CIMG Inc 10-K/A for FY2024
CIMG Inc. (CIMG)
About this 10-K/A
CIMG Inc filed this 10-K/A on July 30, 2025, covering the fiscal year ended September 30, 2024 (FY2024).
Headline figures
Fiscal year ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.93M
- up 9.8% from $1.76M a year earlier
- Net loss
- $8.97M
- compared with a net loss of $8.75M a year earlier
- Diluted EPS
- -$3.98
- compared with -$11.95 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(
For
the fiscal year ended
or
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)
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
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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. Yes ☐
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). Yes
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant (based on the price at which the
registrant’s Common Stock was last sold as of March 31, 2024, the last business day of the most recently completed second fiscal
quarter), was approximately $
As of July 2, 2025, there were outstanding shares of the registrant’s Common Stock, $ par value.
TABLE OF CONTENTS
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Our Holding Company Structure and Risks Related to Doing Business in China
Our business operations are partially based in China, and our PRC Subsidiaries are subject to certain legal and operational risks associated with being based in China. On December 28, 2021, the Cyberspace Administration of China (“CAC”), and 12 other relevant PRC government authorities published the amended Cybersecurity Review Measures, which came into effect on February 15, 2022. The final Cybersecurity Review Measures provide that a “network platform operator” that possesses personal information of more than one million users and seeks a listing in a foreign country must apply for a cybersecurity review. Further, the relevant PRC governmental authorities may initiate a cybersecurity review against any company if they determine certain network products, services, or data processing activities of such company affect or may affect national security. As of the date of this report, our Company and its subsidiaries have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice or sanction. As advised by our PRC counsel, Guangdong Shenmou Law Firm (“Guangdong Shenmou”), we do not believe that we are subject to: (a) the cybersecurity review with the CAC, as we do not possess a large amount of personal information in our business operations, and our business does not involve the collection of data that affects or may affect national security, implicates cybersecurity, or involves any type of restricted industry; or (b) merger control review by China’s anti-monopoly enforcement agency due to the fact that we do not engage in monopolistic behaviors that are subject to these statements or regulatory actions.
On February 17, 2023, the China Securities Regulatory Commission (“CSRC”) issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, which became effective on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure and report relevant information to the CSRC. As advised by our PRC counsel, Guangdong Shenmou, we are a domestic company incorporated in the United States, and the operation of a portion of our business in the PRC does not, by itself, subject us to the Trial Measures or related filing requirements. However, due to uncertainties in the interpretation of PRC laws and regulations, as well as ongoing regulatory reviews of overseas listings involving PRC companies through offshore holding structures, we may be required to submit a filing with the CSRC in the future in connection with our operations in China. Such risks could result in a material change in our operations and/or the value of our securities and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see “Item 1A —Risk Factors—Risks Associated With Doing Business in China” and the associated risk factor on page 30.
Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (1) establishing the National Anti-Monopoly Bureau; (2) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law (draft Amendment published on October 23, 2021 for public opinions), the anti-monopoly guidelines for various industries, and the detailed Rules for the Implementation of the Fair Competition Review System; and (3) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises. As of the date of this report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our ability to conduct business, accept foreign investments, or list on a U.S. or other foreign exchange because neither the Company nor its PRC operating entities engage in monopolistic behaviors that are subject to these statements or regulatory actions. Please see “Item 1A —Risk Factors—Risks Associated With Doing Business in China” and the associated risk factor on page 30.
Permissions Required from the PRC Authorities for Our Operations
We are also subject to legal and operational risks associated with being based in and having part of the Company’s operations in China. These risks may result in a material change in our operations, or a complete hindrance of our ability to offer or continue to offer our securities to investors, and could cause the value of such securities to significantly decline or become worthless. Recently, the PRC government initiated a series of regulatory actions and guidelines to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council, or the State Council, jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On December 28, 2021, the CAC, together with 12 other governmental departments of the PRC, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022. Article 7 of the Cybersecurity Review Measures stipulates that “Network platform operators that hold personal information of more than one million users and plan to go public abroad must report to the Cybersecurity Review Office for a cybersecurity review.”
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As confirmed by our PRC counsel, Guangdong Shenmou Law Firm since we are not an online platform operator that possesses over one million users’ personal information, we are not subject to the cybersecurity review with the CAC under the Cybersecurity Review Measures, and for the same reason, we will not be subject to the network data security review by the CAC though another bill, the Regulations on the Security Management of Network Data, came into effect on January 1, 2025. As such, we believe that, as of the date of this Annual Report, we are compliant with the regulations and policies that have been issued by the CAC. As of the date of this Annual Report, these new laws and guidelines have not impacted the Company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange; however, there are uncertainties in the interpretation and enforcement of these new laws and guidelines, which could materially and adversely impact our business and financial outlook. See “Item 1A —Risk Factors— Risks Associated With Doing Business in China.”
On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Standing Committee of the National People’s Congress (the “SCNPC”) or PRC regulatory authorities may in the future promulgate additional laws, regulations, or implementing rules that require us to obtain regulatory approval from Chinese authorities. If we do not receive or maintain such approval, or inadvertently conclude that such approval is not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a material adverse change in our operations and the value of our shares of common stock, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
Cash Flows through Our Organization
CIMG, and our non-PRC Subsidiaries, may transfer cash to our PRC subsidiaries, through capital injections and intra-group loans. As advised by our PRC counsel, Guangdong Shenmou Law Firm, current PRC regulations permit Beijing Zhongyan to pay dividends to DZR Tech, only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. If we determine to pay dividends on any of our Common Stock in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, DZR Tech. DZR Tech will rely on payments made from Beijing Zhongyan, which will in turn rely on payments made from Beijing Xilin, Shanghai Huomao and Henan Zhongyan. In addition, Beijing Zhongyan requires at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital.
During the fiscal years ended September 30, 2024 and 2023, there is cash transfers of $220,000 and $Nil occurred between the Company and its subsidiaries.
Under mainland China laws and regulations, we are subject to restrictions on foreign exchange and cross-border cash transfers, including to CIMG, our non-PRC Subsidiaries, and U.S. investors. Our ability to distribute earnings to CIMG, non-PRC Subsidiaries, and U.S. investors is also limited. We are partially relying on dividends and other distributions on equity from our PRC Subsidiaries for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur outside of mainland China. Current mainland China regulations permit our PRC Subsidiaries to pay dividends to us only out of their accumulated after-tax profits upon satisfaction of relevant statutory conditions and procedures, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC Subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves, together with the registered capital, are not distributable as cash dividends. Additionally, if our PRC Subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends or make other distributions to us. In addition, the revenue and assets of our PRC Subsidiaries are generally denominated in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC Subsidiaries to pay dividends to us.
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We have established certain controls and procedures for cash flows within our organization. Each transfer of cash among our Nevada holding company holding company and our subsidiaries is subject to internal approval to maximize oversight, minimize risk, and ensure compliance with applicable laws and regulations. See “Item 1A—Risk Factors— Risks Associated With Doing Business in China.”
Cash Management Policies
The Company has comprehensive cash management policies in place, including specific policies governing approvals with respect to fund transfers throughout our organization.
Our Board of Directors and the audit committee oversee the Company’s major financial risk exposures. The Company maintains an authorization policy on cash management, setting forth the scope of authority for certain treasury matters that are delegated by the Board of Directors to management. Under this policy, certain treasury matters, such as intercompany loans, bank borrowings, short-term and long-term investments and dividends distributed from the Company’s subsidiaries to the holding company, are clearly defined, with the level of approval required for each matter specifically identified.
Our management regularly monitors the liquidity position, funding requirements and investment returns in different jurisdictions of our subsidiaries, and takes into consideration regulatory requirements in the jurisdictions in which the Company has subsidiaries or operations. When funding is required, all necessary approvals are obtained from Company management and relevant governmental authorities, including China’s State Administration of Foreign Exchange.
The Holding Foreign Companies Accountable Act
On April 21, 2020, the SEC and PCAOB released a joint statement highlighting the risks associated with investing in companies based in or having substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.
On December 16, 2021, the PCAOB issued a report on its determination that the PCAOB was unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the PRC, because of positions taken by PRC authorities in those jurisdictions. The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the HFCA Act.
On August 26, 2022, the CSRC, the Ministry of Finance (“MOF”), and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong.
On December 15, 2022, the PCAOB determined that it was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and vacated its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB may consider the need to issue a new determination.
On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was signed into law as part of the Consolidated Appropriations Act, amending the HFCA Act by requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
Any lack of access to the PCAOB inspection in China may prevent the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors to lose confidence in audit procedures and reported financial information and the quality of financial statements of China-based companies.
Our auditor, Assentsure PAC, the independent registered public accounting firm is a PCAOB-registered public accounting firm headquartered in Singapore. Our current auditor is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess an auditor’s compliance with the applicable professional standards, and have been inspected by the PCAOB on a regular basis. As such, as of the date of this Annual Report, our listing is not affected by the HFCA Act and related regulations. However, the recent developments would add uncertainties to our listing and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as related to the audit of our financial statements. Furthermore, there is a risk that our auditor cannot be inspected by the PCAOB in the future. The lack of inspection could cause trading in our securities to be prohibited on a national exchange or in the over-the-counter trading market under the HFCA Act and related regulations, and, as a result, Nasdaq may determine to delist our securities, which may cause the value of our securities to decline or become worthless. See “Item 1A. Risk Factors— Risks Associated With Doing Business in China” call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the Public Company Accounting Oversight Board of the United States (the “PCAOB”). These developments could add uncertainties to our listing on the Nasdaq Capital Market and Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or fully investigate our auditor, which may cause the value of our securities to decline or become worthless.
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”) contains forward-looking statements, including, without limitation, in the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “target,” “seek,” “estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. 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, provide our co-packing services, and to continue as a going concern; |
| ● | our expectation that our existing capital resources will be sufficient to fund our operations for at least the next three months and our expectation to need additional capital to fund our planned operations beyond that; |
●
|
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
| ● | our expectations regarding our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market; |
| ● | the impact to our business, including any supply chain interruptions, resulting from changes in general economic, business and political conditions, including changes in the financial markets and macroeconomic conditions resulting from a pandemic; |
| ● | the evolving coffee preferences of coffee consumers in North America and East Asia; |
| ● | 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 ability to successfully achieve the anticipated results of strategic transactions; |
| ● | our expectation regarding our future co-packing revenues; |
| ● | our ability to develop or offer innovative new products and services, and expand our co-packing services to other products that are complementary to our current single serve coffee product offerings; |
| ● | our expectations regarding additional manufacturing, coffee roasting and co-packing capabilities to be provided through our manufacturing partners, as well as our manufacturing partners’ ability to successfully facilitate distribution efforts; |
| ● | our reliance on third-party roasters or manufacturing partners to roast coffee beans necessary to manufacture our products and to 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; |
| ● | our ability to develop and maintain our corporate infrastructure, including our internal control over financial reporting; |
| ● | the outcome of pending, threatened or future litigation; |
| ● | our financial performance; and |
| ● | our use of the net proceeds from our recent offering. |
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.
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Any forward-looking statements in this Report reflect our current views with respect to future events or to our future financial performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A below, titled “Risk Factors,” and discussed elsewhere in this Report and in our other reports filed with the SEC. Given these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise, except as required by law.
REFERENCES
As used in this Report:
| ● | “$”, “US$”, “USD” or “U.S. Dollars” refers to the legal currency of the United States; |
| ● | “Beijing Xilin” refers to Xilin Online (Beijing) E-commerce Co., Ltd, a limited liability company organized under the laws of the People’s Republic of China, which is 51% owned by Beijing Zhongyan; |
| ● | “Beijing Zhongyan” refers to Zhongyan Shangyue Technology Co., Ltd., a limited liability company organized under the laws of the People’s Republic of China, which is wholly owned by DZR Tech; |
| ● | “Common Stock” refers to our common stock, US$0.00001 par value per share; |
| ● | “DZR Tech” refers to DZR Tech Limited, a Hong Kong limited company, which is wholly owned by the Company; |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| ● | “Henan Zhongyan” refers to Henan Zhongyan Shangyue Technology Co., Ltd, a limited liability company organized under the laws of the People’s Republic of China, which is wholly owned by Beijing Zhongyan; |
| “non-PRC Subsidiaries” refers to Wewin, DZR Tech, and Singapore CIMG; | |
| ● | “PRC Subsidiaries” refers to Beijing Zhongyan, Henan Zhongyan, Beijing Xilin and Shanghai Huomao; |
| ● | “PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this report only, Hong Kong SAR, Macau SAR and Taiwan; |
| ● | “RMB” or “Renminbi” refers to the legal currency of China; |
| ● | “SEC” refers to the Securities and Exchange Commission; |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended; |
| ● | “Shanghai Huomao” refers to Shanghai Huomao Cultural Development Co., Ltd., a limited liability company organized under the laws of the People’s Republic of China, which is 51% owned by Beijing Zhongyan; |
| ● | “Singapore CIMG” refers to CIMG PTE. LTD., a Singapore limited liability company, which is wholly owned by the Company; |
| ● | “we”, “us”, “our”, “CIMG” and the “Company” refers CIMG Inc. and its subsidiaries, taken together; and |
| ● | “Wewin” refers to WEWIN TECHNOLOGY LLC, a Florida limited liability company, which is wholly owned by the Company; |
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PART I
ITEM 1. BUSINESS.
Overview
CIMG Inc. is a company incorporated in Nevada and listed on Nasdaq since June 2020. We were formerly known as “Nuzee, Inc.” with a previous ticker symbol “NUZE”, and we changed our corporate name and ticker symbol to “CIMG Inc.” and “IMG” in October 2024. We previously focused on specialty coffee and related technologies but are now expanding our sales and distribution channels in Asia to encompass a broader range of consumer food and beverage products. This expansion is fueled by our online sales platform, which leverages a natural language search function.
On June 7, 2024, we entered into a Share Purchase Agreement (“Share Purchase Agreement”) with Masateru Higashida, our former Chief Executive Officer and Director, under which we sold all issued and outstanding shares of our wholly-owned subsidiaries, NuZee KOREA Ltd. and NuZee Investment Co., Ltd., to Mr. Higashida, which sale was completed in June 2024.
Since July 2024, CIMG has been undergoing a transformation in digital marketing, distribution, and sales. As part of this transformation, we have extended our sales and distribution network to include maca-enhanced food and beverages, reaffirming our commitment to reshaping the online marketing, sales, and distribution landscape for consumer products.
Maca, a plant of the Brassicaceae family that originated in South America, has oval leaves and a rootstock shaped like a small round radish. It is edible and renowned as a natural superfood. Maca is rich in nutrients, boasts high levels of essential nutrients, and is believed to nourish and strengthen the human body. It is often referred to as “South American ginseng.” The primary cultivation regions for maca include the Andes Mountains in South America and the Jade Dragon Snow Mountain in Lijiang, Yunnan, China.
CIMG has successfully secured the exclusive distribution and sales rights for all maca products produced by Jiangsu Kangduoyuan Beverage Co., Ltd., a leading maca production base in Asia. These products include Maca Peptide Coffee, Maca-Noni, Maca Wine, Maca Purified Powder, and other full-range offerings. Through a comprehensive digital marketing strategy, CIMG is optimistic in its ability to achieve sales growth and enhance the Company’s enterprise value.
CIMG aims to become a leading distributor of premium maca products, a natural superfood known for its numerous health benefits. Our business focuses on sourcing, marketing, and distributing a wide range of maca-based dietary supplements, functional foods, and beauty products. We operate with a commitment to providing high-quality, sustainably sourced products to consumers who seek to enhance their health and wellness. Our products are sold through both online channels and a network of retail partners, including grocery stores, convenience stores, and vending machines.
The diagram below is our corporate structure as of the date of this report.
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Our sources of revenue
Co-Packing and Product Innovation
With years of experience as a third-party contract packer for leading companies in the coffee beverage industry, combined with our own coffee sales and market insights from the Asian region, we have expanded our business strategy to deepen our industry engagement. This evolution includes a shift toward reshaping product value by integrating health-oriented concepts and applying advanced technologies such as artificial intelligence, neuroscience, and big data. These efforts have culminated in the establishment of a global digital health and sales development business group.
While we remain committed to delivering our high-quality single-serving coffee and DRIPKIT products, our entry into the Asian market has prompted a broader commitment to health, sustainability, and nutrition.
The Maca Series
In the fourth quarter of the year ended September 30, 2024, we introduced our first health-focused product line in Asia: the Maca Series. This product line includes Maca Peptide Coffee, Maca-Noni, Maca Purified Powder, and Maca Wine. Each product features green purification factors derived from the maca plant, ensuring a natural and clean composition.
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Maca, a plant native to South America and a member of the Brassicaceae family, is known for its nutritional value and adaptogenic properties. Often referred to as “South American ginseng,” maca is prized for its ability to support stamina, vitality, and overall wellness. It is primarily cultivated in the Andes Mountains in south America, and Jade Dragon Snow Mountain in Yunnan Province, China.
| ● | Maca-Noni – a plant-based energy drink designed to support sexual vitality, with maca root as its key ingredient. | |
| ● | Maca Peptide Coffee – a functional coffee beverage infused with maca peptides for enhanced wellness benefits. | |
| ● | Maca Purified Powder – a concentrated, versatile maca powder ideal for daily nutritional use. | |
| ● | Maca Wine – a unique beverage that combines traditional wine with the nourishing properties of maca. |
We currently distribute our products through wholesale channels, supplying grocery stores, convenience stores, and vending machine operators. Looking ahead, we plan to expand into retail services and leverage digital technologies to optimize marketing strategies and diversify our sales models. Our distribution network already spans both online platforms and offline points of sale.
Our commitment extends beyond product quality and health benefits—we also focus on enhancing the packaging experience. Each design is crafted to resonate with professionals across various industries, making our products more personalized, youthful, and distinctive. For example, Maca-Noni represents a new entry into the functional beverage market, blending health-forward branding with innovative design.
Our customer base includes wholesale distributors such as grocery stores, convenience stores, and vending machine providers.
International operations
Hong Kong and PRC
We acquired DZR Tech and Beijing Zhongyan in June 2024, followed by the establishment of Singapore CIMG on January 13, 2025, and Henan Zhongyan on March 21, 2025. We subsequently acquired Shanghai Huomao on April 22, 2025, and Beijing Xilin on March 31, 2025. Today, we are one of the largest distributors of maca products in Hong Kong, the PRC, and other Asian markets. Our strategy focuses on leveraging local relationships to establish long-term partnerships across these regions.
Our customers and products
Our customers primarily include wholesale distributors.
We sell the Maca Series products to wholesale distributors such as grocery stores, convenience stores, and vending machine providers. Our core product line mainly consists of a variety of maca-based products designed to cater to the growing demand for natural health supplements. These products include Maca Peptide Coffee, Maca-Noni, Maca Purified Powder, and Maca Wine.
Maca-Noni
Maca-Noni is a maca-enhanced plant-based energy drink, with its consumption scenarios overlapping with traditional energy drinks such as Red Bull. It helps consumers quickly replenish energy in various situations such as traveling, working, and exercising, allowing them to maintain good performance. Unlike traditional energy drinks, Maca-Noni is made primarily from maca extracts, and does not contain caffeine. As a result, it is a healthier alternative compared to conventional energy drinks, and long-term consumption also offers health benefits.
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The first batch of Maca-Noni plant-based energy drinks is available in 250ml cans, with packaging designed to appeal to younger consumers. The bottle features a “professional role bottle” design, selecting 66 professions and 132 facial expressions from the target consumer group, including drivers, workers, students, athletes, fitness enthusiasts, lawyers, doctors, streamers, and e-commerce operators, which adds emotional appeal and storytelling to the product.
We emphasize the importance of quality, sustainability, and transparency in the sourcing and production of our maca. Our maca is primarily sourced from Yunnan, China, where it is cultivated in high-altitude regions that naturally enhance its potency. We work closely with local sources in Jiangsu Kangduoyuan Beverage Co., Ltd to ensure sustainable farming practices and fair-trade standards.
Maca Peptide Coffee
Our Maca Peptide Coffee is known for its strong yet smooth, non-bitter taste with a subtle fruity aroma. It is medium-roasted and contains no added sugar, preserving the original flavor profile. The main ingredients include maca peptide, yellow essence, and Malaysian white coffee. In our formulation, coffee is added primarily to enhance flavor and deliver the familiar taste of coffee, while the functional benefits come primarily from the maca and yellow essence.
We use high-quality maca grown at altitudes of no less than 3,200 meters, with a low yield of approximately 70 kilograms per mu. Maca is cultivated without the use of pesticides, fertilizers, or growth enhancers. To maximize its potency, harvesting only occurs when the leaves have turned brown, ensuring peak effectiveness of the raw ingredient.
Maca Wine
As a combination of maca and alcohol drinks, Maca Wine has become a popular choice for family gatherings due to its distinctive taste and health benefits. It not only adds a special flavor to meals but also helps relieve fatigue and improve mental alertness, allowing families to enjoy their food while promoting wellness.
Maca Wine is also known for its traditional health functions, including promoting blood circulation, relieving blood stasis, dispelling wind and dampness, and alleviating symptoms such as cold hands and feet. As a daily wellness beverage, moderate consumption can support physical regulation, enhance vitality, and improve sleep quality. For those experiencing insomnia, restless sleep, or poor sleep, moderate intake of Maca Wine may contribute to more restful and restorative sleep.
Maca Purified Powder
Maca Purified Powder as a nutritional supplement, rich in protein, amino acids, polysaccharides, minerals and bioactive substances such as macamide and macalene, these ingredients help to enhance human immunity and improve the body’s resistance. Its natural ingredients can regulate the human endocrine system, balance hormone levels, help relieve menopause symptoms, improve endocrine disorders and other problems. At the same time, antioxidant ingredients help to clear free radicals in the body, reduce skin damage, improve skin condition, make skin smoother and more delicate, enhance skin elasticity, and help delay the aging process.
Market Opportunity
The global market for natural and plant-based dietary supplements has seen significant growth in recent years, driven by increasing consumer awareness of health and wellness. As a result, the demand for maca products has grown substantially, particularly in the wellness, beauty, and fitness industries. According to market research firm Research Nester’s public report, it is projected that from 2025 to 2037, the compound annual growth rate (CAGR) of the global maca market will exceed 4.2%. It is predicted that this figure will exceed 106 million US dollars by 2037.
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Our company is well-positioned to capitalize on this trend due to our established brand, product offerings, and commitment to quality. We believe that maca’s versatility as a superfood, combined with its growing recognition in the wellness community, will drive continued growth for our business.
Operational capacity
We currently lease office space in Florida, United States, Hong Kong, and Beijing, China, to serve as offices for our daily operations. We believe our office space is sufficient to meet our current and anticipated operational requirements.
Our executive office and administrative operations are now located in Room R2, FTY D, 16/F, Kin Ga Industrial Building, 9 San On Street, Tuen Mun, Hong Kong.
Distribution
For the distribution of Maca products to our customers, we currently sell offline. In the future, we plan to achieve joint development of online and offline sales channels. Offline channels will involve traditional personal convenience stores, chain supermarkets, chain stores, gas stations, vending machines, etc. The online channel will be multi-platform matrix layout, including TikTok, Alibaba.com, Tencent, JD.com +AI artificial intelligence, enhance brand exposure, precise audience positioning, multi-channel communication, and improve content exposure and interaction. Through a comprehensive and systematic e-commerce operations service model, we help brands maximize resource utilization, accurately target consumers, enhance brand exposure and sales, and optimize the user experience. Based on product attributes, we identify and coordinate suitable celebrity or influencer collaborations to build brand identity, elevate brand image, increase awareness, and drive product sales.
Competition
The maca product market in Asia is competitive, with both local and international brands vying for consumer attention. There is strong growth potential, especially as consumer interest in natural, functional foods continues to rise. International brands, with their strong emphasis on quality, organic ingredients, and health benefits, are well-positioned to capture market share in countries like Southeast Asia. However, local competitors have an advantage in terms of distribution networks and understanding regional consumer preferences. A focus on premium product quality, sustainability, and effective marketing will be key to success in this evolving market.
Popular maca brands in Asia include the Maca Team, who is known for its organic maca powder, capsules, and energy drinks sourced from Peru; Maca-Root, who emphasizes energy and stamina benefits with a loyal customer base across Japan and China; Navitas Organics, who is a leading organic superfoods brand offering maca powder in Japan, South Korea, and Southeast Asia; Sunfood Superfoods, who specializes in high-quality, raw maca products across South Korea and Singapore; Sambazon, who integrates maca into energy drinks with other functional ingredients like acai and green tea, available in Japan and Hong Kong; and FGO, who is a premium brand of organic maca powder available in Japan, Hong Kong, and Taiwan, targeting fitness and wellness consumers. These brands compete in a rapidly growing market driven by the increasing demand for natural, functional products in Asia.
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Our competitive strengths
We believe that the following strengths contribute to our success:
| ● | Premium Product Quality: Our maca products are sourced from the highest-quality farms in Yunnan, China, where the unique environmental conditions maximize the potency and purity of the maca root. We ensure consistency and reliability in every batch through rigorous testing and quality control processes, which results in a premium product that consumers can trust. Our commitment to quality allows us to stand out in the marketplace and build long-term customer loyalty. |
| ● | Sustainability and Fair Trade: We are deeply committed to sustainability and ethical sourcing practices. We work directly with local maca suppliers in China to support responsible farming techniques that protect the environment and promote the long-term viability of maca cultivation. In addition, we ensure that fair wages and equitable compensation are provided to all the farmers and cooperatives in our supply chain. Our sustainable approach not only benefits the environment but also strengthens our reputation as a socially responsible brand. |
| ● | Strong Brand Recognition: Our brand is built on the pillars of transparency, integrity, and customer satisfaction, which has resulted in consistently positive reviews, high repurchase rates, and a loyal customer base. Through strategic branding efforts and word-of-mouth marketing, we aim to establish ourselves as a leader in the maca product category in Asia. |
| ● | Innovative Product Offerings: Our diverse and innovative product portfolio is designed to meet the evolving needs and preferences of modern consumers. In addition to traditional maca powders, we offer Maca-Noni, Maca Peptide Coffee and Maca Wine that cater to various lifestyle choices and health goals. We continually invest in research and development to identify new applications for maca and expand our product line to address emerging consumer trends, such as plant-based nutrition and natural wellness solutions. This adaptability allows us to stay ahead of competitors and reach a broad customer demographic. |
| ● | Experienced Management Team: Our leadership team brings together a wealth of experience in retail, marketing, e-commerce, and business management. This diverse expertise enables us to effectively navigate complex markets, make informed decisions, and scale our operations efficiently. Our team has a proven track record of launching successful marketing campaigns, optimizing sales channels, and driving customer engagement, positioning us to achieve both short-term and long-term business objectives. |
| ● | Effective Digital Marketing and Customer Engagement: One of our key strengths lies in our ability to leverage digital marketing strategies to reach a wide audience and drive brand awareness. Through targeted social media campaigns, sport champion partnerships, and content marketing, we create engaging and informative content that educates consumers about the benefits of maca and builds trust in our brand. Our e-commerce platforms are optimized for user experience, making it easy for customers to browse, purchase, and interact with our brand online. Additionally, our data-driven approach allows us to continuously refine our marketing strategies to maximize customer acquisition, retention, and lifetime value. |
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Our business strategy
We intend to achieve our mission and further grow our business by pursuing the following strategies:
| ● | Expanding Product Offerings: As part of our ongoing commitment to innovation and meeting evolving consumer demands, we plan to continue developing a diverse range of maca-based products. This includes introducing new product lines such as Maca Peptide Coffee, Maca-Noni, Maca Wine, Maca Purified Powder, and other functional food and beverage items. By expanding our offerings, we aim to tap into various consumer segments, including those seeking energy-boosting products, plant-based nutrition, and wellness solutions. This broad product portfolio will allow us to diversify our revenue streams and enhance our market penetration, positioning us as a leader in the maca product category. |
| ● | Geographic Expansion: In line with our growth strategy, we aim to increase our global presence, particularly in international markets where the demand for natural health products is growing rapidly. Our focus will be on expanding within Asia, especially in countries like China and Southeast Asia, where there is a rising interest in plant-based, wellness-oriented foods and beverages. Additionally, we will explore opportunities in North America and Europe, leveraging the increasing consumer shift toward natural and functional ingredients. By strategically entering these markets, we will establish a strong global footprint, catering to consumers seeking alternative, natural solutions for their health and energy needs. Our geographic expansion will be supported by thorough market research, localized marketing efforts, and strategic partnerships with regional distributors and retailers. |
| ● | Enhancing Brand Awareness: Building on our existing reputation, we will significantly increase our marketing efforts to boost brand recognition across all markets. Our strategy will focus heavily on digital marketing initiatives, including targeted online advertising, to engage potential customers at every touchpoint. We also partner with social media influencers and sport champions, to promote our products and showcase their benefits to a larger audience. We will also invest in content marketing, creating valuable educational materials that highlight the health benefits of maca, thus driving consumer awareness and trust. Our overall marketing approach will aim to create a strong emotional connection with consumers, turning them into long-term loyal customers. |
| ● | Strengthening Distribution Channels: To expand our reach and ensure product availability, we will continue to strengthen and diversify our distribution channels. We will focus on growing our e-commerce platform, optimizing the user experience. Additionally, we will increase partnerships with both large and small retailers, expanding our presence in grocery stores, convenience stores, and vending machines. We will also explore opportunities with international distributors and retailers to increase our product’s visibility in new markets. Through effective supply chain management and collaboration with logistics partners, we will ensure that our products are delivered efficiently and meet the growing demand in different regions. We aim to create a seamless, omnichannel shopping experience for consumers, enabling them to purchase our products both online and in-store. |
Risks Associated with Our Business and History of Losses
We have incurred net losses since we commenced operations as CIMG Inc. in 2013, including net losses of $8.97 million and $8.75 million for the years ended September 30, 2024 and 2023, respectively. As of September 30, 2024, our accumulated deficit was approximately $82.34 million. We expect to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset existing expenses. In the United States, we expect to incur additional losses as a result of the costs associated with operating as an exchange-listed public company.
Recent Developments
Since July 2024, CIMG has been undergoing a transformation in digital marketing, distribution, and sales. As part of this transformation, we have extended our sales and distribution network to include maca-infused food and beverages, reaffirming our commitment to reshaping the online marketing, sales, and distribution landscape for consumer products.
CIMG has successfully secured the exclusive distribution and sales rights for all maca products produced by Jiangsu Kangduoyuan Beverage Co., Ltd., a leading maca production base in Asia. These products include Maca Peptide Coffee, Maca-Noni, Maca Wine, Maca Purified Powder, and other full-range offerings. Through a comprehensive digital marketing strategy, CIMG is optimistic in its ability to achieve sales growth and enhance the Company’s enterprise value.
CIMG’s PRC subsidiary, Beijing Zhongyan, has signed contracts with multiple PRC-based distribution companies, including Guangdong Jixinsheng Trading Co., Ltd., Shanghai Qingshuteng Trading Co., Ltd., Sichuan Haohua Dinghui Trading Co., Ltd., and Shanghai Jinxianfang Trading Co., Ltd. The Company aims to place Maca-Noni drinks gradually to a significant number of retail stores with the help of these distribution companies, targeting within the next three years at selling and distributing Maca-Noni at 25,000 convenience stores of uSmile PetroChina, 400 convenience stores of Guangdong Petroleum Co., Ltd, 129 convenience stores at Chengdu Energy Gas Stations in Sichuan Province, and no fewer than 300 self-service vending machines within the next 12 months.
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Intellectual Property
Trademarks
We rely on certain intellectual property rights to protect our products and ensure our competitive position in the industry. We have 6 registered trademarks and 4 registered domain names.
We own the following trademark through our subsidiaries:
| Trademark Number | File Date | Issue Date | Expiration Date | Trademark Name | Issue Country | |||||||
| 53613382 | 2021/09/07 | 2021/09/07 | 2031/09/06 | 中烟商悦 | China | |||||||
| 53313376 | 2021/09/07 | 2021/09/07 | 2031/09/06 | 中烟商悦 | China | |||||||
| 53585197 | 2021/09/07 | 2021/09/07 | 2031/09/06 | 中烟商悦 | China | |||||||
| 53589114 | 2021/08/28 | 2021/08/28 | 2031/08/27 |  | China | |||||||
| 7813288 | 2024/08/19 | 2025/05/27 | 2035/05/26 | coco mango | USA | |||||||
| 7813227 | 2024/08/19 | 2025/05/27 | 2035/05/26 | coco mango | USA | |||||||
Domain
We have the right to use the following domain registration issued in the PRC:
| Number | Issue Date | Expiration Date | Registration Agency | Domain Name | |||||
| 1 | 2021/1/4 | 2026/1/5 | Alibaba Cloud Computing (Beijing) Co., Ltd. | Zhongyan.online | |||||
| 2 | 2021/1/4 | 2026/1/5 | Alibaba Cloud Computing (Beijing) Co., Ltd. | Zhongyan.tech | |||||
| 3 | 2024/4/30 | 2026/4/30 | Alibaba Cloud Computing (Beijing) Co., Ltd. | cocomango.cc | |||||
| 4 | 2024/4/30 | 2026/5/1 | Alibaba Cloud Computing (Beijing) Co., Ltd. | ccmg.tech |
Employees
As of September 30, 2024, we had a total of one (1) employee in the United States, four (4) employees in Hong Kong and 12 employees in mainland China, all of whom are full-time. None of our employees are represented by a labor organization or under any collective bargaining arrangements. We believe our relationships with our employees are good.
Our operations are overseen directly by the management that engages our employees to carry on our business. Our management oversees all responsibilities in the areas of corporate administration, product development, marketing, and research. We may expand our current management to retain other skilled directors, officers, and employees with experience relevant to our business focus. Our management’s relationships will provide the foundation through which we expect to grow our business in the future. We believe that the skills sets of our core management team will be a primary asset in the development of our brands and trademarks.
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Governmental Regulation
Our operations are in compliance with all relevant regulations, including those governing food safety, product labeling, and consumer protection in the jurisdictions where we operate. We ensure that our products meet or exceed all applicable quality standards, and we work with regulatory agencies to ensure that our products are appropriately registered and approved.
According to Article 35 of the Food Safety Law of the People’s Republic of China, the state implements a licensing system for food production and marketing. This means that any unit or individual engaged in food production, food sales and catering services should obtain the appropriate license in accordance with the law. Exemptions under specific circumstances: While licensing is required for most food production and business activities, licensing is not required for the sale of edible agricultural products and for the sale of pre-packaged foods only. Units and individuals that only sell prepackaged food shall be reported to the food safety supervision and administration department of the local people’s government at or above the county level for the record. As stated in the previous report under the section “Our customers and products”, all products sold by our company are pre-packaged products; moreover, our company obtained the Food Business License issued by the Chaoyang District Market Supervision Administration of Beijing on August 23, 2024. The license number is JY11105412762093, and the business scope includes pre-packaged food sales (and bulk food sales). All products of the Maca series have been allowed to operate in China.
Corporate Information
We were incorporated in 2011 in Nevada as Havana Furnishings, Inc. NuZee Co. Ltd. was incorporated in 2011. NuZee Co. Ltd. merged into Havana Furnishings, Inc. in 2013, at which time we changed our name to NuZee, Inc. In June 2020, our common stock commenced trading on the Nasdaq Capital Market under the symbol “NUZE.” Prior to that, our Common Stock was quoted on the OTCQB Marketplace under the same symbol. We changed our name to CIMG Inc. and our ticker symbol from “NUZE” to “IMG” effective October 31, 2024. Our principal executive and administrative offices are located at Room R2, FTY D, 16/F, Kin Ga Industrial Building, 9 San On Street, Tuen Mun, Hong Kong., and our telephone number is + 85270106695.
The Company received a notification letter from NASDAQ on January 23, 2024 (the “NASDAQ Notification Letter”), indicating that the Company was not in compliance with NASDAQ Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”). The NASDAQ Notification Letter stated that the Company failed to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing, as required by the Stockholders’ Equity Requirement.
Subsequently, the Company completed a convertible note financing of $320,000 on April 27, 2024, an equity financing of $1,500,000 on June 4, 2024, and an equity financing of $3,000,000 on July 11, 2024. On July 23, 2024, the Company received a letter from NASDAQ stating that based on the Company’s Form 8-K, filed with the Commission on July 19, 2024, NASDAQ has determined that the Company has complied with Listing Rule 5550(b)(1).
On January 14, 2025, the Company received a notification letter (the “Minimum Bid Price Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with the minimum bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Minimum Bid Price Notice has no immediate effect on the listing of the Company’s Common Stock, which continues to trade on The Nasdaq Capital Market under the symbol “IMG.” In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days from the date of the Minimum Bid Price Notice, or until July 14, 2025, to regain compliance. If at any time before July 14, 2025 the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, NASDAQ will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter will be resolved. If the Company does not regain compliance during the compliance period ending July 14, 2025, then NASDAQ may in its discretion determine to grant the Company an additional 180 calendar day period to regain compliance, provided that the Company on July 14, 2025 meets the continued listing requirement for market value of publicly held shares and all other applicable initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and will need to provide NASDAQ written notice of its intent to cure the deficiency during the second compliance period.
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On January 17, 2025, the Company received another notice (the “Annual Report Notice”) from NASDAQ indicating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Annual Report on Form 10-K for the period ended September 30, 2024 with the SEC. The Annual Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq, and it states that the Company is required to submit a plan to regain compliance with Nasdaq Listing Rule 5250(c)(1) within 60 calendar days from the date of the Annual Report Notice. If the plan is accepted by Nasdaq, then Nasdaq can grant the Company up to 180 calendar days from the due date of the Form 10-K for the fiscal year ended September 30, 2025 to regain compliance. In determining whether to accept such plan, Nasdaq will consider such things as the likelihood that the remedial filing, along with any subsequent periodic filing that will be due, can be made within the 180 day period, the Company’s past compliance history, the reasons for the late filing, other corporate events that may occur within our review period, the Company’s overall financial condition and its public disclosures. Any subsequent periodic filing that is due within the 180-day exception period must be filed no later than the end of the period.
On February 19, 2025, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with Listing Rule 5250(c)(1) because the Company did not timely file its quarterly report on Form 10-Q for the period ended December 31, 2024 with the SEC.
We have submitted a Nasdaq compliance plan to Nasdaq on March 18, 2025 and Nasdaq grant the Company extension to (i) file the Form 10-K for the period ended September 30, 2024 on or before June 13, 2025; and (ii) file the Form 10-Q for the period ended December 31, 2024 on or before July 14, 2025.
On May 19, 2025, the Company received a notice (the “Quarterly Report Notice”) from NASDAQ indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Quarterly Report on Form 10-Q for the period ended March 31, 2025 with the Securities and Exchange Commission. The Quarterly Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq.
As a result of this additional delinquency of the Form 10-Q for the period ended March 31, 2025, the Company submitted an update to its original plan to regain compliance with respect to the filing requirement on June 3, 2025.
On June 13, 2025, the Company did not manage to file its Form 10-K for the year ended September 30, 2024 and received a delist determination letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC on June 27, 2025 (“Nasdaq Delist Determination Letter”). According to the Nasdaq Delist Determination Letter, unless the Company requests an appeal of this determination by July 7, 2025, trading of the Company’s common stock will be suspended from The Nasdaq Capital Market at the opening of business on July 9, 2025, and NSADAQ will file a Form 25-NSE with the SEC to remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
The Company intends to file its Form 10-K for the fiscal year ended September 30, 2024 as soon as possible, and in any event before July 7, 2025. In addition, the Company intends to appeal Nasdaq’s delist determination and plans to request a hearing before a Nasdaq Hearings Panel to present its plan for regaining compliance with the applicable Nasdaq Listing Rules by 4:00 Eastern Time on July 7, 2025.
Currently, the Company has 7 subsidiaries: WEWIN TECHNOLOGY LLC, a Florida limited liability company (“Wewin”), DZR Tech Limited; a Hong Kong limited company (“DZR Tech”); CIMG PTE. LTD., a Singapore limited liability company; Zhongyan Shangyue Technology Co., Ltd., a limited liability company organized under the laws of the PRC (“Beijing Zhongyan”); Henan Zhongyan Shangyue Technology Co., Ltd, a limited liability company organized under the laws of the PRC; Xilin Online (Beijing) E-commerce Co., Ltd, a limited liability company organized under the laws of the PRC; and Shanghai Huomao Cultural Development Co., Ltd., a limited liability company organized under the laws of the PRC.
Wewin, DZR Tech and CIMG Singapore are wholly owned subsidiaries of the Company. Beijing Zhongyan is a wholly owned subsidiary of DZR Tech. Henan Zhongyan is wholly owned subsidiaries of Beijing Zhongyan. Beijing Xilin and Shanghai Huomao are 51% owned by Beijing Zhongyan. Beijing Zhongyan, Henan Zhongyan, Beijing Xilin and Shanghai Huomao are our PRC Subsidiaries.
Available Information
Our annual and quarterly reports, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at http://www.ccmg.tech as soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Report. Our corporate governance policies, ethics code and board of directors’ committee charters are posted under the Investor Relations section of the website. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
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ITEM 1A. RISK FACTORS
Risk Factor Summary
The risk factors summarized below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our Common Stock to decline. These risks are discussed more fully in the section titled “Risk Factors.” Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:
Risks Related to Our Financial Condition and Capital Requirements
| ● | We have a history of net losses. We expect to continue to incur net losses in the future and we may never generate sufficient revenue to achieve or sustain profitability. (see page 23) |
| ● | We expect to need to obtain additional capital to fund our existing operations and, if we are unable to obtain such financing, we may be unable to continue to operate as a going concern. (see page 23) |
| ● | We have a limited operating history, which may make it difficult to evaluate our current business and to forecast our future performance. (see page 24) |
| ● | Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations. (see page 24) |
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Risks Related to Our Business
| ● | Continued innovation and the successful development and timely launch of new products are critical to our financial results and the achievement of our growth strategy. (see page 25) |
| ● | Our future financial results are difficult to predict, and failure to meet market expectations for our financial performance or any publicly announced guidance may cause the price of our stock to decline. (see page 25) |
| ● | Increased competition, including as a result of industry consolidation, could hurt our businesses, and changes in the coffee, tea and beverage environment and retail landscape could impact our financial results. (see page 26) |
| ● | Our business, growth and profitability depend on the performance of third-parties and our relationship with them, including third-party maca product providers. (see page 27) |
| ● | Interruption or increased costs of our supply chain and sales network, including a disruption in operations at any of our facilities, could affect our ability to distribute products and could adversely affect our business and sales. (see page 27) |
| ● | The loss of any member of our senior management team or our inability to attract and retain highly skilled personnel could have a material adverse effect on our business. (see page 28) |
| ● | Because our management structure is not centralized, the management of our business operations may be more expensive and more difficult. (see page 28) |
| ● | We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. (see page 28) |
| ● | Any failure by us to accurately forecast customer demand for our products, or to quickly adjust to forecast changes, could adversely affect our business and financial results. (see page 29) |
| ● | We may not be able to adequately protect our intellectual property rights, and our competitors may be able to offer similar products, which would harm our competitive position. Additionally, we may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. (see page 29) |
| ● | Failure to comply with applicable transfer pricing and similar regulations could harm our business and financial results. (see page 30) |
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Risks Associated With Doing Business in China
| ● | Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of our business. (see page 30) |
| ● | The approval and/or other requirements of the CSRC or other mainland China governmental authorities may be required in connection with our issuance of securities overseas under mainland China rules, regulations or policies, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such other requirements. (see page 30) |
| ● | A slowdown or other adverse developments in the PRC economy may harm our customers and the demand for our services and our products. (see page 31) |
| ● | If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease. (see page 31) |
| ● | Future inflation in China may inhibit the profitability of our business in China. (see page 31) |
| ● | The fluctuation of the Renminbi may have a material adverse effect on your investment. (see page 32) |
| ● | Restrictions on currency exchange may limit our ability to receive and use our revenue effectively. (see page 32) |
| ● | Our subsidiary in China is subject to restrictions on making dividends and other payments to us. (see page 32) |
| ● | Uncertainties with respect to the PRC legal system could have a material adverse effect on us. (see page 33) |
| ● | The PRC’s legal and judicial system under special circumstances may not adequately protect our business and operations and the rights of foreign investors. (see page 33) |
| ● | Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it more difficult for us to pursue growth through acquisitions in China. (see page 33) |
| ● | PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to the PRC Subsidiaries and affiliated entities, which could harm our liquidity and our ability to fund and expand our business. (see page 34) |
| ● | We must remit offering proceeds to China in a future securities issuance before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can complete all necessary governmental registration processes in a timely manner. (see page 34) |
| ● | A failure by the beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law. (see page 35) |
| ● | We may be subject to fine due to our insufficient payment of the social insurance and housing fund of the employees. (see page 35) |
| ● | You may face difficulties in protecting your interests and exercising your rights as a stockholder of ours since we conduct part of our operations in China and part of our officers and directors reside in China. (see page 36) |
| ● | You may experience difficulties in protecting your rights through the United States courts. (see page 36) |
| ● | Increases in labor costs in the PRC may adversely affect our business and our profitability. (see page 36) |
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| ● | Our auditor is headquartered in Singapore and is subject to inspection by the PCAOB on a regular basis. To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our Common Stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act. (see page 36) |
| ● | In light of recent events indicating greater oversight by the CAC over data security, we may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on our business and our securities. (see page 37) |
| ● | Compliance with China’s new Data Security Law, Measures on Cybersecurity Review (revised draft for public consultation), Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business. (see page 37) |
| ● | Failure to comply with the Foreign Corrupt Practices Act could adversely affect our business. (see page 39) |
Risks Related to Ownership of our Common Stock
| ● | The market price of our stock may be volatile, and you could lose all or part of your investment. (see page 40) |
| ● | Despite our listing on the Nasdaq Capital Market, there can be no assurance that an active trading market for our Common Stock will be sustained. (see page 40) |
| ● | The Nasdaq Capital Market may subsequently delist our securities if we fail to comply with ongoing listing standards. (see page 40) |
| ● | We have broad discretion in the use of the net proceeds from our recent offering and may not use them effectively, which could affect our results of operations and cause our stock price to decline. (see page 42) |
| ● | We incur significant costs as a result of operating as a public company, and our management must devote substantial time to compliance initiatives as a result of the listing of our Common Stock on the Nasdaq Capital Market. (see page 42) |
| ● | We expect to incur significant costs and devote substantial management time to maintaining our disclosure controls and procedures and internal control over financial reporting, and regardless we may be unable to prevent or detect all errors or acts of fraud or to accurately and timely report our financial results or file our periodic reports in a timely manner. If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud. (see page 43) |
| ● | Anti-takeover provisions in our third amended and restated bylaws and Nevada law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our securities. (see page 44) |
| ● | We have never paid dividends on our capital stock and we do not anticipate paying any dividends in the foreseeable future. Consequently, any profits from an investment in our Common Stock will depend on whether the price of our Common Stock increases. (see page 44) |
| ● | Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. (see page 44) |
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General Risk Factors
| ● | Product safety and quality concerns could negatively affect our business. (see page 45) |
| ● | If we are unable to protect our information systems against service interruption or failure, misappropriation of data or breaches of security, our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation and our reputation may be damaged. (see page 46) |
| ● | Changes in regulatory standards could adversely affect our business. (see page 46) |
| ● | Employment litigation and unfavorable publicity could negatively affect our future business. (see page 46) |
| ● | Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations. (see page 47) |
| ● | Currently pending, threatened or future litigation or governmental proceedings or inquiries could result in material adverse consequences, including judgments or settlements. (see page 47) |
| ● | Future acquisitions of and investments in new businesses could impact on our business and financial condition. (see page 47) |
| ● | Ongoing geopolitical tensions around the world may have a material adverse effect on our business, financial condition, and results of operations. (see page 47) |
In addition to the other information set forth in this Report and other filings we have made and make in the future with the SEC, you should carefully consider the following risk factors and uncertainties, which could materially affect our business, financial condition or results of operations in future periods. Additional risks are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.
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Risks Related to Our Financial Condition and Capital Requirements
We have a history of net losses. We expect to continue to incur net losses in the future.
We have incurred net losses since our inception in 2013, including net losses of $8.97 million and $8.75 million for the years ended September 30, 2024, and 2023, respectively. As of September 30, 2024, our accumulated deficit was approximately $82.34 million. We expect to incur significant sales and marketing expenses, as well as costs associated with operating as an exchange-listed public company, prior to recording sufficient revenue from our operations to offset these expenses.
These losses have had, and will continue to have, an adverse effect on our working capital, total assets and stockholders’ equity. Our ability to become and remain profitable will depend on our ability to generate significantly higher revenues from the sales of our single-service coffee products, Maca series products, etc., which depends upon a number of factors, including but not limited to successful sales, manufacturing, marketing and distribution of our products and services.
Because of the numerous risks and uncertainties associated with our commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our inability to achieve and then sustain profitability would have a material adverse effect on our business and financial condition.
Our independent auditor’s report for the fiscal year ended September 30, 2024 includes an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, and absent additional financing we may be unable to remain a going concern.
Considering our current cash resources and our current and expected levels of operating expenses for the next twelve months, we expect to need additional capital to fund our planned operations for at least twelve months. This evaluation is based on relevant conditions and events that are currently known or reasonably foreseeable. A reduction in consumer demand for, or revenues from the sale of, our maca related products could further constrain our cash resources.
We intend to seek to raise additional capital through public or private equity offerings. However, we may not be able raise such additional capital on favorable terms or at all. If we are unsuccessful in efforts to raise additional capital, based on our current levels of operating expenses, our current capital is not expected to be sufficient to fund our operations for the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern.
We may also consider raising additional capital in the future to expand our business, to pursue strategic investments or acquisitions, to take advantage of financing opportunities or for other reasons, including to:
| ● | fund development of our products; |
| ● | acquire, license or invest in technologies or intellectual property relating to our existing products; |
| ● | acquire or invest in complementary businesses or assets; and |
| ● | finance capital expenditures and general and administrative expenses. |
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Our present and future funding requirements will depend on many factors, including:
| ● | success of our current marketing efforts; |
| ● | our revenue growth rate and ability to generate cash flows from sales of our products; |
| ● | effects of competing technological and market developments; and |
| ● | changes in regulatory oversight applicable to our products. |
The various alternatives for raising additional capital include short-term or long-term debt financings, equity offerings, collaborations or licensing arrangements and each one carries potential risks. If we raise funds by issuing equity securities, our stockholders will be further diluted. If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our Common Stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations or our ability to issue additional equity securities or issue additional indebtedness.
We may also be required under additional debt financing to grant security interests on our assets, including our intellectual property. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our intellectual property, or grant licenses on terms that are not favorable to us which could lower the economic value of those items to us.
The credit markets and the financial services industry have in the past experienced turmoil and upheaval characterized by the bankruptcy, failure, collapse, or sale of various financial institutions and intervention from the U.S. federal government. Furthermore, the capital markets and the financial services industry are currently and expected to continue to be unpredictable and volatile. These events typically make equity and debt financing more difficult to obtain. Accordingly, additional equity or debt financing might not be available on reasonable terms, if at all. If we cannot secure additional funding when needed, including due to changes in our business plan, a lower demand for our products or other risks described in this Report, we may have to delay, reduce the scope of or eliminate one or more sales and marketing initiatives and development programs, which would have a materially adverse effect on our business.
We have a limited operating history, which may make it difficult to evaluate our current business and to forecast our future performance.
We have little operating history and are addressing an emerging market. As a result, our current and future business prospects are difficult to evaluate. All potential investors must consider our business prospects in light of the risks and difficulties we have encountered and will continue to encounter as a company operating in a rapidly evolving market. Some of these risks relate to our potential inability to:
| ● | effectively manage our business and proprietary information; |
| ● | recruit and retain sales and marketing, technical and managerial personnel; |
| ● | recruit and retain appropriate distributor relationships; |
| ● | successfully develop and protect our intellectual property portfolio; |
| ● | successfully provide high quality products as our business expands; and |
| ● | successfully address other risks, as described in this Report or otherwise. |
If we do not address these risks successfully, it could have a material adverse effect on our business and financial condition.
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
The Tax Cuts and Jobs Act (the “TCJA”), enacted in 2017, limited the use of net operating loss carryforwards arising in periods beginning after 2017 to eighty-percent of taxable income in the period to which the losses are carried. The TCJA also extended the expiration period for net operating losses arising in periods after 2017 from 20 years to an unlimited period.
However, the taxable income limitation on the use of net operating loss carryforwards was eliminated by the Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) for tax years beginning before January 1, 2021. We may not be able to utilize our existing net operating losses or any portion thereof in the current tax year or any available carryforward period.
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In addition, Section 382 may limit the utilization of net operating loss carryforwards. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to annual limitations on its ability to use its pre-change net operating loss carryforwards, or NOLs, and certain other tax attributes to offset future taxable income or reduce taxes. Our past issuance of stock and other changes in our stock ownership may have resulted in one or more ownership changes within the meaning of Section 382 of the Code; accordingly, our pre-change NOLs may be subject to limitations under Section 382. State NOL carryforwards may be similarly limited. Furthermore, transactions in our stock that have occurred in the past and could occur in the future may trigger another ownership change pursuant to Section 382. Because of the cost and complexity involved in the analysis of a Section 382 ownership change and the fact that we do not have any taxable income to offset, we have not undertaken a study to assess whether an “ownership change” has occurred or whether there have been multiple ownership changes since we became a “loss corporation” as defined in Section 382. Future changes in our stock ownership could result in ownership changes under Section 382 of the Code further limiting our ability to utilize our NOLs. Finally, our ability to use NOLs of companies that we may acquire in the future may be subject to limitations. For these reasons, even if we attain profitability, we may not be able to use a material portion of our NOLs, and this could reduce our earnings and potentially affect the valuation of our stock.
Risks Related to Our Business
Continued innovation and the successful development and timely launch of new products are critical to our financial results and the achievement of our growth strategy.
Our primary focus is on developing maca-based products for the Asian market, targeting consumers for use at home, in the office, and in other everyday settings. Our future success depends, largely, on our ability to implement these and our other growth strategies effectively. However, the achievement of our growth strategy is dependent, among other things, on our ability to extend the product offerings of our existing brands and introduce innovative new. Although we devote significant focus to the development of new products, including Maca Peptide Coffee, Maca-Noni, Maca Wine, Maca Purified Powder, we may not be successful in developing innovative new products or our new products may not be commercially successful. Additionally, our new product introductions are often time sensitive, and thus failure to deliver innovations on schedule could be detrimental to our ability to successfully launch such new products and retain partners, in addition to potentially harming our reputation and customer loyalty. If we fail to implement our growth strategies or if we invest resources in growth strategies that ultimately prove unsuccessful, our sales and profitability may be negatively affected, which would materially and adversely affect our business, financial condition and results of operations. Our financial results and our ability to maintain or improve our competitive position will depend on our ability to effectively gauge the direction of our key marketplaces and successfully identify, develop, manufacture, market and sell new or improved products and co-packing services in these changing marketplaces.
Our future financial results are difficult to predict, and failure to meet market expectations for our financial performance or any publicly announced guidance may cause the price of our stock to decline.
As we and our industry evolve, we expect to face new challenges with respect to our introduction of innovative products and the changing competitive landscape within the maca products industry. These challenges can occur at various stages, including design, supply chain and sales cycle. Any public forecasts regarding the expected performance of our business and future operating results are forward-looking statements subject to risks and uncertainties, including the risks and uncertainties described in our filings with the SEC and in our other public statements, and necessarily reflect current assumptions and judgments that may prove incorrect. As a result, there can be no assurance that our performance will be consistent with any public forecasts or that any variation from such forecasts will not be material and adverse. Failure to meet expectations, particularly with respect to operating margins, earnings per share, operating cash flows and net revenues may result in a decline and/or increased volatility in the price of our stock. In addition, broad price and volume fluctuations in the stock market as a whole, as well as general economic, business and political conditions, may adversely affect the price of our stock in ways that may be unrelated to our financial performance.
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Our international sales and operations subject us to various additional legal, regulatory, financial and other risks.
We have a manufacturing and sales office in Hong Kong. We operate globally and are attempting to develop products in multiple countries. Consequently, we face complex legal and regulatory requirements in multiple jurisdictions, which may expose us to certain financial and other risks. International operations are subject to a variety of risks, including:
| ● | foreign currency exchange rate fluctuations; |
| ● | greater difficulty in overseeing foreign operations; |
| ● | logistical and communications challenges; |
| ● | potential adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws; |
| ● | burdens and costs of compliance with a variety of foreign laws; |
| ● | political and economic instability; |
| ● | foreign tax laws and potential increased costs associated with overlapping tax structures; |
| ● | greater difficulty in protecting intellectual property; |
| ● | the risk of third-party disputes over ownership of intellectual property and infringement of third-party intellectual property by our products; and |
| ● | general social, economic and political conditions in these foreign markets. |
Increased competition, including as a result of industry consolidation, could hurt our businesses.
The maca products industry is intensely competitive and we compete with respect to product, quality, convenience, technology, innovation, and price. We face significant competition in each of our channels and marketplaces. We compete with major international maca products companies that operate in multiple geographic areas, many of which have greater financial and other resources than we do, as well as numerous companies that are primarily local in operation. Our Maca Series products also compete against local or regional brands as well as against private label brands developed by retailers. Our ability to gain or maintain share of sales in the global marketplace or in various local marketplaces or maintain or enhance our relationships with our partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the maca products industry.
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Changes in the maca products environment and retail landscape could impact our financial results.
The maca products environment is rapidly evolving as a result of, among other things, changes in consumer preferences; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the maca products retail landscape is dynamic and constantly evolving, not only in emerging and developing marketplaces, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed marketplaces, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If we are unable to successfully adapt to the rapidly changing environment and retail landscape, our share of sales, volume growth and overall financial results could be negatively affected.
Our business, growth and profitability depend on the performance of third-parties and our relationship with them.
In connection with the distribution of maca products, we rely on third-party suppliers and manufacturing partners to provide high quality maca products. We also rely on our manufacturing partners to provide us with additional manufacturing and facilitate distribution efforts throughout China. Our reliance on third-party suppliers and manufacturing partners subjects us to additional risks, including the possible termination of the arrangement by a third-party suppliers or manufacturing partner at a time that is costly or inconvenient for us. Our third-party suppliers and manufacturing partners are independent entities subject to their own unique operational and financial risks that are out of our control. If any of these third-party suppliers or manufacturing partners fail to perform as required, this could cause delays in our receipt of the maca products or otherwise adversely affect our business.
In addition, a significant portion of our distribution network, and correspondingly our success in distributing our maca products, depends on the performance of third-parties. Any non-performance or deficient performance by such parties may undermine our operations and profitability. For distribution of our maca products, we typically rely on third party distribution networks, including freight companies and common carriers. The success of these distribution networks depends on the performance of brokers, distributors, common carriers and retailers, as well as our third-party manufacturing partners as it relates to distribution of certain of our products. There is a risk that a broker, distributor, common carrier or retailer may refuse to or cease to market or carry our product, or that any such entity or our third-party manufacturing partner may not adequately perform its functions within the network by, without limitation, failing to distribute our products.
Furthermore, such third-parties’ financial position or market share may deteriorate, which could adversely affect our distribution, marketing and sale activities. We must also maintain good commercial relationships with third-party brokers, distributors and retailers so that they will promote and carry our product. Any adverse consequences resulting from the performance of third-parties or our relationship with them could undermine our operations and profitability.
Interruption or increased costs of our supply chain and sales network, including a disruption in operations at any of our facilities or our manufacturer partners’ facilities, could affect our ability to manufacture or distribute products and could adversely affect our business and sales.
A disruption in operations at any of our facilities or any other disruption in our supply chain or increase in prices relating to service by our retailers, distributors, common carriers that ship goods within our distribution channels, or otherwise, whether as a result of shipping costs and delays, trade restrictions, casualty, natural disaster, weather, power loss, telecommunications failure, terrorism, labor shortages, contractual disputes, interruptions in port operations or highway arteries, pandemic, strikes, work stoppages, the financial or operational instability of key suppliers, distributors and transportation providers, or other causes, could significantly impair our ability to operate our business, adversely affect our relationship with our customers, and impact our financial condition or results of operations.
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The loss of any member of our senior management team or our inability to attract and retain highly skilled personnel could have a material adverse effect on our business.
Our success depends on the skills, experience and performance of key members of our senior management team. The individual and collective efforts of our senior management team will be important as we continue to expand our commercial activities and develop additional products. The loss or incapacity of existing members of our senior management team could have a material adverse effect on our business and financial condition if we experience difficulties in hiring qualified successors. Our employment agreements with our executive officers are “at will”, and the retention of our executive officers for any period of time cannot be guaranteed. We do not maintain “key person” insurance on any of our employees.
Due to the specialized nature of the business and our small size, we are highly dependent upon our ability to attract and retain qualified sales and marketing, technical and managerial personnel. The loss of the services of existing personnel, as well as the failure to recruit key sales, marketing, technical and managerial personnel in a timely manner would be detrimental to our development and could have a material adverse effect on our business and financial condition. Our anticipated growth and expansion into areas and activities requiring additional expertise, such as sales and marketing, may require the addition of new management personnel, both domestic and international. All of our employees may terminate their employment at any time with short or no advance notice. We may have difficulties locating, recruiting or retaining qualified sales people. Recruiting and retention difficulties will limit our ability to support our development and sales programs and to build a commercially viable business.
The competition for talent is currently extremely high. In this competitive environment, our business could be adversely impacted by increases in labor costs, including wages and benefits, including those increases triggered by regulatory actions regarding wages, scheduling and benefits; increased health care and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the right skill sets, and increased wages, and benefits and other costs. In addition, our wages and benefits programs, combined with the periodic challenges in the labor market, may be insufficient to attract and retain talent.
Because our management structure is not centralized, the management of our business operations may be more expensive and more difficult.
As part of our strategy to attract the most qualified individuals, we do not require the members of our management team to relocate to a particular geographic area. Accordingly, the members of our management team are geographically dispersed. This decentralized structure might cause additional expenses in the conduct of our business, and may also delay communication between members of our management team, lower the quality of our management decisions or decrease our ability to take action quickly.
We expect to continue to experience inflationary pressure on our cost structure, and price increases may not be sufficient to offset cost increases or may result in sales volume declines.
We expect for the foreseeable future to experience inflationary pressure on our cost structure. We may be able to pass some or all raw materials, energy and other input cost increases to customers by increasing the selling prices of our products or decreasing the size of our products; however, higher product prices or decreased product sizes may also result in a reduction in sales volume and/or consumption. If we are not able to mitigate these inflationary pressures, such as by increasing our selling prices or reducing product sizes sufficiently to offset increased raw material, energy or other input costs, including but not limited to packaging, direct labor, overhead and employee benefits, or if our sales volume decreases significantly, there could be a negative impact on our results of operations and financial condition.
We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
While we are currently a small company and, therefore, limited in our product development, marketing and sales activities, we anticipate continued growth in our business operations commensurate with the expansion of our sales and support operations and distribution network and the commercialization of our coffee products. Any future growth could impose significant added responsibilities on members of our existing management and create strain on our organizational, administrative, and operational infrastructure, including sales and marketing, quality control, and customer service. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures, which in the past have been determined to be inadequate. Our status as an exchange-listed public company will require us to increase our investment in financial accounting and reporting. If our current infrastructure is unable to handle our growth, we may need to expand our infrastructure, to identify and recruit new staff and to implement new reporting systems. The time and resources required to implement such expansion and systems could adversely affect our operations. Our future financial performance and our ability to expand and market our single-serve coffee products and to compete effectively will depend, in part, on our ability to manage this potential future growth effectively, without compromising quality.
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Any failure by us to accurately forecast customer demand for our products, or to quickly adjust to forecast changes, could adversely affect our business and financial results.
There is inherent risk in forecasting demand due to the uncertainties involved in assessing the current level of maturity of the single serve component of our business as well as the current and future needs of our customers. We set target levels for the manufacture of our coffee products and for the purchase of coffee in advance of customer orders based upon our forecasts of customer demand and those of our business partners. If our forecasts exceed demand, we could experience excess inventory in the short-term, excess manufacturing capacity in the short and long-term, and/or price decreases, all of which could impact our financial performance. Alternatively, if demand exceeds our forecasts significantly beyond our current manufacturing capacity, we may not be able to satisfy customer demand, which could result in a loss of share if our competitors are able to meet customer demands. A failure to accurately predict the level of demand for our products could adversely affect our net revenues and net income.
We may not be able to adequately protect our intellectual property rights, and our competitors may be able to offer similar products and services, which would harm our competitive position.
Our success depends in part upon our intellectual property rights. We rely primarily on trademark, trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights over our products, procedures and services. Other persons could copy or otherwise obtain and use our intellectual properties without authorization or create intellectual properties similar to ours independently. We may also pursue the registration of our domain names, trademarks and service marks in other jurisdictions, including the United States. However, we cannot assure you that we will be able to protect our proprietary rights. Further, our competitors may be able to independently develop similar intellectual property, duplicate our products and services or design around any intellectual property rights we hold. Further, our intellectual property rights may be subject to termination or expirations. The loss of intellectual property protections or the inability to timely regain intellectual property protections could harm our business and ability to compete.
We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time subject to legal proceedings and claims relating to the intellectual property rights of others.
There may be third-party intellectual property that is infringed by our products, services or other aspects of our business. There could also be existing patents or other intellectual property rights of which we are not aware that our products may inadvertently infringe. We cannot assure you that holders of the relevant intellectual property rights purportedly relating to some aspect of our technology platform or business, if any such holders exist, would not seek to enforce such intellectual property rights against us in the United States or any other jurisdiction. We also cannot be certain that our efforts will be effective in completely preventing the infringement of trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these third-party infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question.
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Failure to comply with applicable transfer pricing and similar regulations could harm our business and financial results.
In many countries, including the United States, we are subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned and are taxed accordingly. Although we believe that we are in substantial compliance with all applicable regulations and restrictions, we are subject to the risk that governmental authorities could audit our transfer pricing and related practices and assert that additional taxes are owed. In the event that the audits or assessments are concluded adversely to us, we may or may not be able to offset or mitigate the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits. Because the laws and regulations governing U.S. foreign tax credits are complex and subject to periodic legislative amendment, we cannot be sure that we would in fact be able to take advantage of any foreign tax credits in the future.
Risks Associated With Doing Business in China
Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of our business.
The PRC’s economy is in a transition from a planned economy to a market-oriented economy subject to five-year and annual plans adopted by the government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions within the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, there can be no assurance that this will be the case. A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Implementation of the negative list system. Although the PRC government has been pursuing economic reform policies for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.
The approval and/or other requirements of the CSRC or other mainland China governmental authorities may be required in connection with our issuance of securities overseas under mainland China rules, regulations or policies, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such other requirements.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by mainland China companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of mainland China domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear. If CSRC approval is required, it is uncertain how long it will take for us to obtain such approval, and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or a delay in obtaining CSRC approval for our future issuance of securities overseas may subject us to sanctions imposed by the CSRC and other mainland China regulatory agencies, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
Furthermore, on July 6, 2021, the PRC government promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities, or the July 6 Opinions, which, among other things, called for enhanced administration and supervision of overseas-listed mainland China-based companies, proposed to strengthen the supervision of the overseas issuance and listing of shares by mainland China-based companies and clarified the responsibilities of competent domestic industry regulators and government authorities. On December 28, 2021, the CAC, together with other relevant administrative departments, jointly released the Cybersecurity Review Measures, which took effect on February 15, 2022. Pursuant to the Cybersecurity Review Measures, network platform operators with personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before going to list abroad.
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The new rules for the filing-based administration of overseas securities offerings and listings by Chinese domestic companies released on February 17, 2023, or New Filing Rules, establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. According to the New Filing Rules, (i) an overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC; and (ii) the issuer or its affiliated domestic company, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering, issuance of convertible bonds, offshore relisting after go-private transactions and other equivalent offing activities. In addition, after a domestic company has offered and listed securities in an overseas markets, it is required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to change of control and voluntary or mandatory delisting. From March 31, 2023, enterprises that have been listed overseas shall constitute existing enterprises and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct future offshore offerings or capital raising activities or are involved in other circumstances that require filing with the CSRC.
On February 24, 2023, the CSRC, together with other relevant government authorities, issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which became effective on March 31, 2023. According to the Archives Rules, domestic mainland China companies, whether offering and listing securities overseas directly or indirectly, must strictly abide the applicable laws and regulations when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities companies, securities services providers such as accounting firms, or overseas regulators in the process of their overseas offering and listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority. Furthermore, the Archives Rules also provides that securities companies and securities service providers shall also fulfill the applicable legal procedures when providing overseas regulatory institutions and other relevant institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest.
A slowdown or other adverse developments in the PRC economy may harm our customers and the demand for our services and our products.
Part of our operations are conducted in the PRC. Although the PRC economy has grown significantly in recent years, there is no assurance that this growth will continue. A slowdown in overall economic growth, an economic downturn, a recession or other adverse economic developments in the PRC could significantly reduce the demand for our products and services.
If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease.
At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries that may affect our economic outlook both in the United States and in China. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our Common Stock.
Future inflation in China may inhibit the profitability of our business in China.
In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our services and products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services and products.
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The fluctuation of the Renminbi may have a material adverse effect on your investment.
The change in value of the Renminbi against the U.S. dollar and other currencies is affected by, various factors, such as changes in China’s political and economic conditions and China’s foreign exchange controls. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under such policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Later on, the People’s Bank of China has decided to further implement the reform of the RMB exchange regime and to enhance the flexibility of RMB exchange rates. Such changes in policy have resulted in a significant appreciation of the Renminbi against the U.S. dollar since 2005. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant adjustment of the Renminbi against the U.S. dollar. Any significant appreciation or revaluation of the Renminbi may have a material adverse effect on the value of, and any dividends payable on, shares of our Common Stock in foreign currency terms. More specifically, if we decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our 2018 offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of shares of our Common Stock in U.S. dollars without giving effect to any underlying change in our business or results of operations.
Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.
Part of our revenue is denominated in Renminbi. As a result, restrictions on currency exchange may limit our ability to use revenue generated in Renminbi to fund any business activities we may have outside China in the future or to make dividend payments to our shareholders in U.S. dollars. Under current PRC laws and regulations, Renminbi is freely convertible for current account items, such as trade and service-related foreign exchange transactions and dividend distributions. However, Renminbi is not freely convertible for direct investment or loans or investments in securities outside China, unless such use is approved by SAFE. For example, foreign exchange transactions under the subsidiary’s capital account, including principal payments in respect of foreign currency-denominated obligations, remain subject to significant foreign exchange controls and the approval requirement of SAFE. These limitations could affect our ability to convert Renminbi into foreign currency for capital expenditures. And the Chinese government is further strengthening the control of foreign exchange; we will not be able to change the Chinese government’s decision in our own power.
Our subsidiary in China is subject to restrictions on making dividends and other payments to us.
CIMG is a holding company and relies partially on dividends paid by its subsidiaries in China for our cash needs, including paying dividends and other cash distributions to our shareholders to the extent we choose to do so, servicing any debt we may incur and paying our operating expenses. Current PRC regulations permit the subsidiary in China to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Under the applicable requirements of PRC law, Beijing Zhongyan may only distribute dividends after it has made allowances to fund certain statutory reserves. These reserves are not distributable as cash dividends. In addition, if the subsidiaries or affiliated entities in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any such restrictions may materially affect such entities’ ability to make dividends or make payments, in service fees or otherwise, to us, which may materially and adversely affect our business, financial condition and results of operations.
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Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions in a civil law system may be cited as reference but have limited precedential value. Since 1979, newly introduced PRC laws and regulations have significantly enhanced the protections of interest relating to foreign investments in China. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve rapidly, the interpretations of such laws and regulations may not always be consistent, and enforcement of these laws. In different administrative areas and regulations involves significant uncertainties, any of which could limit the available legal protections. In addition, the PRC administrative and judicial authorities have significant discretion in interpreting, implementing or enforcing statutory rules and contractual terms, and it may be more difficult to predict the outcome of administrative and judicial proceedings and the level of legal protection we may enjoy in the PRC than under some more developed legal systems. These uncertainties may affect our decisions on the policies and actions to be taken to comply with PRC laws and regulations, and may affect our ability to enforce our contractual or tort rights. In addition, the regulatory uncertainties may be exploited through unmerited legal actions or threats in an attempt to extract payments or benefits from us. Such uncertainties may therefore increase our operating expenses and costs, and materially and adversely affect our business and results of operations.
The PRC’s legal and judicial system under special circumstances may not adequately protect our business and operations and the rights of foreign investors.
The legal and judicial systems in the PRC are still rudimentary, and enforcement of existing laws is uncertain. As a result, it may be impossible to obtain swift and equitable enforcement of laws that do exist, Different administrative regions have different legal and judicial interpretations or to obtain enforcement of the judgment of one court by a court of another jurisdiction. The PRC’s legal system is based on the civil law regime, that is, it is based on written statutes. A decision by one judge does not set a legal precedent that is required to be followed by judges in other cases. In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes.
The promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may adversely affect foreign investors. There can be no assurance that a change in leadership, social or political disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, will not affect the PRC government’s ability to continue to support and pursue these reforms. Such a shift could have a material adverse effect on our business and prospects.
Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it more difficult for us to pursue growth through acquisitions in China.
The M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the Ministry of Commerce (“MOFCOM”) must be notified in the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national security review by the MOFCOM. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited. There is significant uncertainty regarding the interpretation and implementation of these regulations relating to merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected. In addition, if the MOFCOM determines that we should have obtained its approval for our entry into contractual arrangements with the affiliated entities, we may be required to file for remedial approvals. There is no assurance that we would be able to obtain such approval from the MOFCOM. We may also be subject to administrative fines or penalties by the MOFCOM that may require us to limit our business operations in the PRC, delay or restrict the conversion and remittance of our funds in foreign currencies into the PRC or take other actions that could have material and adverse effect on our business, financial condition and results of operations.
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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to the PRC Subsidiaries and affiliated entities, which could harm our liquidity and our ability to fund and expand our business.
CIMG is a Nevada corporation conducting part of its operations in China through its PRC and Hong Kong subsidiaries. CIMG may make loans to the Hong Kong PRC Subsidiaries subject to the approval from governmental authorities and limitation of amount, or may make additional capital contributions to subsidiaries in China.
Any loans to the subsidiaries in China are subject to foreign investment and are under PRC regulations and foreign exchange loan registrations. For example, loans by us to the wholly foreign-owned subsidiaries or VIE entities in China to finance their activities must be registered with the local counterpart of SAFE. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly use for investment in securities or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises). On October 23, 2019, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience of Cross-border Trade and Investment, or the SAFE Circular 28, which, among other things, allows all foreign-invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine, does not violate applicable laws, and does not violate with the negative list on foreign investment. However, since the SAFE Circular 28 is newly promulgated, it is unclear how SAFE and competent banks will carry this out in practice. In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis.
We must remit offering proceeds to China in a future securities issuance before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can complete all necessary governmental registration processes in a timely manner.
The proceeds of a future offering may be remitted back to the PRC, and the process for wiring such proceeds back to the PRC may be time-consuming after the closing of a future offering. We may be unable to use these proceeds to grow our business until the PRC Subsidiaries receive such proceeds in the PRC. Any transfer of funds by us to the PRC Subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China. Any foreign loans procured by the PRC Subsidiaries is required to be registered with China’s State Administration of Foreign Exchange (“SAFE”) or its local branches or satisfy relevant requirements, and the PRC subsidiaries may not procure loans which exceed the difference between their respective total project investment amount and registered capital or 2 times (which may be varied year by year due to the change of PRC’s national macro-control policy) of the net worth of the PRC subsidiary. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to the PRC subsidiaries are subject to the approval of or filing with State Administration for Market Regulation in its local branches, the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE.
In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to the PRC subsidiary or with respect to future capital contributions by us to the PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund the PRC operations may be negatively affected, which could materially and adversely affect our liquidity, our ability to fund and expand our business and our securities.
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A failure by the beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.
SAFE has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles (or SAFE Circular No. 37), effective on July 4, 2014, and its appendices, that require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.
These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures on the application and implementation of SAFE regulations, and since SAFE Circular No. 37 was relatively new, there remains uncertainty with respect to its implementation. As of the date of this report, all PRC residents known to us that currently hold direct or indirect interests in our company have completed the necessary registrations with SAFE as required by SAFE Circular 37. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the requirements of SAFE Circular 37. However, we cannot assure you that these individuals or any other direct or indirect shareholders or beneficial owners of our company who are PRC residents will be able to successfully complete the registration or update the registration of their direct and indirect equity interest as required in the future. If they fail to make or update the registration, our shareholders could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting the PRC subsidiary’s ability to distribute dividends to, or obtain loans denominated in foreign currencies from, our company, or prevent us from paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.
We may be subject to fine due to our insufficient payment of the social insurance and housing fund of the employees.
Pursuant to the Social Insurance Law of the PRC, as amended on December 29, 2018,and the Regulation on the Administration of Housing Accumulation Funds, as amended on March 24, 2019, employers in China shall register with relevant social insurance agency and relevant housing provident fund management center and open special housing provident fund accounts for each of their employees, and pay contributions to the social insurance plan and the housing provident fund for their employees, such contribution amount payable shall be calculated based on the employee’s actual salary in accordance with the relevant regulations. In case the employer fails to make sufficient payment of the social insurance, it may be subject to fine up to 3 times of the insufficient amount and pay late fees. If the employer failed to register with relevant housing provident fund management center or failed to open special housing provident fund accounts for the employees within the ordered time limit, a fine of not less than RMB10,000 nor more than RMB50,000 may be imposed. In addition, if the employer fails to pay sufficient contributions to housing provident fund as required, the housing provident fund management center shall order it to make the payment and deposit within a prescribed time limit; where the payment has not been made after the expiration of the time limit, the housing provident fund management center may request the people’s court for compulsory enforcement. On July 20, 2018, the General Office of the Communist Party of China and the General Office of the State Council jointly issued the Reform Plan on Tax Collection and Administration Systems for Local Offices of the State Administration of Taxation and Local Taxation Bureaus, according to which the collection and administration of social insurance will be transferred from the social insurance departments to competent tax authorities, and the supervision over the payment of social insurance will be significantly strengthened in the way that an enterprise must pay social insurance for its employees based on their overall salary at certain legally required rates. If we are fined due to insufficient payment of the social insurance and housing fund of the employees, our business operations could be materially and adversely affected.
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You may face difficulties in protecting your interests and exercising your rights as a stockholder of ours since we conduct part of our operations in China and part of our officers and directors reside in China.
We conduct part of our operations in China through Beijing Zhongyan, our subsidiary in China. Part of our current officers and directors reside outside the United States and part of the assets of those persons are located outside of the United States. Because of this, it may be difficult for you to conduct due diligence on our company, our executive officers or directors and attend stockholder meetings if the meetings are held in China. As a result, our public stockholders may have more difficulty in protecting their interests through actions against our management, directors or major stockholders than would stockholders of a corporation doing business entirely or predominantly within the United States.
You may experience difficulties in protecting your rights through the United States courts.
Currently, part of our operations is conducted in China and part of our assets are located in China. Part our officers are nationals or residents of the PRC and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a stockholder to effect service of process within the United States upon these persons, or to enforce judgments against us which are obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
In addition, it may be difficult or impossible for you to effect service of process within the United States upon us our directors and officers in the event that you believe that your rights have been violated under United States securities laws or otherwise. Even if you are successful in effecting service of process and bringing an action of this kind, the laws of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the PRC of judgments obtained in the United States.
Increases in labor costs in the PRC may adversely affect our business and our profitability.
The economy of China has been experiencing significant growth, leading to inflation and increased labor costs. China’s overall economy and the average wage in the PRC are expected to continue to grow. Future increases in China’s inflation and material increases in the cost of labor may materially and adversely affect our profitability and results of operations.
Our auditor is headquartered in Singapore and is subject to inspection by the PCAOB on a regular basis. To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our Common Stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act.
Our independent registered public accounting firm issued an audit opinion on the financial statements included in this report filed with the SEC and will issue audit reports related to our company in the future. As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB. However, to the extent that our auditor’s work papers become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. On December 2, 2021, the Securities and Exchange Commission adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. We are required by the HFCAA to have an auditor that is subject to the inspection by the PCAOB. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China and Hong Kong. Our independent registered public accounting firm is headquartered in the Singapore and has been inspected by the PCAOB on a regular basis and as such, it is not affected by or subject to the PCAOB’s Determination Report. To the extent this status changes in the future and our auditor’s audit documentation related to their audit reports for our company becomes outside of the inspection by the PCAOB, our Common Stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act.
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Our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for two consecutive years. As a result, an exchange may determine to delist our securities.
In light of recent events indicating greater oversight by the CAC over data security, we may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on our business and our securities.
Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (1) establishing the National Anti-Monopoly Bureau; (2) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law (draft Amendment published on October 23, 2021 for public opinions), the anti-monopoly guidelines for various industries, and the detailed Rules for the Implementation of the Fair Competition Review System; and (3) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises. As of the date of this report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our ability to conduct business, accept foreign investments, or list on a U.S. or other foreign exchange because neither the Company nor its PRC operating entities engage in monopolistic behaviors that are subject to these statements or regulatory actions.
On November 14, 2021, the CAC released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security Management Regulations Draft, to solicit public opinion and comments till December 13, 2021, which has not been promulgated as of the date of this report. Pursuant to the Data Security Management Regulations Draft, data processors holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data. According to the latest amended Cybersecurity Review Measures, which was promulgated on November 16, 2021 and became effective on February 15, 2022, an online platform operator holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad.
As of the date of this report, CIMG and its subsidiaries have not received any notice from any authorities requiring the PRC subsidiaries to go through cybersecurity review or network data security review by the CAC. Given that CIMG and its subsidiaries do not possess personal data of at least one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future, which could materially and adversely affect our business, financial conditions, and results of operations.
Compliance with China’s new Data Security Law, Measures on Cybersecurity Review (revised draft for public consultation), Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.
China has implemented or will implement rules and is considering a number of additional proposals relating to data protection. China’s new Data Security Law promulgated by the Standing Committee of the National People’s Congress of China in June 2021, or the Data Security Law, will take effect in September 2021. The Data Security Law provides that the data processing activities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government. As the Data Security Law has not yet come into effect, we may need to make adjustments to our data processing practices to comply with this law.
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Additionally, China’s Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entity’s information and network systems belong-from the lowest Level 1 to the highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection of Cyber Security. The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.
Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Measures on Cybersecurity Review, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.” On July 10, 2021, the Cyberspace Administration of China published a revised draft of the Measures on Cybersecurity Review, expanding the cybersecurity review to data processing operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country.
It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.
In addition, our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for two consecutive years.
Also, on August 20, 2021, the National People’s Congress passed the Personal Information Protection Law, which will be implemented on November 1, 2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year.
Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market.
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On November 14, 2021, the Cyberspace Administration of China released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security Management Regulations Draft, to solicit public opinion and comments till December 13, 2021, which has not been promulgated as of the date of this report. Pursuant to the Data Security Management Regulations Draft, data processors holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data. According to the latest amended Cybersecurity Review Measures, which was promulgated on November 16, 2021 and became effective on February 15, 2022, an online platform operator holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad.
As of the date of this report, CIMG and its subsidiaries have not received any notice from any authorities requiring the PRC subsidiaries to go through cybersecurity review or network data security review by the CAC. Given that the PRC subsidiaries do not possess personal data of at least one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future, which could materially and adversely affect our business, financial conditions, and results of operations.
Failure to comply with the Foreign Corrupt Practices Act could adversely affect our business.
We are required to comply with the United States Foreign Corrupt Practices Act (or FCPA), which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of other companies or government agencies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage.
We have operations, agreements with third parties, and make sales in China. Companies with operations in China have been accused and found guilty of sales practices that involve unlawful activity, including violations of the FCPA. We believe to date we have complied in all material respects with the provisions of the FCPA. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants and/or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
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Risks Related to Ownership of our Common Stock
The market price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our Common Stock is likely to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Report, these factors include but are not limited to:
| ● | the success of, or developments in, competitive products, services or technologies; |
| ● | regulatory actions with respect to our products and our competitors; |
| ● | the level of success of our marketing strategy; |
| ● | announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures or capital commitments; |
| ● | regulatory or legal developments in the United States and other countries; |
| ● | recruitment or departure of key personnel; |
| ● | expenses related to any of our development programs and our business in general; |
| ● | actual or anticipated changes in financial estimates, development timelines or recommendations by securities analysts; |
| ● | failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; |
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | fluctuations in the valuation of companies perceived by investors to be comparable to us; |
| ● | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
| ● | our ability or failure to raise additional capital in equity or debt transactions; |
| ● | costs associated with our sales and marketing initiatives; |
| ● | sales of our Common Stock by us, our insiders or our other stockholders; and |
| ● | general economic, business, industry, market and political conditions, including prevailing interest rates and the rate of inflation. |
In addition, the stock market in general has in the past experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the relevant companies. Broad market and industry factors may negatively affect the market price of our Common Stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and material adverse impact on the market price of our Common Stock.
Despite our listing on the Nasdaq Capital Market, there can be no assurance that an active trading market for our Common Stock will be sustained.
In June 2020, our Common Stock commenced trading on the Nasdaq Capital Market under the symbol “NUZE.” On October 31, 2024, we changed our symbol to “IMG.” Although our Common Stock is listed on the Nasdaq Capital Market, an active trading market for our shares may never be sustained. You may not be able to sell your shares quickly or at the market price if trading in shares of our securities is not active. Further, an inactive market may also impair our ability to raise capital by selling shares of our securities and may impair our ability to enter into strategic partnerships or acquire companies or products by using shares of our securities as consideration, which could have a material adverse effect on our business, financial condition, and results of operations.
The Nasdaq Capital Market may subsequently delist our securities if we fail to comply with ongoing listing standards.
The Nasdaq Capital Market’s rules for listed companies requires us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common Stock. In addition to specific listing and maintenance standards, the Nasdaq Capital Market has broad discretionary authority over the continued listing of securities, which it could exercise with respect to the listing of our Common Stock.
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As a listed company, we are required to meet the continued listing requirements applicable to all Nasdaq Capital Market companies. On September 20, 2022, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“NASDAQ”) indicating that the Company was not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing (the “Bid Price Rule”). On December 28, 2022, the Company completed a 1-for-35 reverse stock split, which became effective on December 28, 2022. On January 17, 2023, the Company received notice that the Company had regained compliance with the Bid Price Rule. In addition to the Bid Price Rule previously described, Nasdaq Capital Market listing rules require us to maintain a minimum stockholders’ equity of $2.5 million under Nasdaq Listing Rule 5550(b)(1), a minimum market value of listed securities of $35 million under Nasdaq Listing Rule 5550(b)(2), or a minimum net income of $500,000 under Nasdaq Listing Rule 5550(b)(3).
The Company received a notification letter from NASDAQ on January 23, 2024 (the “NASDAQ Notification Letter”), indicating that the Company was not in compliance with NASDAQ Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”). The NASDAQ Notification Letter stated that the Company failed to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing, as required by the Stockholders’ Equity Requirement. Subsequently, the Company completed a convertible note financing of $320,000 on April 27, 2024, an equity financing of $1,500,000 on June 4, 2024, and an equity financing of $3,000,000 on July 11, 2024. On July 23, 2024, the Company received a letter from NASDAQ stating that based on the Company’s Form 8-K, filed with the Commission on July 19, 2024, NASDAQ has determined that the Company has complied with Listing Rule 5550(b)(1).
On January 14, 2025, the Company received a notification letter (the “Minimum Bid Price Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with the minimum bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Minimum Bid Price Notice has no immediate effect on the listing of the Company’s Common Stock, which continues to trade on The Nasdaq Capital Market under the symbol “IMG.” In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days from the date of the Minimum Bid Price Notice, or until July 14, 2025, to regain compliance. If at any time before July 14, 2025 the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, NASDAQ will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter will be resolved. If the Company does not regain compliance during the compliance period ending July 14, 2025, then NASDAQ may in its discretion determine to grant the Company an additional 180 calendar day period to regain compliance, provided that the Company on July 14, 2025 meets the continued listing requirement for market value of publicly held shares and all other applicable initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and will need to provide NASDAQ written notice of its intent to cure the deficiency during the second compliance period.
On January 17, 2025, the Company received another notice (the “Annual Report Notice”) from NASDAQ indicating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Annual Report on Form 10-K for the period ended September 30, 2024 with the SEC. The Annual Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq, and it states that the Company is required to submit a plan to regain compliance with Nasdaq Listing Rule 5250(c)(1) within 60 calendar days from the date of the Annual Report Notice. If the plan is accepted by Nasdaq, then Nasdaq can grant the Company up to 180 calendar days from the due date of the Form 10-K for the fiscal year ended September 30, 2025 to regain compliance. In determining whether to accept such plan, Nasdaq will consider such things as the likelihood that the remedial filing, along with any subsequent periodic filing that will be due, can be made within the 180 day period, the Company’s past compliance history, the reasons for the late filing, other corporate events that may occur within our review period, the Company’s overall financial condition and its public disclosures. Any subsequent periodic filing that is due within the 180 day exception period must be filed no later than the end of the period.
On February 19, 2025, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with Listing Rule 5250(c)(1) because the Company did not timely file its quarterly report on Form 10-Q for the period ended December 31, 2024 with the SEC.
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We have submitted a Nasdaq compliance plan to Nasdaq on March 18, 2025 and Nasdaq grant the Company extension to (i) file the Form 10-K for the period ended September 30, 2024 on or before June 13, 2025; and (ii) file the Form 10-Q for the period ended December 31, 2024 on or before July 14, 2025.
On May 19, 2025, the Company received a notice (the “Quarterly Report Notice”) from NASDAQ indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Quarterly Report on Form 10-Q for the period ended March 31, 2025 with the Securities and Exchange Commission. The Quarterly Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq.
As a result of this additional delinquency of the Form 10-Q for the period ended March 31, 2025, the Company submitted an update to its original plan to regain compliance with respect to the filing requirement on June 3, 2025.
On June 13, 2025, the Company did not manage to file its Form 10-K for the year ended September 30, 2024 and received a delist determination letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC on June 27, 2025 (“Nasdaq Delist Determination Letter”). According to the Nasdaq Delist Determination Letter, unless the Company requests an appeal of this determination by July 7, 2025, trading of the Company’s common stock will be suspended from The Nasdaq Capital Market at the opening of business on July 9, 2025, and NSADAQ will file a Form 25-NSE with the SEC to remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
The Company intends to file its Form 10-K for the fiscal year ended September 30, 2024 as soon as possible, and in any event before July 7, 2025. In addition, the Company intends to appeal Nasdaq’s delist determination and plans to request a hearing before a Nasdaq Hearings Panel to present its plan for regaining compliance with the applicable Nasdaq Listing Rules by 4:00 Eastern Time on July 7, 2025.
If the Company does not regain compliance within the allotted compliance period or periods, including any extensions that NASDAQ may determine to grant, NASDAQ will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a NASDAQ hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other NASDAQ listing requirements.
If we fail to meet one of those standards or any other Nasdaq Capital Market continued listing requirement, our Common Stock may be subject to delisting, as applied by Nasdaq in its discretion. We intend to take all commercially reasonable actions to maintain our Nasdaq Capital Market listing. If our Common Stock is delisted in the future, it is not likely that we will be able to list our Common Stock on another national securities exchange on a timely basis or at all and, as a result, we expect our securities would be quoted on an over-the-counter market; however, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our Common Stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.
We have broad discretion in the use of the net proceeds from our recent offering and may not use them effectively, which could affect our results of operations and cause our stock price to decline.
Our management will have broad discretion in the application of the net proceeds from our recent offering. We intend to use the net proceeds from the offering to acquire complementary businesses, acquire or license products or technologies that are complementary to our own, although we have no current plans, commitments or agreements with respect to any such use of proceeds for acquisitions or licenses, and for working capital and general corporate purposes. As a result, you will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of the offering. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds from the offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
We incur significant costs as a result of operating as a public company, and our management must devote substantial time to compliance initiatives as a result of the listing of our Common Stock on the Nasdaq Capital Market.
As a listed company, we are required to meet the continued listing requirements applicable to all NASDAQ Capital Market companies. We expect our ongoing compliance with such rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. These requirements may divert the attention of our management and personnel from other business concerns, and they could have a material adverse effect on our business, financial condition, and results of operations. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot accurately predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board, our Board committees or as executive officers.
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We expect to incur significant costs and devote substantial management time to maintaining our disclosure controls and procedures and internal control over financial reporting, and regardless we may be unable to prevent or detect all errors or acts of fraud or to accurately and timely report our financial results or file our periodic reports in a timely manner.
As a publicly traded company, our management is required to report annually on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
Because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. We cannot assure you that the measures we have taken will be effective in mitigating or preventing significant deficiencies or material weaknesses in our internal control over financial reporting in the future.
If we fail to maintain effective internal control over financial reporting to meet the demands that are placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results, or to report them within the timeframes required by law or exchange regulations.
Additionally, we have engaged only a very limited number of accounting and finance personnel and we rely in part on outside consultants. We may need to incur additional expenses to hire additional personnel with public company financial reporting expertise to build our financial management and reporting infrastructure, and further develop and document our accounting policies and financial reporting procedures. In the event we need to hire additional personnel with public company financial reporting expertise but we are unable to do so, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
If we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.
Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, detected or corrected on a timely basis.
If material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, then there exists a risk that our consolidated financial statements may contain material misstatements that are unknown to us at that time, and such misstatements could require us to restate our financial results. The existence of a material weakness in our internal control over financial reporting may result in current and potential stockholders losing confidence in our financial reporting, which could negatively impact the market price of our Common Stock.
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In addition, the existence of any material weaknesses in our internal control over financial reporting may affect our ability to timely file periodic reports under the Exchange Act and may consequently result in the SEC revoking the registration of our Common Stock, or the delisting of our Common Stock. Any of these events, if they were to occur, could have a material adverse effect on the market price of our Common Stock or on our business, financial condition and results of operations.
Anti-takeover provisions in our third amended and restated bylaws and Nevada law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our securities.
Our third amended and restated bylaws contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board. Our third amended and restated bylaws include provisions:
| ● | limiting the liability of, and providing indemnification to, our directors, including provisions that require the Company to advance payment for defending pending or threatened claims; |
| ● | controlling the procedures for the conduct and scheduling of board and stockholder meetings; and |
| ● | limiting the number of directors on our board and the filling of vacancies or newly created seats on the board to our Board then in office. |
In addition, we are subject to anti-takeover laws for Nevada corporations. These anti-takeover laws prevent Nevada corporations from engaging in a business combination with any shareholder, including all affiliates and associates of the shareholder, who is the beneficial owner of 10% or more of the corporation’s outstanding voting stock, for two years following the date that the shareholder first became the beneficial owner of 10% or more of the corporation’s voting stock, unless specified conditions are met. If those conditions are not met, then after the expiration of the two-year period the corporation may not engage in a business combination with such shareholder unless certain other conditions are met.
These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management. The existence of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Common Stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive a premium for their Common Stock in an acquisition.
We have never paid dividends on our capital stock and we do not anticipate paying any dividends in the foreseeable future. Consequently, any profits from an investment in our Common Stock will depend on whether the price of our Common Stock increases.
We have not paid dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our Common Stock will be our stockholders’ sole source of gain for the foreseeable future.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our third amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Nevada law. In addition, our third amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide for the following:
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| ● | We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Nevada law. Nevada law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. |
| ● | We will also indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. |
| ● | We are required to advance expenses, as incurred, to any indemnitee in connection with defending a proceeding, except that such indemnitee shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. |
| ● | The rights conferred in our third amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons. |
General Risk Factors
Product safety and quality concerns could negatively affect our business.
Our success depends in part on our ability to maintain consumer confidence in the safety and quality of all of our products. While we are committed to the safety and quality of our products, we may not achieve our product safety and quality standards. Product safety or quality issues, or mislabeling, actual or perceived, or allegations of product contamination or quality or safety issues, even when false or unfounded, could subject us to product liability and consumer claims, negative publicity, a loss of consumer confidence and trust, may require us from time to time to conduct costly recalls from some or all of the channels in which the affected product was distributed, could damage the goodwill associated with our brands, and may cause consumers to choose other products. Such issues could result in the destruction of product inventory and lost sales due to the unavailability of product for a period of time, which could cause our business to suffer and affect our results of operations.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our Common Stock, the price of our Common Stock could decline.
The trading market for our Common Stock will rely in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our Common Stock could decline if one or more equity analysts downgrade our Common Stock or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our Common Stock has been, and may in the future be, volatile. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including but not limited to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could have a material adverse effect on our business and financial condition.
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If we are unable to protect our information systems against service interruption or failure, misappropriation of data or breaches of security, our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation and our reputation may be damaged.
Our business involves the collection, storage and transmission of personal, financial or other information that is entrusted to us by our customers and employees. Our information systems also contain the Company’s proprietary and other confidential information related to our businesses. Despite the implementation of network security measures, our systems and those of third parties on which we rely may also be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components; power outages; telecommunications or system failures; server or cloud provider breaches; computer viruses; physical or electronic break-ins; cyber-attacks; catastrophic events; or breaches due to employee error or malfeasance or other attempts to harm our systems. Cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures, known as advanced persistent threats, directed at the Company, its products, its customers and/or its third-party service providers. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures in time. We could also experience a loss of critical data and delays or interruptions in our ability to manage inventories or process transactions. Some of our commercial partners, such as those that help us deliver our website, may receive or store information provided by us or our users through our websites. If these third parties fail to adopt or adhere to adequate information security practices, or fail to comply with our online policies, or in the event of a breach of their networks, our users’ data may be improperly accessed, used or disclosed.
If our systems are harmed or fail to function properly, we may need to expend significant financial resources to repair or replace systems or to otherwise protect against security breaches or to address problems caused by breaches. If we experience a significant security breach or fail to detect and appropriately respond to a significant security breach, we could be exposed to costly legal or regulatory actions against us in connection with such incidents, which could result in orders or consent decrees forcing us to modify our business practices. Any incidents involving unauthorized access to or improper use of user information, or incidents that are a violation of our online privacy policy, could harm our brand reputation and diminish our competitive position. Any of these events could have a material and adverse effect on our business, reputation or financial results. Our insurance policies carry coverage limits, which may not be adequate to reimburse us for losses caused by security breaches.
Changes in regulatory standards could adversely affect our business.
Our business is subject to extensive domestic and international regulatory requirements regarding distribution, production, labeling and marketing. Changes to regulation of the maca products industry could include increased limitations on advertising and promotional activities or other non-tariff measures that could adversely impact our business. In addition, we face government regulations pertaining to the health and safety of our employees and our consumers as well as regulations addressing the impact of our business on the environment, domestically as well as internationally. Compliance with these health, safety and environmental regulations may require us to alter our manufacturing processes and our sourcing. Such actions could adversely impact our results of operations, cash flows and financial condition, and our inability to effectively and timely comply with such regulations could adversely impact our competitive position.
Employment litigation and unfavorable publicity could negatively affect our future business.
Employees may, from time to time, bring lawsuits against us regarding injury, creation of a hostile work place, discrimination, wage and hour, sexual harassment and other employment issues. In recent years there has been an increase in the number of discrimination and harassment claims generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Companies that have faced employment or harassment related lawsuits have had to terminate management or other key personnel and have suffered reputational harm that has negatively impacted their sales. If we were to face any employment related claims, our business could be negatively affected.
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Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.
A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.
Currently pending, threatened or future litigation or governmental or regulatory proceedings or inquiries could result in material adverse consequences, including judgments or settlements.
We are, or may from time to time become, involved in lawsuits and other legal, governmental or regulatory proceedings or inquiries. See “Item 3. Legal Proceedings” included in this Annual Report for information regarding currently pending litigation that could have a material impact on the Company. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly to address. The timing of the final resolutions to any such lawsuits, inquiries, and other legal proceedings is uncertain.
Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows. Any judgment against us, the entry into any settlement agreement, or the imposition of any fine could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.
Future acquisitions of and investments in new businesses could impact our business and financial condition.
From time to time, we may acquire or invest in businesses or partnerships that we believe could complement our business. The pursuit of such acquisitions or investments may divert the attention of management and cause us to incur various expenses, regardless of whether the acquisition or investment is ultimately completed. In addition, acquisitions and investments may not perform as expected and we may be unable to realize the expected benefits, synergies, or developments that we may initially anticipate. Further, if we are able to successfully identify and acquire additional businesses, we may not be able to successfully integrate the acquired personnel or operations, or effectively manage the combined business following the acquisition, any of which could harm our business and financial condition.
In addition, to the extent we finance any acquisition or investment in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with shares of our Common Stock, it could be dilutive to our current stockholders.
Ongoing geopolitical tensions around the world may have a material adverse effect on our business, financial condition, and results of operations.
We may face risks associated with heightened tensions in geopolitical and economic relations. Rivalries and sanctions between major powers, including the United States and China, and unrest, terrorist threats, wars and other conflicts involving Ukraine, the Middle East and elsewhere have created increased global uncertainty. Such geopolitical tensions, along with trade disputes and regional conflicts, may result in economic instability, market volatility, and regulatory changes, which could impact our supply chain, operations, and consumer demand. Recently, the United States has proposed to impose multiple rounds of tariffs on a wide range of goods imported from multiple countries, including China, and China has responded with retaliatory tariffs. Since February 2025, the U.S. administration has proposed to increase the total tariff level for imported Chinese goods to 125%, and additional tariff increases could be imposed as the trade tension between the two countries continues to heighten. On April 9, 2025, China responded by hiking its levies on U.S. imports to 84% from 34%. On April 10, 2025, the U.S. imposed a 34% “reciprocal tariff” on top of existing levies, effectively raising the minimum tariff on Chinese goods to 54%. On April 11, 2025, the U.S. announced that consumer electronics would be exempt from tariffs imposed on most countries, but a 20% tariff would remain in place for electronics imported from China. Later that same day, in a further retaliatory move, China increased tariffs on U.S. imports to 125%.
Historically, tariffs have led to increased trade and political tensions, between the U.S. and China, as well as between the U.S. and other countries. Political tensions as a result of trade policies could reduce trade volume, cross-border investment, technological exchange, and other economic activities between major economies, resulting in a material adverse effect on global economic conditions and the stability of global financial and stock markets. Moreover, the heightened geopolitical uncertainty and potential for further escalation may discourage investments in securities issued by China-based companies (including us) and affect the global macroeconomic environment. For example, it has been reported that the U.S. administration may consider imposing further restrictions or prohibitions on trading of Chinese securities. Such geopolitical developments could materially and adversely affect our overall financial performance and prices of our Common Stock.
Furthermore, such tensions may lead to consumer boycotts, increased security measures, and travel restrictions, all of which could negatively affect our ability to conduct business, maintain supply chain operations, and expand into new markets. Any restrictions on international trade and capital flows may have a negative impact on our ability to access capital and expand our operations. As a result, any of these events could have a material adverse effect on our business, financial condition, and results of operations. The Maca Series products are exclusively distributed in the Asian market, with raw materials, supply chains, and sales operations based in China. In contrast, DRIPKIT products are sold solely in the U.S. market, with their raw materials, supply chains, and sales operations entirely within the United States. As both product lines operate independently and do not involve cross-border trade, the Company is not directly affected by changes in export tariffs or foreign import policies. Accordingly, as of the date of this report, ongoing geopolitical tensions have had a limited impact on our business.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
ITEM 2. PROPERTIES
Our principal executive office is located at Room R2, FTY D, 16/F, Kin Ga Industrial Building, 9 San On Street, Tuen Mun, Hong Kong, at a monthly rental cost of RMB 4,167 (approximately $594), with the lease expiring on December 17, 2025.
We currently lease office space and facilities in Delray Beach, Florida; Tuen Mun, Hong Kong; and Beijing, China. Our office in Delray Beach, Florida has a total monthly lease expense of approximately $3,500, with the lease expiring on August 31, 2025. Our office in Beijing, China has a total yearly lease expense of approximately RMB 3,000 (approximately $428), with the lease expiring on August 12, 2027. We have analyzed our current facilities in light of our anticipated requirements, and we expect to continue optimizing our office space and facilities to meet our future needs.
ITEM 3. LEGAL PROCEEDINGS
Steeped Litigation
As previously disclosed, on January 27, 2023, Steeped, Inc. d/b/a Steeped Coffee (“Steeped”) filed a complaint against the Company in the Superior Court of California, Santa Cruz County (Case No. 23CV00234) (the “Complaint”). The Complaint related to Steeped’s claim that the Company breached a 2021 settlement agreement that resolved Steeped’s 2019 trademark infringement case against the Company. The earlier case involved Steeped’s purported trademark protection for “steeped coffee” and related phrases.
Steeped alleged breach of contract, intentional interference with contractual relations, intentional interference with prospective economic advantage, and fraud in the inducement of contract. Plaintiff sought a trial by jury and relief in the form of a permanent injunction for use of “Steep Coffee” or any confusingly similar variant of “STEEPED COFFEE”; the impoundment and destruction of allegedly violating packaging materials and/or finished goods; a final judgment for all profits derived from the Company’s allegedly unlawful conduct, actual damages, damages to the Steeped’s reputation and goodwill among its customers and partners; and reasonable attorneys’ fees and costs. The Company answered the Complaint with a general denial and asserted twenty-five affirmative defenses.
On January 16, 2024, without a finding or admission of wrongdoing, the Company entered into a settlement agreement with Steeped. In exchange for mutual releases and a dismissal of the lawsuit with prejudice, the Company paid Steeped $500,000. Steeped filed a Notice of Settlement on January 30, 2024, and on April 18, 2024, the case was dismissed. On June 19, 2024, both parties officially signed the “SETTLEMENT AGREEMENT AND MUTUAL RELEASE”, the Company paid Steeped $500,000.
Curtin Litigation
As previously disclosed, on January 6, 2023, a former employee of the Company, Rosalina Curtin filed a complaint against the Company and another former employee of the Company, Jose Ramirez, in the Superior Court of California, County of San Diego (Case No. 37-2023-00000841-CU-WT-NC) (the “Complaint”). The Complaint alleged that Ms. Curtin was subject to harassment by Mr. Ramirez, gender discrimination throughout her employment, that she reported this discrimination and harassment to the Company, and that the Company retaliated against her and wrongfully terminated her for whistleblowing and failed to prevent discrimination, harassment, and retaliation. Ms. Curtin sought compensatory damages, including loss of past, present and future earnings, and benefits, as well as punitive damages, penalties, attorney’s fees and costs and interest. Pursuant to the terms of Ms. Curtin’s Employment Agreement with the Company, on December 22, 2023, the Court compelled the case to arbitration with the American Arbitration Association (Case Number 01-24-0002-3225).
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On November 8, 2024, without a finding or admission of wrongdoing, the Company entered into a settlement agreement with Ms. Curtin. In exchange for mutual general releases and a dismissal of the lawsuit with prejudice, the Company paid Ms. Curtin $125,000. On December 6, 2024, the case was dismissed in its entirety.
Kim Litigation
On October 3, 2024, Mr. Sooncha Kim filed a complaint against the Company in the Southern District of New York, (Case No. 1:24-cv-7485) (the “Complaint”). The Complaint alleges that the Company breached a Convertible Note and Warrant Purchase Agreement, dated June 6, 2024, between the Company and Mr. Kim, by, among other things, failing to deliver the registration rights agreement, excluding Mr. Kim from the S1 registration statement, delaying conversion of Mr. Kim’s notes, undertaking steps to dilute Mr. Kim’s shares, failing to honor Mr. Kim’s 50% participation right in any subsequent financing and failing to appoint a designated director, as set forth in the parties’ agreement. Mr. Kim seeks specific performance of the Convertible Note and Warrant Purchase Agreement, and monetary damages in the amount of $1,041,216, plus applicable interest. The Company filed its answer to the Complaint on December 3, 2024. On January 7, 2025, Mr. Kim filed a motion seeking a preliminary injunction against the Company (the “Motion”). The Company opposed the Motion on January 22, 2025, and on February 13, 2025, the Court denied Mr. Kim’s Motion. Discovery in the case is ongoing, and no trial date has been set.
The Company believes it has a basis to defend the claims in the Kim Litigation. The company believes that it is very likely to succeed in the defense.
Ex-Directors Lawsuit
On March 10, 2025, former directors of the Company, Kevin J. Connor, Chris J. Jones, Nobuki Kurita, and David Robson (collectively, the “Ex-Directors”), filed a complaint against the Company in the Superior Court of California, County of San Diego (Case No. 25CU012922N) (the “Complaint”). The Complaint alleges the Company failed to pay directors’ fees and expenses from the last quarter of the fiscal year ended 2023 through the first two quarters of the fiscal year ended 2024, and is claiming breach of contract, quantum meruit, unjust enrichment, promissory estoppel, breach of the implied covenant of good faith and fair dealing, and unfair business practices. The Ex-Directors seek monetary damages in excess of $200,000, with applicable interest, costs and attorneys’ fees. The Company’s answer to the Complaint was due on April 16, 2025. On April 17, 2025, the Ex-Director’s filed a request for entry of default. To date, no default has been entered against the Company. As of the date of this annual report, two parties are still negotiating.
ITEM 4. MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is listed on the Nasdaq Capital Market under the symbol “IMG.” As of July 2, 2025, there were approximately 298 holders of record of our Common Stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Dividends
We have not paid dividends on any of our classes of capital stock to date and do not anticipate paying any cash dividends on shares of our Common Stock in the foreseeable future. We currently intend to retain all of our future earnings, if any, to fund the development and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our Board and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that our Board may deem relevant.
2024 Incentive plan
See “Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. - Equity Compensation Plan Information”.
Repurchases of Shares
There were no repurchases of shares of common stock during for the year ended September 30, 2024.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto included elsewhere in this Report. Except for historical information contained herein, the following discussion contains forward-looking statements which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this Report and specifically under Item 1A of Part I of this Report, Risk Factors. For additional discussion, see “CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS” above.
Corporate Overview
CIMG Inc. is a company incorporated in Nevada and listed on Nasdaq since June 2020. We were formerly known as “Nuzee, Inc.” with a previous ticker symbol “NUZE”, and we changed our corporate name and ticker symbol to “CIMG Inc.” and “IMG” in October 2024. We previously focused on specialty coffee and related technologies but are now expanding our sales and distribution channels in Asia to encompass a broader range of consumer food and beverage products. This expansion is fueled by our online sales platform, which leverages a natural language search function.
On June 7, 2024, we entered into a Share Purchase Agreement (“Share Purchase Agreement”) with Masateru Higashida, our former Chief Executive Officer and Director, under which we sold all issued and outstanding shares of our wholly-owned subsidiaries, NuZee KOREA Ltd. and NuZee Investment Co., Ltd., to Mr. Higashida, which sale was completed in June 2024.
Since July 2024, CIMG has been undergoing a transformation in digital marketing, distribution, and sales. As part of this transformation, we have extended our sales and distribution network to include maca-infused food and beverages, reaffirming our commitment to reshaping the online marketing, sales, and distribution landscape for consumer products.
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Maca, a plant of the Brassicaceae family that originated in South America, has oval leaves and a rootstock shaped like a small round radish. It is edible and renowned as a natural superfood. Maca is rich in nutrients, boasts high levels of essential nutrients, and is believed to nourish and strengthen the human body. It is often referred to as “South American ginseng.” The primary cultivation regions for maca include the Andes Mountains in South America and the Jade Dragon Snow Mountain in Lijiang, Yunnan, China.
CIMG has successfully secured the exclusive distribution and sales rights for all maca products produced by Jiangsu Kangduoyuan Beverage Co., Ltd., a leading maca production base in Asia. These products include Maca Peptide Coffee, Maca-Noni, Maca Wine, Maca Purified Powder, and other full-range offerings. Through a comprehensive digital marketing strategy, CIMG is optimistic in its ability to achieve sales growth and enhance the Company’s enterprise value.
CIMG aims to become a leading distributor of premium maca products, a natural superfood known for its numerous health benefits. Our business focuses on sourcing, marketing, and distributing a wide range of maca-based dietary supplements, functional foods, and beauty products. We operate with a commitment to providing high-quality, sustainably sourced products to consumers who seek to enhance their health and wellness. Our products are sold through both online channels and a network of retail partners, including grocery stores, convenience stores, and vending machines.
The diagram below is our corporate structure as of the date of this report.
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Our sources of revenue
Co-Packing and Product Innovation
With years of experience as a third-party contract packer for leading companies in the coffee beverage industry, combined with our own coffee sales and market insights from the Asian region, we have expanded our business strategy to deepen our industry engagement. This evolution includes a shift toward reshaping product value by integrating health-oriented concepts and applying advanced technologies such as artificial intelligence, neuroscience, and big data. These efforts have culminated in the establishment of a global digital health and sales development business group.
While we remain committed to delivering our high-quality Nuzee single-serving coffee and DRIPKIT products, our entry into the Asian market has prompted a broader commitment to health, sustainability, and nutrition.
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The Maca Series
In the fourth quarter of the year ended September 30, 2024, we introduced our first health-focused product line in Asia: the Maca Series. This product line includes Maca Peptide Coffee, Maca-Noni, Maca Purified Powder, and Maca Wine. Each product features green purification factors derived from the maca plant, ensuring a natural and clean composition.
Maca, a plant native to South America and a member of the Brassicaceae family, is known for its nutritional value and adaptogenic properties. Often referred to as “South American ginseng,” maca is prized for its ability to support stamina, vitality, and overall wellness. It is primarily cultivated in the Andes Mountains in south America, and Jade Dragon Snow Mountain in Yunnan Province, China.
| ● | Maca-Noni – a plant-based energy drink designed to support sexual vitality, with maca root as its key ingredient. | |
| ● | Maca Peptide Coffee – a functional coffee beverage infused with maca peptides for enhanced wellness benefits. | |
| ● | Maca Purified Powder – a concentrated, versatile maca powder ideal for daily nutritional use. | |
| ● | Maca Wine – a unique beverage that combines traditional wine with the nourishing properties of maca. |
We currently distribute our products through wholesale channels, supplying grocery stores, convenience stores, and vending machine operators. Looking ahead, we plan to expand into retail services and leverage digital technologies to optimize marketing strategies and diversify our sales models. Our distribution network already spans both online platforms and offline points of sale.
Our commitment extends beyond product quality and health benefits—we also focus on enhancing the packaging experience. Each design is crafted to resonate with professionals across various industries, making our products more personalized, youthful, and distinctive. For example, Maca-Noni represents a new entry into the functional beverage market, blending health-forward branding with innovative design.
Our customer base includes wholesale distributors such as grocery stores, convenience stores, and vending machine providers.
Nasdaq Listing Deficiency
The Company received a notification letter from NASDAQ on January 23, 2024 (the “NASDAQ Notification Letter”), indicating that the Company was not in compliance with NASDAQ Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”). The NASDAQ Notification Letter stated that the Company failed to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing, as required by the Stockholders’ Equity Requirement.
Subsequently, the Company completed a convertible note financing of $320,000 on April 27, 2024, an equity financing of $1,500,000 on June 4, 2024, and an equity financing of $3,000,000 on July 11, 2024. On July 23, 2024, the Company received a letter from NASDAQ stating that based on the Company’s Form 8-K, filed with the Commission on July 19, 2024, NASDAQ has determined that the Company has complied with Listing Rule 5550(b)(1).
On January 14, 2025, the Company received a notification letter (the “Minimum Bid Price Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with the minimum bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Minimum Bid Price Notice has no immediate effect on the listing of the Company’s Common Stock, which continues to trade on The Nasdaq Capital Market under the symbol “IMG.” In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days from the date of the Minimum Bid Price Notice, or until July 14, 2025, to regain compliance. If at any time before July 14, 2025 the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, NASDAQ will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter will be resolved. If the Company does not regain compliance during the compliance period ending July 14, 2025, then NASDAQ may in its discretion determine to grant the Company an additional 180 calendar day period to regain compliance, provided that the Company on July 14, 2025 meets the continued listing requirement for market value of publicly held shares and all other applicable initial listing standards for The Nasdaq Capital Market, with the exception of the minimum bid price requirement, and will need to provide NASDAQ written notice of its intent to cure the deficiency during the second compliance period.
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On January 17, 2025, the Company received another notice (the “Annual Report Notice”) from NASDAQ indicating that the Company is not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Annual Report on Form 10-K for the period ended September 30, 2024 with the SEC. The Annual Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq, and it states that the Company is required to submit a plan to regain compliance with Nasdaq Listing Rule 5250(c)(1) within 60 calendar days from the date of the Annual Report Notice. If the plan is accepted by Nasdaq, then Nasdaq can grant the Company up to 180 calendar days from the due date of the Form 10-K for the fiscal year ended September 30, 2025 to regain compliance. In determining whether to accept such plan, Nasdaq will consider such things as the likelihood that the remedial filing, along with any subsequent periodic filing that will be due, can be made within the 180 day period, the Company’s past compliance history, the reasons for the late filing, other corporate events that may occur within our review period, the Company’s overall financial condition and its public disclosures. Any subsequent periodic filing that is due within the 180-day exception period must be filed no later than the end of the period.
On February 19, 2025, the Company received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC indicating that the Company is not in compliance with Listing Rule 5250(c)(1) because the Company did not timely file its quarterly report on Form 10-Q for the period ended December 31, 2024 with the SEC.
We have submitted a Nasdaq compliance plan to Nasdaq on March 18, 2025 and Nasdaq grant the Company extension to (i) file the Form 10-K for the period ended September 30, 2024 on or before June 13, 2025; and (ii) file the Form 10-Q for the period ended December 31, 2024 on or before July 14, 2025.
On May 19, 2025, the Company received a notice (the “Quarterly Report Notice”) from NASDAQ indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) because the Company did not timely file its Quarterly Report on Form 10-Q for the period ended March 31, 2025 with the Securities and Exchange Commission. The Quarterly Report Notice has no immediate effect on the listing of the Company’s stock on Nasdaq.
As a result of this additional delinquency of the Form 10-Q for the period ended March 31, 2025, the Company submitted an update to its original plan to regain compliance with respect to the filing requirement on June 3, 2025.
On June 13, 2025, the Company did not manage to file its Form 10-K for the year ended September 30, 2024 and received a delist determination letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC on June 27, 2025 (“Nasdaq Delist Determination Letter”). According to the Nasdaq Delist Determination Letter, unless the Company requests an appeal of this determination by July 7, 2025, trading of the Company’s common stock will be suspended from The Nasdaq Capital Market at the opening of business on July 9, 2025, and NSADAQ will file a Form 25-NSE with the SEC to remove the Company’s securities from listing and registration on The Nasdaq Stock Market.
The Company intends to file its Form 10-K for the fiscal year ended September 30, 2024 as soon as possible, and in any event before July 7, 2025. In addition, the Company intends to appeal Nasdaq’s delist determination and plans to request a hearing before a Nasdaq Hearings Panel to present its plan for regaining compliance with the applicable Nasdaq Listing Rules by 4:00 Eastern Time on July 7, 2025.
Results of Operations
Revenue
Year ended September 30, | Change | |||||||||||||||
| 2024 | 2023 | Dollars | % | |||||||||||||
| Revenue | $ | 1,930,291 | $ | 1,757,968 | $ | (172,323 | ) | (9.80 | )% | |||||||
In fiscal year ended September 30, 2024, we are fully focused on our first health line in Asia, the Maca line, which includes Maca Peptide Coffee, Maca-Noni, Maca Purified Powder and Maca Wine. All of the products from the Maca Series contain maca green purification factors, which are green purification of maca plants and pure natural products. After that, the contract packaging service of coffee and the sales of pure coffee beans gradually decreased, and the Maca Series products became the core products.
In the fourth quarter of the fiscal year ended September 30, 2024, we focused on the introduction of our first health series in Asia, the Maca Series, which includes Maca Peptide Coffee, Maca-Noni, Maca Purified Powder and Maca Wine. All of the products from the Maca Series contains maca green purification factors, which are green purification of maca plants and pure natural products.
Cost of sales and gross margin
Year ended September 30, | Change | |||||||||||||||
| 2024 | 2023 | Dollars | % | |||||||||||||
| Cost of sales | $ | 1,898,122 | $ | 1,968,785 | $ | (70,663 | ) | (3.59 | )% | |||||||
| Gross profit (loss) | $ | 32,169 | $ | (210,817 | ) | $ | 242,986 | (115.26 | )% | |||||||
| Gross margin % | 1.69 | % | (10.71 | )% | ||||||||||||
For the year ended September 30, 2024, our cost of sales totaled $1,898,122, as compared to cost of sales for the year ended September 30, 2023 of $1,968,785, representing a 3.59% decrease. This is mainly due to the reduction in material and labor costs related to sales. For the year ended September 30, 2024, our total gross profit was $32,169, while the gross loss for the year ended September 30, 2023 was $210,817. This is also mainly due to the reduction in material and labor costs related to sales. The gross profit margin for the year ended September 30, 2024 was 1.69%, and for the fiscal year ended September 30, 2023, it was (10.71)%. The marginal improvement is mainly due to the reduction in sales costs.
Operating Expenses
Year ended September 30, | Change | |||||||||||||||
| 2024 | 2023 | Dollars | % | |||||||||||||
| Operating Expenses | $ | 6,425,571 | $ | 8,174,200 | $ | (1,748,629 | ) | (21.39 | )% | |||||||
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For the fiscal year ended September 30, 2024, our operating expenses totaled $6,425,571 compared to $8,174,200 for the fiscal year ended September 30, 2023, a decrease of $(1,748,629), or (21.39)%.This reduction is mainly due to the decrease in labor costs and travel expenses.
Net Loss
Year ended September 30, | Change | |||||||||||||||
| 2024 | 2023 | Dollars | % | |||||||||||||
| Net Loss | $ | 8,972,735 | $ | 8,749,467 | $ | (223,268 | ) | (2.55 | )% | |||||||
For the fiscal year ended September 30, 2024, the Company reported a net loss of $8,972,735 compared to a net loss of $8,749,467 for the fiscal year ended September 30, 2023. The main reason for the reduction in net loss is the decrease in packaging services for the coffee business and the main launch of a new maca series of products.
Liquidity and Capital Resources
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 products, the continuation of efforts to improve our products, administrative support of our operations and other working capital requirements.
As of September 30, 2024, we had a cash balance of $0.46 million. Considering our current cash resources and our current and expected levels of operating expenses for the next twelve months, we expect to need additional capital to fund our planned operations for at least twelve months This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. A reduction in consumer demand for, or revenues from the sale of, our 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 coffee products, may change as a result of many factors currently unknown to us.
We intend to seek to raise additional capital, including through a public or private equity offering, to support our operating activities over the next 12 months and beyond, which may not be available to us on acceptable terms or may not be available at all. The timing and amount of capital we need to raise will depend on a number of factors, including our ability to generate sufficient revenue from the sale of our products to fund our business operations, and the timing and amount of funds received by warrant holders when they exercise their outstanding warrant cash. Until we are able to generate sufficient revenue, we may seek to raise additional capital through equity, equity-linked or debt financing.
Summary of Cash Flows
Year Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash used in operating activities | $ | (9,970,680 | ) | $ | (6,381,560 | ) | ||
| Cash used in investing activities | $ | (320,043 | ) | $ | (31,813 | ) | ||
| Cash provided by used in financing activities | $ | 9,586,272 | $ | (36,031 | ) | |||
| Effect of foreign exchange on cash | $ | 312,906 | $ | 36,599 | ||||
| Cash flows generated from discontinued business operations | $ | (127,102 | ) | $ | (866,645 | ) | ||
| Net decrease in cash | $ | (518,647 | ) | $ | (7,279,450 | ) | ||
Discontinued operations
On June 7, 2024, the company’s board of directors passed a resolution to sale (1) NuZee KOREA Ltd a company incorporated in Korea and a wholly-owned subsidiary of the Company; and (2) NuZee Investment Co., Ltd, a company incorporated in Japan and a wholly-owned subsidiary of the Company.
During the year ended September 30, 2024 and September 30, 2023, the cash outflows arising from the cessation of business operations were $127,102 and $866,645 respectively.
Operating Activities
We used $9,970,680 and $6,381,560 of cash in operating activities during the years ended September 30, 2024 and 2023, the cash outflow arising from the purchase of raw materials, finished products and the disposal of subsidiaries.
Investing Activities
We used $320,043 and $31,813 of cash in investing activities during the years ended September 30, 2024 and 2023, the cash outflow arising from the purchase of equipment.
Financing Activities
Historically, we have funded our operations through the issuance of our equity securities.
Cash provided from financing activities increased from $(36,031) as of September 30, 2023 to $9,586,272 as of September 30, 2024. The main reason for the increase is that no funds were raised in the year ending September 30, 2023, while in the year ending September 30, 2024, we raised funds by selling our equity securities and issuing convertible bonds. During the year ending September 30, 2024, financing activities included private placement and convertible notes.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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”). As discussed in “Note 2—Basis of Presentation and Summary of Significant Accounting Policies” to the Consolidated Financial Statements, 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, assumptions 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 the “Note 2—Basis of Presentation and Summary of Significant Accounting Policies” to the Consolidated Financial Statements for a summary of our accounting policies.
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Recent Accounting Pronouncements
Recent accounting pronouncements which may be applicable to us are described in “Note 2—Basis of Presentation and Summary of Significant Accounting Policies” to the Consolidated Financial Statements included as part of this Report.
ITEM 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and The Report of Independent Registered Public Accounting Firm required by this item are included in this Report on pages F-1 through F-24 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with our Independent Registered Public Accounting Firm on any matter of accounting principles or financial disclosures.
ITEM 9A. CONTROLS AND PROCEDURES
| a. | Evaluation on Disclosure Controls and Procedures |
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our Company 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.
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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 September 30, 2024, the end of the period covered by this Report (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 not effective, at the reasonable assurance level, to ensure 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 disclosure and (iii) because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. We cannot assure you that the measures we have taken will be effective in mitigating or preventing significant deficiencies or material weaknesses in our internal control over financial reporting in the future.
| b. | Management’s report on internal control over financial reporting |
Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Our management assessed the effectiveness of the Company’s internal control over financial reporting as of the end of the period covered by this Report based on the criteria for effective internal control described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Based on this assessment, our management has concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2024.
As we are a non-accelerated filer, our independent registered public accounting firm is not required to issue an attestation report on our internal control over financial reporting.
Changes In Internal Control Over Financial Reporting
There are no changes in our internal control over financial reporting that occurred during the fiscal year ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Management and Board of Directors
Our Board of Directors (“Board”) is comprised of six directors. In addition to the information set forth below regarding our directors and the skills that led our Board to conclude that these individuals should serve as directors, we also believe that all of our directors have a reputation for integrity, honesty and adherence to the highest ethical standards. We believe they each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our Company and to their Board duties.
The following persons currently serve as CIMG’s executive officers and directors. For biographical information concerning the executive officers and directors, see below.
| Name | Age | Position(s) Held | ||
| Executive Officers | ||||
| Jianshuang Wang | 46 | Chief Executive Officer and Chairperson of the Board | ||
| Zhanzhan Shi | 38 | Acting Chief Financial Officer | ||
| Xiaocheng Hao | 46 | Chief Operating Officer | ||
| Non- Executive Directors | ||||
| Yanli Hou | 42 | Independent Director | ||
| Changzheng Ye | 34 | Independent Director | ||
| Zongmei Huang | 53 | Independent Director | ||
| Jinmei Guo Hellstroem | 51 | Independent Director |
Executive Officers
Chief Executive Officer and Chairperson
Ms. Jiangshuang Wang has served as our Chief Executive Officer and Chairperson since June 6, 2024. Prior to joining us, from 2025 to the present, Ms. Wang served as the legal representative of the Chinese subsidiary of WeTrade Group INC. (now Next Technology Holding Inc., NASDAQ: NXTT) and a director of the Hong Kong subsidiary. She worked as a human resources supervisor at Beijing Yuanzhou Decoration Co., Ltd. and Beijing Dingzhi Huihai Management Consulting Co., Ltd. from October 2001 to March 2012. Ms. Jiangshuang Wang served as the Human Resources Director at Zhongrong Minxin Capital Management Co., LTD., Shuyun Puhui Technology Co., Ltd. and Beijing Meixin Technology Co., Ltd. from March 2012 to July 2020. Ms. Jiangshuang Wang graduated from Hebei University of Economics and Business, China, majoring in Human Resource Management in 2001.
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Acting Chief Financial Officer
Ms. Zhanzhan Shi has served as our Acting Chief Financial Officer since September 4, 2024. Ms. Shi has specialized in the financial field for 12 years, and previously worked as an accounts payable accountant, general ledger accountant, financial supervisor, financial manager, and IPO compliance consulting consultant, with experience in financial management of enterprises quoted on exchanges in Mainland China. Prior to joining us, Ms. Shi previously served as the financial director at Beijing Alita Commercial Co., Ltd. from February 2023 to April 2024., Zhicheng Technology (Co., Ltd.) from May 2022 to February 2023, and Shenzhen Green Leopard Medical Technology Co., Ltd. Ms. Shi has substantial experience in fund and asset management, cost accounting, report analysis, consolidated report preparation, tax planning, internal control and other work, familiar with import and export foreign exchange business, financial management system construction and practical operation and maintenance of various financial software, proficient in overall accounting processing and financial management of manufacturing and e-commerce. Ms. Shi graduated from Wuhan College of Zhongnan University of Economics in 2010.
Chief Operating Officer
Mr. Xiaocheng Hao has served as our Chief Operating Officer since April 30, 2025. From 2021 to 2025, Mr. Hao has served as the Chief Executive Officer of Shanghai Huomao Cultural Development Co., Ltd (“Shanghai Huomao”) prior to the acquisition of Shanghai Huomao by the Company. From 2014 to 2021, Mr. Hao served as the chairman of Shaanxi E&A Education Technology Co., Ltd. He has held sales and management positions in multiple listed companies, with over 20 years of experience in sales and management. Mr. Hao holds a bachelor’s degree in business administration from Central South University of Finance and Economics and a master’s degree of business administration from Xi’an Jiaotong University in China.
Director
Ms. Yanli Hou has served as our director since June 6, 2024. Prior to joining us, Ms. Hou was an Executive Director of MBV International Limited (01957. HK) from August 1, 2023 and the present. From August 2021 to October 2022, Ms. Yanli Hou served as the CEO of Daren Group. Daren Group is a national high-tech enterprise invested by state-owned civil aviation investment funds and well-known investment institutions. From March 2019 to July 2021, Ms. Yanli Hou served as the President of the US: WETG (US: WETG), contributing to the live streaming business of Yueshang Group. From January 2014 to March 2019, Ms. Yanli Hou served as the co-founder of 3Q Children’s Business School, overseeing the company’s overall operations and development. The school operates under Henan Aishang International Education Consulting Co., Ltd., a company listed on the Zhongyuan Equity Trading Center under enterprise code 204424. From September 2006 to April 2013, Ms. Yanli Hou worked at Tianan Insurance Company, a Chinese company, during which she held various positions including financial accounting, auditing, head of fund settlement center, assistant to general manager, and group finance manager. She resigned and started her own business in 2014. Ms. Yanli Hou graduated from Shandong University of Finance and Economics in 2006, obtaining a bachelor’s degree in financial management.
Director
Mr. Changzheng Ye has served as our director since May 2, 2024. Prior to joining us, Mr. Ye’s professional experience includes roles as an Engineer at SAIC Volkswagen Automotive Co., Ltd. from 2014 to 2015, a Software Engineer at Shanyi Shanmei Technology Co., Ltd from 2015 to 2017, a Project Manager at Shenzhen Baoyide Network Technology Co., Ltd from 2018 to 2021, and a Technical Director at Enron Investment Management from 2021 to 2023. Since March 2023, he has been serving as the Technical Director at Lear Group Limited. Mr. Changzheng Ye graduate from Zhengzhou University in 2014, with a bachelor’s degree in Mold Design and Manufacture.
Director
Ms. Zongmei Huang has served as our director since June 19, 2024. Ms. Huang previously held senior management positions at PPS Baolian Company and ISS World Company in Hong Kong from 1997 to 2018. Since 2019, Ms. Huang has served as CEO of XinRui Technology Co., Limited, a Hong Kong-based firm focused on helping Chinese technology companies expand globally, as well as supporting growth-stage companies through venture capital and private equity, with investments spanning enterprise services, cloud computing, cybersecurity, fintech, cross-border supply chains, retail, e-commerce, logistics, and digital entertainment. Ms. Huang graduated from Hong Kong Metropolitan University in 1996.
Independent Director
Ms. Jinmei Guo Hellstroem has served as our independent director of the Board and chairman of the compensation committee since December 19, 2024. Prior to joining us, Ms. Hellstroem held senior management positions at Dalian Tianfu Hotel and Shanghai Diweis Enterprise Development Co., Ltd. from July 1998 to November 2013. Since 2014, she has been serving as the CEO of Trend Interior Trading Co., Ltd. in Sweden. Ms. Hellstrom is a senior manager with extensive theoretical knowledge and practical experience. She has previously held senior executive roles, including Marketing Director at a prominent large hotel, Sales Director at a major import and export company, and General Manager of a large group corporation. Ms. Hellstrom has specialized expertise in business management, with a particular focus on integrated marketing strategies and team development. Ms. Hellstroem graduated from Bohai University in Liaoning in 1997.
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Family Relationships
There are no family relationships among any of CIMG’s executive officers or directors.
Composition of the CIMG Board of Directors
The Board manages the business and affairs of CIMG, as provided by Nevada law, and conducts its business through meetings of the Board and its standing committees. The Board consists of six members, and all of whom was appointed by the Board. The primary responsibilities of the CIMG Board are to provide risk oversight and strategic guidance to CIMG and to counsel and direct CIMG’s management. The Board will meet on a regular basis and will convene additional meetings, as required.
Board of Directors Meetings
During the fiscal year ended September 30, 2024, our board met 8 times, including video conference meetings, the audit committee met 4 times, the compensation committee did not meet. nor did the nominating and corporate governance committee. All directors attended 100% of the aggregate number of meetings of the board and all of the audit committee members attended 100% of the audit committee meetings.
Director Independence
As a result of its common stock continuing to be listed on Nasdaq following consummation of the Business Combination, CIMG adheres to the rules of Nasdaq in determining whether a director is independent. The Board has consulted with its counsel to ensure that the Board’s determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Nasdaq listing standards generally define an “independent director” as a person who is not an executive officer or employee, or who does not have a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. The parties have determined that Jinmei Guo Hellstroem, Yanli Hou, Changzheng Ye, and Zongmei Huang are considered independent directors of CIMG. CIMG’s independent directors will have regularly scheduled meetings at which only independent directors are present.
Committees of the Board of Directors
CIMG has an audit committee, a compensation committee, and a nominating and corporate governance committee. In addition, from time to time, special committees may be established under the direction of the Board when necessary to address specific issues. Copies of each board committee’s charter are posted on CIMG’s website. CIMG’s website and the information contained on, or that can be accessed through, such website is not deemed to be incorporated by reference in, and are not considered part of, this Annual Report. The composition and responsibilities of each of the committees of the Board are described below. Members serve on these committees until their resignation or until otherwise determined by the CIMG Board.
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Audit Committee
CIMG’s audit committee consists of Changzheng Ye, Yanli Hou and Jinmei Guo Hellstroem. The parties have determined that each member of the audit committee satisfies the independence requirements under the Nasdaq Listing Rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of the audit committee is Changzheng Ye. The parties have determined that Yanli Hou is an “audit committee financial expert” within the meaning of SEC regulations. Each member of the audit committee can read and understand fundamental financial statements in accordance with applicable listing standards. In arriving at these determinations, the parties have examined each audit committee member’s scope of experience and the nature of his or her employment. The primary purpose of the audit committee is to discharge the responsibilities of the Board with respect to corporate accounting and financial reporting processes, systems of internal control, and financial statement audits, and to oversee our independent registered public accounting firm. Specific responsibilities of the audit committee include:
| ● | helping the Board oversee the corporate accounting and financial reporting processes; | |
| ● | managing and/or assessing the selection, engagement, qualifications, independence, and performance of a qualified firm to serve as the independent registered public accounting firm to audit CIMG’s consolidated financial statements; | |
| ● | discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, CIMG’s interim and year-end operating results; | |
| ● | developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; | |
| ● | reviewing related party transactions; | |
| ● | reviewing CIMG’s policies on risk assessment and risk management; | |
| ● | reviewing, with the independent registered public accounting firm, CIMG’s internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues; and | |
| ● | pre-approving audit and permissible non-audit services to be performed by the independent registered public accounting firm. |
CIMG’s audit committee operates under a written charter that satisfies the applicable Nasdaq Listing Rules.
Compensation Committee
CIMG’s compensation committee consists of Jinmei Guo Hellstroem, Zongmei Huang and Jianshuang Wang. The chair of the compensation committee is Zongmei Huang. The parties have determined that each member of the compensation committee satisfies the independence requirements under the Nasdaq Listing Rules, and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The primary purpose of CIMG’s compensation committee is to discharge the responsibilities of the Board in overseeing CIMG’s compensation policies, plans, and programs and to review and determine the compensation to be paid to CIMG’s executive officers, directors, and other senior management, as appropriate. Specific responsibilities of the compensation committee include:
| ● | reviewing and recommending to the Board the compensation of executive officers; | |
| ● | reviewing and recommending to the Board the compensation of directors; | |
| ● | administering CIMG’s equity incentive plans and other benefit programs; | |
| ● | reviewing, adopting, amending, and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections, and any other compensatory arrangements for CIMG’s executive officers and other senior management; and | |
| ● | reviewing and establishing general policies relating to compensation and benefits of CIMG’s employees, including CIMG’s overall compensation philosophy. |
CIMG’s compensation committee operates under a written charter that satisfies the applicable Nasdaq Listing Rules.
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Nominating and Corporate Governance Committee
CIMG’s nominating and corporate governance committee consists of Zongmei Huang, Jinmei Guo Hellstroem and Yanli Hou. The chair of the nominating and corporate governance committee is Jinmei Guo Hellstroem. The parties have determined that each member of the nominating and corporate governance committee satisfies the independence requirements under the Nasdaq Listing Rules.
Specific responsibilities of CIMG’s nominating and corporate governance committee include:
| ● | identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on the Board; | |
| ● | considering and making recommendations to the Board regarding the composition and chairpersonship of the CIMG Board and committees of the Board; | |
| ● | reviewing developments in corporate governance practices; | |
| ● | developing and making recommendations to the Board regarding corporate governance guidelines and matters; and | |
| ● | overseeing periodic evaluations of the Board performance, including committees of the CIMG Board. |
CIMG’s nominating and corporate governance committee operates under a written charter that satisfies the applicable Nasdaq Listing Rules.
Code of Business Conduct and Ethics
CIMG adopted a code of business conduct and ethics, or the Code of Conduct, that applies to all directors, officers, and employees, including the principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Conduct for CIMG applies to all directors, officers, and employees of CIMG and is available on CIMG’s website at www.ccmg.tech. In addition, CIMG intends to post on its website all disclosures that are required by law or the Nasdaq Listing Rules concerning any amendments to, or waivers from, any provision of the Code of Conduct. The reference to CIMG’s website address does not constitute incorporation by reference of the information contained at or available through the website, and you should not consider it to be a part of this Annual Report.
Compensation Committee Interlocks and Insider Participation
None of the members or intended members of the compensation committee is currently, or has been at any time, one of our executive officers or employees. None of our executive officers currently serves, or has served during the last calendar year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
Corporate Governance Guidelines
Our board of directors adopted corporate governance guidelines in accordance with the corporate governance rules of Nasdaq that serve as a flexible framework within which our board of directors and its committees operate. These guidelines cover a number of areas including board membership criteria and director qualifications, director responsibilities, board agenda, roles of the chair of the board, principal executive officer and presiding director, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning.
Insider Trading Policy
Our Board of Directors has adopted an insider trading policy that applies to all of its officers, directors and employees. Officers, directors and employees are prohibited from engaging in any of the following types of transactions with respect to the Company’s securities: (i) short sales, (ii) purchases or sales of puts, calls, or other derivative securities, (iii) purchases of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or other similar transactions that directly hedge or offset, or are designed to directly hedge or offset, any decrease in the market value of Company securities, (iv) holding Company securities in a margin account or pledge Company securities as collateral for a loan, and (v) selling Company securities of the same class less than six months after the purchase.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires our officers, directors, and beneficial owners of more than 10% of our equity securities to timely file certain reports regarding ownership of and transactions in our securities with the Securities and Exchange Commission. Copies of the required filings must also be furnished to us. Section 16(a) compliance was required during the year ended September 30, 2024. To our knowledge, during the fiscal year ended September 30, 2024, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except the Form 3 for Changzheng Ye and Form 4s for Yumei Liu, Future Science & Technology Co. Ltd., JOYER INVESTMENT LTD. and Xiang Zhang, were filed late.
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ITEM 11. EXECUTIVE COMPENSATION.
Executive Officers Compensation for the fiscal years ended September 30, 2024 and 2023
| Name | Position | Fiscal Year ended September 30 | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||
| Jianshuang Wang | Chief Executive Officer | 2024 | $ | 8,000 | $ | - | $ | - | $ | - | $ | 8,000 | ||||||||||||||
| 2023 | - | - | - | - | - | |||||||||||||||||||||
| Zhanzhan Shi | Chief Financial Officer | 2024 | $ | 1,000 | $ | - | $ | - | $ | - | $ | 1,000 | ||||||||||||||
| 2023 | - | - | - | - | - | |||||||||||||||||||||
| Xiaocheng Hao | Chief Operating Officer | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| 2023 | - | - | - | - | - | |||||||||||||||||||||
| Randell Weaver | Former Chief Financial Officer | 2024 | $ | 245,689 | $ | - | $ | - | $ | - | $ | 245,689 | ||||||||||||||
| 2023 | $ | 27,404 | $ | 48,000 | $ | 31,819 | $ | - | $ | 107,223 | ||||||||||||||||
| Masa Higashida | Former Chief Executive Officer | 2024 | $ | 243,997 | $ | - | $ | - | $ | - | $ | 243,997 | ||||||||||||||
| 2023 | $ | 318,000 | $ | - | $ | - | $ | - | $ | 318,000 | ||||||||||||||||
| Patrick Shearer | Former Chief Financial Officer | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| 2023 | $ | 66,250 | $ | - | $ | - | $ | - | $ | 66,250 | ||||||||||||||||
| Shana Bowman, | Former Interim Chief Financial Officer | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| 2023 | $ | 165,446 | $ | - | $ | - | $ | - | $ | 165,446 | ||||||||||||||||
Director Compensation
CIMG’s non-employee directors are entitled to receive $60,000 in compensation per year for services rendered to CIMG. The following table presents the directors’ compensation during the fiscal years ended September 30, 2024 and 2023.
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| Fiscal | Fees Earned | |||||||||||||||||||||
| Year | or Paid in | Stock | Option | All Other | ||||||||||||||||||
| ended | Cash(1) | Awards | Awards | Compensation | Total | |||||||||||||||||
| Name | 30-Sep | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
| Yanli Hou | 2024 | $ | 4,000 | $ | - | $ | - | $ | - | $ | 4,000 | |||||||||||
| 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Jian Liu | 2024 | $ | 3,000 | $ | - | $ | - | $ | - | $ | 3,000 | |||||||||||
| 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Changzheng Ye | 2024 | $ | 5,000 | $ | - | $ | - | $ | - | $ | 5,000 | |||||||||||
| 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Zongmei Huang | 2024 | $ | 3,000 | $ | - | $ | - | $ | - | $ | 3,000 | |||||||||||
| 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Jinmei Guo Hellstroem | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Kevin J. Conner | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2023 | $ | 72,000 | $ | 50,000 | $ | - | $ | - | $ | 122,000 | ||||||||||||
| Tracy Ging | 2024 | $ | - | $ | - | $ | - | $ | - | $ | ||||||||||||
| 2023 | $ | 56,000 | $ | - | $ | - | $ | - | $ | 56,000 | ||||||||||||
| J. Chris Jones | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2023 | $ | 62,000 | $ | 50,000 | $ | - | $ | - | $ | 112,000 | ||||||||||||
| Nobuki Kurita | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2023 | $ | 62,000 | $ | 50,000 | $ | - | $ | - | $ | 112,000 | ||||||||||||
| David G. Robson | 2024 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2023 | $ | 62,000 | $ | 50,000 | $ | - | $ | - | $ | 112,000 | ||||||||||||
| (1) | Pro-rated compensation for the fiscal year ended September 30, 2024, served as a director and chairperson of the Board. |
| ● | On June 18, 2024, J. Chris Jones, and on June 19, 2024, David G. Robson, resigned from the Board. | |
| ● | On May 2, 2024, Mr. Kurita resigned from the Company’s board of directors. | |
| ● | On June 6, 2024, Masateru Higashida and Kevin J. Conner resigned from the Board. | |
| ● | On March 22, 2023, the Company granted 4,398 Restricted Shares of the Company’s common stock to each of the Company’s five independent directors. The restricted shares are scheduled to vest in full on the one-year anniversary of the grant date, subject to each independent director’s continued service as a director of the Company. No options were granted during the fiscal year. | |
| ● | On September 5, 2023 Tracy Ging notified the Company of her resignation from the Board of Directors. The restricted stock award granted on March 17, 2023 was forfeited upon her resignation. |
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Compensation Committee Interlocks and Insider Participation
The current members of the compensation committee are Jinmei Guo Hellstroem, Changzheng Ye and Yanli Hou. All of these members are independent directors. The compensation committee is responsible for overseeing the Company’s compensation policies generally and making recommendations to the board of directors with respect to incentive compensation and equity-based plans of the Company that are subject to board of directors approval, evaluating executive officer performance and reviewing the Company’s management succession plan, overseeing and setting compensation for the Company’s directors and, as applicable, its executive officers and, as applicable, preparing the report on executive officer compensation that SEC rules require to be included in our Annual Report on Form 10-K. Currently, none of our executive officers are compensated by the Company and as such the compensation committee is not required to produce a report on executive officer compensation for inclusion in our Annual Report on Form 10-K.
During the fiscal year ended September 30, 2024 none of the Company’s executive officers served on the board of directors (or a compensation committee thereof or other board committee performing equivalent functions) of any entities that had one or more executive officers serve on the compensation committee or on the board of directors. No current or past executive officers or employees of the Company or its affiliates serve on the compensation committee.
Clawback Policy
On January 20, 2023, our Board of Directors adopted Incentive-Based Compensation Clawback Policy (“Clawback Policy”), which provides for the clawback of certain compensation in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements. The Clawback Policy is a supplement to any other clawback policies in effect now or in the future at the Company. The Incentive-Based Compensation subject to clawback is the Incentive-Based Compensation Received during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
Our Board has terminated the 2013 Plan, the 2019 Plan and the 2023 Plan.
The following table sets forth information concerning the 2024 Plan as of September 30, 2024:
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
| Equity compensation plans approved by security holders | — | $ | — | — | ||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||
| Total | 0 | $ | 0 | 0 |
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Management and Directors
The following table sets forth certain information regarding the beneficial ownership of our common stock as of July 2, 2025 by: (i) each director and nominee for director; (ii) each of the named executive officers named in the Summary Compensation Table set forth above; and (iii) all of the directors, nominees and executive officers as a group.
Except as otherwise indicated, all shares are owned directly, and the percentage shown is based on 36,397,418 shares of Common Stock issued and outstanding as of July 2, 2025.
| Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Beneficially Owned | ||||||
| Jianshuang Wang | — | — | % | |||||
| Zhanzhan Shi | — | — | % | |||||
| Xiaocheng Hao | — | — | % | |||||
| Changzheng Ye | — | — | % | |||||
| Yanli Hou | — | — | % | |||||
| Jinmei Guo Hellstroem | — | — | % | |||||
| Zongmei Huang | — | — | % | |||||
| All directors, nominees and executive officers as a group (7 persons) | 0 | 0 | % |
Other Beneficial Owners
The following table sets forth certain information regarding beneficial ownership by other persons known to us to own more than 5% of our outstanding common stock as of July 2, 2025 based on 36,397,418 shares of common stock outstanding as of such date.
| Amount and Nature of Beneficial Ownership | ||||||||||||||||||||||||
| Name and Address of | Voting Power | Investment Power | Percent of | |||||||||||||||||||||
| Beneficial Owner | Sole | Shared | Sole | Shared | Aggregate | Class | ||||||||||||||||||
| JOYER INVESTMENT LIMITED.(1) | 7,125,872 | — | 17.6 | % | ||||||||||||||||||||
| DYT INFO PTE. LTD.(2) | 9,270,842 | — | 22.5 | % | ||||||||||||||||||||
| YY Tech Inc.(3) | 8,365,419 | 20.3 | % | |||||||||||||||||||||
| VMADE CO., LIMITED(4) | 7,400,282 | — | 18.4 | % | ||||||||||||||||||||
| DADA Business Trading Co., Limited(5) | 6,739,761 | — | 17 | % | ||||||||||||||||||||
| Xiangrong Dai(6) | 3,000,000 | — | 8.24 | % | ||||||||||||||||||||
| Yanqin Chen(7) | 3,000,000 | 8.24 | % | |||||||||||||||||||||
| METAVERSE INTELLIGENCE TECH LTD(8) | 8,688,557 | — | 21.1 | % | ||||||||||||||||||||
| (1) | Based on Schedule 13 D filed with the SEC on April 3, 2025, Yumei Liu, through her 100% ownership of Joyer Investment Limited, beneficially owns 7,125,872 shares of common stock, including (i) 3,074,590 shares of common stock directly held; and (ii) warrants have the right to acquire up to 4,051,282 shares of common stock within 60 days. | |
| (2) | Based on Schedule 13 D filed with the SEC on April 3, 2025, Ling Choi, through her 100% ownership of DYT INFO PTE LTD. beneficially owns 9,270,842 shares of common stock, including (i) 4,399,048 shares of common stock directly held; and (ii) warrants have the right to acquire up to 4,871,794 shares of common stock within 60 days. | |
| (3) | Based on Schedule 13 D filed with the SEC on April 3, 2025, Yujie Liu, through her 100% ownership of YY Tech Inc., beneficially owns 8,365,419 shares of common stock, including (i) 3,609,009 shares of common stock directly held; and (ii) warrants have the right to acquire up to 4,756,410 shares of common stock within 60 days. | |
| (4) | Based on Schedule 13 D filed with the SEC on April 3, 2025, Xiaodong Liu, through her 100% ownership of Vmade Co., Limited, beneficially owns 7,400,282 shares of common stock, including (i) 3,528,488 shares of common stock directly held; and (ii) warrants have the right to acquire up to 3,871,794 shares of common stock within 60 days. | |
| (5) | Based on Schedule 13 D/A filed with the SEC on July 14, 2025, Yubo Yang 100% owns Dada Business Trading Co., Limited and is the sole director of it, and therefore beneficially owns 6,739,761 shares of common stock, including (i) 3,406,428 shares of common stock directly held; and (ii) warrants have the right to acquire up to 3,333,333 shares of common stock within 60 days. | |
| (6) | Based on Schedule 13 G/A filed with the SEC on June 10, 2025, Xiangrong Dai beneficially owns 3,000,000 shares of common stock. | |
| (7) | Based on Schedule 13 G/A filed with the SEC on June 9, 2025, Yanqin Chen beneficially owns 3,000,000 shares of common stock. | |
| (8) | Based on Schedule 13 D filed with the SEC on April 3, 2025, Wenwen Yu, through her 100% ownership of Metaverse Intelligence Tech Ltd., beneficially owns 8,688,557 shares of common stock, including (i) 3,932,147 shares of common stock directly held; and (ii) warrants have the right to acquire up to 4,756,410 shares of common stock within 60 days. Metaverse Intelligence Tech Ltd. is governed by its sole director, Ying Yu. As such, Ms. Yu has voting and investment discretion with respect to the shares of common stock held of record by Metaverse Intelligence Tech Ltd. and may be deemed to have beneficial ownership of the shares and warrants held directly by Metaverse Intelligence Tech Ltd. Therefore, both Wenwen Yu and Ying Yu are deemed to have shared voting power over the 8,688,557 shares of common stock. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
Except as set forth below, other than the director and executive officer compensation, there has not been any transaction or series of transactions since October 1, 2020, nor is there any currently proposed transaction, in which:
| ● | we have been or are to be a participant; |
| ● | the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years; and |
| ● | any of our directors, executive officers or, to our knowledge, beneficial owners of 5% or more of our capital stock, or any immediate family member of or person sharing the household with any of these individuals or entities, had or will have a direct or indirect material interest. |
Mr. Sooncha Kim, purchased 24,286 shares of Common Stock for an aggregate purchase price of approximately $697,000 on August 10, 2022 in our underwritten public offering (the “Registered Offering”) of Common Stock, which we completed pursuant to an Underwriting Agreement dated as of August 7, 2022 and a prospectus supplement to our effective shelf registration statement on Form S-3 (Registration No. 333-248531). Mr. Sooncha Kim purchased shares of Common Stock in the Registered Offering from the underwriter on the same terms as all other investors participating in the Registered Offering. The Board pre-approved Mr. Sooncha Kim’s purchase of shares of Common Stock in the Registered Offering in accordance with our Related Party Transaction Policy.
In November, 2023, Mr. Sooncha Kim also purchased 46,800 shares of Common Stock and warrants to purchase an additional 5,200 shares for an aggregate purchase price of approximately $130,000 in a private placement transaction. The Board pre-approved Mr. Sooncha Kim’s purchase of shares of Common Stock and warrants in accordance with our Related Party Transaction Policy.
For the fiscal year ended September 30, 2024 and as of the date of this annual report, there has not been any transaction or series of transactions, nor is there any currently proposed transaction.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Please refer to the Current Reports on Form 8-K of the Company filed on January 24, 2025, which described that the change of auditors from MaloneBailey, LLP to Assentsure PAC was approved by the audit committee of the board of directors of the Company.
The Company appointed Assentsure PAC as the Company’s new independent registered public accounting firm, effective as of January 20, 2025 to audit our financial statements for the year ended September 30, 2024 and review its unaudited financial statements for the periods ended December 31, 2024, March 31, 2025 and June 30, 2025, which was approved by its Audit Committee.
The Audit Committee of the Board of Directors of the “Company has approved the termination of MaloneBailey, LLP (“MaloneBailey”) as its independent registered public accounting firm, effective January 20, 2025. The reports of MaloneBailey on the Company’s financial statements as of and for the two most recent fiscal years ended September 30, 2023 and September 30, 2022, did not contain any adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles, except for an explanatory paragraph regarding our ability to continue as a going concern.
During the Company’s fiscal years ended September 30, 2024 and September 30, 2023, and the subsequent interim period through January 20, 2025: (1) there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304) with MaloneBailey on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of MaloneBailey would have caused MaloneBailey to make reference to the subject matter of such disagreements in connection with its reports on the financial statements for such periods and (2) there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K.
| 67 |
The following table summarizes the billed/expected to be billed in each respective period for audit fees and other services of :(1) the audit fees of Assentsure PAC for the fiscal year ended September 30, 2024 and review its unaudited financial statements for the periods ended December 31, 2024, March 31, 2025 and June 30, 2025; and (2) the audit fees of MaloneBailey for the fiscal year ended September 30, 2023 and the subsequent interim period through January 20, 2025.
| Fee Category | For the fiscal year ended September 30, 2024 | For the fiscal
year ended | ||||||||
| (in thousands) | ||||||||||
| Assentsure PAC | Audit Fees (1) | $ | 180,000 | - | ||||||
| Audit-Related Fees | - | - | ||||||||
| Tax Fees | 9,500 | - | ||||||||
| All Other Fees | - | - | ||||||||
| MaloneBailey, LLP | Audit Fees (2) | 169,950 | 319,750 | |||||||
| Audit-Related Fees | - | - | ||||||||
| Tax Fees | - | 2,060 | ||||||||
| All Other Fees | 119,480 | - | ||||||||
| Total | $ | 289,430 | 321,810 | |||||||
| (1) | Audit fees were for professional services rendered by Assentsure PAC for the audit of our annual financial statements, and services that are normally provided by Assentsure PAC in connection with statutory and regulatory filings or engagements for that fiscal year. |
| (2) | Audit fees were for professional services rendered by MaloneBailey, LLP for the audit of our annual financial statements, quarterly financial statements and services. |
| (3) | All other fees were for professional services rendered by MaloneBailey, LLP for the statutory and regulatory filings or engagements for that fiscal year. |
Audit Committee Pre-Approval Policy and Procedures
The Audit Committee’s policy is to pre-approve all audit and other services rendered by our independent registered public accounting firm, subject to de minimis exceptions for non-audit services set forth in the applicable rules of the SEC. In fiscal year 2024, our independent registered public accounting firm was not engaged to perform any non-audit services, except for a minimal amount of tax services.
| 68 |
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are filed as part of this Report: | |
| (1) | The following consolidated financial statements of the Company are incorporated by reference in Part II, Item 8-See Index to Consolidated Financial Statements | |
| (2) | All financial statement schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the Notes thereto. | |
| (3) | See exhibits listed under Part (b) below. | |
| (b) | Exhibits: |
| 69 |
| 70 |
* Filed or furnished herewith.
† Indicates management contract or compensatory plan.
+ Certain schedules to this agreement have been omitted pursuant to Item 601 of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.
ITEM 16. FORM 10-K SUMMARY
None.
| 71 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on July 30, 2025.
| CIMG INC. | ||
| By: | /s/ Jianshuang Wang | |
| Name: | Jianshuang Wang | |
| Title: | Chief Executive Officer | |
| By: | /s/ Zhanzhan Shi | |
| Name: | Zhanzhan Shi | |
| Title: | Chief Financial Officer |
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.
| Signature | Title | Date | ||
| /s/ Jianshuang Wang | Chief Executive Officer and Director | July 30, 2025 | ||
| Jianshuang Wang | (Principal Executive Officer) | |||
| /s/ Zhanzhan Shi | Chief Financial Officer | July 30, 2025 | ||
| Zhanzhan Shi | (Principal Financial and Accounting Officer) | |||
| /s/ Yanli Hou | Director | July 30, 2025 | ||
| Yanli Hou | ||||
| /s/ Changzheng Ye | Director | July 30, 2025 | ||
| Changzheng Ye | ||||
| /s/ Zongmei Huang | Director | July 30, 2025 | ||
| Zongmei Huang | ||||
| /s/ Jinmei Guo Hellstroem | Director | July 30, 2025 | ||
| Jinmei Guo Hellstroem |
| 72 |
CIMG Inc. (f.k.a. NUZEE, INC.)
Index to Consolidated Financial Statements
Contents
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of CIMG, Inc. (formerly known as Nuzee, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of CIMG, Inc. (formerly known as NuZee, Inc.) and its subsidiaries (collectively, the “Company”) as of September 30, 2023, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
www.malonebailey.com
We have served as the Company’s auditor since 2013.
January 16, 2024
| F-2 |
 |
Assentsure PAC UEN – 201816648N 180B Bencoolen Street #03-01 The Bencoolen Singapore 189648 http://www.assentsure.com.sg |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of CIMG Inc. (f.k.a. NuZee, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of CIMG Inc. (f.k.a. NuZee, Inc.) (the “Company”) as of September 30, 2024, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ (deficit) equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced recurring losses from operations and negative operating cash flows. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the United States federal securities laws. and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
July 30, 2025
PCAOB
ID number:
We have served as the Company’s auditor since 2025.
| F-3 |
CIMG Inc. (f.k.a. NUZEE, INC.)
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars, except for share and per share data, or otherwise noted)
| Sep 30, 2024 | Sep 30, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Assets Held for Sale-Current | ||||||||
| Currently held assets waiting to be disposed of | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use asset - operating lease | ||||||||
| Investment in unconsolidated affiliate | ||||||||
| Intangible assets, net | ||||||||
| Long-term holdings of assets to be disposed of | ||||||||
| Other asset | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Short term loan | ||||||||
| Current portion of long-term loan payable | ||||||||
| Current portion of lease liability - operating lease | ||||||||
| Current portion of lease liability - finance lease | ||||||||
| Convertible Notes | ||||||||
| Convertible Note-related party | ||||||||
| Deferred income | ||||||||
| Other payables-related party | ||||||||
| Other current liabilities | ||||||||
| Liabilities held for disposal in the current period | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Lease liability - operating lease, net of current portion | ||||||||
| Non-current liabilities held for disposition | ||||||||
| Total non current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Stockholders’ equity: | ||||||||
| and Common shares issued and outstanding as of September 30, 2024 and 2023, 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 consolidated financial statements.
| F-4 |
CIMG Inc. (f.k.a. NUZEE, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(In U.S. dollars, except for share and per share data, or otherwise noted)
| Year Ended | Year Ended | |||||||
| Sep 30, 24 | Sep 30, 23 | |||||||
Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Operating expenses | ||||||||
| Allowance for expected credit loss | ||||||||
| Asset impairment loss | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Fair value variation on convertible notes | ( | ) | ||||||
| Loss from investment | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Interest expense, net | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Gain from disposition of discontinued operations | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Income tax expenses | ||||||||
| Foreign currency translation adjustment, net of tax | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Basic and diluted net loss per share | ||||||||
| Loss from continuing operations | ) | ) | ||||||
| Loss from discontinued operations | ) | |||||||
Net loss per share | ) | ) | ||||||
| Basic and diluted weighted average number of common stock outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
*The discrepancy in financial data as of September 30, 2023 is due to the split of discontinued operations. Please refer to Note 6.
| F-5 |
CIMG Inc. (f.k.a. NUZEE, INC.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In U.S. dollars, except for share and per share data, or otherwise noted)
| For the years ended September 30, 2023 and 2022 | 2024 | 2023 | ||||||
| For the years ended September 30 | ||||||||
| 2024 | 2023 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation | ||||||||
| Total other comprehensive income, net of tax | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| F-6 |
CIMG Inc. (f.k.a. NUZEE, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In U.S. dollars, except for share and per share data, or otherwise noted)
| Shares | Amount | capital | deficit | income | Total | |||||||||||||||||||
| Common Stock | Additional paid-in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | capital | deficit | income | Total | |||||||||||||||||||
| Balance September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||
| Reversal of stock option expense | - | ( | ) | ( | ) | |||||||||||||||||||
| Issued private placement | ||||||||||||||||||||||||
| Treasury stock | ||||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||
| Common Stock | Additional paid-in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | capital | deficit | income | Total | |||||||||||||||||||
| Balance September 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Forgiveness of stock issuance costs | - | |||||||||||||||||||||||
| Round-up shares issued in reverse split | ||||||||||||||||||||||||
| Common Stock issued for services | ||||||||||||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||
| Restricted stock compensation | ||||||||||||||||||||||||
| Other comprehensive gain | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
CIMG Inc. (f.k.a. NUZEE, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars, except for share and per share data, or otherwise noted)
| For the Year Ended | For the Year Ended | |||||||
| 30-Sep-24 | 30-Sep-23 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
Net loss from discontinued operations | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Fair value variation | ||||||||
| Depreciation and amortization | ||||||||
| Noncash lease expense | ||||||||
| Loss on disposition of assets | ||||||||
| Stock option (reversal) expense | ( | ) | ||||||
| Restricted stock award compensation | ||||||||
| Issuance of common stock for services | ||||||||
| Allowance for expected credit loss | ||||||||
| Loss from equity method investment | ||||||||
| Property and equipment asset impairment | ||||||||
| Impairment loss on inventory | ||||||||
| Gain on disposal of subsidiary | ( | ) | ||||||
| Interest income, net | ||||||||
| Forgiveness of Loan Payable and Other payables | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Other assets | ||||||||
| Accounts payable, Accrued Expenses & Other Current Liabilities | ||||||||
| Other payables-related party | ||||||||
| Deferred income | ( | ) | ||||||
| Lease liability - operating lease | ( | ) | ( | ) | ||||
| Other current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
Discontinued Operations: | ||||||||
| Losses caused by the termination of business | ( | ) | ( | ) | ||||
Adjustments to reconcile net income (loss) to net cash | ||||||||
| Interest income | ||||||||
| Depreciation from discontinued operations | ||||||||
| Changes in operating assets and liabilities | ( | ) | ||||||
| Cash flows generated from discontinued business operations | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Acquisition of subsidiary | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from loans | ||||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Repayment of finance lease | ( | ) | ( | ) | ||||
| Proceeds from issuance of convertible notes | ||||||||
| Proceeds from issuance of convertible notes-related party | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from private placement | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of foreign exchange on cash | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalent, beginning of period | ||||||||
| Cash and cash equivalent, end of period | $ | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | |||||||
| Cash paid for taxes | $ | |||||||
| Noncash investing and financing activities: | ||||||||
| Stock issuance costs | $ | |||||||
| Forgiveness of stock issuance costs | $ | |||||||
| Deferred Stock Offering cost accrued ROU assets and liabilities added during the period | $ | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-8 |
CIMG Inc. (f.k.a. NUZEE, INC.)
Notes to Consolidated Financial Statements
(In U.S. dollars, except for share and per share data, or otherwise noted)
1. ORGANIZATION
CIMG Inc. is a company incorporated in Nevada and listed on Nasdaq since June 2020. We were formerly known as “Nuzee, Inc.” with a previous ticker symbol “NUZE”, and we changed our corporate name and ticker symbol to “CIMG Inc.” and “IMG” in October 2024. We previously focused on specialty coffee and related technologies but are now expanding our sales and distribution channels in Asia to encompass a broader range of consumer food and beverage products. This expansion is fueled by our online sales platform, which leverages a natural language search function.
CIMG, our holding company, or DZR Tech, its subsidiary incorporated in Hong Kong, or Weiwin, our subsidiary incorporated in Florida, may transfer cash to our PRC subsidiaries, Beijing Zhongyan, through capital injections and intra-group loans.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects and have been consistently applied in preparing the accompanying financial statements.
Principles of Consolidation
The Company prepares its financial statements on the 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 consolidates DZR Tech, Wewin and Beijing
Zhongyan in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, the usual condition for a controlling financial interest
is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly,
of over
Basic earnings per common share are equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflect 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 September 30, 2024 and September 30, 2023, the total number of Common Stock equivalents was and , respectively, and composed of stock options and warrants.
Going Concern and Capital Resources
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
Since inception, the Company has focused primarily
on business planning, research and development, recruiting personnel, acquiring assets, securing financing, and commercializing its single-serve
coffee products. As of September 30, 2024, the Company reported cash of $
In response, the Company undertook several mitigating
actions. It completed a private placement of $
Management has evaluated the Company’s ability to continue as a going concern under ASC 205-40, Presentation of Financial Statements - Going Concern, and considered its financial condition, projected cash flows, obligations due within 12 months, and sources of liquidity. Based on this assessment, management has concluded that no substantial doubt exists regarding the Company’s ability to continue as a going concern for at least one year from the date of issuance of these consolidated financial statements. Accordingly, the financial statements have been prepared on a going concern basis.
Use of Estimates
In preparing these consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
| F-9 |
Fair Value of Financial Instruments
Fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date).
On August 20, 2024, the Company entered into a convertible note purchase
agreement with certain investors (the “August Notes Investors”) to issue and sell convertible notes in the aggregate principal
amount of $
Per ASC 470-20-25-5, An embedded beneficial conversion feature (“BCF”) present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.
The company evaluated that the fair value of the instrument is slightly higher than the proceeds from the instrument issuance. The BCF is embedded in the convertible note.
Still, since the converting period is short (only 50 days) and the fair value of the embedded BCF is relatively small, we decided not to separate the feature until the proceeds to paid-in-capital. Since we do not directly pay the interest expenses, but to put them in the total repayable amount and convert to shares, we do not amortize the interest expense.
During the year ended September 30, 2024 and September
30, 2023,the fair value variation on convertible notes is $
Cash and Cash Equivalents
The Company considers all highly liquid
investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash
equivalents were $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company places its cash with high quality banking institutions. From time to time, the Company may or may not maintain cash balances at certain institutions in excess of the Federal Deposit Insurance Corporation limit.
Accounts Receivable, net
During the year ended September 30, 2024 and
September 30, 2023, accounts receivable was $ and $
Trade accounts receivable is periodically evaluated for
collectability based on past credit history with customers and their current financial condition. Bad debts expense or write offs of
receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current
economic conditions. The Company had $
SCHEDULE OF ACCOUNTS RECEIVABLES
| September 30. | September 30, | |||||||
| 2024 | 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for expected credit loss | ( | ) | ( | ) | ||||
| Total accounts receivable | $ | $ | ||||||
Assets Held for Sale-Current
As of September 30, 2024, assets held for sale-current totaled $
SCHEDULE OF ASSETS HELD FOR SALE
| September
30, 2024 | September
30, 2023 | |||||||
| Non-Current Assets Held for Sale | ||||||||
| Property and equipment asset impairment | ( | ) | ||||||
| Total | ||||||||
Major Customers
For the years ended September 30, 2024 and 2023, the Company’s largest single source of revenue was from one major customer disclosed below.
For the year ended September 30, 2024:
SCHEDULE OF REVENUE BY MAJOR CUSTOMERS
| Customer Name | Sales Amount | % of Total Revenue | Accounts Receivable Amount | % of Total Accounts Receivable | ||||||||||||
| Customer CN | $ | % | ||||||||||||||
| Customer WP | $ | % | ||||||||||||||
For the year ended September 30, 2023:
| Customer Name | Sales Amount | % of Total Revenue | Accounts Receivable Amount | % of Total Accounts Receivable | ||||||||||||
| Customer WP | $ | % | $ | % | ||||||||||||
| Customer CN | $ | % | $ | % | ||||||||||||
| Customer AD | $ | % | ||||||||||||||
| F-10 |
Leases
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 conducts a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company has a 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 and Tenancy terminated. The Company did not apply the recognition requirements of ASC 842 to operating leases with a remaining lease term of 12 months or less.
In May 2022, the Company renewed the office
and manufacturing space in Vista, California through March 31, 2025, which was scheduled to expire on
The Company leased a new larger office and manufacturing
space in Seoul, Korea beginning November 15, 2021, through November 15, 2023. The lease has a monthly expense of $
Effective September 1, 2024, we have leased a principal
office space located at 16097 Poppyseed Cir, Unit 1904, Delray Beach, Florida, 33484, which we lease for $
As of September 30, 2024, the Company’s operating leases had a weighted average remaining lease term of 1 years and a weighted-average discount rate of 5%. Other information related to our operating leases is as follows:
SCHEDULE OF OTHER INFORMATION RELATED TO OPERATING LEASE
| ROU Asset – October 1, 2023 | $ | |||
| Disposal of ROU | ( | ) | ||
| ROU Asset added during the period | ||||
| Amortization during the period | ( | ) | ||
| ROU Asset – September 30, 2024 | $ | |||
| Lease Liability – October 1, 2023 | $ | |||
| Lease Liability added during the period | ||||
| Amortization during the period | ( | ) | ||
| Disposal of lease liability | ( | ) | ||
| Lease Liability – September 30, 2024 | $ | |||
| 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 September 30, 2024.
Amounts due within 12 months of September 30,
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES
| 2025 | Sep 30, 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 | $ |
During the year ended September 30, 2024, we had the following cash and non-cash activities associated with our leases:
SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES
| Operating cash outflows from operating leases: | $ | |||
| Operating cash outflows from finance leases: | $ | |||
| 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 ended June
30, 2024. During the year ended September 30, 2024, we recognized sublease income of $
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 adjustment attributable to CIMG Inc. recorded to other comprehensive
income and loss amounted to $
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency.
Equity Method
Investee companies that are not consolidated, but
over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company
exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation
of the investee company’s board of directors and ownership level, which is generally a
| F-11 |
When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
Revenue Recognition
In FY 2024, We have reduced our single-serving pour-over coffee packaging business, and in the portion of bagged coffee sales, we have added other brands, such as “Maca Coffee” and other finished products with maca as the main raw material, such as “Maca Noni”. In 2024, we sell maca peptide coffee and other new products on a distribution model. We usually sign distribution contracts with distributors on a batch basis. Based on the contract, we deliver the goods after full payment to our bank account. We courier the goods to the customer. The customer will sign a receipt after receiving the goods. The customers can also choose to pick up their goods from our warehouse on their own. Also, the customer will sign a receipt.
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.
Per ASC 606-10-32-2, an entity shall consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.
Per ASC 606-10-25-23 An entity shall recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service (that is, an asset) to a customer.
Per ASC 606-10-55-37 An entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. However, an entity does not necessarily control a specified good if the entity obtains legal title to that good only momentarily before legal title is transferred to a customer. An entity that is a principal may satisfy its performance obligation to provide the specified good or service itself or it may engage another party (for example, a subcontractor) to satisfy some or all of the performance obligation on its behalf.
ASC 606-10-55-38 An entity is an agent if the entity’s performance obligation is to arrange for the provision of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer. When (or as) an entity that is an agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party. An entity’s fee or commission might be the net amount of consideration that the entity retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party.
Return and Exchange Policy
All products are thoroughly inspected and securely packaged before they are shipped to ensure buyers receive the best possible product. If for any reason buyers are unsatisfied with the products, they can return them, and the Company will exchange or refund the purchase minus any shipping charges. For wholesale customers, return policies vary based on their specific agreements with customers. Under chargebacks agreements with the customers, the Company agrees to reimburse the seller for a portion of the costs incurred by the seller to advertise and promote certain of the Company’s products. The Company estimates, accrues and recognizes such chargebacks. These amounts are included in the determination of net sales. As of September 30, 2024, CIMG’s Maca collection has never had a return record.
Accounts payable and accrued expenses
For the year ended September 30, 2024,
accounts payable totaled $
For the year ended September 30, 2023, accounts payable totaled $
During the year ended September 30, 2024 and
September 30, 2023, the accrued expenses are $
Accounts payable and accrued expenses for the years ended September 30, 2024 and 2023 are as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| September
30. 2024 | September
30, 2023 | |||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total | ||||||||
Deferred income
During the year ended September 30, 2024 and
September 30, 2023, the deferred income are $
and $
Other current liabilities
During the year ended September 30, 2024 and
September 30, 2023, the other current liabilities are $
Loss from investment
Due to Discontinued Operations, the investment
income for 2024 is in the red. As of September 30, 2024 and September 30, 2023, the investment income losses were $
Cost Recognition
The Maca Series products are pure plant products that we purchase maca raw materials and entrust to process. Therefore, the raw materials - the procurement cost of maca, the packaging cost of goods, the freight cost of goods and so on.
Selling, General and Administrative Expense
Selling, general and administrative expenses (SG&A) are primarily comprised of personnel costs, selling and marketing expenses, depreciation and amortization, insurance expenses, professional services, travel and office expenses, etc. In some cases, the company bears shipping costs for shipping customer orders, and shipping and handling costs are recorded under operating expenses in the consolidated statement of operations.
As of September 30, 2024 and September 30, 2023,
the operating expenses were $
Asset impairment loss
During
the year ended September 30, 2024 and September 30, 2023, the asset impairment loss are $
SCHEDULE OF ASSET IMPAIRMENT LOSS
| September
30. 2024 |
September
30, 2023 |
|||||||
| Property and equipment asset impairment | ||||||||
| Impairment loss on inventory | ||||||||
| Total | $ | $ | ||||||
Other income
During the year ended September 30, 2024 and
September 30, 2023, the other income are $
| F-12 |
Other expense
During the year ended September 30, 2024, the
other expense is $
During the year ended September 30, 2023, the other expense is
$
Prepaid expenses and other current assets
Prepaid expenses and other current assets for the years ended September 30, 2024 and 2023 are as follows:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
September
30, | September 30, | |||||||
| Prepaid expenses | $ | $ | ||||||
| Other current assets | ||||||||
| Total | ||||||||
The Prepaid expenses and other current assets balance
of $
The balance of $
Inventories, net
Inventory, consisting principally of raw
materials, work in process and finished goods held for production and sale, is stated at the lower cost or net realizable value,
cost being determined using the weighted average cost method. In 2024, we purchased raw materials and finished products from
Hangzhou Yikang Yimei Technology Co., LTD. The current
inventory is stored in Jiangsu, China. The Company reviews inventory levels at least quarterly. On September 30, 2024, the carrying value of inventory of $
SCHEDULE OF INVENTORY
September
30, |
September
30, | |||||||
| Raw materials | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
As
of September 30, 2024, the provision for inventory obsolescence was $
SCHEDULE OF IMPAIRMENT LOSS ON INVENTORY
| September
30, 2024 | September
30, 2023 | |||||||
| Raw materials | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Property and equipment, net
Property and equipment are stated at cost, net
of accumulated depreciation. Office equipment is depreciated over a
SCHEDULE OF PROPERTY AND EQUIPMENT
| September
30. 2024 | September
30, 2023 | |||||||
| Machinery & Equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Leasehold Improvements | ||||||||
| Less - Accumulated Depreciation | ( | ) | ( | ) | ||||
| Subtotal | ||||||||
| Less-Non-Current Assets Held for Sale | ( | ) | ||||||
| Disposal of property and equipment | ( | ) | ||||||
| Property and equipment, net | ||||||||
Samples
The Company distributes samples of its products as a component of its marketing program. Costs for samples are expensed at the time the samples are produced and recorded under operating expenses in the consolidated statements of operations.
| F-13 |
Long-Lived Assets
The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicated that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances.
Goodwill and intangible assets
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. We have identifiable useful life intangible assets related to acquired Dripkit tradename and customer relationships. We evaluate these intangible assets annually for impairment, and when indications of potential impairment exist. The management uses considerable judgment to determine key assumptions, including projected revenue, projected costs, marketing expenses and projected profits, etc. This kind of analysis requires important estimates and judgments, including the estimation of future cash flows, which depends on internal forecasts, the estimation of the long-term growth rate of our business, the estimation of the useful life of the cash flows that will occur, customer churn, and the determination of our weighted average cost of capital.
Income Taxes
In accordance with ASC 740 - Income Taxes, the provision for income taxes is computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company also follows the guidance related to accounting
for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of
a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.
For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit
that has a
| F-14 |
Related parties
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Stock-based Compensation
We account for share-based awards issued to employees in accordance with Accounting Standards Codification (ASC) 718, “Compensation-Stock Compensation”. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period, which is normally the vesting period. Share-based compensation to directors is treated in the same manner as share-based compensation to employees, regardless of whether the directors are also employees. In June 2018, the FASB issued ASU 2018-07 which simplifies several aspects of the accounting for non-employee transactions by stipulating that the existing accounting guidance for share-based payments to employees (accounted for under ASC Topic 718, “Compensation-Stock Compensation”) will also apply to non-employee share-based transactions (accounted for under ASC Topic 505, “Equity”). The Company implemented ASU 2018-07 on October 1, 2019 and the impact of the implementation was not material to the financial statements.
We determine the fair value of share-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of our common stock for common share issuances. We recognize forfeitures as they occurred.
During the year ended September 30, 2024, we did not distribute employee stock rewards to our staff.
Comprehensive income/loss
Comprehensive income/loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income/loss are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income/loss pertains to foreign currency translation adjustments.
Segment Information
ASC Topic 280, “Disclosures about Segments of an Enterprise and Related Information,” established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. Management has determined that the Company operates in one business segment, which is the commercialization and development of functional beverages.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted.
In November 2023,the FASB issued ASU 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures. The amendments in this Update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in this Update retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Group adopted ASU 2023-07 in the consolidated financial statements for the year ended December 31, 2024. The Company concluded that it has no material impact on the consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which applies to all entities subject to income taxes. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. For public business entities, ASU 2023-09 will be effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the requirements will be effective for annual periods beginning after December 15, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of these accounting standard updates on its consolidated financial statements.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
Discontinued Operations
ASC 205-20-45-10 In the period(s) that a discontinued operation is classified as held for sale and for all prior periods presented, the assets and liabilities of the discontinued operation shall be presented separately in the asset and liability sections, respectively, of the statement of financial position.
ASC 205-20-45-3 The statement in which net income of a business entity is reported or the statement of activities of a not-for-profit entity (NFP) for current and prior periods shall report the results of operations of the discontinued operation, including any gain or loss recognized in accordance with paragraph 205-20-45-3C, in the period in which a discontinued operation either has been disposed of or is classified as held for sale.
The company has terminated the sold business in accordance with ASC 205-20-45-10 and ASC 205-20-45-3. Additional information on discontinued operations can be found in Note 6-discontinued operations.
Identified Intangibles and Goodwill
The Company identified tradename and customer relationships intangible assets. The tradename and customer relationships intangible assets will be amortized on a straight-line basis over their respective estimated useful lives. The goodwill recognized results from such factors as an assembled workforce and management’s industry know-how. See Note 7-Goodwill and Intangible Assets for additional information on identified intangible assets and goodwill.
3. LOANS
On April 1, 2019, the Company purchased a
delivery van from Ford Motor Credit for $
On February 15, 2024, Social e-commerce
Co., Ltd. provided short-term loans to the company. The Borrower of a loan approved by Lender and serviced by Bill.com Capital 3, LLC
through www, the loan is for the operation of the company. The outstanding balance of this loan as of September 30, 2024 is
On March 1, 2024,CFG MERCHANT SOLUTIONS lent a
total of $
On April 18, 2024, SOONCHA KIM lent the company
$
On July 2024, the Company secured unsecured
financing in the aggregate amount of $
| F-15 |
4. GEOGRAPHIC CONCENTRATIONS
The Company operates primarily within a single business segment, despite distributing its products globally. Its operations are organized into two geographic regions: North America and China. The Company jointly manufactures and markets its products in these regions. The tables below present net revenue and property and equipment, net, by geographic area for the years ended September 30, 2024 and 2023:
SCHEDULE OF GEOGRAPHICAL OPERATIONS
| September 30, 2024 | September 30, 2023 | |||||||
| Net Revenue: | ||||||||
| North America | $ | $ | ||||||
| China | ||||||||
| Revenues, net | $ | $ | ||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Property and equipment, net: | ||||||||
| North America | $ | $ | ||||||
| Property and equipment, net | $ | $ | ||||||
5. RELATED PARTY TRANSACTIONS
On August 20, 2024, the Company entered into a convertible note purchase agreement (the “Purchase
Agreement”) with certain investors (the “August Notes Investors”) to issue and sell convertible notes in the aggregate
principal amount of $
As of September 30, 2024, the directors of Wewin Technology LLC paid an administrative fee of $
During the year ended September 30, 2024, the relevant
trading volume generated by CIMG Inc was $
During the year ended September 30, 2023, NuZee
KOREA Ltd sold single serve pour over and coffee brew bag coffee products worth $
6. DISCONTINUED OPERATIONS
On
June 7, 2024, the company’s board of directors passed a resolution to sale (1) NuZee KOREA Ltd a company incorporated in Korea
and a wholly-owned subsidiary of the Company; and (2) NuZee Investment Co., Ltd, a company incorporated in Japan and a wholly-owned
subsidiary of the Company, and the total price is $
The losses from discontinued operations for the year ended September 30, 2024 and September 30, 2023 are as follows:
SCHEDULE OF LOSSES FROM ASSET DISPOSAL OF DISCONTINUED OPERATIONS
| Year Ended 30-Sep-24 | Year Ended 30-Sep-23 | |||||||
Revenue | $ | $ | ||||||
| Cost of revenue | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Operations Loss | ( | ) | ( | ) | ||||
| Other revenue | ||||||||
| Other income (expense) | ( | ) | ||||||
| Interest (expense) income, net | ( | ) | ||||||
| Loss from discontinued operations before income tax | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Loss from discontinued operation after tax | ( | ) | ( | ) | ||||
| Gain from disposal of discontinued operations | $ | $ | ||||||
The major components of assets and liabilities related to discontinued operations are summarized below:
SCHEDULE OF OPERATING RESULTS, ASSETS AND LIABILITIES OF DISCONTINUED OPERATION
| Year Ended 30-Sep-24 | Year Ended 30-Sep-23 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash & Equivalents | $ | $ | ||||||
| Receivable | ||||||||
| Inventory | ||||||||
| Prepaid Expenses | ||||||||
| Property and Equipment | ||||||||
| Other Assets | ||||||||
| Total assets related to discontinued operations | ||||||||
| LIABILITIES | ||||||||
| Accounts Payable | $ | $ | ||||||
| Other Current Liabilities | ||||||||
| Reserves & Other Liabilities | ||||||||
| Total liabilities related to discontinued operations | $ | $ | ||||||
| Net liabilities | ( | ) | ( | ) | ||||
| F-16 |
7. GOODWILL AND INTANGIBLE ASSETS
Impairments
Goodwill
As of September 30, 2023 and September 30, 2024, the remaining goodwill was $.
Identifiable life intangible assets
During
the year ended September 30, 2024 and 2023, the remaining tradename asset balance adjusting for impairment was $
As
of September 30, 2024, the Company’s intangible assets consisted of unamortized tradename asset of $
Amortization
expense was $
Amortization expense for the next four fiscal years is as follows:
SCHEDULE OF AMORTIZATION EXPENSE
| Tradename Amortization | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Grand Total | $ | |||
8. ISSUANCE OF EQUITY SECURITIES
During the year ended September 30, 2024, and shares were issued in the form of cash and private placement respectively.
As of September 30, 2024, the Company has corrected the number of treasury shares recorded with the transfer agent to include 34,095 shares of common stock that were not successfully cancelled prior to September 30, 2023 due to administrative reasons.
SCHEDULE OF COMMON SHARES ISSUED
| Date | Transaction Description | Amount/Shares | Status | |||
| Common stock issued for cash: | ||||||
| October 18, 2023 | (Form S-3 effective on October 5, 2023, Form 424B5 filed on October 19, 2025 and Form 8-K filed on October 20, 2023) |
$ |
shares of common stock were registered pursuant to a shelf registration statement filed with and declared effective by the SEC (Registration No. 333-274818), a base prospectus, dated October 5, 2023, included as part of the registration statement, and a prospectus supplement, dated October 17, 2023.
On December 5, 2023, the Underwriter utilized its option to purchase additional shares of Common Stock, which were registered the same above. | |||
| April 27, 2024 |
(From 8-K filed May 2, 2024 and Form S-1 effective on July 1, 2024) |
$ |
On October 18, 2024, the holders of warrants exercised its cashless option to purchase an aggregate of | |||
| July 24, 2024 | (From 8-K filed July 30, 2024) |
$ |
The closing of the private placement occurred on July 26, 2024 and the Company issued an aggregate of | |||
| $ |
||||||
| Issued private placement: | ||||||
| June 4, 2024 | (From 8-K filed June 10, 2024) |
$ |
The Transaction was closed on June 7, 2024 and the Company issued an aggregate of shares of Common stock | |||
| July 11, 2024 | (From 8-K filed July 16, 2024 and From 8-K filed on July 19, 2024) |
$ |
The Transaction was closed on July 18, 2024 and the Company issued an aggregate of shares of Common stock. | |||
| $ |
||||||
Treasury Stock: |
||||||
| September 30, 2024 | shares of Common Stock, $par value | As of September 30, 2024, the Company has corrected the number of treasury shares recorded with the transfer agent to include shares of common stock that were not successfully cancelled prior to September 30, 2023 due to administrative reasons. | ||||
| F-17 |
Restricted Stock Awards
During the year ended September 30, 2024, the Company did not issue restricted stock awards.
On August 11, 2023, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors granted to Randell Weaver, the Company’s newly appointed Chief Financial Officer, in connection with his employment agreement, an award of restricted shares (the “Restricted Shares”) of the Company’s common stock under the 2023 Stock Incentive Plan. These Restricted Shares vested as follows: (i) Restricted Shares shall vest upon the first anniversary of the commencement date; (ii) Restricted Shares shall vest upon the second anniversary of the commencement date; and (iii) Restricted Shares shall vest upon the third anniversary of the commencement date. The Company recognized common stock compensation expense of $ for the year ended September 30, 2023 related to these Restricted Shares.
On March 15, 2023, the Company granted performance-based restricted shares to executive officers, employees and consultants as part of the 2013 Stock Incentive Plan and the 2019 Stock Incentive Plan. % of the Performance-Based Restricted Shares would vest, if at all, in fiscal year 2023, based on the Company’s achievement of a specified amount of cash on hand, sales growth, increased gross margin, and reduced operating losses in fiscal year 2023, and the other % of the Performance-Based Restricted Shares will vest, if at all, in fiscal year 2024, based on performance metrics to be set by the Board in its sole and absolute discretion. The performance goals for fiscal year 2023 were not achieved and the Company recognized common stock compensation expense of $ for the year ended September 30, 2023, related to these Restricted Shares.
The Company recognized common stock compensation expense of $ and $ in fiscal year ending September 30 2023 and September 30, 2024, respectively.
Grant of Restricted Stock Awards to the Company’s Independent Board Members
During the year ended September 30, 2024, no restricted stock awards were issued to any board members.
Forfeiture of Restricted Shares
During the year ended September 30, 2024, restricted shares were forfeited because of the termination of employment or performance goals not achieved.
Common Stock issued for services
During the year ended September 30, 2024, the company did not have Common Stock issued for services.
Exercise of options
During the year ended September 30, 2024, the company did not exercise any options.
Options
During the fiscal year ended September 30, 2024, the Company granted new stock options, issued shares upon the exercise of outstanding stock options.
During the fiscal year ended September 30, 2023, the Company granted new stock options at an exercise price of $ to an employee. These options shall be vested and become exercisable 1/3 on each anniversary of the grant date. The options will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.
| F-18 |
The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model using the assumptions noted as follows: expected volatility was based on the volatility of a peer group of companies. The expected term of options granted was determined using the simplified method under SAB 107 which represents the mid-point between the vesting term and the contractual term. The risk-free rate is calculated using the U.S. Treasury yield curve and is based on the expected term of the option.
SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS FOR FAIR VALUE MEASUREMENT OF OPTIONS GRANTED
| For employees | September 30, 2024 | September 30, 2023 | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected option life | years | |||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Exercise price | $ | $ | ||||||
The Company is expensing these stock option awards on a straight-line basis over the requisite service period.
Due to forfeitures exceeded previously recognized expense, and the company reversed prior costs. Company recognized stock option expense of $(
The Company recognized stock option expense of
$
Unamortized option expense as of September 30, 2024, for all outstanding options amounted to $. These costs are expected to be recognized over a weighted-average period of year.
During the year ended September 30, 2024, stock options were forfeited or expired because of termination of employment, expiration of options and performance conditions not met.
SCHEDULE OF STOCK OPTION ACTIVITY
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding on September 30, 2023 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Forfeited | ( | ) | - | |||||||||||||
| Outstanding on September 30, 2024 | $ | |||||||||||||||
| Exercisable on September 30, 2024 | $ | $ | ||||||||||||||
During the year ended September 30, 2023, the Company issued shares of Common Stock upon the exercise of outstanding stock options and stock options were forfeited or expired because of termination of employment, expiration of options and performance conditions not met.
| F-19 |
The following table summarizes stock option activity for the year ended September 30, 2023.
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding on September 30, 2022 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Forfeited | ( | ) | - | |||||||||||||
| Outstanding on September 30, 2023 | $ | |||||||||||||||
| Exercisable on September 30, 2023 | $ | $ | ||||||||||||||
SCHEDULE OF NONVESTED OPTIONS
Number of Nonvested Options | Weighted Average Grant Date Fair Value | |||||||
| Nonvested options on September 30, 2022 | $ | |||||||
| Granted | $ | |||||||
| Forfeited | ( | ) | $ | |||||
| Vested | ( | ) | $ | |||||
| Nonvested options on September 30, 2023 | $ | |||||||
| Granted | $ | |||||||
| Forfeited | ( | ) | $ | |||||
| Vested | ( | ) | $ | |||||
| Nonvested options on September 30, 2024 | $ | |||||||
Warrants
2024 Warrants
On November 9, 2023,
the Company entered into a subscription agreement of common stock and warrant, which sold an accredited investor to shares
of Common Stock, together with warrants to purchase a total of approximately
On January 30, 2024, the
Company issued in a private placement to an accredited investor shares
of Common Stock, together with warrants to purchase a total of approximately
On April 27, 2024, the Company entered into
a convertible note and warrant purchase agreement (the “2024 April Purchase Agreement”) with certain investors (the “Investors”),
providing for the private placement of convertible promissory notes in the aggregate principal amount of $
On October 18, 2024, the holders of warrants issued by the Company exercised its cashless option to purchase an aggregate of shares of the Company’s common stock pursuant to warrants issued by the Company. Such warrants were previously issued pursuant to the convertible note and warrant purchase agreement dated April 27, 2024, as disclosed in the current report of the Company on Form 8-K filed with the SEC on May 2, 2024. In connection with such cashless exercise, the Company will not receive any cash proceeds. The shares of common stock issuable upon exercise of such warrants were registered under the Form S-1 effective on July 1, 2024.
| F-20 |
The following table summarizes warrant activity for the year ended September 30, 2024:
SCHEDULE OF WARRANT ACTIVITY
Number of Shares Issuable Upon Exercise of Warrants | Weighted Price | Weighted Average Remaining | Aggregate Intrinsic Value | |||||||||||||
| Outstanding on September 30, 2023 | $ | $ | ||||||||||||||
| Issued | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired | - | - | ||||||||||||||
| Outstanding on September 30, 2024 | $ | |||||||||||||||
| Exercisable on September 30, 2024 | $ | $ | ||||||||||||||
The following table summarizes warrant activity for the year ended September 30, 2023:
Number of Shares Issuable Upon Exercise of Warrants | Weighted Price | Weighted Average Remaining | Aggregate Intrinsic Value | |||||||||||||
| Outstanding on September 30, 2022 | $ | $ | ||||||||||||||
| Issued | - | - | - | - | ||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired | - | |||||||||||||||
| Outstanding on September 30, 2023 | $ | |||||||||||||||
| Exercisable on September 30, 2023 | $ | $ | ||||||||||||||
On April 13, 2022, the Company sold
Units, with each 2022 Unit consisting of (a) one share of our Common Stock and (b) one 2022 Warrant. Each 2022 Warrant entitles the holder
to purchase one share of our Common Stock at an exercise price of $
| F-21 |
10. INCOME TAX
The company recorded $ income tax expense for the years ended September 30, 2024 and 2023.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The Company will have tax losses available to
be applied against future years’ income as result of the losses incurred. However, due to the losses incurred in the period
and expected future operating results, management determined that it is more likely than not that the deferred tax asset resulting
from the tax losses available for carry forward will not be realized through the reduction of future income tax payments.
Accordingly, a
The Company used statutory blended tax rates of
Deferred tax assets consisted of the following as of September 30, 2024 and 2023:
SCHEDULE OF DEFERRED TAX ASSETS
| 2024 | 2023 | |||||||
| Net Operating Losses | $ | |||||||
| Stock based compensation | ||||||||
| Fixed assets and intangible assets | ||||||||
| Total deferred tax assets | $ | |||||||
| Valuation Allowance | ( | ) | $ | ( | ) | |||
| Deferred tax assets net of valuation allowance | $ | |||||||
11. CONTINGENCIES
Steeped Litigation
As previously disclosed, on January 27, 2023, Steeped, Inc. d/b/a Steeped Coffee (“Steeped”) filed a complaint against the Company in the Superior Court of California, Santa Cruz County (Case No. 23CV00234) (the “Complaint”). The Complaint related to Steeped’s claim that the Company breached a 2021 settlement agreement that resolved Steeped’s 2019 trademark infringement case against the Company. The earlier case involved Steeped’s purported trademark protection for “steeped coffee” and related phrases.
Steeped alleged breach of contract, intentional interference with contractual relations, intentional interference with prospective economic advantage, and fraud in the inducement of contract. Plaintiff sought a trial by jury and relief in the form of a permanent injunction for use of “Steep Coffee” or any confusingly similar variant of “STEEPED COFFEE”; the impoundment and destruction of allegedly violating packaging materials and/or finished goods; a final judgment for all profits derived from the Company’s allegedly unlawful conduct, actual damages, damages to the Steeped’s reputation and goodwill among its customers and partners; and reasonable attorneys’ fees and costs. The Company answered the Complaint with a general denial and asserted twenty-five affirmative defenses.
| F-22 |
On
January 16, 2024, without a finding or admission of wrongdoing, the Company entered into a settlement agreement with Steeped. In
exchange for mutual releases and a dismissal of the lawsuit with prejudice, the Company completed the payment of $
Curtin Litigation
As previously disclosed, on January 6, 2023, a former employee of the Company, Rosalina Curtin filed a complaint against the Company and another former employee of the Company, Jose Ramirez, in the Superior Court of California, County of San Diego (Case No. 37-2023-00000841-CU-WT-NC) (the “Complaint”). The Complaint alleged that Ms. Curtin was subject to harassment by Mr. Ramirez, gender discrimination throughout her employment, that she reported this discrimination and harassment to the Company, and that the Company retaliated against her and wrongfully terminated her for whistleblowing and failed to prevent discrimination, harassment, and retaliation. Ms. Curtin sought compensatory damages, including loss of past, present and future earnings, and benefits, as well as punitive damages, penalties, attorney’s fees and costs and interest. Pursuant to the terms of Ms. Curtin’s Employment Agreement with the Company, on December 22, 2023, the Court compelled the case to arbitration with the American Arbitration Association (Case Number 01-24-0002-3225).
On November
8, 2024, without a finding or admission of wrongdoing, the Company entered into a settlement agreement with Ms. Curtin. In exchange for
mutual general releases and a dismissal of the lawsuit with prejudice, the Company paid Ms. Curtin $
Kim Litigation
On October 3, 2024, Mr. Sooncha Kim filed a complaint
against the Company in the Southern District of New York, (Case No. 1:24-cv-7485) (the “Complaint”). The Complaint alleges
that the Company breached a Convertible Note and Warrant Purchase Agreement, dated June 6, 2024, between the Company and Mr. Kim, by,
among other things, failing to deliver the registration rights agreement, excluding Mr. Kim from the S1 registration statement, delaying
conversion of Mr. Kim’s notes, undertaking steps to dilute Mr. Kim’s shares, failing to honor Mr. Kim’s 50% participation
right in any subsequent financing and failing to appoint a designated director, as set forth in the parties’ agreement. Mr. Kim
seeks specific performance of the Convertible Note and Warrant Purchase Agreement, and monetary damages in the amount of $
The Company believes it has a basis to defend the claims in the Kim Litigation, however, the Company is not able to predict the outcome, and there is no assurance that the Company will be successful in its defense.
Ex-Directors Lawsuit
On March 10, 2025, former directors
of the Company, Kevin J. Connor, Chris J. Jones, Nobuki Kurita, and David Robson (collectively, the “Ex-Directors”), filed
a complaint against the Company in the Superior Court of California, County of San Diego (Case No. 25CU012922N) (the “Complaint”).
The Complaint alleges the Company failed to pay directors’ fees and expenses from the last quarter the fiscal year ended September
30, 2023 through the first two quarters of the fiscal year ended September 30, 2024, and is claiming breach of contract, quantum meruit,
unjust enrichment, promissory estoppel, breach of the implied covenant of good faith and fair dealing, and unfair business practices.
The Ex-Directors seek monetary damages in excess of $
| F-23 |
12. SUBSEQUENT EVENTS
New Operating Lease
Effective December 16, 2024, we have leased a principal
office space located at Room R2, FTY D, 16/F, Kin Ga Industrial Building, 9 San On Street, Tuen Mun, Hong Kong, which we lease for RMB
Private Placement
| Date | Transaction Description | Amount/Shares | Status | |||
| November 9, 2023 |
(Form 8-K filed on November 15 2023) |
$ |
The
company has received purchase price of $
Shares
of Common stock
The warrants remains unexcised as of the date of this report. | |||
| January 30, 2024 |
(Form 10-Q filed on May 6, 2024) |
$
|
The
company has received the advance payment of $
Shares
of Common stock
The warrants remains unexcised as of the date of this report. | |||
| April 27, 2024 |
(From 8-K filed May 2, 2024 and Form S-1 effective on July 1, 2024) |
$ |
On October 18, 2024, the holders of warrants exercised its cashless option to purchase an aggregate of shares of the Company’s common stock.
In connection with such cashless exercise, the Company will not receive any cash proceeds. The shares of common stock issuable upon exercise of such warrants were registered under the Form S-1 effective on July 1, 2024. | |||
| August 20, 2024 | Convertible Note Purchase Agreement
(Form 8-K filed on August 26, 2024, September 6, 2024, September 10, 2024 and Form S-1 filed on November 29, 2024)
|
$ |
On October 31, 2024, all the August 2024 Notes Investors converted their August Notes to shares of Common Stock. As a result of such conversions of the August Notes, we issued an aggregate of shares of Common Stock to the August Notes Investors.
shares of Common Stock has been issued and registered under Form S-1 filed on November 29, 2024 | |||
| September 24, 2024 |
(Form 8-K filed on September 20, 2024 and Form S-1 filed on November 29, 2024) |
$ |
shares of Common Stock has been issued and registered under Form S-1 filed on November 29, 2024 | |||
| October 14, 2024 |
(Form 8-K filed on October 16, 2024) |
$ |
shares of Common Stock has been issued | |||
| October 22, 2024 |
(Form 8-K filed on October 23, 2024) |
$ |
shares of Common Stock has been issued | |||
| December 12, 2024 |
(Form 8-K filed on December 17, 2024, Form 8-K/A filed on January 23, 2025, Form 8-K filed on April 3, 2025)
|
$ |
The closings of the sale of the notes and warrants occurred on January 16, 2025 and January 17, 2025.
On February 10, 2025, the Company obtained its shareholder approval for the issuance of shares underlying the notes and the warrants.
On March 18, 2025, the investors submitted their respective conversion notices to the Company, converting their respective Notes.
Upon receiving the conversion notices, the Company issued shares of the Company’s common stock to the Investors pursuant to the same. | |||
| June 2, 2025 |
(Form 8-K filed on June 5, 2025 and June 10, 2025) |
$ |
The closing of the sale of the shares of common stock occurred on June 9, 2025.
shares of common stock has been issued. |
Legal Proceedings
Kim Litigation
On
October 3, 2024, Mr. Sooncha Kim filed a complaint against the Company in the Southern District of New York, (Case No. 1:24-cv-7485)
(the “Complaint”). The Complaint alleges that the Company breached a Convertible Note and Warrant Purchase Agreement, dated
June 6, 2024, between the Company and Mr. Kim, by, among other things, failing to deliver the registration rights agreement, excluding
Mr. Kim from the S1 registration statement, delaying conversion of Mr. Kim’s notes, undertaking steps to dilute Mr. Kim’s
shares, failing to honor Mr. Kim’s 50% participation right in any subsequent financing and failing to appoint a designated director,
as set forth in the parties’ agreement. Mr. Kim seeks specific performance of the Convertible Note and Warrant Purchase Agreement,
and monetary damages in the amount of $
The Company believes it has a basis to defend the claims in the Kim Litigation. The company believes that it is very likely to succeed in the defense.
Ex-Directors Lawsuit
On
March 10, 2025, former directors of the Company, Kevin J. Connor, Chris J. Jones, Nobuki Kurita, and David Robson (collectively, the
“Ex-Directors”), filed a complaint against the Company in the Superior Court of California, County of San Diego (Case No.
25CU012922N) (the “Complaint”). The Complaint alleges the Company failed to pay directors’ fees and expenses from the
last quarter of the fiscal year ended September 30, 2023 through the first two quarters of the fiscal year ended September 30, 2024,
and is claiming breach of contract, quantum meruit, unjust enrichment, promissory estoppel, breach of the implied covenant of good faith
and fair dealing, and unfair business practices. The Ex-Directors seek monetary damages in excess of $
New Subsidiary
On March 10, 2025, Zhongyan Shangyue Technology
Co., Ltd. (“Zhongyan”), CIMG Inc.’s wholly-owned subsidiary,
entered into a Business Cooperation Intent Agreement (the “Agreement”) with Shanghai Huomao Cultural Development Co., Ltd.
(“Huomao”). Pursuant to the Agreement, the three shareholders of Huomao intend to transfer an aggregate of
On March 21, 2025, Zhongyan Shangyue Technology Co., Ltd. established a wholly-owned subsidiary, Henan Zhongyan Shangyue Technology Co. Ltd.
On March 27, 2025, Zhongyan Shangyue Technology
Co., Ltd. entered into a Business Cooperation Intent Agreement (the “Agreement”) with Xilin Online (Beijing) E-commerce Co.,
Ltd (“Beijing Xilin”). Pursuant to the Agreement, certain shareholders of Beijing Xilin intend to transfer an aggregate of
On March 31, 2025, the Company completed its acquisition of Beijing Xilin, along with the necessary business registration updates in China.
On April 22, 2025, the Company completed its acquisition of Shanghai Huomao, along with the necessary business registration updates in China.
| F-24 |
Exhibit 10.37
Cooperation agreement
Party A:
Zhongyan Shangyue Technology Co., Ltd(hereinafter referred to as Party A)
Unified social credit code:
Address: 6107, 6th Floor, Building C4, No.1 Huangchang West Road, Dougezhuang, Chaoyang District, Beijing
person: Jianshuang Wang
Contact number:
Party B: Hangzhou Yikang Yimei Health Technology Co., LTD.
(hereinafter referred to as Party B)
Social credit code:
Address: Room 473, Building 5, East Lake Technology Innovation Center, No. 2199 Jiangdong Avenue, Yipeng Street, Qiantang District, Hangzhou City, Zhejiang Province
person: Yubin Wang
Contact number:
Whereas Party A is a company incorporated in China and has abundant online media and Internet e-commerce platform resources and many years of e-commerce marketing experience, Party B is a comprehensive company specializing in import trade and planting, with business covering more than a dozen countries and regions such as Peru, Hong Kong, Shenzhen, Jiangsu, Yunnan, Sichuan, Xinjiang and Gansu. Has a modern sales channel business line, the use of international advanced sales platform technology, scientific management, complete qualifications. In the spirit of win-win cooperation and through friendly consultation, the parties hereby agree as follows on matters of cooperation.
1/5
| I. | Content of cooperation |
| 1) | Party B shall be responsible for the production, processing and delivery of its brand products. |
| 2) | All products of Party B and the whole series of products authorized by the Kangduoyuan brand shall be granted to Party A for exclusive omni-channel sales. |
| II. | Term and scope of cooperation |
| 1) | Term of cooperation: From July 10, 2024 to July 1, 2027. |
| 2) | Scope of cooperation: omni-channel exclusive sales. |
| III. | Method of settlement |
| 1) | Party B shall supply the goods to Party A in the form of cost price, and Party A shall have the right of unified sales pricing, pricing and activity planning according to market conditions. |
| 2) | Invoice requirements: The payer shall issue a formal, legal and valid VAT special invoice with the corresponding proportional amount to the payer. |
| 3) | Both parties shall bear their respective taxes and fees in accordance with the relevant regulations of the People’s Republic of China on taxes and fees, and pay taxes in accordance with law. |
| 4) | Party B’s bank account information: |
Account name:
Opening bank:
Bank address:
Account number:
Detailed address:
2/5
| IV. | Rights and Responsibilities of both parties |
| 1) | Both parties shall actively use their brand influence and resources to introduce customer resources for cooperation; |
| 2) | Each Party shall actively cooperate with the other party in publicity and marketing of the cooperation; |
| 3) | Each Party shall provide the list and fee data of all customers truthfully and accurately, and the list and data shall be transparent to the other party, and the parties promise that there will be no falsification; |
| 4) | Party A and Party B are independent economic entities, operating independently, accounting independently, and assuming their own profits and losses. Neither party shall be directly and severally liable for the debts of the other party; |
| 5) | Each party shall assign relevant personnel to cooperate with the other party to collect and contact the required information; Party B shall provide Party A with relevant materials required for cooperation and assist Party B in online operation and other related work to ensure smooth progress of cooperation according to schedule requirements; |
| 6) | Without the consent of Party A, Party B shall not have private contact with the sponsors, customers and their staff of the other party, and shall refer the matter to the personnel designated by Party A for handling; |
| 7) | Both parties confirm that the results of online sales achieved during the cooperation shall be owned by Party A; |
| 8) | Party B shall ensure that its authorization to Party A hereunder is legal and effective, that it has fully obtained the authorization of the right holder, and that Party A will not infringe the legitimate rights and interests of any third party or cause unnecessary disputes when using such authorization; |
| 9) | Party B warrants that the products provided shall comply with relevant Chinese laws, regulations and industry standards and shall not infringe upon the legitimate rights and interests of any third party. Otherwise, Party B shall compensate Party A for any losses caused by Party B, including but not limited to direct economic losses and indirect economic losses. |
3/5
| V. | Confidentiality |
Either Party shall keep confidential the confidential information and information of the other party (hereinafter referred to as “Confidential Information”) that is known or accessed by the other party in connection with the execution or performance of this Agreement; Neither party shall disclose such confidential information to any third party without the written consent of the other party. Either Party shall, at the request of the other party, return, destroy or otherwise dispose of any documents, materials or software containing the confidential Information of the other party, and shall not continue to use such Confidential Information. After the termination of this Agreement, the obligations of the parties hereunder shall not be terminated, and the parties shall still comply with the confidentiality provisions hereof and perform their confidentiality obligations as promised. The confidentiality period is permanent.
| VI. | Liability for breach of contract |
Any failure or incomplete performance by either party of its obligations under the terms of this Agreement or breach of its commitments or warranties hereunder shall constitute a breach of contract. The breaching party shall bear all economic losses caused by the breaching party, including direct economic losses and indirect economic losses.
| VII. | Validity and termination of the Contract |
| 1) | This Agreement shall come into force upon being signed and sealed by both parties. After the expiration of the Agreement, if Party A and Party B continue to cooperate as desired, the cooperation period may be extended, which shall be determined by another agreement signed by Party A and Party B. |
| 2) | This Agreement may be terminated upon mutual agreement of both parties. |
4/5
| VIII. | Others |
| 1) | Matters not covered herein and matters to be changed shall be determined in the form of a supplementary agreement after negotiation between the parties, and the supplementary agreement and attachments shall have the same effect as this Agreement. In case of conflict, the later date of signature shall prevail. |
| 2) | Any dispute between Party A and Party B shall be settled through negotiation. If no agreement can be reached through negotiation, a lawsuit may be filed with the people’s court at the place where the contract is signed. |
| 3) | The invalidity of some provisions hereof shall not affect the validity of other provisions hereof. |
| 4) | This Agreement shall be governed by the laws of the People’s Republic of China. |
| 5) | This Agreement is made in two originals, with one held by each party. Both originals shall come into force after being signed and sealed by both parties and shall have the same binding force and legal effect. |
---- (There is no text below, for signing information and attachments) ----
| Party A: Zhongyan Shangyue Technology Co., Ltd | |
| Party B: Hangzhou Yikang Yimei Health Technology Co., LTD. |
| Date of signature: |
5/5
Exhibit 14.1
CIMG INC.
Code of Ethics and Business Conduct
1. Introduction.
1.1 The Board of Directors (the “Board”) of CIMG Inc. (the “Company”) has adopted this Code of Ethics and Business Conduct (the “Code”) in order to:
(a) promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
(b) promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company;
(c) promote compliance with applicable governmental laws, rules and regulations;
(d) promote the protection of Company assets, including corporate opportunities and confidential information;
(e) promote fair dealing practices;
(f) deter wrongdoing; and
(g) ensure accountability for adherence to the Code.
1.2 All directors, officers and employees are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 10, Reporting and Enforcement.
2. Honest and Ethical Conduct.
2.1 The Company’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.
2.2 Each director, officer and employee must act with integrity and observe the highest ethical standards of business conduct in his or her dealings with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job.
3. Conflicts of Interest.
3.1 A conflict of interest occurs when an individual’s private interest (or the interest of a member of his or her family) interferes, or even appears to interfere, with the interests of the Company as a whole. A conflict of interest can arise when an employee, officer or director (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when an employee, officer or director (or a member of his or her family) receives improper personal benefits as a result of his or her position in the Company.
3.2 Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or executive officer or their family members are expressly prohibited.
3.3 Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest should be avoided unless specifically authorized as described in Section 3.4.
3.4 Persons other than directors and executive officers who have questions about a potential conflict of interest or who become aware of an actual or potential conflict should discuss the matter with, and seek a determination and prior authorization or approval from, their supervisor or the Chief Executive Officer. A supervisor may not authorize or approve conflict of interest matters or make determinations as to whether a problematic conflict of interest exists without first providing the Chief Executive Officer with a written description of the activity and seeking the Chief Executive Officer’s written approval. If the supervisor is himself involved in the potential or actual conflict, the matter should instead be discussed directly with the Chief Executive Officer.
Directors and executive officers must seek determinations and prior authorizations or approvals of potential conflicts of interest exclusively from the Audit Committee.
4. Compliance.
4.1 Employees, officers and directors should comply, both in letter and spirit, with all applicable laws, rules and regulations in the cities, states and countries in which the Company operates.
4.2 Although not all employees, officers and directors are expected to know the details of all applicable laws, rules and regulations, it is important to know enough to determine when to seek advice from appropriate personnel. Questions about compliance should be addressed to the Legal Department.
4.3 No director, officer or employee may purchase or sell any Company securities while in possession of material nonpublic information regarding the Company, nor may any director, officer or employee purchase or sell another company’s securities while in possession of material nonpublic information regarding that company. It is against Company policies and illegal for any director, officer or employee to use material nonpublic information regarding the Company or any other company to:
(a) obtain profit for himself or herself; or
(b) directly or indirectly “tip” others who might make an investment decision on the basis of that information.
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5. Disclosure.
5.1 The Company’s periodic reports and other documents filed with the SEC, including all financial statements and other financial information, must comply with applicable federal securities laws and SEC rules.
5.2 Each director, officer and employee who contributes in any way to the preparation or verification of the Company’s financial statements and other financial information must ensure that the Company’s books, records and accounts are accurately maintained. Each director, officer and employee must cooperate fully with the Company’s accounting and internal audit departments, as well as the Company’s independent public accountants and counsel.
5.3 Each director, officer and employee who is involved in the Company’s disclosure process must:
(a) be familiar with and comply with the Company’s disclosure controls and procedures and its internal control over financial reporting; and
(b) take all necessary steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Company provide full, fair, accurate, timely and understandable disclosure.
6. Protection and Proper Use of Company Assets.
6.1 All directors, officers and employees should protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability and are prohibited.
6.2 All Company assets should be used only for legitimate business purposes. Any suspected incident of fraud or theft should be reported for investigation immediately.
6.3 The obligation to protect Company assets includes the Company’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business and marketing plans, engineering and manufacturing ideas, designs, databases, records and any nonpublic financial data or reports. Unauthorized use or distribution of this information is prohibited and could also be illegal and result in civil or criminal penalties.
7. Corporate Opportunities. All directors, officers and employees owe a duty to the Company to advance its interests when the opportunity arises. Directors, officers and employees are prohibited from taking for themselves personally (or for the benefit of friends or family members) opportunities that are discovered through the use of Company assets, property, information or position. Directors, officers and employees may not use Company assets, property, information or position for personal gain (including gain of friends or family members). In addition, no director, officer or employee may compete with the Company.
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8. Confidentiality. Directors, officers and employees should maintain the confidentiality of information entrusted to them by the Company or by its customers, suppliers or partners, except when disclosure is expressly authorized or is required or permitted by law. Confidential information includes all nonpublic information (regardless of its source) that might be of use to the Company’s competitors or harmful to the Company or its customers, suppliers or partners if disclosed.
9. Fair Dealing. Each director, officer and employee must deal fairly with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or her job. No director, officer or employee may take unfair advantage of anyone through manipulation, concealment, abuse or privileged information, misrepresentation of facts or any other unfair dealing practice.
10. Reporting and Enforcement.
10.1 Reporting and Investigation of Violations.
(a) Actions prohibited by this Code involving directors or executive officers must be reported to the Audit Committee.
(b) Actions prohibited by this Code involving anyone other than a director or executive officer must be reported to the reporting person’s supervisor or the Chief Executive Officer.
(c) After receiving a report of an alleged prohibited action, the Audit Committee, the relevant supervisor or the Chief Executive Officer must promptly take all appropriate actions necessary to investigate.
(d) All directors, officers and employees are expected to cooperate in any internal investigation of misconduct.
10.2 Enforcement.
(a) The Company must ensure prompt and consistent action against violations of this Code.
(b) If, after investigating a report of an alleged prohibited action by a director or executive officer, the Audit Committee determines that a violation of this Code has occurred, the Audit Committee will report such determination to the Board.
(c) If, after investigating a report of an alleged prohibited action by any other person, the relevant supervisor or the Chief Executive Officer determines that a violation of this Code has occurred, the supervisor or the Chief Executive Officer will report such determination to the Board.
(d) Upon receipt of a determination that there has been a violation of this Code, the Board will take such preventative or disciplinary action as it deems appropriate, including, but not limited to, reassignment, demotion, dismissal and, in the event of criminal conduct or other serious violations of the law, notification of appropriate governmental authorities.
10.3 Waivers.
(a) The Board may, in its discretion, waive any violation of this Code.
(b) Any waiver for a director or an executive officer shall be disclosed as required by SEC and Nasdaq rules.
10.4 Prohibition on Retaliation.
The Company does not tolerate acts of retaliation against any director, officer or employee who makes a good faith report of known or suspected acts of misconduct or other violations of this Code.
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Exhibit 19.1
Insider Trading Policy
This Insider Trading Policy describes the standards of CIMG Inc. and its subsidiaries (the “Company”) on trading, and causing the trading of, the Company’s securities or securities of certain other publicly traded companies while in possession of confidential information. This Policy is divided into two parts: the first part prohibits trading in certain circumstances and applies to all directors, officers and employees and their respective immediate family members of the Company and the second part imposes special additional trading restrictions and applies to all (i) directors of the Company, (ii) executive officers of the Company (together with the directors, “Company Insiders”), and (iii) certain other employees that the Company may designate from time to time as “covered persons” because of their position, responsibilities or their actual or potential access to material information (“Covered Employees”, together with the Company Insiders, “Covered Persons”).
One of the principal purposes of the federal securities laws is to prohibit so-called “insider trading.” Simply stated, insider trading occurs when a person uses material nonpublic information obtained through involvement with the Company to make decisions to purchase, sell, give away or otherwise trade the Company’s securities or the securities of certain other companies or to provide that information to others outside the Company. The prohibitions against insider trading apply to trades, tips and recommendations by virtually any person, including all persons associated with the Company, if the information involved is “material” and “nonpublic.” These terms are defined in this Policy under Part I, Section 3 below. The prohibitions would apply to any director, officer or employee who buys or sells securities on the basis of material nonpublic information that he or she obtained about the Company, its customers, suppliers, partners, competitors or other companies with which the Company has contractual relationships or may be negotiating transactions.
PART I
1. Applicability
This Policy applies to all trading or other transactions in (i) the Company’s securities, including common stock, options and any other securities that the Company may issue, such as preferred stock, notes, bonds and convertible securities, as well as to derivative securities relating to any of the Company’s securities, whether or not issued by the Company and (ii) the securities of certain other companies, including common stock, options and other securities issued by those companies as well as derivative securities relating to any of those companies’ securities.
This Policy applies to all employees of the Company, all officers of the Company and all members of the Company’s board of directors, officers, employees, and their respective family members.
2. General Policy: No Trading or Causing Trading While in Possession of Material Nonpublic Information
(a) No director, officer or employee or any of their immediate family members may purchase or sell, or offer to purchase or sell, any Company security, whether or not issued by the Company, while in possession of material nonpublic information about the Company. (The terms “material” and “nonpublic” are defined in Part I, Section 3(a) and (b) below.)
(b) No director, officer or employee or any of their immediate family members who knows of any material nonpublic information about the Company may communicate that information to (“tip”) any other person, including family members and friends, or otherwise disclose such information without the Company’s authorization.
(c) No director, officer or employee or any of their immediate family members may purchase or sell any security of any other publicly-traded company while in possession of material nonpublic information that was obtained in the course of his or her involvement with the Company. No director, officer or employee or any of their immediate family members who knows of any such material nonpublic information may communicate that information to, or tip, any other person, including family members and friends, or otherwise disclose such information without the Company’s authorization.
(d) For compliance purposes, you should never trade, tip or recommend securities (or otherwise cause the purchase or sale of securities) while in possession of information that you have reason to believe is material and nonpublic unless you first consult with, and obtain the advance approval of, the Compliance Officer (which is defined in Part I, Section 3(c) below).
(e) Covered Persons must “pre-clear” all trading in securities of the Company in accordance with the procedures set forth in Part II, Section 3 below.
3. Definitions
(a) Material. Insider trading restrictions come into play only if the information you possess is “material.” Materiality, however, involves a relatively low threshold. Information is generally regarded as “material” if it has market significance, that is, if its public dissemination is likely to affect the market price of securities, or if it otherwise is information that a reasonable investor would want to know before making an investment decision.
Information dealing with the following subjects is reasonably likely to be found material in particular situations:
(i) significant changes in the Company’s prospects;
(ii) significant write-downs in assets or increases in reserves;
(iii) developments regarding significant litigation or government agency investigations;
(iv) liquidity problems;
(v) changes in earnings estimates or unusual gains or losses in major operations;
(vi) major changes in the Company’s management or the board of directors;
(vii) changes in dividends;
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(viii) extraordinary borrowings;
(ix) major changes in accounting methods or policies;
(x) award or loss of a significant contract;
(xi) cybersecurity risks and incidents, including vulnerabilities and breaches;
(xii) changes in debt ratings;
(xiii) proposals, plans or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations, strategic alliances, licensing arrangements, or purchases or sales of substantial assets; and
(xiv) offerings of Company securities.
Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a merger, acquisition or introduction of a new product, the point at which negotiations or product development are determined to be material is determined by balancing the probability that the event will occur against the magnitude of the effect the event would have on a company’s operations or stock price should it occur. Thus, information concerning an event that would have a large effect on stock price, such as a merger, may be material even if the possibility that the event will occur is relatively small. When in doubt about whether particular nonpublic information is material, you should presume it is material. If you are unsure whether information is material, you should either consult the Compliance Officer before making any decision to disclose such information (other than to persons who need to know it) or to trade in or recommend securities to which that information relates or assume that the information is material.
(b) Nonpublic. Insider trading prohibitions come into play only when you possess information that is material and “nonpublic.” The fact that information has been disclosed to a few members of the public does not make it public for insider trading purposes. To be “public” the information must have been disseminated in a manner designed to reach investors generally, and the investors must be given the opportunity to absorb the information. Even after public disclosure of information about the Company, you must wait until the close of business on the second trading day after the information was publicly disclosed before you can treat the information as public.
Nonpublic information may include:
(i) information available to a select group of analysts or brokers or institutional investors;
(ii) undisclosed facts that are the subject of rumors, even if the rumors are widely circulated; and
(iii) information that has been entrusted to the Company on a confidential basis until a public announcement of the information has been made and enough time has elapsed for the market to respond to a public announcement of the information, normally two trading days.
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As with questions of materiality, if you are not sure whether information is considered public, you should either consult with the Compliance Officer or assume that the information is nonpublic and treat it as confidential.
(c) Compliance Officer. The Company has appointed the Chief Executive Officer as the Compliance Officer for this Policy. The duties of the Compliance Officer include, but are not limited to, the following:
(i) assisting with implementation and enforcement of this Policy;
(ii) circulating this Policy to all employees and ensuring that this Policy is amended as necessary to remain up-to-date with insider trading laws;
(iii) pre-clearing all trading in securities of the Company by Covered Persons in accordance with the procedures set forth in Part II, Section 3 below; and
(iv) providing approval of any Rule 10b5-1 plans under Part II, Section 1(c) below and any prohibited transactions under Part II, Section 4 below.
(v) providing a reporting system with an effective whistleblower protection mechanism.
4. Exceptions
The trading restrictions of this Policy do not apply to exercising stock options granted under the Company’s current or future equity incentive plans or option plans for cash or the delivery of previously owned Company stock. However, the sale of any shares issued on the exercise of Company-granted stock options and any cashless exercise of Company-granted stock options are subject to trading restrictions under this Policy.
5. Violations of Insider Trading Laws
Penalties for trading on or communicating material nonpublic information can be severe, both for individuals involved in such unlawful conduct and their employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions. Given the severity of the potential penalties, compliance with this Policy is absolutely mandatory.
(a) Legal Penalties. A person who violates insider trading laws by engaging in transactions in a company’s securities when he or she has material nonpublic information can be sentenced to a substantial jail term and required to pay a criminal penalty of several times the amount of profits gained or losses avoided.
In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material nonpublic information. Tippers can be subject to the same penalties and sanctions as the tippees, and the SEC has imposed large penalties even when the tipper did not profit from the transaction.
The SEC can also seek substantial civil penalties from any person who, at the time of an insider trading violation, “directly or indirectly controlled the person who committed such violation,” which would apply to the Company and/or management and supervisory personnel. These control persons may be held liable for up to the greater of $1 million or three times the amount of the profits gained or losses avoided. Even for violations that result in a small or no profit, the SEC can seek penalties from a company and/or its management and supervisory personnel as control persons.
(b) Company-Imposed Penalties. Employees who violate this Policy may be subject to disciplinary action by the Company, including dismissal for cause. Any exceptions to the Policy, if permitted, may only be granted by the Compliance Officer and must be provided before any activity contrary to the above requirements takes place.
6. Inquiries
If you have any questions regarding any of the provisions of this Policy, please contact CIMG Inc. at + 852 70106695, Room R2, FTY D, 16/F, Kin Ga Industrial Building, 9 San On Street, Tuen Mun, Hong Kong
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PART II
1. Blackout Periods
All Covered Persons are prohibited from trading in the Company’s securities during blackout periods as defined below.
(a) Quarterly Blackout Periods. Trading in the Company’s securities is prohibited during the period beginning at the close of the market on two weeks before the end of each fiscal quarter and ending at the close of business on the second trading day following the date the Company’s financial results are publicly disclosed. During these periods, Covered Persons generally possess or are presumed to possess material nonpublic information about the Company’s financial results.
(b) Other Blackout Periods. From time to time, other types of material nonpublic information regarding the Company (such as negotiation of mergers, acquisitions or dispositions, investigation and assessment of cybersecurity incidents or new product developments) may be pending and not be publicly disclosed. While such material nonpublic information is pending, the Company may impose special blackout periods during which Covered Persons are prohibited from trading in the Company’s securities. If the Company imposes a special blackout period, it will notify the Covered Persons affected.
(c) Exception. These trading restrictions do not apply to transactions under a pre-existing written plan, contract, instruction, or arrangement under Rule 10b5-1 under the Securities Exchange Act of 1934 (an “Approved 10b5-1 Plan”) that:
(i) has been reviewed and approved at least one month in advance of any trades thereunder by the Compliance Officer (or, if revised or amended, such revisions or amendments have been reviewed and approved by the Compliance Officer at least one month in advance of any subsequent trades);
(ii) was entered into in good faith by the Covered Person at a time when the Covered Person was not in possession of material nonpublic information about the Company; and
(iii) gives a third party the discretionary authority to execute such purchases and sales, outside the control of the Covered Person, so long as such third party does not possess any material nonpublic information about the Company; or explicitly specifies the security or securities to be purchased or sold, the number of shares, the prices and/or dates of transactions, or other formula(s) describing such transactions.
2. Trading Window
Covered Persons are permitted to trade in the Company’s securities when no blackout period is in effect. Generally, this means that Covered Persons can trade during the period beginning on DAY THAT BLACKOUT PERIOD UNDER SECTION 1(A) ENDS and ending on DAY THAT NEXT BLACKOUT PERIOD UNDER SECTION 1(A) BEGINS. However, even during this trading window, a Covered Person who is in possession of any material nonpublic information should not trade in the Company’s securities until the information has been made publicly available or is no longer material. In addition, the Company may close this trading window if a special blackout period under Part II, Section 1(b) above is imposed and will re-open the trading window once the special blackout period has ended.
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3. Pre-Clearance of Securities Transactions
(a) Because Company Insiders are likely to obtain material nonpublic information on a regular basis, the Company requires all such persons to refrain from trading, even during a trading window under Part II, Section 2 above, without first pre-clearing all transactions in the Company’s securities.
(b) Subject to the exemption in subsection (d) below, no Company Insider may, directly or indirectly, purchase or sell (or otherwise make any transfer, gift, pledge or loan of) any Company security at any time without first obtaining prior approval from the Compliance Officer. These procedures also apply to transactions by such person’s spouse, other persons living in such person’s household and minor children and to transactions by entities over which such person exercises control.
(c) The Compliance Officer shall record the date each request is received and the date and time each request is approved or disapproved. Unless revoked, a grant of permission will normally remain valid until the close of trading two business days following the day on which it was granted. If the transaction does not occur during the two-day period, pre-clearance of the transaction must be re-requested.
(d) Pre-clearance is not required for purchases and sales of securities under an Approved 10b5-1 Plan. With respect to any purchase or sale under an Approved 10b5-1 Plan, the third party effecting transactions on behalf of the Company Insider should be instructed to send duplicate confirmations of all such transactions to the Compliance Officer.
4. Prohibited Transactions
(a) Company Insiders are prohibited from trading in the Company’s equity securities during a blackout period imposed under an “individual account” retirement or pension plan of the Company, during which at least 50% of the plan participants are unable to purchase, sell or otherwise acquire or transfer an interest in equity securities of the Company, due to a temporary suspension of trading by the Company or the plan fiduciary.
(b) Covered Persons, including any person’s spouse, other persons living in such person’s household and minor children and entities over which such person exercises control, are prohibited from engaging in the following transactions in the Company’s securities unless advance approval is obtained from the Compliance Officer:
(i) Short-term trading. Company Insiders who purchase Company securities may not sell any Company securities of the same class for at least six months after the purchase;
(ii) Short sales. Company Insiders/Covered Persons may not sell the Company’s securities short;
(iii) Options trading. Covered Persons may not buy or sell puts or calls or other derivative securities on the Company’s securities;
(iv) Trading on margin or pledging. Covered Persons may not hold Company securities in a margin account or pledge Company securities as collateral for a loan; and
(v) Hedging. Covered Persons may not enter into hedging or monetization transactions or similar arrangements with respect to Company securities.
5. Acknowledgment and Certification
All Covered Persons are required to sign the attached acknowledgment and certification.
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ACKNOWLEDGMENT AND CERTIFICATION
The undersigned does hereby acknowledge receipt of the Company’s Insider Trading Policy. The undersigned has read and understands (or has had explained) such Policy and agrees to be governed by such Policy at all times in connection with the purchase and sale of securities and the confidentiality of nonpublic information.
| (Signature) | |
| (Please print name) |
| Date: |
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Exhibit 21.1
SUBSIDIAIRES OF
CIMG INC.
| Subsidiaries | Place of Incorporation | |
| Wewin Technology LLC | State of Florida | |
| DZR Tech Limited | Hong Kong SAR | |
| CIMG Pte. Ltd. | Singapore | |
| Zhongyan Shangyue Technology Co., Ltd. | People’s Republic of China | |
| Henan Zhongyan Shangyue Technology Co. Ltd | People’s Republic of China | |
| Shanghai Huomao Cultural Development Co., Ltd. | People’s Republic of China | |
| Xilin Online (Beijing) E-commerce Co., Ltd | People’s Republic of China |
Exhibit 23.1
To:
CIMG Inc.
Room R2, FTY D, 16/F,
Kin Ga Industrial Building, 9 San On Street, Tuen Mun,
| Hong Kong |
June 12, 2025
Dear Sir/Madam,
We, Guangdong Shenmou Law Firm, refer to the Annual Report for the fiscal year ended September 30, 2024 on Form 10-K as amended from time to time (the “Annual Report”) of CIMG Inc. (the “Company”), which will be filed with the Securities and Exchange Commission (the “SEC”).
We, being the PRC legal advisor to the Company in connection with the Annual Report, hereby give our consent, and confirm that we have not withdrawn our consent, to include our name, opinions, advice, confirmations and/or summaries of the same in the Annual Report, and the references to our name, opinions, advice and/or confirmations in the form and context in which they respectively appear in the Annual Report.
We also hereby consent to the filing of this consent letter in connection with the Annual Report with the SEC as exhibit to the Annual Report.
Yours faithfully,
| /s/ Guangdong Shenmou Law Firm |  |
| Guangdong Shenmou Law Firm |
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-8 (No.: 333-283649) and Form S-3 (No.: 333-274818) of our report dated January 16, 2024 with respect to the audited consolidated financial statements of CIMG, Inc. (formerly known as NuZee, Inc.) for the year ended September 30, 2023. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
| /s/ MaloneBailey, LLP | |
| www.malonebailey.com | |
| Houston, Texas | |
| July 30, 2025 |
Exhibit 23.3
 |
Assentsure PAC UEN – 201816648N 180B Bencoolen Street #03-01 The Bencoolen Singapore 189648 http://www.assentsure.com.sg |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statements on Form S-8 (No. 333- 283649) and Form S-3 (No. 333- 274818) of our report dated July 30, 2025, with respect to the audited consolidated financial statements of CIMG Inc. (formerly known as NuZee, Inc.) (the “Company”) for the year ended September 30, 2024, appearing in this Annual Report on Form 10-K for the year ended September 30, 2024.
We also consent to the reference to us under the heading “Experts” in the Registration Statement.
/s/ Assentsure PAC
Singapore
July 30, 2025
Exhibit 31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jianshuang Wang, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 of CIMG Inc.;
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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors 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: July 30, 2025
| By: | /s/ Jianshuang Wang | |
| Name: | Jianshuang Wang | |
| Title: | Chief Executive Officer (Principal Executive Officer) and Chairperson of the Board |
Exhibit 31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Zhanzhan Shi, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 of CIMG Inc.;
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 fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors 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: July 30, 2025
| By: | /s/ Zhanzhan Shi | |
| Name: | Zhanzhan Shi | |
| Title: | Acting Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Jianshuang Wang, Chief Executive Officer and Chairperson of the Board of CIMG Inc. (the “Company”), hereby certify, that, to my knowledge:
1. The Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “Report”) of the Company 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: July 30, 2025
| By: | /s/ Jianshuang Wang | |
| Name: | Jianshuang Wang | |
| Title: | Chief Executive Officer and Chairperson of the Board |
Exhibit 32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Zhanzhan Shi, the Acting Chief Financial Officer of CIMG Inc. (the “Company”), hereby certify, that, to my knowledge:
1. The Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “Report”) of the Company 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: July 30, 2025
| By: | /s/ Zhanzhan Shi | |
| Name: | Zhanzhan Shi | |
| Title: | Acting Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 97.1
CIMG Inc.
POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
In accordance with the applicable rules of The Nasdaq Stock Market (the “Nasdaq Rules”), Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Rule 10D-1”), the Board of Directors (the “Board”) of CIMG Inc. (the “Company”) has adopted this Policy for Recovery of Erroneously Awarded Compensation (the “Policy”), which shall be deemed effective as of July 3, 2025 (the “Effective Date”). Capitalized terms used in this Policy but not otherwise defined herein are defined in Section 11.
1.0 Persons Subject to Policy
This Policy shall apply to current and former Officers of the Company.
2.0 Compensation Subject to Policy
This Policy shall apply to Incentive-Based Compensation received on or after the Effective Date. For purposes of this Policy, the date on which Incentive-Based Compensation is “received” shall be determined under the Applicable Rules, which generally provide that Incentive-Based Compensation is “received” when the relevant Financial Reporting Measure is attained or satisfied, without regard to whether the grant, vesting or payment of the Incentive-Based Compensation occurs after the end of that period.
3.0 Recovery of Compensation
In the event that the Company is required to prepare a Restatement, the Company shall recover, reasonably promptly, the portion of any Incentive-Based Compensation that is Erroneously Awarded Compensation, unless the Committee has determined that recovery would be Impracticable. Recovery shall be required in accordance with the preceding sentence regardless of whether the applicable Officer engaged in misconduct or otherwise caused or contributed to the requirement for the Restatement and regardless of whether or when restated financial statements are filed by the Company. For clarity, the recovery of Erroneously Awarded Compensation under this Policy will not give rise to any person’s right to voluntarily terminate employment for “good reason,” or due to a “constructive termination” (or any similar term of like effect) under any plan, program or policy of or agreement with the Company or any of its affiliates.
4.0 Manner of Recovery; Limitation on Duplicative Recovery
The Committee shall, in its sole discretion, determine the manner of recovery of any Erroneously Awarded Compensation, which may include, without limitation, reduction or cancellation by the Company or an affiliate of the Company of Incentive-Based Compensation or Erroneously Awarded Compensation, reimbursement or repayment by any person subject to this Policy of the Erroneously Awarded Compensation, and, to the extent permitted by law, an offset of the Erroneously Awarded Compensation against other compensation payable by the Company or an affiliate of the Company to such person. Notwithstanding the foregoing, unless otherwise prohibited by the Applicable Rules, to the extent this Policy provides for recovery of Erroneously Awarded Compensation already recovered by the Company pursuant to Sarbanes-Oxley Act Section 304 or Other Recovery Arrangements, the amount of Erroneously Awarded Compensation already recovered by the Company from the recipient of such Erroneously Awarded Compensation may be credited to the amount of Erroneously Awarded Compensation required to be recovered pursuant to this Policy from such person.
5.0 Administration
This Policy shall be administered, interpreted and construed by the Committee, which is authorized to make all determinations necessary, appropriate or advisable for such purpose. The Board may re-vest in itself the authority to administer, interpret and construe this Policy in accordance with applicable law, and in such event references herein to the “Committee” shall be deemed to be references to the Board. Subject to any permitted review by the applicable national securities exchange or association pursuant to the Applicable Rules, all determinations and decisions made by the Committee pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company and its affiliates, stockholders and employees. The Committee may delegate administrative duties with respect to this Policy to one or more directors or employees of the Company, as permitted under applicable law, including any Applicable Rules.
6.0 Interpretation
This Policy will be interpreted and applied in a manner that is consistent with the requirements of the Applicable Rules, and to the extent this Policy is inconsistent with such Applicable Rules, it shall be deemed amended to the minimum extent necessary to ensure compliance therewith.
7.0 No Indemnification; No Liability
The Company shall not indemnify or insure any person against the loss of any Erroneously Awarded Compensation pursuant to this Policy, nor shall the Company directly or indirectly pay or reimburse any person for any premiums for third-party insurance policies that such person may elect to purchase to fund such person’s potential obligations under this Policy. None of the Company, an affiliate of the Company or any member of the Committee or the Board shall have any liability to any person as a result of actions taken under this Policy.
8.0 Application; Enforceability
Except as otherwise determined by the Committee or the Board, the adoption of this Policy does not limit, and is intended to apply in addition to, any other clawback, recoupment, forfeiture or similar policies or provisions of the Company or its affiliates, including any such policies or provisions of such effect contained in any employment agreement, bonus plan, incentive plan, equity-based plan or award agreement thereunder or similar plan, program or agreement of the Company or an affiliate or required under applicable law (the “Other Recovery Arrangements”). The remedy specified in this Policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company or an affiliate of the Company.
9.0 Severability
The provisions in this Policy are intended to be applied to the fullest extent of the law; provided, however, to the extent that any provision of this Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.
10.0 Amendment and Termination
The Board or the Committee may amend, modify or terminate this Policy in whole or in part at any time and from time to time in its sole discretion. This Policy will terminate automatically when the Company does not have a class of securities listed on a national securities exchange or association.
11.0 Definitions
“Applicable Rules” means Section 10D of the Exchange Act, Rule 10D-1 promulgated thereunder, the listing rules of the national securities exchange or association on which the Company’s securities are listed, and any applicable rules, standards or other guidance adopted by the Securities and Exchange Commission or any national securities exchange or association on which the Company’s securities are listed.
“Committee” means the committee of the Board responsible for executive compensation decisions comprised solely of independent directors (as determined under the Applicable Rules), or in the absence of such a committee, a majority of the independent directors serving on the Board.
“Erroneously Awarded Compensation” means the amount of Incentive-Based Compensation received by a current or former Officer that exceeds the amount of Incentive-Based Compensation that would have been received by such current or former Officer based on a restated Financial Reporting Measure, as determined on a pre-tax basis in accordance with the Applicable Rules.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Financial Reporting Measure” means any measure determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures derived wholly or in part from such measures, including GAAP, non-GAAP financial measures, as well as stock price and total stockholder return.
“GAAP” means United States generally accepted accounting principles.
“Impracticable” means (a) (i) the direct costs paid to third parties to assist in enforcing recovery would exceed the Erroneously Awarded Compensation; provided that the Company (i) has made reasonable attempts to recover the Erroneously Awarded Compensation, (ii) documented such attempt(s), and (iii) provided such documentation to the relevant listing exchange or association, (b) to the extent permitted by the Applicable Rules, the recovery would violate the Company’s home country laws pursuant to an opinion of home country counsel; provided that the Company has (i) obtained an opinion of home country counsel, acceptable to the relevant listing exchange or association, that recovery would result in such violation, and (ii) provided such opinion to the relevant listing exchange or association, or (c) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and the regulations thereunder.
“Incentive-Based Compensation” means, with respect to a Restatement, any compensation that is granted, earned, or vested based wholly or in part upon the attainment of one or more Financial Reporting Measures and received by a person: (a) after beginning service as an Officer; (b) who served as an Officer at any time during the performance period for that compensation; (c) while the Company has a class of its securities listed on a national securities exchange or association; and (d) during the applicable Three-Year Period.
“Officer” means each person who serves as an executive officer of the Company, as defined in Rule 10D-1(d) under the Exchange Act.
“Restatement” means an accounting restatement to correct the Company’s material noncompliance with any financial reporting requirement under securities laws, including restatements that correct an error in previously issued financial statements (a) that is material to the previously issued financial statements or (b) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
“Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare a Restatement.
“Three-Year Period” means the three completed fiscal years immediately preceding the date the Company is required to prepare a Restatement. The “Three Year Period” also includes any transition period (that results from a change in the Company’s fiscal year) within or immediately following the three completed fiscal years identified in the preceding sentence. However, a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months shall be deemed a completed fiscal year.