UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A10-K

FOR THE FISCAL YEAR ENDED September 30, 20182019

OR

For the transition period from to

COMMISSION FILE NUMBER: 000-55377

Exceed World, Inc.

(Exact name of registrant as specified in its charter)

Securities to be registered under Section 12(b) of the Act: None 

Securities to be registered under Section 12(g) of the Exchange Act: 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 (§ 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of March 31, 2018,2019, the aggregate market value of the voting common stock held by non-affiliates of the Registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) was approximately $1,222,180$1,383,600 based on a market price per share of $0.53.$0.6.

As of July 11, 2019March 20, 2020 there were 32,700,000 shares of the Registrant’s common stock, par value $0.0001 per share, issued and outstanding. As of the same date there were no shares of preferred stock issued and outstanding.

TABLE OF CONTENTS

Exceed World, Inc.

Table of Contents

Note:e-Learning Laboratory Co., Ltd. may be referred to herein as “e-Learning”, Force Internationale Limited may be referred to herein as “Force Internationale.” Force International Holdings Limited may be referred to herein as “Force Holdings.” References to “the Company” are synonymous with Exceed World, Inc. unless otherwise specified.

FORWARD LOOKING STATEMENTS

Explanatory Note

This prospectus contains forward-looking statements that involve risk and uncertainties. We are filing this Amendment on Form 10K/Ause words such as “anticipate”, “believe”, “plan”, “expect”, “future”, “intend”, and similar expressions to amend our Annual Report (“Amended Report”) for the year ended September 30, 2018, originally filed with the Securities and Exchange Commission on January 14, 2019 (the “Original Report”), to amend our consolidated financialidentify such forward-looking statements.

This Amended Report has not been updated for events occurring after the filing of the Original Report nor does it change any other disclosures contained in the Original Report. Accordingly, this Amended Report Investors should be read in conjunction with the Original Report.

In accordance with applicable SEC rules,aware that all forward-looking statements contained within this Form 10K/A includes new certifications required by Sections 302 and 906filing are good faith estimates of the SarbanesOxley Act of 2002, as amended, from our Chief Executive Officer and Chief Financial Officer dated January 14, 2019 10-K as of the filing date of this Form 10K/A.

Amendment and Restatement Background

In the course of its financial statements closing process subsequent to the period ended March 31, 2018, the CEO and CFO (collectively, “the Management”) of Exceed World, Inc. (the “Company”), determined that the Company’s annual financial statements for the year ended September 30, 2018 and interim financial statements for the three-month ended December 31, 2018 and six months ended March 31, 2019, could no longer be relied upon. Specifically, on June 12, 2019, Management discovered that (i) overstatement of cost of revenue which should not be expensed during the year ended September 30, 2018, and (ii) understatement of administrative expenses during the year ended September 30, 2018. As such, previously issued financial statements should be amended for such transactions in the respective periods to such applicable costs.

The Company has evaluated that the changes described above will result in (i) a decrease in cost of revenue of $1,719,934 for the year ended September 30, 2018, increase in net income of $1,719,934 for the year ended September 30, 2018, decrease in accounts payable of $1,671,358 as of September 30, 2018, increase in accumulated earnings of $1,719,934 as of September 30, 2018 and increase in accumulated other comprehensive loss of $48,576 as of September 30, 2018; and (ii) an increase in administrative expenses of $502,926 for the year ended September 30, 2018, decrease in net income of $502,926 for the year ended September 30, 2018, increase in due to director of $213,515 and other accounts payable of $289,411 as of September 30, 2018, decrease in accumulated earnings of $502,926 as of September 30, 2018.

Because these revisions are treated as corrections of errors to our prior period financial results, the revisions are considered to be an “amendment” under U.S. generally accepted accounting principles. Accordingly, the revised financial information included in the Annual Report on Form 10-K/A has been identified as “amended and restated”.

Internal Control Consideration

As disclosed in the Company’s Form 10-K filed on January 14, 2019, Management had previously disclosed that material weakness existed as of September 30, 2018 with respect to the lack of a functioning audit committee and inadequate segregation of duties resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. While management’s assessment of the Company’s internal control over financial reporting is ongoing, because of the material weaknesses identified, management concludes that the Company’s internal controls over financial reporting remain ineffective as of the date of this report. Management has determined thatfiling. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the failure to record these cost of revenues and professional fees resulted from control deficiencies with respect to the tracking and disclosure of all Company agreements, and that this control deficiency constitutes a material weaknessrisks faced by us as described in the Company’s internal controls over financial reporting. The Company has thoroughly investigated the entire financial reporting process to ensure no other material errors are left undiscovered that may affect the Company’s financial results. 

“Risk Factors” section and elsewhere in this prospectus.

PART I

Item 1. 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 (the “Agreement”) with e-Learning Laboratory Co., Ltd., a Japan corporation (“e-Learning”), with an address at 1-23-38-6F, Esakacho, Suita-shi, Osaka 564-0063 Japan.. Pursuant to the Agreement, Mr. DeNunzio transferred to e-Learning, 20,000,000 shares of our common stock which representedrepresents all of our issued and outstanding shares at the time of sale.

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 usAlso, 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 representedrepresents all of its issued and outstanding shares in consideration of $4,835 (JPY 500,000). Following the effective date of the share purchase transaction on February 29, 2016, Exceed World, Inc. gained a 100% interest in the issued and outstanding shares of E&F’s common stock and E&F became a wholly owned subsidiary of Exceed World. On August 4, 2016, the E&F changed its name to School TV Co., Ltd (“School TV”) and filed such amendment with the Legal Affairs Bureau in Osaka, Japan.

On April 1, 2016, e-Learning entered into stock purchase agreements with 7 Japanese shareholders.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 shareholder paid $0.215 Japanese YenJPY0.215 per share. At the time of purchase the price paid per share by each shareholder was the equivalent of about $0.002 USD. 

The aforementioned$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 (asas defined under Rule 902 section (k)(2)(i) of Regulation S),S, pursuant to offshore transactions, and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing.

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

On August 9, 2016, e-Learning entered into stock purchase agreements with 33 Japanese shareholders.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 shareholder paid 10 Japanese YenJPY10 per share. At the time of purchase the price paid per share by each shareholder was the equivalent ofto about $0.1 USD. 

$0.1. These shares were sold pursuant to the Company’s effective S-1 Registration Statement deemed effective on July 20, 2016 at 4pm EST.

On October 28, 2016, Exceed World, Inc., a Delaware corporation, (the “Company” or “Exceed”),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 has provided consent forconsented 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.

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

On October 28, 2016, every one (1) share of Common Stock,common stock, par value $.0001 per share, of the companyCompany issued and outstanding was automatically reclassified and changed into twenty (20) shares fully paid and non-assessable shares of Common Stockcommon stock of the company,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 Stockcommon 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.

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

On September 26, 2018, e-Learning, a direct wholly owned subsidiary of Force International Holdings Limited, a Hong Kong limited company (“Force Holdings”), which was incorporated in Hong Kong with limited liability, entered into a share purchase agreement with Force Internationale Limited, a Cayman Island limited company (“Force Internationale”), entered into a Share Purchase Agreement with its wholly-owned subsidiary, e-Learning and 74.5% owner of the sole shareholder ofCompany. Under this Share Purchase Agreement, e-Learning transferred its 74.5% interest in the Company to Force Holdings, in which e-Learning agreed to sell andInternationale. As consideration for this transfer, Force Internationale agreedpaid $26,000.00 to purchase 74.5% equity interest of the Company at a consideration of US$26,000.

On September 26, 2018,e-Learning. Immediately subsequent, the Company entered into and consummated, a share purchase agreementShare Purchase Agreement with Force Internationale, to acquire 100% of Force Holdings. Force Holdings is theand 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, Exceed World, Inc., a Delaware company (the "Company" and or "Exceed")the Company entered into a Share Contribution Agreement (this "Agreement"share contribution agreement (the “Contribution Agreement”) with Force Internationale Limited, a Cayman Island limited company ("Force Internationale"), our controlling shareholder.Internationale. Under this Agreement, the Company transferred 100% of the equity interestsinterest of School TV Co., Ltd., a Japan corporation ("School TV"), to Force Internationale without consideration. This Contribution Agreement and action werewas approved by the board of directors of each of, Exceed,the Company, Force Internationale and School TV. A copyUpon the completion of this Agreement is included as Exhibit 10.1 to this Current Report and is hereby incorporated by reference.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:

* The following chart illustrates the structure of our consolidated affiliated entities:

Currently, the number of the employees of the Company is 46. 

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Table of Contents

Background Information

Exceed World, Inc., is referred to herein as, “the Company.” e-Learning Business

With the completion of the Company’s acquisition of Force Holdings and its subsidiaries (hereinafter,(Hereinafter, collectively referred to as the “Group”), our primarywe are in the business activity became to provideof providing education services as of September 26, 2018, the date the Company acquired 100% ownership of Force Holdings. The Company and the Group share the same business plan, which is to provide educational services.

Note: e-Learning Laboratory Co., Ltd, a Japan Corporation, is the 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.

The GroupCompany is an education service provider in Japan thatand it offers a range of e-learning education programs and additionalas well as supporting services to complement such education programs through an internet platform callednamed “Force Club” (“Force Club”), which was launched in 2007. The GroupCompany has offered and continues to offer, e-learning programs through Force Club,“Force Club”, all of which were procured from independent third-party software developers, based in Japan, who have been identified and hired by the Group. The e-learning education programs include, but are not strictly limited to,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. Through this diverse range of courses, it is the Group’s intentionlearning, appealing to sustain a diverse customer base ranging from pre-school children to students and adult learners.

A list of the Group’sCompany’s e-learning programs, target customer groups,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.

In order to access the Group’sThe Company’s e-learning programs are offered to its customers mustwho have to be first registerregistered as a member of Force Club. FromSince 2002, to 2007 the GroupCompany began to offer its e-learning programs to its customers viain CD-ROMs with pre-loaded learning content.content until 2007. Due to the rise inpopular trend for internet, usage,starting from 2007, the GroupCompany has made its e-learning programs available on its website for its customers, from 2007 onwards. Customersand 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 Group.

In lightCompany. At the advent of digital technology in recent years and in view of the increasing popularity of tablet devices, and to cater to the demand of young learners and users in rural areas of Japan, the GroupCompany has released its e-learning programs on smartphones and tablet devices for customer use beginningsince 2012 to cater for the popular demand of young learners and users in 2012.rural areas of Japan. The e-learning programs of Force Club are designed fortargeted at residents of Japan, and thus the e-learning programs are presented in Japanese only and no translated version is available.

Beginning in Since 2015, in addition to e-learning, the Group began to conductCompany has started offline classes,business which attracts public attentions such as the Force Abacus School (teaching abacus and arithmetic by using the Ishido method) and Force Robot Programming School (a program relatedSchool. The Company also opened “ixi After School” in Tokyo, which provides after school care services to computer programming by using tablet-type devices). At present any and allchildren. Through these offline courses are, and will be, taught by teachers contracted bybusiness, the Group.Company has provided services to general users.

The GroupCompany regularly updates its e-learning materials and programs and performs an annual review of all courses. However, if any changes in rules and regulations will affect the Group’s materials or programs (such as amendments to the Course of Study by Ministry of Education, Culture, Sports, Science and Technology), such changes will be reflected in our materials and programs accordingly.programs. In particular, the learning resources supplementing elementary school, junior high school and senior high school curriculum would be overhauled in conjunction withto correspond to any revision ofin school curriculums,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-yeartwo year intervals to cater tofor any changes to the examination syllabus. The website of the GroupCompany is updated from time to time to reflect the updates and changes to the learning materials and programs. Forprograms and for users with smartphones and tablet devices, these updates can also be downloaded from the Group’s website.website of the Company.

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The websiteTable of e-Learning Laboratory Co. Ltd can be found at the following link: https://e-ll.co.jp/en/ Users can find corporate information on the website as well as the company’s business, services and social contribution activities. Visitors to the website can find information on the Force Club (which will be detailed below), as well as MANA Digi (the company’s online portal site for business education) and GAKU LOG (an online portal with information regarding educational institution, from kindergarten to graduate school).

Business ModelContents

Business Model

Apart from using a conventional direct sales marketing strategy, the GroupCompany has also adopted multilevel marketing (“MLM”), via the Premium Membership in the Force Club, in operating its businesses.

Since 2002, the GroupCompany has adopted a direct sales marketing strategy to market its e-learning programs. Subsequently, in 2007, the GroupCompany 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 Group.Company. Currently, the GroupCompany has no retail shops or other point-of-sale for its products (e-learning courses).

MLM was adopted by the GroupCompany 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 Group’sCompany’s e-learning educational content. Since the Group’sCompany’s e-learning education programs are distributed in the form of online downloads, it can be used both online and offline.

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Table of Contents

Force Club Membership

Force Club members are those who intend to use products and services the GroupCompany offers. There are two tiers of Force Club members, namely standard members and premium members. Premium members”)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 Group,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 GroupCompany 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 Group’sCompany’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 JPY453,600,JPY420,000 (exclusive of sales tax), comprising:

(i) The one-off registration fee of JPY10,800;JPY10,000;

(ii) The premium package fee of JPY421,200;JPY390,000; and

(iii)An advanced payment of monthly membership fees for the initial two months amounting to JPY21,600.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 GroupCompany 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 7,6356,583 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

Future Plans

Over the course of the next twelve months, the GroupCompany 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 GroupCompany to maintain this revenue stream, and to further increase the number of premium members of the Force Club, the GroupCompany also intends to diversify its operations and develop additional business activities.

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

Further, it isIn addition to e-learning business, the intention of the GroupCompany has also been engaged in physical school business such as abacus school and programming school. In July 2019, we opened “After School” which provides various after school education and activities programs to begin development of a plan to set up after-school care facilities within Japan. Our exact plan has not been finalized in any capacity, as we will need to hire additional personnel in order to assist with the formulation of such plans with any level of specificity.children.

Employees

The number of the employees of the Company, and all subsidiaries, as of the filing date is forty-six. All forty-six 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 GroupCompany 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.

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Former Business Plan

*The below plans pertain to our operations up until December 6, 2018, when 100% of the Company’s equity interest in School TV was transferred to Force Internationale, a Cayman Island limited company, without consideration. As of December 6, 2018, the below business plan is no longer related, in any way, to the Company. Any language that is written in present tense, in the below business plan, is only current as of the period in which School TV was a subsidiary of the Company.

We operate three lines of business through our wholly owned subsidiary, School TV. These include:

- The sale and distribution of health-related products;

- The promotion of third-party consumer goods and services; and

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

Nature of Business: Sale and Distribution of Health-Related Products

*The chart above does not depict when we make direct sales to consumers. 

School TV sells primarily health related consumer goods to distributors and consumers alike. School TV primarily operates under the operational model of “drop shipping.” It should be noted however, that School TV does hold inventory and sells products directly to the consumer from time to time. For products sold through our drop shipping model, after a purchase order has been filled out by a consumer the product is shipped out by School TV’s suppliers, rather than School TV. School TV sends a portion of the proceeds from the sale of any our products directly to suppliers when sold through the drop shipping model. This accounts for Exceed World’s cost of the good and any other related expenses. School TV is responsible for shipping goods sold that come from its own supply of inventory.

School TV has acquired its physical inventory, which will be explained in further detail below, from suppliers, and has plans to acquire additional inventory from as of yet unidentified suppliers.

School TV has future intentions to create an online marketplace to sell goods through but at this time, has not yet begun pursuing development of such a marketplace or website. Plans and timeline of such also remain undetermined.

School TV has no storefront and there is no guarantee that it will ever obtain a storefront. School TV is not actively seeking to acquire a storefront and it relies exclusively on personal relationships of our Chief Executive Officer to sell its current inventory.

Health Related Products

We offer the below products for sale:

		PURE ESALA	POPOCA	Le jeune	Magic Soap in Bath	Becker
		Supplement	Supplement	Supplement	Soap	Health Beauty Equipment
Benefit		Discharges excessive moisture and salt from the body; Relieves constipation.	Heats the body; Promotes metabolism.	Antioxidation from the body; Keeps moisture in the skin.	Free of additives; Positive for skin health	Activation of tissue by impulse waves
Principal Ingredients		Potassium chloride, Essence of vitamin Hyaluronic acid	Piper longum extracts, Essential vitamins, Ginger and pepper	Placental extracts, Collagen peptide, Essence of melon	Olive oil, Palm oil, Clay called kaoline	N/A
Supplier		Exceed Japan Co., Ltd.	Exceed Japan Co., Ltd.	Exceed Japan Co., Ltd.	Exceed Japan Co., Ltd.	Amoto Kyouiku Kenko Co., Ltd.
Unit Price and Cost	Selling Price JPY	4,000	4,000	9,800	2,400	58,320
	Selling Price USD	38.10	38.10	93.33	22.86	555.43
	Cost Price JPY	1,920	1,920	5,220	600	37,800
	Cost Price USD	18.29	18.29	49.71	5.71	360.00
Markup %		52%	52%	46.7%	75%	35.2%

Process of Ordering, Delivery and Payment

Should a customer purchase a health related supplement or product directly from School TV, the Company provides the purchaser a “call sheet” or in other words a purchase order form which includes but is not limited to, basic information on the purchaser, the shipping address of the purchaser, and payment details of the purchaser. School TV offers standard methods of shipping for its products at the cost of the purchaser. School TV bills the purchaser directly as the purchase is from School TV’s own stock of inventory.

Purchasers may also decide to purchase products through particular ‘distributors’ or sales agents of School TV. In this case the distributors receive a commission decided upon by the Company on a case by case basis. Payments, billing, and shipping are still handled by School TV.

For products not available in School TV’s inventory, the Company utilizes the drop-shipping model described in the proceeding paragraphs. In this case School TV is responsible for collecting payment and shipping information from the purchaser and then provides this information to the supplier at which time the supplier bills the purchaser for the purchase of the product(s) and handles any shipping of the product(s) thereafter. A commission is then paid to School TV for facilitating the transaction. Commissions are on a case by case basis with no set commission. 

Competition - Health, Food, and Related Goods

Our primary competition comes from other health food and supplement companies within Japan, but can also include global companies who offer their products within Japan. Some of our competitors have larger resources than we have, a longer operating history, and established connections throughout our target regions, which may make it difficult to penetrate into the market effectively. Even if we do manage to penetrate into the health food and or supplement market with our products there can be no guarantee that we will be able to continue to compete effectively with these established competitors.

Our competition includes, but is not limited to, MUSO Co., Ltd, Asahi Food & Healthcare Co., Ltd., Daiichi Sankyo Co., Ltd., Taisho Pharmaceutical Co., Ltd. and Takeda Pharmaceutical Co., Ltd.. Several of these competitors have an established track record in Japan and offer highly valued products throughout the country, which may serve to make it more difficult for our own products to gain attention as we begin operations.

Nature of Business: Promotion of Third-Party Consumer Goods and Services

In addition to our retail and drop-shipping business described above we also provide promotional services for third party businesses and receive a commission upon the sale of such product(s) or service(s). Included below we have disclosed the name, and principal good or service, of each third party business to whom we offer promotional services.

Products and Services - Sales

Products	Supplier of Product or Service
Internet provider service(s)	Next BB Co., Ltd.
Delivery service(s) of Goods	Real Web Co., Ltd.
Food product(s)	Morita Seicha
Food product(s)	TOMOTO Co., Ltd.

Promotional activities are made through existing relationships of School TV.

Process of Ordering, Delivery and Payment

Any and all billing, fulfillment, and shipping (if applicable) related to this business is handled entirely by the supplier of each product or service exclusively. We receive a commission upon facilitating a sale of a service or product that varies on a case by case basis. We are not directly involved in the sale of any product or service in any way except for assisting with facilitating the sale via promotional services.

Nature of Business: RE/MAX Realtor Business in Kanagawa, Okinawa, and Tokyo, Japan

Basic structure

Kanagawa region and Okinawa region

On July 7, 2017, our wholly owned subsidiary, School TV entered into a RE/MAX Regional Franchise Agreement with the master franchisor of RE/MAX Japan, Kidding Co., to lease the franchise rights to two Japanese Prefectures, Kanagawa and Okinawa, in consideration of JPY75,060,000 ($674,333) effective on July 7, 2017. Both lease terms are for a term of fifteen years and, after expiration of the lease term, School TV will need to pay to renew its rights to franchise RE/MAX should the Company decide to do so at that time. (*1, *2)

As depicted in the chart above, School TV has leased the rights to be regional franchisor owner of RE/MAX brokerage offices in two Prefectures (regions) of Japan from Kidding Co. Kidding Co. is the managing company for all of Japan’s RE/MAX operations. School TV is not engaged in any real estate activities and any brokerage offices opened up in these prefectures under School TV will be Japanese real estate companies with the proper licenses to carry out real estate sales and activities.

There is no brokerage office in either of these Prefectures and we have not yet generated any income relating to these activities. School TV is actively searching for real estate companies which will agree to open up, own and run RE/MAX broker offices for each region. However, any and all plans regarding the identification of an appropriate and interested real estate company remain speculative in nature and are still under development. (*3)

Tokyo region

On July 28, 2017, School TV entered into an Agreement with Investech Co. whereas it is agreed that School TV will provide monetary support to Investech Co., a Japanese Company, which operates a real estate brokerage office of RE/MAX Japan in the Tokyo region (the “Investech Agreement”). (*4)

On July 28, 2017, School TV entered into a Memorandum of Understanding with Kidding Co., pursuant to which Kidding Co. consents for School TV to provide monetary support to Investech Co., a Japanese Company, which operates a regional branch of RE/MAX Japan in the Tokyo region (further details can be found in the agreement titled “Kidding MOU”).

The Tokyo region has the largest real estate market in Japan. However, there is no regional owner in the Tokyo area. As such, Kidding Co. conducts management of the RE/MAX location in Tokyo, Japan.

School TV cannot, at this time, open and/or own a real estate brokerage office pursuant to Japanese regulations. However, they are not forbidden from providing monetary support to such brokerage offices in exchange for a percentage of profits from the brokerage offices. At present, School TV provides monetary support to Investech Co., the owner and operator of the RE/MAX brokerage office located in Tokyo. Investech Co. has three sales agents.

From time to time Kidding Co., may pay fees to School TV to cover some or all of the monetary support given to Investech Co., by School TV.

(*5) Ikezoe Trust owns Kidding Co., referred to in the chart as “Kidding”.

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Item 1A. Risk Factors.

 

Risks Related to Our Company

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 future, 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. We currently do not maintain “key person” life insurance with respect to our senior management team.

Foreign currency fluctuations and inflation in foreign markets could impact our financial position and results of operations.

In 2018, 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 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.

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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 Group. 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 internal audit team regularly audits 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.

The recently enacted JOBS Act will allow the Company to postpone the date by which it must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.

The recently enacted 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 exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;

-be exempt from the "say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;

-be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and instead provide a reduced level of disclosure concerning executive compensation; and

-be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.

Although the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging growth company”. The Company has elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an “emerging growth company”, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an “emerging growth company”, the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected.

Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and have a public floatas defined in Rule 12b-2 of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event thatExchange Act, we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, the disclosure we will benot required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harderinformation called for investors to analyze the Company’s results of operations and financial prospects.

We are an “Emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.

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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.Item.

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.

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.

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.

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Risks Related to Our Common 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.

Because the Company’s headquarters and assets are located in Japan, investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon US Federal Securities Laws against the Company and its non-US resident officer and director.

While we are organized under the laws of State of Delaware, our sole officer and director is a non-US resident and our headquarters and assets are located outside the United States. Consequently, it may be difficult for investors to affect service of process on our officer/director in the United States and to enforce, in the United States, judgments obtained in United States courts against our officer/director based on the civil liability provisions of the United States securities laws. Since all our assets will be located outside U.S. it may be difficult or impossible for U.S. investors to collect a judgment against us. 

Due to the fact that our sole officer and director is a non-US Citizen, and does not reside in the United States, an investor in the United States may be limited in several ways.

As an investor you may have difficulty with the following:

-Effecting service of process within the United States against our sole officer and director;

-Enforcing U.S. court judgments based upon the civil liability provisions of the U.S. federal securities laws against the above referenced foreign person in the United States;

-Enforcing in a Japanese court U.S. court judgments based on the civil liability provisions of the U.S. federal securities laws against the above foreign person; and

-Bringing an original action in a Japanese court to enforce liabilities based upon the U.S. federal securities laws against the above foreign person.

Exceed World will incur increased costs and compliance risks as a result of becoming 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.

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Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties.

 

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,.Ltd.

 

The following table details the terms of the lease agreements for various properties leased by our wholly owned subsidiary, Force International Holdings Limited, a Hong Kong company, and its wholly owned subsidiary, e-Learning Laboratory Co., Ltd., a Japan company.

 

Work space	Address	Lessee	Lessor	Monthly Rent (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.	JPY 715,176 ($6,329)	May 31, 2019
				($6,499)
				JPY 715,176	May 31, 2021
				($6,449)
Esaka, Osaka, 6th floor	1-23-38-6F, Esakacho, Suita-shi, Osaka Japan	e-Learning Laboratory Co., Ltd.	F&M Co., Ltd.	JPY 1,190,700 ($10,537)	July 31, 2019
				($10,820)
				JPY 1,190,700	April 17, 2021
				($10,820)
Esaka, Osaka, 8th floor	1-23-38-8F, Esakacho, Suita-shi, Osaka Japan	e-Learning Laboratory Co., Ltd.	F&M Co., Ltd.	JPY 664,129 ($5,877) JPY614,935	October 31, 2020
				($5,588)
Tokyo	1-8-40-1F, Konan, Minato-ku, Tokyo, Japan	e-Learning Laboratory Co., Ltd.	Tokyu Community Corp.	JPY 1,513,383 ($13,393) 1,401,281	August 31, 2020
				($12,733)
Ishibashi Building, 4th floor (*1)	2-4-7-4F, Konan, Minato-ku, Tokyo, Japan	e-Learning Laboratory Co., Ltd.	Ishibashi Ltd	JPY 420,000	March 24, 2020
				($3,816)
Dick Building, 3rd floor (*2)	1-34-13-3F, Toyo, Koto-ku, Tokyo, Japan	e-Learning Laboratory Co., Ltd.	Dick Co., Ltd.	JPY 495,000	February 28, 2021
				($4,498)
Wanchai, Hong Kong	Unit 3306-12, 33/F., Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong	Force International Holdings Limited	New Trend Business Services (HK) Limited	HKD 9,000 ($1,150)	June 30, 2019
	Unit 3306-12, 33/F.,			($1,154)
	Shui On Centre, 6-8 Harbour Road,			HKD 7,000	September 30, 2019
	Wanchai, Hong Kong			($897)
				HKD 5,000	March 31, 2020
				($641)

(*1) The Company cancelled the rental agreement with Ishibashi Building as of January 31, 2020.

(*2) The Company left Dick Building on January 31, 2020 and expect to cancel the rental agreement on April 30, 2020.

Item 3. Legal Proceedings.

For the year ended September 30, 2019, the Company settled 11 legal cases in total amount of approximately JPY48.8 million ($443,000) related to the cancellation of contracts. From timeSeptember 30, 2019 to time, we maythe filing date, the Company as settle one case under the same nature with the amount of approximately JPY2.7 million ($25,000). As of the filing date, the Company had 24 pending legal cases whose total amount of claim was approximately JPY159.2 million ($1.5 million) under the same nature. Our legal counsel estimated the loss for 23 of these cases to be probable, and the total amount of the settlements approximates JPY41.6 million ($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 ($232,000).

During the past ten (10) years, none of our directors, persons nominated to become party to litigationdirectors, executive officers, promoters or othercontrol persons was involved in any of the legal proceedings that we consider to be a partlisten in Item 401 (f) of the ordinary course of our business.Regulation S-K.

We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations, and or those that are outside the ordinary routine litigation incidental to our business.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

We are currently quoted on the OTC Marketplace. Our ticker symbol is EXDW.

Holders

Currently, as of the date of this report, and as of our fiscal year end, there are approximately 60 shareholders of record of our common stock and 32,700,000 shares of common stock deemed issued and outstanding.

Dividends and Share Repurchases

We have not paid any dividends to our shareholder. There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.

Issuer Purchases of Equity Securities

None.

Equity Compensation Plan Information

Not applicable.

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities

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

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Item 6. Selected Financial Data. 

No applicable because the Company is a smaller reporting company. 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.”

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.

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. 

The Company and Force International Holdings Limited, a Hong Kong limited company, and its subsidiaries share the same business plan, which is to provide education services.

Liquidity and Capital Resources 

As of September 30, 20182019 and 2017,September 30, 2018, we had cash and cash equivalents in the amount of $22,737,755$20,198,362 and 13,226,698,$22,737,755, respectively. The increasedecrease in cash is attributed to the increasedecrease of deferred income and accounts payable and deferred income.payable. These accounts payable were mainly unpaid commissions to force clubForce 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 $28,393,548 for the year ended September 30, 2019 as opposed to $34,878,988 for the year ended September 30, 2018 as opposed to $36,860,282 for the year ended September 30, 2017.2018. The decrease in revenue, in our opinion, is attributed to a decrease in recruitment activities of premium force club members in the first half of the year from 2017 to 2018.members.

Net Incomeincome (loss)

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 and net income of $4,233,254 for the year ended September 30, 2017.2018. The decrease in net income is attributed to a decrease in revenue from 20172018 to 2018.2019.

Cash flow

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, and 2017, we generated cash flows from operations in the amount of $10,665,370$10,665,370. The decrease in operating cash flow, in our opinion, is attributed to decreases in net income, accounts payable and $6,093,381, respectively.deferred income.

Working capital

As of September 30, 20182019 and 2017,2018, we had working capital of $13,436,660$15,318,405 and $10,792,789,$13,436,660, respectively. The increase in working capital, in our opinion, is attributed to an increasedecreases in cash from 2017 to 2018.accounts payable and deferred income.

Advertising

Advertising costs are expensed as incurred and included in selling and distributions expenses. Advertising expenses were $913,480$1,908,950 and $761,891$913,480 for the years ended September 30, 2019 and 2018, and 2017, respectively.

Advertising expenses were comprised of, but not limited to, sales events hosted for sales agents, exhibitions to promote and display company product offerings, signboards, and public relations activities.

Future Plans

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

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

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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Item 8. Financial Statements and Supplementary Data.

Exceed World, Inc.

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OFTo the Shareholders and Board of Directors of

EXCEED WORLD, INC.Exceed World, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheetssheet 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

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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"“Company”) and its subsidiaries (collectively referred to as the “Group”) as of September 30, 2018, and 2017, the related consolidated statements of operations and comprehensive income, consolidated statements of shareholders’ equity, and consolidated statements of cash flows for the yearsyear ended September 30, 2018, and 2017, 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 2017, 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

These

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 opinions.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 discussed in Note 15)restatement)

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(*) On October 28, 2016, the Company performed the forward stock split, whereby every one (1) share of the common stock was automatically reclassified and changed into twenty (20) shares (the “20-for-1 Forward Stock Split”). The authorized number of shares and par value per share were not be affected by the 20-for-1 Forward Stock Split. The Company’s capital accounts have been retroactively restated to reflect the 20-for-1 Forward Stock Split.

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EXCEED WORLD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 20182019

NOTE 1 -– ORGANIZATION, DESCRIPTION OF BUSINESS ANDBASIS 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 issueissued 12,700,000 common stock at US$1 each to Force Internationale. The results of these transactions are that Force Internationale is aan 84.4% owner of the Company and the Company is a 100% owner of Force Holdings.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, 2018, we operate2019, the Company operates through our wholly owned subsidiaries, which are engaged in various business activities and industries including:

-        The sale and distributionprovision of health related products;

-       The promotion of third party consumer goods and services;

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

-        Educational service providerthe educational services through the distributors namedan internet platform called “Force Club”.

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

NOTE 2 – SUMMARY OF- SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries (the “Group”).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.

* It had been disposed(*1) Wholly owned subsidiary of during the year ended September 30, 2018Force Holdings

(*2) Wholly owned subsidiary of e-Learning

COMBINED FINANCIAL STATEMENTSRECLASSIFICATIONS

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 Company and Force Holdings were under common control before and after the Reorganization, weaccompanying consolidated financial statements are required under theprepared on a basis of conformity with accounting principles generally accepted accounting principles in the United States of America (“U.S.US GAAP”) to account for this common control acquisition in a manner similar to the pooling of interests method of accounting. Under this method of accounting, our consolidated financial statements as of September 30, 2018 and 2017 reflect Force Holdings historical carryover basis in the assets and liabilities instead of reflecting the fair market value of the assets and liabilities. We have also retrospectively recast our financial statements to combine the operating results of the Company and Force Holdings from the date common control began, January 12, 2016.

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

RELATED PARTY TRANSACTION

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

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

CASH EQUIVALENTS

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

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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 written off againstrecorded corresponding to the allowance when identified.

MARKETABLE SECURITIESINVESTMENTS

InvestmentsThe Company's investments in marketable securities with readily determinable fair values and all investments in equity securities are reported at their fair values as quoted by market exchanges in the consolidated balance sheets. Unrealized and realized gains and losses are included in the changesheets 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 marketable securities.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:

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

INTANGIBLE ASSETS

Intangible assets consist of internal use software, franchise rights, membership and land.

The Company amortizes its intangible assets with definite useful lives over their estimated useful livescapitalizes certain costs related to obtaining or developing software for internal use. Costs incurred during the application development stage internally or externally are capitalized and periodically evaluated for recoverability, and those evaluations take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.

The intangible assets with definite useful life are amortized using theon a straight-line basis over the following estimatedexpected useful life: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. Management has determined there were no events or changes in circumstances that required an impairment during the years ended September 30, 2018 and 2017.

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REVENUE RECOGNITION

The Company recognizes revenue from sales of goods when the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and risk of loss has passed; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. When payments are received in advance of recognizing revenue, the Company includes the amount in deferred income on the consolidated balance sheets. Membership income of e-learning educational services was recognized when the membership services are rendered.

ADVERTISING

Advertising costs are expensed as incurred and included in selling and distributions expenses. Advertising expense was $913,480 and $761,891 for the years ended September 30, 2018 and 2017, respectively.

FOREIGN CURRENCY TRANSLATION 

The Company maintains its books and records in its local currencies, Japanese YEN (“JPY”) and, 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 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 GroupCompany 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 GroupCompany into US$1 has been made at the following exchange rates:

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.

COMPREHENSIVE INCOME OR LOSSThe 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.

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income or loss, its components and accumulated balances. Comprehensive income or loss as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying consolidated statements of shareholders’ equity consists of changes in unrealized gains and losses on foreign currency translation.The Company does not have any contract asset.

BASIC 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, 20182019 and 20172018 and, thus, anti-dilution issues are not applicable.

INCOME TAXES

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

RECENTLY ISSUEDRECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (ASU)ASU 2014-09, “Revenue from Contracts with Customers (ASC 606) (Topic 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”). The objective of the updateUnder ASC 606, revenue is to recognize revenue to depict the transferrecognized when a customer obtains control of promised goods or services to customersand is recognized in an amount that reflects the consideration to which the entity expects to be entitledreceive in exchange for those goods or services. ASU 2015-14 deferredIn addition, the effective datestandard requires disclosure of the update to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. This update provides a five-step analysisnature, amount, timing, and uncertainty of transactions to determine whenrevenue and how revenue is recognized, alongcash flows arising from contracts with expanded disclosure requirements. An entity should recognize revenue to depictcustomers. Effective October 1, 2018, the transfer of promised goods or services to customers in an amount that reflectsCompany adopted the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company will adopt this accounting standard update using the modified retrospective method, with the cumulative effect of initially applying this update, recognized in the first quarter of fiscal 2019. The adoption of this ASU isASC 606 did not expected to 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 “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”). This new guidanceUnder ASC 842, lessees will require that a lesseebe required to recognize assets and liabilities on the balance sheet for all leases withat the commencement date including a lease term of more than twelve months, withliability, 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 result beinglessee’s right to use, or control the recognitionuse of, a right of usespecified asset and afor the lease liability. term.

The new lease accounting requirements arestandard will be effective for fiscal yearsthe Company beginning after December 15, 2018, and interim periods within those fiscal years. EarlyOctober 1, 2019, with early adoption is 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 currently evaluating the impactor contains a lease and initial direct costs for any leases that exist prior to adoption of the new guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13,Fair Value Measurement (Topic 820). This new guidance removes and modifies disclosure requirements on fair value statements. This update is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal year.standard. The Company is currently evaluatingwill 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 if any, on its disclosures in the Notes to Consolidated Financial Statements.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.

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NOTE 3 - FAIR VALUE MEASUREMENT

NOTE 3 – FAIR VALUE MEASUREMENTFASB 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:

The Company’s valuation techniques used to measure the fair value of marketable equity securities are derived from quotedLevel 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.

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

National income tax in Japan is charged at 15% with taxable income up to JPY8,000,000 and 23.2%, 23.4% at September 30, 2018 and September 30, 2017, respectively, with taxable income over JPY8,000,000. The Company’s subsidiaries, School TV, e-Learning and e-Communications (“Japanese Subsidiaries”), were incorporated in Japan andSubsidiaries are subject to a number of income taxes, which, in aggregate, represent a statutory tax rate approximately as follows:

Open tax years in Japan are five years. As of September 30, 2019, the Company’s earliest open tax year for Japanese national income tax and local corporate tax, business tax and corporate inhabitant taxes 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.

For thepurposes is its fiscal year ended September 30, 20182014. 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:

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, 2017, income2019 and 2018.

Open tax credit (expense)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 Japanese Subsidiaries is $89,297 and $(533,439), respectively.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 yearyears ended September 30, 20182019 and 2017, respectively,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.

United States

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

The 2017 Act also includes provisions for a new tax on 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’s management is still evaluating the effect of the 2017 Act on the Company. Management may update its judgment of that effect based on its continuing evaluation and on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may takeelected to account for GILTI tax in the future.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.

One-Time Transition Tax RelatedAs 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 the 2017 Actadjustment. Open tax years in state and foreign jurisdictions generally range from three to six years.

NOTE 5 - DEFERRED TAX ASSETS

The Group estimated the amountComponents of U.S. corporate incomedeferred tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries of the Company mandated by the 2017 Act. The Group retained an accumulated deficitassets as of December 31, 2017September 30, 2019 and therefore did not recognize any one-time transition tax. The actual impact of the 2017 Act on the Company may differ from management’s estimates, and management may update its judgments based on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.2018 are as follows: