CIMG Inc 10-Q for FY2022 Q1
CIMG Inc. (CIMG)
About this 10-Q
CIMG Inc filed this 10-Q on February 11, 2022, covering the quarter ended December 31, 2021 (FY2022 Q1).
Headline figures
Quarter ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.02M
- up 96.8% from $517.99K a year earlier
- Net loss
- $2.8M
- compared with a net loss of $5.9M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________to________
Commission
File No.
(exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The
|
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated Filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
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 ☐
As of February 4, 2022, the registrant had shares of common stock outstanding.
Table of Contents
| 2 |
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This report includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Such forward-looking statements reflect the views of NuZee, Inc. (“NuZee” or the “Company”) with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about the Company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance, or any other matters, are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “expects”, “project,” “predict,” “believe,” “expect,” “anticipate,” “target,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements in this report may include, without limitation, statements regarding:
| ● | our plans to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our products and provide our co-packing services; | |
| ● | the impact to our business from the COVID-19 global crisis, including any supply chain interruptions; | |
| ● | the evolving coffee preferences of coffee consumers in North America and Korea; | |
| ● | the size and growth of the markets for our products and co-packing services; | |
| ● | our ability to compete with companies producing similar products or providing similar co-packing services; | |
| ● | our expectation that our existing capital resources will be sufficient to fund our operations for at least the next 12 months; | |
| ● | our expectation regarding our future co-packing revenues; | |
| ● | our ability to develop innovative new products and expand our co-packing services to other products that are complementary to our current single serve coffee product offerings; | |
| ● | our reliance on third-party roasters to roast coffee beans necessary to manufacture our products and fulfill every aspect of our co-packing services; | |
| ● | regulatory developments in the U.S. and in non-U.S. countries; | |
| ● | our ability to retain key management, sales, and marketing personnel; | |
| ● | the scope of protection we are able to establish and maintain for intellectual property rights covering our products and technology; | |
| ● | the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; | |
| ● | our ability to develop and maintain our corporate infrastructure, including our internal control over financial reporting; | |
| ● | the outcome of pending, threatened or future litigation; and | |
| ● | our financial performance. |
The forward-looking statements are not meant to predict or guarantee actual results, performance, events, or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements in the section of our Annual Report on Form 10-K filed with the SEC on December 22, 2021, titled “Risk Factors” and sections of this report that describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.
Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
| 3 |
Item 1. Financial Statements.
NuZee, Inc.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, 2021 | September 30, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets: | ||||||||
| Right-of-use asset - operating lease | ||||||||
| Investment | ||||||||
| Other assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of long-term loan payable | ||||||||
| Current portion of lease liability - operating lease | ||||||||
| Current portion of lease liability - finance lease | ||||||||
| Accrued expenses | ||||||||
| Deferred income | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Lease liability - operating lease, net of current portion | ||||||||
| Lease liability - finance lease, net of current portion | ||||||||
| Loan payable - long term, net of current portion | ||||||||
| Other noncurrent liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Stockholders’ equity: | ||||||||
| Common stock; shares authorized, $ par value; and shares issued and outstanding as of December 31, 2021, and September 30, 2021, respectively | $ | $ | ||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 4 |
NuZee, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31, 2021 | Three Months Ended December 31, 2020 | |||||||
| Revenues, net | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Loss from investment in unconsolidated affiliate | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest income | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average number of common stock outstanding | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 5 |
NuZee, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| NuZee, Inc. | ||||||||
| For the three months ended December 31 | 2021 | 2020 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation | ||||||||
| Total other comprehensive income, net of tax | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 6 |
NuZee, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||
| Common stock | paid-in | Accumulated | comprehensive | |||||||||||||||||||||
| Shares | Amount | capital | deficit | income | Total | |||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Equity securities issued for cash | ||||||||||||||||||||||||
| Equity securities issued for cash, shares | ||||||||||||||||||||||||
| Exercise of warrants | - | - | ||||||||||||||||||||||
| Stock option expense | - | - | - | - | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Exercise of stock options, shares | ||||||||||||||||||||||||
| Other comprehensive gain | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||
| Common stock | paid-in | Accumulated | comprehensive | |||||||||||||||||||||
| Shares | Amount | capital | deficit | income | Total | |||||||||||||||||||
| Balance September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| - | ||||||||||||||||||||||||
Equity securities issued for cash | - | - | ||||||||||||||||||||||
| Stock option expense | - | - | - | - | ||||||||||||||||||||
| Exercise of stock options | - | - | - | |||||||||||||||||||||
| Other comprehensive gain | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
NuZee, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and Amortization | ||||||||
| Noncash lease expense | ||||||||
| Stock option expense | ||||||||
| Sales allowance | - | |||||||
| Loss from investment in unconsolidated affiliate | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Deferred income | ( | ) | ||||||
| Lease liability – operating lease | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Other non-current liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from exercise of options | - | |||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Repayment of finance lease | ( | ) | ( | ) | ||||
| Proceeds from exercise of warrants, net of issuance costs | - | |||||||
| Proceeds from issuance of equity securities, net of issuance costs | - | |||||||
| Net cash provided by financing activities | ||||||||
| Effect of foreign exchange on cash | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash transactions: | ||||||||
| Deferred offering costs accrued | $ | $ | ||||||
| ROU assets and liabilities added during the period | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 8 |
NuZee, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2021
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements of NuZee, Inc. (together with its subsidiaries, referred to herein as the “Company”, “we” or “NuZee”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021 as filed with the SEC on December 22, 2021. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the Annual Report on Form 10-K for the year ended September 30, 2021 have been omitted.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss.
Principles of Consolidation
The Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, balances and transactions have been eliminated upon consolidation.
The Company has two wholly owned international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”) and NuZee Investment Co., Ltd. (“NuZee INV”).
Basic earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants 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. As of December 31, 2021 and December 31, 2020, the total number of common stock equivalents was and , respectively, comprised of stock options and warrants as of December 31, 2021 and December 30, 2020. The Company incurred a net loss for the three months ended December 31, 2021 and 2020, respectively, and therefore basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.
Capital Resources
Since its inception, the Company has devoted substantially all its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, raising capital, and the commercialization and manufacture of its single serve coffee products. The Company has generated limited revenues from its principal operations, and there is no assurance of future revenues.
| 9 |
As
of December 31, 2021, the Company had cash of $
Major Customers
In the three months ended December 31, 2021 and 2020, revenue was primarily derived from major customers disclosed below.
Three months ended December 31, 2021:
SCHEDULE OF REVENUE BY MAJOR CUSTOMERS
| Customer Name | Sales Amount | % of Total Revenue | Accounts Receivable Amount | % of Total Accounts Receivable | ||||||||||||
| Customer WP | $ | % | $ | % | ||||||||||||
| Customer CU | $ | % | $ | % | ||||||||||||
Three months ended December 31, 2020:
| Customer Name | Sales Amount | % of Total Revenue | Accounts Receivable Amount | % of Total Accounts Receivable | ||||||||||||
| Customer WP | $ | % | $ | % | ||||||||||||
| Customer RSM | $ | % | $ | % | ||||||||||||
| Customer GR | $ | % | $ | % | ||||||||||||
Lease
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the consolidated balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The Company implemented ASU No. 2016-02 on October 1, 2019.
The Company performs a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company has one significant long-term operating lease for office and manufacturing space in Plano, Texas. The leased property in Plano, Texas, has a remaining lease term through June 2024. The lease has an option to extend beyond the stated termination date, but exercise of this option is not probable. The Company did not apply the recognition requirements of ASC 842 to operating leases with a remaining lease term of 12 months or less.
During
our analysis of leases in the three months ended December 31, 2021, we determined to renew the office and manufacturing space in Vista,
California which was originally scheduled to expire on
| 10 |
As
of December 31, 2021, our operating leases had a weighted average remaining lease term of
SCHEDULE OF OTHER INFORMATION RELATED TO OPERATING LEASE
| 1 | ||||
| ROU Asset – October 1, 2021 | $ | |||
| ROU Asset added during the period | ||||
| Amortization during the period | ( | ) | ||
| ROU Asset –December 31, 2021 | $ | |||
| Lease Liability – October 1, 2021 | $ | |||
| Lease Liability added during the period | ||||
| Amortization during the period | ( | ) | ||
| Lease Liability – December 31, 2021 | $ |
| Lease Liability – Short-Term | $ | |||
| Lease Liability – Long-Term | ||||
| Lease Liability – Total | $ |
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2021:
Amounts due within 12 months of December 31,
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES
| 2021 | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total Minimum Lease Payments | ||||
| Less Effect of Discounting | ( | ) | ||
| Present Value of Future Minimum Lease Payments | ||||
| Less Current Portion of Operating Lease Obligations | ||||
| Long-Term Operating Lease Obligations | $ |
On
October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on certain
packing equipment. The terms of this agreement require us to pay $
During the year ended September 30, 2021, we recorded an impairment to fully write off the related equipment as it was deemed no longer useful for our operations.
The table below summarizes future minimum finance lease payments at December 31, 2021 for the 12 months ended December 31:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS FOR FINANCE LEASES
| 2021 | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total Minimum Lease Payments | ||||
| Amount representing interest | ( | ) | ||
| Present Value of Minimum Lease Payments | ||||
| Current Portion of Finance Lease Obligations | ||||
| Finance Lease Obligations, Less Current Portion | $ |
Rent
expense included in general and administrative expense for the three months ended December 31, 2021 and 2020 was $
| 11 |
Cash and non-cash activities associated with the leases for the three months ended December 31, 2021 are as follows:
SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES
| Operating cash outflows from operating leases: | $ | |||
| Operating cash outflows from finance lease: | $ | |||
| Financing cash outflows from finance lease: | $ |
In
September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020, under favorable terms that
are co-terminus with the original lease ending June 30, 2024. During the three months ended December 31, 2021, we recognized sublease
income of $
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS OF SUBLEASE
| 2021 | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total | $ |
Loans
On
April 1, 2019, we purchased a delivery van from Ford Motor Credit for $
On
February 15, 2019, NuZee KR entered into equipment financing for production equipment with Shin Han Bank for $
The remaining loan payments are as follows:
SCHEDULE OF LOAN PAYMENTS
| Ford Motor Credit | ShinHan Bank | Total | ||||||||||
| 2022 (Jan 2022 - Sep 2022) | $ | $ | $ | |||||||||
| 2023 (Oct 2022 - Dec 2022) | ||||||||||||
| Total Current Portion | $ | $ | $ | |||||||||
| 2023 (Jan 2023 - Sep 2023) | $ | $ | ||||||||||
| 2024 | ||||||||||||
| Total Long-Term Portion | $ | $ | $ | |||||||||
| Grand Total | $ | $ | $ | |||||||||
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605). The new standard’s core principle is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in the standard are applied in five steps: 1) Identify the contract(s) with a customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations in the contract; and 5) Recognize revenue when (or as) the entity satisfies a performance obligation. We adopted Topic 606 as of October 1, 2018, on a modified retrospective basis. The adoption of Topic 606 did not have a material impact on our consolidated financial statements, including the presentation of revenues in our Consolidated Statements of Operations.
| 12 |
Foreign Currency Translation
The
financial position and results of operations of each of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s
local currency as the functional currency. Revenues and expenses of each such subsidiary have been translated into U.S. dollars at average
exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet
date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity
unless there is a sale or complete liquidation of the underlying foreign investment. Foreign currency translation adjustments recorded
to other comprehensive gain amounted to $
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Inventories
Inventory,
consisting principally of raw materials, work in process and finished goods held for production and sale, is stated at the lower of cost
or net realizable value, cost being determined using the weighted average cost method. The Company reviews inventory levels at least
quarterly and records a valuation allowance when appropriate. At December 31, 2021 and September 30, 2021, the carrying value of inventory
was $
SCHEDULE OF INVENTORY
| December 31, 2021 | September 30, 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Less – Inventory reserve | - | - | ||||||
| Total | $ | $ | ||||||
Joint Venture
On
January 9, 2020, a joint venture agreement was signed between Industrial Marino, S.A. de C.V. (
The
Company accounts for NLA using the equity method of accounting since the management of day-to-day operations at NLA ultimately lies with
the Company’s joint venture partner as the operations of NLA are based in its partners facilities and our partner appoints the
Chairman of the joint board of directors of NLA. As of December 31, 2021, the only activity in NLA was the contribution of two machines
as described above and other start up related activities. $
2. GEOGRAPHIC CONCENTRATION
The Company is organized based on fundamentally one business segment although it does sell its products on a world-wide basis. The Company is organized in three geographical segments. The Company co-packs product for customers and produces and sells its products directly in North America and Korea. The Company has a minimally staffed office in Japan that provides support for import and export of product and materials between the U.S. and Japan, as well as investor relations support to our shareholders based in Japan. Information about the Company’s geographic operations for the three months ended December 31, 2021 and 2020 are as follows:
| 13 |
Geographic Concentrations
SCHEDULE OF GEOGRAPHIC OPERATIONS
| Three Months Ended | Three Months Ended | |||||||
| December 31, 2021 | December 30, 2020 | |||||||
| Net Revenue: | ||||||||
| North America | $ | $ | ||||||
| South Korea | ||||||||
| Net Revenue | $ | $ | ||||||
| Property and equipment, net: | As of December 31, 2021 | As of September 30, 2021 | ||||||
| North America | $ | $ | ||||||
| South Korea | ||||||||
| Japan | ||||||||
| Property and equipment, net | $ | $ | ||||||
3. RELATED PARTY TRANSACTIONS
For
the three months ended December 31, 2021 and December 31, 2020, respectively, the Company had sales of $
4. ISSUANCE OF EQUITY SECURITIES
Exercise of Warrants
In the three months ended December 31,
2021, we issued
shares of common stock related to exercises of warrants, including
shares of common stock issued upon exercise of
ATM Offering
On
December 28, 2021, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Maxim Group
LLC, as agent (the “Agent”), pursuant to which we may offer and sell, from time to time, shares of our common stock through
the Agent in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act, having an aggregate offering price
of up to $
Options
During the three months ended December 31, 2021, the Company granted no new stock options, had of stock options that were forfeited because of the termination of employment, and issued no shares upon the exercise of outstanding stock options.
| 14 |
SUMMARY OF STOCK OPTION ACTIVITY
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at September 30, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding at December 31, 2021 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2021 | $ | $ | ||||||||||||||
The
Company is expensing these stock option awards on a straight-line basis over the requisite service period. The Company recognized stock
option expense of $
SUMMARY OF UNVESTED SHARES
Nonvested options
| Number of Nonvested Options | Weighted Average Grant Date Fair Value | |||||||
| Nonvested options at September 30, 2021 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Vested | ( | ) | ||||||
| Nonvested options at December 31, 2021 | $ | |||||||
Warrants
On
June 23, 2020, as part of our agreement with Benchmark Company, LLC, the underwriter of the Company’s June 2020 registered public
offering of common stock, we issued
On
March 19, 2021, we entered into an underwriting agreement in connection with our registered public offering (the “Offering”)
of
Each
Series A Warrant entitles the registered holder to purchase one share of our common stock at an exercise price of $
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The Series A and Series B Warrant holders are obligated to pay the exercise price in cash upon exercise of the Warrants unless we fail to maintain a current prospectus relating to the common stock issuable upon the exercise of the Warrants (in which case, the Warrants may only be exercised via a “cashless” exercise provision).
The following table summarizes warrant activity for the three months ended December 31, 2021:
SCHEDULE OF WARRANT ACTIVITY
| Number of Shares Issuable Upon Exercise of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at September 30, 2021 | $ | $ | ||||||||||||||
| Issued | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Expired | ||||||||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||||||
| Exercisable at December 31, 2021 | $ | $ | ||||||||||||||
In the three months ended December 31,
2021, we issued
shares of common stock related to exercises of warrants, including
shares of common stock issued upon exercise of
6. SUBSEQUENT EVENTS
ATM Offering—Sales under Equity Distribution Agreement
During
the period from January 1, 2022 through February 4, 2022, we issued and sold shares of our common stock under the Equity Distribution
Agreement, raising net proceeds of $
Agreement with Farmer Bros. Co.
As previously disclosed in 2020, we entered into an Equipment Bailment and Contract Manufacturing Agreement (the “FBC Agreement”) with Farmer Bros. Co. (“FBC”), pursuant to which FBC agreed to provide us with access to manufacturing capacity and was obligated to manufacture finished products for us. On January 27, 2022, we and FBC mutually agreed to terminate the FBC Agreement, effective immediately. Prior to its termination, the Company had placed one machine with FBC under the FBC Agreement. The Company plans to pick up the machine within 60 days of the termination date and redeploy the machine to one of its two manufacturing locations in the United States.
Director Compensation Policy
On
January 11, 2022, the Company’s Board of Directors (the “Board”) adopted and approved a new director compensation policy
pursuant to which the Company will provide the following compensation to its non-employee Board members: (i) annual cash compensation
of $, effective as of October 1, 2021 and payable quarterly in advance; (ii) payment to each Board member of reasonable out-of-pocket
expenses for travel costs to attend Board meetings; (iii) beginning with the Company’s 2022 Annual Meeting of Stockholders, pursuant
to the NuZee, Inc. 2019 Stock Incentive Plan, annual grants of restricted shares of common stock with an aggregate grant date fair value
of $ to each Board member upon such Board member’s election or re-election, as applicable, to the Board at each annual meeting
of stockholders, and (iv) annual payments to the Audit Committee Chair, Compensation Committee Chair and Nominating and Corporate Governance
Committee Chair of $
Amended Non-Binding Letter of Intent for Potential Asset Acquisition; Bridge Loan
As previously disclosed in the Company’s Current Report on Form 8-K filed on December 29, 2021, the Company announced it entered into a non-binding letter of intent (the “Letter of Intent”)
affording the Company an exclusivity period lasting until January 31, 2022, to negotiate a definitive agreement (the
“Definitive Agreement”) to acquire substantially all the assets (the “Potential Transaction”) of an
unaffiliated, privately held company in the coffee industry (the “Third Party”). On February 3, 2022, the Company and
the Third Party amended the Letter of Intent to extend the exclusivity period to March 1, 2022 (the “Extension”). In
consideration of the Extension, the Company agreed to loan the Third Party up to $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a specialty coffee company and, we believe, a leading co-packer of single serve pour over coffee in the United States, as well as a preeminent co-packer of tea-bag style coffee. Our mission is to leverage our position as a co-packer at the forefront of the North American single serve coffee market to revolutionize the way single serve coffee is enjoyed in the United States. While the United States is our core market, we also have manufacturing and sales operations in Korea and a joint venture in Latin America.
We believe we are the only commercial-scale producer that has the dual capacity to pack both single serve pour over coffee and tea-bag style coffee within the North American market. We intend to leverage our position to be the commercial manufacturer of choice for major companies seeking to enter the single serve pour over and tea-bag style coffee markets in North America. We target existing high-margin companies and are paid per-package based on the number of single serve coffee products produced by us. Accordingly, we consider our business model to be a form of tolling arrangement, as we receive a fee for almost every single serve coffee product our co-packing customers sell in the North American and Korean markets. While we financially benefit from the success of our co-packing customers through the sales of their respective single serve pour over and tea-bag style coffee products, we are also able to avoid the risks associated with owning and managing the product and its related inventory.
We have also developed and sell NuZee branded single serve coffee products, including our flagship Coffee Blenders line of both single serve pour over coffee and tea-bag style coffee, which we believe offers consumers some of the best coffee available in a single serve application in the world.
We may also consider co-packaging other products that are complementary to our current product offerings and provide us with a deeper access to our customers. In addition, we are continually exploring potential strategic partnerships, co-ventures, and mergers, acquisitions, or other transactions with existing and future business partners to generate additional business, reduce manufacturing costs, expand into new markets, and further penetrate the markets in which we currently operate.
Since 2016, we have been primarily focused on single serve pour over coffee production. Over this time, we have developed expertise in the operation of our sophisticated packing equipment and the related production of our single serve pour over coffee products at both our Vista, California facility and at our production operations in Seoul, Korea. In addition, our manufacturing facility and corporate headquarters in Plano, Texas is now operational. We have also expanded our co-packing expertise to tea bag style coffee products, which we believe are gaining traction in the United States.
Impact of the COVID-19 Pandemic
The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In the three months ended December 31, 2021, as a result of the COVID-19 pandemic and responses to the outbreak, certain of our customers slowed or delayed purchases of our co-packing services or single serve coffee products, and we also believe that potential sales of our single serve coffee products to new or potential customers in the hospitality industry were adversely impacted. We have also experienced delays in the submission and approval of custom artwork and packaging as well as the shipment to us of coffee for co-packing. In addition, we incurred lost production time due to employee absences. We do not believe, however, that these delays and disruptions had a significant effect on our business or results of operations to date, and in some cases, we have been able to mitigate these adverse effects in part by sourcing coffee and other supplies from alternative suppliers in the United States. The COVID-19 crisis may have an adverse impact on our business and financial results going forward that we are not currently able to fully determine or quantify. The COVID-19 crisis may adversely affect the ability of our customers to pay for goods delivered on a timely basis, or at all. Any increase in the amount or deterioration in the collectability of accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.
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Geographic Concentration
Our operations are primarily split between two geographic areas: North America and Asia.
For the three months ended December 31, 2021, net revenues attributable to our operations in North America totaled $817,341 compared to $406,488 of net revenues attributable to our operations in North America for the three months ended December 31, 2020. Additionally, as of December 31, 2021, $462,389 of our property and equipment, net was attributable to our North American operations, compared to $517,966 attributable to our North American operations as of September 30, 2021.
For the three months ended December 31, 2021, net revenues attributable to our operations in Asia totaled $201,912 compared to $111,499 of net revenues attributable to our operations in Asia during the three months ended December 31, 2020. Additionally, as of December 31, 2021, $177,933 of our property and equipment, net was attributable to our Asian operations, compared to $156,058 attributable to our Asian operations as of September 30, 2021.
Results of Operations
Comparison of three months ended December 31, 2021 and 2020:
Revenue
| Three months ended December 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | % | |||||||||||||
| Revenue | $ | 1,019,253 | $ | 517,987 | $ | 501,266 | 97 | % | ||||||||
For the three months ended December 31, 2021, our revenue increased by $501,266, or approximately 97%, compared with the three months ended December 31, 2020. This increase was primarily related to increased co-packing revenue to existing and new customers. In the third and fourth quarters of fiscal year 2021, we expanded our U.S. sales and support operations, which resulted in increased orders and increased co-packing opportunities in the three months ended December 31, 2021.
Cost of sales and gross margin
| Three months ended | ||||||||||||||||
| December 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | % | |||||||||||||
| Cost of sales | $ | 1,003,882 | $ | 516,284 | $ | 487,598 | 94 | % | ||||||||
| Gross profit | 15,371 | $ | 1,703 | $ | 13,668 | 803 | % | |||||||||
| Gross profit % | 2 | % | 0 | % | ||||||||||||
For the three months ended December 31, 2021, we generated a total gross profit of $15,371, from sales of our products and co-packing services, compared to a total gross profit of $1,703 for the three months ended December 31, 2020. The gross margin rate was 2% for the three months ended December 31, 2021, and 0% for the three months ended December 30, 2020. This increase in gross profit was driven primarily by greater scale in our manufacturing operations due to increased production during the current quarter versus the same period in the prior year, combined with increased sales offset by increased materials and labor costs.
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Operating Expenses
| Three months ended | ||||||||||||||||
| December 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | % | |||||||||||||
| Operating Expenses | $ | 2,852,793 | $ | 5,903,826 | $ | (3,051,033 | ) | (52 | )% | |||||||
For the three months ended December 31, 2021, the Company’s operating expenses totaled $2,852,793 compared to $5,903,826 for the three months ended December 31, 2020, representing a 52% decrease. This decrease is primarily attributable to a decrease in stock-based compensation expense, offset by an increase in operating expenses associated with greater staffing levels and marketing activities.
Net Loss
| Three months ended | ||||||||||||||||
| December 31, | Change | |||||||||||||||
| 2021 | 2020 | Dollars | % | |||||||||||||
| Net Loss | $ | 2,804,203 | $ | 5,896,072 | $ | (3,091,869 | ) | (52 | )% | |||||||
For the three months ended December 31, 2021, we generated a net loss of $2,804,203 versus $5,896,072 for the three months ended December 31, 2020. This decrease in net loss is primarily attributable to increased revenues and lower stock compensation expense, offset by an increase in operating expenses associated with greater staffing levels and marketing activities.
Liquidity and Capital Resources
Since our inception in 2011, we have incurred significant losses, and as of December 31, 2021, we had an accumulated deficit of approximately $55.6 million. We have not yet achieved profitability and anticipate that we will continue to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset these expenses. In the United States, we expect to incur additional losses because of the costs associated with operating as an exchange-listed public company. We are unable to predict the extent of any future losses or when we will become profitable, if at all.
To date, we have funded our operations primarily with proceeds from registered public offerings and private placements of shares of our common stock. Our principal use of cash is to fund our operations, which includes the commercialization of our single serve coffee products, the continuation of efforts to improve our products, administrative support of our operations and other working capital requirements.
As of December 31, 2021, we had a cash balance of $10,967,104. We believe that our cash and cash equivalents will be sufficient to fund our planned operations and capital expenditure requirements for at least 12 months from February 4, 2022. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. As a result, we could deplete our available capital resources sooner than we currently expect, and a reduction in consumer demand for, or revenues from the sale of, our single serve coffee products could further constrain our cash resources. We have based these estimates on assumptions that may prove to be wrong, and our operating projections, including our projected revenues from sales of our single serve coffee products, may change as a result of many factors currently unknown to us.
On December 28, 2021, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Maxim Group LLC (“Maxim”), as agent (the “Agent”), pursuant to which we may offer and sell, from time to time, shares of our common stock through the Agent in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act, having an aggregate offering price of up to $20,000,000, subject to any applicable limits when using Form S-3 (the “ATM Offering”). During the period from January 1, 2022 through February 4, 2022, we issued and sold 4,860 shares of our common stock under the Equity Distribution Agreement, raising net proceeds of $12,542.
| 19 |
In the future, we may seek to raise additional capital through sales of our common stock under the Equity Distribution Agreement. We also expect to receive additional funds upon the exercise for cash of outstanding warrants, if and when exercised at the election of the warrant holders, including the Series A warrants (the “Series A Warrants”) and Series B warrants (the “Series B Warrants” and, collectively with the Series A Warrants, the “Warrants”) that were sold by us in March 2021 in an underwritten registered public offering. For additional information regarding the Warrants, including net proceeds received upon exercise of Warrants in the quarter ended December 31, 2021, see “—Summary of Cash Flows—Financing Activities” and Note 5—Stock Options and Warrants to the Unaudited Consolidated Financial Statements.
In the long-term, we may need to raise additional funds to support our operating activities, and such funding may not be available to us on acceptable terms, or at all. Our need to raise funds will depend on a number of factors, including our ability to generate a sufficient amount of revenues from the sale of our single serve coffee products to fund our business operations, the timing and amount of proceeds from sales of our common stock under the Equity Distribution Agreement, and the timing and amount of funds received upon the exercise for cash of outstanding warrants by the warrant holders. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. Until we can generate a sufficient amount of revenue, we may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders.
Our significant contractual cash requirements as of December 31, 2021 primarily include payments for operating and finance lease liabilities and principal and interest on loans. Additionally, we may incur purchase obligations in the ordinary course of business that are enforceable and legally binding and enter into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement. As of December 31, 2021, we had payments for lease and loan obligations of approximately $668,933, of which $265,437 are payable within 12 months as of December 31, 2021. We had no purchase obligations as of December 31, 2021.
Summary of Cash Flows
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash used in operating activities | $ | (1,579,731 | ) | $ | (1,699,073 | ) | ||
| Cash used in investing activities | $ | (3,009 | ) | $ | (58,990 | ) | ||
| Cash provided by financing activities | $ | 1,701,202 | $ | 2,679,420 | ||||
| Effect of foreign exchange on cash | $ | 32,688 | $ | 1,656 | ||||
| Net increase in cash | $ | 151,150 | $ | 923,013 | ||||
Operating Activities
We used $1,579,731 and $1,699,073 of cash in operating activities during the three months ended December 31, 2021 and 2020, respectively, principally to fund our operating losses.
Investing Activities
We used $3,009 and $58,990 of cash in investing activities during the three months ended December 31, 2021 and 2020, respectively. Cash used in both periods was to fund the purchase of equipment.
Financing Activities
Historically, we have funded our operations primarily through the issuance of our common stock.
Cash provided by financing activities of $1,701,202 and $2,679,420 for the three months ended December 31, 2021 and 2020, respectively, is primarily related to proceeds received upon the exercise of outstanding Warrants by the Warrant holders in the three months ended December 31, 2021, as further described below, and issuance of equity securities in the three months ended December 31, 2020.
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In the three months ended December 31, 2021, we issued 384,447 shares of common stock related to exercises of warrants, including 380,447 shares of common stock issued upon exercise of 380,447 Series A Warrants and 4,000 shares of common stock issued upon exercise of 8,000 Series B Warrants. In connection with such exercises, in the three months ended December 31, 2021, we received aggregate net proceeds of $1,721,018. For additional information regarding the Series A Warrants and Series B Warrants, see Note 5—Stock Options and Warrants to the Unaudited Consolidated Financial Statements.
ATM Offering
On December 28, 2021, we entered into the Equity Distribution Agreement with Maxim, as Agent, pursuant to which we may offer and sell, from time to time, shares of our common stock through the Agent in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act, having an aggregate offering price of up to $20,000,000, subject to any applicable limits when using Form S-3. The offer and sale of shares will be made pursuant to a shelf registration statement on Form S-3 and the related prospectus (File No. 333-248531) initially filed by us with the SEC on September 1, 2020, and declared effective by the SEC on October 2, 2020, under the Securities Act. We are not obligated to make any sales of shares of our common stock under the Equity Distribution Agreement. As of December 31, 2021, no sales had occurred under the Equity Distribution Agreement. During the period from January 1, 2022 through February 4, 2022, we issued and sold 4,860 shares of our common stock under the Equity Distribution Agreement, raising net proceeds of $12,542.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements that have been
prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. US GAAP provides the framework
from which to make these estimates, assumption and disclosures. We choose accounting policies within US GAAP that management believes
are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Management regularly
assesses these policies in light of current and forecasted economic conditions. See Note 1—Basis of Presentation and Summary of
Significant Accounting Policies of the Notes to the Unaudited Consolidated Financial Statements for a summary of our accounting policies.
There were no significant and material changes in our critical accounting policies and use of estimates during the three months ended December 31, 2021, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, filed with the SEC on December 22, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is collected and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company. In designing and evaluating our disclosure controls and procedures, management recognizes that no matter how well conceived and operated, disclosure controls and procedures can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II.
Item 1. Legal Proceedings
On November 23, 2021, Next Vision, Inc. (the “Consultant”) filed a complaint against the Company in the Superior Court of California, County of San Diego Central Division (Case No. 37-2021-00049557-CU-BC-CTL) (the “Complaint”). The Complaint alleges that the Company’s delay in issuing shares of the Company’s common stock (the “Shares”) to the Consultant after receiving due notice from the Consultant of its intent to exercise vested stock options to acquire 70,000 Shares, as initially granted in 2018 (or, as adjusted to account for the Company’s reverse stock split effected on November 12, 2019, vested stock options to acquire 23,334 Shares) (the “Options”), which had previously been issued to the Consultant as compensation for consulting services provided in 2018, breached express and implied contractual obligations to the Consultant and resulted in the Company reporting an overstated amount of income on the IRS Form 1099-B that was issued to the Consultant for U.S. federal tax purposes. In addition, the Complaint alleges that the 23,334 Shares issued to the Consultant upon exercise of the Options improperly contained a six-month restriction on resale and that such restriction prevented the Consultant from selling the Shares at the desired time. The Complaint seeks equitable relief requiring the Company to issue an IRS Form 1099-NEC to reflect the correct amount of compensation. The Complaint also seeks compensatory damages, including to recover for alleged lost profits due to the alleged improper six-month restriction on resale for the Shares, as well as punitive damages, costs of suit, attorney’s fees, and interest. On January 20, 2022, the Company filed its general denial and answer in which it raised affirmative defenses and disputed the claims contained in the Complaint.
We believe the allegations set forth in the Complaint are without merit and intend to defend vigorously against the allegations. However, the Company is not able to predict the outcome, and there is no assurance that the Company will be successful in its defense.
From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on December 22, 2021.
A significant portion of our total outstanding shares of common stock are eligible to be sold into the market in the near future, including pursuant to Rule 144, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. We have also registered all shares of common stock that are reserved for issuance under the NuZee, Inc. 2019 Stock Incentive Plan and all shares of common stock currently reserved for issuance under the NuZee, Inc. 2013 Stock Incentive Plan. As a result, these shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in our filings with the SEC. A sale under Rule 144 or under any other exemption from the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop. We believe that a significant portion of our total outstanding shares of common stock may be sold in the public market without restriction by non-affiliates pursuant to Rule 144.
We have also entered into the Equity Distribution Agreement with Maxim, as Agent, pursuant to which we may offer and sell, from time to time, shares of our common stock through the Agent in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act, having an aggregate offering price of up to $20,000,000, subject to any applicable limits when using Form S-3. Sales of a substantial number of shares of common stock under the Equity Distribution Agreement, or the perception that those sales may occur, could cause the market price of our common stock to decline.
| 22 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 6. Exhibits
† Indicates management contract or compensatory plan.
* Filed herewith.
** Furnished herewith.
*** The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: | February 11, 2022 | NUZEE, INC. | ||
| By: | /s/ Masateru Higashida | |||
| Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director | ||||
| By: | /s/ Patrick Shearer | |||
| Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||
| 24 |
Exhibit 10.2
NUZEE, INC.
STOCK OPTION AGREEMENT
(2013 Stock Incentive Plan)
| Type of Option (check one): | ☐ Incentive | ☐ Nonqualified |
This Stock Option Agreement (the “Agreement”) is entered into as of [Date] (the “Grant Date”) by and between NuZee, Inc., a Nevada corporation (the “Company”), and [Name] (“Optionee”) pursuant to the Company’s 2013 Stock Incentive Plan (the “Plan”). Any capitalized term not defined in this Agreement shall have the same meaning ascribed to it in the Plan.
1. Grant of Option. The Company hereby grants to Optionee an option (the “Option”) to purchase all or any portion of a total of [__________] ([_____]) shares (the “Shares”) of the Common Stock of the Company at a purchase price of [____________________] ($[__________]) per share (the “Exercise Price”), subject to the terms and conditions set forth herein and the provisions of the Plan.
If the box marked “Incentive” above is checked, then this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code (the “Code”). If this Option fails in whole or in part to qualify as an Incentive Option, or if the box marked “Nonqualified” is checked, then this Option shall constitute a nonqualified stock option.
2. Vesting of Option. No portion of this Option may be exercised until such portion shall have become exercisable. The Option may be exercised, in whole or in part, in accordance with the following vesting schedule: [_____]% of the Shares subject to the Option shall vest on the one-year anniversary of the Grant Date, with the remaining Shares subject to the Option vesting at the rate of [_____]% per year on each anniversary of the Grant Date until either the Option is fully vested or until the Optionee’s Continuous Service is terminated, whichever occurs first. For the avoidance of doubt, the Option will become vested and exercisable with respect [#] Shares on the first anniversary of the Grant Date; [#] Shares on the second anniversary of the Grant Date; and [#] Shares on the third anniversary of the Grant Date.1
No additional Shares shall vest after the date of termination of Optionee’s Continuous Service, but this Option shall continue to be exercisable in accordance with Section 3 below with respect to that number of Shares that have vested as of the date of termination of Optionee’s Continuous Service.
3. Term of Option. Optionee’s right to exercise this Option shall terminate upon the first to occur of the following:
(a) the expiration of ten (10) years from the date of this Agreement; or
(b) the expiration of three (3) months from the date of termination of Optionee’s Continuous Service if such termination occurs for any reason other than permanent Disability, death or for Cause (as defined in Section 9 below); provided, however, that if Optionee dies during such three-month period the provisions of Section 3(d) below shall apply; or
(c) the expiration of one (1) year from the date of termination of Optionee’s Continuous Service if such termination is due to the permanent Disability of Optionee; or
(d) the expiration of one (1) year from the date of termination of Optionee’s Continuous Service if such termination is due to Optionee’s death or if death occurs during the three-month period following termination of Optionee’s Continuous Service pursuant to Section 3(b) above, as the case may be; or
1 Note to Draft: The vesting schedule may be changed to reflect the actual terms of the award.
(e) upon the consummation of a Change in Control, unless otherwise provided pursuant to Section 9 below; or
(f) the termination of Optionee’s Continuous Service for Cause.
4. Exercise of Option. On or after the vesting of any portion of this Option in accordance with Sections 2 or 9 hereof, and until termination of the right to exercise this Option in accordance with Section 3 above, the portion of this Option which has vested may be exercised in whole or in part by Optionee (or, after his or her death, by the person designated in Section 6 below) upon delivery of the following to the Company at its principal executive offices:
(a) A written notice of exercise which identifies this Agreement and states the number of Shares then being purchased (but no fractional Shares may be purchased);
(b) A payment of the exercise price for Shares the Optionee is purchasing, to the extent permitted by law, in one of the following forms:
| i. | A check or cash; | |
| ii. | Only to the extent that the Option granted is a Nonqualified Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of the Option by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate exercise price. The Optionee must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment; | |
| iii. | By delivery to the Company (either by actual delivery or attestation) of previously owned Shares that are owned free and clear of any liens, claims, encumbrances or security interests. The Fair Market Value of the Shares will be determined as of the effective date of the option exercise. The Option may not be exercised by delivery to the Company of previously owned Shares if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s Share; or | |
| iv. | A combination of (i), (ii) but only to the extent that the Option granted is a Nonqualified Option or (iii) above. |
(c) Payment of the amount reasonably requested by the Company to satisfy the Company’s withholding obligations under federal, state or other applicable tax laws with respect to the taxable income, if any, recognized by Optionee in connection with the exercise of this Option. The Optionee may arrange to pay any withholding taxes that may be due as a result of the Option exercise pursuant to the following methods, in accordance with the terms of the Plan: (i) by payment by cash or check, (ii) by the withholding of Shares issuable upon exercise of this Option with a Fair Market Value no greater than the minimum amount required to be withheld by law, or (iii) by the delivery of Shares previously owned by the Optionee with a Fair Market Value no greater than the minimum amount required to be withheld by law. The Fair Market Value of withheld or surrendered Shares, determined as of the date when taxes otherwise would have been withheld in cash, will be applied to the withholding taxes; and
(d) Any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares upon exercise of the Option (and any subsequent resale of the Shares) will be in compliance with applicable laws and regulations.
The Shares issued upon exercise of the Option shall be transferred to Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements of this Agreement and the Plan. The determination of the Administrator as to such compliance shall be final and binding on Optionee.
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5. Notice of Disqualifying Disposition of ISO Shares. If the Option is an Incentive Option and if the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the exercise of the Incentive Stock Option on or before the later of (i) the date two years after the Grant Date, or (ii) the date one year after the date of exercise, the Optionee shall immediately notify the Administrator in writing of such disposition. The Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.
6. Death of Optionee; No Assignment. The rights of Optionee under this Agreement may not be assigned or transferred except by will or by the laws of descent and distribution, and may be exercised during the lifetime of Optionee only by such Optionee. Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this Option in contravention of this Agreement or the Plan shall be void and shall have no effect. If Optionee’s Continuous Service terminates as a result of his or her death, and provided Optionee’s rights hereunder shall have vested pursuant to Section 2 above, Optionee’s legal representative, his or her legatee, or the person who acquired the right to exercise this Option by reason of the death of Optionee (individually, a “Successor”) shall succeed to Optionee’s rights and obligations under this Agreement. After the death of Optionee, only a Successor may exercise this Option.
7. Incorporation of Plan. Notwithstanding anything herein to the contrary, the Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator of the Plan. Optionee acknowledges receipt of a copy of the Plan.
8. Adjustments Upon Changes in Capital Structure. In the event that the outstanding Shares are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend or other change in the capital structure of the Company, then appropriate adjustment shall be made by the Administrator to the number of Shares subject to the unexercised portion of this Option and to the Exercise Price per share, in order to preserve, as nearly as practical, but not to increase, the benefits of Optionee under this Option, in accordance with the provisions of the Plan.
9. Change in Control. In the event of a Change in Control of the Company:
(a) Notwithstanding Section 2 above, provided the Optionee’s Continuous Service with the Company has not terminated from the Grant Date through the effective date of the Change in Control, the right to exercise this Option shall accelerate automatically and vest in full effective as of immediately prior to the consummation of the Change in Control unless this Option is to be assumed by the acquiring or successor entity (or parent thereof) or new options or New Incentives are to be issued in exchange therefor, as provided in subsection (b) below. If vesting of this Option will accelerate, the Administrator in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of this Option for an amount of cash or other property having a value equal to the difference (or “spread”) between: (x) the value of the cash or other property that Optionee would have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and (y) the aggregate Exercise Price for such Shares. If the vesting of this Option will accelerate, the Administrator shall cause written notice of the Change in Control transaction to be given to Optionee not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction.
(b) The vesting of this Option shall not accelerate if and to the extent that:
(i) this Option (including the unvested portion thereof) is to be assumed by the acquiring or successor entity (or parent thereof) or a new option of comparable value is to be issued in exchange therefor pursuant to the terms of the Change in Control transaction, or
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(ii) this Option (including the unvested portion thereof) is to be replaced by the acquiring or successor entity (or parent thereof) with New Incentives containing such terms and provisions as the Administrator in its discretion may consider equitable. If this Option is assumed, or if a new option of comparable value is issued in exchange therefor, then this Option or the new option shall be appropriately adjusted, concurrently with the Change in Control to apply to the number and class of securities or other property that Optionee would have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and appropriate adjustment also shall be made to the Exercise Price such that the aggregate Exercise Price of this Option or the new option shall remain the same as nearly as practicable and in a manner satisfying the provisions of Sections 409A and 424 of the Code.
(c) If the provisions of subsection (b) above apply, then this Option, the new option or the New Incentives shall continue to vest in accordance with the provisions of Section 2 above and shall continue in effect for the remainder of the term of this Option in accordance with the provisions of Section 3 above. However, in the event of an Involuntary Termination (as defined below) of Optionee’s Continuous Service following such Change in Control, then vesting of this Option, the new option or the New Incentives shall accelerate in full automatically effective upon such Involuntary Termination.
(d) For purposes of this Section 9, “Involuntary Termination” shall mean the termination of Optionee’s Continuous Service any reason other than (i) termination for Cause or (ii) the Optionee’s voluntary resignation (unless such resignation is at the request of the acquirer in which case the Optionee’s termination will deemed involuntary).
(e) For all purposes of this Agreement, including this Section 9, “Cause” shall mean:
| (i) Optionee’s commission of a felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; | ||
| (ii) Optionee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company or an Affiliated Company; | ||
| (iii) Optionee’s intentional, material violation of any contract or agreement between Optionee and the Company or Affiliated Company or of any statutory duty owed to the Company or any Affiliated Company; | ||
| (iv) Optionee’s unauthorized use or disclosure of the Company’s or any Affiliated Company’s confidential information or trade secrets; | ||
| (v) Optionee’s gross negligence or willful misconduct; | ||
| (vi) Optionee’s action which constitutes “Cause” under his or her applicable employment or consulting agreement. | ||
The determination that a termination of Optionee’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that Optionee’s Continuous Service was terminated by reason of dismissal without Cause for the purposes of outstanding Options held by Optionee shall have no effect upon any determination of the rights or obligations of the Company or Optionee for any other purpose. If, subsequent to Optionee’s termination of Continuous Service, it is discovered that Optionee could have been terminated for Cause, Optionee shall, at the election of the Company, in its sole discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred. In such event, any amounts or Shares received under this Agreement shall be returned to the Company within thirty (30) days of the Company’s written demand.
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10. No Agreement to Employ. Nothing in this Agreement shall be construed as granting to Optionee any right with respect to the continuance of any relationship that Optionee might have as a director, consultant or employee of the Company. To the extent applicable, the right of the Company to terminate at will Optionee’s employment or service relationship at any time (whether by dismissal, discharge or otherwise), with or without Cause, is specifically reserved.
11. Rights as Stockholder. Optionee (or Successor) shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any of the Shares unless and until this Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to Optionee, and Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, Optionee shall have full voting, dividend and other ownership rights with respect to such Shares for which the Option has been exercised.
12. Market Stand-Off Agreement. If requested by the Company or the managing underwriter pursuant to any proposed public offering of the Company’s securities, Optionee hereby agrees that it shall not, directly or indirectly, sell, lend, pledge, offer, transfer, make any short sale of, sell any option or contract to purchase, contract to sell, purchase any option or contract to sell, grant any option, right or warrant for the purchase of, otherwise transfer or dispose of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares held by Optionee immediately prior to the effectiveness of the registration statement for such public offering for a period specified by the Company or the managing underwriter for such offering, which period shall not exceed one hundred eighty (180) days following the effective date of the public offering. Optionee further agrees to execute such agreements as may be reasonably requested by the Company or the managing underwriter for such offering that are consistent with this Section 12 or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Shares until the end of such period.
13. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail, with postage prepaid, (or by such other method as the Administrator may from time to time deem appropriate), and addressed, if to the Company, at its principal place of business, Attention: General Counsel, and if to Optionee, at his or her most recent address as shown in the employment or stock records of the Company.
14. Governing Law. The validity, construction, interpretation, and effect of this Agreement shall be governed by and determined in accordance with the laws of the State of Nevada.
15. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.
16. Captions and Section Headings. Captions and section headings used herein are for convenience only, and are not part of this Agreement and shall not be used in construing it.
17. Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or contemporaneous written or oral agreements and understandings of the parties, either express or implied.
18. Attorneys’ Fees. If any party shall bring an action in law or equity against another to enforce or interpret any of the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover reasonable attorneys’ fees and costs.
19. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed one instrument.
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IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement as of the date first above written.
| NUZEE, INC. | OPTIONEE | |||
| [NAME, TITLE] | [NAME] | |||
| [DATE] | [DATE] | |||
| 6 |
Exhibit 10.3
NUZEE, INC.
STOCK OPTION AGREEMENT
(2013 Stock Incentive Plan)
Nonqualified Stock Options
This Stock Option Agreement (the “Agreement”) is entered into as of [_____________], 20[__] (the “Grant Date”), by and between NuZee, Inc., a Nevada corporation (the “Company”), and [__________] (“Optionee”) pursuant to the Company’s 2013 Stock Incentive Plan (the “Plan”). Any capitalized term not defined in this Agreement shall have the same meaning ascribed to it in the Plan.
1. Grant of Option. The Company hereby grants to Optionee an option (the “Option”) to purchase all or any portion of a total of [__________] shares of the Common Stock of the Company (the “Shares”) at a purchase price of [_________] $[___] per share (the “Exercise Price”), subject to the terms and conditions set forth herein and the provisions of the Plan. This Option is not intended to qualify as an “incentive stock option” as defined in Section 422 of the Code but shall constitute a nonqualified stock option.
2. Vesting of Option. No portion of this Option may be exercised until such portion shall have become exercisable. The right to exercise this Option shall vest pursuant to the vesting terms set forth in this Section 2. The Option may be exercised, in whole or in part, in accordance with the following vesting schedule:1
(a) [_____] Shares upon the Company’s achievement of [__________];
(b) [_____] Shares upon the Company’s achievement of [__________]; and
(c) [_____] Shares upon the Company’s achievement of [__________].
The Committee shall, on an annual basis and in its sole discretion: (i) determine whether the applicable vesting terms set forth herein were satisfied and (ii) approve the actual amount of Shares that vested in the applicable fiscal year, in each case as promptly as practicable following the Company’s public filing of its audited financial statements for the applicable fiscal year. In the event that any applicable performance target is not satisfied in a respective fiscal year, the Shares that would have vested in the applicable fiscal year shall be forfeited, regardless of whether any performance targets are satisfied in any subsequent fiscal year.
No additional Shares shall vest after the date of termination of Optionee’s Continuous Service, but this Option shall continue to be exercisable in accordance with Section 3 below with respect to that number of Shares that have vested as of the date of termination of Optionee’s Continuous Service.
3. Term of Option. Optionee’s right to exercise this Option shall terminate upon the first to occur of the following:
(a) the expiration of ten (10) years from the date of this Agreement; or
(b) the expiration of three (3) months from the date of termination of Optionee’s Continuous Service if such termination occurs for any reason other than permanent Disability, death or for Cause (as defined in Section 8 below); provided, however, that if Optionee dies during such three-month period the provisions of Section 3(d) below shall apply; or
(c) the expiration of one (1) year from the date of termination of Optionee’s Continuous Service if such termination is due to the permanent Disability of Optionee; or
1 Note to Draft: The vesting schedule may be changed to reflect the actual terms of the award.
(d) the expiration of one (1) year from the date of termination of Optionee’s Continuous Service if such termination is due to Optionee’s death or if death occurs during the three-month period following termination of Optionee’s Continuous Service pursuant to Section 3(b) above, as the case may be; or
(e) upon the consummation of a Change in Control, unless otherwise provided pursuant to Section 8 below; or
(f) the termination of Optionee’s Continuous Service for Cause.
4. Exercise of Option. On or after the vesting of any portion of this Option in accordance with Sections 2 or 8 hereof, and until termination of the right to exercise this Option in accordance with Section 3 above, the portion of this Option which has vested may be exercised in whole or in part by Optionee (or, after his or her death, by the person designated in Section 5 below) upon delivery of the following to the Company at its principal executive offices:
(a) A written notice of exercise which identifies this Agreement and states the number of Shares then being purchased (but no fractional Shares may be purchased);
(b) A payment of the exercise price for Shares the Optionee is purchasing, to the extent permitted by law, in one of the following forms:
(i) A check or cash;
(ii) By a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of the Option by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate exercise price. The Optionee must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment;
(iii) By delivery to the Company (either by actual delivery or attestation) of previously owned Shares that are owned free and clear of any liens, claims, encumbrances or security interests. The Fair Market Value of the Shares will be determined as of the effective date of the option exercise. The Option may not be exercised by delivery to the Company of previously owned Shares if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s Share; or
(iv) A combination of (i), (ii) or (iii) above.
(c) Payment of the amount reasonably requested by the Company to satisfy the Company’s withholding obligations under federal, state or other applicable tax laws with respect to the taxable income, if any, recognized by Optionee in connection with the exercise of this Option. The Optionee may arrange to pay any withholding taxes that may be due as a result of the Option exercise pursuant to the following methods, in accordance with the terms of the Plan:
(i) by payment by cash or check,
(ii) by the withholding of Shares issuable upon exercise of this Option with a Fair Market Value no greater than the minimum amount required to be withheld by law, or
(iii) by the delivery of Shares previously owned by the Optionee with a Fair Market Value no greater than the minimum amount required to be withheld by law. The Fair Market Value of withheld or surrendered Shares, determined as of the date when taxes otherwise would have been withheld in cash, will be applied to the withholding taxes; and
(d) Any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares upon exercise of the Option (and any subsequent resale of the Shares) will be in compliance with applicable laws and regulations.
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The Shares issued upon exercise of the Option shall be transferred to Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such transfer and with the requirements of this Agreement and the Plan. The determination of the Committee as to such compliance shall be final and binding on Optionee.
5. Death of Optionee; No Assignment. The rights of Optionee under this Agreement may not be assigned or transferred except by will or by the laws of descent and distribution, and may be exercised during the lifetime of Optionee only by such Optionee. Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this Option in contravention of this Agreement or the Plan shall be void and shall have no effect. If Optionee’s relationship as a Service Provider terminates as a result of his or her death, and provided Optionee’s rights hereunder shall have vested pursuant to Section 2 above, Optionee’s legal representative, his or her legatee, or the person who acquired the right to exercise this Option by reason of the death of Optionee (individually, a “Successor”) shall succeed to Optionee’s rights and obligations under this Agreement. After the death of Optionee, only a Successor may exercise this Option.
6. Incorporation of Plan. Notwithstanding anything herein to the contrary, the Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Committee. Optionee acknowledges receipt of a copy of the Plan.
7. Adjustments Upon Changes in Capital Structure. In the event that the outstanding Shares are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock split, combination of shares, reclassification, stock dividend or other change in the capital structure of the Company, then appropriate adjustment shall be made by the Committee to the number of Shares subject to the unexercised portion of this Option and to the Exercise Price per share, in order to preserve, as nearly as practical, but not to increase, the benefits of Optionee under this Option, in accordance with the provisions of the Plan.
8. Change in Control. In the event of a Change in Control of the Company:
(a) Notwithstanding Section 2 above, provided Optionee’s Continuous Service has not terminated from the Grant Date through the effective date of the Change in Control, the right to exercise this Option shall accelerate automatically and vest in full effective as of immediately prior to the consummation of such a Change in Control unless this Option is to be assumed by the acquiring or successor entity (or parent thereof) or new options or new incentives are to be issued in exchange therefor, as provided in subsection (b) below. If vesting of this Option will accelerate, the Committee in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of this Option for an amount of cash or other property having a value equal to the difference (or “spread”) between: (x) the value of the cash or other property that Optionee would have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and (y) the aggregate Exercise Price for such Shares. If the vesting of this Option will accelerate, the Committee shall cause written notice of the Change in Control transaction to be given to Optionee not less than fifteen (15) days prior to the anticipated effective date of the proposed transaction.
(b) The vesting of this Option shall not accelerate if and to the extent that:
(i) this Option (including the unvested portion thereof) is to be assumed by the acquiring or successor entity (or parent thereof) or a new option of comparable value is to be issued in exchange therefor pursuant to the terms of the Change in Control transaction, or
(ii) this Option (including the unvested portion thereof) is to be replaced by the acquiring or successor entity (or parent thereof) with New Incentives containing such terms and provisions as the Committee in its discretion may consider equitable. If this Option is assumed, or if a new option of comparable value is issued in exchange therefor, then this Option or the new option shall be appropriately adjusted, concurrently with the Change in Control, to apply to the number and class of securities or other property that Optionee would have received pursuant to the Change in Control transaction in exchange for the Shares issuable upon exercise of this Option had this Option been exercised immediately prior to the Change in Control, and appropriate adjustment also shall be made to the Exercise Price such that the aggregate Exercise Price of this Option or the new option shall remain the same as nearly as practicable and in a manner satisfying the provisions of Sections 409A and 424 of the Code.
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(c) If the provisions of subsection (b) above apply, then this Option, the new option or the New Incentives shall continue to vest in accordance with the provisions of Section 2 above and shall continue in effect for the remainder of the term of this Option in accordance with the provisions of Section 3 above. However, in the event of an Involuntary Termination (as defined below) of Optionee’s Continuous Service on or following such Change in Control, then vesting of this Option, the new option or the New Incentives shall accelerate in full automatically effective upon such Involuntary Termination.
(d) As defined and used for purposes of this Agreement, the following terms shall have the meanings set forth below:
(i) “Involuntary Termination” shall mean the termination of Optionee’s Continuous Service any reason other than (i) termination for Cause or (ii) the Optionee’s voluntary resignation (unless such resignation is at the request of the acquirer in which case the Optionee’s termination will deemed involuntary).
(ii) For all purposes of this Agreement, including this Section 8, “Cause” shall mean:
(1) Optionee’s commission of a felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof;
(2) Optionee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company or an Affiliated Company;
(3) Optionee’s intentional, material violation of any contract or agreement between Optionee and the Company or Affiliated Company or of any statutory duty owed to the Company or any Affiliated Company;
(4) Optionee’s unauthorized use or disclosure of the Company’s or any Affiliated Company’s confidential information or trade secrets;
(5) Optionee’s gross negligence or willful misconduct;
(6) Optionee’s action which constitutes “Cause” under his or her applicable employment or consulting agreement.
The determination that a termination of Optionee’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that Optionee’s Continuous Service was terminated by reason of dismissal without Cause for the purposes of outstanding Options held by Optionee shall have no effect upon any determination of the rights or obligations of the Company or Optionee for any other purpose. If, subsequent to Optionee’s termination of Continuous Service, it is discovered that Optionee could have been terminated for Cause, Optionee shall, at the election of the Company, in its sole discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred. In such event, any amounts or Shares received under this Agreement shall be returned to the Company within thirty (30) days of the Company’s written demand.
9. No Agreement to Employ. Nothing in this Agreement shall be construed as granting to Optionee any right with respect to the continuance of any relationship that Optionee might have as a Director, Consultant or Employee. To the extent applicable, the right of the Company to terminate at will Optionee’s employment or service relationship at any time (whether by dismissal, discharge or otherwise), with or without Cause, is specifically reserved.
10. Rights as Stockholder. Optionee (or Successor) shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any of the Shares unless and until this Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to Optionee, and Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, Optionee shall have full voting, dividend and other ownership rights with respect to such Shares for which the Option has been exercised.
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11. Market Stand-Off Agreement. If requested by the Company or the managing underwriter pursuant to any proposed public offering of the Company’s securities, Optionee hereby agrees that it shall not, directly or indirectly, sell, lend, pledge, offer, transfer, make any short sale of, sell any option or contract to purchase, contract to sell, purchase any option or contract to sell, grant any option, right or warrant for the purchase of, otherwise transfer or dispose of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Shares held by Optionee immediately prior to the effectiveness of the registration statement for such public offering for a period specified by the Company or the managing underwriter for such offering, which period shall not exceed one hundred eighty (180) days following the effective date of the public offering. Optionee further agrees to execute such agreements as may be reasonably requested by the Company or the managing underwriter for such offering that are consistent with this Section 11 or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Shares until the end of such period.
12. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail, with postage prepaid, (or by such other method as the Committee may from time to time deem appropriate), and addressed, if to the Company, at its principal place of business, Attention: General Counsel, and if to Optionee, at his or her most recent address as shown in the employment or stock records of the Company.
13. Governing Law. The validity, construction, interpretation, and effect of this Agreement shall be governed by and determined in accordance with the laws of the State of Nevada.
14. Severability. Should any provision or portion of this Agreement be held to be unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.
15. Captions and Section Headings. Captions and section headings used herein are for convenience only, and are not part of this Agreement and shall not be used in construing it.
16. Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or contemporaneous written or oral agreements and understandings of the parties, either express or implied.
17. Attorneys’ Fees. If any party shall bring an action in law or equity against another to enforce or interpret any of the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to recover reasonable attorneys’ fees and costs.
18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed one instrument.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement as of the date first above written.
| NUZEE, INC. | OPTIONEE | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | ||||
Exhibit 10.4
NUZEE, INC.
RESTRICTED STOCK AWARD AGREEMENT
(2013 EQUITY INCENTIVE PLAN)
This Stock Award Agreement (the “Agreement”) is entered into as of [DATE], (the “Grant Date”), by and between NuZee, Inc., a Nevada corporation (the “Company”), and [NAME] (“Participant”) pursuant to the Company’s 2013 Equity Incentive Plan (the “Plan”). Any capitalized term not defined in this Agreement shall have the same meaning ascribed to it in the Plan.
| 1. | Grant of Restricted Stock. The Company hereby grants to Participant an award of [NUMBER] shares of Restricted Stock (the “Award”). The shares of Restricted Stock granted pursuant to the Award shall be issued in the form of book entry Shares in the name of Participant as soon as reasonably practicable after the Grant Date and shall be subject to the execution and return of this Agreement by the Participant to the Company. | |
| 2. | Restrictions on Transfer. Unless otherwise determined by the Administrator, the shares of Restricted Stock issued under this Agreement may not be sold, transferred or otherwise disposed of and may not be pledged or otherwise hypothecated until all restrictions on such shares of Restricted Stock shall have lapsed in the manner provided in Section 3, 4 or 5 hereof. | |
| 3. | Lapse of Restrictions Generally. Except as provided in Sections 4, 5 and 6 hereof, the number of shares of Restricted Stock issued hereunder shall vest as follows, provided the Participant’s Continuous Service has not terminated on each such applicable date: (i) one-third (1/3) of the shares of Restricted Stock will vest on the Grant Date, (ii) one-third (1/3) of the shares of Restricted Stock will vest on the first anniversary of the Grant Date and (iii) one-third (1/3) of the shares of Restricted Stock will vest on the second anniversary of the Grant Date. For the avoidance of doubt, (i) [______] shares of Restricted Stock will vest on the Grant Date, (ii) [________] shares of Restricted Stock will vest on the first anniversary of the Grant Date and (iii) [________] shares of Restricted Stock will vest on the second anniversary of the Grant Date.1 | |
| 4. | Effect of Certain Terminations of Continuous Service. If Participant’s Continuous Service is terminated by the Company without Cause, all shares of Restricted Stock which have not become vested in accordance with Section 3 or 5 hereof shall vest as of the date of the termination of the Participant’s Continuous Service. For purposes of this Agreement, “Cause” shall mean: |
| a. | Participant’s commission of a felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; | |
| b. | Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company or an Affiliated Company; | |
| c. | Participant’s intentional, material violation of any contract or agreement between Participant and the Company or Affiliated Company or of any statutory duty owed to the Company or any Affiliated Company; | |
| d. | Participant’s unauthorized use or disclosure of the Company’s or any Affiliated Company’s confidential information or trade secrets; | |
| e. | Participant’s gross negligence or willful misconduct; |
1 Note to Draft: The vesting schedule may be changed to reflect the actual terms of the award.
| f. | Participant’s action which constitutes “Cause” under his or her applicable employment or consulting agreement. |
The determination that a termination of Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that Participant’s Continuous Service was terminated by reason of dismissal without Cause for the purposes of shares of Restricted Stock held by Participant shall have no effect upon any determination of the rights or obligations of the Company or Participant for any other purpose. If, subsequent to Participant’s termination of Continuous Service, it is discovered that Participant could have been terminated for Cause, Participant shall, at the election of the Company, in its sole discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred. In such event, any amounts or Shares received under this Agreement shall be returned to the Company within thirty (30) days of the Company’s written demand.
| 5. | Effect of Change in Control. In the event of a Change in Control at any time on or after the Grant Date, provided Participant’s Continuous Service has not terminated from the Date of Grant through the effective date of the Change in Control, all shares of Restricted Stock which have not become vested in accordance with Section 3 or 4 hereof shall vest as of the effective date of the Change in Control. | |
| 6. | Forfeiture of Restricted Stock. Any and all shares of Restricted Stock which have not become vested in accordance with Section 3, 4 or 5 hereof shall be forfeited and shall revert to the Company upon the termination by the Participant, or the Company, of the Participant’s Continuous Service for any reason other than those set forth in Section 4 hereof prior to such vesting. | |
| 7. | Delivery of Restricted Stock. Evidence of book entry Shares with respect to shares of Restricted Stock which have vested pursuant to Section 3, 4 or 5 hereof or, if requested by Participant prior to vesting, a stock certificate with respect to such shares of Restricted Stock, shall be delivered to the Participant as soon as practicable following the date on which the shares of Restricted Stock have vested and are free of all restrictions hereunder. | |
| 8. | Dividends and Voting Rights. Upon issuance of the shares of Restricted Stock, Participant shall have all of the rights of a stockholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect thereto; provided, however, that dividends or distributions declared or paid on the shares of Restricted Stock by the Company prior to vesting with respect to such Shares shall be deferred and reinvested in shares of Restricted Stock based on the Fair Market Value of a Share on the date such dividend or distribution is paid or made (provided that no fractional Shares will be issued), and the additional shares of Restricted Stock thus acquired shall be subject to the same restrictions on transfer, forfeiture and vesting conditions as the shares of Restricted Stock in respect of which such dividends or distributions were made. | |
| 9. | No Right to Continued Employment or Service. Nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or any Affiliated Company to terminate Participant’s Continuous Service, nor confer upon Participant any right to continuance of his or her Continuous Service. | |
| 10. | Withholding of Taxes. |
10.1 Prior to the delivery to Participant of a stock certificate or evidence of book entry Shares with respect to shares of Restricted Stock which have vested, Participant shall pay to the Company the federal, state and local income taxes and other amounts as may be required by law to be withheld by the Company (the “Withholding Taxes”) with respect to such shares of Restricted Stock. The Participant may satisfy such tax withholding obligation, in whole or in part by one or more of the following: (i) paying by cash or check, (ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already vested and owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of such Shares otherwise deliverable to Participant under this Award through such means as the Company may determine in its sole discretion equal to the amount required to be withheld. If Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder at the time any applicable shares of Restricted Stock otherwise are scheduled to vest, Participant will permanently forfeit such Shares.
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10.2 Participant understands that Participant may elect to be taxed at the time the shares of Restricted Stock are awarded rather than when the shares of Restricted Stock vest by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days from the Grant Date. THE PARTICIPANT (AND NOT THE COMPANY OR ANY OF ITS AGENTS) SHALL BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING THE 83(B) ELECTION FORM, EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS AGENTS TO MAKE THIS FILING ON PARTICIPANT’S BEHALF. THE 83(B) ELECTION FORM MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS AFTER GRANT DATE OF THIS RESTRICTED STOCK.
| 11. | Participant Bound by the Plan. Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. | |
| 12. | Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. | |
| 13. | Notices. All notices required or permitted in connection with this Agreement shall be in writing and shall be deemed delivered and received: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile to the specified address or number, if sent during normal business hours of the recipient; if not, then on the next business day, (iii) three days after having been sent by registered or certified mail to the specified address, return receipt requested, postage prepaid, or (iv) one day after deposit with a nationally recognized overnight courier directed to the specified address for next day delivery, with written notification of receipt. All communications shall be sent to the address of Participant set forth on the Company’s records, and, if to the Company, at the Company’s principal place of business, or at such other address or electronic mail address as any party hereto may designate in advance. | |
| 14. | Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. | |
| 15. | Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Nevada without giving effect to the conflicts of laws principles thereof. | |
| 16. | Assignment. The Company may assign this Agreement or any of its rights under this Agreement to single or multiple assignees. This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred or delegated by Participant without the prior written consent of the Company. Any attempt by Participant without such consent to assign, transfer or delegate any rights, duties or obligations that arise under this Agreement shall be void. | |
| 17. | Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Participant’s legal representatives. All obligations imposed upon Participant and all rights granted to the Company under this Agreement shall be binding upon the Participant’s heirs, executors, administrators and successors. |
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| 18. | Resolution of Disputes. Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Administrator. Any determination made hereunder shall be final, binding and conclusive on Participant, the Participant’s heirs, executors, administrators and successors, and the Company for all purposes. | |
| 19. | Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted to both parties hereunder are cumulative and shall not constitute a waiver of either party’s right to assert any other legal remedy available to it. | |
| 20. | Entire Agreement. This Agreement and the terms and conditions of the Plan constitute the entire understanding between Participant and the Company, and supersede all other agreements, whether written or oral, with respect to the Award. | |
| 21. | Headings. The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. | |
| 22. | Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. |
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties have executed this Restricted Stock Award Agreement as of the date first above written.
| NUZEE, INC. | PARTICIPANT | |||
| By: | ||||
| Name: | Name: | |||
| Title: | Title: | |||
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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Masateru Higashida, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of NuZee, Inc. for the quarter ended December 31, 2021; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | February 11, 2022 | NUZEE, INC. | ||
| By: | /s/ Masateru Higashida | |||
| Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director | ||||
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Patrick Shearer, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of NuZee, Inc. for the quarter ended December 31, 2021; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: | February 11, 2022 | NUZEE, INC. | ||
| By: | /s/ Patrick Shearer | |||
| Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of NuZee, Inc. and its subsidiaries (the “Company”) on Form 10-Q for the period ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the Company’s Chief Executive Officer, Masateru Higashida, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: | February 11, 2022 | NUZEE, INC. | ||
| By: | /s/ Masateru Higashida | |||
| Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director | ||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of NuZee, Inc. and its subsidiaries (the “Company”) on Form 10-Q for the period ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the Company’s Chief Financial Officer, Patrick Shearer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: | February 11, 2022 | NUZEE, INC. | ||
| By: | /s/ Patrick Shearer | |||
| Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||