Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Mar. 31, 2017 | |
Document and Entity Information: | ||
Entity Registrant Name | NuZee, Inc. | |
Document Type | 10-K | |
Document Period End Date | Sep. 30, 2017 | |
Trading Symbol | nuze | |
Amendment Flag | true | |
Amendment Description | Amendment 1 | |
Entity Central Index Key | 1,527,613 | |
Current Fiscal Year End Date | --09-30 | |
Entity Common Stock, Shares Outstanding | 34,172,431 | |
Entity Public Float | $ 0 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | No | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 | |
Current assets: | |||
Cash | $ 347,327 | $ 40,613 | |
Accounts receivable, net | 143,893 | 57,711 | |
Accounts receivable - Related party | 12,380 | 0 | |
Inventories, net | 266,620 | 206,356 | |
Other current assets | 102,926 | 65,726 | |
Other current assets - Related party | 29,378 | 0 | |
Total current assets | 902,524 | 370,406 | |
Property and equipment, net | 277,987 | 151,946 | |
Other assets: | |||
Goodwill | 17,112 | 0 | |
Customer List, net | 45,899 | 0 | |
Investment in unconsolidated affiliate | 10,733 | 0 | |
Total other assets | 73,744 | 0 | |
Total assets | 1,254,255 | 522,352 | |
Current liabilities: | |||
Accounts payable | 104,973 | 189,317 | |
Loan payable - short term - Related party | 200 | 145,377 | |
Current portion of long-term loan payable | 44,681 | 0 | |
Convertible Notes payable - Related party | 0 | 603,008 | |
Other current liabilities | 126,687 | 717 | |
Other current liabilities - Related party | 1,089 | 0 | |
Deferred revenue | 72,750 | 6,620 | |
Total current liabilities | 350,380 | 945,039 | |
Non-current liabilities: | |||
Loan payable - long term, net of current portion | 133,644 | 0 | |
Other noncurrent liabilities | 9,610 | 0 | |
Total non-current liabilities | 143,254 | 0 | |
Total liabilities | 493,634 | 945,039 | |
Stockholders' equity (deficit): | |||
Common stock | 347 | 311 | |
Additional paid in capital | 9,718,648 | 6,909,523 | |
Accumulated deficit | (9,030,551) | (7,263,412) | |
Less: treasury stock, at cost | [1] | 0 | (69,109) |
Accumulated other comprehensive loss | (20,680) | 0 | |
Total shareholders' equity (deficit) | [2] | 667,764 | (422,687) |
Noncontrolling interest | 92,857 | 0 | |
Total stockholders' equity (deficit) | 760,621 | (422,687) | |
Total liabilities and stockholders' equity (deficit) | $ 1,254,255 | $ 522,352 | |
[1] | 0 and 1,800,844 shares held in treasury. | ||
[2] | For NuZee, Inc. |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Sep. 30, 2017 | Sep. 30, 2016 |
Statement of Financial Position | ||
Preferred Stock, Par Value | $ 0.00001 | $ 0.00001 |
Preferred Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par Value | $ 0.00001 | $ 0.00001 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares Issued | 34,720,538 | 31,154,951 |
Common Stock, Shares Outstanding | 34,720,538 | 31,154,951 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS, For the Years Ended September 30, 2017 and 2016 - USD ($) | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Statement of Income | |||
Revenues, net | $ 1,628,410 | $ 455,491 | |
Cost of sales | 1,319,232 | 408,150 | |
Gross Profit | 309,178 | 47,341 | |
Operating expenses | 2,076,654 | 1,325,463 | |
Loss from operations | (1,767,476) | (1,278,122) | |
Other income | 40,764 | 11,897 | |
Equity in loss of unconsolidated affiliate | (39,267) | 0 | |
Other expense | (3,235) | (5,683) | |
Interest expense | (6,976) | (3,385) | |
Net loss | (1,776,190) | (1,275,293) | |
Net loss attributable to noncontrolling interest | (9,051) | 0 | |
Net loss attributable to shareholders | [1] | $ (1,767,139) | $ (1,275,293) |
Basic and diluted loss per common share | $ (0.05) | $ (0.04) | |
Basic and diluted weighted average number of common stock outstanding | 32,135,363 | 30,752,267 | |
[1] | NuZee, Inc. |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended September 30, 2017 and 2016 - USD ($) | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Operating activities: | |||
Net loss | $ (1,776,190) | $ (1,275,293) | |
Adjustments to reconcile net loss to net cash used by operating activities: | |||
Depreciation and Amortization | 87,392 | 41,921 | |
Loss on disposition of equipments | 0 | 2,715 | |
Share issued for services | 14,879 | 0 | |
Option expense | 138,098 | 37,253 | |
Interest Expense | 2,615 | 3,385 | |
Inventory impairment | 9,086 | 49,223 | |
Provision for sales returns and chargebacks | 86,487 | 0 | |
Equity in loss of unconsolidated affiliate | 39,267 | 0 | |
Change in operating assets and liabilities: | |||
Accounts receivable (increase/decrease) | (165,614) | (39,506) | |
Accounts receivable - Related party (increase/decrease) | 35,174 | 0 | |
Inventories (increase/decrease) | 140,784 | (53,816) | |
Other current assets (increase/decrease) | 31,564 | (44,194) | |
Other current assets - Related party (increase/decrease) | (29,378) | 0 | |
Accounts payable (increase/decrease) | (159,859) | 123,796 | |
Other current liabilities (increase/decrease) | 80,648 | 6,730 | |
Other current liabilities - Related party (increase/decrease) | 1,089 | 0 | |
Deferred revenue (increase/decrease) | 66,130 | 0 | |
Net cash used by operating activities | (1,397,828) | (1,147,786) | |
Investing activities: | |||
Purchase of equipment | (186,973) | (4,479) | |
Acquisition of investment in unconsolidated affiliate | (50,000) | 0 | |
Net cash acquired from business acquisition | 201,676 | 0 | |
Net cash used by investing activities | (35,297) | (4,479) | |
Financing activities: | |||
Proceeds from issuance of Loan - short term - Related party | 572,306 | 0 | |
Repayment of loans - short term - Related party | (617,106) | 0 | |
Proceeds from issuance of Loan - short term | 87,268 | 200,000 | |
Repayment of loans - short term | (37,600) | (55,000) | |
Payments on capital lease | (7,866) | 0 | |
Proceeds from issuance of common stock | 860,045 | 801,001 | |
Proceeds from issuance of exercise of options | 0 | 1,500 | |
Proceeds from issuance of treasury stock | 900,783 | 137,699 | |
Net cash provided by financing activities | 1,757,830 | 1,085,200 | |
Effect of foreign exchange on cash | (17,991) | 0 | |
Net change in cash | 306,714 | (67,065) | |
Cash, beginning of period | 40,613 | 107,678 | |
Cash, end of period | 347,327 | 40,613 | |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 2,649 | 0 | |
Cash paid for taxes | 800 | 800 | |
Noncash investing and financing activities: | |||
Acquisition through issuance of common shares | [1] | 258,465 | 0 |
Conversion of note payable to common stock | 606,000 | 0 | |
Conversion of note payable to common stock - Related party | $ 100,000 | $ 0 | |
[1] | Of NuZee JAPAN Co., Ltd. |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) For the period from October 1, 2015 to September 30, 2017 - USD ($) | Total | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Noncontrolling Interest | OCI | Total Stockholders' Equity | |||
Balance, Value at Sep. 30, 2015 | $ 301 | $ 5,940,337 | $ (77,366) | $ (5,988,119) | $ 0 | $ 0 | $ (124,847) | ||||
Balance, Shares at Sep. 30, 2015 | 30,124,951 | 0 | 2,016,000 | 0 | 0 | 0 | 0 | ||||
Common stock issued for cash, Value | $ 10 | $ 800,991 | $ 0 | $ 0 | $ 0 | $ 0 | $ 801,001 | ||||
Common stock issued for cash, Shares | 1,025,000 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Treasury stock issued for cash, Value at Sep. 30, 2016 | $ (69,109) | [1] | $ 0 | $ 129,442 | $ 8,257 | $ 0 | $ 0 | $ 0 | $ 137,699 | ||
Treasury stock issued for cash, Shares at Sep. 30, 2016 | 0 | 0 | (215,156) | 0 | 0 | 0 | 0 | ||||
Stock option expense | $ 0 | $ 37,253 | $ 0 | $ 0 | $ 0 | $ 0 | $ 37,253 | ||||
Stock options-exercised, Value | $ 0 | $ 1,500 | $ 0 | $ 0 | $ 0 | $ 0 | $ 1,500 | ||||
Stock options-exercised, Shares | 5,000 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Treasury stock issued for service, Value | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Treasury stock issued for service, Shares | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Common stock issued for conversion of note payable, Value | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Common stock issued for conversion of note payable, Shares | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Stock issued for acquisition, Value | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Stock issued for acquisition, Shares | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Foreign currency gain (loss) | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Profit (Loss) | 0 | 0 | 0 | (1,275,293) | 0 | 0 | (1,275,293) | ||||
Balance, Value at Sep. 30, 2016 | $ 311 | $ 6,909,523 | $ (69,109) | $ (7,263,412) | $ 0 | $ 0 | $ (422,687) | ||||
Balance, Shares at Sep. 30, 2016 | 31,154,951 | 31,154,951 | 0 | (1,800,844) | 0 | 0 | 0 | 0 | |||
Common stock issued for cash, Value | $ 11 | $ 860,034 | $ 0 | $ 0 | $ 0 | $ 0 | $ 860,045 | ||||
Common stock issued for cash, Shares | 1,032,539 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Treasury stock issued for cash, Value at Sep. 30, 2017 | $ 0 | [1] | $ 0 | $ 833,002 | $ 67,781 | $ 0 | $ 0 | $ 0 | $ 900,783 | ||
Treasury stock issued for cash, Shares at Sep. 30, 2017 | 0 | 0 | 1,766,242 | 0 | 0 | 0 | 0 | ||||
Stock option expense | $ 0 | $ 138,098 | $ 0 | $ 0 | $ 0 | $ 0 | $ 138,098 | ||||
Treasury stock issued for service, Value | $ 0 | $ 13,551 | $ 1,328 | $ 0 | $ 0 | $ 0 | $ 14,879 | ||||
Treasury stock issued for service, Shares | 0 | 0 | 34,602 | 0 | 0 | 0 | 0 | ||||
Common stock issued for conversion of note payable, Value | $ 14 | $ 705,986 | $ 0 | $ 0 | $ 0 | $ 0 | $ 706,000 | ||||
Common stock issued for conversion of note payable, Shares | 1,384,314 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
Stock issued for acquisition, Value | $ 11 | $ 258,454 | $ 0 | $ 0 | $ 110,771 | $ 0 | $ 369,236 | ||||
Stock issued for acquisition, Shares | 1,148,734 | [2] | 0 | 0 | 0 | 0 | 0 | 0 | |||
Foreign currency gain (loss) | $ 0 | $ 0 | $ 0 | $ 0 | $ (8,863) | [3] | $ (20,680) | $ (29,543) | |||
Profit (Loss) | 0 | 0 | 0 | (1,767,139) | (9,051) | 0 | (1,776,190) | ||||
Balance, Value at Sep. 30, 2017 | $ 347 | $ 9,718,648 | $ 0 | $ (9,030,551) | $ 92,857 | $ (20,680) | $ 760,621 | ||||
Balance, Shares at Sep. 30, 2017 | 34,720,538 | 34,720,538 | 0 | 0 | 0 | 0 | 0 | 0 | |||
[1] | 0 and 1,800,844 shares held in treasury. | ||||||||||
[2] | NuZee JP. | ||||||||||
[3] | NuZee Japan. |
1. Organization
1. Organization | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
1. Organization | 1. Organization NuZee, Inc. (the "Company", "we", "our") was incorporated on November 9, 2011 in Nevada. The Company is a start-up organization which markets and distributes consumer products primarily in the beverage segment. Additionally, while the Company primarily intends to purchase its proprietary products and resell, the Company may also engage in contract manufacturing where the Company purchases raw materials and retains a contract converter to process the raw materials into finished products for resale. On August 16, 2016, the Company entered into a Share Exchange Agreement with NuZee JAPAN Co., Ltd ("NuZee JP") and its shareholders whereby the Company will exchange 1,148,734 shares of its common stock, par value $0.00001 per share, for seventy percent (70%) of the issued and outstanding common stock of NuZee JP. The acquisition of NuZee JP closed on October 3, 2016. NuZee JP was incorporated on December 16, 2013 in Aichi, Japan and is a start-up organization which markets and distributes consumer products primarily in the beverage segment. NuZee JP primarily intends to purchase and resell its proprietary products directly to consumers through its website portal as well as through online stores such as Rakuten and Japan Post online shop. |
2. Basis of Presentation and Su
2. Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
2. Basis of Presentation and Summary of Significant Accounting Policies | 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies presented below is designed to assist in understanding the Company's financial statements. Such financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects and have been consistently applied in preparing the accompanying financial statements. Earnings per Share Basic earnings per common share equal 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 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. The Company incurred a net loss for the years ended September 30, 2017 and 2016, 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 and raising capital. The Company has suffered recurring losses from operations, and negative cash flows from operations. As of September 30, 2017, the Company had cash (operating capital) of $347,327 and had $200 short-term loan payable. The Company has not attained profitable operations since inception. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had limited revenues, recurring losses, an accumulated deficit and is dependent on the shareholder to provide additional funding for operating expenses. These items raise substantial doubt as to the Company's ability to continue as a going concern. 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. Fair Value of Financial Instruments Fair value is an estimate of the exit price, representing the amount that would be received to, sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are not adjusted for transaction cost. Fair value measurement under generally accepted accounting principles provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis. The carrying amounts of cash, accounts receivable, notes receivable, accounts payable, accrued liabilities and short-term debt approximate fair value because of the short-term nature of these instruments. The carrying amount of long-term debt approximates fair value because the debt is based on current rates at which the Company could borrow funds with similar remaining maturities. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments when available. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the 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 September 30, 2017 and 2016. 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 recognized a reserve of $86,487 and $0 as of September 30, 2017 and 2016, respectively, for estimated chargebacks from retailers. Major Customers For the years ended September 30, 2017 and 2016, revenue was primarily from major customers disclosed below. Besides those revenues, there were $106,413 accounts receivable owed by customer PO and $6,280 accounts receivable owed by customer N which is a related party of the Company as of September 30, 2017 and $51,384 accounts receivable owed by customer S and $0 accounts receivable owed by H and C as of September 30, 2016. For the year ended September 30, 2017: Customer Name Sales Amount % of Total Revenue Customer PO $ 536,511 33 % Customer N $ 489,058 30 % For the year ended September 30, 2016: Customer Name Sales Amount % of Total Revenue Customer S $ 259,104 57 % Customer H $ 91,712 21 % Customer C $ 70,462 15 % Lease The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. NuZee JAPAN Co., Ltd is the lessee of certain equipment under a capital lease extending through 2020. The asset and liability under the capital lease are recorded at the lower of the present value of the minimum lease payments, or the fair value of the asset. Leased equipment is depreciated over a 6-year life. The leased equipment is reported in the accompanying consolidated balance sheets in property and equipment of $11,465 as of September 30, 2017. The capital lease liability is included in other current liabilities on the consolidated balance sheets. Future minimum lease payments under capital lease as of September 30, 2017 for each of the remaining years are as follows: 2017 $ 4,271 2018 $ 4,271 2019 $ 4,271 2020 $ 1,068 Total Minimum Lease Payments $ 13,881 The Company leases office space under leases expiring on May 31, 2020. Rent expense included in general and administrative expense for the year ended September 30, 2017 and 2016 was $88,903 and $49,592 respectively. Future minimum rents as of September 30, 2017 for each of the remaining years are as follows: 2017 $ 56,784 2018 $ 58,488 2019 $ 39,760 Total Minimum Lease Payments $ 155,032 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 majority owned subsidiary which has a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated in the consolidation. The Company consolidates its subsidiary in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation. Foreign Currency Translation The financial position and results of operations of the Company's foreign subsidiary is measured using the foreign subsidiary's local currency as the functional currency. Revenues and expenses of such subsidiary has 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 recorded to other comprehensive loss amounted to $20,680 and $0 as of September 30, 2017 and 2016, 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. Foreign currency transaction losses included in the consolidated statements of operations totaled $3,235 and $2,968 for the years ended September 30, 2017 and 2016, respectively. 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 ''Equity in loss of unconsolidated affiliate'' 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. Goodwill The Company evaluates goodwill on an annual basis or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative goodwill impairment test. The first step of the impairment test involves comparing the fair value of the applicable reporting unit with its carrying value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, management performs the second step of the goodwill impairment test. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill. The amount, by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. Revenue Recognition The Company recognizes revenue only when all of the following criteria have been met: Persuasive evidence of an arrangement exists; Delivery has occurred or services have been rendered; The fee for the arrangement is fixed or determinable; and Collectability is reasonably assured. Persuasive Evidence of an Arrangement Delivery Has Occurred or Services Have Been Performed Collectability Is Reasonably Assured Return and Exchange Policy The Company provides a 30-day money-back guarantee if a buyer is not satisfied with a product. All of the 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 the wholesale customers, return policies varies based on their specific agreements with customers. Under chargebacks agreements with the customers, the Company agrees to reimburse the seller for a portion of the costs incurred by the seller to advertise and promote certain of the Company's products. The Company estimates, accrues and recognized such chargebacks. These amounts are included in the determination of net sales. As of September 30, 2017, the Company had $155,854 of sales allowances for estimated chargebacks and returns. Revenue recognized is net of sales allowances. Cost Recognition Cost of products sold is primarily comprised of direct materials consumed in the manufacturing of primary coffee blender products. Cost of products sold also includes directly related labors' salaries and other overhead cost. Selling, General and Administrative Expense Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, research and development costs, administrative and other indirect overhead costs, depreciation expense and other miscellaneous operating items. Personnel expenses, occupying a majority portion of SG&A, were $741,550 and $308,631 for the years ended September 30, 2017 and 2016, respectively. Company covers shipping fees for wholesalers and distributors and the shipping and handling expenses are recorded under operating expenses in the consolidated statements of operations. The Company expenses advertising costs when incurred. Advertising expense for the years ended September 30, 2017 and 2016 is as follows: 10/01/2016 to 09/30/2017 10/01/2015 to 09/30/2016 Advertising $ 61,202 $ 33,030 The consolidated statements of cash flows are prepared using the indirect method, which reconciles net loss to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net loss. The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Research and Development Research and development expenses are expensed in the consolidated statements of operations as incurred in accordance with FASB ASC 730, Research and Development. Research and development expenses for the years ended September 30, 2017 and 2016 amounted to $18,908 and $9,423 respectively. 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 September 30, 2017 and 2016, the carrying value of inventory of $266,620 and $206,356 respectively, reflected on the consolidated balance sheets is net of this adjustment. September 30, 2017 September 30, 2016 Raw materials $ 111,043 $ 124,035 Work in process 5,535 14,366 Finished goods 159,128 67,955 Less - Inventory reserve 9,086 0 Total (Inventories, net) $ 266,620 $ 206,356 Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation. The Company depreciates equipment on a straight-line basis over the estimated useful lives of the assets after the assets are placed in service. Office equipment is depreciated over a 3-year life, furniture over a 7-year life, and other equipment over a 7-year life. Depreciation expense for the years ended September 30, 2017 and 2016 was $75,917 and $41,921 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 September 30, 2017 and 2016 consist of: September 30, 2017 September 30, 2016 Furniture and Fixture $ 31,514 $ 31,514 Machinery and Equipment $ 323,706 $ 169,864 Vehicles $ 44,657 $ 9,657 Software $ 14,807 $ 0 Accumulated Depreciation $ (136,697) $ (59,089) Net PP & E (Property and equipment, net) $ 277,987 $ 151,946 Samples The Company distributes samples of its products as a component of its marketing program. Costs for samples are expensed at the time the samples are shipped and recorded under operating expenses in the consolidated statements of operations. Long-Lived Assets The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicated that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. Intangible Assets Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company's amortizable intangible asset consists of customer list which, recognized as a result of the acquisition of NuZee JAPAN Co., Ltd, which has an estimated useful life of 5 years. As of September 30, 2017,the intangible assets consist of : September 30, 2017 Gross Carrying Accumulated Net Carrying Amount Amortization Amount Amortized intangible assets: Customer List $ 57,374 $ (11,475 ) $ 45,899 Total $ 57,374 $ (11,475 ) $ 45,899 No significant residual value is estimated for the intangible asset. Aggregate amortization expense for the years ended September 30, 2017, and September 30, 2016, totaled $11,475 and $0, respectively. The following table represents the total estimated amortization of intangible assets for the next five years: For the Year Ending September 30 Estimated Amortization Expense 2018 $11,475 2019 $11,475 2020 $11,475 2021 $11,474 Income Taxes In accordance with ASC 740 - Income Taxes, the provision for income taxes is computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of September 30, 2017 and 2016. Related parties A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. Stock-based Compensation We account for share-based awards issued to employees in accordance with Accounting Standards Codification (ASC) 718, "Compensation-Stock Compensation". Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period, which is normally the vesting period. Share-based compensation to directors is treated in the same manner as share-based compensation to employees, regardless of whether the directors are also employees. We account for share-based compensation to persons other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. We estimate the fair value of share-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of our common stock for common share issuances. We recognized forfeitures as they occurred. Comprehensive income/loss Comprehensive income/loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income/loss are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company's current component of other comprehensive income/loss is the foreign currency translation adjustment. Noncontrolling Interests Noncontrolling interests represent third-party ownership in the net assets of the Company's consolidated subsidiary and are presented as a component of equity. Segment Information ASC Topic 280, "Disclosures about Segments of an Enterprise and Related Information," established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. Management has determined that the Company operates in one business segment, which is the commercialization and development of functional beverages. Reclassifications have been made to conform with the current year presentation. Recent Accounting Pronouncements In May 2014 the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The collective guidance is effective for interim and annual periods in the first annual period beginning after December 15, 2017, with early adoption permitted. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on its ongoing financial reporting. 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 core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the consolidated balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for consolidated financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. The Company has adopted ASU No. 2016-09 with no impact on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have on the consolidated financial statements of a registrant when such standards are adopted in a future period. Specifically, these disclosure requirements apply to the adoption of ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, CompensationStock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, CompensationStock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification account |
3. Acquisition
3. Acquisition | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
3. Acquisition | 3. ACQUISITION NuZee JAPAN Co., Ltd On August 16, 2016, the Company entered into a Share Exchange Agreement with NuZee JAPAN Co., Ltd ("NuZee JP") and its shareholders whereby the Company will exchange 1,148,734 shares of its common stock, par value $0.00001 per share, for seventy percent (70%) of the issued and outstanding common stock of NuZee JP. The Company's issued shares had an acquisition date fair value of $258,465. The remaining thirty percent (30%) of NuZee JP's issued and outstanding common stock is, and will be at the closing, owned by NuZee JP's current President and Chairman of its Board of Directors. The reason for this acquisition is to extend our market shares as well as obtain more business opportunities in both USA and Japan market. This transaction closed on October 3, 2016. The Company applied the acquisition method to the business combination and valued each of the assets acquired and liabilities assumed at fair value as of the acquisition date. The following table shows the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition: Acquisition of NuZee Japan Co., Ltd. Assets acquired: Cash $ 201,676 Accounts receivable 60,770 Inventories 233,845 Other current assets 76,524 Customer list 57,374 Property and equipment 16,677 Goodwill 17,112 Total assets acquired 663,978 Less liabilities assumed Accounts payable and accrued liabilities (153,820 ) Loan payable (140,922 ) Total liabilities assumed (294,742 ) Less noncontrolling interest (110,771 ) Net assets acquired from NuZee JP acquisition 258,465 Since the date of acquisition, revenues of $1,170,368 and net loss of $30,172 were included in the Company's consolidated net loss for the year ended September 30, 2017. In accordance with ASC 805-10-50, the Company is providing the following unaudited pro-forma information to present a summary of the combined results of the Company's consolidated operations as if the acquisitions had been completed as of October 1, 2015. Adjustments were made to eliminate any inter-company transactions in the periods presented. There is no pro forma information for 2017 as NuZee JP was acquired at the beginning of the period. NuZee, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Year Ended September 30, 2016 (Pro Forma) Revenues $ 1,526,057 Cost of sales 1,141,403 Gross Profit 384,654 Operating expenses 1,656,796 Loss from operations (1,272,142 ) Other income 39,686 Other expense (22,704 ) Net loss (1,255,160 ) Net loss attributable to noncontrolling interest - Net loss attributable to NuZee, Inc. $ (1,255,160 ) Net loss per share, basic and fully diluted $ (0.04 ) Weighted average of shares outstanding 31,901,001 |
4. Investment in Unconsolidated
4. Investment in Unconsolidated Affiliate | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
4. Investment in Unconsolidated Affiliate | 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE The Company has an investment in an equity method affiliate which has main businesses related to the production, sale, import and export of coffee & beans, tea & tea leaf, healthy foods and drinks. The following table is a reconciliation of the Company's investment in equity affiliate as presented on the consolidated balance sheet as of September 30, 2017: 2017 Beginning of period $ - Additional investments in unconsolidated affiliate $ 50,000 Distributions received $ - Sale of investment in unconsolidated affiliate $ - Equity in net income (loss) of unconsolidated affiliate $ (39,267 ) End of period $ 10,733 |
5. Loan
5. Loan | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
5. Loan | 5. LOAN On June 30, 2016, NuZee JAPAN Co., Ltd entered into a loan agreement with Tono Shinyo Kinko Bank. The Company borrowed the sum of approximately $145,758 to be repaid on or before June 5, 2021 at an annual interest rate of 1.2%. The loan is unsecured and guaranteed by a director. The Company had $99,973 loan payable at September 30, 2017. On January 27, 2017, NuZee JAPAN Co., Ltd entered into a loan agreement with Nihon Seisaku Kouko. The Company borrowed the sum of approximately $87,268 to be repaid on or before January 20, 2022 at an interest rate of 0.16%. The loan is unsecured and not guaranteed by a director. The Company had $78,352 loan payable at September 30, 2017. The loan payments required for the next five years are as follows: Tono Shinyo Kinko Bank Nihon Seisaku Kouko 2017 $ 26,660 $ 18,022 2018 $ 26,660 $ 18,022 2019 $ 26,660 $ 18,022 2020 $ 19,993 $ 18,022 2012 $ - $ 6,264 Total Loan Payment $ 99,973 $ 78,352 |
6. Geographic Concentrations
6. Geographic Concentrations | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
6. Geographic Concentrations | 6. Geographic Concentrations The Company is organized based on fundamentally one business segment although it does sell its products on a world-wide basis. The revenues earned and long-lived assets in Japan increased due to the acquisition of NuZee JP. Information about the Company's geographic operations for 2016 and 2017 are as follows: Net Revenue: 2017 2016 North America $ 458,042 $ 194,150 Japan 1,170,368 2,237 South Korea 0 259,104 $ 1,628,410 $ 455,491 Property and equipment, net: North America $ 266,522 $ 151,946 Japan 11,465 0 $ 277,987 $ 151,946 |
7. Related Party Transactions
7. Related Party Transactions | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
7. Related Party Transactions | 7. Related Party Transactions Loans During February 2015, the Company issued a secured convertible promissory note in the sum of $600,000 to Masateru Higashida, the Company's major shareholder. Interest was calculated at the annual rate of zero percent (0%) for the period until April 2016. During March 2016, the Company and Masateru Higashida decided to extend the repayment date to March 31, 2017 so that Company has more funds for production and marketing to fulfill customers' requirements, which is in the best interest of the Company and its shareholders. The annual rate of repayment is at an interest rate of one percent (1%) for the period until March 31, 2017. This promissory note will convert to 1,176,471 shares of the Company's common stock at $0.51 per share if the Company is unable to pay back the note by then. A beneficial conversion feature does not arise because the conversion price of the note is above the per share fair value of the Company's stock. The conversion feature was evaluated as a derivative and the Company determined that derivative accounting did not apply. During the year ended September 30, 2016, the Company accrued interest of $3,008 relating to this related party note. On March 31, 2017, Masateru Higashida (Lender, a/k/a the "Seller") deemed it beneficial to engage in a private sale (the "Sale") and to sell the Amended Note to Kenichi Miura (the "Purchaser") upon the terms and conditions of the Convertible Note Purchase Agreement. The Amended Note shall continue to bear interest on the principal amount at the annual interest rate of one percent (1%) per year; and the Amended Note shall continue to be convertible in whole or in part to shares of the Corporation's common stock, at the election of the Lender (now at the election of Purchaser), at a price of $0.51 per share, on or after March 31, 2017. On March 31, 2017, Kenichi Miura exercised his right to convert the Amended Note to shares of the Corporation's common stock (the "Conversion"), at the price of $0.51 per share, in accordance with the terms and conditions of the Convertible Note Purchase Agreement, thus equating to a conversion of $606,000 [i.e., $600,000 principal, plus $6,000 in accrued interest] to the equivalent 1,188,236 shares of the Corporation's common stock. During March 2016, the Company borrowed the sum of $100,000 unsecured short-term loan from NuZee Co., Ltd to be repaid on or before March 31, 2017 at an interest rate of one percent (1%). The Company accrued interest of $230 and $262 for the years ended September 30, 2017 and 2016, respectively. The Company paid back $55,000 of this short-term loan during the year ended September 30, 2016 and the balance of $45,000 during the year ended September 30, 2017. As of September 30, 2017, the loan had principal and accrued interest balances of $0 and $492, respectively. During August 2016, the Company borrowed the sum of $100,000 unsecured short-term loan from Masateru Higashida to be repaid on or before August 31, 2017 at an interest rate of one percent (1%). During March 2017, the Company borrowed the sum of $44,000 unsecured short-term loan from Masateru Higashida to be repaid on or before March 14, 2018 at an interest rate of one percent (1%). During June 2017, the Company borrowed the sum of $1,200 unsecured short-term loan from Masateru Higashida to be repaid on or before June 14, 2018 at an interest rate of one percent (1%). The Company accrued interest of $443 and $115 for the years ended September 30, 2017 and 2016, respectively. The Company paid back $0 of the short-term loan during the year ended September 30, 2016 and $145,000 during the year ended September 30, 2017. As of September 30, 2017, the loan had principal and accrued interest balances of $200 and $558, respectively. During December 2016, the Company borrowed the sum of $18,384 unsecured short-term loan from NuZee Co., Ltd to be repaid on or before December 14, 2017 at an interest rate of one percent (1%). Between February and March 2017, the Company borrowed the sum of $ 14,440 short-term loan from NuZee Co., Ltd to be repaid on or before March 23, 2018 at an interest rate of one percent (1%). During June 2017, the Company borrowed 5,500,000 JPY ($47,361) and $150,000 unsecured short-term loan from NuZee Co., Ltd to be repaid on or before June 30, 2018 at an interest rate of one percent (1%). During August 2017, the Company borrowed the sum of $30,000 unsecured short term loan from NuZee Co., Ltd. For the year ended the September 30, 2017, the Company accrued interest of $334. The Company paid back the full principal amount of the loans as of September 30, 2017. As of September 30, 2017, the loans had principal and accrued interest balances of $0 and $272, respectively. During February 2017, the Company borrowed the sum of $4,000 unsecured short-term loan from Travis Gorney to be repaid on or before February 14, 2018 at an interest rate of one percent (1%). The Company paid back the total principal amount of $4,000 and accrued interest of $5 on March 31, 2017. During March 2017, the Company borrowed the sum of $100,000 secured short-term loan from Takayuki Nagashima to be repaid on or before June 30, 2017 at an interest rate of one percent (1%). On or about May 9, 2017, the Board of Directors amended the terms of the bridge loan in order to permit Takayuki Nagashima to convert the loan and to receive a ("Note") evidencing his right, exercisable at this election, to convert, his loan to shares of the Corporation's stock at $0.51 per share at any time upon reasonable notice to the Corporation. On or about May 9, 2017, Takayuki Nagashima exercised his right to convert the Amended Note to shares of the Corporation's common stock at the price of $0.51 per share, thus equating to a conversion of $100,000 [i.e., $100,000 principal] to the equivalent 196,078 shares of the Corporation's common stock. There is $121 interest balance left as of September 30, 2017. During April, 2017, the Company borrowed the sum of $50,000 unsecured short-term loan from Eguchi Holdings Co.,Ltd ("EHCL") and the sum of $50,000 unsecured short-term loan from Eguchi Steel Co.,Ltd ("ESCL") to be repaid on or before June 30,2017 at an interest rate of one percent (1%). Both of the two short-term loans as well as incurred interests have been paid back as of September 30, 2017. During July, 2017, NuZee JP borrowed the sum of $62,921 unsecured short-term loan from Katsuyoshi Eguchi. Interest was calculated at the annual rate of zero percent (0%). As of September 30, 2017, NuZee JP paid back the full principal amount. All convertible promissory note payable and short-term loans are related party transactions since Masateru Higashida is the Company's major shareholder and he holds 100% ownership of NuZee Co., Ltd. Travis Gorney is an officer of the Company and Takayuki Nagashima is the co-owner of the equity method affiliate. Katsuyoshi Eguchi is a director and the minority owner of NuZee JP. EHCL and ESCL are controlled by Katsuyoshi Eguchi. Masateru Higashida, NuZee Co., Ltd, Travis Gorney, Takyuki Nagashima, EHCL, ESCL and Masayoshi Eguchi are related parties of the Company. Sales, Purchases and Operating Expenses For the year ended September 30, 2017, NuZee JP sold their products to NuZee Co., Ltd., EHCL and ESCL and the sales to them totaled approximately $488,670, $49,703 and $932, respectively. The corresponding accounts receivable balance from them was $6,280, $6,100 and $0 as of September 30, 2017, respectively. For the year ended September 30, 2017, NuZee JP purchased goods from Eguchi Holdings Co.,Ltd totaling to $15,535. The corresponding accounts payable balance to them was $1,089 as of September 30, 2017. NuZee JP had a professional expense of $39,544 to EHCL for the audit related fee paid by them on behalf of the Company. The Company fully paid off the liability as of September 30, 2017. NuZee JP leased an employee to NuZee Co., Ltd. for Contlus during October 2016 to January 2017 for $10,936 and sold greeting cards to NuZee Co., Ltd. for $7,418 during the year ended September 30, 2017. The related receivables outstanding was $14,020 as of September 30, 2017. NuZee JP leased an employee to Contlus. During the year ended September 30, 2017, NuZee JP billed $24,973 for this arrangement and $15,358 remains outstanding as of September 30, 2017. Contlus is the Company's related party as the Company holds 50% of their issued shares. Rent During October 2016, NuZee JP entered into a rental agreement of an office space with NuZee Co., Ltd. The Company agrees to pay $1,169 per month for the office on the last day of each month. There is no set expiration date on the agreement. During September 2016, the Company entered into a rental agreement of an office space and warehouse with EHCL. The Company agrees to pay $1,213 per month for the office and the warehouse on the last day of each month. The term of this agreement is 3 years and will be automatically renewed. During February 2015, the Company entered into a rental agreement of a warehouse with ESCL. The Company agrees to pay $449 per month for the warehouse on the last day of each month. There is no set expiration date on the agreement. |
8. Common Stock
8. Common Stock | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
8. Common Stock | 8. COMMON STOCK During the year ended September 30, 2016, the Company sold 1,025,000 shares of common stock at prices ranging from $0.70 to $0.80 per share for an aggregate purchase price of $801,001. In April 2016, Michael Billing exercised 5,000 stock options with a purchase price of $1,500 at $0.30 per share. During the year ended September 30, 2016, the Company sold 215,156 shares of our treasury stock, with cost of $0.03838, at $0.64 per share, for an aggregate purchase price of $137,699. On October 3, 2016, the Company exchanged 1,148,734 shares of its common stock, par value $0.00001 per share, for seventy percent (70%) of the issued and outstanding common stock of NuZee JP. During the year ended September 30, 2017, the Company sold 1,032,539 shares of common stock at prices ranging from $0.51 to $1.00 per share for an aggregate purchase price of $860,045. On March 31, 2017, Kenichi Miura exercised his right to convert the Amended Note to shares of the Corporation's common stock (the "Conversion"), at the price of $0.51 per share, in accordance with the terms and conditions of the Convertible Note Purchase Agreement, thus equating to a conversion of $606,000 [i.e., $600,000 principal, plus $6,000in accrued interest] to the equivalent 1,188,236 shares of the Corporation's common stock. During the year ended September 30, 2017, the Company sold 1,766,242 shares of treasury stock at $0.51 per share, for an aggregate purchase price of $900,783. During May 2017, the Company agreed to amend Nagashima Takayuki's $100,000 short-term loan to a convertible loan with a conversion price of $0.51 per share. Nagashima Takayuki then converted this loan to 196,078 shares of the Company's common stock. During August 2017, the Company issued 34,602 shares of treasury stock at $0.43 per share, for services and recognized stock compensation expense of $14,879. |
9. Stock Options
9. Stock Options | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
9. Stock Options | 9. STOCK OPTIONS During February 2016, the Company issued 275,500 options to directors, employees and consultants. Among those shares, 125,500 shares were issued to employees and 150,000 shares were issued to non-employees, which are consultants. The right to exercise these options shall vest and become exercisable from February 23, 2016 to February 1, 2017. The vesting date varies for each option agreements. The options have exercise prices ranging from $0.30-$0.80 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. During April 2016, the Company agreed to extend an employee's previously issued stock options of 22,500 until April 29, 2016. In April 2016, this employee exercised 5,000 shares of their stock options at $0.30 per share. The remaining shares of their stock options expired by the end of April 2016. During July 2016, the Company issued 320,000 options to an employee. The right to exercise these options shall vest and become exercisable on December 31, 2021. The exercise price is $0.88 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. During January 2017, the Company issued 84,000 options to employees. The right to exercise these options shall vest and become exercisable on January 2018. The exercise price is $0.40-$0.51 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. During July 2017, the Company issued 2,170,000 options to employees and 430,000 options to non-employees. The right to exercise these options shall vest and become exercisable on January 2018. The exercise price is $0.51-$0.56 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model using the assumptions noted as follows: expected volatility was based on a representative peer group of small public companies in their industry segment as the Company has a limited stock history. The expected term of options granted was determined using the simplified method under SAB 107 and represents the mid-point between the vesting term and the contractual term. The risk-free rate is calculated using the U.S. Treasury yield curve, and is based on the expected term of the option. The Black-Scholes option pricing model was used with the following weighted average assumptions for options granted during the twelve months ended September 30, 2017 and 2016, respectively: For employees September 30, 2017 September 30, 2016 Risk-free interest rate 1.64% - 1.75 % 1.11% - 1.43 % Expected option life 5.5 - 6.5 years 4.5 years Expected volatility 97.6% - 99.1 % 80.2% - 83.6 %% Expected dividend yield 0.00 % 0.00 % Exercise price $ 0.40 - $0.56 $ 0.30 - $0.88 For non-employees September 30, 2017 September 30, 2016 Risk-free interest rate 2.27 % 1.74 % Expected option life 10 years 10 years Expected volatility 115.70 % 104.70 % Expected dividend yield 0.00 % 0.00 % Exercise price $ 0.51 - $0.56 $ 0.30 - $0.60 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 $138,098 for the year ended September 30, 2017. Unamortized option expense as of September 30, 2017, for all options outstanding amounted to approximately $993,358. These costs are expected to be recognized over a weighted-average period of 3 years. The Company recognized stock option expenses of $37,253 for the year ended September 30, 2016, which relates to vesting of options that were granted in 2015. The following table summarizes stock option activity for the year ended September 30, 2017. Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Price Contractual Life (years) Intrinsic Value Outstanding at September 30, 2016 573,000 $ 0.54 Granted 2,684,000 0.48 Exercised - - Expired (192,500 ) 0.48 Forfeited - - Outstanding at September 30, 2017 3,064,500 $ 0.58 9.6 17,425 Exercisable at September 30, 2017 180,500 $ 0.48 8.4 17,425 The following table summarizes stock option activity for the year ended of September 30, 2016. Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Price Contractual Life (years) Intrinsic Value Outstanding at September 30, 2015 2,833,333 $ 0.48 Granted 618,000 0.67 Exercised (5,000 ) 0.30 Expired (40,000 ) 0.30 Forfeited (2,833,333 ) 0.48 Outstanding at September 30, 2016 573,000 $ 0.70 9.6 $ - Exercisable at September 30, 2016 195,000 $ 0.42 9.6 $ - A summary of the status of the Company's unvested shares as of September 30, 2017 and 2016, are presented below: Nonvested options Number of Nonvested Shares Nonvested shares at September 30, 2015 - Granted 618,000 Exercised (5,000 ) Forfeited (40,000 ) Vested (195,000 ) Nonvested shares at September 30, 2016 378,000 Granted 2,684,000 Exercised - Forfeited (120,000 ) Vested (58,000 ) Nonvested shares at September 30, 2017 2,884,000 |
10. Income Tax
10. Income Tax | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
10. Income Tax | 10. INCOME TAX As of September 30, 2017, and, 2016, there were no differences between financial reporting and tax bases of assets and liabilities. The Company will have tax losses available to be applied against future years' income as result of the losses incurred. However, due to the losses incurred in the period and expected future operating results, management determined that it is more likely than not that the deferred tax asset resulting from the tax losses available for carry forward will not be realized through the reduction of future income tax payments. Accordingly, a 100% valuation allowance has been recorded for deferred income tax assets. Cumulative net operating loss carry forward is $8,710,253 and $7,185,378 as of September 30, 2017 and 2016, respectively, and will begin expiring in 2033. The earliest tax year which remains subject to examination is 2013. Deferred tax assets consisted of the following as of September 30, 2017 and 2016: 2017 2016 Net Operating Losses 3,048,589 2,514,882 Valuation Allowance (3,048,589 ) (2,514,882 ) |
11. Subsequent Events
11. Subsequent Events | 12 Months Ended |
Sep. 30, 2017 | |
Notes | |
11. Subsequent Events | 11. SUBSEQUENT EVENTS Common Stock During October to December 2017, the Company sold 1,341,783 shares of common stock at $0.51 per share, for an aggregate purchase price of $684,310. Related Party Transaction During October to December 2017, the Company borrowed the sum of $254,000 unsecured short-term loan from NuZee Co., Ltd to be repaid on or before January 31, 2019 at an interest rate of one percent (1%). During December 2017, the Company borrowed the sum of $2,000 unsecured short-term loan from Masateru Higashida to be repaid on or before December 31, 2018 at an interest rate of one percent (1%). The Company paid back the total principal during December 2017. |
2. Basis of Presentation and 18
2. Basis of Presentation and Summary of Significant Accounting Policies: Earnings Per Share (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Earnings Per Share | Earnings per Share Basic earnings per common share equal 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 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. The Company incurred a net loss for the years ended September 30, 2017 and 2016, respectively and therefore, basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive. |
2. Basis of Presentation and 19
2. Basis of Presentation and Summary of Significant Accounting Policies: Going Concern and Capital Resources (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Going Concern and Capital Resources | 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 and raising capital. The Company has suffered recurring losses from operations, and negative cash flows from operations. As of September 30, 2017, the Company had cash (operating capital) of $347,327 and had $200 short-term loan payable. The Company has not attained profitable operations since inception. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has had limited revenues, recurring losses, an accumulated deficit and is dependent on the shareholder to provide additional funding for operating expenses. These items raise substantial doubt as to the Company's ability to continue as a going concern. |
2. Basis of Presentation and 20
2. Basis of Presentation and Summary of Significant Accounting Policies: Use of Estimates (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Use of Estimates | 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. |
2. Basis of Presentation and 21
2. Basis of Presentation and Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is an estimate of the exit price, representing the amount that would be received to, sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are not adjusted for transaction cost. Fair value measurement under generally accepted accounting principles provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis. The carrying amounts of cash, accounts receivable, notes receivable, accounts payable, accrued liabilities and short-term debt approximate fair value because of the short-term nature of these instruments. The carrying amount of long-term debt approximates fair value because the debt is based on current rates at which the Company could borrow funds with similar remaining maturities. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments when available. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
2. Basis of Presentation and 22
2. Basis of Presentation and Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Cash and Cash Equivalents | 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 September 30, 2017 and 2016. |
2. Basis of Presentation and 23
2. Basis of Presentation and Summary of Significant Accounting Policies: Concentration of Credit Risk (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Concentration of Credit Risk | 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. |
2. Basis of Presentation and 24
2. Basis of Presentation and Summary of Significant Accounting Policies: Accounts Receivable (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Accounts Receivable | 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 recognized a reserve of $86,487 and $0 as of September 30, 2017 and 2016, respectively, for estimated chargebacks from retailers. |
2. Basis of Presentation and 25
2. Basis of Presentation and Summary of Significant Accounting Policies: Major Customers (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Major Customers | Major Customers For the years ended September 30, 2017 and 2016, revenue was primarily from major customers disclosed below. Besides those revenues, there were $106,413 accounts receivable owed by customer PO and $6,280 accounts receivable owed by customer N which is a related party of the Company as of September 30, 2017 and $51,384 accounts receivable owed by customer S and $0 accounts receivable owed by H and C as of September 30, 2016. For the year ended September 30, 2017: Customer Name Sales Amount % of Total Revenue Customer PO $ 536,511 33 % Customer N $ 489,058 30 % For the year ended September 30, 2016: Customer Name Sales Amount % of Total Revenue Customer S $ 259,104 57 % Customer H $ 91,712 21 % Customer C $ 70,462 15 % |
2. Basis of Presentation and 26
2. Basis of Presentation and Summary of Significant Accounting Policies: Lease (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Lease | Lease The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. NuZee JAPAN Co., Ltd is the lessee of certain equipment under a capital lease extending through 2020. The asset and liability under the capital lease are recorded at the lower of the present value of the minimum lease payments, or the fair value of the asset. Leased equipment is depreciated over a 6-year life. The leased equipment is reported in the accompanying consolidated balance sheets in property and equipment of $11,465 as of September 30, 2017. The capital lease liability is included in other current liabilities on the consolidated balance sheets. Future minimum lease payments under capital lease as of September 30, 2017 for each of the remaining years are as follows: 2017 $ 4,271 2018 $ 4,271 2019 $ 4,271 2020 $ 1,068 Total Minimum Lease Payments $ 13,881 The Company leases office space under leases expiring on May 31, 2020. Rent expense included in general and administrative expense for the year ended September 30, 2017 and 2016 was $88,903 and $49,592 respectively. Future minimum rents as of September 30, 2017 for each of the remaining years are as follows: 2017 $ 56,784 2018 $ 58,488 2019 $ 39,760 Total Minimum Lease Payments $ 155,032 |
2. Basis of Presentation and 27
2. Basis of Presentation and Summary of Significant Accounting Policies: Principles of Consolidation (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Principles of Consolidation | 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 majority owned subsidiary which has a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated in the consolidation. The Company consolidates its subsidiary in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation. |
2. Basis of Presentation and 28
2. Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Foreign Currency Translation | Foreign Currency Translation The financial position and results of operations of the Company's foreign subsidiary is measured using the foreign subsidiary's local currency as the functional currency. Revenues and expenses of such subsidiary has 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 recorded to other comprehensive loss amounted to $20,680 and $0 as of September 30, 2017 and 2016, 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. Foreign currency transaction losses included in the consolidated statements of operations totaled $3,235 and $2,968 for the years ended September 30, 2017 and 2016, respectively. |
2. Basis of Presentation and 29
2. Basis of Presentation and Summary of Significant Accounting Policies: Equity Method (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Equity Method | 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 ''Equity in loss of unconsolidated affiliate'' 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. |
2. Basis of Presentation and 30
2. Basis of Presentation and Summary of Significant Accounting Policies: Goodwill (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Goodwill | Goodwill The Company evaluates goodwill on an annual basis or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative goodwill impairment test. The first step of the impairment test involves comparing the fair value of the applicable reporting unit with its carrying value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, management performs the second step of the goodwill impairment test. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit's goodwill with the carrying value of that goodwill. The amount, by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. |
2. Basis of Presentation and 31
2. Basis of Presentation and Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Revenue Recognition | Revenue Recognition The Company recognizes revenue only when all of the following criteria have been met: Persuasive evidence of an arrangement exists; Delivery has occurred or services have been rendered; The fee for the arrangement is fixed or determinable; and Collectability is reasonably assured. Persuasive Evidence of an Arrangement Delivery Has Occurred or Services Have Been Performed Collectability Is Reasonably Assured Return and Exchange Policy The Company provides a 30-day money-back guarantee if a buyer is not satisfied with a product. All of the 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 the wholesale customers, return policies varies based on their specific agreements with customers. Under chargebacks agreements with the customers, the Company agrees to reimburse the seller for a portion of the costs incurred by the seller to advertise and promote certain of the Company's products. The Company estimates, accrues and recognized such chargebacks. These amounts are included in the determination of net sales. As of September 30, 2017, the Company had $155,854 of sales allowances for estimated chargebacks and returns. Revenue recognized is net of sales allowances. |
2. Basis of Presentation and 32
2. Basis of Presentation and Summary of Significant Accounting Policies: Cost Recognition (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Cost Recognition | Cost Recognition Cost of products sold is primarily comprised of direct materials consumed in the manufacturing of primary coffee blender products. Cost of products sold also includes directly related labors' salaries and other overhead cost. |
2. Basis of Presentation and 33
2. Basis of Presentation and Summary of Significant Accounting Policies: Selling, General and Administrative Expense (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Selling, General and Administrative Expense | Selling, General and Administrative Expense Selling, general and administrative expense (SG&A) is primarily comprised of marketing expenses, research and development costs, administrative and other indirect overhead costs, depreciation expense and other miscellaneous operating items. Personnel expenses, occupying a majority portion of SG&A, were $741,550 and $308,631 for the years ended September 30, 2017 and 2016, respectively. Company covers shipping fees for wholesalers and distributors and the shipping and handling expenses are recorded under operating expenses in the consolidated statements of operations. The Company expenses advertising costs when incurred. Advertising expense for the years ended September 30, 2017 and 2016 is as follows: 10/01/2016 to 09/30/2017 10/01/2015 to 09/30/2016 Advertising $ 61,202 $ 33,030 The consolidated statements of cash flows are prepared using the indirect method, which reconciles net loss to cash flow from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in net loss. The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. |
2. Basis of Presentation and 34
2. Basis of Presentation and Summary of Significant Accounting Policies: Research and Development (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Research and Development | Research and Development Research and development expenses are expensed in the consolidated statements of operations as incurred in accordance with FASB ASC 730, Research and Development. Research and development expenses for the years ended September 30, 2017 and 2016 amounted to $18,908 and $9,423 respectively. |
2. Basis of Presentation and 35
2. Basis of Presentation and Summary of Significant Accounting Policies: Inventory (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Inventory | 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 September 30, 2017 and 2016, the carrying value of inventory of $266,620 and $206,356 respectively, reflected on the consolidated balance sheets is net of this adjustment. September 30, 2017 September 30, 2016 Raw materials $ 111,043 $ 124,035 Work in process 5,535 14,366 Finished goods 159,128 67,955 Less - Inventory reserve 9,086 0 Total (Inventories, net) $ 266,620 $ 206,356 |
2. Basis of Presentation and 36
2. Basis of Presentation and Summary of Significant Accounting Policies: Property and Equipment (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Property and Equipment | Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation. The Company depreciates equipment on a straight-line basis over the estimated useful lives of the assets after the assets are placed in service. Office equipment is depreciated over a 3-year life, furniture over a 7-year life, and other equipment over a 7-year life. Depreciation expense for the years ended September 30, 2017 and 2016 was $75,917 and $41,921 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 September 30, 2017 and 2016 consist of: September 30, 2017 September 30, 2016 Furniture and Fixture $ 31,514 $ 31,514 Machinery and Equipment $ 323,706 $ 169,864 Vehicles $ 44,657 $ 9,657 Software $ 14,807 $ 0 Accumulated Depreciation $ (136,697) $ (59,089) Net PP & E (Property and equipment, net) $ 277,987 $ 151,946 |
2. Basis of Presentation and 37
2. Basis of Presentation and Summary of Significant Accounting Policies: Samples (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Samples | Samples The Company distributes samples of its products as a component of its marketing program. Costs for samples are expensed at the time the samples are shipped and recorded under operating expenses in the consolidated statements of operations. |
2. Basis of Presentation and 38
2. Basis of Presentation and Summary of Significant Accounting Policies: Long-Lived Assets (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Long-Lived Assets | Long-Lived Assets The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicated that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. |
2. Basis of Presentation and 39
2. Basis of Presentation and Summary of Significant Accounting Policies: Intangible Assets (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Intangible Assets | Intangible Assets Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company's amortizable intangible asset consists of customer list which, recognized as a result of the acquisition of NuZee JAPAN Co., Ltd, which has an estimated useful life of 5 years. As of September 30, 2017,the intangible assets consist of : September 30, 2017 Gross Carrying Accumulated Net Carrying Amount Amortization Amount Amortized intangible assets: Customer List $ 57,374 $ (11,475 ) $ 45,899 Total $ 57,374 $ (11,475 ) $ 45,899 No significant residual value is estimated for the intangible asset. Aggregate amortization expense for the years ended September 30, 2017, and September 30, 2016, totaled $11,475 and $0, respectively. The following table represents the total estimated amortization of intangible assets for the next five years: For the Year Ending September 30 Estimated Amortization Expense 2018 $11,475 2019 $11,475 2020 $11,475 2021 $11,474 |
2. Basis of Presentation and 40
2. Basis of Presentation and Summary of Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Income Taxes | Income Taxes In accordance with ASC 740 - Income Taxes, the provision for income taxes is computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of September 30, 2017 and 2016. |
2. Basis of Presentation and 41
2. Basis of Presentation and Summary of Significant Accounting Policies: Related Parties (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Related Parties | Related parties A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
2. Basis of Presentation and 42
2. Basis of Presentation and Summary of Significant Accounting Policies: Stock-Based Compensation (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Stock-Based Compensation | Stock-based Compensation We account for share-based awards issued to employees in accordance with Accounting Standards Codification (ASC) 718, "Compensation-Stock Compensation". Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period, which is normally the vesting period. Share-based compensation to directors is treated in the same manner as share-based compensation to employees, regardless of whether the directors are also employees. We account for share-based compensation to persons other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. We estimate the fair value of share-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of our common stock for common share issuances. We recognized forfeitures as they occurred. |
2. Basis of Presentation and 43
2. Basis of Presentation and Summary of Significant Accounting Policies: Comprehensive Income/Loss (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Comprehensive Income/Loss | Comprehensive income/loss Comprehensive income/loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income/loss are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company's current component of other comprehensive income/loss is the foreign currency translation adjustment. |
2. Basis of Presentation and 44
2. Basis of Presentation and Summary of Significant Accounting Policies: Noncontrolling Interests (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Noncontrolling Interests | Noncontrolling Interests Noncontrolling interests represent third-party ownership in the net assets of the Company's consolidated subsidiary and are presented as a component of equity. |
2. Basis of Presentation and 45
2. Basis of Presentation and Summary of Significant Accounting Policies: Segment Information (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Segment Information | Segment Information ASC Topic 280, "Disclosures about Segments of an Enterprise and Related Information," established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. Management has determined that the Company operates in one business segment, which is the commercialization and development of functional beverages. Reclassifications have been made to conform with the current year presentation. |
2. Basis of Presentation and 46
2. Basis of Presentation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 12 Months Ended |
Sep. 30, 2017 | |
Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014 the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The collective guidance is effective for interim and annual periods in the first annual period beginning after December 15, 2017, with early adoption permitted. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not selected a transition method and is currently evaluating the impact of the pending adoption of this ASU on its ongoing financial reporting. 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 core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the consolidated balance sheet. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for consolidated financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. The Company has adopted ASU No. 2016-09 with no impact on its consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have on the consolidated financial statements of a registrant when such standards are adopted in a future period. Specifically, these disclosure requirements apply to the adoption of ASU No. 2014- 09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, CompensationStock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, CompensationStock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of these amendments on its consolidated financial statements. In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this amendment on its consolidated financial statements. |
2. Basis of Presentation and 47
2. Basis of Presentation and Summary of Significant Accounting Policies: Major Customers: Schedule of Revenue by Major Customers by Reporting Segments (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Revenue by Major Customers by Reporting Segments | For the year ended September 30, 2017: Customer Name Sales Amount % of Total Revenue Customer PO $ 536,511 33 % Customer N $ 489,058 30 % For the year ended September 30, 2016: Customer Name Sales Amount % of Total Revenue Customer S $ 259,104 57 % Customer H $ 91,712 21 % Customer C $ 70,462 15 % |
2. Basis of Presentation and 48
2. Basis of Presentation and Summary of Significant Accounting Policies: Lease: Schedule of Future Minimum Lease Payments for Capital Leases (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Future Minimum Lease Payments for Capital Leases | 2017 $ 4,271 2018 $ 4,271 2019 $ 4,271 2020 $ 1,068 Total Minimum Lease Payments $ 13,881 |
2. Basis of Presentation and 49
2. Basis of Presentation and Summary of Significant Accounting Policies: Lease: Schedule of Future Minimum Rental Payments for Operating Leases (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Future Minimum Rental Payments for Operating Leases | 2017 $ 56,784 2018 $ 58,488 2019 $ 39,760 Total Minimum Lease Payments $ 155,032 |
2. Basis of Presentation and 50
2. Basis of Presentation and Summary of Significant Accounting Policies: Inventory: Schedule of Inventory, Current (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Inventory, Current | September 30, 2017 September 30, 2016 Raw materials $ 111,043 $ 124,035 Work in process 5,535 14,366 Finished goods 159,128 67,955 Less - Inventory reserve 9,086 0 Total (Inventories, net) $ 266,620 $ 206,356 |
2. Basis of Presentation and 51
2. Basis of Presentation and Summary of Significant Accounting Policies: Property and Equipment: Property, Plant and Equipment (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Property, Plant and Equipment | September 30, 2017 September 30, 2016 Furniture and Fixture $ 31,514 $ 31,514 Machinery and Equipment $ 323,706 $ 169,864 Vehicles $ 44,657 $ 9,657 Software $ 14,807 $ 0 Accumulated Depreciation $ (136,697) $ (59,089) Net PP & E (Property and equipment, net) $ 277,987 $ 151,946 |
2. Basis of Presentation and 52
2. Basis of Presentation and Summary of Significant Accounting Policies: Intangible Assets: Schedule of Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Intangible Assets and Goodwill | September 30, 2017 Gross Carrying Accumulated Net Carrying Amount Amortization Amount Amortized intangible assets: Customer List $ 57,374 $ (11,475 ) $ 45,899 Total $ 57,374 $ (11,475 ) $ 45,899 |
2. Basis of Presentation and 53
2. Basis of Presentation and Summary of Significant Accounting Policies: Intangible Assets: Finite-Lived Intangible Assets Amortization Expense (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Finite-Lived Intangible Assets Amortization Expense | For the Year Ending September 30 Estimated Amortization Expense 2018 $11,475 2019 $11,475 2020 $11,475 2021 $11,474 |
3. Acquisition_ Schedule of Rec
3. Acquisition: Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | Acquisition of NuZee Japan Co., Ltd. Assets acquired: Cash $ 201,676 Accounts receivable 60,770 Inventories 233,845 Other current assets 76,524 Customer list 57,374 Property and equipment 16,677 Goodwill 17,112 Total assets acquired 663,978 Less liabilities assumed Accounts payable and accrued liabilities (153,820 ) Loan payable (140,922 ) Total liabilities assumed (294,742 ) Less noncontrolling interest (110,771 ) Net assets acquired from NuZee JP acquisition 258,465 |
3. Acquisition_ Business Acquis
3. Acquisition: Business Acquisition, Pro Forma Information (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Business Acquisition, Pro Forma Information | NuZee, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Year Ended September 30, 2016 (Pro Forma) Revenues $ 1,526,057 Cost of sales 1,141,403 Gross Profit 384,654 Operating expenses 1,656,796 Loss from operations (1,272,142 ) Other income 39,686 Other expense (22,704 ) Net loss (1,255,160 ) Net loss attributable to noncontrolling interest - Net loss attributable to NuZee, Inc. $ (1,255,160 ) Net loss per share, basic and fully diluted $ (0.04 ) Weighted average of shares outstanding 31,901,001 |
4. Investment in Unconsolidat56
4. Investment in Unconsolidated Affiliate: Investment in Unconsolidated Affiliate (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Investment in Unconsolidated Affiliate | 2017 Beginning of period $ - Additional investments in unconsolidated affiliate $ 50,000 Distributions received $ - Sale of investment in unconsolidated affiliate $ - Equity in net income (loss) of unconsolidated affiliate $ (39,267 ) End of period $ 10,733 |
5. Loan_ Schedule of Maturities
5. Loan: Schedule of Maturities of Long-Term Debt (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Maturities of Long-Term Debt | Tono Shinyo Kinko Bank Nihon Seisaku Kouko 2017 $ 26,660 $ 18,022 2018 $ 26,660 $ 18,022 2019 $ 26,660 $ 18,022 2020 $ 19,993 $ 18,022 2012 $ - $ 6,264 Total Loan Payment $ 99,973 $ 78,352 |
6. Geographic Concentrations_ S
6. Geographic Concentrations: Schedules of Concentration of Risk, by Risk Factor (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedules of Concentration of Risk, by Risk Factor | Net Revenue: 2017 2016 North America $ 458,042 $ 194,150 Japan 1,170,368 2,237 South Korea 0 259,104 $ 1,628,410 $ 455,491 Property and equipment, net: North America $ 266,522 $ 151,946 Japan 11,465 0 $ 277,987 $ 151,946 |
9. Stock Options_ Schedule of S
9. Stock Options: Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions | For employees September 30, 2017 September 30, 2016 Risk-free interest rate 1.64% - 1.75 % 1.11% - 1.43 % Expected option life 5.5 - 6.5 years 4.5 years Expected volatility 97.6% - 99.1 % 80.2% - 83.6 %% Expected dividend yield 0.00 % 0.00 % Exercise price $ 0.40 - $0.56 $ 0.30 - $0.88 For non-employees September 30, 2017 September 30, 2016 Risk-free interest rate 2.27 % 1.74 % Expected option life 10 years 10 years Expected volatility 115.70 % 104.70 % Expected dividend yield 0.00 % 0.00 % Exercise price $ 0.51 - $0.56 $ 0.30 - $0.60 |
9. Stock Options_ Share-Based C
9. Stock Options: Share-Based Compensation, Stock Options, Activity (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Share-Based Compensation, Stock Options, Activity | The following table summarizes stock option activity for the year ended September 30, 2017. Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Price Contractual Life (years) Intrinsic Value Outstanding at September 30, 2016 573,000 $ 0.54 Granted 2,684,000 0.48 Exercised - - Expired (192,500 ) 0.48 Forfeited - - Outstanding at September 30, 2017 3,064,500 $ 0.58 9.6 17,425 Exercisable at September 30, 2017 180,500 $ 0.48 8.4 17,425 The following table summarizes stock option activity for the year ended of September 30, 2016. Weighted Weighted Average Average Number of Exercise Remaining Aggregate Shares Price Contractual Life (years) Intrinsic Value Outstanding at September 30, 2015 2,833,333 $ 0.48 Granted 618,000 0.67 Exercised (5,000 ) 0.30 Expired (40,000 ) 0.30 Forfeited (2,833,333 ) 0.48 Outstanding at September 30, 2016 573,000 $ 0.70 9.6 $ - Exercisable at September 30, 2016 195,000 $ 0.42 9.6 $ - |
9. Stock Options_ Schedule of N
9. Stock Options: Schedule of Nonvested Share Activity (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Nonvested Share Activity | Nonvested options Number of Nonvested Shares Nonvested shares at September 30, 2015 - Granted 618,000 Exercised (5,000 ) Forfeited (40,000 ) Vested (195,000 ) Nonvested shares at September 30, 2016 378,000 Granted 2,684,000 Exercised - Forfeited (120,000 ) Vested (58,000 ) Nonvested shares at September 30, 2017 2,884,000 |
10. Income Tax_ Schedule of Def
10. Income Tax: Schedule of Deferred Tax Assets and Liabilities (Tables) | 12 Months Ended |
Sep. 30, 2017 | |
Tables/Schedules | |
Schedule of Deferred Tax Assets and Liabilities | 2017 2016 Net Operating Losses 3,048,589 2,514,882 Valuation Allowance (3,048,589 ) (2,514,882 ) |
2. Basis of Presentation and 63
2. Basis of Presentation and Summary of Significant Accounting Policies: Going Concern and Capital Resources (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2015 |
Details | |||
Cash | $ 347,327 | $ 40,613 | $ 107,678 |
Loan payable - short term - Related party | $ 200 | $ 145,377 |
2. Basis of Presentation and 64
2. Basis of Presentation and Summary of Significant Accounting Policies: Accounts Receivable (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Details | ||
Valuation Allowances and Reserves, Balance | $ 86,487 | $ 0 |
2. Basis of Presentation and 65
2. Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Accumulated other comprehensive loss | $ 20,680 | $ 0 |
Other expense | $ 3,235 | $ 5,683 |
2. Basis of Presentation and 66
2. Basis of Presentation and Summary of Significant Accounting Policies: Revenue Recognition (Details) | 12 Months Ended |
Sep. 30, 2017USD ($) | |
Details | |
Sales Allowances, Goods | $ 155,854 |
2. Basis of Presentation and 67
2. Basis of Presentation and Summary of Significant Accounting Policies: Selling, General and Administrative Expense (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Selling, General and Administrative Expense | $ 741,550 | $ 308,631 |
Advertising Expense | $ 61,202 | $ 33,030 |
2. Basis of Presentation and 68
2. Basis of Presentation and Summary of Significant Accounting Policies: Research and Development (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Research and Development Expense | $ 18,908 | $ 9,423 |
2. Basis of Presentation and 69
2. Basis of Presentation and Summary of Significant Accounting Policies: Inventory (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Details | ||
Inventories, net | $ 266,620 | $ 206,356 |
2. Basis of Presentation and 70
2. Basis of Presentation and Summary of Significant Accounting Policies: Inventory: Schedule of Inventory, Current (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Details | ||
Inventory, Raw Materials, Gross | $ 111,043 | $ 124,035 |
Inventory, Work in Process, Gross | 5,535 | 14,366 |
Inventory, Finished Goods, Gross | 159,128 | 67,955 |
Inventory Valuation Reserves | 9,086 | 0 |
Inventories, net | $ 266,620 | $ 206,356 |
2. Basis of Presentation and 71
2. Basis of Presentation and Summary of Significant Accounting Policies: Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Depreciation | $ 75,917 | $ 41,921 |
2. Basis of Presentation and 72
2. Basis of Presentation and Summary of Significant Accounting Policies: Property and Equipment: Property, Plant and Equipment (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Details | ||
Furniture and Fixtures, Gross | $ 31,514 | $ 31,514 |
Machinery and Equipment, Gross | 323,706 | 169,864 |
Fixtures and Equipment, Gross | 44,657 | 9,657 |
Capitalized Computer Software, Gross | 14,807 | 0 |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (136,697) | (59,089) |
Property and equipment, net | $ 277,987 | $ 151,946 |
2. Basis of Presentation and 73
2. Basis of Presentation and Summary of Significant Accounting Policies: Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Amortization | $ 11,475 | $ 0 |
5. Loan (Details)
5. Loan (Details) | Sep. 30, 2017USD ($) |
Details | |
Notes Payable, Current | $ 99,973 |
Other Notes Payable, Current | $ 78,352 |
9. Stock Options (Details)
9. Stock Options (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Details | ||
Option expense | $ 138,098 | $ 37,253 |
10. Income Tax (Details)
10. Income Tax (Details) - USD ($) | Sep. 30, 2017 | Sep. 30, 2016 |
Details | ||
Operating Loss Carryforwards | $ 8,710,253 | $ 7,185,378 |