In this public offering our selling shareholders
are offering 3,000,000 shares of our common stock. We will not receive any of the proceeds from the sale of shares by the
selling shareholders. Rather our selling shareholders will receive any and all proceeds from this offering. There is no minimum
number of shares required to be purchased by each investor. Additionally, there is no guarantee that a public market will
ever develop and you may be unable to sell your shares.
This primary offering will automatically
terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or
(ii) 365 days from the effective date of this Prospectus, unless extended by our directors for an additional 90 days. We may however,
at our discretion terminate the offering at any time.
SHARES OFFERED
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PRICE
TO
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SELLING AGENT
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PROCEEDS
TO THE SELLING
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BY
SELLING SHAREHOLDERS
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PUBLIC
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COMMISSIONS
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SHAREHOLDERS
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Per Share
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$
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0.09
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Not applicable
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$
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0.09
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Minimum Purchase
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None
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Not applicable
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Not
applicable
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Total (3,000,000
shares)
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$
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270,000
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Not applicable
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$
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270,000.00
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Currently, our Chief Executive Officer
Tomoo Yoshida directly owns approximately 4.3% of the voting power of our outstanding capital stock, and Force Internationale
Limited, a Cayman Island Company (“Force Internationale”), of which Mr. Yoshida also owns and controls, owns approximately
84.4% of the voting power of our outstanding capital stock. After the offering, assuming all of the shares that are being registered
herein of Force Internationale are sold, Mr. Yoshida and Force Internationale will have the ability to collectively control approximately
79.5% of the voting power of our outstanding capital stock.
The Company estimates the costs of this
offering at $67,000. All expenses incurred in this offering are being paid for by the Company. If the Company has insufficient
funds to do so, it will rely upon funds provided by the Company’s Chief Executive Officer, Tomoo Yoshida. Mr. Yoshida has
no legal obligation to provide the Company funds.
The Company qualifies as an “emerging
growth company” as defined in the Jumpstart Our Business Startups Act, which became law in April 2012 and will be subject
to reduced public company reporting requirements.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE
REFER TO ‘RISK FACTORS’ BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
You should rely only on the information contained
in this Prospectus and the information we have referred you to. We have not authorized any person to provide you with any information
about this Offering, the Company, or the shares of our Common Stock offered hereby that is different from the information included
in this Prospectus. If anyone provides you with different information, you should not rely on it.
The following table of contents has been designed
to help you find important information contained in this prospectus. We encourage you to read the entire prospectus.
TABLE OF CONTENTS
You should rely only on the information contained
in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not
authorized anyone to provide you with additional information or information different from that contained in this prospectus filed
with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability
of, any other information that others may give you. Our selling shareholders are offering to sell, and seeking offers to buy,
our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common
stock. Our business, financial condition, results of operations and prospects may have changed since that date.
The date of this prospectus is June 30, 2020.
-1-
Table of Contents
PROSPECTUS SUMMARY
In this Prospectus, “Exceed World,
the “Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our,’’
refer to Exceed World, Inc., unless the context otherwise requires. Unless otherwise indicated, the term ‘‘fiscal
year’’ refers to our fiscal year ending September 30. Unless otherwise indicated, the term ‘‘common stock’’
refers to shares of the Company’s common stock.
This Prospectus, and any supplement to this
Prospectus include “forward-looking statements”. To the extent that the information presented in this Prospectus discusses
financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise
makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by
the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”,
“forecasts”, “expects”, “plans” and “proposes”. Although we believe that the expectations
reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties
that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary
statements in the “Risk Factors” section and the “Management’s Discussion and Analysis” section
in this Prospectus.
This summary only highlights selected information
contained in greater detail elsewhere in this Prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the entire Prospectus, including “Risk Factors”
beginning on Page 4, and the financial statements in their entirety, before making an investment decision.
All dollar amounts refer to US dollars unless
otherwise indicated.
The Company
The Company is an education service provider
in Japan and it offers a range of e-learning education programs as well as supporting services to complement such education programs
through an internet platform named “Force Club” (“Force Club”), which was launched in 2007. The Company
has offered e-learning programs through Force Club, all of which were procured from independent third-party software developers,
including pre-school learning resources, learning resources supplementing elementary school, junior high school and senior high
school curriculum, preparation courses for university entrance examinations and professional qualification examinations, and English
learning, appealing to a diverse customer base from pre-school children to students and adult learners. The e-learning programs
of Force Club mainly serve as supplemental learning resources and self-learning tools for students and adult learners.
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. (“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 Laboratory Co., Ltd., a Japan corporation (“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 International Holdings Limited, a Hong Kong
limited company (“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. Pursuant
to the Contribution Agreement, the Company no longer has any interest in the previous businesses related to the sale and distribution
of health related products, the promotion of third party consumer goods and services, and a RE/MAX realtor business in Kanagawa,
Okinawa, and Tokyo, Japan.
Currently, we own the following affiliated entities:
Name
of Subsidiary
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State
or Other Jurisdiction of Incorporation or Organization
|
|
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Force
International Holdings Limited
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Hong
Kong
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e-Learning
Laboratory Co., Ltd.
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Japan
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e-Communications
Co., Ltd.
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Japan
|
* The following chart illustrates the structure
of our consolidated affiliated entities:
The Company is electing to not opt out of
JOBS Act extended accounting transition period. This may make its financial statements more difficult to compare to other
companies.
Pursuant to the JOBS Act of 2012, as an emerging
growth company the Company can elect to opt out of the extended transition period for any new or revised accounting standards
that may be issued by the PCAOB or the SEC. The Company has elected not to opt out of such extended transition period, which means
that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the standard for the private company. This may make comparison of the Company’s
financial statements with any other public company which is not either an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period difficult or impossible as possible different or revised standards
may be used.
The JOBS Act is intended to reduce the regulatory burden on emerging
growth companies. The Company meets the definition of an emerging growth company and so long as it qualifies as an “emerging
growth company,” it will, among other things:
|
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·
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be temporarily exempted from the internal control
audit requirements Section 404(b) of the Sarbanes-Oxley Act;
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·
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be temporarily exempted from various existing
and forthcoming executive compensation-related disclosures, for example: “say-on-pay”, “pay-for-performance”,
and “CEO pay ratio”;
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·
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be temporarily exempted from any rules that
might be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or supplemental
auditor discussion and analysis reporting;
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·
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be temporarily exempted from having to
solicit advisory say-on-pay, say-on-frequency and say-on-golden-parachute shareholder votes on executive compensation under
Section 14A of the Securities Exchange Act of 1934, as amended;
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·
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be permitted to comply with the SEC’s
detailed executive compensation disclosure requirements on the same basis as a smaller reporting company; and,
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·
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be permitted to adopt any new or revised accounting
standards using the same timeframe as private companies (if the standard applies to private companies).
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Our company will continue to be an emerging growth company until
the earliest of:
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·
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the last day of the fiscal year during which
we have annual total gross revenues of $1 billion or more;
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·
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the last day of the fiscal year following the
fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act;
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·
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the date on which we issue more than $1 billion
in non-convertible debt securities during a previous three-year period; or
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·
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the date on which we become a large accelerated
filer, which generally is a company with a public float of at least $700 million (Exchange Act Rule 12b-2).
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Our principal executive offices are located
at 1-1-36, 1-2-38-6F, Esaka-cho, Suita-shi, Osaka 564-0063, Japan. Our phone number is +81-6-6339-4177.
The Company has elected September 30th as
its fiscal year end.
The Company estimates the costs of this offering
at $67,000. All expenses incurred in this offering are being paid for by the Company. If the Company has insufficient funds to
do so, it will rely upon funds provided by the Company’s Chief Executive Officer, Tomoo Yoshida. Mr. Yoshida has no legal
obligation to provide the Company funds.
-2-
Table of Contents
Our Offering
We have authorized capital stock consisting
of 500,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”) and 20,000,000 shares of preferred
stock, $0.0001 par value per share (“Preferred Stock”). We have 32,700,000 shares of Common Stock and no shares of
Preferred Stock issued and outstanding. Through this offering we will register a total of 3,000,000 shares. These shares
represent 3,000,000 shares of common stock held by our selling stockholders. The selling stockholders will sell shares at a fixed
price of $0.09 for the duration of the offering. There is no arrangement to address the possible effect of the offering on the
price of the stock. We will not receive any proceeds from the selling stockholders.
*We will notify investors of any extension to this offering by
filing a supplement to our prospectus pursuant to Rule 424(b)(3).
Securities being offered by the Selling Stockholders
|
3,000,000 shares
of common stock, at a fixed price of $0.09 offered by selling stockholders in a resale offering. As previously mentioned
this fixed price applies at all times for the duration of this offering. This offering will automatically terminate upon the
earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days
from the effective date of this prospectus unless extended by our Board of Directors for an additional 90 days. We may however,
at our discretion terminate the offering at any time.
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Offering price per share
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The selling shareholders
will sell the shares at a fixed price per share of $0.09 for the duration of this Offering.
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Number of shares outstanding before the offering
of common stock
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32,700,000 common
shares are currently issued and outstanding.
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Number of shares outstanding after the offering
of common shares
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32,700,000 common
shares will be issued and outstanding.
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The minimum number of shares to be
sold in this offering
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None.
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Use of Proceeds
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We will not receive any proceeds from
the sale of the shares in this offering.
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Market for the common shares
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Our common shares
are quoted on the OTC Pink.
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Termination of the Offering
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This offering will
automatically terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with
the Securities and Exchange Commission, or (ii) the date on which all 3,000,000 shares registered hereunder have been sold.
We may, at our discretion, extend the offering for an additional 90 days or terminate the offering at any time.
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Registration Costs
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We estimate our total offering registration
costs to be approximately $67,000.
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Risk Factors:
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See “Risk
Factors” and the other information in this prospectus for a discussion of the factors you should consider before deciding
to invest in shares of our common stock.
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Currently, our Chief Executive Officer Tomoo
Yoshida owns approximately 4.3% of the voting power of our outstanding capital stock and Force Internationale of which Mr. Yoshida
also owns and controls, owns approximately 84.4% of the voting power of our outstanding capital stock. After the offering, assuming
all of the shares that are being registered herein of Force Internationale are sold, Mr. Yoshida and Force Internationale will
have the ability to collectively control approximately 79.5% of the voting power of our outstanding capital stock.
You should rely only upon the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained
in this prospectus. We are offering to sell common stock and seeking offers to common stock only in jurisdictions where offers
and sales are permitted.
-3-
Table of Contents
RISK FACTORS
Please consider the following risk factors and other information
in this prospectus relating to our business before deciding to invest in our common stock.
This offering and any investment in our common
stock involves a high degree of risk. You should carefully consider the risks described below and all of the information contained
in this prospectus before deciding whether to purchase our common stock. If any of the following risks actually occur, our business,
financial condition and results of operations could be harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
We consider the following to be the material
risks for an investor regarding this offering. Our company should be viewed as a high-risk investment and speculative in nature.
An investment in our common stock may result in a complete loss of the invested amount.
Risks Relating to Our Company
Since one of our products constitutes a
significant portion of our net sales, significant decreases in consumer demand for this product or our failure to produce a suitable
replacement should we cease offering it would harm our financial condition and operating results.
If consumer demand for this product decreases
significantly or we cease offering this product without a suitable replacement, then our financial condition and operating results
would be harmed.
If we lose the services of members of our
senior management team, then our financial condition and operating results could be harmed.
We depend on the continued services of our
Chief Executive Officer, Tomoo Yoshida, who also serves as our Chief Financial Officer, Director, President, Secretary, and Treasurer,
and our senior management team as it works to create an environment of inspiration, motivation and entrepreneurial business success.
Any significant leadership change or senior management transition involves inherent risk and any failure to ensure a smooth transition
could hinder our strategic planning, execution and future performance. While we strive to mitigate the negative impact associated
with changes to our senior management team, there may be uncertainty among investors, employees, Force Club and Premium Members
and others concerning our future direction and performance. Any disruption in our operations or uncertainty could have a material
adverse effect on our business, financial condition or results of operations.
Additionally, although we do not believe that
any of our senior management team are planning to leave or retire in the near term, we cannot assure you that our senior managers
will remain with us. The loss or departure of any member of our senior management team could adversely impact our Force Club and
Premium Member relations and operating results. If any of these executives do not remain with us, our business could suffer. Also,
our continued success will also be dependent on our ability to retain existing, and attract additional, qualified personnel to
meet our needs.
Foreign-currency fluctuations and inflation
in foreign markets could impact our financial position and results of operations.
In 2019, 100% of
our sales occurred in Japan. In preparing our financial statements, we translate revenue and expenses in our markets outside the
United States from their local currencies into U.S. dollars using weighted-average exchange rates. Foreign-currency fluctuations
can also cause losses and gains resulting from translation of foreign-currency-denominated balances on our balance sheet. In addition,
high levels of inflation and currency devaluations in any of our markets could negatively impact our balance sheet and results
of operations. It is difficult to predict future fluctuations and the effect these fluctuations may have upon future reported
results or our overall financial condition.
Difficult economic conditions could
harm our business.
Global economic conditions
continue to be challenging. Difficult economic conditions could adversely affect our business by causing a decline in demand for
our products, particularly if the economic conditions are prolonged or worsen. In addition, such economic conditions may adversely
impact access to capital for us and may otherwise adversely impact our operations and overall financial condition.
We may become
involved in legal proceedings and other matters that, if adversely adjudicated or settled, could adversely affect our financial
results.
We have been, and
may again become in the future, party to litigation, investigations or other legal matters. In general, litigation claims could
result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution
of any litigation to which we may become party, and the impact of these matters on our business, results of operations and financial
condition could be material.
Government authorities
may question our tax or customs positions or change their laws in a manner that could increase our effective tax rate or otherwise
harm our business.
As a U.S. company
doing business globally, we are subject to all applicable tax laws. We are subject to audit by tax authorities. If authorities
challenge our tax positions, we may be subject to penalties, interest and payment of back taxes. The tax laws are continually
changing and are further subject to interpretation by the local government agencies. Such situations may require that we defend
our positions and/or adjust our operating procedures in response to such changes. Any or all of these potential risks may increase
our effective tax rate, increase our overall tax costs or otherwise harm our business.
We may be held
responsible for certain taxes or assessments relating to the activities of our Premium Members, which could harm our financial
condition and operating results.
Our Premium Members
are independent contractors and subject to taxation in their country of residency. In the event that our independent distributors
are deemed as employees rather than independent distributors under local laws and regulations, or the interpretation of local
laws and regulations, we may be held responsible for a variety of obligations that are imposed upon employers relating to their
employees, including withholding and related taxes plus any related assessments and penalties, which could harm our financial
condition and operating results. If our independent distributors were deemed to be employees rather than independent contractors,
we would also face the risk of increased liability for their actions.
Market conditions
and the strengths of competitors may harm our business.
Our results of operations
may be harmed by market conditions and competition in the future. In addition, our business may be negatively impacted if we fail
to adequately adapt to trends in consumer behavior and technologies.
The COVID-19 global pandemic may impact our current and future
revenue streams. As a result, we may generate lesser revenues than anticipated
Globally, the COVID-19 pandemic has negatively affected businesses
of all kinds. It is possible that the pandemic may hinder our own operations, resulting in lesser future revenues.
In the second quarter of the Company’s
financial year of 2020, the global outbreak of the coronavirus disease 2019 (“COVID-19”) has significantly affected
economy in Japan, where the Company mainly operates its business. Especially since February 2020, the economy has rapidly declined
due to limited economic activity caused by COVID-19. 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. As a result,
the Company’s performance has been inevitably affected. Consequently, the COVID-19 pandemic may adversely affect the Company’s
business operations, financial condition and operating results for 2020, including but not limited to material negative impact
to the Company’s total revenues. Due to the high uncertainty of the evolving situation, the Company has limited visibility
on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time.
The aforementioned events may result in a partial loss of your
investment in our common stock.
-4-
Table of Contents
The intellectual property we utilize
may infringe on the rights of others, resulting in costly litigation.
Currently, the rights
of 70% of our products are licensed from third party providers and the remaining 30% are owned by the Company. We expect that
competition for developing new products will become more severe in the competitive education industry. Under such circumstances,
if we depend on development of our own products, it would be time consuming and expensive. Rather, as our established sales system
has proved effective, we plan to continue to use the products developed by other companies. We expect to increase the ratio of
the products licensed by third parties.
In recent years,
there has been significant litigation involving patents and other intellectual property rights. In particular, there has been
an increase in the filing of suits alleging infringement of intellectual property rights, which pressure defendants into entering
settlement arrangements quickly to dispose of such suits, regardless of their merit. Other companies or individuals may allege
that we, or our members consumers, licensees or other parties indemnified by us infringe on their intellectual property rights.
Even if we believe that such claims are without merit, defending such intellectual property litigation can be costly, distract
management's attention and resources, and the outcome is inherently uncertain. Claims of intellectual property infringement also
might require us to redesign affected products, enter into costly settlement or license agreements, pay costly damage awards,
or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products. Any of these results
may adversely affect our financial condition.
If we are unable to protect our intellectual
property rights, our ability to compete could be negatively impacted.
Many of our products
rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and
technologies from these third parties on reasonable terms or at all. The market for our products depends to a significant extent
upon the value associated with our product innovations and our brand equity. We rely upon patent, copyright, trademark and trade
secret laws in Japan and similar laws in other markets, and non-disclosure, confidentiality and other types of agreements with
our employees, members, consumers, suppliers and other parties, to establish, maintain and enforce our intellectual property
rights. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated,
or such intellectual property rights may not be sufficient to permit us to provide competitive advantages, which could result
in costly product redesign efforts, discontinuance of certain product offerings or other competitive harm. The costs required
to protect our intellectual property may be substantial or even not practical.
To enforce and protect
our intellectual property rights, we may initiate litigation against third parties. Any lawsuits that we initiate could be expensive,
take significant time and divert management's attention from other business concerns, and we may ultimately fail to prevail or
recover on any claim. Litigation also puts our intellectual property at risk of being invalidated or interpreted narrowly. Additionally,
we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages
or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may adversely affect
our financial condition or diminish our investments in this area.
If we are unable
to protect the confidentiality of our proprietary information and know-how, the value of our products could be adversely affected.
We rely on our licenses,
copyrights, trade secrets, processes and know-how. Despite these measures, any of our intellectual property rights could be challenged,
invalidated, circumvented or misappropriated. We generally seek to protect this information by confidentiality, non-disclosure
and assignment of invention agreements with our employees, consultants, scientific advisors and third parties. Our employees may
leave to work for competitors. Our distributors or sales leaders may seek other opportunities. These agreements may be breached,
and we may not have adequate remedies for any such breach. In addition, our trade secrets may be disclosed to or otherwise become
known or be independently developed by competitors. To the extent that our current or former employees, distributors, sales leaders,
consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions. If, for any of the above reasons, our intellectual property is disclosed or misappropriated,
it would harm our ability to protect our rights and adversely affect our financial condition.
A failure of our
internal controls over financial reporting or our compliance efforts could harm our stock price and our financial and operating
results or could result in fines or penalties.
We have implemented
internal controls to help ensure the accuracy and completeness of our financial reporting and have implemented compliance policies
and programs to help ensure that our employees and members comply with applicable laws and regulations. Our management
regularly reviews our internal controls and various aspects of our business and compliance program, and we regularly assess the
effectiveness of our internal controls. There can be no assurance, however, that our internal or external assessments and audits
will identify all significant deficiencies or material weaknesses in our internal controls. If a material weakness results in
a material misstatement of our financial results, we would be required to restate our financial statements.
Cyber security
risks and the failure to maintain the integrity of company, employee, member data could expose us to data loss, litigation, liability
and harm to our reputation.
We collect, store
and transmit large volumes of company, employee and member data, including personally identifiable information, for business purposes,
including for transactional and promotional purposes, and our various information technology systems enter, process, summarize
and report such data. The integrity and protection of this data is critical to our business.
In addition, a penetrated
or compromised data system or the intentional, inadvertent or negligent release, misuse or disclosure of data could result in
theft, loss or fraudulent or unlawful use of company, employee or member data. Although we take measures to protect the security,
integrity and confidentiality of our data systems, we experience cyber attacks of varying degrees and types on a regular basis,
and our infrastructure may be vulnerable to these attacks. Our security measures may also be breached due to employee error or
malfeasance, system errors or otherwise. Additionally, outside parties may attempt to fraudulently induce employees, users, or
customers to disclose sensitive information to gain access to our data or our users' or customers' data. Any such breach or unauthorized
access could result in the unauthorized disclosure, misuse or loss of sensitive information and lead to significant legal and
financial exposure, regulatory inquiries or investigations, loss of confidence by our members, disruption of our operations and
damage to our reputation. These risks are heightened as we work with third-party partners and as our members use social media,
as the partners and social media platforms could be vulnerable to the same types of breaches.
We will need additional capital to expand
our current operations or to enter into new fields of operations.
Currently, a significant portion of our revenue
derives from sales of our premium package. We expect this revenue to continue to grow. While we will maintain and further increase
the base for sale of this product, we also aim to expand our business by developing other services as well as entering into other
promising market. We will need to seek additional financing either through borrowing, private offerings of our securities or through
strategic partnerships and other arrangements with corporate partners. We cannot be assured that additional financing will be
available to us, or if available, will be available to us on terms favorable to us. If adequate additional financing is not available
on acceptable terms, we may not be able to implement our business development plan or expand our operations.
If we fail to effectively manage our growth
our future business results could be harmed and our managerial and operational resources may be strained.
As we proceed with the expansion of our operations,
we expect to experience significant and rapid growth in the scope and complexity of our business. We will need to hire additional
personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational
resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance
of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively,
could have a materially adverse effect on our business and financial condition.
Relationships with our majority shareholder
and its parent and affiliates may be on terms which are perceived by investors as more or less favorable than those that could
be obtained from third parties.
Our majority shareholder, Force Internationale,
presently owns 84.4% of our issued and outstanding common stock. While we anticipate that such percentage will be diluted over
time, our majority shareholder, its parent and affiliates will be perceived as having influence over our management and operations,
and any loans or other agreements which we may enter into with our majority shareholder and its parents and affiliates may be
perceived by investors as being on terms that are less favorable than we could otherwise receive; such perception could adversely
impact the price of our common stock. Similarly, such agreements could be perceived as being on terms more favorable than those
that could be obtained from third parties, and any unwillingness by our majority shareholder and its parent and affiliates to
engage with our common stock could discourage investors.
-5-
Table of Contents
If we fail to further penetrate existing
markets, then the growth in sales of our products, along with our operating results, could be negatively impacted.
We plan to expand business around Asia. Recently
the number of foreigners visiting Japan for sightseeing and other purposes is increasing and there has been a growing interest
in Japanese culture. We plan to start providing language education services which include Japanese language education to foreigners.
Our business could be materially and adversely
affected as a result of natural disasters, other catastrophic events, acts of war or terrorism, or cyber-security incidents
and other acts by third parties.
We depend on the ability of our business to
run smoothly, including the ability of Premium Members to engage in their business building activities and the ability of our
programs and products to be available to consumers. Any material disruption caused by natural disasters, including, but not limited
to, fires, floods, hurricanes, volcanoes, and earthquakes; power loss or shortages; environmental disasters; telecommunications
or business information systems failures; acts of war or terrorism and other similar disruptions, including those due to cyber-security
incidents, ransomware, or other actions by third parties, could adversely affect our ability to conduct business.
We depend on the integrity and reliability
of our information technology infrastructure, and any related inadequacies may result in substantial interruptions to our business.
Our ability to provide products and services
to our Force Club and Premium Members depends on the performance and availability of our core transactional systems. While we
continue to invest in our information technology infrastructure, there can be no assurance that there will not be any significant
interruptions to such systems or that the systems will be adequate to meet all of our future business needs.
The most important aspect of our information
technology infrastructure is the system through which we calculate, record and store Premium Member sales and other incentives.
We have encountered, and may encounter in the future, errors in our software or our enterprise network, or inadequacies in the
software and services supplied by our vendors, although to date none of these errors or inadequacies has had a meaningful adverse
impact on our business. Any such errors or inadequacies that we may encounter in the future may result in substantial interruptions
to our services and may damage our relationships with, or cause us to lose, our Force Club and Premium Members if the errors or
inadequacies impair our ability to calculate sales and pay royalty overrides, bonuses and other incentives, which would harm our
financial condition and operating results. Such errors may be expensive or difficult to correct in a timely manner,
and we may have little or no control over whether any inadequacies in software or services supplied to us by third parties are
corrected, if at all.
Anyone who is able to circumvent our security
measures could misappropriate confidential or proprietary information, including that of third parties such as our Force Club
and Premium Members, cause interruption in our operations, damage our computers or otherwise damage our reputation and business.
We may need to expend significant resources to protect against security breaches or to address problems caused by such breaches.
Any actual security breaches could damage our reputation and result in a violation of applicable privacy and other laws, legal
and financial exposure, including litigation and other potential liability, and a loss of confidence in our security measures,
which could have an adverse effect on our results of operations and our reputation as a brand, business partner or employer. In
addition, employee error or malfeasance or other errors in the storage, use or transmission of any such information could result
in a disclosure to third parties. If this should occur, we could incur significant expenses addressing such problems. Since we
collect and store Force Club and Premium Member and vendor information, these risks are heightened.
Risks Relating to the Education Industry
It is expected that if the birthrate continues
to be declining in Japan, the Japanese education industry will face severe competition and face reduced revenues over the medium
and long terms. Taking such risk into consideration, we are planning to develop business in the emerging countries in Asia and
establish education platform adding usability to provision of content. However, if the change in the market is faster than expected
or conversion into new business is not promptly made, our revenue or financial condition may be adversely affected.
Risks Associated with Multi-Level Marketing
Our failure to establish and maintain Force
Club and Premium Member relationships for any reason could negatively impact sales of our products and harm our financial condition
and operating results.
We distribute our products exclusively to
and through Force Club and Premium Members, and we depend upon them directly for substantially all of our sales. Our Force Club
and Premium Members may voluntarily terminate their agreements with us at any time subject to the termination provisions. To increase
our revenue, we must increase the number of, or the productivity of, our Force Club and Premium Members. Accordingly, our success
depends in significant part upon our ability to recruit, retain and motivate a large base of Premium Members. The loss of a significant
number of Force Club or Premium Members for any reason could negatively impact sales of our products and could impair our ability
to attract new Force Club or Premium Members. Our operating results could be harmed if our existing and new business opportunities
and products do not generate sufficient interest to retain existing, and attract new, Force Club and Premium Members. Further,
we may have disputes with our Force Club and Premium Members resulting in cancellation of their contracts, resulting in the loss
of a sales agency relationship and potentially the return of fees to the Force Club or Premium Members. See “Force Club
Membership” below under the heading “Description of Business.”
Adverse publicity associated with our products,
ingredients or network marketing program, or those of similar companies, could harm our financial condition and operating results.
The size of our Force Club and Premium Members
and the results of our operations may be significantly affected by the public’s perception of the Company and similar companies.
This perception is dependent upon opinions concerning:
|
•
|
the quality of our
products;
|
|
•
|
the quality of similar
products distributed by other companies;
|
|
•
|
our Force Club and
Premium Members;
|
Adverse publicity concerning any actual or
purported failure of our Company or our Force Club and Premium Members to comply with applicable laws and regulations could have
an adverse effect on the goodwill of our Company and could negatively affect our ability to attract, motivate and retain Force
Club and Premium Members, which would negatively impact our ability to generate revenue.
In addition, our Force Club and Premium Members’
and consumers’ perception of the quality of our products and as well as similar products distributed by other companies
can be significantly influenced by media attention concerning our products or similar products distributed by other companies.
Adverse publicity questions the benefits of our or similar products could lead to lawsuits or other legal challenges and could
negatively impact our reputation, the market demand for our products, or our general business.
Inability of products
to gain or maintain Force Club or Premium Membership could harm our business.
Our operating results
could be adversely affected if our products, business opportunities, and other initiatives do not generate sufficient enthusiasm
and economic benefit to retain our existing Force Club and Premium Members or to attract new Force Club or Premium Members. Potential
factors affecting the attractiveness of our products, business opportunities, and other initiatives include, among other items,
perceived product quality and value, product exclusivity or effectiveness, economic success in our business opportunity, adverse
media attention, or regulatory restrictions.
Challenges to
the form of our network marketing system could harm our business.
We may be subject
to challenges by government regulators regarding the form of our network marketing system. Legal and regulatory requirements concerning
the multi-level marketing industry generally do not include "bright line" rules and are inherently fact-based and subject
to interpretation. As a result, regulators and courts have discretion in their application of these laws and regulations, and
the enforcement or interpretation of these laws and regulations by government agencies or courts can change. We could also be
subject to challenges by private parties in civil actions. All of these actions and any future scrutiny of us or our industry
could generate negative publicity or further regulatory actions that could result in fines, restrict our ability to conduct our
business in our various markets, enter into new markets, motivate our membership, and attract consumers.
-6-
Table of Contents
Improper actions
by our Members could harm our business.
Actions by our Members,
sanctioned by our Company or not, could violate applicable laws or regulations could result in government or third-party actions
against us, which could harm our business.
The direct selling
industry in Japan continues to experience regulatory and media scrutiny, and other direct selling companies have been suspended
from sponsoring activities in the past. Japan imposes strict requirements regarding how distributors approach prospective
customers. As a result, we continually evaluate and enhance our distributor compliance, education and training efforts in
Japan. However, we cannot be certain that our efforts will successfully prevent regulatory actions against us, including fines,
suspensions or other sanctions, or that the company and the direct selling industry will not receive further negative media attention,
all of which could harm our business.
The loss of key
Premium Members could negatively impact our growth and our revenue.
Currently we have
20 key Premium Members. They are responsible for sales promotion to expand their group and provide support and compliance training
to the members of their group. The loss of a key Premium Member, or a sales leader or a group of leading sales leaders, whether
by their own choice or through disciplinary actions by us for violations of our policies and procedures, could negatively impact
our growth and our revenue.
Laws and regulations may prohibit or
severely restrict direct selling and cause our revenue and profitability to decline, and regulators could adopt new regulations
that harm our business.
Laws and regulations
in Japan are particularly stringent and subject to broad discretion in enforcement by regulators. These laws and regulations are
generally intended to prevent fraudulent or deceptive schemes, often referred to as "pyramid schemes," that compensate
participants primarily for recruiting additional participants without significant emphasis on product sales to consumers.
Complying with these
rules and regulations can be difficult, time-consuming and expensive, and may require significant resources. The laws and regulations
governing direct selling are modified from time to time, and, like other direct selling companies, we are subject from time to
time to government inquiries and investigations related to our direct selling activities. In addition, markets where we currently
do business could change their laws or regulations to prohibit direct selling. If we are unable to continue business in existing
markets or commence operations in new markets because of these laws, our revenue and profitability may decline.
Risks Relating to the Company’s
Stock
The shares of our common stock are currently
not being traded and there can be no assurance that there will be an active market in the future.
Our shares of common stock are traded on the
OTC Pink, which does not have the liquidity or corporate standards of the NYSE or NASDAQ and as such, the price per share quoted
on the OTC Pink may not reflect our value. There can be no assurance that there will be an active market for our shares of common
stock in the future. As a result, investors may not be able to liquidate their investment or liquidate it at a price that reflects
the value of the business.
It is possible that we will not establish
an active market unless our stock is listed for trading on an exchange, and we cannot assure you that we will ever satisfy exchange
listing requirements.
It is possible that a significant trading
market for our shares will not develop unless the shares are listed for trading on a national exchange. Exchange listing would
require us to satisfy a number of tests as to corporate governance, public float, shareholders, equity, assets, market makers
and other matters, some of which we do not currently meet. We cannot assure you that we will ever satisfy listing requirements
for a national exchange or that there ever will be significant liquidity in our shares.
If we issue additional shares of our common
stock, you will experience dilution of your ownership interest.
We may issue shares of our authorized but
unissued equity securities in the future. Such shares may be issued in connection with raising capital, acquiring assets or firing
or retaining employees or consultants. If we issue such shares, your ownership will be diluted.
We do not intend to pay dividends in the
foreseeable future, and investors should not purchase our stock expecting to receive dividends.
We have not paid any dividends on our common
stock in the past, and we do not anticipate that we will pay dividends in the foreseeable future. Accordingly, some investors
may decline to invest in our common stock, and this may reduce the liquidity of our stock.
The limitations on liability for officers,
directors and employees under the laws of the State of Delaware and the existence of indemnification rights for our officers,
directors and employees could result in substantial expenditures by the Company and could discourage lawsuits against our officers,
directors and employees.
Our Articles of Incorporation contain a specific
provision that eliminates the liability of our officers and directors for monetary damages to our company and shareholders. Further,
we intend to provide indemnification to our officers and directors to the fullest extent permitted by the laws of the State of
Delaware. We may also enter into employment and other agreements in the future pursuant to which we will have indemnification
obligations. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover
the cost of settlement or damage awards against officers and directors. These obligations may discourage the filing of derivative
litigation by our shareholders against our officers and directors even where such litigation may be perceived as beneficial by
our shareholders.
We are an emerging growth company and cannot
be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive
to investors.
Exceed World will incur increased costs
and compliance risks as a public company.
As a public company, Exceed World will have
additional legal, accounting and other expenses that Exceed World did not have prior to acquiring Force Holdings and its subsidiaries.
-7-
Table of Contents
SUMMARY OF OUR FINANCIAL
INFORMATION
The following table sets forth selected financial information,
which should be read in conjunction with the information set forth in the “Management’s Discussion and Analysis”
section and the accompanying financial statements and related notes included elsewhere in this Prospectus.
EXCEED
WORLD, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
As
of
|
|
As
of
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
|
(Restated)
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
20,198,362
|
$
|
22,737,755
|
|
Marketable
securities
|
|
1,156,108
|
|
830,331
|
|
Accounts
receivable
|
|
2,344
|
|
1,032
|
|
Short-term
loan receivable
|
|
-
|
|
395,848
|
|
Income
tax recoverable
|
|
-
|
|
425,303
|
|
Prepaid
expenses
|
|
865,274
|
|
295,510
|
|
Inventories
|
|
626,142
|
|
380,925
|
|
Due
from related party
|
|
92,524
|
|
-
|
|
Other
current assets
|
|
453,291
|
|
255,030
|
TOTAL
CURRENT ASSETS
|
|
23,394,045
|
|
25,321,734
|
|
|
|
|
|
|
Non-current
Assets
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
792,452
|
|
343,991
|
|
Software,
net
|
|
1,051,398
|
|
2,236,447
|
|
Other
intangible assets, net
|
|
176,897
|
|
992,208
|
|
Long-term
prepaid expenses
|
|
84,968
|
|
58,341
|
|
Deferred
tax assets
|
|
134,936
|
|
287,157
|
|
Long-term
loan receivable from related party
|
|
232,128
|
|
-
|
|
Insurance
funds
|
|
91,161
|
|
-
|
TOTAL
NON-CURRENT ASSETS
|
|
2,563,940
|
|
3,918,144
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
25,957,985
|
$
|
29,239,878
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
1,226,111
|
$
|
4,572,204
|
|
Accrued
expenses and other payables
|
|
565,506
|
|
65,811
|
|
Deposit
receipt
|
|
-
|
|
100,657
|
|
Contingency
liability
|
|
409,428
|
|
-
|
|
Income
tax payable
|
|
287,301
|
|
-
|
|
Deferred
income
|
|
3,267,399
|
|
4,460,652
|
|
Capital
lease obligations, current
|
|
28,683
|
|
9,327
|
|
Due
to related parties
|
|
814,153
|
|
338,725
|
|
Due
to director
|
|
741,133
|
|
596,059
|
|
Other
current liabilities
|
|
735,926
|
|
1,741,639
|
TOTAL
CURRENT LIABILITIES
|
|
8,075,640
|
|
11,885,074
|
|
|
|
|
|
|
Non-current
Liabilities
|
|
|
|
|
|
Capital
lease obligations, long-term
|
|
98,964
|
|
41,786
|
|
Long-term
note payable
|
|
-
|
|
483,814
|
|
Long-term
deferred income
|
|
-
|
|
2,183
|
TOTAL
NON-CURRENT LIABILITIES
|
|
98,964
|
|
527,783
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
8,174,604
|
|
12,412,857
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Preferred
stock ($0.0001 par value, 20,000,000 shares authorized;
|
|
|
|
|
|
none
issued and outstanding as of September 30, 2019 and 2018)
|
|
-
|
|
-
|
|
Common
stock ($0.0001 par value, 500,000,000 shares authorized,
|
|
|
|
|
|
32,700,000
shares issued and outstanding as of September 30, 2019 and 2018)
|
|
3,270
|
|
3,270
|
|
Additional
paid-in capital
|
|
261,516
|
|
99,440
|
|
Accumulated
earnings
|
|
16,764,282
|
|
16,896,299
|
|
Accumulated
other comprehensive income (loss)
|
|
754,313
|
|
(171,988)
|
TOTAL
SHAREHOLDERS' EQUITY
|
|
17,783,381
|
|
16,827,021
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
25,957,985
|
$
|
29,239,878
|
EXCEED
WORLD, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
|
|
|
Year
Ended
|
|
Year
Ended
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
|
(Restated)
|
Revenues
|
$
|
28,393,548
|
$
|
34,878,988
|
Cost
of revenues
|
|
16,105,594
|
|
18,654,182
|
Gross
profit
|
|
12,287,954
|
|
16,224,806
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Selling
and distribution expenses
|
|
1,908,950
|
|
1,989,146
|
|
Administrative
expenses
|
|
10,853,331
|
|
11,623,028
|
Total
operating expenses
|
|
12,762,281
|
|
13,612,174
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
(474,327)
|
|
2,612,632
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
Other
income
|
|
1,270,353
|
|
266,946
|
|
Other
expenses
|
|
(845,289)
|
|
(18,171)
|
|
Change
in fair value of marketable securities
|
|
365,026
|
|
(568,990)
|
|
Interest
expenses
|
|
(1,513)
|
|
(6,082)
|
Total
other income (expense)
|
|
788,577
|
|
(326,297)
|
|
|
|
|
|
|
Net
income before tax
|
|
314,250
|
|
2,286,335
|
Income
tax expense (credit)
|
|
446,267
|
|
(89,297)
|
Net
income (loss)
|
$
|
(132,017)
|
$
|
2,375,632
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
|
|
|
Net
income (loss)
|
|
(132,017)
|
|
2,375,632
|
Other
comprehensive income (loss)
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
926,301
|
|
(244,734)
|
|
|
|
|
|
|
TOTAL
COMPREHENSIVE INCOME
|
$
|
794,284
|
$
|
2,130,898
|
|
|
|
|
|
|
Income
(loss) per common share
|
|
|
|
|
|
Basic
|
$
|
(0.00)
|
$
|
0.12
|
|
Diluted
|
$
|
(0.00)
|
$
|
0.12
|
Weighted
average common shares outstanding
|
|
|
|
|
|
Basic
|
|
32,700,000
|
|
20,173,973
|
|
Diluted
|
|
32,700,000
|
|
20,173,973
|
-8-
Table of Contents
EXCEED
WORLD, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
As
of
|
|
As
of
|
|
|
|
March
31, 2020
|
|
September
30, 2019
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
17,117,857
|
$
|
20,198,362
|
|
Marketable
securities
|
|
766,617
|
|
1,156,108
|
|
Accounts
receivable
|
|
2,234
|
|
2,344
|
|
Short-term
loan receivable
|
|
278,992
|
|
-
|
|
Prepaid
expenses
|
|
1,175,751
|
|
865,274
|
|
Inventories
|
|
520,226
|
|
626,142
|
|
Due
from related party
|
|
92,997
|
|
92,524
|
|
Other
current assets
|
|
257,080
|
|
453,291
|
TOTAL
CURRENT ASSETS
|
|
20,211,754
|
|
23,394,045
|
|
|
|
|
|
|
Non-current
Assets
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
743,382
|
|
792,452
|
|
Software,
net
|
|
719,787
|
|
1,051,398
|
|
Operating
lease right-of-use assets
|
|
450,204
|
|
-
|
|
Other
intangible assets, net
|
|
177,265
|
|
176,897
|
|
Long-term
prepaid expenses
|
|
82,764
|
|
84,968
|
|
Deferred
tax assets
|
|
291,765
|
|
134,936
|
|
Long-term
loan receivable from related party
|
|
233,315
|
|
232,128
|
|
Insurance
funds
|
|
109,060
|
|
91,161
|
TOTAL
NON-CURRENT ASSETS
|
|
2,807,542
|
|
2,563,940
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
23,019,296
|
$
|
25,957,985
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
955,952
|
$
|
1,226,111
|
|
Accrued
expenses and other payables
|
|
457,228
|
|
565,506
|
|
Contingency
liability
|
|
455,789
|
|
409,428
|
|
Income
tax payable
|
|
-
|
|
287,301
|
|
Deferred
income
|
|
1,240,173
|
|
3,267,399
|
|
Finance
lease obligations, current
|
|
26,388
|
|
28,683
|
|
Operating
lease liabilities, current
|
|
302,836
|
|
-
|
|
Due
to related parties
|
|
837,560
|
|
814,153
|
|
Due
to director
|
|
741,157
|
|
741,133
|
|
Other
current liabilities
|
|
871,434
|
|
735,926
|
TOTAL
CURRENT LIABILITIES
|
|
5,888,517
|
|
8,075,640
|
|
|
|
|
|
|
Non-current
Liabilities
|
|
|
|
|
|
Finance
lease obligations, non-current
|
|
81,301
|
|
98,964
|
|
Operating
lease liabilities, non-current
|
|
107,603
|
|
-
|
TOTAL
NON-CURRENT LIABILITIES
|
|
188,904
|
|
98,964
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
6,077,421
|
|
8,174,604
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Preferred
stock ($0.0001 par value, 20,000,000 shares authorized;
|
|
|
|
|
|
none
issued and outstanding as of March 31, 2020 and September 30, 2019)
|
|
-
|
|
-
|
|
Common
stock ($0.0001 par value, 500,000,000 shares authorized,
|
|
|
|
|
|
32,700,000
shares issued and outstanding as of March 31, 2020 and September 30, 2019)
|
|
3,270
|
|
3,270
|
|
Additional
paid-in capital
|
|
261,516
|
|
261,516
|
|
Accumulated
earnings
|
|
15,834,037
|
|
16,764,282
|
|
Accumulated
other comprehensive income
|
|
843,052
|
|
754,313
|
TOTAL
SHAREHOLDERS' EQUITY
|
|
16,941,875
|
|
17,783,381
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
23,019,296
|
$
|
25,957,985
|
EXCEED WORLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
Three
Months Ended
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
Six
Months Ended
|
|
|
|
March
31, 2020
|
|
March
31, 2019
|
|
March
31, 2020
|
|
March
31, 2019
|
|
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
Revenues
|
$
|
5,345,918
|
$
|
5,908,517
|
$
|
11,178,526
|
$
|
13,800,681
|
Cost
of revenues
|
|
3,043,386
|
|
3,050,728
|
|
5,863,270
|
|
7,547,419
|
Gross
profit
|
|
2,302,532
|
|
2,857,789
|
|
5,315,256
|
|
6,253,262
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Selling
and distribution expenses
|
|
423,895
|
|
424,407
|
|
622,720
|
|
638,920
|
|
Administrative
expenses
|
|
3,038,048
|
|
2,587,188
|
|
5,327,520
|
|
5,735,325
|
Total
operating expenses
|
|
3,461,943
|
|
3,011,595
|
|
5,950,240
|
|
6,374,245
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
(1,159,411)
|
|
(153,806)
|
|
(634,984)
|
|
(120,983)
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
16,494
|
|
50,902
|
|
19,889
|
|
78,195
|
|
Other
expenses
|
|
(53,949)
|
|
-
|
|
(77,683)
|
|
-
|
|
Change
in fair value of marketable securities
|
|
(604,354)
|
|
181,677
|
|
(390,645)
|
|
(168,383)
|
|
Interest
expenses
|
|
(525)
|
|
(378)
|
|
(1,081)
|
|
(757)
|
Total
other income (expense)
|
|
(642,334)
|
|
232,201
|
|
(449,520)
|
|
(90,945)
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before tax
|
|
(1,801,745)
|
|
78,395
|
|
(1,084,504)
|
|
(211,928)
|
Income
tax expense (credit)
|
|
(381,747)
|
|
86,583
|
|
(154,259)
|
|
153,082
|
NET
LOSS
|
$
|
(1,419,998)
|
$
|
(8,188)
|
$
|
(930,245)
|
$
|
(365,010)
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
181,547
|
|
(201,978)
|
|
88,739
|
|
476,866
|
|
|
|
|
|
|
|
|
|
|
TOTAL
COMPREHENSIVE INCOME (LOSS)
|
$
|
(1,238,451)
|
$
|
(210,166)
|
$
|
(841,506)
|
$
|
111,856
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.04)
|
$
|
(0.00)
|
$
|
(0.03)
|
$
|
(0.01)
|
|
Diluted
|
$
|
(0.04)
|
$
|
(0.00)
|
$
|
(0.03)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
Diluted
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
-9-
Table of Contents
MANAGEMENT’S
DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
As of March 31, 2020 and September 30, 2019,
we had cash and cash equivalents in the amount of 17,117,857 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.
As of September 30, 2019 and September 30,
2018, we had cash and cash equivalents in the amount of $20,198,362 and $22,737,755, 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 $5,345,918 for the
three months ended March 31, 2020 as opposed to $5,908,517 for the three months ended March 31, 2019. We recorded revenue of $11,178,526
for the six months ended March 31, 2020 as opposed to $13,800,681 for the six months ended March 31, 2019. The decrease in revenue,
in our opinion, is attributed to a decrease in recruitment activities of premium Force Club members.
We recorded revenue of $28,393,548 for the
year ended September 30, 2019 as opposed to $34,878,988 for the year ended September 30, 2018. The decrease in revenue, in our
opinion, is attributed to a decrease in recruitment activities of premium Force Club members.
Net Income (Loss)
We recorded net loss of $1,419,998 for the
three months ended March 31, 2020 as opposed to $8,188 for the three months ended March 31, 2019. We recorded net loss of $930,245
for the six months ended March 31, 2020 as opposed to $365,010 for the six months ended March 31, 2019. The increase in net loss
is attributed to a decrease in revenues.
We recorded net loss of $132,017 for the year
ended September 30, 2019 and net income of $2,375,632 for the year ended September 30, 2018. The decrease in net income is attributed
to a decrease in revenue from 2018 to 2019.
Cash flow
For the six months ended March 31, 2020 and
2019, we had negative cash flows from operations in the amount of $2,672,016 and $3,586,808, respectively. The decrease in negative
operating cash flow, in our opinion, is attributed to the decrease in negative changes in accounts payable.
For the year ended September 30, 2019, we
had negative cash flows from operations in the amount of $4,953,889. For the year ended September 30, 2018, we generated cash
flows from operations in the amount of $10,665,370. The decrease in operating cash flow, in our opinion, is attributed to decreases
in net income, accounts payable and deferred income.
Working capital
As of March 31, 2020 and September 30, 2019,
we had working capital of $14,323,237 and $15,318,405, respectively. The decrease in working capital, in our opinion, is attributed
to decreases in Cash and cash equivalents.
As of September 30, 2019 and 2018, we had
working capital of $15,318,405 and $13,436,660, 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 $423,895 and $424,407 for the three months ended
March 31, 2020 and 2019, respectively. For the six months ended March 31, 2020 and March 31, 2019, advertising expenses were $622,720
and $638,920.
For the years ended September 30, 2019 and
2018, Advertising expenses were $1,908,950 and $913,480, 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.
Impact of COVID-19
In the second quarter of the Company’s
financial year of 2020, the global outbreak of the coronavirus disease 2019 (“COVID-19”) has significantly affected
economy in Japan, where the Company mainly operates its business. Especially since February 2020, the economy has rapidly declined
due to limited economic activity caused by COVID-19. 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. Consequently,
the COVID-19 pandemic continues to adversely affect the Company’s business operations, financial condition and operating
results for 2020, including but not limited to a material negative impact to the Company’s total revenues. Due to the high
uncertainty of the evolving situation, the Company has limited visibility on the full impact brought upon by the COVID-19 pandemic
and the related financial impact to the Company cannot be estimated at this time.
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.
Emerging Growth Company
The Company is an emerging growth company
and continues to elect to utilize the extended accounting transition period as permitted by the JOBS Act of 2012. This may
make its financial statements more difficult to compare to other companies.
Pursuant to the JOBS Act of 2012, as an emerging
growth company the Company can elect to opt out of the extended transition period for any new or revised accounting standards
that may be issued by the PCAOB or the SEC. The Company has elected not to opt out of such extended transition period, which means
that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the standard for the private company. This may make comparison of the Company’s
financial statements with any other public company which is not either an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period difficult or impossible as possible different or revised standards
may be used.
The JOBS Act is intended to reduce the regulatory burden on emerging
growth companies. The Company meets the definition of an emerging growth company and so long as it qualifies as an “emerging
growth company,” it will, among other things:
|
|
·
|
be temporarily exempted from the internal control
audit requirements Section 404(b) of the Sarbanes-Oxley Act;
|
|
|
·
|
be temporarily exempted from various existing
and forthcoming executive compensation-related disclosures, for example: “say-on-pay”, “pay-for-performance”,
and “CEO pay ratio”;
|
|
|
·
|
be temporarily exempted from any rules that
might be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or supplemental
auditor discussion and analysis reporting;
|
|
|
·
|
be temporarily exempted from having to
solicit advisory say-on-pay, say-on-frequency and say-on-golden-parachute shareholder votes on executive compensation under
Section 14A of the Securities Exchange Act of 1934, as amended;
|
|
|
·
|
be permitted to comply with the SEC’s
detailed executive compensation disclosure requirements on the same basis as a smaller reporting company; and,
|
|
|
·
|
be permitted to adopt any new or revised accounting
standards using the same timeframe as private companies (if the standard applies to private companies).
|
Our company will continue to be an emerging growth company until
the earliest of:
|
|
·
|
the last day of the fiscal year during which
we have annual total gross revenues of $1 billion or more;
|
|
|
·
|
the last day of the fiscal year following the
fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act;
|
|
|
·
|
the date on which we issue more than $1 billion
in non-convertible debt securities during a previous three-year period; or
|
|
|
·
|
the date on which we become a large accelerated
filer, which generally is a company with a public float of at least $700 million (Exchange Act Rule 12b-2).
|
-10-
Table of Contents
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements
that involve risk and uncertainties. We use words such as “anticipate”, “believe”, “plan”,
“expect”, “future”, “intend”, and similar expressions to identify such forward-looking statements.
Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management
as of the date of this filing. Our actual results could differ materially from those anticipated in these forward-looking statements
for many reasons, including the risks faced by us as described in the “Risk Factors” section and elsewhere in this
prospectus.
DESCRIPTION OF
BUSINESS
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. 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
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.
Overview
Our principal executive offices are located
at 1-1-36, 1-2-38-6F, Esaka-cho, Suita-shi, Osaka 564-0063, Japan. Our phone number is +81-6-6339-4177.
The Company has elected September 30th as
its fiscal year end.
Currently, we own the following wholly owned affiliated entities:
Name
of Subsidiary
|
State
or Other Jurisdiction of Incorporation or Organization
|
|
|
Force
International Holdings Limited
|
Hong
Kong
|
e-Learning
Laboratory Co., Ltd.
|
Japan
|
e-Communications
Co., Ltd.
|
Japan
|
* The following chart illustrates the structure
of our consolidated affiliated entities:
Currently, the number of the employees of
the Company is 41.
-11-
Table of Contents
e-Learning Business
With the completion of the Company’s
acquisition of Force Holdings and its subsidiaries, we are now adding the business of providing education services to current
business plan.
The Company is an education service provider
in Japan and it offers a range of e-learning education programs as well as supporting services to complement such education programs
through an internet platform named “Force Club” (“Force Club”), which was launched in 2007. The Company
has offered e-learning programs through “Force Club”, all of which were procured from independent third-party software
developers, including pre-school learning resources, learning resources supplementing elementary school, junior high school and
senior high school curriculum, preparation courses for university entrance examinations and professional qualification examinations,
and English learning, appealing to a diverse customer base from pre-school children to students and adult learners. A list of
the Company’s e-learning programs, target customer group and release date are set out below. The e-learning programs of
Force Club mainly serve as supplemental learning resources and self-learning tools for students and adult learners.
No.
|
Content
Name
|
Target
|
Compatible
Devices
|
Release
Date
|
1
|
ENGLISH
MONSTERS
|
Primary
school student
|
iOS
smartphone / tablet
|
2013
|
Android
smartphone / tablet
|
2013
|
2
|
Romantic
English Conversation - London Ver.
|
Age
18 and over
|
iOS
smartphone / tablet
|
2013
|
Android
smartphone / tablet
|
2013
|
3
|
Romantic
English Conversation - College Life Ver.
|
Age
18 and over
|
iOS
smartphone / tablet
|
2013
|
Android
smartphone / tablet
|
2013
|
4
|
ENGLISH
MONSTERS AR
|
Primary
school student
|
iOS
smartphone / tablet
|
2013
|
Android
smartphone / tablet
|
2013
|
5
|
The
Blue Danube
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
6
|
The
Nutcracker
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
7
|
Peter
& the Wolf
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
8
|
The
Four Seasons
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
9
|
The
Carnival of the Animals
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
10
|
Play
A,B,C on the Keyboard
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
11
|
Say
Hello to English Words!
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
12
|
Force
Paint
|
Infants
|
iOS
smartphone / tablet
|
2012
|
Android
smartphone / tablet
|
2014
|
13
|
Force
Musician
|
Infants
|
iOS
smartphone / tablet
|
2012
|
14
|
Inheritance
Diagnosis Consultant
|
Adult
|
iOS
smartphone / tablet
|
2013
|
Android
smartphone / tablet
|
2013
|
15
|
Sign
Language Course
|
Adult
|
PC
|
2014
|
16
|
University
Entrance Exam Preparation Course
|
High
school student /
Those who prepare for entrance exam
|
PC
|
2008
|
Android
smartphone / tablet
|
2014
|
17
|
LEARNING
EYES
|
Adult
|
PC
|
2012
|
Android
smartphone / tablet
|
2014
|
18
|
High
School Student-oriented e-learning
|
High
school student
|
PC
|
2009
|
Android
smartphone / tablet
|
2014
|
19
|
Folstar
|
Adult
|
Feature
Phone
|
2008
|
20
|
Qualification
Attainment Strategies Course
|
Adult
|
iOS
smartphone / tablet
|
2015
|
Android
smartphone / tablet
|
21
|
School
TV
|
Primary
school student / Middle school student
|
PC
|
2015
|
iOS
smartphone / tablet
|
Android
smartphone / tablet
|
23
|
English
Monsters app
|
Main:
High school student / College student
(However, primary school student, middle school student, and adults are also included as targets.)
|
iOS
smartphone / tablet
|
2015
|
23
|
ForceMart
|
Force
Club Members
|
PC
|
2017
|
iOS
smartphone / tablet
|
Android
smartphone / tablet
|
The Company’s e-learning programs are
offered to its customers who have to be first registered as a member of Force Club. Since 2002, the Company began to offer its
e-learning programs to its customers in CD-ROMs with pre-loaded learning content until 2007. Due to the popular trend for internet,
starting from 2007, the Company has made its e-learning programs available on its website for its customers, and the customers
need to pay a monthly fee in order to access and view the most up-to-date content on the website of the Company. At the advent
of digital technology in recent years and in view of the increasing popularity of tablet devices, the Company has released its
e-learning programs on smartphones and tablet devices for customer use since 2012 to cater for the popular demand of young learners
and users in rural areas of Japan. The e-learning programs of Force Club are targeted at residents of Japan, and thus the e-learning
programs are presented in Japanese only and no translated version is available. Since 2015, in addition to e-learning, the Company
has started offline business which attracts public attentions such as Abacus School and Robot Programming School. The Company
also opened “ixi After School” in Tokyo, which provides after school care services to children. Through these offline
business, the Company has provided services to general users.
The Company regularly updates its e-learning
materials and programs. In particular, the learning resources supplementing elementary school, junior high school and senior high
school curriculum would be overhauled to correspond to any revision in school curriculum, which generally takes place once in
a four-year period. In addition, most of preparation courses for the university entrance examinations and professional qualification
examinations would be revised at one to two year intervals to cater for any changes to the examination syllabus. The website of
the Company is updated from time to time to reflect the updates and changes to the learning materials and programs and for users
with smartphones and tablet devices, these updates can also be downloaded from the website of the Company.
-12-
Table of Contents
Business Model
Apart from using a conventional direct sales
marketing strategy, the Company has also adopted multilevel marketing (“MLM”), via the Premium Membership in the Force
Club, in operating its businesses.
Since 2002, the Company has adopted a direct
sales marketing strategy to market its e-learning programs. Subsequently, in 2007, the Company gradually changed its marketing
strategy from direct sales to MLM for the purposes of (i) establishing its brand name and penetrating into the rural areas of
Japan; (ii) promoting its products to wider customer groups through premium members; and (iii) incentivizing premium members to
recruit new members to join Force Club in order to increase the sales of its products and maximize profits for the Company. Currently,
the Company has no retail shops or other point-of-sale for its products (e-learning courses).
MLM was adopted by the Company in order to
expand the sales of its e-learning programs through its Force Club members. There are two tiers of Force Club members, namely
standard members and premium members. Among Force Club members, premium members get a tablet device which entitles the premium
members to life-time access of all of the Company’s e-learning educational content. Since the Company’s e-learning
education programs are distributed in the form of online downloads, it can be used both online and offline.
Force Club Membership
Force Club members are those who intend to
use products and services the Company offers. There are two tiers of Force Club members, namely standard members and premium members.
Premium members are those who wish to engage in recruiting new members (“Premium Members”).
Premium Members have to join a premium plan
under which members are given rights to use all products and services of the Company, and engage in activities to recruit new
Force Club members and obtain monetary rewards and bonuses (special income or commissions) from such activities. The Company enters
into a contract (the “Premium Member Contract”) with each of its Premium Members. The salient terms of the Premium
Member Contract are as follows:
Eligibility - the following individuals/corporations
are eligible to register as the Company’s Premium Members:
(i) Individuals (other than students) who
are 20 years old or above and are residents of Japan; and
(ii) Corporations established in Japan.
Applicants are required to provide proof of
identity, such as driver’s license, passport or resident card for individual members or a certified copy of the commercial
registration for corporate members.
Payments – an applicant who wishes to
be a Force Club Premium Member has to join the premium plan and pay an initial payment of JPY420,000 (exclusive of sales tax),
comprising:
(i) The one-off registration fee of JPY10,000;
(ii) The premium package fee of JPY390,000;
and
(iii)An advanced payment of monthly membership
fees for the initial two months amounting to JPY20,000.
Standard members pay the same registration
fee, but a reduced monthly rate and no premium package fee. Monthly membership fees payable from the third month onwards will
be automatically transmitted from a member’s bank account until termination of membership.
Based on provisions described fully in the
Premium Member Contract there are fees related to, but not exclusively limited to, cancellation of membership and other stipulations
pursuant to certain actions. If a Premium Member does not pay the monthly membership fee before the prescribed due date, such
Premium Member will be disqualified and will not be paid any commission with respect to his/her recruitment performance in the
preceding month, and Force Club services for such Premium Member will be suspended in the following month. The commission and
Force Club services for such Premium Member will be resumed in the subsequent month if the monthly membership fee is paid within
three months from the due date. Otherwise, the Premium Member is deemed to have withdrawn from his membership if the monthly membership
fee is not paid for three consecutive months after the payment due date.
In addition, the Premium Member Contract sets
out the rules of conduct required to be observed by Premium Members in recruiting new members to join Force Club. The Company
is entitled to suspend a Premium Member’s business activities, suspend his or her commission, demand return of commission(s),
remove his or her title, or terminate his or her membership if such Premium Member violates or infringes the rules of conduct
or other related laws or regulations, and/or acts in a way that is offensive to public order and morals.
Upon registration as Force Club members, applicants
will be given a user ID to gain access to the e-learning programs through Force Club platform. Force Club members will be given
additional four user IDs after registration so that they can use a total of five user IDs for accessing e-learning content through
Force Club platform.
The number of Force Club members has increased
from approximately 3,989 as of September 30, 2008 to approximately 7,216 as of the date of this report.
Competition
We believe that our main competitors are those provide similar
e-learning product offerings in Japan. Specifically, we believe our biggest competitors at present are Recruit Marketing Partners
Co., Ltd., which provides "Study Supplements", JustSystem Corporation, which provides "Smile Zemi", Benesse
Corporation which provides "Challenge Touch" and SuRaLa Net Co., Ltd. which provides "SuRaLa", whose product
offerings are also consistent of e-learning programs and services.
Current Advertising
Our advertising expenses are primarily 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 premium package. While it is the intention of the Company to maintain this revenue stream,
and to further increase the number of premium members 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.
Employees
The number of the employees of the Company,
and all subsidiaries, as of the filing date is forty-one. All forty-one employees are considered full-time employees. We do not
presently have pension, health, annuity, insurance, stock options, profit sharing, or similar benefit plans; however, we may adopt
plans in the future. There are presently no personal benefits available to our officers/or directors and or employees.
Government Regulations
Companies in Japan are regulated by the “Act
on Specified Commercial Transactions in Japan.” The Company believes it is fully in compliance with this Act, which outlines
the rules and regulation regarding transactions arising from door-to-door sales, mail order sales, telemarketing sales, and multilevel
marketing transactions, among other transactions defined in the Act.
The Company has legal counsel in Japan whom
provides instruction, direction, and reviews Company activities to ensure, to the best of Legal Counsel’s knowledge, that
the Company is in compliance with the aforementioned Act.
-13-
Table of Contents
USE OF PROCEEDS
Since the offering is being made by the selling
shareholder we will not receive any of the proceeds from the offering. The selling shareholder however, will be the beneficiary
of the proceeds and will be able to use the proceeds from the sale of their shares in any way they see fit. There is currently
no appointed escrow agent for the sale of any shares of our common stock by the selling shareholders.
DETERMINATION
OF OFFERING PRICE
Our shares are quoted on the OTC Pink, which
does not have the liquidity or corporate standards of the NYSE or NASDAQ. Since the price per share quoted on the OTC Pink may
not reflect our value, the offering price of the shares of common stock was arbitrarily determined. The offering price was determined
by us and affiliated parties and is based on the assessment of the Company’s financial condition and prospects, limited
offering history, and the general condition of the securities market. It does not necessarily bear any relationship to our book
value, assets, past operating results, financial condition or any other established criteria of value.
DILUTION
Dilution represents the difference between
the offering price and the net tangible book value per share immediately after completion of this Offering. Net tangible book
value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises
mainly as a result of our arbitrary determination of the Offering price of the shares being offered. Dilution of the value
of the shares you purchase is also a result of the lower book value of the shares held by our existing stockholders. The
following tables compare the differences of your investment in our shares with the investment of our existing stockholders.
As of March 31, 2020, the net tangible book
value of our shares of common stock was $16,941,875.
Existing
stockholders if all of the shares are sold
|
|
|
|
|
|
|
Price
per share
|
$
|
0.09
|
|
Net
tangible book value per share before Offering
|
$
|
0.52
|
|
Potential
gain (loss) to existing shareholders
|
$
|
(0.43)
|
|
Net
tangible book value per share after Offering
|
$
|
0.52
|
|
Increase
to present stockholders in net tangible book value per share after Offering
|
$
|
0.00
|
|
Number
of shares outstanding before the Offering
|
|
32,700,000
|
|
Number
of shares after Offering held by existing stockholders
|
|
29,700,000
|
|
Percentage
of ownership after Offering
|
|
90.8
|
%
|
|
|
|
|
Purchasers
of shares in this Offering if all shares are sold
|
|
|
|
|
|
|
Price
per share
|
$
|
0.09
|
|
Dilution
per share
|
$
|
(0.43)
|
|
Capital
contributions
|
$
|
0.00
|
|
Percentage
of capital contributions
|
|
0.00
|
%
|
Number
of shares after Offering held by public investors
|
|
3,000,000
|
|
Percentage
of ownership after Offering
|
|
9.2
|
%
|
SELLING SHAREHOLDERS
The shares being offered for resale by the
selling stockholders consist of 3,000,000 shares of our common stock held by 1 shareholder.
Selling security
holders are persons or entities that, directly or indirectly, have acquired shares. This prospectus and any prospectus supplement
will only permit the selling security holder to sell the Common Shares identified in the column “Shares of Common stock
to be sold.”
The Common Shares issued to the selling security
holder are “restricted” shares under applicable federal and state securities laws and are being registered to give
the selling security holder the opportunity to sell their Common Shares. The registration of such Common Shares does not necessarily
mean, however, that any of these Common Shares will be offered or sold by the selling security holder. The selling security holder
may from time to time offer and sell all or a portion of their shares in the over-the-counter market, in negotiated transactions,
or otherwise, at market prices prevailing at the time of sale or at negotiated prices.
The selling security
holder reserves the sole right to accept or reject, in whole or in part, any proposed purchase of the registered Common Shares
to be made directly or through agents. As of the date of this prospectus, based on the representations received by the Company
from the selling shareholder, the selling shareholder is not a broker or dealer or affiliated with brokers or dealers.
The following table sets forth the name of
the selling stockholder, the number of shares of common stock beneficially owned by the selling stockholder as of the filing date
and the number of shares of common stock being offered by the selling stockholder. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholder may offer all or part of the shares for resale from time to time.
However, the selling stockholder is under no obligation to sell all or any portion of such shares nor are the selling stockholder
obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership
has been furnished by the selling stockholder.
Name
of selling stockholder
|
Shares
of Common stock owned prior to offering
|
Shares
of Common stock to be sold
|
Shares
of Common stock owned after offering (if all shares are sold)
|
Percent
of common stock owned after offering (if all shares are sold)
|
Force
Internationale Limited *
|
27,594,000
|
3,000,000
|
24,594,000
|
75.2%
|
Total
|
27,594,000
|
3,000,000
|
24,594,000
|
75.2%
|
* Force Internationale Limited is the controlling shareholder of
the Company. Mr. Tomoo Yoshida is the controlling shareholder and director of Force Internationale Limited, a Cayman Islands Company.
Mr. Yoshida is also our sole officer and director.
-14-
Table of Contents
PLAN OF DISTRIBUTION
The Company has 32,700,000 shares of common
stock issued and outstanding as of the date of this prospectus. Pursuant to this offering the Company is registering for resale
3,000,000 shares of our common stock at a fixed price of $0.09 per share for the duration of the offering.
Only after our registration statement is declared
effective by the Securities and Exchange Commission, can the selling shareholder sell shares in this offering. No shares
purchased in this Offering will be subject to any kind of lock-up agreement. There is no minimum number of shares that must be
sold in this offering. We may close this offering at any time prior to the 365 day period (duration of offering; starts from date
of effectiveness) for any reason in our sole discretion.
Offering Period and Expiration Date
The offering of securities by the Company
will start on the date that this registration statement is declared effective by the SEC and continue for a period of 365 days
unless the offering is completed or otherwise terminated by us, or in such case extended for an additional 90 days by the Company’s
sole officer and director, Tomoo Yoshida.
Procedures for Subscribing
The selling shareholder will not accept any
money until the SEC declares this registration statement effective. Once the registration statement is declared effective
by the SEC, if you decide to subscribe for any shares in this Offering, you must purchase shares directly from the selling shareholder.
All checks or cash will be for the beneficiary
of the selling shareholder. The process to subscribe may vary depending on the shareholder as the Company is not affiliated with
any subsequent purchase of shares between future investors and the shareholders herein who will be able to sell shares.
Right to Reject Subscriptions
Shareholders have the right to accept or reject
subscriptions in whole or in part, for any reason or for no reason.
DESCRIPTION OF
SECURITIES
We have authorized capital stock consisting
of 500,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”) and 20,000,000 shares of preferred
stock, $0.0001 par value per share (“Preferred Stock”). As of the date of this filing we have 32,700,000 shares of
Common Stock and no shares of Preferred Stock issued and outstanding.
Common Stock
The holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and
in such amounts as the board from time to time may determine. Holders of Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing
for election. The Common Stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation,
dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding payment of other claims
of creditors.
Preferred Stock
Shares of Preferred Stock may be issued from
time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by our
Board of Directors (“Board of Directors”) prior to the issuance of any shares thereof. Preferred Stock shall have
such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions
providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof. The number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting
power of all the then outstanding shares of our capital stock entitled to vote generally in the election of the directors, voting
together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote
of any such holders is required pursuant to any Preferred Stock Designation.
Options and Warrants
None.
Convertible Notes
None.
Dividend Policy
We have not paid any cash dividends to shareholders. The declaration
of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital
requirements and financial position, general economic conditions, and other pertinent conditions. It is our present intention
not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Transfer Agent
Our stock transfer agent is Olde Monmouth
Stock Transfer Co., Inc. Their mailing address is 200 Memorial Parkway, Atlantic Highlands, NJ 07716, and their telephone number
is 732-872-2727.
-15-
Table of Contents
INTERESTS OF NAMED
EXPERTS AND COUNSEL
The validity of the shares of common stock
offered hereby will be passed upon for us by NewRev General Counsel, LLC at 8547 E. Arapahoe Road, Number J453, Greenwood Village,
CO 80112.
Our consolidated financial statements as of
September 30, 2019 and 2018 included in this prospectus and the registration statement have been audited by MaloneBailey, LLP
and Lo and Kwong C.P.A. & Co., two independent registered public accounting firms, given on the authority of said firm as
experts in accounting and auditing. Lo and Kwong C.P.A. & Co. was appointed by the Company to serve as its independent registered
public accounting firm for fiscal year ended September 30, 2018. MaloneBailey, LLP was appointed by the Company to serve as its
independent registered public accounting firm for fiscal year ended September 30, 2019.
REPORTS TO SECURITIES
HOLDERS
We will and will continue to make our financial
information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation
S-K for a smaller reporting company under the Securities Exchange Act. In addition, we will file Form 8-K and other proxy and
information statements from time to time as required. The public may read and copy any materials that we file with the SEC at
the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
DESCRIPTION OF
FACILITIES
Exceed World,
Inc. is provided office space rent free from e-Learning Laboratory Co., Ltd. at the address of 1-23-38-6F, Esakacho, Suita-shi.
e-Communications
Co., Ltd, a Japan corporation, is a wholly owned subsidiary of e-Learning Laboratory Co, Ltd., a Japan corporation.
e-Communications
sub-leases (rents) office space from its parent company, e-Learning Laboratory Co, Ltd., a Japan corporation at the following
addresses:
1-23-38-1F,
Esakacho, Suita-shi, Osaka Japan 1-23-38-6F, Esakacho, Suita-shi, Osaka Japan 1-23-38-8F, Esakacho, Suita-shi, Osaka Japan 1-8-40-1F,
Konan, Minato-ku, Tokyo, Japan. The aforementioned office spaces are shared by both e-Communications Co., Ltd. and e-Learning
Laboratory Co., Ltd.
The following
table details the terms of the lease agreements for various properties leased by our wholly owned subsidiary, e-Learning Laboratory
Co., Ltd., a Japan company.
Work
space
|
Address
|
Lessee
|
Lessor
|
Monthly
Rent, Approximate
(Tax
included)
|
Term
(Expiration of Lease)
|
Esaka,
Osaka, 1st floor
|
1-23-38-1F,
Esakacho, Suita-shi, Osaka Japan
|
e-Learning
Laboratory Co., Ltd.
|
F&M
Co., Ltd.
|
JPY715,000
|
May
31, 2021
|
($6,500)
|
Esaka,
Osaka, 6th floor
|
1-23-38-6F,
Esakacho, Suita-shi, Osaka Japan
|
e-Learning
Laboratory Co., Ltd.
|
F&M
Co., Ltd.
|
JPY
1,200,000
|
April
17, 2021
|
($11,000)
|
Esaka,
Osaka, 8th floor
|
1-23-38-8F,
Esakacho, Suita-shi, Osaka Japan
|
e-Learning
Laboratory Co., Ltd.
|
F&M
Co., Ltd.
|
JPY615,000
|
October
31, 2022
|
($5,600)
|
Tokyo
|
1-8-40-1F,
Konan, Minato-ku, Tokyo, Japan
|
e-Learning
Laboratory Co., Ltd.
|
Tokyu
Community Corp.
|
JPY
1,400,000
|
August
31, 2020
|
($13,000)
|
LEGAL
PROCEEDINGS
For the six
months ended March 31, 2020, 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 June 25, 2020, the filing date of the financial statements for the six months ended March 31, 2020, the Company had
26 pending legal cases, claiming a damage of approximately JPY177.8 million (approximately $1.7 million) under the same nature.
Our legal counsel estimated a probable settlement of 25 of these cases with total settlement amount of approximately JPY49.0 million
(approximately $456,000). The Company was unable to estimate the likelihood of the loss of one pending legal case with original
claim of approximately JPY25.1million (approximately $231,000). The Company has contingency liability in the amount of $455,789
and $409,428 as of March 31, 2020 and September 30, 2019, respectively. The change in the estimate was recorded in earnings during
the six months ended March 31, 2020. Subsequent to June 25, 2020, the Company had one new pending legal case under the same nature,
claiming a damage of approximately JPY12.7 million (approximately $118,000). Our legal counsel estimated a probable settlement
of this case with settlement amount of approximately JPY5.1 million (approximately $47,000).
For the year ended September 30, 2019, the
Company settled 11 legal cases in total amount of approximately JPY48.8 million (approximately $443,000) related to the cancellation
of contracts.
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.
PATENTS AND TRADEMARKS
We do not own, either legally or beneficially, any patents or trademarks.
-16-
Table of Contents
DIRECTORS AND EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
The name, age and position of our officers
and directors are set forth below:
Name
|
|
Age
|
|
Position(s)
|
Tomoo Yoshida
|
|
57
|
|
CEO, President,
Director
|
The mailing address for each of the officers
and directors named above is c/o of the Company at: 1-23-38-6F, Esakacho, Suita-shi, Osaka 564-0063, Japan.
Tomoo Yoshida
Mr. Tomoo Yoshida graduated from Osaka
University of Commerce in 1986. Also in 1986, Mr. Yoshida took a sales position with Toyota Corolla Nankai Co. Ltd, where he remained
until 1994. In 1997, Mr. Yoshida incorporated Dipro Data Service Co., Ltd., where he worked in both a managerial capacity and
as an IT support consultant until 2002. In 2002, Mr. Yoshida incorporated e-Learning Laboratory Co., Ltd., a company that provides
educational services and products. Currently, he is the President of e-Learning Laboratory Co., Ltd. In 2009, Mr. Yoshida incorporated
e-Communications Co., Ltd, a company offering educational services. He is currently the president of e-Communications Co., Ltd.
In 2011, Mr. Yoshida incorporated Force Internationale Limited, a holding company, where he currently serves as a Director. In
2012, Mr. Yoshida incorporated Force International Holdings Limited, a holding company, where he currently serves as a Director.
The board of directors of the Company (the
“Board”) appointed Mr. Yoshida in recognition of his abilities to assist the Company in expanding its business and
the contributions he can make to the Company’s strategic direction.
Corporate Governance
The Company promotes accountability for adherence
to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and
documents that the Company files with the Securities and Exchange Commission (the “SEC”) and in other public communications
made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not
formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and Directors
as the Company is not required to do so.
In lieu of an Audit Committee, the Company’s
Board of Directors, is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing
the scope, results and effectiveness of the annual audit of the Company's financial statements and other services provided by
the Company’s independent public accountants. The Board of Directors, the Chief Executive Officer and the Chief Financial
Officer of the Company review the Company's internal accounting controls, practices and policies.
Committees of the Board
Our Company currently does not have nominating,
compensation, or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation
or audit committee charter. Our sole Director believes that it is not necessary to have such committees, at this time, because
the Director(s) can adequately perform the functions of such committees.
Audit Committee Financial Expert
Our Board of Directors has determined that
we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(D)(5)
of Regulation S-K, nor do we have a Board member that qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B)
of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the FINRA Rules.
We believe that our Director(s) are capable
of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.
The Director(s) of our Company does not believe that it is necessary to have an audit committee because management believes that
the Board of Directors can adequately perform the functions of an audit committee. In addition, we believe that retaining an independent
Director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and
is not warranted in our circumstances given the stage of our development.
-17-
Table of Contents
Involvement in Certain Legal Proceedings
Our sole officer and director has not been involved in or a party
in any of the following events or actions during the past ten years:
1.
|
any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;
|
2.
|
any conviction in
a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
3.
|
being subject to
any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or
banking activities; or
|
4.
|
being found by a
court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
|
5.
|
Such person was
found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities
law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or
vacated;
|
6.
|
Such person was
found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or vacated;
|
7.
|
Such person was
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of:(i) Any Federal or State securities or commodities law
or regulation; or(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order; or(iii) Any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity; or
|
8.
|
Such person was
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member.
|
Independence of Directors
We are not required to have independent members of our Board of
Directors, and do not anticipate having independent Directors until such time as we are required to do so.
Code of Ethics
We have not adopted a formal Code of Ethics.
The Board of Director(s) evaluated the business of the Company and the number of employees and determined that since the business
is operated by a small number of persons, general rules of fiduciary duty and federal and state criminal, business conduct and
securities laws are adequate ethical guidelines. In the event our operations, employees and/or Directors expand in the future,
we may take actions to adopt a formal Code of Ethics.
Shareholder Proposals
Our Company does not have any defined policy
or procedural requirements for shareholders to submit recommendations or nominations for Directors. The Board of Director(s) believes
that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business
operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election
of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board
of Director(s) will assess all candidates, whether submitted by management or shareholders, and make recommendations for election
or appointment.
A shareholder who wishes to communicate with
our Board of Director(s) may do so by directing a written request addressed to our sole officer and director Tomoo Yoshida, at
the address appearing on the first page of this Information Statement.
-18-
Table of Contents
EXECUTIVE COMPENSATION
The table below summarizes all compensation
awarded to, earned by, or paid to our named executive officer(s) and director(s) for the year ended September 30, 2019 and 2018.
This in relation to the Company, Exceed World, Inc.
|
|
|
|
|
|
|
|
|
|
SUMMARY
COMPENSATION TABLE
|
Name and
principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
Tomoo Yoshida
Chief Executive Officer,
Chief Financial Officer
Director
|
2019
|
1,290,322
|
0
|
0
|
0
|
0
|
0
|
0
|
1,290,322
|
|
|
|
|
|
|
|
|
|
|
Tomoo Yoshida
Chief Executive Officer,
Chief Financial Officer
Director
|
2018
|
1,187,324
|
0
|
0
|
0
|
0
|
0
|
0
|
1,187,324
|
Notes:
On September 26, 2018, the Company entered
into, and consummated, 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.
Note: e-Learning Laboratory Co., Ltd, a Japan
corporation, is a wholly owned subsidiary of Force International Holdings Limited, a Hong Kong limited company. e-Communications
Co., Ltd, a Japan corporation, is a wholly owned subsidiary of e-Learning Laboratory Co, Ltd, a Japan corporation.
For the year ended September 30, 2019 and
2018, e-Learning Laboratory Co., Ltd., paid out $1,090,413 and $1,072,914, respectively, to Mr. Tomoo Yoshida as salary compensation.
For the year ended September 30, 2019 and
2018, e-Communications Co., Ltd., paid out $199,909 and $114,410, respectively, to Mr. Tomoo Yoshida as salary compensation.
From October 1, 2017 through the year ended
September 30, 2019, School TV Co., Ltd. and Force International Holdings Limited had not paid any compensation of any type to
Mr. Tomoo Yoshida.
Option/SAR Grants in Last Fiscal Year
None.
Outstanding Equity Awards at Fiscal Year-End
None.
Equity Compensation Plan Information
Not applicable.
Employment Agreements of our Sole Officer
and Director
None.
Compensation Discussion and Analysis
Director Compensation
The Board of Directors reserves the right
in the future to award the members of the Board of Directors cash or stock based consideration for their services to the Company,
which awards, if granted shall be in the sole determination of the Board of Directors.
Executive Compensation Philosophy
Our Board of Directors determines the compensation
given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executive or
any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or
to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance.
This package may also include long-term stock based compensation to certain executives, which is intended to align the performance
of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance
base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its
sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive
bonuses to our executive officer and/or future executive officers in its sole discretion, if the Board of Directors believes such
bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the
amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive
talent necessary to support the Company’s long-term business strategy we may award our executive and any future executives
with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors, which we do not currently
have any immediate plans to award.
-19
Table of Contents
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pre-Closing Security Ownership
As of the filing date, the Company had 32,700,000 shares
of common stock and no shares of preferred stock issued and outstanding, which number of issued and outstanding shares of common
stock and preferred stock have been used throughout this report.
*The table below is as of the filing date.
Name
and Address of Beneficial Owner
|
Shares
of Common Stock Beneficially Owned
|
Common
Stock Voting Percentage Beneficially Owned
|
Voting
Shares of Preferred Stock
|
Preferred
Stock Voting Percentage Beneficially Owned
|
Total
Voting Percentage Beneficially Owned (1)
|
Executive Officers and Directors
|
|
|
|
|
|
Tomoo Yoshida
|
1,400,000
|
4.3%
|
0
|
0.0%
|
4.3%
|
5% Shareholders
|
|
|
|
|
|
Keiichi Koga
|
1,400,000
|
4.3%
|
0
|
0.0%
|
4.3%
|
Force Internationale Limited
|
27,594,000
|
84.4%
|
0
|
0.0%
|
84.4%
|
Note: Tomoo Yoshida and Keiichi
Koga are the controlling parties of Force Internationale Limited, a Cayman Island company. Collectively, Mr. Yoshida and Keiichi
Koga, through their personal equity interests and those indirect interests of the Company, through their ownership in Force Internationale
Limited, own 93% of the issued and outstanding shares of our common stock.
Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more
than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares
are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an
option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of
any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such
acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily
reflect the person’s actual voting power at any particular date.
Changes in Control
The Company is not aware of any arrangement
which may at a subsequent date result in a change in control of the Company.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Family Relationships
None.
Transactions with Related Persons, Promoters,
and Certain Control Persons
On September 26, 2018, e-Learning, a direct
wholly owned subsidiary of Force Holdings, which was incorporated in Hong Kong with limited liability, entered into a share purchase
agreement with Force Internationale, the sole shareholder of Force Holdings, in which e-Learning agreed to sell and Force Internationale
agreed to purchase 74.5% equity interest of the Company at a consideration of US$26,000.
On September 26, 2018, the Company entered
into, and consummated, a Share Purchase Agreement with Force Internationale, to acquire 100% of Force Holdings and 100% direct
owner of e-Learning. In consideration of this agreement, the Company issued 12,700,000 common shares to Force Internationale.
On December 6, 2018, the Company entered into
a Share Contribution Agreement (this "Agreement") with Force Internationale, our controlling shareholder. Under this
Agreement, the Company transferred 100% of the equity interests of School TV to Force Internationale without consideration. This
Agreement and action were approved by the board of directors of each of, the Company, Force Internationale and School TV. A copy
of this Agreement is included as Exhibit 10.1 to this Current Report and is hereby incorporated by reference.
Due to related
parties and directors
As of March 31, 2020 and September 30, 2019,
the Company’s due to related parties and directors are as follows:
|
|
March
31, 2020
|
|
September
30, 2019
|
Due
to director
|
|
|
|
|
Tomoo
Yoshida, CEO, CFO, sole director and a shareholder of the Company
|
$
|
741,157
|
$
|
741,133
|
Total
due to director
|
$
|
741,157
|
$
|
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
|
|
656,305
|
|
633,578
|
School
TV Co., Ltd., a wholly-owned subsidiary of Force Internationale
|
|
133,620
|
|
132,940
|
Total
due to related parties
|
$
|
837,560
|
$
|
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 six months ended March 31, 2020 and 2019.
Due from related parties
As of March 31, 2020 and September 30, 2019,
the Company had a long-term loan of $233,315 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 March 31, 2020 and September 30, 2019,
the Company had a short-term loan of $92,997 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.
Review, Approval and Ratification of Related
Party Transactions
Given our small size and limited financial
resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as
those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to establish formal
policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such
transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof.
On a moving forward basis, our Directors will continue to approve any related party transaction.
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On September 7, 2018, the Company released
its independent registered public accounting firm, MaloneBailey, LLP (“MB”) of Houston, Texas. MB's report on the
financial statements for the year ended September 30, 2017 and the ten-month period from December 1, 2015 through September 30,
2016 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to audit scope or accounting principles,
except that the report contained an explanatory paragraph stating that there was substantial doubt about the Company's ability
to continue as a going concern.
Our Board of Directors participated in and
approved the decision to change our independent registered public accounting firm. During the year ended September 30, 2017 and
the ten-month period from December 1, 2015 through September 30, 2016, and through September 7, 2018, there have been no disagreements
with MB on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of MB would have caused them to make reference thereto in their
reports on the financial statements.
On September 13, 2018, the Company engaged
Lo and Kwong C.P.A. & Co. (“L&K”) of Hong Kong, as its new Independent Registered Public Accounting Firm.
During the period ended June 30, 2018 and prior to September 13, 2018 (the date of the new engagement), we did not consult with
L&K regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that
might be rendered on the Company’s financial statements by L&K, in either case where written or oral advice provided
by L&K would be an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting
issues or (iii) any other matter that was the subject of a disagreement between us and our former auditor or was a reportable
event (as described in Items 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively).
On July 12, 2019, the Company dismissed L&K
and engaged MB, as its new Independent Registered Public Accounting Firm. The dismissal of L&K was approved by the Company’s
Board. During the ten-month period from September 13, 2018 through July 12, 2019, there have been no disagreements with L&K
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements,
if not resolved to the satisfaction of L&K would have caused them to make reference thereto in their reports on the financial
statements.
During the period ended June 30, 2019 and
prior to July 12, 2019 (the date of the new engagement), we did not consult with MB regarding (i) the application of accounting
principles to a specified transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial
statements by MB, in either case where written or oral advice provided by MB would be an important factor considered by
us in reaching a decision as to any accounting, auditing or financial reporting issues or (iii) any other matter that was the
subject of a disagreement between us and our former auditor or was a reportable event (as described in Items 304(a)(1)(iv) or
Item 304(a)(1)(v) of Regulation S-K, respectively).
Board of Directors Pre-Approval Process, Policies and Procedures
Our principal auditors have informed our sole director of the scope
and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services,
our principal accountants brought such services to the attention of our sole director prior to commencing such services.
MATERIAL CHANGES
There are no material changes to the Company
that are not reported herein.
-20-
Table of Contents
EXCEED
WORLD, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND
2018
INDEX TO FINANCIAL
STATEMENTS
|
|
Pages
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F2-F3
|
|
|
|
Consolidated
Balance Sheets
|
|
F4
|
|
|
|
Consolidated Statements
of Operations and Comprehensive Income
|
|
F5
|
|
|
|
Consolidated
Statements of Shareholders' Equity
|
|
F6
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
F7
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
F8-F11
|
-F1-
Table of Contents
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Exceed World, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheet of Exceed World, Inc. and its subsidiaries (collectively, the “Company”) as of September 30, 2019, and
the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the
year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019,
and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company's auditor since
2019.
Houston, Texas
March 20, 2020
-F2-
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Exceed World, Inc.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying consolidated
balance sheet of Exceed World, Inc. (the “Company”) and its subsidiaries (collectively referred to as the “Group”)
as of September 30, 2018, and the related consolidated statements of operations and comprehensive income, consolidated statements
of shareholders’ equity, and consolidated statements of cash flows for the year ended September 30, 2018, and the related
notes (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Group as of September 30,
2018, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting
principles in the United States of America.
Basis for Opinion
The consolidated financial statements are
the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Group in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures
to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor
since 2018.
Lo and Kwong C.P.A. & Co. (successor to Lo and Kwong C.P.A.
Company Limited)
Hong Kong
January 14, 2019 (July 11, 2019 as the effects of the restatement)
-F3-
Table of Contents
EXCEED
WORLD, INC.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
As
of
|
|
As
of
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
|
(Restated)
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
20,198,362
|
$
|
22,737,755
|
|
Marketable
securities
|
|
1,156,108
|
|
830,331
|
|
Accounts
receivable
|
|
2,344
|
|
1,032
|
|
Short-term
loan receivable
|
|
-
|
|
395,848
|
|
Income
tax recoverable
|
|
-
|
|
425,303
|
|
Prepaid
expenses
|
|
865,274
|
|
295,510
|
|
Inventories
|
|
626,142
|
|
380,925
|
|
Due
from related party
|
|
92,524
|
|
-
|
|
Other
current assets
|
|
453,291
|
|
255,030
|
TOTAL
CURRENT ASSETS
|
|
23,394,045
|
|
25,321,734
|
|
|
|
|
|
|
Non-current
Assets
|
|
|
|
|
|
Property,
plant and equipment, net
|
$
|
792,452
|
$
|
343,991
|
|
Software,
net
|
|
1,051,398
|
|
2,236,447
|
|
Other
intangible assets, net
|
|
176,897
|
|
992,208
|
|
Long-term
prepaid expenses
|
|
84,968
|
|
58,341
|
|
Deferred
tax assets
|
|
134,936
|
|
287,157
|
|
Long-term
loan receivable from related party
|
|
232,128
|
|
-
|
|
Insurance
funds
|
|
91,161
|
|
-
|
TOTAL
NON-CURRENT ASSETS
|
|
2,563,940
|
|
3,918,144
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
25,957,985
|
$
|
29,239,878
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
1,226,111
|
$
|
4,572,204
|
|
Accrued
expenses and other payables
|
|
565,506
|
|
65,811
|
|
Deposit
receipt
|
|
-
|
|
100,657
|
|
Contingency
liability
|
|
409,428
|
|
-
|
|
Income
tax payable
|
|
287,301
|
|
-
|
|
Deferred
income
|
|
3,267,399
|
|
4,460,652
|
|
Capital
lease obligations, current
|
|
28,683
|
|
9,327
|
|
Due
to related parties
|
|
814,153
|
|
338,725
|
|
Due
to director
|
|
741,133
|
|
596,059
|
|
Other
current liabilities
|
|
735,926
|
|
1,741,639
|
TOTAL
CURRENT LIABILITIES
|
|
8,075,640
|
|
11,885,074
|
|
|
|
|
|
|
Non-current
Liabilities
|
|
|
|
|
|
Capital
lease obligations, long-term
|
$
|
98,964
|
$
|
41,786
|
|
Long-term
note payable
|
|
-
|
|
483,814
|
|
Long-term
deferred income
|
|
-
|
|
2,183
|
TOTAL
NON-CURRENT LIABILITIES
|
|
98,964
|
|
527,783
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
$
|
8,174,604
|
$
|
12,412,857
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Preferred
stock ($0.0001 par value, 20,000,000 shares authorized;
|
|
|
|
|
|
none
issued and outstanding as of September 30, 2019 and 2018)
|
$
|
-
|
$
|
-
|
|
Common
stock ($0.0001 par value, 500,000,000 shares authorized,
|
|
|
|
|
|
32,700,000
shares issued and outstanding as of September 30, 2019 and 2018)
|
|
3,270
|
|
3,270
|
|
Additional
paid-in capital
|
|
261,516
|
|
99,440
|
|
Accumulated
earnings
|
|
16,764,282
|
|
16,896,299
|
|
Accumulated
other comprehensive income (loss)
|
|
754,313
|
|
(171,988)
|
TOTAL
SHAREHOLDERS' EQUITY
|
$
|
17,783,381
|
$
|
16,827,021
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
25,957,985
|
$
|
29,239,878
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
|
-F4-
Table of Contents
EXCEED
WORLD, INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
|
|
|
Year
Ended
|
|
Year
Ended
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
|
(Restated)
|
Revenues
|
$
|
28,393,548
|
$
|
34,878,988
|
Cost
of revenues
|
|
16,105,594
|
|
18,654,182
|
Gross
profit
|
|
12,287,954
|
|
16,224,806
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Selling
and distribution expenses
|
|
1,908,950
|
|
1,989,146
|
|
Administrative
expenses
|
|
10,853,331
|
|
11,623,028
|
Total
operating expenses
|
|
12,762,281
|
|
13,612,174
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
(474,327)
|
|
2,612,632
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
Other
income
|
|
1,270,353
|
|
266,946
|
|
Other
expenses
|
|
(845,289)
|
|
(18,171)
|
|
Change
in fair value of marketable securities
|
|
365,026
|
|
(568,990)
|
|
Interest
expenses
|
|
(1,513)
|
|
(6,082)
|
Total
other income (expense)
|
|
788,577
|
|
(326,297)
|
|
|
|
|
|
|
Net
income before tax
|
|
314,250
|
|
2,286,335
|
Income
tax expense (credit)
|
|
446,267
|
|
(89,297)
|
Net
income (loss)
|
$
|
(132,017)
|
$
|
2,375,632
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
|
|
|
Net
income (loss)
|
|
(132,017)
|
|
2,375,632
|
Other
comprehensive income (loss)
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
926,301
|
|
(244,734)
|
|
|
|
|
|
|
TOTAL
COMPREHENSIVE INCOME
|
$
|
794,284
|
$
|
2,130,898
|
|
|
|
|
|
|
Income
(loss) per common share
|
|
|
|
|
|
Basic
|
$
|
(0.00)
|
$
|
0.12
|
|
Diluted
|
$
|
(0.00)
|
$
|
0.12
|
Weighted
average common shares outstanding
|
|
|
|
|
|
Basic
|
|
32,700,000
|
|
20,173,973
|
|
Diluted
|
|
32,700,000
|
|
20,173,973
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
|
-F5-
Table of Contents
EXCEED
WORLD, INC.
|
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
ADDITIONAL
|
|
OTHER
|
|
|
|
|
|
COMMON
STOCK
|
|
PAID
IN
|
|
COMPREHENSIVE
|
|
RETAINED
|
|
|
|
NUMBER
|
|
AMOUNT
|
|
CAPITAL
|
|
INCOME
(LOSS)
|
|
EARNINGS
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- September 30, 2017
|
20,000,000
|
$
|
2,000
|
$
|
59,679
|
$
|
72,746
|
$
|
14,520,667
|
$
|
14,655,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (Restated)
|
-
|
|
-
|
|
-
|
|
-
|
|
2,375,632
|
|
2,375,632
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares for the acquisition of subsidiaries
|
12,700,000
|
|
1,270
|
|
(1,270)
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal
of a subsidiary under common control
|
-
|
|
-
|
|
15,031
|
|
-
|
|
-
|
|
15,031
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization
of the Group
|
-
|
|
-
|
|
26,000
|
|
-
|
|
-
|
|
26,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation (Restated)
|
-
|
|
-
|
|
-
|
|
(244,734)
|
|
-
|
|
(244,734)
|
|
|
|
|
|
|
|
|
|
|
|
|
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
income
|
-
|
|
-
|
|
-
|
|
-
|
|
(132,017)
|
|
(132,017)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
-
|
|
-
|
|
-
|
|
926,301
|
|
-
|
|
926,301
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– September 30, 2019
|
32,700,000
|
$
|
3,270
|
$
|
261,516
|
$
|
754,313
|
$
|
16,764,282
|
$
|
17,783,381
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
|
-F6-
Table of Contents
EXCEED
WORLD, INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
Year
Ended
|
|
Year
Ended
|
|
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
|
(Restated)
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net
income (loss)
|
$
|
(132,017)
|
$
|
2,375,632
|
|
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
1,482,474
|
|
1,120,652
|
|
Loss
on written off of property, plant and equipment
|
|
-
|
|
11,178
|
|
Gain
on disposal of property, plant and equipment
|
|
(8,178)
|
|
-
|
|
Loss
on written off of intangible asset
|
|
-
|
|
6,275
|
|
Change
in fair value of marketable securities
|
|
(365,026)
|
|
568,990
|
|
Interest
expenses
|
|
-
|
|
6,082
|
|
Gain
on company owned life insurance policies
|
|
(1,106,958)
|
|
-
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(2,018)
|
|
(32)
|
|
Income
tax recoverable
|
|
439,331
|
|
(1,072,527)
|
|
Prepaid
expense
|
|
(470,721)
|
|
26,221
|
|
Inventories
|
|
(299,412)
|
|
888,033
|
|
Other
current assets
|
|
(182,333)
|
|
179,344
|
|
Long-term
prepaid expenses
|
|
(23,241)
|
|
-
|
|
Deferred
tax asset
|
|
164,108
|
|
-
|
|
Accounts
payable
|
|
(3,513,357)
|
|
3,489,220
|
|
Accrued
expenses and other payables
|
|
539,697
|
|
(3,928)
|
|
Deposit
receipts
|
|
-
|
|
100,611
|
|
Income
tax payable
|
|
282,158
|
|
-
|
|
Deferred
income
|
|
(1,398,006)
|
|
2,589,542
|
|
Due
to related parties
|
|
-
|
|
(29,485)
|
|
Due
to director
|
|
-
|
|
431,173
|
|
Other
current liabilities
|
|
(360,390)
|
|
(21,611)
|
|
Net
cash provided by (used in) operating activities
|
|
(4,953,889)
|
|
10,665,370
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Collection
of short-term loan receivable
|
|
408,905
|
|
-
|
|
Purchase
of property, plant and equipment
|
|
(224,865)
|
|
-
|
|
Proceeds
from disposal of property, plant and equipment
|
|
8,178
|
|
-
|
|
Purchase
of intangible assets
|
|
(24,989)
|
|
(593,662)
|
|
Proceeds
from sale of securities
|
|
87,333
|
|
-
|
|
Payment
towards company-owned life insurance policies
|
|
(442,744)
|
|
-
|
|
Proceeds
from company-owned life insurance policies
|
|
1,460,173
|
|
-
|
|
Reorganization
of the Company
|
|
-
|
|
26,000
|
|
Disposal
of subsidiary
|
|
(79,876)
|
|
-
|
|
Net
cash provided by (used in) investing activities
|
|
1,192,115
|
|
(567,662)
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Interest
expense paid
|
|
-
|
|
(6,082)
|
|
Repayment
of capital lease obligation
|
|
(12,113)
|
|
(9,146)
|
|
Short-term
loan
|
|
-
|
|
(395,848)
|
|
Proceeds
from related parties
|
|
185,525
|
|
-
|
|
Repayments
to related parties and director
|
|
(58,723)
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
114,689
|
|
(411,076)
|
|
|
|
|
|
|
Net
effect of exchange rate changes on cash
|
$
|
1,107,692
|
$
|
(175,575)
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
|
|
Cash
and cash equivalents - beginning of year
|
|
22,737,755
|
|
13,226,698
|
Net
increase (decrease) in cash
|
|
(2,539,393)
|
|
9,511,057
|
Cash
and cash equivalents - end of year
|
$
|
20,198,362
|
$
|
22,737,755
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING TRANSACTIONS
|
|
|
|
|
|
Equipment
obtained in connection with capital lease
|
$
|
84,675
|
$
|
-
|
|
Liabilities
assumed in connection with purchase of intangible asset
|
$
|
59,714
|
$
|
-
|
|
Operating
expenses paid by related parties and director
|
$
|
405,835
|
$
|
-
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
|
|
|
|
|
Interest
paid
|
$
|
-
|
$
|
-
|
Income
taxes paid
|
$
|
1,908
|
$
|
553,889
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
|
-F7-
Table of Contents
EXCEED WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS
OF SEPTEMBER 30, 2019
NOTE 1 –
ORGANIZATION, DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Exceed World, Inc. (the “Company”),
was incorporated under the laws of the State of Delaware on November 25, 2014.
On September 26, 2018, e-Learning Laboratory
Co., Ltd. (“e-Learning”), a direct wholly owned subsidiary of Force International Holdings Limited, which was incorporated
in Hong Kong with limited liability (“Force Holdings”), entered into a share purchase agreement with Force Internationale
Limited (“Force Internationale”), the holding company of Force Holdings, in which e-Learning agreed to sell and Force
Internationale agreed to purchase 74.5% equity interest of the Company at a consideration of US$26,000.
On September 26, 2018, the same date, Force
Internationale entered into a share purchase agreement with the Company, in which Force Internationale agreed to sell and the
Company agreed to purchase 100% equity interest of Force Holdings. In consideration of the agreement, the Company issued 12,700,000
common stock at US$1 each to Force Internationale. The results of these transactions are that Force Internationale is an 84.4%
owner of the Company and the Company is a 100% owner of Force Holdings (the “Reorganization”).
On December 6, 2018, the Company entered into
a share contribution agreement (the “Agreement”) with Force Internationale. Under this Agreement, the Company transferred
100% of the equity interest of School TV Co., Ltd. ("School TV"), to Force Internationale without consideration. This
Agreement was approved by the board of directors of the Company, Force Internationale and School TV. Upon the completion of the
disposal, School TV was deconsolidated from the Company's consolidated financial statements.
As of September 30, 2019, the Company operates
through our wholly owned subsidiaries, which are engaged in provision of the educational services through an internet platform
called “Force Club”.
The Company has elected September 30th as
its fiscal year end.
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. The results
of subsidiaries disposed during the respective periods are included in the consolidated statements of operations and comprehensive
income up to the effective date of disposal.
Name
of Subsidiary
|
Place
of Organization
|
Percentage of
Effective
Ownership
|
Force
International Holdings Limited (“Force Holdings”)
|
Hong
Kong
|
100%
|
e-Learning
Laboratory Co., Ltd. (“e-Learning”)
|
Japan
|
100% (*1)
|
e-Communications
Co., Ltd. (“e-Communications”)
|
Japan
|
100% (*2)
|
(*1) Wholly owned subsidiary of Force Holdings
(*2) Wholly owned subsidiary of e-Learning
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to
the current period presentation. These reclassifications had no impact on net earnings and financial position.
USE OF ESTIMATES
The accompanying consolidated financial statements
are prepared on a basis of conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). 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.
Transactions involving related parties cannot
be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not
exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were
consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
CASH
EQUIVALENTS
The Company considers all highly liquid investments with maturities
of three months or less at the date of purchase as cash equivalents.
ACCOUNTS RECEIVABLE AND ALLOWANCE
Accounts receivable are recognized and carried
at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection
of the full amount is no longer probable. Bad debts are recorded corresponding to the allowance when identified.
INVESTMENTS
The Company's investments in marketable securities
are reported at their fair values as quoted by market exchanges in the consolidated balance sheets with changes in fair value
recognized in earnings. The Company regularly reviewed its investments in marketable securities for impairments. In the event
that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other than temporary,
the Company would record an impairment charge and establish a new carrying value.
The Company also has investments in corporate-owned
life insurance policies to insure its CEO and key employees. These insurance policies are recorded at their cash surrender values
in the consolidated balance sheets with change in the cash surrender value during the period recorded in earnings.
INVENTORIES
Inventories, consisting of mainly educational
products accounted for using the weighted average method and health related products accounted for using the first-in, first-out
method, are valued at the lower of cost and market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at
cost less depreciation and impairment loss. Depreciation is calculated using the straight-line method or reducing balance method
at the following estimated useful life:
Building
|
47
years on straight-line method
|
Leasehold
improvement
|
10
years on straight-line method
|
Equipment
|
2
to 15 years on declining balance method or straight-line method
|
Vehicle
|
6
years on declining balance method or straight-line method
|
Assets held under capital lease obligation
are depreciated over their expected useful lives on the same basis as owned assets.
INTANGIBLE ASSETS
Intangible assets consist of internal use
software, franchise rights, membership and land.
The Company capitalizes certain costs related
to obtaining or developing software for internal use. Costs incurred during the application development stage internally or externally
are capitalized and amortized on a straight-line basis over the expected useful life of five years. The application development
stage includes design of chosen path, software configuration and integration, coding, hardware installation and testing. Costs
incurred during the preliminary project stage and post implementation-operation stage are expensed as incurred.
Franchise rights were amortized on a straight-line
basis over a useful life of 15 years. The gross carrying value was $nil and $667,378, and accumulated amortization was $nil and
$55,848, included in other intangible asset as of September 30, 2019 and 2018, respectively. Franchise rights were disposed along
with the disposal of STV (see Note 11).
Membership and land have indefinite useful
life, and the balance was $176,897 and $386,390 as of September 30, 2019 and 2018, respectively, included in other intangible
assets.
IMPAIRMENT OF LONG-LIVED ASSETS
The carrying value of property, plant and
equipment and intangible assets subject to depreciation and amortization is evaluated whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be measured by the amount by which
the carrying value of the asset exceeds the fair value of the asset.
-F8-
Table of Contents
FOREIGN CURRENCY TRANSLATION
The Company maintains its books and records
in its local currencies, Japanese YEN (“JPY”) , Hong Kong Dollars (“HK$”) and United States Dollars (“US$”),
which are the functional currencies as being the primary currencies of the economic environment in which their operations are
conducted. Transactions denominated in currencies other than the functional currency are translated into the functional currency
at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet
dates. The resulting exchange differences are recorded in the consolidated statements of operations and comprehensive income.
The reporting currency of the Company is US$
and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, Translation
of Financial Statement, assets and liabilities of the Company whose functional currency is not US$ are translated into US$,
using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the
period. 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 Company into US$1 has been made at the following exchange rates:
|
September
30, 2019
|
|
September
30, 2018
|
Current
JPY: US$1 exchange rate
|
108.08
|
|
113.68
|
Average
JPY: US$1 exchange rate
|
110.05
|
|
110.47
|
|
|
|
|
Current
HK$: 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.
On October 1, 2018, the Company adopted ASC
606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not
completed as of October 1, 2018. Results for reporting periods beginning after October 1, 2018 are presented under ASC 606, while
prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting
under ASC 605, Revenue Recognition. The adoption had no material impact on the Company’s consolidated financial statements
and there was no adjustment to the beginning retained earnings on October 1, 2018.
The Company recognizes revenue by applying
the following steps in accordance with ASC 606 - Revenue from contracts with Customers. The Company recognizes revenue upon transfer
of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled
to receive in exchange for those products or services.
- Identification of the contract, or contracts,
with a customer
- Identification of the performance obligations
in the contract
- Determination of the transaction price
- Allocation of the transaction price to the
performance obligations in the contract
- Recognition of revenue when (or as) we satisfy
the performance obligation
Force Club Membership fee
Nature of operation
Our revenue generated from Force Club Membership
arrangements accounted for substantially all of our revenues during the year ended September 30, 2019. Generally, the Company
grants Force Club members the rights to access the Company’s educational content. There are two tiers of members, namely
standard members and premium members.
The premium members are granted full access
to the Company’s educational contents and the right to recruit prospect customers to become the Company’s members.
Each premium member needs to purchase a premium pack, containing promotional materials aiding the recruiting process, from the
Company. The standard members are granted limited access to the Company’s educational content.
Revenue from the premium pack is recognized
at a point in time upon delivery. Revenue from the right to access the Company’s educational contents is recognized over
a period of time ratably over the effective period.
The revenue generated from premium members
consists substantially all of the Company’s revenue. 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 September 30, 2019, the Company's
deferred income was $3,267,399. As of September 30, 2018, the Company's deferred income was $4,460,652, all of which was recognized
as revenue in the year ended September 30, 2019.
The Company does not have any contract asset.
ADVERTISING
Advertising costs are expensed as incurred
and included in selling and distributions expenses. Advertising expense was $1,908,950 and $913,480 for the years ended September
30, 2019 and 2018, respectively.
EARNINGS PER SHARE
The Company computes basic and diluted earnings
per share in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net
income by the weighted average number of common stock outstanding during the reporting period. Diluted earnings per share reflects
the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity
awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
The Company does not have any potentially
dilutive instruments as of September 30, 2019 and 2018 and, thus, anti-dilution issues are not applicable.
INCOME TAXES
The provision for income taxes includes income
taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income
tax basis of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted income tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that
includes the enactment date. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit
when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable
income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any
increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income
tax provision and net income or loss in the period the determination is made.
LEASES
The Company classifies leases as either capital
lease or operating lease. If the lease terms meet one or all of the following criteria, it is classified as a capital lease, otherwise
as an operating lease: (1) the ownership of the lease is transferred to the lessee at the end of the lease term; (2) the lease
contains a bargain purchase option; (3) the lease term is at least 75% of the economic life of the leased property; and (4) the
present value of the lease payments is at least 90% of the fair market value of the leased property.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU 2014-09,
“Revenue from Contracts with Customers (ASC 606)” and issued subsequent amendments to the initial guidance
or implementation guidance between August 2015 and November 2017 within ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU
2016-20, ASU 2017-13, and ASU 2017-14 (collectively, including ASU 2014-09, “ASC 606”). Under ASC 606, revenue is
recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration
which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of
the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective October
1, 2018, the Company adopted the standard using the modified retrospective method, the adoption of ASC 606 did not have a material
impact on our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01
“Financial Instruments – Overall.” The amendments in ASU 2016-01 are intended to improve the recognition, measurement,
presentation and disclosure of financial assets and liabilities to provide users of financial statements with information that
is more useful for decision-making purposes. Among other changes, ASU 2016-01 would require equity securities to be measured at
fair value with changes in fair value recognized through net income, but would allow equity securities that do not have readily
determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification
of an impairment. The amendments would simplify the impairment assessment of such equity securities and would require enhanced
disclosure about these investments. ASU 2016-01 would also require separate presentation of financial assets and liabilities by
measurement category and type of instrument, such as securities or loans, on the balance sheet or in the notes, and would eliminate
certain other disclosures relating to the methods and assumptions used to estimate fair value. For public entities, the amendments
in ASU 2016-01 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company adopted ASU
2016-01 on October 1, 2018 with no impact to the Company’s beginning retained earnings.
In February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842)” and issued subsequent amendments to the initial guidance or implementation guidance including
ASU 2017-13, 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, including ASU 2016-02, “ASC 842”). Under
ASC 842, lessees will be required to recognize all leases at the commencement date including a lease liability, which is a lessee’s
obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which
is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
The standard will be effective for the Company
beginning October 1, 2019, with early adoption permitted. The Company will adopt the standard on October 1, 2019 on a modified
retrospective basis and will not restate comparable periods. The Company will elect the package of practical expedients permitted
under the transition guidance, which allows the Company to carry forward the historical lease classification, the assessment whether
a contract is or contains a lease and initial direct costs for any leases that exist prior to adoption of the new standard. The
Company will also elect the practical expedient not to separate lease and non-lease components for certain classes of underlying
assets and the short-term lease exemption for contracts with lease terms of 12 months or less. The Company anticipates this standard
will have a material impact on the Company’s consolidated balance sheets. The Company estimates that approximately $563,000
would be recognized as ROU assets and lease liabilities upon adoption. However, the Company does not expect adoption will have
a material impact on the consolidated statements of operations and comprehensive income.
-F9-
Table of Contents
NOTE 3 - FAIR VALUE MEASUREMENT
FASB ASC 820, Fair Value Measurements
and Disclosures, ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes
a fair value hierarchy that prioritizes the inputs used in valuation methodologies into three levels:
Level 1: Quoted prices in active markets
for identical assets or liabilities.
Level 2: Significant other inputs that
are directly or indirectly observable in the marketplace.
Level 3: Significant unobservable inputs
which are supported by little or no market activity.
The following table presents information about
the Company’s assets that are measured at fair value as of September 30, 2019 and 2018, and indicates the fair value hierarchy
of the valuation.
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance as of
September 30, 2019
|
Marketable
Securities:
|
|
|
|
|
|
|
|
|
Publicly
held equity securities
|
$
|
1,156,108
|
|
-
|
|
-
|
|
1,156,108
|
Total
|
|
1,156,108
|
|
-
|
|
-
|
|
1,156,108
|
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance as of
September 30, 2018
|
Marketable
Securities:
|
|
|
|
|
|
|
|
|
Publicly
held equity securities
|
$
|
830,331
|
|
-
|
|
-
|
|
830,331
|
Total
|
|
830,331
|
|
-
|
|
-
|
|
830,331
|
NOTE 4 - INCOME TAXES
For the years ended September 30, 2019, the
provision of income tax expense was $ $446,267, consisting of current portion of $282,159 and deferred portion of $164,108.
For the years ended September 30, 2018, the
Company incurred income tax credit in the amount of $89,297.
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 year ended September 30,
|
|
Up
to JPY 4 million
|
|
Up
to JPY 8 million
|
|
Over
JPY 8 million
|
2018
|
|
21.42%
|
|
23.20%
|
|
33.80%
|
2019
|
|
21.42%
|
|
23.20%
|
|
33.80%
|
Open tax years in Japan are five years. As of September 30, 2019,
the Company’s earliest open tax year for Japanese income tax purposes is its fiscal year ended September 30, 2014. The Company's
tax attributes from prior periods remain subject to adjustment.
The reconciliations of the Japanese statutory
income tax rate and the Company’s effective income tax rate are as follows:
|
Year
Ended
|
|
Year
Ended
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
(Restated)
|
Japanese
statutory tax rate
|
33.80
%
|
|
33.80
%
|
Carryover
of losses
|
-
|
|
(33.80)%
|
Income
tax difference under different tax jurisdictions
|
49.50%
|
|
-
|
Additional
deduction allowed for tax
|
(9.58)%
|
|
-
|
Deferred
tax adjustments
|
59.83%
|
|
-
|
Other
adjustments
|
8.46%
|
|
-
|
Total
|
142.01
%
|
|
-
|
Hong Kong
Force Holdings, a direct wholly owned subsidiary
of the Company in Hong Kong, is engaged in investment holding. Hong Kong profits tax has been provided at the rate of 16.5% on
the estimated assessable profit arising in Hong Kong.
No provision for the Hong Kong profits tax
has been made as Force Holdings did not generate any estimated assessable profits in Hong Kong during the years ended September
30, 2019 and 2018.
Open tax year in Hong Kong is six years after
the relevant year of assessment. This may be extended to ten years in the case of fraud of willful evasion of taxes. There are
no provisions that govern the time limit for tax collection.
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 years ended September 30, 2019 and 2018, Exceed World, Inc., as a holding company registered in the state of
Delaware, has incurred net loss and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry forward
has been fully reserved.
The Company is a Delaware corporation that
is subject to U.S. corporate income tax on its taxable income at a rate of up to 21% for taxable years beginning after December
31, 2017 and U.S. corporate income tax on its taxable income of up to 35% for prior tax years. Recent U.S. federal tax legislation,
commonly referred to as the Tax Cuts and Jobs Act (the “2017 Act”), was signed into law on December 22, 2017. The
2017 Act significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate
income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business
deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of
previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S.
corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers
may elect to pay the one-time transition tax over eight years or in a single lump sum.
The 2017 Act also includes provisions for
a new tax on the Global Intangible Low-taxed Income (“GILTI”) effective for tax years of foreign corporations beginning
after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of
controlled foreign corporations (“CFCs”), subject to the possible use of foreign tax credits and a deduction equal
to 50 percent to offset the income tax liability, subject to some limitations. The Company elected to account for GILTI tax in
the period the tax is incurred, and no provision is made during the year ended September 30, 2019.
To the extent that portions of the Company’s
U.S. taxable income, such as Subpart F income or GILTI, are determined to be from sources outside of the U.S., subject to certain
limitations, the Company may be able to claim foreign tax credits to offset its U.S. income tax liabilities. If dividends that
the Company receives from its subsidiaries are determined to be from sources outside of the U.S., subject to certain limitations,
the Company will generally not be required to pay U.S. corporate income tax on those dividends. Any liabilities for U.S. corporate
income tax will be accrued in the Company’s consolidated statements of operations and comprehensive income and estimated
tax payments will be made when required by U.S. law.
As of September 30, 2019, the Company’s
earliest open tax year for U.S. federal income tax purposes is its fiscal year ended September 30, 2017. The Company's tax attributes
from prior periods remain subject to adjustment. Open tax years in state and foreign jurisdictions generally range from three
to six years.
NOTE 5 - DEFERRED TAX ASSETS
The Components of deferred tax assets as of September 30, 2019
and 2018 are as follows:
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
(Restated)
|
Marketable
securities
|
$
|
(304,944)
|
$
|
-
|
Insurance
funds
|
|
73,551
|
|
287,157
|
Software
|
|
157,084
|
|
|
Expenses
|
|
153,949
|
|
-
|
Revenues
|
|
55,296
|
|
|
Deferred
tax assets
|
|
134,936
|
|
287,157
|
Valuation
allowance
|
|
-
|
|
-
|
Net
deferred tax assets, non-current
|
$
|
134,936
|
$
|
287,157
|
NOTE 6 - RELATED-PARTY TRANSACTIONS
Due to related parties and directors
As of September 30, 2019 and 2018, the Company’s
due to related parties and directors are as follows:
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
(Restated)
|
Due
to director
|
|
|
|
|
Tomoo
Yoshida, CEO, CFO, sole director and a shareholder of the Company
|
$
|
741,133
|
$
|
596,059
|
Total
due to director
|
$
|
741,133
|
$
|
596,059
|
|
|
|
|
|
Due
to related parties
|
|
|
|
|
Keiichi
Koga, a shareholder of the Company and a director of certain subsidiaries of the Company
|
$
|
47,635
|
$
|
47,710
|
Force
Internationale, the Company’s majority shareholder. Tomoo Yoshida is a director of Force Internationale
|
|
633,578
|
|
291,015
|
School
TV Co., Ltd. (“School TV”), a wholly-owned subsidiary of the Company as of September 30, 2018, disposed to and
currently owned by Force Internationale at the date of filing (See note 1)
|
|
132,940
|
|
-
|
Total
due to related parties
|
$
|
814,153
|
$
|
338,725
|
|
|
|
|
|
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 years ended September 30, 2019 and 2018.
Due from related parties
As of September 30, 2019, the Company had
a long-term loan of $232,128 due from School TV. The loan is unsecured, bears a 1% per annum interest, and is due on 5/24/2023.
During the year ended September 30, 2019, the Company received an interest of $2,272 from School TV.
As of September 30, 2019, the Company had
a short-term loan of $92,524 due from School TV included in due from related party. The loan is unsecured, due on demand, and
bears a 1% interest per annum. During the year ended September 30, 2019, the Company received an interest of $1,363 from School
TV.
-F10-
Table of Contents
NOTE 7 – SHORT-TERM LOAN RECEIVABLE
On September 14, 2018, the Company entered
into a loan agreement to lend JPY45,000,000 ($395,848) to a third party, Star Gate Investment Holdings Limited. The loan was unsecured
with the maturity date on March 31, 2019 and an interest of JPY400,000 ($3,577) per quarter. The loan was collected in full on
April 24, 2019.
NOTE
8 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consist of the following:
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
(Restated)
|
Building
|
$
|
243,840
|
$
|
54,984
|
Leasehold
improvement
|
|
57,217
|
|
-
|
Equipment
|
|
1,086,546
|
|
741,083
|
Vehicles
|
|
68,930
|
|
119,296
|
|
|
1,456,533
|
|
915,363
|
|
|
|
|
|
Accumulated
depreciation
|
|
(664,081)
|
|
(569,650)
|
|
|
792,452
|
|
345,713
|
Net
effect of exchange rate
|
|
-
|
|
(1,722)
|
Total
net book value
|
$
|
792,452
|
$
|
343,991
|
The aggregate depreciation
expense of property, plant and equipment was $108,152 and $100,229 for the years ended September 30, 2019 and 2018, respectively.
NOTE
9 – SOFTWARE
The book value of the Company’s software
as of September 30, 2019 and 2018 were as follows:
|
|
September
30, 2019
|
|
September
30, 2018
|
|
|
|
|
(Restated)
|
Software
|
$
|
3,917,921
|
$
|
5,121,311
|
Accumulated
amortization
|
|
(2,866,523)
|
|
(2,867,476)
|
|
|
1,051,398
|
|
2,253,835
|
Net
effect of exchange rate
|
|
-
|
|
(17,388)
|
Total
net book value
|
$
|
1,051,398
|
$
|
2,236,447
|
The aggregate amortization expense related
to the software was $1,362,342 and $962,534 for the years ended December 31, 2019 and 2018, respectively, included
in operating expenses.
The estimated future amortization expense
of our software as of September 30, 2019 is as follows:
Year
ending September 30
|
|
Amount
|
2020
|
|
$
|
561,791
|
2021
|
|
|
265,306
|
2022
|
|
|
134,827
|
2023
|
|
|
80,613
|
2024
|
|
|
8,861
|
Thereafter
|
|
|
-
|
Total
|
|
$
|
1,051,398
|
NOTE
10 – COMMITMENTS
As of September 30, 2019, the Company has
three capital leases of equipment and vehicle with a gross value of $86,218 and $68,930, respectively, included in property, plant
and equipment.
The Company also leases its offices under
operating lease, and the rental expense is $550,683 and $411,226 for the years ended September 30, 2019 and 2018.
The future minimum lease payments as of September
30, 2019 are as follows:
Year
ending September 30
|
|
Capital
lease
|
|
Operating
lease
|
2020
|
$
|
30,305
|
$
|
470,430
|
2021
|
|
30,305
|
|
112,212
|
2022
|
|
43,458
|
|
-
|
2023
|
|
19,558
|
|
-
|
2024
|
|
11,409
|
|
-
|
Thereafter
|
|
-
|
|
-
|
Total
|
$
|
135,035
|
$
|
582,642
|
Less:
imputed interest
|
|
(7,388)
|
|
-
|
Total
capital lease obligation
|
|
127,647
|
|
-
|
Less:
current portion
|
|
(28,683)
|
|
-
|
Long-term
lease obligation
|
$
|
98,964
|
$
|
-
|
NOTE 11 - DISPOSAL OF SUBSIDIARY
On December 6, 2018, School TV, an entity
under common control of Force Internationale, was deconsolidated from the Company's consolidated financial statements (see Note
1). The Company recorded an increase in additional paid in capital of $162,076 at this deconsolidation. This disposal does not
constitute a strategic shift of the Company’s operation and business after Reorganization.
NOTE 12 - 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 year ended September 30, 2019, the
Company settled 11 legal cases in total amount of approximately JPY48.8 million (approximately $443,000) related to the cancellation
of contracts. From September 30, 2019 to March 20, 2020, the filing date of this 10-K report, the Company has settled one case
under the same nature with the amount of approximately JPY2.7 million (approximately $25,000). As of the filling date, the Company
had 24 pending legal cases, claiming a damage of approximately JPY159.2 million (approximately $1.5 million) under the same nature.
Our legal counsel estimated a probable settlement of 23 of these cases with total settlement amount of approximately JPY41.6 million
(approximately $384,000). Our legal counsel was not able to estimate the likelihood of the loss for one of the pending legal cases
with an original claim of approximately JPY25.1 million (approximately $232,000). The Company has recorded JPY44.3 million (approximately
$409,000) as contingency liability as of September 30, 2019.
NOTE 13 – SUBSEQUENT EVENTS
On November 15, 2019, the Company entered into a loan agreement
to lend JPY30,000,000 (approximately $278,000) to a third party, CAI Media Co., Ltd (“CAI”). The loan is secured by
a number of common shares of CAI. The loan charges an annual interest rate of 2% and matures on May 14, 2020.
-F11-
Table of Contents
EXCEED
WORLD, INC.
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2020
AND 2019
INDEX TO FINANCIAL STATEMENTS
|
|
Pages
|
|
|
|
Consolidated
Balance Sheets (Unaudited)
|
|
FF2
|
|
|
|
Consolidated Statements
of Operations and Comprehensive Income (Loss) (Unaudited)
|
|
FF3
|
|
|
|
Consolidated
Statements of Shareholders' Equity (Unaudited)
|
|
FF4
|
|
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
FF5
|
|
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
|
FF6-FF7
|
-FF1-
Table of Contents
EXCEED
WORLD, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
As
of
|
|
As
of
|
|
|
|
March
31, 2020
|
|
September
30, 2019
|
|
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
17,117,857
|
$
|
20,198,362
|
|
Marketable
securities
|
|
766,617
|
|
1,156,108
|
|
Accounts
receivable
|
|
2,234
|
|
2,344
|
|
Short-term
loan receivable
|
|
278,992
|
|
-
|
|
Prepaid
expenses
|
|
1,175,751
|
|
865,274
|
|
Inventories
|
|
520,226
|
|
626,142
|
|
Due
from related party
|
|
92,997
|
|
92,524
|
|
Other
current assets
|
|
257,080
|
|
453,291
|
TOTAL
CURRENT ASSETS
|
|
20,211,754
|
|
23,394,045
|
|
|
|
|
|
|
Non-current
Assets
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
743,382
|
|
792,452
|
|
Software,
net
|
|
719,787
|
|
1,051,398
|
|
Operating
lease right-of-use assets
|
|
450,204
|
|
-
|
|
Other
intangible assets, net
|
|
177,265
|
|
176,897
|
|
Long-term
prepaid expenses
|
|
82,764
|
|
84,968
|
|
Deferred
tax assets
|
|
291,765
|
|
134,936
|
|
Long-term
loan receivable from related party
|
|
233,315
|
|
232,128
|
|
Insurance
funds
|
|
109,060
|
|
91,161
|
TOTAL
NON-CURRENT ASSETS
|
|
2,807,542
|
|
2,563,940
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
23,019,296
|
$
|
25,957,985
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
955,952
|
$
|
1,226,111
|
|
Accrued
expenses and other payables
|
|
457,228
|
|
565,506
|
|
Contingency
liability
|
|
455,789
|
|
409,428
|
|
Income
tax payable
|
|
-
|
|
287,301
|
|
Deferred
income
|
|
1,240,173
|
|
3,267,399
|
|
Finance
lease obligations, current
|
|
26,388
|
|
28,683
|
|
Operating
lease liabilities, current
|
|
302,836
|
|
-
|
|
Due
to related parties
|
|
837,560
|
|
814,153
|
|
Due
to director
|
|
741,157
|
|
741,133
|
|
Other
current liabilities
|
|
871,434
|
|
735,926
|
TOTAL
CURRENT LIABILITIES
|
|
5,888,517
|
|
8,075,640
|
|
|
|
|
|
|
Non-current
Liabilities
|
|
|
|
|
|
Finance
lease obligations, non-current
|
|
81,301
|
|
98,964
|
|
Operating
lease liabilities, non-current
|
|
107,603
|
|
-
|
TOTAL
NON-CURRENT LIABILITIES
|
|
188,904
|
|
98,964
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
6,077,421
|
|
8,174,604
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Preferred
stock ($0.0001 par value, 20,000,000 shares authorized;
|
|
|
|
|
|
none
issued and outstanding as of March 31, 2020 and September 30, 2019)
|
|
-
|
|
-
|
|
Common
stock ($0.0001 par value, 500,000,000 shares authorized,
|
|
|
|
|
|
32,700,000
shares issued and outstanding as of March 31, 2020 and September 30, 2019)
|
|
3,270
|
|
3,270
|
|
Additional
paid-in capital
|
|
261,516
|
|
261,516
|
|
Accumulated
earnings
|
|
15,834,037
|
|
16,764,282
|
|
Accumulated
other comprehensive income
|
|
843,052
|
|
754,313
|
TOTAL
SHAREHOLDERS' EQUITY
|
|
16,941,875
|
|
17,783,381
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
23,019,296
|
$
|
25,957,985
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
|
-FF2-
Table of Contents
EXCEED WORLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
|
Three
Months Ended
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
Six
Months Ended
|
|
|
|
March
31, 2020
|
|
March
31, 2019
|
|
March
31, 2020
|
|
March
31, 2019
|
|
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
Revenues
|
$
|
5,345,918
|
$
|
5,908,517
|
$
|
11,178,526
|
$
|
13,800,681
|
Cost
of revenues
|
|
3,043,386
|
|
3,050,728
|
|
5,863,270
|
|
7,547,419
|
Gross
profit
|
|
2,302,532
|
|
2,857,789
|
|
5,315,256
|
|
6,253,262
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Selling
and distribution expenses
|
|
423,895
|
|
424,407
|
|
622,720
|
|
638,920
|
|
Administrative
expenses
|
|
3,038,048
|
|
2,587,188
|
|
5,327,520
|
|
5,735,325
|
Total
operating expenses
|
|
3,461,943
|
|
3,011,595
|
|
5,950,240
|
|
6,374,245
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
(1,159,411)
|
|
(153,806)
|
|
(634,984)
|
|
(120,983)
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
16,494
|
|
50,902
|
|
19,889
|
|
78,195
|
|
Other
expenses
|
|
(53,949)
|
|
-
|
|
(77,683)
|
|
-
|
|
Change
in fair value of marketable securities
|
|
(604,354)
|
|
181,677
|
|
(390,645)
|
|
(168,383)
|
|
Interest
expenses
|
|
(525)
|
|
(378)
|
|
(1,081)
|
|
(757)
|
Total
other income (expense)
|
|
(642,334)
|
|
232,201
|
|
(449,520)
|
|
(90,945)
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before tax
|
|
(1,801,745)
|
|
78,395
|
|
(1,084,504)
|
|
(211,928)
|
Income
tax expense (credit)
|
|
(381,747)
|
|
86,583
|
|
(154,259)
|
|
153,082
|
NET
LOSS
|
$
|
(1,419,998)
|
$
|
(8,188)
|
$
|
(930,245)
|
$
|
(365,010)
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
181,547
|
|
(201,978)
|
|
88,739
|
|
476,866
|
|
|
|
|
|
|
|
|
|
|
TOTAL
COMPREHENSIVE INCOME (LOSS)
|
$
|
(1,238,451)
|
$
|
(210,166)
|
$
|
(841,506)
|
$
|
111,856
|
|
|
|
|
|
|
|
|
|
|
Loss
per common share
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.04)
|
$
|
(0.00)
|
$
|
(0.03)
|
$
|
(0.01)
|
|
Diluted
|
$
|
(0.04)
|
$
|
(0.00)
|
$
|
(0.03)
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
Diluted
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
32,700,000
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
|
-FF3-
Table of Contents
EXCEED WORLD, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
|
|
|
|
|
ADDITIONAL
|
|
ACCUMULATED
OTHER
|
|
RETAINED
|
|
|
|
COMMON
STOCK
|
|
PAID
IN
|
|
COMPREHENSIVE
|
|
EARNINGS
|
|
|
|
NUMBER
|
|
AMOUNT
|
|
CAPITAL
|
|
INCOME
(LOSS)
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss (Restated)
|
-
|
|
-
|
|
-
|
|
-
|
|
(8,188)
|
|
(8,188)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation (Restated)
|
-
|
|
-
|
|
-
|
|
(201,978)
|
|
-
|
|
(201,978)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– March 31, 2019 (Restated)
|
32,700,000
|
$
|
3,270
|
$
|
261,516
|
$
|
304,878
|
$
|
16,531,289
|
$
|
17,100,953
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,419,998)
|
|
(1,419,998)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
-
|
|
-
|
|
-
|
|
181,547
|
|
-
|
|
181,547
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– March 31, 2020
|
32,700,000
|
$
|
3,270
|
$
|
261,516
|
$
|
843,052
|
$
|
15,834,037
|
$
|
16,941,875
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
|
-FF4-
Table of Contents
EXCEED WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
Six
Months Ended
|
|
Six
Months Ended
|
|
|
|
March
31, 2020
|
|
March
31, 2019
|
|
|
|
|
|
(Restated)
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net
loss
|
$
|
(930,245)
|
$
|
(365,010)
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
388,790
|
|
519,415
|
|
Change
in fair value of marketable securities
|
|
390,645
|
|
168,383
|
|
Loss
on company owned life insurance policies
|
|
52,885
|
|
-
|
|
Noncash
lease expense
|
|
246,152
|
|
-
|
|
Deferred
tax assets
|
|
(154,259)
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
121
|
|
302
|
|
Income
tax recoverable
|
|
-
|
|
339,594
|
|
Prepaid
expenses
|
|
(345,511)
|
|
(426,951)
|
|
Inventories
|
|
107,805
|
|
(330,118)
|
|
Other
current assets
|
|
196,053
|
|
(78,916)
|
|
Long-term
prepaid expenses
|
|
2,602
|
|
-
|
|
Accounts
payable
|
|
(273,104)
|
|
(3,648,669)
|
|
Accrued
expenses and other payables
|
|
19,036
|
|
(178,422)
|
|
Income
tax payable
|
|
(285,295)
|
|
-
|
|
Deferred
income
|
|
(1,322,875)
|
|
413,584
|
|
Operating
lease liabilities
|
|
(242,293)
|
|
-
|
|
Other
current liabilities
|
|
(522,523)
|
|
-
|
|
Net
cash used in operating activities
|
|
(2,672,016)
|
|
(3,586,808)
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Loan
made to third party
|
|
(275,964)
|
|
-
|
|
Purchase
of property, plant and equipment
|
|
(2,760)
|
|
(139,207)
|
|
Purchase
of intangible assets
|
|
-
|
|
(24,578)
|
|
Purchase
of company-owned life insurance policies
|
|
(70,191)
|
|
-
|
|
Disposal
of a subsidiary, net of cash disposed of
|
|
-
|
|
(79,875)
|
|
Proceeds
from sale of securities
|
|
-
|
|
86,623
|
|
Net
cash used in investing activities
|
|
(348,915)
|
|
(157,037)
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Repayment
of finance lease obligation
|
|
(20,362)
|
|
-
|
|
Proceeds
from related parties
|
|
-
|
|
5,366
|
|
Repayment
to related parties and director
|
|
(105,209)
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
(125,571)
|
|
5,366
|
|
|
|
|
|
|
Net
effect of exchange rate changes on cash
|
|
65,997
|
|
639,459
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
|
|
Cash
and cash equivalents - beginning of period
|
|
20,198,362
|
|
22,737,755
|
Net
decrease in cash
|
|
(3,080,505)
|
|
(3,099,020)
|
Cash
and cash equivalents - end of period
|
$
|
17,117,857
|
$
|
19,638,735
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING TRANSACTIONS
|
|
|
|
|
|
Operating
expense paid by related parties on behalf of the Company
|
$
|
128,550
|
$
|
282,814
|
|
Liabilities
assumed in connection with purchase of intangible assets
|
$
|
-
|
$
|
20,329
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
Interest
paid
|
$
|
1,081
|
$
|
-
|
Income
taxes paid
|
$
|
285,636
|
$
|
-
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
|
-FF5-
Table of Contents
EXCEED WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS
OF MARCH 31, 2020
(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 March 31, 2020, 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. The extent to which the COVID-19 pandemic may directly or indirectly impact our business,
financial condition, and results of operations is highly uncertain and subject to change. We considered the potential impact of
the COVID-19 pandemic on our estimates and assumptions and there was not a material impact to our consolidated financial statements
as of March 31, 2020 and for the six months then ended. Due to the high uncertainty of the evolving situation, the Company has
limited visibility on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated
at this time. 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 Company whose
functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses
are translated at average rates prevailing during the period. 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 Company into US$1 has been made at the following exchange rates:
|
March
31, 2020
|
|
March
31, 2019
|
Current
JPY: US$1 exchange rate
|
107.53
|
|
110.84
|
Average
JPY: US$1 exchange rate
|
108.84
|
|
111.84
|
|
|
|
|
Current
HK$: US$1 exchange rate
|
7.80
|
|
7.85
|
Average
HK$: 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 six months ended March 31, 2020. 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 March 31, 2020 and September 30,
2019, the Company's deferred income was $1,240,173 and $3,267,399, respectively. During the six months ended March 31, 2020, the
Company recognized $3,267,399 of deferred income in the opening balance.
The Company does not have any contract asset.
LEASES
In February 2016, the FASB issued ASU 2016-02,
Leases (together with all amendments subsequently issued thereto, “ASC Topic 842”). Under ASC 842, lessees will be
required to recognize all qualified operating 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 Company recognizes lease expenses for such
leases on a straight-line basis over the lease term. In addition, the Company elected the land easement transition practical expedient
and did not reassess whether an existing or expired land easement is a lease or contains a lease if it has not historically been
accounted for as a lease.
The initial lease liability is equal to the
future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The lease
term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise
those rights. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and
prepayments, less any lease incentives.
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 have a material
impact on the presentation of the Company’s consolidated statement of operations and comprehensive income (loss) or consolidated
statement of cash flows of the Company. The Company’s accounting treatment for its finance leases remains unchanged.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU 2016-13, Financial Instruments
– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which eliminates the probable recognition
threshold for credit impairments. The new guidance broadens the information that an entity must consider in developing its expected
credit loss estimate for assets measured either collectively or individually to include forecasted information, as well as past
events and current conditions. There is no specified method for measuring expected credit losses, and an entity is allowed to
apply methods that reasonably reflect its expectations of the credit loss estimate. ASU 2016-13 will be effective for the Company
beginning on October 1, 2020. The Company is in the process of evaluating the impact of the adoption of this pronouncement on
its consolidated financial statements.
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 public entities 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.
-FF6-
Table of Contents
NOTE 3 - FAIR VALUE MEASUREMENT
FASB ASC 820, Fair Value Measurements
and Disclosures, ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes
a fair value hierarchy that prioritizes the inputs used in valuation methodologies into three levels:
Level 1: Quoted prices in active markets
for identical assets or liabilities.
Level 2: Significant other inputs that
are directly or indirectly observable in the marketplace.
Level 3: Significant unobservable inputs
which are supported by little or no market activity.
The following table presents information about
the Company’s assets that are measured at fair value as of March 31, 2020 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 March 31, 2020
|
$
|
766,617
|
|
-
|
|
-
|
|
766,617
|
As
of September 30, 2019
|
$
|
1,156,108
|
|
-
|
|
-
|
|
1,156,108
|
NOTE 4 - INCOME TAXES
For the six months ended March 31, 2020 and
2019, the Company had income tax credit in the amount of $154,259 and income tax expense in the amount of $153,082, respectively.
Effective tax rate was 14.22% and (72.23%) for the six months ended March 31, 2020 and 2019, 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 March 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 six months ended March 31, 2020 and 2019, 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 March 31, 2020 and September 30, 2019,
the Company’s due to related parties and directors are as follows:
|
|
March
31, 2020
|
|
September
30, 2019
|
Due
to director
|
|
|
|
|
Tomoo
Yoshida, CEO, CFO, sole director and a shareholder of the Company
|
$
|
741,157
|
$
|
741,133
|
Total
due to director
|
$
|
741,157
|
$
|
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
|
|
656,305
|
|
633,578
|
School
TV Co., Ltd., a wholly-owned subsidiary of Force Internationale
|
|
133,620
|
|
132,940
|
Total
due to related parties
|
$
|
837,560
|
$
|
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 six months ended March 31, 2020 and 2019.
Due from related party
As of March 31, 2020 and September 30, 2019,
the Company had a long-term loan of $233,315 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 March 31, 2020 and September 30, 2019,
the Company had a short-term loan of $92,997 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, bears an annual interest rate of 2% and matures on May 14, 2020. The loan principal
and interests were collected in full by the Company on May 12, 2020.
NOTE
7 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the
following:
|
|
March
31, 2020
|
|
September
30, 2019
|
Building
|
$
|
245,087
|
$
|
243,840
|
Leasehold
improvement
|
|
57,509
|
|
57,217
|
Equipment
|
|
1,079,341
|
|
1,086,546
|
Vehicles
|
|
64,285
|
|
68,930
|
|
|
1,446,222
|
|
1,456,533
|
|
|
|
|
|
Accumulated
depreciation
|
|
(702,840)
|
|
(664,081)
|
|
|
|
|
|
Total
net book value
|
$
|
743,382
|
$
|
792,452
|
The aggregate depreciation
expense of property, plant and equipment was $55,069 and $35,540 for the six months ended March 31, 2020 and 2019, respectively.
NOTE
8 – SOFTWARE
The book value of the Company’s software
as of March 31, 2020 and September 30, 2019 was as follows:
|
|
March
31, 2020
|
|
September
30, 2019
|
Software
|
$
|
3,937,960
|
$
|
3,917,921
|
Accumulated
amortization
|
|
(3,218,173)
|
|
(2,866,523)
|
|
|
719,787
|
|
1,051,398
|
The aggregate amortization expense related
to the software was $332,932 and $483,875 for the six months ended March 31, 2020 and 2019, respectively, included
in cost of revenues.
NOTE
9 – COMMITMENTS
As of March 31, 2020, the Company has three
finance leases of equipment and vehicle with a gross value of $86,686 and $64,285, respectively, included in property, plant and
equipment. The Company also leases its offices under operating lease and short-term lease. The estimated effect of lease renewal
and termination options, as applicable, was included in the consolidated financial statements in current period.
The components of lease expense were as follows:
|
|
|
For
the six months ended March 31,
|
|
|
|
2020
|
|
|
|
|
Operating
lease cost
|
|
$
|
251,153
|
Short
term lease cost
|
|
|
1,757
|
Finance
lease cost:
|
|
|
|
Amortization
of right-of-use asset
|
|
|
14,915
|
Interest
on lease liability
|
|
|
1,081
|
Total
finance lease cost
|
|
|
15,996
|
Total
lease cost
|
|
$
|
268,906
|
The following table presents the Company’s
supplemental information related operating and finance leases:
|
|
|
For
the six months ended March 31,
|
|
|
|
2020
|
Cash
paid for amounts included in the measurement of lease liabilities
|
|
|
|
Operating
cash flows from finance lease
|
|
$
|
1,081
|
Operating
cash flows from operating lease
|
|
$
|
247,294
|
Financing
cash flows from finance lease
|
|
$
|
20,362
|
|
|
|
|
Weighted
Average Remaining Lease Term
|
|
|
|
Operating
leases
|
|
|
1.57
years
|
Finance
leases
|
|
|
3.35
years
|
Weighted
Average Discount Rate
|
|
|
|
Operating
leases
|
|
|
1.84%
|
Finance
leases
|
|
|
1.87%
|
The future maturity of lease liabilities as
of March 31, 2020 are as follows:
Year
ending September 30
|
|
Finance
lease
|
|
Operating
lease
|
2020
(remaining)
|
$
|
14,102
|
$
|
184,906
|
2021
|
|
28,204
|
|
162,997
|
2022
|
|
40,445
|
|
68,625
|
2023
|
|
18,201
|
|
-
|
2024
|
|
10,618
|
|
-
|
Thereafter
|
|
-
|
|
-
|
Total
|
$
|
111,570
|
$
|
416,528
|
Less
imputed interest
|
|
(3,881)
|
|
(6,089)
|
Total
lease obligation
|
|
107,689
|
|
410,439
|
Less
current portion
|
|
(26,388)
|
|
(302,836)
|
Non-current
lease obligation
|
$
|
81,301
|
$
|
107,603
|
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 six months ended March 31, 2020, 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 June 25, 2020, the filling
date of this 10-Q report, the Company had 26 pending legal cases, claiming a damage of approximately JPY177.8 million (approximately
$1.7 million) under the same nature. Our legal counsel estimated a probable settlement of 25 of these cases with total settlement
amount of approximately JPY49.0 million (approximately $456,000). The Company was unable to estimate the likelihood of the loss
of one pending legal case with original claim of approximately JPY25.1million (approximately $231,000). The Company has contingency
liability in the amount of $455,789 and $409,428 as of March 31, 2020 and September 30, 2019, respectively. The change in the
estimate was recorded in earnings during the six months ended March 31, 2020.
-FF7-
Table of Contents
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE
AND DISTRIBUTION
The estimated costs (assuming all shares are sold) of this offering
are as follows:
SEC
Registration Fee
|
$
|
35.05
|
Auditor
Fees and Expenses
|
$
|
12,000.00
|
Legal
Fees
|
$
|
2,000.00
|
Consulting
Fees
|
$
|
13,000.00
|
Transfer
Agent Fees
|
$
|
40,000.00
|
TOTAL
|
$
|
67,035.05
|
(1) All amounts are estimates, other than the SEC’s registration
fee.
INDEMNIFICATION
OF OFFICER(S) AND DIRECTOR(S)
Section 145 of the Delaware General Corporation
Law (the “Delaware Law”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity
to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities,
(including reimbursement for expenses incurred) arising under the Securities Act of 1933. Article VII of the Certificate of Incorporation
of Exceed World, Inc. (“we”, “us” or “our company”) provides for indemnification of officers,
directors and other employees of Exceed World, Inc. to the fullest extent permitted by Delaware Law. Article VII of the Certificate
of Incorporation provides that directors shall not be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except (i) for any breach of a director’s duty of loyalty to our company or
our stockholders, (ii) acts and omissions that are not in good faith or that involve intentional misconduct or knowing violation
of law, (iii) under Section 174 of the Delaware Law, or (iv) for any transaction from which the director derived any improper
benefit.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Delaware Law and our Certificate of Incorporation,
allow us to indemnify our officers and Directors from certain liabilities and our Bylaws, as amended (“Bylaws”), state
that we shall indemnify every (i) present or former Director, advisory Director or officer of us and (ii) any person who while
serving in any of the capacities referred to in clause (i) served at our request as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust, association or other enterprise. (each an “Indemnitee”).
Our Bylaws provide that the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director or officer of the Corporation, or, while a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, association or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable
cause to believe that his conduct was unlawful.
Except as provided above, our Certificate
of Incorporation provides that a Director shall be liable to the extent provided by applicable law, (i) for breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which
the director derived an improper personal benefit. If the Delaware Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware Law.
Neither any amendment to or repeal of this Article 7, nor the adoption of any provision hereof inconsistent with this Article
7, shall adversely affect any right or protection of any director of the Corporation existing at the time of, or increase the
liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director
occurring prior to or at the time of such amendment.
Neither our Bylaws, nor our Certificate of
Incorporation include any specific indemnification provisions for our officer or Directors against liability under the Securities
Act of 1933, as amended. Additionally, insofar as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable.
-21-
Table of Contents
RECENT SALES OF UNREGISTERED
SECURITIES
On September 26, 2018, 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.
EXHIBITS TO REGISTRATION
STATEMENT
Exhibit
No.
|
Description
|
2.1
|
Share Purchase
Agreement dated September 26, 2018 by and among Force Internationale and e-Learning. (4)
|
2.2
|
Share Purchase
Agreement dated September 26, 2018 by and among Force Internationale and Exceed World. (4)
|
2.3
|
Contribution
Agreement dated December 6, 2018 by and among Force Internationale and Exceed World. (6)
|
3.1
|
Certificate of
Incorporation of the Company (1)
|
3.2
|
Bylaws of the
Company (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)
|
5.1
|
Legal Opinion Letter
(5)
|
23.1
|
Consent of Independent
Accounting Firm “MaloneBailey, LLP” (5)
|
23.2
|
Consent of Independent
Accounting Firm “Lo and Kwong C.P.A. & Co.” (5)
|
|
|
(1)
|
Filed as an exhibit
to the Company's Registration Statement on Form 10-12G 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 Form 8-K,
as filed with the SEC on October 2, 2018, and incorporated herein by this reference.
|
(5)
|
Filed herewith.
|
(6)
|
Filed as an exhibit to the Company’s Form
8-K, as filed with the SEC on December 12, 2018, and incorporated herein by this reference.
|
-22-
Table of Contents
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which
offers or sales of securities are being made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 383(b) (§230.383(b) of this chapter)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability
under the Securities Act of 1933 to any purchaser:
(i) If the registrant is subject to Rule 430C,
each prospectus filed pursuant to Rule 383(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to
a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date
of first use.
(5) That, for the purpose of determining liability
of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned
registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will
be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus
of the undersigned registrant relating to the offering required to be filed pursuant to Rule 383;
(ii) Any free writing prospectus relating
to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing
prospectus relating to the offering containing material information about the undersigned registrant or our securities provided
by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer
in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the “Act”) may be permitted to our directors, officers and controlling persons
pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification
against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling
persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against
public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
-23-
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in Osaka, Japan, on July , 2020.
EXCEED
WORLD, INC.
|
|
By: /s/ Tomoo
Yoshida
|
Name: Tomoo Yoshida
|
Title: Chief Executive Officer
Date: June 30, 2020
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Tomoo Yoshida
|
|
Chief
Executive Officer, President, Secretary and Director
|
|
June
30, 2020
|
Tomoo
Yoshida
|
|
|
|
|
|
|
|
|
|
/s/
Tomoo Yoshida
|
|
Treasurer,
Chief Financial Officer
|
|
June
30, 2020
|
Tomoo
Yoshida
|
|
|
|
|
|
|
|
|
|
/s/
Tomoo Yoshida
|
|
Principal
Accounting Officer
|
|
June
30, 2020
|
Tomoo
Yoshida
|
|
|
|
|
-24-
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