10-Q: Exceed World Reports Q1 2025 Results: Revenue Declines, Net Loss Widens

Exceed World, Inc. reports a decrease in revenue and an increased net loss for the quarter ended December 31, 2024, compared to the same period in 2023.

Summary

• Exceed World, Inc. reported its financial results for the first quarter of fiscal year 2025, ending December 31, 2024.
• The company's revenue decreased to $3,005,008 from $4,827,149 in the same quarter of the previous year.
• The net loss for the quarter was $774,189, compared to a net loss of $277,946 for the three months ended December 31, 2023.
• The company's cash and restricted cash decreased to $14,289,019 as of December 31, 2024, from $17,963,261 as of December 31, 2023.
• The decrease in revenue is attributed to a decline in recruitment activities of premium Force Club members.
• The increase in net loss is attributed to the decrease in revenue.
• The company's working capital decreased to $10,625,225 as of December 31, 2024, from $13,800,283 as of September 30, 2024.
• The company is focusing on expanding its sales network and providing benefits to premium members to strengthen its business activities.

Sentiment

Score: 3

Explanation: The report indicates a negative trend with declining revenue and increasing losses, coupled with internal control weaknesses. While the company has sufficient cash, the overall outlook is concerning.

Positives

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

Negatives

• Revenue decreased significantly compared to the same period last year.
• Net loss increased substantially compared to the same period last year.
• Cash and working capital decreased during the period.
• The company identified material weaknesses in its internal controls over financial reporting.
• The company is facing legal claims related to contract cancellations.

Risks

• Changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, and competition could have a material adverse effect on the company's operations.
• The company's internal controls are not effective, which could lead to misstatements in financial reporting.
• The company is subject to legal proceedings, which could result in financial losses.
• The company's reliance on Force Club membership fees makes it vulnerable to changes in recruitment activities and customer preferences.

Future Outlook

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

Management Comments

• The decrease in revenue is primarily attributed to a decrease in recruitment activities of premium Force Club members.
• The increase in net loss is attributed to the decrease in revenue.
• The increase in operating cash outflow is mainly attributed to an increase in settlement of account payable, other current liabilities, deferred income and increase in 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 may reflect broader trends in the online education market or increased competition.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific niche within educational services that Exceed World operates in.
• Companies like Coursera, Udemy, and Skillsoft are major players in online education, but their business models and target markets may differ significantly.
• A more relevant comparison would be to companies that utilize multi-level marketing (MLM) for educational content distribution, but these are often smaller and less publicly visible.
• Benchmarking against industry averages for revenue growth and profitability would require a deeper analysis of comparable companies with similar business models and geographic focus.

Legal Proceedings

• During the three months ended December 31, 2024, the Company has settled one legal case in the amount of approximately $24,000 related to the cancellation of contract.
• As of filing date, the Company had four pending legal cases, claiming a damage of approximately $82,100 related to the cancellation of contracts.
• The Company's legal counsel estimated a probable settlement for these cases with total settlement amount of approximately $32,800.
• The Company accrued a total liability of approximately $32,800 as of December 31, 2024.

Related Party Transactions

• As of December 31, 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.
• Due to related parties Keiichi Koga, a shareholder of the Company and a director of certain subsidiaries of the Company $47,635.
• Due to related parties Force Internationale, the Company's majority shareholder. Tomoo Yoshida is a director of Force Internationale 1,951,260.
• During the three months ended December 31, 2024 and 2023, Force Internationale paid expenses on behalf of the Company in the amount of $7,535 and $132,592, respectively.
• Tomoo Yoshida provided guarantee for the Company's office leases during the three months ended December 31, 2024 and 2023.

Stakeholder Impact

• Shareholders may be concerned about the declining revenue and increasing losses.
• Employees may be affected by potential cost-cutting measures or restructuring.
• Customers may be impacted by changes in the company's offerings or pricing.
• Suppliers and creditors may face increased risk due to the company's financial challenges.

Next Steps

• The company will continue to 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, quarterly report, revenue, net loss, Exceed World, Force Club, financial statements, education services