Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | |
Jun. 30, 2018 | Mar. 31, 2018 | |
Document and Entity Information: | ||
Entity Registrant Name | NuZee, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Trading Symbol | nuze | |
Amendment Flag | false | |
Entity Central Index Key | 1,527,613 | |
Current Fiscal Year End Date | --09-30 | |
Entity Common Stock, Shares Outstanding | 37,122,321 | |
Entity Public Float | $ 0 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS (UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED FOR JUNE 30, 2018) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 | |||
Current assets: | |||||
Cash | $ 615,568 | $ 347,327 | |||
Accounts receivable, net | 140,548 | 143,893 | |||
Accounts receivable - Related party | 603 | 12,380 | |||
Inventories, net | 367,577 | 266,620 | |||
Other current assets | 298,773 | 102,926 | |||
Other current assets - Related party | 0 | 29,378 | |||
Total current assets | 1,423,069 | 902,524 | |||
Property and equipment, net | 575,068 | 277,987 | |||
Other assets: | |||||
Goodwill | 17,112 | 17,112 | |||
Customer List, net | 37,293 | 45,899 | |||
Investment in unconsolidated affiliate | 0 | 10,733 | |||
Total other assets | 54,405 | 73,744 | |||
Total assets | 2,052,542 | 1,254,255 | |||
Current liabilities: | |||||
Accounts payable | 140,808 | 104,973 | |||
Loan payable - short term - Related party | 0 | 200 | |||
Current portion of long-term loan payable | 45,432 | 44,681 | |||
Other current liabilities | 118,815 | 126,687 | |||
Other current liabilities - Related party | 2,876 | 1,089 | |||
Deferred revenue | 0 | 72,750 | |||
Total current liabilities | 307,931 | 350,380 | |||
Non-current liabilities: | |||||
Loan payable - long term, net of current portion | 101,816 | 133,644 | |||
Other noncurrent liabilities | 9,771 | 9,610 | |||
Total non-current liabilities | 111,587 | 143,254 | |||
Total liabilities | 419,518 | 493,634 | |||
Stockholders' equity: | |||||
Common stock | 378 | [1] | 347 | [2] | |
Additional paid in capital | 12,613,987 | 9,718,648 | |||
Accumulated deficit | (11,056,263) | (9,030,551) | |||
Accumulated other comprehensive loss | (23,761) | (20,680) | |||
Total shareholders' equity | [3] | 1,534,341 | 667,764 | ||
Noncontrolling interest | 98,683 | 92,857 | |||
Total stockholders' equity | 1,633,024 | 760,621 | |||
Total liabilities and stockholders' equity | $ 2,052,542 | $ 1,254,255 | |||
[1] | 100,000,000 shares authorized, $0.00001 par value; 37,851,173 shares issued. | ||||
[2] | 100,000,000 shares authorized, $0.00001 par value; 34,720,538 shares issued. | ||||
[3] | NuZee, Inc. |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | ||
Statement of Income | |||||
Revenues | $ 271,317 | $ 268,262 | $ 1,018,849 | $ 1,222,096 | |
Cost of sales | 173,088 | 203,076 | 699,497 | 945,536 | |
Gross Profit | 98,229 | 65,186 | 319,352 | 276,560 | |
Operating expenses | 731,827 | 437,176 | 2,330,605 | 1,359,384 | |
Loss from operations | (633,598) | (371,990) | (2,011,253) | (1,082,824) | |
Other income | 7 | 8,426 | 9,058 | 39,386 | |
Equity in loss of unconsolidated affiliate | 0 | (2,108) | (10,733) | (50,000) | |
Other expense | (5,751) | (1,337) | (5,754) | (5,237) | |
Interest expense | (521) | 0 | (2,000) | 0 | |
Net loss | (639,863) | (367,009) | (2,020,682) | (1,098,675) | |
Net income (loss) attributable to noncontrolling interest | (6,124) | (11,492) | 5,030 | (26,340) | |
Net loss attributable to shareholders | [1] | $ (633,739) | $ (355,517) | $ (2,025,712) | $ (1,072,335) |
Basic and diluted loss per common share | $ (0.02) | $ (0.01) | $ (0.06) | $ (0.03) | |
Basic and diluted weighted average number of common stock outstanding | 37,330,769 | 32,744,196 | 36,305,238 | 31,539,132 | |
[1] | NuZee, Inc. |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | ||
Operating activities: | |||
Net loss | $ (2,020,682) | $ (1,098,675) | |
Adjustments to reconcile net loss to net cash used by operating activities: | |||
Depreciation and Amortization | 103,587 | 55,883 | |
Option expense | 366,708 | 23,470 | |
Interest Expense | 0 | 2,890 | |
Inventory impairment | 20,048 | 4,112 | |
Allowance for sales return | 4,438 | 0 | |
Equity in loss of unconsolidated affiliate | 10,733 | 50,000 | |
Change in operating assets and liabilities: | |||
Accounts receivable (increase/decrease) | 1,020 | 16,036 | |
Accounts receivable - Related party (increase/decrease) | 11,985 | 0 | |
Inventories (increase/decrease) | (119,119) | 59,693 | |
Other current assets (increase/decrease) | (195,166) | (6,640) | |
Other current assets - Related party (increase/decrease) | 29,871 | 0 | |
Accounts payable (increase/decrease) | 35,474 | (160,000) | |
Other current liabilities (increase/decrease) | (6,235) | (21,705) | |
Other current liabilities - Related party (increase/decrease) | 1,768 | 0 | |
Deferred revenue (increase/decrease) | (72,750) | 0 | |
Net cash used by operating activities | (1,828,320) | (1,074,936) | |
Investing activities: | |||
Purchase of equipment | (391,855) | (136,333) | |
Acquisition of investment in unconsolidated affiliate | 0 | (50,000) | |
Net cash acquired from business acquisition | 0 | 201,676 | |
Net cash provided (used) by investing activities | (391,855) | 15,343 | |
Financing activities: | |||
Proceeds from issuance of Loan - short term - Related party | 341,000 | 479,385 | |
Repayment of loans - short term - Related party | (341,200) | (322,824) | |
Proceeds from issuance of Loan - short term | 0 | 89,016 | |
Repayment of loans - short term | (34,571) | (26,046) | |
Payments on capital lease | (2,683) | 0 | |
Proceeds from issuance of common stock | 2,528,662 | 680,510 | |
Proceeds from issuance of treasury stock | 0 | 315,318 | |
Net cash provided by financing activities | 2,491,208 | 1,215,359 | |
Effect of foreign exchange on cash and cash equivalents | (2,792) | (44,770) | |
Net change in cash | 268,241 | 110,996 | |
Cash, beginning of period | 347,327 | 40,613 | |
Cash, end of period | 615,568 | 151,609 | |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 1,082 | 2,063 | |
Cash paid for taxes | 800 | 800 | |
Noncash investing and financing activities: | |||
Acquisition through issuance of common shares | [1] | 0 | 258,465 |
Software purchased with installment agreement | 0 | 14,807 | |
Conversion of note payable | 0 | 606,000 | |
Conversion of note payable to common stock - Related party | $ 0 | $ 100,000 | |
[1] | Of NuZee JAPAN Co., Ltd. |
1. Basis of Presentation and Su
1. Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
1. Basis of Presentation and Summary of Significant Accounting Policies | 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim consolidated financial statements of NuZee, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), and rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended September 30, 2017 as filed with the SEC. In the opinion of management, all adjustments, consisting of recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reported in the annual report on Form 10-K have been omitted. Principles of Consolidation The Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and majority owned subsidiaries which have a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated in the consolidation. The Company consolidates its subsidiaries 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. NuZee JAPAN Co., Ltd ("NuZee JP") and NuZee Korea Ltd ("NuZee KR") are wholly owned subsidiaries. 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 three and nine months ended June 30, 2018 and 2017, 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 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 recurring losses, negative operating cash flows and is dependent on its shareholders to provide additional funding for operating expenses. These items raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's continued existence is dependent upon management's ability to develop profitable operations, continued contributions from the Company's executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company's products and business. Major Customers In the nine months ended June 30, 2018 and 2017, revenue was primarily from major customers disclosed below. Besides those revenues, there were $37,558 and $0 account receivable owed by customer PO and customer B as of June 30, 2018, and $57,192 and $13,680 account receivable owed by customer PO and K as of June 30, 2017, respectively. Nine months ended June 30, 2018: Sales Amount % of Total Revenue Customer Name Customer PO $ 590,304 58 % Customer B $ 77,750 8 % Nine months ended June 30, 2017: Sales Amount % of Total Revenue Customer Name Customer PO $ 613,550 50 % Customer K $ 168,875 14 % 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 JP 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 $8,973 as of June 30, 2018. The capital lease liability is included in other current liabilities on the consolidated balance sheets. Future minimum lease payments under capital lease obligations as of June 30, 2018 for each of the remaining fiscal years are as follows: 2018 $ 1,146 2019 $ 4,588 2020 $ 4,588 2021 $ 1,147 Total Minimum Lease Payments $ 11,469 The Company leases office space under leases expiring on May 31, 2020. Rent expense included in general and administrative expense for nine months ended June 30, 2018 and 2017 was $107,746 and $37,605 respectively. Future minimum rents as of June 30, 2018 for each of the remaining fiscal years are as follows: 2018 $ 14,478 2019 $ 58,488 2020 $ 39,760 Total Minimum Lease Payments $ 112,726 Loan On June 30, 2016, NuZee JP 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 $81,323 loan payable at June 30, 2018. On January 27, 2017, NuZee JP 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 $65,925 loan payable at June 30, 2018. During the nine months ended June 30, 2018 and 2017, respectively, the Company paid back the principal amount of The loan payments required for the next five fiscal years are as follows: Tono Shinyo Kinko Bank Nihon Seisaku Kouko 2018 $ 6,776 $ 4,598 2019 $ 27,108 $ 18,398 2020 $ 27,108 $ 18,398 2021 $ 20,331 $ 18,398 2022 $ - $ 6,133 Total Loan Payment $ 81,323 $ 65,925 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 adjustments comprising accumulated other comprehensive loss amounted to $23,761 and $20,680 as of June 30, 2018 and September 30, 2017, 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 loss and gain included in the consolidated statements of operations totaled $804 and $896 for the nine months ended June 30, 2018 and 2017, respectively. Inventories Inventory, consisting principally of raw materials, work in process and finished goods held for production and sale, is stated at the lower of cost or net realizable value, cost being determined using the weighted average cost method. The Company reviews inventory levels at least quarterly and records a valuation allowance when appropriate. At June 30, 2018 and September 30 2017, the carrying value of inventory of $367,577 and $266,620 respectively, reflected on the consolidated balance sheets is net of this adjustment. June 30, 2018 September 30, 2017 Raw materials $ 79,513 $ 111,043 Work in process - 5,535 Finished goods 317,198 159,128 Less - Inventory reserve (29,134 ) (9,086 ) Total (Inventories, net) $ 367,577 $ 266,620 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 FASB has also issued related ASUs relevant to Topic 842. 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. |
2. Geographic Concentrations
2. Geographic Concentrations | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
2. Geographic Concentrations | 2. GEOGRAPHIC CONCENTRATIONS The Company is organized based on fundamentally one business segment although it does sell its products on a world-wide basis. Information about the Company's geographic operations are as follows: Geographic Concentrations Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017 Net Revenue: North America $ 368,321 $ 480,015 Japan 650,528 742,081 South Korea - - $ 1,018,849 $ 1,222,096 June 30, 2018 September 30, 2017 Property and equipment, net: North America $ 552,722 $ 266,522 Japan 8,973 11,465 South Korea 13,373 - $ 575,068 $ 277,987 |
3. Related Party Transactions
3. Related Party Transactions | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
3. Related Party Transactions | 3. RELATED PARTY TRANSACTIONS Loans During the nine months ended June 30, 2018, 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 made principal payments of $2,000 during the nine months ended June 30, 2018. The Company accrued interest of $2 for the nine months ended June 30, 2018. As of June 30, 2018, the loan had principal and accrued interest balances of $200 and $560, respectively. During the nine months ended June 30, 2018, the Company borrowed the sum of $154,000 unsecured short-term loan from NuZee Co., Ltd to be repaid on or before October 31, 2018 at an interest rate of one percent (1%) and the sum of $185,000 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%). The Company made principal payments of $339,200 during nine months ended June 30, 2018.The Company accrued interest of $396 for nine months ended June 30, 2018. As of June 30, 2018, the loans had overpaid principal and accrued interest balances of $200 and $668, respectively. The Company plans to take new loans from NuZee Co., Ltd after the balance sheet date in excess of the overpayment. During February 2017, the Company borrowed the sum of approximately $4,000 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 full principal amount of the loan on March 31, 2017. During March 2017, the Company borrowed the sum of $100,000 short-term loan from Takayuki Nagashima to be repaid on or before June 30, 2017 at an interest rate of one percent (1%). On 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 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. During April, 2017, the Company borrowed the sum of $50,000 short-term loan from Eguchi Holdings Co.,Ltd and the sum of $50,000 short-term loan from Eguchi Steel Co.,Ltd to be repaid on or before June 30,2017 at an interest rate of one percent (1%). Both of those two short-term loans as well as incurred interests have been paid back as of June 30, 2017. 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 short-term loan from NuZee Co., Ltd to be repaid on or before June 30, 2018 at an interest rate of one percent (1%). The Company made principal payments of $73,824 during nine month ended June 30, 2017.The Company accrued interest of $86 for nine months ended June 30, 2017. During March 2017, the Company borrowed the sum of $44,000 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 made principal payments of $145,000 during nine month ended June 30, 2017. The Company accrued interest of $442 for nine months ended June 30, 2017. All short-term loans are related party transactions since Masateru Higashida is the Company's major shareholder, principal executive and financial officer and sole director and he holds 100% ownership of NuZee Co., Ltd. Sales, Purchases and Operating Expenses For nine months ended June 30, 2018, NuZee JP sold their products to Eguchi Holdings Co.,Ltd ("EHCL") and the sales to them totaled approximately $3,198 . The corresponding accounts receivable balance from them was $154 as of June 30, 2018. NuZee JP sold their products to NuZee Co., Ltd. during the 2017 fiscal year. The related accounts receivable outstanding was $449 as of June 30, 2018. EHCL is the Company's related party as they are controlled by Katsuyoshi Eguchi who is a director and the minority owner of NuZee JP. NuZee JP leased an employee to NuZee Co., Ltd. for Contlus which is an equity method affiliate 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 $0 as of June 30, 2018. NuZee JP leased an employee to Contlus. For nine months ended June 30, 2018, NuZee JP billed $20,456 for this arrangement and the related other receivables outstanding was $0 as of June 30, 2018. 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. The corresponding rent payable balance to them was $1,472 as of June 30, 2018. 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. The corresponding rent payable balance to them was $1,404 as of June 30, 2018. During February 2015, the Company entered into a rental agreement of a warehouse with Eguchi Steel Co.,Ltd ("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. ESCL is the Company's related party as they are controlled by Katsuyoshi Eguchi who is a director and the minority owner of NuZee JP. |
4. Investment in Unconsolidated
4. Investment in Unconsolidated Affiliate | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
4. Investment in Unconsolidated Affiliate | 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE The Company has an equity method investment in Contlus which has main businesses related to the production, sale, import and export of coffee & beans, tea & tea leaf, healthy foods and drinks. The investment of $50,000 was made during the three months ended December 31, 2016. The following table is a reconciliation of the Company's investment in equity affiliate as presented on the consolidated balance sheet as of June 30, 2018: INVESTMENT IN AFFILIATE June 30, 2018 Beginning of period $ 10,733 Additional investments in unconsolidated affiliate $ - Distributions received $ - Sale of investment in unconsolidated affiliate $ - Equity in net income (loss) of unconsolidated affiliate $ (10,733 ) End of period $ - |
5. Common Stock
5. Common Stock | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
5. Common Stock | 5. COMMON STOCK During nine months ended June 30, 2018, the Company sold 1,341,783 shares of common stock at $0.51 per share, for an aggregate purchase price of $684,310, 1,511,352 shares of common stock at $1.00 per share, for an aggregate purchase price of $1,511,352 and 277,500 shares of common stock at $1.20 per share, for an aggregate purchase price of $333,000. On October 3rd, 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. The Company's issued shares had an acquisition date fair value of $258,465. During nine months ended June 30, 2017, the Company sold 680,510 shares of common stock at $1.00 per share, for an aggregate purchase price of $680,510 and 618,271 shares of treasury stock at $0.51 per share, for an aggregate purchase price of $315,318. 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 $.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 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. |
6. Stock Options
6. Stock Options | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
6. Stock Options | 6. STOCK OPTIONS The following table summarizes stock option activity for nine months ended June 30, 2018: Weighted Weighted Average Average Remaining Number of Exercise Contractual Life Aggregate Shares Price (years) Intrinsic Value Outstanding at September 30, 2017 3,064,500 $ 0.58 9.6 17,425 Granted - - Exercised - - Expired - - Forfeited (100,000 ) 0.51 Outstanding at June 30, 2018 2,964,500 $ 0.58 8.9 281,935 Exercisable at June 30, 2018 244,500 $ 0.48 7.9 41,935 The Company is expensing these stock option awards on a straight-line basis over the requisite service period. The Company recognized stock option expenses of $366,708 for nine months ended June 30, 2018. Unamortized option expense as of June 30, 2018, for all options outstanding amounted to approximately $585,547. These costs are expected to be recognized over a weighted-average period of 2.8 years. The Company recognized stock option expenses of $23,470 for nine months ended June 30, 2017. A summary of the status of the Company's nonvested shares as of June 30, 2018, is presented below: Nonvested options Number of Nonvested Shares Nonvested shares at September 30, 2017 2,884,000 Granted - Exercised Forfeited (100,000 ) Vested (64,000 ) Nonvested shares at June 30, 2018 2,720,000 |
7. Subsequent Events
7. Subsequent Events | 9 Months Ended |
Jun. 30, 2018 | |
Notes | |
7. Subsequent Events | 7. SUBSEQUENT EVENTS -Common Stock During July to August 2018, the Company sold 50,000 shares of common stock at $1.00 per share, for an aggregate purchase price of $50,000 and 73,000 shares of common stock at $1.20 per share, for an aggregate purchase of $87,600. |
1. Basis of Presentation and 12
1. Basis of Presentation and Summary of Significant Accounting Policies: Principles of Consolidation (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
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 majority owned subsidiaries which have a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated in the consolidation. The Company consolidates its subsidiaries 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. NuZee JAPAN Co., Ltd ("NuZee JP") and NuZee Korea Ltd ("NuZee KR") are wholly owned subsidiaries. |
1. Basis of Presentation and 13
1. Basis of Presentation and Summary of Significant Accounting Policies: Earnings Per Share (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
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 three and nine months ended June 30, 2018 and 2017, respectively and therefore, basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive. |
1. Basis of Presentation and 14
1. Basis of Presentation and Summary of Significant Accounting Policies: Going Concern (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Policies | |
Going Concern | Going Concern 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 recurring losses, negative operating cash flows and is dependent on its shareholders to provide additional funding for operating expenses. These items raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's continued existence is dependent upon management's ability to develop profitable operations, continued contributions from the Company's executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company's products and business. |
1. Basis of Presentation and 15
1. Basis of Presentation and Summary of Significant Accounting Policies: Major Customers (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Policies | |
Major Customers | Major Customers In the nine months ended June 30, 2018 and 2017, revenue was primarily from major customers disclosed below. Besides those revenues, there were $37,558 and $0 account receivable owed by customer PO and customer B as of June 30, 2018, and $57,192 and $13,680 account receivable owed by customer PO and K as of June 30, 2017, respectively. Nine months ended June 30, 2018: Sales Amount % of Total Revenue Customer Name Customer PO $ 590,304 58 % Customer B $ 77,750 8 % Nine months ended June 30, 2017: Sales Amount % of Total Revenue Customer Name Customer PO $ 613,550 50 % Customer K $ 168,875 14 % |
1. Basis of Presentation and 16
1. Basis of Presentation and Summary of Significant Accounting Policies: Lease (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
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 JP 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 $8,973 as of June 30, 2018. The capital lease liability is included in other current liabilities on the consolidated balance sheets. Future minimum lease payments under capital lease obligations as of June 30, 2018 for each of the remaining fiscal years are as follows: 2018 $ 1,146 2019 $ 4,588 2020 $ 4,588 2021 $ 1,147 Total Minimum Lease Payments $ 11,469 The Company leases office space under leases expiring on May 31, 2020. Rent expense included in general and administrative expense for nine months ended June 30, 2018 and 2017 was $107,746 and $37,605 respectively. Future minimum rents as of June 30, 2018 for each of the remaining fiscal years are as follows: 2018 $ 14,478 2019 $ 58,488 2020 $ 39,760 Total Minimum Lease Payments $ 112,726 |
1. Basis of Presentation and 17
1. Basis of Presentation and Summary of Significant Accounting Policies: Loan (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Policies | |
Loan | Loan On June 30, 2016, NuZee JP 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 $81,323 loan payable at June 30, 2018. On January 27, 2017, NuZee JP 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 $65,925 loan payable at June 30, 2018. During the nine months ended June 30, 2018 and 2017, respectively, the Company paid back the principal amount of The loan payments required for the next five fiscal years are as follows: Tono Shinyo Kinko Bank Nihon Seisaku Kouko 2018 $ 6,776 $ 4,598 2019 $ 27,108 $ 18,398 2020 $ 27,108 $ 18,398 2021 $ 20,331 $ 18,398 2022 $ - $ 6,133 Total Loan Payment $ 81,323 $ 65,925 |
1. Basis of Presentation and 18
1. Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
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 adjustments comprising accumulated other comprehensive loss amounted to $23,761 and $20,680 as of June 30, 2018 and September 30, 2017, 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 loss and gain included in the consolidated statements of operations totaled $804 and $896 for the nine months ended June 30, 2018 and 2017, respectively. |
1. Basis of Presentation and 19
1. Basis of Presentation and Summary of Significant Accounting Policies: Inventories (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Policies | |
Inventories | Inventories Inventory, consisting principally of raw materials, work in process and finished goods held for production and sale, is stated at the lower of cost or net realizable value, cost being determined using the weighted average cost method. The Company reviews inventory levels at least quarterly and records a valuation allowance when appropriate. At June 30, 2018 and September 30 2017, the carrying value of inventory of $367,577 and $266,620 respectively, reflected on the consolidated balance sheets is net of this adjustment. June 30, 2018 September 30, 2017 Raw materials $ 79,513 $ 111,043 Work in process - 5,535 Finished goods 317,198 159,128 Less - Inventory reserve (29,134 ) (9,086 ) Total (Inventories, net) $ 367,577 $ 266,620 |
1. Basis of Presentation and 20
1. Basis of Presentation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
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 FASB has also issued related ASUs relevant to Topic 842. 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. |
1. Basis of Presentation and 21
1. Basis of Presentation and Summary of Significant Accounting Policies: Major Customers: Schedule of Revenue by Major Customers by Reporting Segments (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Revenue by Major Customers by Reporting Segments | Nine months ended June 30, 2018: Sales Amount % of Total Revenue Customer Name Customer PO $ 590,304 58 % Customer B $ 77,750 8 % Nine months ended June 30, 2017: Sales Amount % of Total Revenue Customer Name Customer PO $ 613,550 50 % Customer K $ 168,875 14 % |
1. Basis of Presentation and 22
1. Basis of Presentation and Summary of Significant Accounting Policies: Lease: Schedule of Future Minimum Lease Payments for Capital Leases (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Future Minimum Lease Payments for Capital Leases | 2018 $ 1,146 2019 $ 4,588 2020 $ 4,588 2021 $ 1,147 Total Minimum Lease Payments $ 11,469 |
1. Basis of Presentation and 23
1. Basis of Presentation and Summary of Significant Accounting Policies: Lease: Schedule of Future Minimum Rental Payments for Operating Leases (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Future Minimum Rental Payments for Operating Leases | 2018 $ 14,478 2019 $ 58,488 2020 $ 39,760 Total Minimum Lease Payments $ 112,726 |
1. Basis of Presentation and 24
1. Basis of Presentation and Summary of Significant Accounting Policies: Loan: Schedule of Maturities of Long-term Debt (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Maturities of Long-term Debt | Tono Shinyo Kinko Bank Nihon Seisaku Kouko 2018 $ 6,776 $ 4,598 2019 $ 27,108 $ 18,398 2020 $ 27,108 $ 18,398 2021 $ 20,331 $ 18,398 2022 $ - $ 6,133 Total Loan Payment $ 81,323 $ 65,925 |
1. Basis of Presentation and 25
1. Basis of Presentation and Summary of Significant Accounting Policies: Inventories: Schedule of Inventory, Current (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Inventory, Current | June 30, 2018 September 30, 2017 Raw materials $ 79,513 $ 111,043 Work in process - 5,535 Finished goods 317,198 159,128 Less - Inventory reserve (29,134 ) (9,086 ) Total (Inventories, net) $ 367,577 $ 266,620 |
2. Geographic Concentrations_ S
2. Geographic Concentrations: Schedules of Concentration of Risk, by Risk Factor (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedules of Concentration of Risk, by Risk Factor | Geographic Concentrations Nine Months Ended June 30, 2018 Nine Months Ended June 30, 2017 Net Revenue: North America $ 368,321 $ 480,015 Japan 650,528 742,081 South Korea - - $ 1,018,849 $ 1,222,096 June 30, 2018 September 30, 2017 Property and equipment, net: North America $ 552,722 $ 266,522 Japan 8,973 11,465 South Korea 13,373 - $ 575,068 $ 277,987 |
4. Investment in Unconsolidat27
4. Investment in Unconsolidated Affiliate: Investments in and Advances to Affiliates, Schedule of Investments (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Investments in and Advances to Affiliates, Schedule of Investments | INVESTMENT IN AFFILIATE June 30, 2018 Beginning of period $ 10,733 Additional investments in unconsolidated affiliate $ - Distributions received $ - Sale of investment in unconsolidated affiliate $ - Equity in net income (loss) of unconsolidated affiliate $ (10,733 ) End of period $ - |
6. Stock Options_ Share-based C
6. Stock Options: Share-based Compensation, Stock Options, Activity (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Share-based Compensation, Stock Options, Activity | Weighted Weighted Average Average Remaining Number of Exercise Contractual Life Aggregate Shares Price (years) Intrinsic Value Outstanding at September 30, 2017 3,064,500 $ 0.58 9.6 17,425 Granted - - Exercised - - Expired - - Forfeited (100,000 ) 0.51 Outstanding at June 30, 2018 2,964,500 $ 0.58 8.9 281,935 Exercisable at June 30, 2018 244,500 $ 0.48 7.9 41,935 |
6. Stock Options_ Schedule of N
6. Stock Options: Schedule of Nonvested Share Activity (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Tables/Schedules | |
Schedule of Nonvested Share Activity | Nonvested options Number of Nonvested Shares Nonvested shares at September 30, 2017 2,884,000 Granted - Exercised Forfeited (100,000 ) Vested (64,000 ) Nonvested shares at June 30, 2018 2,720,000 |
1. Basis of Presentation and 30
1. Basis of Presentation and Summary of Significant Accounting Policies: Lease (Details) - USD ($) | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Capital Lease Obligations, Current | $ 8,973 | |
Operating Leases, Rent Expense | $ 107,746 | $ 37,605 |
1. Basis of Presentation and 31
1. Basis of Presentation and Summary of Significant Accounting Policies: Loan (Details) - USD ($) | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Notes and Loans Payable, Current | $ 81,323 | |
Other Loans Payable, Current | 65,925 | |
Repayment of loans - short term | $ 34,571 | $ 26,046 |
1. Basis of Presentation and 32
1. Basis of Presentation and Summary of Significant Accounting Policies: Foreign Currency Translation (Details) - USD ($) | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2017 | |
Details | |||
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax | $ 23,761 | $ 20,680 | |
Conversion Gains and Losses on Foreign Investments | $ 804 | $ 896 |
1. Basis of Presentation and 33
1. Basis of Presentation and Summary of Significant Accounting Policies: Inventories (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Details | ||
Inventories, net | $ 367,577 | $ 266,620 |
1. Basis of Presentation and 34
1. Basis of Presentation and Summary of Significant Accounting Policies: Inventories: Schedule of Inventory, Current (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Details | ||
Inventory, Raw Materials, Gross | $ 79,513 | $ 111,043 |
Inventory, Finished Goods, Gross | 317,198 | 159,128 |
Inventory, Finished Goods and Work in Process, Net of Reserves | (29,134) | (9,086) |
Inventories, net | $ 367,577 | $ 266,620 |
3. Related Party Transactions (
3. Related Party Transactions (Details) | 9 Months Ended |
Jun. 30, 2018USD ($) | |
Details | |
Proceeds from Short-term Debt | $ 2,000 |
Proceeds from (Repayments of) Short-term Debt | 2,000 |
Proceeds from Issuance of Unsecured Debt | 154,000 |
Proceeds from Unsecured Notes Payable | 185,000 |
Repayments of Unsecured Debt | 339,200 |
Revenue from Related Parties | 3,198 |
Due from Related Parties, Current | $ 449 |
6. Stock Options (Details)
6. Stock Options (Details) - USD ($) | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Details | ||
Option expense | $ 366,708 | $ 23,470 |