10-Q: Exceed World, Inc. Reports Q2 2025 Results: Revenue Declines, Net Loss Increases

Exceed World, Inc.'s Q2 2025 results reveal a decrease in revenue and an increase in net loss compared to the same period in the previous year, primarily due to reduced recruitment activities.

Summary

• Exceed World, Inc. reported its financial results for the quarter ended March 31, 2025.
• The company's revenue decreased to $2,315,935 for the three months ended March 31, 2025, from $6,359,520 for the three months ended March 31, 2024.
• For the six months ended March 31, 2025, revenue was $5,320,943, compared to $11,186,669 for the same period in 2024.
• The company recorded a net loss of $1,631,923 for the three months ended March 31, 2025, compared to a net loss of $163,242 for the three months ended March 31, 2024.
• The net loss for the six months ended March 31, 2025, was $2,608,963, compared to a net loss of $441,188 for the six months ended March 31, 2024.
• The decrease in revenue is attributed to a decline in recruitment activities of premium Force Club members.
• The company had negative cash outflows from operations of $3,709,737 for the six months ended March 31, 2025, compared to cash inflows of $1,283,161 for the six months ended March 31, 2024.
• This increase in operating cash outflow is mainly attributed to an increase in settlement of account payable, deferred income and other current liabilities, and decrease in receipts of accounts receivable.
• As of March 31, 2025, the company's cash balance was $11,587,260, compared to $17,573,926 as of September 30, 2024.
• The company's working capital as of March 31, 2025, was $8,742,154, compared to $13,800,283 as of September 30, 2024.
• The company is involved in legal proceedings related to Force Club membership cancellations, with five pending cases claiming damages of approximately $129,300.
• The company accrued a total liability of approximately $53,400 for these legal cases as of March 31, 2025.
• Management has identified material weaknesses in internal controls, including domination of management by a single individual, lack of outside directors, inadequate segregation of duties, and lack of well-established procedures for related party transactions.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to declining revenue, increased net losses, negative cash flow, and identified material weaknesses in internal controls. While the company believes it has sufficient cash, the overall trend is concerning.

Positives

• The company believes its current cash balance is sufficient to fund operations without additional funding.
• The company is focusing on expanding its sales network and providing benefits to premium members.

Negatives

• Significant decrease in revenue compared to the previous year.
• Substantial increase in net loss compared to the previous year.
• Negative cash flow from operations.
• Decrease in cash balance and working capital.
• Material weaknesses in internal controls.
• Pending legal cases related to Force Club membership cancellations.

Risks

• The company's reliance on recruitment activities makes it vulnerable to fluctuations in membership interest.
• Legal proceedings could result in significant financial liabilities.
• Material weaknesses in internal controls could lead to financial misstatements or fraud.
• The company's small size and concentrated management structure pose risks to its operational effectiveness.

Future Outlook

Over the next twelve months, the Company will continue to focus on expanding its sales network in order to strengthen its business activities as well as to provide benefits and incentives to premium members as value-added services, in addition to the standard compensation package.

Management Comments

• The decrease in revenue is primarily attributed to a decrease in recruitment activities of premium Force Club members.
• The increase in operating cash outflow is mainly attributed to an increase in settlement of account payable, deferred income and other current liabilities, and decrease in receipts of accounts receivable.
• Currently, our cash balance is sufficient to fund our operations without the need for additional funding.

Industry Context

The company operates in the educational services sector, specifically through an internet platform. The decline in revenue suggests challenges in maintaining or growing its membership base, which could be due to increased competition or changing consumer preferences in the online education market.

Comparison to Industry Standards

• It is difficult to compare Exceed World directly to industry standards without knowing the specific niche of educational services they provide.
• However, generally, online education companies like Coursera or Udemy focus on diverse course offerings and partnerships with universities.
• MLM companies like Herbalife or Amway rely heavily on recruitment, so a decline in recruitment activity is a significant concern.
• Compared to these companies, Exceed World's financial performance indicates it is struggling to maintain its market position and needs to address its recruitment challenges and internal control weaknesses.

Legal Proceedings

• The Company has settled one legal case in the amount of approximately $22,500 related to the cancellation of contract.
• As of filing date, the Company had five pending legal cases, claiming a damage of approximately $129,300 related to the cancellation of contracts.
• The Company's legal counsel estimated a probable settlement for these cases with total settlement amount of approximately $53,400.
• The Company accrued a total liability of approximately $53,400 as of March 31, 2025.

Related Party Transactions

• As of March 31, 2025, and September 30, 2024, the Company's due to related parties and director are as follows: Due to director Tomoo Yoshida, CEO, CFO, sole director and a shareholder of the Company $ 741,248 $ 741,248.
• Due to related parties Keiichi Koga, a shareholder of the Company and a director of certain subsidiaries of the Company $ 47,635 $ 47,635.
• Force Internationale, the Company's majority shareholder. Tomoo Yoshida is a director of Force Internationale 2,059,970 1,943,725.
• From time to time, these related parties have advanced to the Company or paid expenses on behalf of the Company, and the Company has also made repayments.
• During the six months ended March 31, 2025 and 2024, Force Internationale paid expenses on behalf of the Company in the amount of $ 116,246 and $ 242,140 , respectively.
• Tomoo Yoshida provided guarantee for the Company's office leases during the six months ended March 31, 2025 and 2024.

Stakeholder Impact

• Shareholders may be concerned about the declining financial performance and the identified weaknesses in internal controls.
• Employees may face uncertainty due to the company's financial challenges.
• Customers may be affected by changes in the company's offerings or service quality.
• Suppliers and creditors may face increased risk due to the company's financial instability.

Next Steps

• The company will focus on expanding its sales network.
• The company will provide benefits and incentives to premium members as value-added services.

Key Dates

Keywords

financial results, revenue, net loss, cash flow, Force Club, internal controls, legal proceedings, education, membership, Exceed World