ヌージーの四半期報告

Transferees

Percentage Transferred

Number Transferred

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to________

Commission File No. 001-39338

NUZEE, INC.

(exact name of registrant as specified in its charter)

Nevada

38-3849791

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2865 Scott St. Suite 107, Vista, California 92081

(Address of principal executive offices) (zip code)

(760) 295-2408

(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
Common Stock, $0.00001 par value		NUZE		The Nasdaq Stock Market LLC

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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 9, 2024, the registrant had 5,005,170 shares of common stock outstanding.

Table of Contents

	Page

PART I

Item 1. Financial Statements	4
Consolidated Balance Sheets (unaudited)	4
Consolidated Statements of Operations (unaudited)	5
Consolidated Statements of Comprehensive Loss (unaudited)	6
Consolidated Statements of Stockholders’ Equity (unaudited)	7
Consolidated Statements of Cash Flows (unaudited)	8
Notes to Consolidated Financial Statements (unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26

PART II	27

Item 1. Legal Proceedings	27
Item 1A. Risk Factors	28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3. Defaults Upon Senior Securities	28
Item 4. Mine Safety Disclosures	28
Item 5. Other Information	28
Item 6. Exhibits	29
SIGNATURES	30

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This report includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Such forward-looking statements reflect the views of NuZee, Inc. (“NuZee” or the “Company”) with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about the Company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, or any other matters, are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “expects”, “project,” “predict,” “believe,” “expect,” “anticipate,” “target,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements in this report may include, without limitation, statements regarding:

●	our plans to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our products, 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 and maca product 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 securities offerings.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events, or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements in the section of our Annual Report on Form 10-K filed with the SEC on January 16, 2024, as amended, titled “Risk Factors” and sections of this report that describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

Item 1. Financial Statements

NuZee, Inc.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2024			September 30, 2023
ASSETS
Current assets:
Cash	$	374,458		$	982,869
Accounts receivable, net		371,845			499,582
Inventories, net		937,166			772,825
Current assets held for disposition		-			706,925
Prepaid expenses and other current assets		240,906			414,048
Total current assets		1,924,375			3,376,249

Property and equipment, net		375,498			184,763

Other assets:
Right-of-use asset - operating lease		200,295			403,258
Investment in unconsolidated affiliate		158,470			162,259
Intangible assets, net		87,500			110,000
Long-term assets held for disposition		-			197,409
Other assets		2,353			7,060
Total other assets		448,618			879,986

Total assets	$	2,748,491		$	4,440,998

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	2,378,370		$	1,814,035
Notes payable		221,154			4,753
Lease liability - operating lease		100,712			216,128
Lease liability - finance lease		824			26,048
Deferred income		25,127			379,795
Current liabilities held for disposition		-			115,644

Total current liabilities		2,726,187			2,556,403

Non-current liabilities:
Lease liability - operating lease, net of current portion		-			162,301
Non-current liabilities held for disposition		-			47,937
Other noncurrent liabilities		215,917			-
Total Non-current liabilities		215,917			210,238

Total liabilities	$	2,942,104		$	2,766,641

Stockholders’ equity:
Common stock; 200,000,000 shares authorized, $0.00001 par value; 2,387,434 and 748,644 shares issued and outstanding as of June 30, 2024, and September 30, 2023, respectively		24			8
Additional paid in capital		78,266,339			74,925,843
Accumulated deficit		(78,614,726	)		(73,371,987	)
Accumulated other comprehensive income		154,750			120,493
Total stockholders’ (deficit) equity		(193,613	)		1,674,357

Total liabilities and stockholders’ equity	$	2,748,491		$	4,440,998

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NuZee, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30, 2024			Three Months Ended June 30, 2023			Nine Months Ended June 30, 2024			Nine Months Ended June 30, 2023
Revenues, net	$	366,888		$	268,023		$	1,641,955		$	1,205,123
Cost of sales		513,101			262,474			1,820,140			1,237,315
Gross profit		(146,213	)		5,549			(178,185	)		(32,192	)

Operating expenses		1,335,371			1,882,269			4,748,076			5,794,126
Loss from operations		(1,481,584	)		(1,876,720	)		(4,926,261	)		(5,826,318	)

Loss from equity method investment		(1,666	)		(1,853	)		(3,789	)		(5,350	)
Other income		335,838			49,338			412,580			139,601
Other expense		(44,913	)		(60,353	)		(145,140	)		(181,667	)
Interest income (expense), net		(109	)		3,298			(1,277	)		15,573
Net loss from continuing operations		(1,192,434	)	$	(1,886,290	)		(4,663,887	)	$	(5,858,161	)

Loss from discontinued operations		(98,086	)		(139,047	)		(429,175	)		(318,255	)
Loss from disposition of discontinued operations		(149,677	)		-			(149,677	)		-

Net loss	$	(1,440,197	)		(2,025,337	)	$	(5,242,739	)	$	(6,176,416	)

Per Share Information – basic and diluted

Loss from continuing operations	$	(0.76	)	$	(2.45	)	$	(3.48	)	$	(8.18	)

Loss from discontinued operations	$	(0.06	)	$	(0.18	)	$	(0.32	)	$	(0.44	)

Net loss	$	(0.92	)	$	(2.63	)	$	(3.91	)	$	(8.62	)

Basic and diluted weighted average number of common stock outstanding		1,561,410			770,063			1,341,059			716,388

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NuZee, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

For the three months ended June 30	2024			2023
	NuZee, Inc.
For the three months ended June 30	2024			2023
Net loss	$	(1,440,197	)	$	(2,025,337	)

Foreign currency translation		(16,309	)		(19,331	)
Total other comprehensive income net of tax		(16,309	)		(19,331	)
Comprehensive loss	$	(1,456,506	)	$	(2,044,668	)

For the nine months ended June 30	2024			2023
	NuZee, Inc.
For the nine months ended June 30	2024			2023
Net loss	$	(5,242,739	)	$	(6,176,416	)

Foreign currency translation		34,257			53,287
Total other comprehensive income net of tax		34,257			53,287
Comprehensive loss	$	(5,208,482	)	$	(6,123,129	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NuZee, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

										Accumulated
					Additional					other
	Common stock				paid-in		Accumulated			comprehensive
	Shares		Amount		capital		deficit			Income			Total

Balance September 30, 2023		748,644	$	8	$	74,925,843	$	(73,371,987	)	$	120,493		$	1,674,357

Common Stock issued for cash		488,750		5		1,277,113		-			-			1,277,118
Stock option expense		-		-		11,505		-			-			11,505
Issued private placement		46,800		-		129,662		-			-			129,662
Other comprehensive income		-		-		-		-			42,408			42,408
Net loss		-		-		-		(2,148,611	)		-			(2,148,611	)
Balance December 31, 2023		1,284,194	$	13	$	76,344,123	$	(75,520,598	)	$	162,901		$	986,439
Stock option expense		-		-		54,443		-			-			54,443
Issued private placement		14,220				29,994		-			-			29,994
Other comprehensive income		-		-		-		-			8,158			8,158
Net loss		-		-		-		(1,653,931	)		-			(1,653,931	)
Balance March 31, 2024		1,298,414	$	13	$	76,428,560	$	(77,174,529	)	$	171,059		$	(574,897	)

Common Stock issued for cash		1,089,020		11		1,819,988		-			-			1,819,999
Stock option expense		-		-		17,791		-			-			17,791
Issued private placement Other comprehensive income		-		-		-		-			(16,309	)		(16,309	)
Net loss		-		-		-		(1,440,197	)		-			(1,440,197	)
Balance June 30, 2024		2,387,434		24		78,266,339		(78,614,726	)		154,750			(193,613	)

											Accumulated
					Additional						other
	Common stock				paid-in			Accumulated			comprehensive
	Shares		Amount		capital			deficit			income			Total
Balance September 30, 2022		676,229	$	7	$	74,281,418		$	(64,622,520	)	$	83,894		$	9,742,799
Stock option expense		-		-		197,108			-			-			197,108
Restricted stock compensation		-		-		62,839			-			-			62,839
Round-up shares issued in reverse split		8,859		-		-			-			-			-
Other comprehensive income		-		-		-			-			115,583			115,583
Net loss		-		-		-			(2,183,206	)		-			(2,183,206	)
Balance December 31, 2022		685,088	$	7	$	74,541,365		$	(66,805,726	)	$	199,477		$	7,935,123
Common stock issued for services		6,000		-		57,120			-			-			57,120
Forgiveness of stock issuance costs		-		-		25,000			-			-			25,000
Stock option expense		-		-		(114,482	)		-			-			(114,482	)
Restricted stock compensation		78,151		1		51,939			-			-			51,940
Other comprehensive loss		-		-		-			-			(42,965	)		(42,965	)
Net loss		-		-		-			(1,967,873	)		-			(1,967,873	)
Balance March 31, 2023		769,239	$	8	$	74,560,942		$	(68,773,599	)	$	156,512		$	5,943,863
Common stock issued for services		7,500		-		78,750			-			-			78,750
Forgiveness of stock issuance costs		-		-		15,000			-			-			15,000
Stock option expense		-		-		107,754			-			-			107,754
Restricted stock compensation		-		-		61,996			-			-			61,996
Other comprehensive loss		-		-		-			-			(19,331	)		(19,331	)
Other comprehensive income (loss)		-		-		-			-			(19,331	)		(19,331	)
Net loss		-		-		-			(2,025,337	)		-			(2,025,337	)
Balance June 30, 2023		776,739	$	8	$	74,824,442		$	(70,798,936	)	$	137,181		$	4,162,695

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NuZee, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended			Nine Months Ended
	June 30, 2024			June 30, 2023

Operating activities:
Net loss	$	(5,242,739	)	$	(6,176,416	)
Net loss from discontinued operations		429,175			318,255
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		142,107			175,995
Noncash lease expense		308,788			171,718
Stock option expense		83,739			367,155
Issuance of common stock for services		-			135,870
Bad debt expense		24,049			24,049
Loss on disposition of asset		-			41,108
Loss from equity method investment		3,789			5,350
Change in operating assets and liabilities:
Accounts receivable		103,688			99,428
Inventories		(164,341	)		(218,394	)
Prepaid expenses and other current assets		173,142			218,271
Other assets		4,707			7,061
Accounts payable, accrued expenses and other current liabilities		564,335			390,793
Deferred income		(354,668	)		28,934
Lease liability – operating lease		(383,542	)		(195,366	)
Other non-current liabilities		37,229			-
Net cash used in operating activities		(4,270,542	)		(4,606,189	)

Investing activities:
Purchase of equipment		(310,342	)		(31,813	)
Net cash used in investing activities		(310,342	)		(31,813	)

Financing activities:
Repayment of loans		(429,933	)		(5,932	)
Borrowings from loans		398,754			-
Proceeds from sale of future receipts		195,001			-
Repayment of finance lease		(25,224	)		(21,729	)
Repayment of equipment finance		(31,626	)		-
Proceeds from equipment finance		262,893			-
Proceeds from issuance of convertible note		320,000			-
Proceeds from issuance of common stock for cash		1,277,118			-
Proceeds from private placement		1,659,655			-
Net cash provided by (used in) financing activities		3,626,638			(27,661	)

Discontinued Operations:
Net income (loss) from discontinued operations		(429,175	)		(318,255	)
Adjustments to reconcile net income (loss) to net cash
Depreciation from discontinued operations		3,690			5,337
Changes in operating assets and liabilities		737,063			(403,545	)
Cash Flows from operating activities		311,578			(716,463	)
Cash Flows from investing activities		-			-
Cash Flows from financing activities		-			-

Effect of foreign exchange on cash		34,257			53,287
Net change in cash		(608,411	)		(5,328,839	)
Cash, beginning of period		982,869			8,262,319
Cash, end of period	$	374,458		$	2,933,480

Supplemental disclosure of cash flow information:
Cash paid for interest-continuing operations	$	1,416		$	3,760
Cash paid for taxes-continuing operations		3,048			8,090

Cash paid for interest-discontinued operations	$	-		$	-
Cash paid for taxes-discontinued operations		-			-

Non-cash transactions:
Forgiveness of stock issuance costs		-			40,000
ROU assets and liabilities added during the period	$	105,825			-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

NuZee, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2024

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements of NuZee, Inc. (together with its subsidiaries, referred to herein as the “Company”, “we” or “NuZee”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023 as filed with the SEC on January 16, 2024. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the Annual Report on Form 10-K for the year ended September 30, 2023, have been omitted.

Principles of Consolidation

The Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, balances and transactions have been eliminated upon consolidation.

The Company had two wholly owned international subsidiaries in NuZee KOREA Ltd. “NuZee KR”) and NuZee Investment Co., Ltd. “NuZee INV”). Effective June 7, 2024 the Company entered into an agreement to sell both subsidiaries.

Discontinued Operations

On June 7, 2024, the Company consummated the sale of its subsidiaries, NuZee Korea and NuZee Investment, to its former CEO, Chairman and co-founder. The Company elected to focus its efforts and resources on its Dripkit investment, the single serve pour over and brew bag market in North America and its recently introduced bagged coffee processing services in North America. The transaction for the sale of the subsidiaries is accounted for as discontinued operations in accordance with ASC 205-20.

The following table summarizes the major categories of income and expense for the discontinued operations sold on Jun 7, 2024.

SCHEDULE OF INCOME AND EXPENSE FOR THE DISCONTINUED OPERATIONS

	Three Months Ended June 30, 2024			Three Months Ended June 30, 2023			Nine Months Ended June 30, 2024			Nine Months Ended June 30, 2023
Revenues, net	$	157,440		$	380,584		$	842,121		$	1,360,998
Cost of sales		149,875			333,980			773,534			1,164,491
Gross profit		7,565			46,604			68,587			196,507

Operating expenses		106,480			185,646			476,532			533,918
Loss from operations		(98,915	)		(139,042	)		(407,945	)		(337,411	)

Other income and (expense)		829			(5	)		(21,230	)		19,156
Loss from discontinued operations		(98,086	)		(139,047	)		(429,175	)		(318,255	)
Loss from disposition of discontinued operations		(149,677	)		-			(149,677	)		-

Net loss	$	(247,763	)	$	(139,047	)	$	(578,852	)	$	(318,255	)

Reclassifications of Prior Year Amounts

Certain prior year amounts have been reclassified for consistency with the current year presentation. The reclassifications had no effect on the reported results of operations or net assets of the Company.

2022 Reverse Stock Split

On December 9, 2022, our stockholders approved a proposal granting the board of directors of the Company (the “Board”) discretionary authority to file an amendment (the “Certificate of Amendment”) to our Articles of Incorporation, as amended (the “Articles”), which amends the Articles to add a Section 1A to effect a reverse stock split of our common stock, at any ratio from 1-for-10 to 1-for-50 at the Board’s discretion. On December 21, 2022, the Board approved a 1-for-35 reverse stock split of our common stock (the “Reverse Stock Split”). The Certificate of Amendment was filed by the Company on December 28, 2022 and became effective upon acceptance of the Company’s filing of the Certificate of Amendment with the Secretary of State of Nevada. Accordingly, each holder of our common stock received one share of common stock for every 35 shares such stockholder held immediately prior to the effectiveness of the Reverse Stock Split. All shares and per share information included in these financial statements and notes thereto have been retroactively adjusted to give effect to the Reverse Stock Split.

Earnings per Share

Basic earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of June 30, 2024 and June 30, 2023, the total number of common stock equivalents was 225,225 and 253,862, respectively, and composed of stock options and warrants. The Company incurred a net loss for the three and nine months ended June 30, 2024 and 2023, respectively and therefore, basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.

Going Concern and Capital Resources

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, raising capital and the commercialization and manufacture of its single serve coffee products. The Company has grown revenues from its principal operations; however, there is no assurance of future revenue growth similar to historical levels. As of June 30, 2024, the Company had cash of $ 374,458 and working capital of $ (801,812). The Company has not attained profitable operations since inception. The accompanying consolidated financial statements have been prepared in accordance with GAAP, which contemplates continuation of the Company as a going concern. The Company has had limited revenues, recurring losses and an accumulated deficit. These items raise substantial doubt as to the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent upon management’s ability to develop profitable operations and to raise additional capital for the further development and marketing of the Company’s products and business.

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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of June 30, 2024 and September 30, 2023.

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

Trade accounts receivable are 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 $82,685 of allowance for doubtful accounts as of June 30, 2024 and $58,636 allowance for doubtful accounts as of September 30, 2023.

Major Customers

In the nine months ended June 30, 2024 and 2023, revenue was primarily derived from major customers disclosed below.

SCHEDULE OF REVENUE BY MAJOR CUSTOMERS

Nine months ended June 30, 2024:

Customer Name		Sales Amount				% of Total Revenue				Accounts Receivable Amount				% of Total Accounts Receivable
Customer CL		$	1,142,865				70	%		$	138,246				37	%

Nine months ended June 30, 2023:

Customer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer CL	$	391,232		32	%	$	94,487		58	%
Customer CN		426,748		35	%		22,064		13	%

Lease

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the consolidated balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The Company implemented ASU No. 2016-02 on October 1, 2019.

The Company performs a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company had a long-term operating lease for office and manufacturing space in Plano, Texas. The leased property in Plano, Texas, had a lease term which expired on June 30, 2024. The lease has an option to extend beyond the stated termination date, but the option was not exercised. The Company is in the process of exiting the lease along with its subtenant. This lease was not included under ASC 842 because it is expired.

In May 2022, the Company renewed the office and manufacturing space in Vista, California which was scheduled to expire on January 31, 2023, through March 31, 2025. The lease has a monthly base rent of $8,451, plus common area expenses. Along with the extension, we leased an additional 1,796 square feet that has a monthly base rent of $2,514 through March 31, 2025. We extended our sub-leased property in Vista, California, through January 31, 2023. The lease has a monthly rent of $2,111 and has been calculated as a ROU Asset co-terminus with the direct-leased property. The Company sold its operation in Seoul, Korea and has removed remaining asset and liabilities for ROU as of June 2024.

As of June 30, 2024, our operating leases had a weighted average remaining lease term of 0.75 year 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	$	403,258
ROU Asset added during the period		105,825
Amortization and removal during the period		(308,788	)
ROU Asset – June 30, 2024	$	200,295

Lease Liability – October 1, 2023	$	378,429
Lease Liability added during the period		105,825
Amortization and removal during the period		(383,542	)
Lease Liability – June 30, 2024	$	100,712

Lease Liability – Short-Term	$	100,712
Lease Liability – Long-Term		-
Lease Liability – Total	$	100,712

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 June 30, 2024:

Amounts due within twelve months of June 30,

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES


2025	$	100,712
2026		-
Total Minimum Lease Payments		100,712
Less Effect of Discounting		-
Present Value of Future Minimum Lease Payments		100,712
Less Current Portion of Operating Lease Liabilities		100,712
Long-Term Operating Lease Liabilities	$	-

On October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on certain packing equipment. The terms of this agreement require us to pay $2,987 per month through June 2024. All financing leases have been paid off as of June 30, 2024. The Company incurred interest expense of $1,416 during the nine months ended June 30, 2024.

Lease expenses included in operating expense for the nine months ended June 30, 2024, and 2023 was $140,877 and $147,327, respectively. Lease expense, which represents sublease expense included in other expense for the nine months ended June 30, 2024 and 2023 was $144,690 and $140,559, respectively.

Cash and non-cash activities associated with the leases for the nine months ended June 30, 2024, are as follows:

SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES


Operating cash outflows from operating leases:	$	140,877
Operating cash outflows from finance lease:	$	1,303
Financing cash outflows from finance lease:	$	15,297

In September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020 under favorable terms that are co-terminus with the original lease ending June 30, 2024. During the nine months ended June 30, 2024 and 2023, the Company recorded sublease income of $119,275 and $133,443, respectively. As of June 30, 2024, the lease expired but the subtenant remained in the facility subject to holdover provisions. As of August 1, 2024, the Company has been removed from any direct relationship in the lease or sublease and is working through the exit requirements with the subtenant and landlord.

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 NuZee, Inc. recorded to other comprehensive loss amounted to $34,257 and $53,287 for the nine months ended June 30, 2024 and 2023, respectively.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

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 on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s consolidated balance sheets and consolidated statements of operations; however, the Company’s share of the earnings or losses of the Investee company is reflected in the caption Gain (loss) from equity method investment in the consolidated statements of operations. The Company’s carrying value in an equity method investee company is reflected in the caption “Investment in unconsolidated affiliate in the Company’s consolidated balance sheets.

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.

On January 9, 2020, a joint venture agreement was signed between Industrial Marino, S.A. de C.V. (50%) and the Company (50%) forming NuZee LATIN AMERICA, S.A. de C.V. (“NLA”). NLA was formed pursuant to the laws of Mexico, with corporate domicile in Mazatlán, Mexico. As part of the capitalization of NLA, the Company contributed two co-packing machines to the joint venture. These machines had an aggregate carrying cost of $313,012. The Company received $110,000 in cash for this contribution and recorded an investment in NLA of $160,000 and a loss of $43,012 on the contribution of the machines to NLA.

The Company accounts for NLA using the equity method of accounting since the management of day-to-day operations at NLA ultimately lies with the Company’s joint venture partner as the operations of NLA are based in its partners facilities as well as our partner appoints the Chairman of the joint Board. As of June 30, 2024, the activity in NLA consisted of the contribution of two machines as described above and other start up and initial sales and marketing related activities. $3,789 and $5,350 of losses were recognized under the equity method of accounting for the nine months ended June 30, 2024 and 2023, respectively.

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605). The new standard’s core principle is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in the standard are applied in five steps: 1) Identify the contract(s) with a customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations in the contract; and 5) Recognize revenue when (or as) the entity satisfies a performance obligation. We adopted Topic 606 as of October 1, 2018 on a modified retrospective basis. The adoption of Topic 606 did not have a material impact on our consolidated financial statements, including the presentation of revenues in our Consolidated Statements of Operations.

Return and Exchange Policy

The Company provides a 30-day money-back guarantee if a buyer is not satisfied with a product. 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.

For the nine months ended June 30, 2024 and 2023, the Company had no sales allowances for estimated returns. Historically, the Company has experienced minimal returns. Any future returns are not expected to be material.

Cost Recognition

Cost of products sold is primarily comprised of direct materials consumed in the manufacturing of co-packing arrangements or the production of our own products for resale. Cost of products sold also includes directly related labor salaries and other overhead cost including depreciation, temporary labor and shipping costs for shipment of raw materials to our facilities.

Selling, General and Administrative Expense

Selling, general and administrative expense (SG&A) is primarily comprised of personnel costs, sales and marketing expenses, depreciation and amortization, insurance expenses, legal and professional services fees, travel and office expenses, and facilities costs. In some situations, the Company covers shipping fees for delivering customer orders, and the shipping and handling expenses are recorded under operating expenses in the consolidated statements of operations.

Prepaid expenses and other current assets

Prepaid expenses and other current assets as of June 30, 2024 and September 30, 2023 is as follows:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

		June 30, 2024				September 30, 2023
Prepaid expenses and other current assets		$	240,906			$	414,048

The Prepaid expenses and other current assets balance of $240,906 as of June 30, 2024 primarily consists of prepaid rent, prepaid insurance and financing fees. The balance of $414,048 as of September 30, 2023 primarily consists of prepaid insurance, deposits for professional services, and rent.

Inventory

Inventory, consisting principally of raw materials, work in process and finished goods held for production and sale, is stated at the lower of cost or net realizable value, cost being determined using the weighted average cost method. The Company reviews inventory levels at least quarterly and records a valuation allowance when appropriate. At June 30, 2024 and September 30, 2023, the carrying value of inventory of $937,166 and $772,825 respectively, reflected on the consolidated balance sheets is net of this adjustment.

SCHEDULE OF INVENTORY

	June 30, 2024		September 30, 2023
Raw materials	$	920,178	$	766,916
Finished goods	$	16,988		5,909
Total	$	937,166	$	772,825

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation. The Company generally depreciates property and equipment on a straight-line basis over the estimated useful lives of the assets after the assets are placed in service except for NuZee KR which uses the declining balance method. Office equipment is depreciated over a 3-year life, furniture over a 7-year life, and other equipment over a 5-year life. Depreciation expense for the nine months ended June 30, 2024 and 2023 was $119,607 and $153,495, respectively. Repair and maintenance costs are expensed as incurred. Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment that exceed $1,000 are capitalized. Property and equipment as of June 30, 2024 and September 30, 2023 consist of:

SCHEDULE OF PROPERTY AND EQUIPMENT

	June 30, 2024			September 30, 2023
Machinery & Equipment		1,456,064			1,145,722
Vehicles		57,431			57,431
Leasehold Improvements		-			-
Less - Accumulated Depreciation		(1,137,997	)		(1,018,390	)
Net Property and Equipment	$	375,498		$	184,763

The Company is required to make deposits or prepayments and progress payments on equipment purchases before the Company receives possession and title. As a result, the Company accounts for such payments as Other Assets until it has possession at which time the equipment is recorded as Property and Equipment. There were no such deposits as of June 30, 2024 or September 30, 2023.

Loans

On April 1, 2019, the Company purchased a delivery van from Ford Motor Credit for $41,627. The Company paid $3,500 as a down payment and financed $38,127 for 60 months at a rate of 2.9%. The loan is secured by the van. The outstanding balance on the loan at June 30, 2024 and September 30, 2023 amounted to $0 and $4,753, respectively.

On March 1, 2024, the Company entered into an unsecured finance agreement in the amount of $200,000 with an annual interest rate of approximately 23%. Proceeds received, net of fees, were $195,000. Repayments are biweekly in the amount of $4,730. The unsecured finance agreement allows collection of a specified percentage of future receipts, estimated at $4,730 biweekly. The actual collection may be adjusted based on an increase or decrease in future receipts as provided in the agreement.

The Company entered into a financing arrangement on February 15, 2024 with Bill.com wherein it has the option to finance certain accounts receivable at a 3% face discount. The advance against the accounts receivable is repaid when the customer pays the invoice. As of June 30, 2024, outstanding advances of $73,848 were due to be repaid to Bill.com.

Other noncurrent liabilities

On October 12, 2023, the Company entered into a finance agreement with a lender for the purchase of packaging equipment with future payments of $262,893 (net of deferred financing costs) which amount is included in other noncurrent liabilities. The packaging equipment is expected to be delivered in the fourth quarter of fiscal 2024 at which time it will be placed into service.

2. GEOGRAPHIC CONCENTRATION

The Company is organized based on fundamentally one business segment. Through June 7, 2024 it sold its products on a world-wide basis. The Company operated in in three geographical segments. The Company co-packed product for customers and produced and sold its products directly in North America and Korea. With the sale of its Korean subsidiary, the Company no longer sells products in Korea. The Company previously had a minimally staffed office in Japan that provided support for import and export of product and materials between the U.S. and Japan, as well as investor relations support to its stockholders based in Japan; these functions are now supported by the Company’s personnel residing in the United States, and the Japanese subsidiary was sold.

As of June 7, 2024 all revenues are from North America, and all property and equipment is located in North America.

3. INTANGIBLE ASSETS

Identifiable life intangible assets

As of June 30, 2024, the Company’s intangible assets consisted of unamortized tradename asset of $87,500 which is being amortized over five years from the date of acquisition at a rate of $30,000 per year.

Amortization expense was $22,500 for the nine months ended June 30, 2024.

Amortization expense for the next four fiscal years is as follows:

SCHEDULE OF AMORTIZATION EXPENSE

	Tradename Amortization
2024		7,500
2025		30,000
2026		30,000
2027		20,000
Grand Total		87,500

4. ISSUANCE OF EQUITY SECURITIES

Private Placement

On June 4, 2024, the Company entered into a Securities Purchase Agreement (“SPA”) with certain investors providing for the sale of 866,048 share of the Company’s common stock for an aggregate purchase price of $1,500,000. The purchase, sale and issuance of the shares of commons stock took place on June 7, 2024.

On June 4, 2024 in connection with the SPA, the Company entered into a Registration Rights Agreement providing, among other things, that the Company would as soon as reasonably practicable, and no later than June 13, 2024, file with the SEC a registration statement registering the resale of the shares of common stock.

Convertible Notes and Warrant Purchase Agreement

On April 27, 2024, the Company entered into a convertible note and warrant purchase agreement with certain investors providing for the private placement of convertible promissory notes in the aggregate principal amount of $320,000 and warrants to purchase up to an aggregate of 221,147 shares of the Company’s common stock. The closing of the private placement occurred on May 2, 2024.

On April 27, 2024 in connection with the agreement, the Company entered into a Registration Rights Agreement providing, among other things, that the Company would as soon as reasonably practicable file with the SEC a registration statement registering the resale of the shares of common stock issuable upon the conversion of the notes and the shares of common stock issuable upon the exercise of the warrants.

On June 12, 2024, the investors exercised their conversion option and converted the promissory notes to shares of commons stock. As a result of the conversion, 222,972 shares of common stock were issued to the investors.

Registered Offering

The Company offered in an underwritten public offering (the “Offering”), 425,000 shares of common stock, par value $0.00001 per share (the “Common Stock”), at a price to the public of $3.00 per share of Common Stock (the “Offering Price”). The Offering was made pursuant to a shelf registration statement filed with and declared effective by the Securities and Exchange Commission (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 October 18, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC, as the sole book-running manager and underwriter (the “Underwriter”), relating to the Offering. Pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to 63,750 additional shares of Common Stock at the Offering Price, less underwriting discounts and commissions. The Company received approximately $1.0 million in net proceeds from the Offering, after deducting underwriting discounts and commissions and other estimated Offering expenses payable by the Company. In addition, on December 5, 2023, the Underwriter utilized its option to purchase additional shares of Common Stock resulting in additional net proceeds of approximately $178,000 after deducting underwriting discounts and commissions.

Private Placement

On November 9, 2023, the Company issued in a private placement to an accredited investor (“Shareholder”) 46,800 shares of Common Stock, together with warrants to purchase a total of approximately 5,200 shares of Common Stock at an exercise price of $2.77 per share (collectively, the “Subscription Shares”) in accordance with the terms of a Subscription Agreement and common stock purchase warrant. The warrants have a five year term and are exercisable upon the six-month anniversary of the original issuance date. The Subscription Shares were issued with a purchase price of $129,662.

On January 19, 2024, the Company issued in a private placement to an accredited investor 14,220 shares of Common Stock, together with warrants to purchase a total of approximately 1,279 shares of Common Stock at an exercise price of $2.11 per share (collectively, the “Subscription Shares”) in accordance with the terms of a Subscription Agreement and common stock purchase warrant. The warrants have a five year term and are exercisable upon the six-month anniversary of the original issuance date. The Subscription Shares were issued with a purchase price of $30,004.

Restricted Shares

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 6,000 restricted shares (the “Restricted Shares”) of the Company’s common stock under the 2023 Stock Incentive Plan. These Restricted Shares vested as follows: (i) 2,000 Restricted Shares shall vest upon the first anniversary of the commencement date; (ii) 2,000 Restricted Shares shall vest upon the second anniversary of the commencement date; and (iii) 2,000 Restricted Shares shall vest upon the third anniversary of the commencement date. The Company recognized common stock compensation expense of $3,751 for the year ended September 30, 2023 related to these Restricted Shares.

On March 15, 2023, the Company granted 58,619 performance-based restricted shares to executive officers, employees and consultants as part of the 2013 Stock Incentive Plan and the 2019 Stock Incentive Plan. 50% 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 50% 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.

Restricted Stock Awards

On March 17, 2022, pursuant to the Company’s non-employee director compensation policy, the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) granted 674 restricted shares (the “Restricted Shares”) of the Company’s common stock to each of the Company’s five independent directors pursuant to the NuZee, Inc. 2013 Stock Incentive Plan, totaling 3,370 Restricted Shares. 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. The Restricted Shares are valued using the closing stock price on the grant date and the Company is expensing these stock option awards on a straight-line basis over the requisite service period.

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.

The Company recognized common stock compensation expense of $83,739 in the nine months ending June 30, 2024 as compared to $176,775 in the nine months ending June 30, 2023.

The following table summarizes the restricted common shares activities for the nine months ended June 30, 2024 and 2023:

SCHEDULE OF RESTRICTED COMMON SHARES

	2024			2023
Number of shares outstanding at September, 2023 and 2022		50,056			3,370
Restricted shares granted		-			80,609
Restricted shares forfeited		(13,561	)		(2,458	)
Restricted shares vested		(17,592	)		(3,370	)
Number of shares outstanding at June 30, 2024 and 2023		18,903			78,151

During the nine months ended June 30, 2024, 13,561 restricted shares were forfeited because of the termination of employment or performance goals not achieved.

During the nine months ended June 30, 2023, the Company issued 7,500 shares of common stock for services rendered.

5. STOCK OPTIONS AND WARRANTS

Options

During the nine months ended June 30, 2024, the Company granted no new stock options.

During the nine months ended June 30, 2024, 30,107 stock options were forfeited or expired because of termination of employment, expiration of options and performance conditions not met.

The following table summarizes stock option activity for the nine months ended June 30, 2024.

SCHEDULE OF STOCK OPTION ACTIVITY

	Number of Shares Issuable Upon Exercise of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2023		96,458		$	150.39		5.84	$	-
Forfeited and expired		(30,107	)		93.07		-0-		-
Outstanding at June 30, 2024		66,351		$	175.24		2.27	$	-
Exercisable at June 30, 2024		59,089		$	193.51		1.48	$	-

The Company is expensing these stock option awards on a straight-line basis over the requisite service period. The Company recognized stock option expense of $10,823 and $190,380 for the nine months ended June 30, 2024 and June 30, 2023, respectively. Unamortized option expense as of June 30, 2024, for all options outstanding amounted to $20,300. These costs are expected to be recognized over a weighted average period of 1.62 years.

A summary of the status of the Company’s nonvested options as of June 30, 2024, is presented below:

SCHEDULE OF NONVESTED OPTIONS

Nonvested options

	Number of Nonvested Options			Weighted Average Grant Date Fair Value
Nonvested options at September 30, 2023		24,029		$	80.73
Granted		-			-
Forfeited		(16,119	)		103.83
Vested		(648	)		352.55
Nonvested options at June 30, 2024		7,262		$	24.27

Warrants

During the nine months ended June 30, 2024, the Company granted 6,476 new warrants to purchase shares of common stock and did not issue any shares upon the exercise of outstanding warrants to purchase shares of common stock.

The following table summarizes warrant activity for the nine months ended June 30, 2024:

SCHEDULE OF WARRANT ACTIVITY

	Number of Shares Issuable Upon Exercise of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2023		152,398	$	158.24		2.65	$	-
Issued		6,476		2.64
Exercised		-		-
Expired		-		-
Outstanding at June 30, 2024		158,874	$	151.90		2.00		-
Exercisable at June 30, 2024		158,874	$	151.90		2.00	$	-

6. CONTINGENCY

Steeped, Inc. 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 “Steeped Litigation”). The Steeped Litigation relates 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’s operative complaint in the pending Steeped Litigation alleges breach of contract, intentional interference with contractual relations, intentional interference with prospective economic advantage, and fraud in the inducement of contract. Plaintiff seeks 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 Plaintiff’s reputation and goodwill among its customers and partners; and reasonable attorneys’ fees and costs. NuZee answered Steeped’s complaint with a general denial and asserted twenty-five affirmative defenses.

On January 16, 2024, a mediation hearing was held. After the close of business, the mediator suggested a settlement amount of $500,000 which both parties agreed to accept. On June 19, 2024 (the “Effective Date”), Steeped and the Company entered into a settlement agreement outlining the payment schedule for the $500,000 according to the following schedule: $100,000 within 20 business days of the Effective Date, $200,000 within 40 business days of the Effective Date and $200,000 within 80 business days of the Effective Date. The settlement amount is accrued in the financial statements as of June 30, 2024 and is included in current liabilities.

Curtin Litigation

As previously disclosed, on January 6, 2023, a former employee of the Company, Rosaline Curtin (“Ms. Curtin”), filed a complaint against the Company and another former employee of the Company, Jose Ramirez (“Mr. Ramirez”), in the Superior Court of California, County of San Diego (Case No. 37-2023-00000841-CU-WT-NC) (the “Curtin Complaint”). The Curtin Complaint alleges that Ms. Curtin was subject to harassment by her supervisor, Mr. Ramirez, and 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. The Curtin Complaint seeks 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. The Company has responded to the complaint on behalf of the Company and Mr. Ramirez and prevailed on December 22, 2023, prevailed on its motion to compel. Arbitration proceedings have been initiated, and the parties have agreed on an arbitrator. On May 24, 2024, a management conference was held in the arbitration and a hearing date was scheduled for January 13-17, 2025. Discovery is underway and the Company’s responses and objections to Curtin’s discovery demands are due on August 9, 2024. Curtin’s discovery responses and objections to the Company’s discovery demands are due on August 23, 2024. The Company believes the allegations set forth in the Curtin Complaint are without merit and intends to defend vigorously against the allegations. However, the Company is not able to predict the outcome, and there is no assurance that the Company will be successful in its defense.

From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Other

On July 29, 2024, the Company received a letter from an investor alleging that the Company has breached a purported agreement by failing to satisfy certain alleged obligations. The investor has demanded fulfillment of the alleged obligations, undisclosed monetary damages, legal fees and interest. He has indicated he will seek Court intervention if the Company fails to adequately address his demands. The Company and its counsel are reviewing the matter.

7. SUBSEQUENT EVENTS

Private Placement – Convertible Notes

On July 24, 2024, the Company entered into a convertible note purchase agreement with certain investors to issue and sell convertible notes in the aggregate principal amount of approximately $300,000. The closing of the private placement took place on July 26, 2024. The notes are convertible any time after issuance date by the holder into a number of shares of common stock equal to the outstanding principal amount plus accrued but unpaid interest divided by $0.52, the conversion price.

On July 26, 2024, the investors exercised their option to convert the notes to common stock.

NASDAQ Compliance

As previously disclosed, the Company received a letter from NASDAQ on January 23, 2024 indicating that the Company was not in compliance with NASDAQ Listing Rule 5550(b)(1), the Stockholders’ Equity Requirement. NASDAQ stated that the Company failed to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing.

On July 23, 2024, the Company received a letter from NASDAQ stating that based on the 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). However, in the future, if the Company fails to evidence compliance upon filing its next periodic report, it may be subject to a delisting determination. Any such determination may be appealed to a Hearings Panel.

Private Placement

On July 11, 2024 the Company entered into a Securities Purchase Agreement (“SPA”) with certain investors providing for the sale of 2,040,814 shares of the Company’s common stock for an aggregate purchase price of approximately $3,000,000. In connection therewith, the Company entered into a Registration Rights Agreement providing, among other things, that the Company will as soon as reasonably practicable, and no later than September 30, 2024, file with the SEC a registration statement registering the resale of the shares of common stock.

The transaction closed on July 18, 2024.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and the other information set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as amended (“2023 Annual Report”), initially filed with the Securities and Exchange Commission on January 16, 2024. In addition to historical financial information, this discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. You should not place undue reliance on these forward-looking statements, which involve risks and uncertainties. As a result of many factors, including but not limited to those set forth under “Risk Factors” in our 2023 Annual Report our actual results may differ materially from those anticipated in these forward-looking statements. See “Special Note Regarding Forward Looking Statements.”

Overview

We are a specialty coffee and technologies company and, we believe, a leading co-packer of single-serve pour over coffee in the United States, as well as a preeminent co-packer of coffee brew bags, which is also referred to as tea-bag style coffee. In addition to our single-serve pour over and coffee brew bag coffee products, we have expanded our product portfolio to offer a third type of single-serve coffee format, DRIPKIT pour over products, as a result of our acquisition of substantially all of the assets of Dripkit, Inc. (“Dripkit”). Our DRIPKIT pour over format features a large-size single-serve pour over pack that sits on top of the cup and delivers in our view a barista-quality coffee experience to customers in the United States, Canada, and Mexico. Our mission is to leverage our position as a co-packer at the forefront of the North American single-serve coffee market to revolutionize the way single-serve coffee is enjoyed in the United States. Recently, we further expanded our product offerings to include bagged coffees for existing single-serve customers as well as a new licensing relationship with Stone Brewing which will include both bagged and single-serve format coffee products. We believe this expansion will allow us to increase manufacturing efficiency and better serve our customers and the market. While the United States is our core market, we also have manufacturing and sales operations in Korea and a joint venture in Latin America.

We believe we are the only commercial-scale producer within the North American market that has the dual capacity to pack single-serve pour over and brew bag coffee. We intend to leverage our position to become the commercial coffee producer of choice and aim to become the preeminent leader for coffee companies seeking to enter into and grow within the single-serve coffee market in North America. With our single-serve pour over and brew bag coffee we are paid per-package based on the number of single-serve coffee products produced by us. With our bagged coffee products, we will be paid based on the number of completed bags delivered. Accordingly, we consider a portion of our business model to be a form of tolling arrangement, as we receive a fee for almost every single-serve coffee product our co-packing customers sell in the North American and Korean markets. Under the single-1serve model, our risk related to owning and managing inventory is limited. With our bagged coffees and the Stone Brewing licensing relationship, we will manage the production and related inventory which will involve increased risk levels.

We may also consider co-packaging other products that are complementary to our current product offerings and provide us with deeper access to our customers. In addition, we are continually exploring potential strategic partnerships, co-ventures, and mergers, acquisitions, or other transactions with existing and future business partners to generate additional business, drive growth, reduce manufacturing costs, expand our product portfolio, enter into new markets, and further penetrate the markets in which we currently operate. Our goal is to continue to expand our product portfolio to raise our visibility, consumer awareness and brand profile.

Discontinued Operations – Sale of Assets

On June 7, 2024, the Company consummated the sale of its subsidiaries, NuZee Korea and NuZee Investment. The Company elected to focus its efforts and resources on its Dripkit investment, the single serve pour over and brew bag market in North America and its recently introduced bagged coffee processing services in North America. The transaction for the sale of the subsidiaries is accounted for as discontinued operations in accordance with ASC 205-20.

2022 Reverse Stock Split

Geographic Concentration

As of June 7, 2024 all revenues are from North America, and all property and equipment is located in North America.

Results of Operations

During the current fiscal year, we began selling and shipping bagged coffee products for our largest customer in addition to the single-serve products we had been selling and shipping to them. We do not expect the revenues for the nine months ended June 30, 2024 to be indicative of future quarters as revenues from sale of bagged coffee products have declined in the June quarter.

Our results of operations for the nine months ended June 30, 2024 are influenced by the aforementioned transactions.

Comparison of three months ended June 30, 2024 and 2023

Revenue

	Three months ended June 30,				Change
	2024		2023		Dollars		%
Revenue	$	366,888	$	268,023	$	98,865		37	%

For the three months ended June 30, 2024, our revenue increased by $98,865, or approximately 37% compared with the three months ended June 30, 2023. This increase was primarily related to increased revenue in the US, due to volume sales increase with our major customers in existing single serve formats.

Cost of sales and gross margin

	Three months ended June 30,						Change
	2024			2023			Dollars			%
Cost of sales	$	513,101		$	262,474		$	250,627			95	%
Gross profit (loss)		(146,213	)	$	5,549		$	(151,762	)		(A	)%
Gross profit (loss) %		(40	)%		2	%

(A) – Less than (1,000)%

For the three months ended June 30, 2024, we generated a total gross loss of $146,213 from sales of our products and co-packing services, compared to a total gross profit of $5,549 for the three months ended June 30, 2023. The gross margin rate was (40)% for the three months ended June 30, 2024, and 2% for the three months ended June 30, 2023. The decrease is primarily attributable to an increase in inventory reserves and higher overall costs.

Operating Expenses

	Three months ended June 30,				Change
	2024		2023		Dollars			%
Operating Expenses	$	1,335,371	$	1,882,269	$	(546,898	)		(29	)%

For the three months ended June 30, 2023, the Company’s operating expenses totaled $1,335,371 compared to $1,882,269 for the three months ended June 30, 2023, representing a 29% decrease. This decrease is primarily attributable to a decrease in stock based compensation expense and legal and professional fees.

Net Loss

	Three months ended June 30,				Change
	2024		2023		Dollars			%
Net Loss	$	1,440,197	$	2,025,337	$	(585,140	)		(29	)%

For the three months ended June 30, 2024, we generated a net loss of $1,440,197 compared to a net loss of $2,025,337 for the three months ended June 30, 2023. This decrease in net loss is primarily attributable to lower stock-based compensation expense and legal and professional fees.

Comparison of nine months ended June 30, 2024 and 2023

Revenue

	Nine months ended June 30,				Change
	2024		2023		Dollars		%
Revenue	$	1,641,955	$	1,205,123	$	436,832		36	%

For the nine months ended June 30, 2024, our revenue increased by $436,832, or approximately 36%, compared with the nine months ended June 30, 2023. This increase was primarily related to increased revenue in the US, due to volume of sales increase with our major customers for both single serve and bagged coffee formats.

Cost of sales and gross margin

	Nine months ended June 30,						Change
	2024			2023			Dollars			%
Cost of sales	$	1,820,140		$	1,237,315		$	582,825			47	%
Gross profit	$	(178,185	)	$	(32,192	)	$	(145,993	)		(454	)%
Gross profit %		(11	)%		(3	)%

For the nine months ended June 30, 2024, we generated a total gross loss of $178,185 from sales of our products and co-packing services, compared to a total gross loss of $32,192 for the nine months ended June 30, 2023. The gross margin rate was (11)% for the nine months ended June 30, 2024, and (3)% for the nine months ended June 30, 2023. The decrease is primarily attributable to an increase in inventory reserves as well as overall cost increases.

Operating Expenses

	Nine months ended June 30,				Change
	2024		2023		Dollars		%
Operating Expenses	$	4,748,076	$	5,794,126	$	(1,046,050)		(18	)%

For the nine months ended June 30, 2024, the Company’s operating expenses totaled $4,748,076 compared to $5,794,126 for the nine months ended June 30, 2023, representing an 18% decrease. This decrease is primarily attributable to a decrease in professional fees and compensation expense.

Net Loss

	Nine months ended June 30,				Change
	2024		2023		Dollars			%
Net Loss	$	5,242,739	$	6,176,416	$	(933,677	)		(15	)%

For the nine months ended June 30, 2024, we generated a net loss of $5,242,739 compared to a net loss of $6,176,416 for the nine months ended June 30, 2023. This decrease in net loss is primarily attributable to lower professional fees and compensation expense.

Liquidity and Capital Resources

Since our inception in 2011, we have incurred significant losses, and as of June 30, 2024, we had an accumulated deficit of approximately $78.6 million. We have not yet achieved profitability and anticipate that we will continue to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset these expenses. In the United States, we expect to incur additional losses because of the costs associated with operating as an exchange-listed public company. We are unable to predict the extent of any future losses or when we will become profitable, if at all.

To date, we have funded our operations primarily with proceeds from registered public offerings and private placements of shares of our common stock. Our principal use of cash is to fund our operations, which includes the commercialization of our single serve coffee products, the continuation of efforts to improve our products, administrative support of our operations and other working capital requirements.

As of June 30, 2024, we had a cash balance of $374,458. 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 from August 15, 2024. 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.

During the three months ended June 30, 2024, we issued no shares of common stock related to exercises of warrants and received no proceeds from the exercise of warrants.

In the future, we may receive additional funds upon the exercise for cash of outstanding warrants, if and when exercised for cash at the election of the warrant holders, including the Series A warrants (the “Series A Warrants”) and Series B warrants (the “Series B Warrants” and, collectively with the Series A Warrants, the “2021 Warrants”) that were sold by us in March 2021 in an underwritten registered public offering and the 2022 Warrants. The 2021 Warrant holders are obligated to pay the exercise price in cash upon exercise of the 2021 Warrants unless we fail to maintain a current prospectus relating to the common stock issuable upon the exercise of the 2021 Warrants (in which case, the 2021 Warrants may only be exercised via a “cashless” exercise provision). For additional information regarding the 2021 Warrants, see “Note 5—Stock Options and Warrants” to the Consolidated Financial Statements.

We intend to seek to raise additional capital, including through public or private equity offerings, to support our operating activities for the next twelve months and beyond, and such funding may not be available to us on acceptable terms, or at all. The timing and amount of funds that we will need to raise will depend on a number of factors, including our ability to generate a sufficient amount of revenues from the sale of our coffee products to fund our business operations and the timing and amount of funds received upon the exercise for cash of outstanding warrants by the warrant holders. Until we can generate a sufficient amount of revenue, we may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders.

While we believe our plans to raise additional funds will alleviate the conditions that raise substantial doubt about our ability to continue as a going concern, these plans are not entirely within our control and cannot be assessed as being probable of occurring at this time. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected.

If we are unsuccessful in our efforts to raise additional capital, based on our current and expected 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.

Notice

On January 23, 2024, the Company received a notice (the “Notice”) from the Listing Qualifications staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that the Company’s stockholders’ equity as reported in its Annual Report on Form 10-K for the period ended September 30, 2023 (“Form 10-K”), did not satisfy the continued listing requirement under Nasdaq Listing Rule 5550(b)(1) for the Nasdaq Capital Market, which requires that a listed company’s stockholders’ equity be at least $2,500,000. In its Form 10-K, the Company reported stockholders’ equity of $1,674,357, and, as a result, does not currently satisfy Nasdaq Marketplace Rule 5550(b)(1). The Notice has no immediate effect on the Company’s listing on the Nasdaq Capital Market. In accordance with Nasdaq rules, the Company had 45 calendar days from the date of the notification to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1). The Company timely submitted a plan to regain compliance. On April 9, 2024 Nasdaq granted the Company an extension of time to regain compliance through June 14, 2024. The Company must furnish to the SEC and Nasdaq a publicly available report (e.g. a Form 8-K) which report, among other things must include a description of the completed transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing. After filing the publicly available report described above, if the Company fails to evidence compliance upon filing its periodic report for June 30, 2024 (or the periodic report for September 30, 2024, if Nasdaq determines to provide a further extension), the Company may be subject to delisting. In the event the Company does not satisfy these terms, Nasdaq will provide written notification that its securities will be delisted. At that time, the Company may appeal Nasdaq’s determination to a Listing Qualifications Panel.

Contractual Obligations

Our significant contractual cash requirements as of June 30, 2024, include payments for operating and finance lease liabilities. Additionally, we may incur purchase obligations in the ordinary course of business that are enforceable and legally binding and enter into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement. As of June 30, 2024, we had payments for lease obligations of approximately $100,712 of which all are payable within 12 months. We had no purchase obligations as of June 30, 2024.

Summary of Cash Flows

	Nine Months Ended June 30,
	2024			2023
Cash used in operating activities	$	(4,270,542	)	$	(4,606,189	)
Cash used in investing activities	$	(310,342	)	$	(31,813	)
Cash provided by (used in) financing activities	$	3,626,638		$	(27,661	)
Cash provided by (used in) operating activities-discontinued operations	$	311,578			(716,463	)
Effect of foreign exchange on cash	$	34,257		$	53,287
Net change in cash	$	(608,411	)	$	(5,328,839	)

Operating Activities

We used $4,270,542 and $4,606,189 of cash in operating activities from continuing operations during the nine months ended June 30, 2024, and 2023, respectively, principally to fund our operations. Operating activities of discontinued operations provided $311,578 in cash for the nine months ended June 30, 2024. We used $716,463 of cash in operating activities of discontinued operations during the nine months ended June 30, 2023.

Investing Activities

We used $310,342 and $31,813 of cash in investing activities during the nine months ended June 30, 2024 and 2023, respectively. Cash was used principally for the purchase of equipment.

Financing Activities

Historically, we have funded our operations through the issuance of our equity securities.

Cash provided by financing activities of $3,626,638 for the nine months ended June 30, 2024 was primarily related to the issuance of equity securities. Cash used in financing activities of $27,661 for the nine months ended June 30, 2023 was primarily related to repayments on loans and leases.

Off-Balance Sheet Arrangements

As of June 30, 2024, we had 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”). The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. US GAAP provides the framework from which to make these estimates, assumption and disclosures. We choose accounting policies within US GAAP that management believes are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Management regularly assesses these policies in light of current and forecasted economic conditions.

There were no significant and material changes in our critical accounting policies and use of estimates during the nine months ended June 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on January 16, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed 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 Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officers and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company. In designing and evaluating our disclosure controls and procedures, management recognizes that no matter how well conceived and operated, disclosure controls and procedures can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

Our management, with the participation of our Chief Executive Officers and Chief Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Chief Executive Officers and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officers and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

Steeped, Inc. Litigation

Curtin Litigation

As previously disclosed, on January 6, 2023, a former employee of the Company, Rosaline Curtin (“Ms. Curtin”), filed a complaint against the Company and another former employee of the Company, Jose Ramirez (“Mr. Ramirez”), in the Superior Court of California, County of San Diego (Case No. 37-2023-00000841-CU-WT-NC) (the “Curtin Complaint”). The Curtin Complaint alleges that Ms. Curtin was subject to harassment by her supervisor, Mr. Ramirez, and 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. The Curtin Complaint seeks 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. The Company has responded to the complaint on behalf of the Company and Mr. Ramirez and prevailed on December 22, 2023, prevailed on its motion to compel. Arbitration proceedings have been initiated, and the parties have agreed on an arbitrator. On May 24, 2024, a management conference was held in the arbitration and a hearing date was scheduled for January 13-17, 2025. Discovery is underway and the Company’s responses and objections to Curtin’s discovery demands are due on August 9, 2024. Curtin’s discovery responses and objections to the Company’s discovery demands are due on August 23, 2024. We believe the allegations set forth in the Curtin Complaint are without merit and intend to defend vigorously against the allegations. However, the Company is not able to predict the outcome, and there is no assurance that the Company will be successful in its defense.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on January 16, 2024, as amended, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on January 16, 2024, as amended.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities sold during the period covered by this Quarterly Report that were not previously included in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

During the nine months ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

EXHIBIT NO.		DESCRIPTION

10.1		First Amended and Restated Employment Agreement between Nuzee, Inc. and Randy Weaver, dated April 26, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 29, 2024, SEC File Number 001-39338).
10.2		Convertible Note and Purchase Agreement, dated April 27, 2024, between the Company and the Investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 2, 2024, SEC File Number 001-39338).
10.3		Registration Rights Agreement, dated April 27, 2024, between the Company and the Investors party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 2, 2024, SEC File Number 001-39338).
10.4*#		Convertible Promissory Note dated April 30, 2024, between the Company and Xiang Zhang
10.5*#		Convertible Promissory Note dated April 30, 2024, between the Company and Future science and Technology Co. Ltd.
10.6*		Common Stock Purchase Warrant dated April 30, 2024, issued to Xiang Zhang
10.7*		Common Stock Purchase Warrant dated April 30, 2024, issued to Future science and Technology Co. Ltd.
10.8		Share Purchase Agreement by and between the Company and Masa Higashida dated as of June 7, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2024, SEC File Number 001-39338).
10.9		Second Amended and Restated Employment Agreement by and between the Company and Randell Weaver dated as of June 7, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 7, 2024, SEC File Number 001-39338).
10.10		Termination and Release Agreement by and between the Company and Masa Higashida dated as of June 7, 2024 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 7, 2024, SEC File Number 001-39338).
10.11		Securities Purchase Agreement, dated June 4, 2024, between the Company and the Investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 10, 2024, SEC File Number 001-39338).
10.12		Registration Rights Agreement, dated June 4, 2024, between the Company and the Investors party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 10, 2024, SEC File Number 001-39338).
31.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document***
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.

*** The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

# Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon its request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date:	August 19, 2024	NUZEE, INC.

		By:	/s/ Jianshuang Wang
			Jianshuang Wang, Co-Chief Executive Officer (Principal Executive Officer)

		By:	/s/ Randell Weaver
			Randell Weaver, Co-Chief Executive Officer, Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

EX-10.4 2 ex10-4.htm

Exhibit 10.4

Certain identified information has been excluded from this exhibit because it is both not material and is the type that the registrant treats as private or confidential. Redacted information is indicated by [***].

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

NUZEE, INC.

Convertible Promissory Note

Original Principal Amount: $200,000

Issuance Date: April 30, 2024

Number: 002

FOR VALUE RECEIVED, NUZEE, INC., a Nevada corporation (the “Company”), hereby promises to pay to the order of Xiang Zhang, or its registered assigns (the “Holder”), the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to repayment, redemption, conversion or otherwise, the “Principal”) when due, and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). The Issuance Date is the date of the first issuance of this Convertible Promissory Note (the “Note”) regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Note.

This Note is being issued pursuant to the Note and Warrant Purchase Agreement, dated April 27, 2024, (the “Note Purchase Agreement”), between among others the Company and the Holder. Capitalized terms not defined herein shall have the same meanings as assigned in the Note Purchase Agreement.

(1) GENERAL TERMS

(a) Maturity Date. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest, and any other amounts outstanding pursuant to the terms of this Note. The “Maturity Date” shall be April 30, 2025, being one year from the Issuance Date, as may be extended at the option of the Holder. Other than as specifically permitted by this Note, the Company may not prepay or redeem any portion of the outstanding Principal and accrued and unpaid Interest.

(b) Interest Rate and Payment of Interest. Interest shall accrue on the outstanding Principal balance hereof on a daily basis at an annual rate equal to 7.0% (“Interest Rate”). Interest shall be calculated based on a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law.

(d) Optional Redemption. Not Applicable.

(e) Payment Dates. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(f) Note Issuance. The Company shall not, directly or indirectly, without the prior written consent of the Holder of the Note issue any Notes (other than as contemplated by the Note Purchase Agreement) that would cause a breach or default under the Note or the Warrants.

(g) Stay, Extension, and Usury Laws. To the extent that it may lawfully do so, the Company (i) agrees that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension, or usury law (wherever or whenever enacted or in force) that may affect the covenants or the performance of this Note; and (ii) expressly waives all benefits or advantages of any such law and agrees that it will not, by resort to any such law, hinder, delay, or impede the execution of any power granted to the Holder by this Note, but will suffer and permit the execution of every such power as though no such law has been enacted.

(h) Seniority. The Notes constitute direct, senior, unsubordinated, unconditional and unsecured obligations of the Company and shall at all times rank pari passu and without any preference or priority among themselves. The payment obligations of the Company under the Notes shall at all times rank senior to any other future indebtedness incurred by the Company.

(2) EVENTS OF DEFAULT AND REMEDIES.

(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) the Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note or any other Transaction Document;

(ii) The Company or any Subsidiary of the Company shall commence, or there shall be commenced against the Company or any Subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any Subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any Subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of thirty (30) days; or the Company or any Subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any Subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or all or substantially all of its property which continues undischarged or unstayed for a period of thirty (30) days; or the Company or any Subsidiary of the Company makes a general assignment of all or substantially all of its assets for the benefit of creditors; or the Company or any Subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any Subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any Subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any Subsidiary of the Company for the purpose of effecting any of the foregoing;

(iii) The Company or any Subsidiary of the Company shall default in any of its obligations under any debenture, mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any Subsidiary of the Company in an amount exceeding $50,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable;

(iv) The common stock of the Company (“Common Stock”) shall cease to be quoted or listed for trading, as applicable, on any Primary Market for a period of five (5) consecutive Trading Days;

(v) The Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date, or a failure to comply with its obligations to deliver Common Stock under the Warrants, or (B) notice, written or oral, to the Holder of the Note or any holder of the Warrants, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of the Notes into shares of Common Stock that is requested in accordance with the provisions of the Note, or a request for exercise of any Warrants for shares of Common Stock in accordance with the provisions of the Warrants;

(vi) the Company’s (A) failure to deliver the required number of Common Stock to the Holder within two (2) Trading Days after the applicable Share Delivery Date or (B) notice, written or oral, to any holder of the Note, including by way of public announcement, at any time, of its intention not to comply with a request for conversion of any Note into Common Stock that is tendered in accordance with the provisions of the Note;

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within five (5) Business Days after such payment is due;

(viii) The Company’s failure to timely file with the Commission any Periodic Report on or before the due date of such filing as established by the Commission, it being understood, for the avoidance of doubt, that due date includes any permitted filing deadline extension under Rule 12b-25 under the Exchange Act;

(ix) Any representation or warranty made or deemed to be made by or on behalf of the Company in or in connection with any Transaction Document, or any waiver hereunder or thereunder, shall prove to have been incorrect in any material respect (or, in the case of any such representation or warranty already qualified by materiality, such representation or warranty shall prove to have been incorrect) when made or deemed made;

(x) Any material provision of any Transaction Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder, ceases to be in full force and effect; or the Company or any other Person contests in writing the validity or enforceability of any provision of any Transaction Document; or the Company denies in writing that it has any or further liability or obligation under any Transaction Document, or purports in writing to revoke, terminate (other than in line with the relevant termination provisions) or rescind any Transaction Document;

(xi) the Company uses the proceeds of the issuance of this Note, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulations T, U and X the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof), or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose; or

(xii) Any Event of Default (as defined in the Other Notes or in any Transaction Document other than this Note) occurs with respect to any Other Notes, or any breach of any term of any other debenture, note, or instrument held by the Holder in the Company or any agreement between or among the Company and the Holder; or

(xiii) The Company shall fail to observe or perform any covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Note (except as may be covered by Section (2)(a)(i) through (2)(a)(xii) hereof) or any other Transaction Document, which is not cured or remedied within the time prescribed or if no time is prescribed within five (5) Business Days; or

(xiv) either (i) any representation or warranty made or deemed made by the Company herein or in any other Transaction Document or any certificate or document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect when so made or deemed made or (ii) a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company as to whether any Default or Event of Default has occurred; or

(xv) any Material Adverse Effect (as defined in the Note Purchase Agreement) occurs.

(b) During the time that any portion of this Note is outstanding, if any Event of Default has occurred (other than an event with respect to the Company described in Section (2)(a)(i)), the full unpaid Principal amount of this Note, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election given by notice pursuant to Section (5), immediately due and payable in cash; provided that, in the case of any event with respect to the Company described in Section (2)(a)(i), the full unpaid Principal amount of this Note, together with interest and other amounts owing in respect thereof to the date of acceleration, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. Furthermore, in addition to any other remedies, the Holder shall have the right (but not the obligation) to convert, on one or more occasions all or part of the Note in accordance with Section (3) at any time after (x) an Event of Default (provided that such Event of Default is continuing) or (y) the Maturity Date at the Conversion Price. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, (other than required notice of conversion) and the Holder may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder in writing at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

(c) The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. No failure on the part of the Holder to exercise, and no delay in exercising, any right, power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Holder of any right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. In addition, the exercise of any right or remedy of the Holder at law or equity or under this Note or any of the documents shall not be deemed to be an election of Holder’s rights or remedies under such documents or at law or equity. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion, and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary, and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.

(d) If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company, or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement, or action or in connection with such bankruptcy, reorganization, receivership, or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the Original Principal Amount hereof.

(3) CONVERSION OF NOTE. This Note shall be convertible into Common Stock, with a Conversion Price of $1.447, as adjusted from time to time pursuant to the other terms and conditions of this Note, on the terms and conditions set forth in this Section (3).

(a) Conversion Right. At any time or times on or after the Issuance Date (or if such date is not a Trading Day, the first Trading Day immediately thereafter), the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount into fully paid and nonassessable Common Stock in accordance with Section (3)(b), at the Conversion Price. The number of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section (3)(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. All calculations under this Section (3) shall be rounded to the nearest $0.0001. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

(b) Mechanics of Conversion.

(i) Optional Conversion. To convert any Conversion Amount into Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by email (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section (3)(b)(iii), surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this Note in the case of its loss, theft or destruction). On or before the third (3rd) Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (X) if legends are not required to be placed on certificates of Common Stock and provided that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if legends are required to be placed on certificates of Common Stock or if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant to rules and regulations of the Commission. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such Common Stock upon the transmission of a Conversion Notice.

(ii) Company’s Failure to Timely Convert. If within three (3) Trading Days after the Company’s receipt of an email copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (a “Conversion Failure”), and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Common Stock, times (B) the Closing Price on the Conversion Date.

(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

(d) Other Provisions.

(i) All calculations under this Section (3) shall be rounded to the nearest $0.0001 or whole share.

(ii) The Company covenants that the number of Common Stock comprised in the Company’s authorized share capital but unissued and not otherwise reserved for issuance shall be not less than the maximum number of Common Stock issuable upon conversion of this Note and the Other Notes and exercise of the Warrants (the “Required Reserve Amount”). If at any time the number of Common Stock reserved pursuant to this Section (3)(d)(ii) becomes less than the Required Reserve Amount, the Company will promptly take all corporate action necessary to propose to its general meeting of shareholders an increase of its authorized share capital necessary to meet the Company’s obligations pursuant to this Note, recommending that shareholders vote in favor of such an increase. The Company covenants that, upon issuance in accordance with conversion of this Note in accordance with its terms, the Common Stock, when issued, will be validly issued, fully paid and nonassessable.

(iii) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section (2) herein for the Company’s failure to deliver certificates representing Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(iv) Legal Opinions. The Company is obligated to cause its Nevada or US legal counsel to deliver legal opinions to the Company’s transfer agent in connection with any legend removal upon the expiration of any holding period or other requirement for which the Underlying Shares may bear legends restricting the transfer thereof. To the extent that are not provided (either timely or at all), then, in addition to being an Event of Default hereunder, the Company agrees to reimburse the Holder for all reasonable costs incurred by the Holder in connection with any legal opinions paid for by the Holder in connection with sale or transfer of Underlying Common Stock. The Holder shall notify the Company of any such costs and expenses it incurs that are referred to in this Section from time to time and all amounts owed hereunder shall be paid by the Company with reasonable promptness.

(e) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company, at any time while this Note is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in Common Stock, (b) subdivide outstanding Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding Common Stock into a smaller number of shares, or (d) issue by reclassification of Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

(f) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such Common Stock had such Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to Common Stock) at a conversion rate for such consideration commensurate with the Conversion Price. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.

(g) Whenever the Conversion Price is adjusted pursuant to Section (3) hereof, the Company shall promptly provide the Holder with a written notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(h) In case of any (1) merger or consolidation of the Company or any Subsidiary of the Company with or into another Person, or (2) sale by the Company or any Subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) convert the aggregate amount of this Note then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the Common Stock into which such aggregate Principal amount of this Note could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (B) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Note with a Principal amount equal to the aggregate Principal amount of this Note then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Note shall have terms identical (including with respect to conversion) to the terms of this Note, and shall be entitled to all of the rights and privileges of the Holder of this Note set forth herein and the agreements pursuant to which this Note was issued. In the case of clause (B), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible debentures shall be based upon the amount of securities, cash and property that each Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.

(4) REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section (4)(d)), registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued and unpaid interest thereof) and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section (4)(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section (3)(b)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section (4)(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section (4)(d)) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms hereof, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section (4)(a) or Section (4)(c), the Principal designated by the Holder which, when added to the Principal represented by the other new Note issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Note), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest from the Issuance Date.

(5) NOTICES. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing by letter and email and will be deemed to have been delivered: upon the later of (A) either (i) receipt, when delivered personally or (ii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same and (B) receipt, when sent by electronic mail. The addresses and e-mail addresses for such communications shall be:

If to the Company, to:	NuZee, Inc.
	2865 Scott Street, Suite 107 Vista, California 92081
	Attn:	Masateru Higashida
	Telephone:	[***]
	Email:	masa@nuzeeusa.com

with a copy (which shall not constitute notice) to:	Alan A. Lanis, Jr. 1900 Avenue of the Stars, Suite 2700 Los Angeles, California 90067
	Attention:	JR Lanis
	Email:	jrlanis@bakerlaw.com

If to the Holder:	To the address and details set out in the signature page of the Note Purchase Agreement.

or at such other address and/or email and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) electronically generated by the sender’s email service provider containing the time, date, recipient email address or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(6) Except as expressly provided herein, no provision of this Note shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the Principal of, interest and other charges (if any) on, this Note at the time, place, and rate, and in the currency, herein prescribed. This Note is a direct obligation of the Company. As long as this Note is outstanding, the Company shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Common Stock or other equity securities; or (iii) enter into any agreement with respect to any of the foregoing.

(7) This Note shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into Common Stock in accordance with the terms hereof.

(8) CHOICE OF LAW; VENUE; WAIVER OF JURY TRIAL

(a) Governing Law. This Note and the rights and obligations of the Parties hereunder shall, in all respects, be governed by, and construed in accordance with, the laws (excluding the principles of conflict of laws) of the State of New York (the “Governing Jurisdiction”) (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), including all matters of construction, validity and performance.

(b) Jurisdiction; Venue; Service.

(i) The Company hereby irrevocably consents to the non-exclusive personal jurisdiction of the state courts of the Governing Jurisdiction and, if a basis for federal jurisdiction exists, the non-exclusive personal jurisdiction of any United States District Court for the Governing Jurisdiction.

(ii) The Company agrees that venue shall be proper in any court of the Governing Jurisdiction selected by the Holder or, if a basis for federal jurisdiction exists, in any United States District Court in the Governing Jurisdiction. The Company waives any right to object to the maintenance of any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any of the state or federal courts of the Governing Jurisdiction on the basis of improper venue or inconvenience of forum.

(iii) Any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or tort or otherwise, brought by the Company against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, shall be brought in a court only in the Governing Jurisdiction. The Company shall not file any counterclaim against the Holder in any suit, claim, action, litigation or proceeding brought by the Holder against the Company in a jurisdiction outside of the Governing Jurisdiction unless under the rules of the court in which the Holder brought such suit, claim, action, litigation or proceeding the counterclaim is mandatory, and not permissive, and would be considered waived unless filed as a counterclaim in the suit, claim, action, litigation or proceeding instituted by the Holder against the Company. The Company agrees that any forum outside the Governing Jurisdiction is an inconvenient forum and that any suit, claim, action, litigation or proceeding brought by the Company against the Holder in any court outside the Governing Jurisdiction should be dismissed or transferred to a court located in the Governing Jurisdiction. Furthermore, the Company irrevocably and unconditionally agrees that it will not bring or commence any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, in any forum other than the courts of the State of New York sitting in New York County, and the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such suit, claim, action, litigation or proceeding may be heard and determined in such New York State Court or, to the fullest extent permitted by applicable law, in such federal court. The Company and the Holder agree that a final judgment in any such suit, claim, action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(iv) The Company and the Holder irrevocably consent to the service of process out of any of the aforementioned courts in any such suit, claim, action, litigation or proceeding by the mailing of copies thereof by registered or certified mail postage prepaid, to it at the address provided for notices in this Note, such service to become effective thirty (30) days after the date of mailing.

(v) Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Company or any other Person in the Governing Jurisdiction or in any other jurisdiction.

(c) THE PARTIES MUTUALLY WAIVE ALL RIGHT TO TRIAL BY JURY OF ALL CLAIMS OF ANY KIND ARISING OUT OF OR BASED UPON THIS NOTE OR ANY MATTER RELATING TO THIS NOTE, OR ANY OTHER TRANSACTION DOCUMENT, OR ANY CONTEMPLATED TRANSACTION. THE PARTIES ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT AND THAT THE PARTIES EACH MAKE THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH COUNSEL OF THEIR RESPECTIVE CHOICE. THE PARTIES AGREE THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING JURISDICTION, WITHOUT A JURY.

(9) If the Company fails to strictly comply with the terms of this Note, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Note, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.

(10) Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

(11) If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the Principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

(12) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(a) “Bloomberg” means Bloomberg Financial Markets.

(b) “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.

(d) “Buy-In Price” shall have the meaning set forth in Section (3)(b)(ii).

(e) “Calendar Month” means one of the months as named in the calendar.

(f) Reserved.

(g) “Closing Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock are then listed as quoted by Bloomberg.

(h) “Commission” means the Securities and Exchange Commission.

(i) “Conversion Amount” means the portion of the Principal, Interest, or other amounts outstanding under this Note to be converted, redeemed or otherwise with respect to which this determination is being made.

(j) “Conversion Date” shall have the meaning set forth in Section (3)(b)(i).

(k) “Conversion Failure” shall have the meaning set forth in Section (3)(b)(ii).

(l) “Conversion Notice” shall have the meaning set forth in Section (3)(b)(i).

(m) “Conversion Price” means $1.447, as adjusted from time to time pursuant to the other terms and conditions of this Note.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) Reserved.

(p) “Fundamental Transaction” means any of the following: (1) the Company effects any merger or consolidation of the Company with or into another Person and the Company is the non-surviving company (other than a merger or consolidation with a wholly owned Subsidiary of the Company for the purpose of redomiciling the Company), (2) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (4) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

(q) “Other Notes” means any other notes issued pursuant to the Note Purchase Agreement and any other debentures, notes, or other instruments issued in exchange, replacement, or modification of the foregoing.

(r) Reserved.

(s) Reserved.

(t) “Periodic Reports” shall mean the Company’s Annual Report on Form 10-K for the fiscal year end, Quarterly Report on Form 10-Q for the fiscal quarter, Current Report on Form 8-K, and all other reports required to be filed by the Company with the Commission under applicable laws and regulations (including, without limitation, Regulation S-K) for so long as any amounts are outstanding under this Note or any Other Note; provided that all such Periodic Reports shall include, when filed, all information, financial statements, audit reports (when applicable) and other information required to be included in such Periodic Reports in compliance with all applicable laws and regulations.

(u) “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

(v) “Primary Market” means any of The New York Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, and any successor to any of the foregoing markets or exchanges.

(w) Reserved.

(x) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(y) “Share Delivery Date” shall have the meaning set forth in Section (3)(b)(i).

(z) “Subsidiary” has the meaning assigned in the Note Purchase Agreement.

(aa) “Trading Day” means a day on which the Common Stock are quoted or traded on a Primary Market on which the Common Stock are then quoted or listed; provided, that in the event that the Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.

(bb) “Transaction Document” means, each of, the Other Notes, the Note Purchase Agreement, the Warrants, and any and all documents, agreements, instruments or other items executed or delivered in connection with any of the foregoing.

(cc) “Underlying Shares” means the Common Stock issuable upon conversion of this Note or as payment of interest in accordance with the terms hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed by a duly authorized officer as of the date set forth above.

	COMPANY:

	NUZEE, INC.

	By:	/s/ Masateru Higashida
	Name:	Masateru Higashida
	Title:	Chief Executive Officer

EXHIBIT I

CONVERSION NOTICE

(To be executed by the Holder in order to Convert the Note)

TO: NUZEE, INC.

Via Email:

The undersigned hereby irrevocably elects to convert a portion of the outstanding and unpaid Conversion Amount of Note No. [__________] into Common Stock of NUZEE, INC., according to the conditions stated therein, as of the Conversion Date written below.

Conversion Date:
Principal Amount to be Converted:
Accrued Interest to be Converted:
Total Conversion Amount to be converted:
Conversion Price:

Number of Common Stock to be issued:

Please issue the Common Stock in the following name and deliver them to the following account:
Issue to:
Broker DTC Participant Code:
Account Number:

Authorized Signature:
Name:
Title:

EX-10.5 3 ex10-5.htm

Exhibit 10.5

NUZEE, INC.

Convertible Promissory Note

Original Principal Amount: $120,000

Issuance Date: April 30, 2024

Number: 001

FOR VALUE RECEIVED, NUZEE, INC., a Nevada corporation (the “Company”), hereby promises to pay to the order of Future Science and Technology Co. Ltd, or its registered assigns (the “Holder”), the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to repayment, redemption, conversion or otherwise, the “Principal”) when due, and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). The Issuance Date is the date of the first issuance of this Convertible Promissory Note (the “Note”) regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Note.

(1) GENERAL TERMS

(d) Optional Redemption. Not Applicable.

(e) Payment Dates. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

(2) EVENTS OF DEFAULT AND REMEDIES.

(i) the Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note or any other Transaction Document;

(iv) The common stock of the Company (“Common Stock”) shall cease to be quoted or listed for trading, as applicable, on any Primary Market for a period of five (5) consecutive Trading Days;

(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within five (5) Business Days after such payment is due;

(xv) any Material Adverse Effect (as defined in the Note Purchase Agreement) occurs.

(b) Mechanics of Conversion.

(d) Other Provisions.

(i) All calculations under this Section (3) shall be rounded to the nearest $0.0001 or whole share.

(4) REISSUANCE OF THIS NOTE.

If to the Company, to:	NuZee, Inc.
	2865 Scott Street, Suite 107 Vista, California 92081
	Attn:	Masateru Higashida
	Telephone:	[***]
	Email:	masa@nuzeeusa.com

with a copy (which shall not constitute notice) to:	Alan A. Lanis, Jr. 1900 Avenue of the Stars, Suite 2700 Los Angeles, California 90067
	Attention:	JR Lanis
	Email:	jrlanis@bakerlaw.com

If to the Holder:	To the address and details set out in the signature page of the Note Purchase Agreement.

(8) CHOICE OF LAW; VENUE; WAIVER OF JURY TRIAL

(b) Jurisdiction; Venue; Service.

(12) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(a) “Bloomberg” means Bloomberg Financial Markets.

(d) “Buy-In Price” shall have the meaning set forth in Section (3)(b)(ii).

(e) “Calendar Month” means one of the months as named in the calendar.

(f) Reserved.

(g) “Closing Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock are then listed as quoted by Bloomberg.

(h) “Commission” means the Securities and Exchange Commission.

(j) “Conversion Date” shall have the meaning set forth in Section (3)(b)(i).

(k) “Conversion Failure” shall have the meaning set forth in Section (3)(b)(ii).

(l) “Conversion Notice” shall have the meaning set forth in Section (3)(b)(i).

(m) “Conversion Price” means $1.447, as adjusted from time to time pursuant to the other terms and conditions of this Note.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) Reserved.

(r) Reserved.

(s) Reserved.

(u) “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

(w) Reserved.

(x) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(y) “Share Delivery Date” shall have the meaning set forth in Section (3)(b)(i).

(z) “Subsidiary” has the meaning assigned in the Note Purchase Agreement.

(cc) “Underlying Shares” means the Common Stock issuable upon conversion of this Note or as payment of interest in accordance with the terms hereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed by a duly authorized officer as of the date set forth above.

	COMPANY:

	NUZEE, INC.

	By:	/s/ Masateru Higashida
	Name:	Masateru Higashida
	Title:	Chief Executive Officer

EXHIBIT I

CONVERSION NOTICE

(To be executed by the Holder in order to Convert the Note)

TO: NUZEE, INC.

Via Email:

Conversion Date:
Principal Amount to be Converted:
Accrued Interest to be Converted:
Total Conversion Amount to be converted:
Conversion Price:

Number of Common Stock to be issued:

Please issue the Common Stock in the following name and deliver them to the following account:
Issue to:
Broker DTC Participant Code:
Account Number:

Authorized Signature:
Name:
Title:

EX-10.6 4 ex10-6.htm

Exhibit 10.6

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AND AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER, IS PROVIDED TO SUCH EFFECT. THE TERMS “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

NUZEE, INC.

Warrant for the Purchase of Common Stock

Issuance Date: April 30, 2024

138,217 shares of Common Stock

Warrant No.:

NuZee, Inc., a Nevada corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Xiang Zhang, the registered holder hereof, or its permitted assigns (the “Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, upon surrender of this Warrant, at any time or times on or after the date hereof, but before April 30, 2026, being two years from the Issuance Date (the “Expiration Date”) the number of shares of Common Stock as set forth above (the “Shares”), at an exercise price per share equal to $1.322, subject to adjustment as provided herein (the “Exercise Price”). As used herein, the term “this Warrant” shall mean and include this warrant and Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. The rights, preferences and obligations of a holder of Common Stock are set forth in the Company’s Third Amended and Restated Bylaws dated March 17, 2022 and the Company’s Articles of Incorporation dated July 15, 2011, as amended.

The number of shares of Common Stock issuable upon exercise of this Warrant (the “Warrant Shares”) and the Exercise Price may be adjusted from time to time as hereinafter set forth. This Warrant was issued pursuant to that certain Convertible Note and Warrant Purchase Agreement, dated as of April 27, 2024, between the Company and the Holder (the “Purchase Agreement”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in the Purchase Agreement .

1. Exercise of Warrant.

(a) Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder, in whole or in part, during normal business hours on any business day on or after the date hereof and prior to 5:00 p.m. Eastern Time on the Expiration Date by:

(i) delivery of a duly executed written notice, in the form of the subscription notice attached as Exhibit A hereto (the “Exercise Notice”), of such Holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased;

(ii) payment to the Company of an amount equal to the Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”), either in cash or by certified check or wire transfer of immediately available funds or by delivery of Warrant Shares receivable upon exercise of this Warrant in accordance with Section 1(b) below; and

(iii) delivery to the Company of this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction as provided in Section 8);

Upon the Company’s receipt of the Exercise Notice, the Aggregate Exercise Price (or notice of a cashless exercise) and this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction as provided in Section 8) (the “Exercise Delivery Documents”), the Holder shall be deemed for all entity purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of certificates evidencing such Warrant Shares.

(b) This Warrant may also be exercised by the Holder through a cashless exercise, as described in this Section 1(b). In lieu of exercising this Warrant for cash, the Holder may elect to receive Shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised), by (i) the delivery to the Company of a duly executed Exercise Notice specifying the number of Warrant Shares to be applied to such exercise, and (ii) delivery to the Company of this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction as provided in Section 8). The number of Shares to be issued upon exercise of this Warrant pursuant to this Section 1(b) shall equal the value of this Warrant (or the portion thereof being exercised) computed as of the date of delivery of this Warrant to the Company using the following formula:

X =	Y(A)-B)
	A

Where:

X =	the number of Shares to be issued to Holder under this Section 1(b);
Y =	the number of Warrant Shares identified in the Exercise Notice as being surrendered for the cashless exercise;
A =	the Fair Market Value of one share of Common Stock (at the date of such valuation); and
B =	the Exercise Price (as adjusted to the date of such calculation).

For purposes of this Section 1(b), Fair Market Value shall have the definition provided in Section 6(g).

The Company acknowledges and agrees that this Warrant was issued on the date set forth on the first page as the Issuance Date. Consequently, the Company acknowledges and agrees that, if the Holder conducts a cashless exercise, the period during which the Holder held this Warrant may, for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), be “tacked” to the period during which the Holder holds the Warrant Shares received upon such cashless exercise.

(c) Effect of Exercise. Upon receipt by the Company of a Notice of Exercise, together with proper payment of the Exercise Price, the Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant Shares as of the close of business on the date on which the Notice of Exercise has been delivered and payment has been made for such Warrant Shares in accordance with this Agreement and the Holder shall be deemed to be the holder of record of the Warrant Shares, notwithstanding that the Share transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder. On or before the second (2nd) business day following the date on which the Company has received each of the Notice of Exercise, the Aggregate Exercise Price (or notice of a cashless exercise) and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft, mutilation or destruction) (the “Exercise Delivery Documents”), the Company shall issue and deliver to the address as specified in the Notice of Exercise, a certificate, registered in the name of the holder of this Warrant or its designee, for the number of Shares to which the holder of this Warrant is entitled pursuant to such exercise. If this Warrant shall be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares subject to purchase hereunder within two (2) business days of receipt of the Warrant.

(d) Voting Share Restriction. In the event the Common Stock is being traded on the Nasdaq Stock Market or any comparable trading market at the time of exercise and the Holder’s exercise of the Warrants would result in the Holder owning more than twenty percent (20%) of the Company’s issued Common Stock, Holder may only exercise up to the number of Warrant Shares equivalent to 19.99% of the Company’s issued Common Stock until such time as the Company receives approval from its shareholders. Upon receipt of the Notice of Exercise from the Holder which would result in the Holder owning twenty percent (20%) or more of the Company’s issued Common Stock, the Company shall seek shareholder approval of the Holder’s ownership of twenty percent (20%) or more of the Company’s issued Common Stock. In the event the Company is unable to obtain shareholder approval within 120 days after receipt of the Notice of Exercise or the shareholders disapprove such issuance of Common Stock, the Holder shall be entitled to a cash payment to place it in the position that it would have been in had the Holder received the relevant Warrant Shares on such date and sold them on-market on the same date at the volume weighted average price of those Warrant Shares for that day.

2. Reserved.

3. Representations of Holder. The Holder, by the acceptance hereof, represents and warrants that it:

(a) is acquiring this Warrant and the Warrant Shares solely for its own account, for investment and not with a view towards the distribution or resale thereof in violation of the Securities Act or any applicable state securities laws;

(b) is not a “U.S. Person” (as defined in Regulation S promulgated under the Securities Act (“Regulation S”));

(d) aware that the sale of this Warrant is being made in reliance on the exemption from registration provided by Regulation S; and

(e) acknowledges and covenants that this Warrant may not be exercised by or on behalf of a U.S. Person, except pursuant to an exemption from the registration requirements of the Securities Act and applicable securities laws;

If the Holder cannot make any of the foregoing representations at the time of any exercise of this Warrant because it would be factually incorrect at that time, the Holder shall so notify the Company, and it shall be a condition to the Holder’s exercise of this Warrant at that time that the Company receive such other assurances as the Company then considers reasonably necessary to assure the Company that the issuance of the Warrant Shares upon such exercise of this Warrant at such time shall not violate the Securities Act or any state securities laws.

4. Reserved.

5. Restrictions on Transfer.

(a) Notwithstanding any provisions contained in this Warrant to the contrary, this Warrant and the related Warrant Shares shall not be transferable except pursuant to the proviso contained in the following sentence or upon the conditions specified in this Section 4, which conditions are intended, among other things, to insure compliance with the provisions of the Securities Act and applicable state law in respect of the transfer of this Warrant or such Warrant Shares. The Holder by acceptance of this Warrant agrees that the Holder will not transfer this Warrant or the related Warrant Shares prior to delivery to the Company of an opinion of the Holder’s counsel (as such opinion and such counsel are described in Section 4(b) hereof) or until registration of such Warrant Shares under the Securities Act has become effective or after a sale of such Warrant or Warrant Shares has been consummated pursuant to Rule 144 under the Securities Act.

(b) The Holder, by its acceptance hereof, agrees that prior to any transfer of this Warrant or of the related Warrant Shares (other than as permitted by Section 4(a) hereof or pursuant to a registration under the Securities Act), the Holder will give written notice to the Company of its intention to effect such transfer, together with an opinion of such counsel for the Holder as shall be reasonably acceptable to the Company, to the effect that the proposed transfer of this Warrant and/or such Warrant Shares may be effected without registration under the Securities Act. Upon delivery of such notice and opinion to the Company, the Holder shall be entitled to transfer this Warrant and/or such Warrant Shares in accordance with the intended method of disposition specified in the notice to the Company.

(c) Each certificate representing Warrant Shares issued upon exercise or exchange of this Warrant shall bear the following legend, unless the opinion of counsel referred to in Section 4(b) states such legend is not required:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”

6. Reservation of Shares. The Company shall at all times prior to the Expiration Date reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrant, such number of Common Shares as shall, from time to time, be sufficient therefor. The Company covenants that all Common Shares issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, and all Common Shares issuable upon conversion of this Warrant, shall be validly issued, fully paid and non-assessable.

7. Exercise Price Adjustments. The Exercise Price shall be subject to adjustment from time to time as follows:

(a) (i) In the event that the Company shall (A) pay a dividend or make a distribution, in Common Shares, on any class of equity interests of the Company or any subsidiary, (B) split or subdivide its outstanding Common Shares into a greater number of Shares, or (C) combine its outstanding Common Shares into a smaller number of Shares, then in each such case the Exercise Price in effect immediately prior thereto shall be adjusted so that the Holder of this Warrant thereafter surrendered for exercise shall be entitled to receive the number of Common Shares that such Holder would have owned or have been entitled to receive after the occurrence of any of the events described above had such Warrant been exercised immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 6(a)(i) shall become effective immediately after the close of business on the record date in the case of a dividend or distribution (except as provided in Section 6(e) below) and shall become effective immediately after the close of business on the effective date in the case of such subdivision, split or combination, as the case may be. Any Shares issuable in payment by the Company of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding Common Shares under clause (iii) below.

(ii) Upon any adjustment of the Exercise Price or a number if issuable Warrant Shares pursuant to Section 6(a), the Company shall give written notice thereof to the Holder, setting forth in reasonable detail the calculation of such adjustment.

(iii) No adjustment in the Exercise Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments that by reason of this Section 6(a)(iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(a) shall be made to the nearest cent or nearest 1/100th of a Common Share.

(iv) In the event that, at any time as a result of an adjustment made pursuant to Section 6(a)(i) or 6(a)(iii) above, the Holder of this Warrant thereafter surrendered for exercise shall become entitled to receive any equity interest of the Company other than Common Shares, thereafter the number of such other equity interests so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Shares contained in Section 6(a)(i) above, and the other provisions of this Section 6(a) with respect to the Common Shares shall apply on like terms to any such other equity interests.

(b) In case of any reclassification of the Common Shares (other than in a transaction to which Section 6(a)(i) applies), any consolidation of the Company with, or merger of the Company into, any other entity, any merger of another entity into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding Common Shares of the Company), any sale or transfer of all or substantially all of the assets of the Company or any compulsory Share or equity interest exchange, pursuant to which exchange the Common Shares are converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder of this Warrant then outstanding shall have the right thereafter, during the period this Warrant shall be exercisable, to exercise this Warrant only for the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of Common Shares of the Company into which this Warrant might have been able to exercise for immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange assuming that such holder of Common Shares failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon consummation of such transaction subject to adjustment as provided in Section 6(a) above following the date of consummation of such transaction. The Company shall not effect any such reclassification, consolidation, merger, sale, transfer, share exchange or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Holder, the obligation to deliver to the Holder upon its exercise of this Warrant such Shares, equity interest, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and the other obligations under this Warrant. The provisions of this Section 6(b) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

(i) the Company shall take any action which would require an adjustment in the Exercise Price pursuant to Section 6(a); or

(ii) the Company shall authorize the granting to the holders of its Common Shares generally of rights, warrants or options to subscribe for or purchase any Shares of any class or any other rights, warrants or options; or

(iii) there shall be any reclassification or change of the Common Shares (other than a subdivision or combination of its outstanding Common Shares) or any consolidation, merger or statutory exchange to which the Company is a party and for which approval of any members of the Company is required, or the sale or transfer of all or substantially all of the assets of the Company; or

(iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in each such case, the Company shall cause to be filed with the transfer agent for this Warrant (and if no such transfer agent, then the Managers of the Company) and shall cause to be mailed to each Holder at such Holder’s address as shown on the books of the Company or the transfer agent for this Warrant, as promptly as possible, but at least thirty (30) days prior to the applicable date hereinafter specified, a notice stating (A) the record date record for the purpose of such dividend, distribution or granting of rights, warrants or options, or, if a record date shall not be set, the date as of which the holders of Common Shares of record to be entitled to such dividend, distribution or rights, warrants or options are to be determined, or (B the date on which such reclassification, change, consolidation, merger, statutory exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property deliverable upon such reclassification, change, consolidation, merger, statutory exchange, sale, transfer, dissolution, liquidation or winding up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 6(c).

(d) Whenever the Exercise Price is adjusted as herein provided, the Company shall promptly file with the transfer agent for this Warrant (and if no such transfer agent, then the Managers of the Company) a certificate of the Managers of the Company setting forth the Exercise Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof. The Company shall promptly cause a notice of the adjusted Exercise Price to be mailed to each Holder.

(e) In any case in which Section 6(a) provides that an adjustment shall become effective immediately after a record date for an event and the date fixed for such adjustment pursuant to Section 6(a) occurs after such record date but before the occurrence of such event, the Company may defer until the actual occurrence of such event (i) issuing to the Holder of this Warrant exercised after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event over and above the Common Shares issuable upon such exercise before giving effect to such adjustment, and (ii) issuing to such holder any fraction of Common Shares.

(f) In case the Company shall take any action affecting the Common Shares, other than actions described in this Section 6, which in the opinion of the Board of Representatives of the Company, as applicable, would materially adversely affect the exercise right of the Holder, the Exercise Price may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Representatives, as applicable, may determine to be equitable in the circumstances.

(g) For the purpose of any computation under Section 1(b) or this Section 6, the “Fair Market Value” per Common Share on any day shall mean: (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange on such day; or (ii) the last reported sales price so reported on such day; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for Common Stock are reported in the over-the-counter market by NASDAQ (or, if not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported on such day. Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the day in question, then the Fair Market Value shall be determined as of the latest date prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for thirty (30) or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by, and reflected in a formal resolution of, the Board of Representatives, of the Company.

(h) Upon each adjustment of the Exercise Price, this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of Common Shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of Common Shares purchasable upon exercise of this Warrant prior to adjustment of the number of Common Shares by the Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise Price in effect after such adjustment of the Exercise Price.

8. Number of Common Shares Adjustment. Reference is made to that certain Convertible Note dated April 30, 2024, issued by the Company in favor of the Holder in the face amount of $200,000 (“Note”). Without limiting Section 6 above, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased subject to and in accordance with the following terms and conditions: (a) if prior to the Expiration Date the holder of the Note, through one or more conversions, converts all or a portion of the Note into Common Shares (the number of such Common Shares issued upon such conversion or conversions, collectively, the “Note Issued Common Shares”), the Warrant Shares shall be increased by the number equal to the Note Issued Common Shares, and (b) all terms and conditions of this Warrant, including, without limitation, the Exercise Price, the Exercise Notice and the Expiration Date, shall apply to such additional Warrant Shares.

9. Transfer Taxes. The issuance of any Common Shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such Common Shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance.

10. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, mutilation or destruction of this Warrant (and upon surrender of this Warrant if mutilated), and upon reimbursement of the Company’s reasonable expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.

11. No Rights as a Member. The Holder of this Warrant shall not have, solely on account of such status, any rights of a member of the Company, either at law or in equity, except as provided in this Warrant.

12. Notice. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been made upon receipt when delivered personally, via pre-paid overnight courier or by certified mail, postage pre-paid, return receipt requested. The addresses for such communications shall be:

If to the Company:
	NuZee, Inc. 2865 Scott St. Suite 107 Vista, California 92081 Attention: Randell Weaver

If to the Holder:	Please refer to the contact information set forth on the signature page to the Purchase Agreement.

or such other address as the Company or Holder, as applicable, may specify in written notice given to the other party in accordance with this Section 11.

13. Amendments; Integration. This Warrant and any term hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party hereto against which enforcement of such change, waiver, discharge or termination is sought. This Warrant constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter of this Warrant, and supersedes all prior representations, agreements, arrangements and understandings, written or oral, between the parties with such subject matter.

14. Expiration. This Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m. Eastern Time on the Expiration Date.

15. Successors and Assigns. The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder and their respective successors and permitted assigns.

16. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.

17. Governing Law. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation, and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action, or proceeding by mailing a copy thereof to the Company at the address set forth on the signature page to the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action, or proceeding is brought in an inconvenient forum or that the venue of such suit, action, or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY AND HOLDER HEREBY IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO, AND AGREE NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

18. Remedies, Characterization, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary, and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 1 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

19. Payment of Collection, Enforcement and Other Costs. If (a) this Warrant is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the holder otherwise takes action to collect amounts due under this Warrant or to enforce the provisions of this Warrant or (b) there occurs any bankruptcy, reorganization, receivership of the company, or other proceedings affecting company creditors’ rights and involving a claim under this Warrant, then the Company shall pay the costs incurred by the Holder for such collection, enforcement, or action or in connection with such bankruptcy, reorganization, receivership, or other proceeding, including, without limitation, attorneys’ fees and disbursements.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as of the Issuance Date.

	NuZee, Inc.

	By:	/s/ Masateru Higashida
	Name:	Masateru Higashida
	Title:	Chief Executive Officer, Secretary, Treasurer, and Director

	By:	/s/ Randell Weaver
	Name:	Randell Weaver
	Title:	President, Chief Operating Officer, and Chief Financial Officer

EXHIBIT A TO WARRANT

SUBSCRIPTION FORM

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to purchase (check applicable box):

___ __________________ Common Shares covered by such Warrant; or

___ the maximum number of Common Shares covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 1 of such Warrant.

The undersigned herewith makes payment of the aggregate Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

___ $__________ in lawful money of the United States; and/or

___ the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ Common Shares (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

___ the cancellation of such number of Common Shares as is necessary, in accordance with the formula set forth in Section 1, to exercise this Warrant with respect to the maximum number of Common Shares purchasable pursuant to the cashless exercise procedure set forth in Section 1.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to whose address is .

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Shares under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Date:
		[Name of Holder]

	By:

	Name:

	Title:

EXHIBIT B TO WARRANT

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of Common Shares of NuZee, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of NuZee, Inc., with full power of substitution in the premises.

Dated:

(Signature must conform to name of holder as specified
on the face of the Warrant)

Signed in the presence of:

(Name)

(address)

ACCEPTED AND AGREED:

[TRANSFEREE]

(Name)

(address)

EX-10.7 5 ex10-7.htm

Exhibit 10.7

NUZEE, INC.

Warrant for the Purchase of Common Stock

Issuance Date: April 30, 2024

82,930 shares of Common Stock

Warrant No.: 001

NuZee, Inc., a Nevada corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Future Science and Technology Co. Ltd, the registered holder hereof, or its permitted assigns (the “Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, upon surrender of this Warrant, at any time or times on or after the date hereof, but before April 30, 2026, being two years from the Issuance Date (the “Expiration Date”) the number of shares of Common Stock as set forth above (the “Shares”), at an exercise price per share equal to $1.322, subject to adjustment as provided herein (the “Exercise Price”). As used herein, the term “this Warrant” shall mean and include this warrant and Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. The rights, preferences and obligations of a holder of Common Stock are set forth in the Company’s Third Amended and Restated Bylaws dated March 17, 2022 and the Company’s Articles of Incorporation dated July 15, 2011, as amended.

1. Exercise of Warrant.

(iii) delivery to the Company of this Warrant (or an indemnity and evidence with respect to this Warrant in the case of its loss, theft, mutilation or destruction as provided in Section 8);

X =	Y(A)-B)
	A

Where:

X =	the number of Shares to be issued to Holder under this Section 1(b);
Y =	the number of Warrant Shares identified in the Exercise Notice as being surrendered for the cashless exercise;
A =	the Fair Market Value of one share of Common Stock (at the date of such valuation); and
B =	the Exercise Price (as adjusted to the date of such calculation).

For purposes of this Section 1(b), Fair Market Value shall have the definition provided in Section 6(g).

2. Reserved.

3. Representations of Holder. The Holder, by the acceptance hereof, represents and warrants that it:

(b) is not a “U.S. Person” (as defined in Regulation S promulgated under the Securities Act (“Regulation S”));

(d) aware that the sale of this Warrant is being made in reliance on the exemption from registration provided by Regulation S; and

4. Reserved.

5. Restrictions on Transfer.

7. Exercise Price Adjustments. The Exercise Price shall be subject to adjustment from time to time as follows:

(i) the Company shall take any action which would require an adjustment in the Exercise Price pursuant to Section 6(a); or

(iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

8. Number of Common Shares Adjustment. Reference is made to that certain Convertible Note dated April 30, 2024, issued by the Company in favor of the Holder in the face amount of $120,000 (“Note”). Without limiting Section 6 above, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased subject to and in accordance with the following terms and conditions: (a) if prior to the Expiration Date the holder of the Note, through one or more conversions, converts all or a portion of the Note into Common Shares (the number of such Common Shares issued upon such conversion or conversions, collectively, the “Note Issued Common Shares”), the Warrant Shares shall be increased by the number equal to the Note Issued Common Shares, and (b) all terms and conditions of this Warrant, including, without limitation, the Exercise Price, the Exercise Notice and the Expiration Date, shall apply to such additional Warrant Shares.

If to the Company:
	NuZee, Inc. 2865 Scott St. Suite 107 Vista, California 92081 Attention: Randell Weaver

If to the Holder:	Please refer to the contact information set forth on the signature page to the Purchase Agreement.

or such other address as the Company or Holder, as applicable, may specify in written notice given to the other party in accordance with this Section 11.

14. Expiration. This Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m. Eastern Time on the Expiration Date.

16. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as of the Issuance Date.

	NuZee, Inc.

	By:	/s/ Masateru Higashida
	Name:	Masateru Higashida
	Title:	Chief Executive Officer, Secretary, Treasurer, and Director

	By:	/s/ Randell Weaver
	Name:	Randell Weaver
	Title:	President, Chief Operating Officer, and Chief Financial Officer

EXHIBIT A TO WARRANT

SUBSCRIPTION FORM

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to purchase (check applicable box):

___ __________________ Common Shares covered by such Warrant; or

___ the maximum number of Common Shares covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 1 of such Warrant.

___ $__________ in lawful money of the United States; and/or

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to whose address is .

Date:
		[Name of Holder]

	By:

	Name:

	Title:

EXHIBIT B TO WARRANT

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

Dated:

(Signature must conform to name of holder as specified
on the face of the Warrant)

Signed in the presence of:

(Name)

(address)

ACCEPTED AND AGREED:

[TRANSFEREE]

(Name)

(address)

EX-31.1 6 ex31-1.htm

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECTUIVE OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jianshuang Wang, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Nuzee, 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;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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: August 19, 2024

	/s/ Jianshuang Wang
	Name:	Jianshuang Wang
	Title:	Co-Chief Executive Officer
		(Principal Executive Officer)

EX-31.2 7 ex31-2.htm

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Randell Weaver, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Nuzee, 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;

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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: August 19, 2024

	/s/ Randell Weaver
	Name:	Randell Weaver
	Title:	Co-Chief Executive Officer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1 8 ex32-1.htm

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, the Co-Chief Executive Officer and principal executive officer of Nuzee, Inc. (the “Company”), hereby certify, that, to my knowledge:

The Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) of the Company fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 19, 2024

	/s/ Jianshuang Wang
	Name:	Jianshuang Wang
	Title:	Co-Chief Executive Officer
		(Principal Executive Officer)

EX-32.2 9 ex32-2.htm

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, Randell Weaver, the Co-Chief Executive Officer and Chief Financial Officer and principal financial officer of Nuzee, Inc. (the “Company”), hereby certify, that, to my knowledge:

The Quarterly Report on Form 10-Q for the period ended June 30, 2024 (the “Report”) of the Company fully complies with the requirements of Section 13(a)/15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 19, 2024

	/s/ Randell Weaver
	Name:	Randell Weaver
	Title:	Co-Chief Executive Officer and Chief Financial Officer
		(Principal Financial and Accounting Officer)