NOTE 9 - CONTINGENCIES

9 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

NOTE 8 - COMMITMENTS

As of June 30, 2024, the Company had three finance leases of equipment and vehicles with a gross value of approximately $74,174 and $30,228, respectively, included in property, plant and equipment. The Company also leases its offices under operating lease and short-term lease. The estimated effect of lease renewal and termination options, as applicable, was included in the consolidated financial statements in current period.

The components of lease expense were as follows:

		For the nine months ended June 30,
		2024	2023

Operating lease cost	$	251,799	276,586
Short term lease cost		11,909	13,154
Finance lease cost:
Amortization of right-of-use asset		14,438	17,471
Interest on lease liability		1,800	1,664
Total finance lease cost		16,238	19,135
Total lease cost	$	279,946	308,875

The following table presents the Company’s supplemental information related to operating and finance leases:

		For the nine months ended June 30,
		2024	2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	1,800	1,664
Operating cash flows from operating leases	$	251,799	276,586
Financing cash flows from finance leases	$	12,661	42,763

Weighted Average Remaining Lease Term
Operating leases		2.06 years	2.57 years
Finance leases		4.33 years	3.51 years
Weighted Average Discount Rate
Operating leases		1.84%	1.84%
Finance leases		3.56%	5.69%

The future maturity of lease liabilities as of June 30, 2024 are as follows:

Year ending September 30		Finance lease		Operating lease
2024 (remaining)	$	5,777	$	90,494
2025		21,981		293,436
2026		20,404		214,493
2027		20,404		-
2028		27,236		-
Thereafter		8,399		-
Total	$	104,201	$	598,423
Less imputed interest		(17,235)		(22,971)
Total lease liabilities		86,966		575,452
Less current portion		(17,756)		(297,754)
Long-term lease liabilities	$	69,210	$	277,698

NOTE 9 - CONTINGENCIES

The Company is subject to various claims and legal proceedings in the course of conducting the business related to Force Club Membership and, from time to time, the Company may become involved in additional claims and lawsuits incidental to the businesses. The Company’s legal counsel and management routinely assess the likelihood of adverse judgments and outcomes to these matters, as well as ranges of probable losses; to the extent losses are reasonably estimable. Accruals are recorded for these matters to the extent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonable estimable.

In the opinion of management, appropriate and adequate accruals for legal matters have been made, and management believes that the probability of a material loss beyond the amounts accrued is remote. Nevertheless, the Company cannot predict the impact of future developments affecting our pending or future claims and lawsuits. The Company expenses legal costs as incurred, and all recorded legal liabilities are adjusted as required as better information becomes available to the Company. The factors the Company considers when recording an accrual for contingencies include, among others: (i) the opinions and views of the Company’s legal counsel; (ii) the Company’s previous experience; and (iii) the decision of our management as to how we intend to respond to the complaints.

During the nine months ended June 30, 2024, the Company has settled six legal cases in the amount of approximately JPY111.7 million (approximately $693,500) related to the cancellation of contract. As of filing date, the Company had four pending legal cases, claiming a damage of approximately JPY17.7 million (approximately $110,200) related to the cancellation of contracts. The Company’s legal counsel estimated a probable settlement for these cases with total settlement amount of approximately JPY7.1 million (approximately $44,000). The Company accrued a total liability of JPY7.1 million (approximately $44,000) as of June 30, 2024.

Exceed World, Inc. 10-Q