Exceed World, Inc. - Quarter Report: 2017 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED December 31, 2017

OR

For the transition period from to

COMMISSION FILE NUMBER: 000-55377

Exceed World, Inc.

(Exact name of registrant as specified in its charter)

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

Fax number: +81-6-6339-4180 

Email: ceo.exceed.world@gmail.com

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

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

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

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

 [ ] Yes [X] No

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

As of February 14, 2018 there were approximately 20,000,000 shares of common stock and no shares of preferred stock issued and outstanding.

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INDEX

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PART I - FINANCIAL INFORMATION

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EXCEED WORLD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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EXCEED WORLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2017

(UNAUDITED)

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

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

As of December 31, 2017, we operate through our wholly owned subsidiary, School TV Co., Ltd. (“School TV”), which is engaged in various business activities and industries including:

- The sale and distribution of health related products;

- The promotion of third party consumer goods and services;

- RE/MAX business in Kanagawa, Okinawa and Tokyo.

The accompanying unaudited consolidated financial statements of Exceed World, Inc. have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Form 10-Q and Regulation S-X. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three month period, have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms “Company”, “we”, “us” or “our” mean the Company. Certain information and note disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America has been omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our consolidated financial statements for the year ended September 30, 2017, included in our Form 10-K.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION 

The consolidated financial statements include the financial statements of its wholly-owned subsidiary, School TV. Intercompany transactions are eliminated.

USE OF ESTIMATES 

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates and assumptions made by management include going concern, allowance for doubtful accounts, valuation allowance on deferred income tax, inventory obsolescence and sales allowance. Operating results in the future could vary from the amounts derived from management's estimates and assumptions.

FOREIGN CURRENCY TRANSLATION 

The Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations. 

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

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

NOTE 3 - INCOME TAXES

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

National income tax in Japan is charged at 15% of a company’s assessable profit. The Company’s subsidiary, School TV, was incorporated in Japan and is subject to Japanese national income tax and city income tax at the applicable tax rates on the taxable income as reported in their Japanese statutory accounts in accordance with the relevant enterprises income tax laws applicable to foreign enterprises.

School TV’s operation during the three months ended December 31, 2017 has resulted a net taxable loss, as such School TV was not subject to income tax for the three months ended December 31, 2017. The effective income tax rate of School TV is 0%. Deferred tax assets arise from net operating loss of $39,30 is fully allowed as the Company is not able to estimate future operating results due to limited operating history. The net operating loss carry forward will start to expire in the year 2026. 

For the three months ended December 31, 2016, income tax for School TV was $410. The effective tax rate of School TV is 15%.

Exceed World, Inc., which acts as a holding company on a non-consolidated basis, does not plan to engage any business activities and current or future loss will be fully allowed. For the three months ended December 31, 2017 and 2016, 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 4 - GOING CONCERN

The accompanying consolidated financial statements are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended December 31, 2017, the Company had generated net loss of $42,097 and negative cash flows from operations of $32,794. As of December 31, 2017, the Company had working deficit of $64,924. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As a first priority, we plan to increase sufficient revenues for necessary working capital from our business. If we cannot generate sufficient revenues, we plan to borrow working capital from the director or parent company.

NOTE 5 - RELATED-PARTY TRANSACTIONS

As of December 31, 2017 and September 30, 2017, the Company had $158,960 and $159,243, respectively, owed to Tomoo Yoshida, Chief Executive Officer and Chief Financial Officer of the Company, respectively. The advance is due on demand and bears no interest. 

On May 24, 2017, the Company borrowed JPY 25,000,000, or $223,534 from e-Learning Laboratory Co., Ltd., the beneficial owner of the Company, primarily for the payment to lease the regional franchise rights of the RE/MAX System. The loan matures on May 24, 2023 with an interest rate of 2% per annum. For the three months ended December 31, 2017, the interest expense related to this note payable was $1,107.

For the three months ended December 31, 2017, e-Learning Laboratory Co. Ltd. provided 10 square meters of office space and 2 square meters of storage space to the Company free of charge.

NOTE 6 - LONG-TERM NOTE PAYABLE

On May 22, 2017, the Company entered into a loan agreement to borrow JPY 55,000,000, or $492,436 from Mr. Toshihiro Hirai, the CEO of Actcall Inc., the 100% owner of Kidding Co., for the initial payment required upon the execution of the RE/MAX Regional Franchise Agreement entered on July 7, 2017. The loan matures on May 31, 2022 with an interest rate of 1% per annum. For the three months ended December 31, 2017, the interest expense related to this note payable was $1,218.

NOTE 7 - INTANGIBLE ASSETS, NET

The following table presents the detail of intangible assets:

NOTE 8 – COMMITMENTS

Under the lease of franchise rights, the Company is subjected to the following potential payment commitments: (1) membership fee in the amount of JPY42,000 (approximately $400) per year per sales associate operating  under the RE/MAX brokerage office franchised from the Company (“RE/MAX Office”); (2) monthly ongoing fees comprised of monthly fixed fees, in the amount of JPY60,000 (approximately $500) per RE/MAX Office, and monthly percentage fees, in the amount of 3% of the commission the Company charges from the RE/MAX Office; (3) monthly advertising fee of JPY10,000 (approximately $100) per RE/MAX Office; and (4) unconditional monthly fixed technology fee of JPY10,000 (approximately $100) per leased franchise right. The membership fee and monthly fixed fee are subjected to increase in every two years, and the monthly advertising fee is subjected to increase upon request and negotiation.

As of December 31, 2017, the Company has not had any RE/MAX Office or sales associate, and was not subject to any non-cancellable payments.

NOTE 9 – CONCENTRATIONS

Concentration of revenues

For the three months ended December 31, 2017, the Company generated revenue from two customers in relation to its RE/MAX business in the amount of $2,840 and $6,761, accounting for 28% and 68% of the total revenues, respectively.

For the three months ended December 31, 2016, the Company sold health products in the amount of $8,486 to a major customer which accounts for 100% of the total revenues.

Concentration of accounts receivable

As of December 31, 2017, the Company has accounts receivable in the amount of $6,774 from a customer which accounts for 97% of the total accounts receivable,

As of December 31, 2016, the Company has accounts receivable in the amount of $7,968 from a customer which accounts for 100% of the total accounts receivable.

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Forward-Looking Statements

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

Any references to “the Company” refer to Exceed World, Inc., which operates through its wholly owned subsidiary School TV Co., Ltd.

Company Overview

Corporate History

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

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

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

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

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

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

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

On April 1, 2016, e-Learning Laboratory Co., Ltd. entered into stock purchase agreements with 7 Japanese shareholders. Pursuant to these agreements, e-Learning Laboratory Co., Ltd. sold 140,000 shares of common stock in total to these individuals and received $270 as aggregate consideration. Each shareholder paid .215 Japanese Yen per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about .002 USD.

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

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

On August 9, 2016, e-Learning Laboratory Co., Ltd. entered into stock purchase agreements with 33 Japanese shareholders. Pursuant to these agreements, e-Learning Laboratory Co., Ltd. sold 3,300 shares of common stock in total to these individuals and received $330 as aggregate consideration. Each shareholder paid 10 Japanese Yen per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about 0.1 USD. 

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

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

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

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

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

Business Information

The Company is a start-up stage company operates through our wholly owned subsidiary, School TV Co., Ltd. (“School TV”), which is engaged in various business activities and industries including:

- The sale and distribution of health related products;

- The promotion of third party consumer goods and services;

- RE/MAX business in Kanagawa, Okinawa and Tokyo. 

Our principal executive offices are located at 1-2-38-8F, Esaka-cho, Suita-shi, Osaka 564-0063, Japan. Our phone number is +81-6-6339-4117.

Liquidity and Capital Resources 

Our cash balance is $13,357 as of December 31, 2017. Our cash balance is not sufficient to fund our limited levels of operations for any period of time. We have been utilizing and may utilize funds from Tomoo Yoshida, our sole Officer and Director who has informally agreed to advance funds to allow us to pay for filing fees, and professional fees. Tomoo Yoshida, however, has no formal commitment, arrangement or legal obligation to advance or loan funds to the company. In order to implement our plan of operations for the next twelve-month period, we require further funding. Being a start-up stage company, we have very limited operating history. After a twelve-month period we may need additional financing but currently do not have any arrangements for such financing.

As of December 31, 2017, the company has a due to the related party of Mr. Tommo Yoshida, our sole Officer and Director, in the amount of $158,960.

As of December 31, 2017, the Company had $221,887 owed to e-Learning Laboratory Co., Ltd., the beneficial owner of the Company.

As of December 31, 2017, the Company had $488,151 owed to Mr. Toshihiro Hirai.

If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash we need, or cease operations entirely.

Inventory

As of December 31, 2017, we have $78,129 in inventory which primarily consists of a health beauty equipment. Any goods that are purchased from our supply of physical inventory are sent out to the purchaser. We are responsible for any shipping and or related costs.

Net Loss

We have recorded a net loss of $42,097 and $11,701 for the three months ended December 31, 2017 and 2016, respectively. The larger net loss we experienced for the three months ended December 31, 2017 is attributed to the fact that we have increased our level of our operations and thus experienced increased expenses to operate our business.

Going Concern

The accompanying consolidated financial statements are prepared on a basis of accounting assuming that the Company is a going concern that contemplates realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended December 31, 2017, the Company had generated net loss of $42,097 and negative cash flows from operations of $32,794. As of December 31, 2017, the Company had working deficit of $64,924. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These conditions and uncertainties raise substantial doubt as to the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company will offer noncash consideration and seek equity lines as a means of financing its operations. If the Company is unable to obtain revenue-producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.

As a first priority, the Company plans to increase sufficient revenues for necessary working capital from our business. If the Company cannot generate sufficient revenues, it plans to borrow working capital from the director or parent company.

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

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Management’s Report on Disclosure Controls and Procedures

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

As of December 31, 2017, the end of the fiscal period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our chief financial officer, of the effectiveness of the design and the operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below. 

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

Inherent limitations on effectiveness of controls

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

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that have occurred for the three months ending December 31, 2017, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II-OTHER INFORMATION

There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.

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

None.

None

Not applicable.

None

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SIGNATURES

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

Exceed World, Inc.

(Registrant)

By: /s/ Tomoo Yoshida 

Name: Tomoo Yoshida

CEO, President, Director

Dated: February 14, 2018 

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