10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

or

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

For the transition period from ________to________

Commission File No. 001-39338

NUZEE, INC.

(exact name of registrant as specified in its charter)

Nevada	38-3849791
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1 401 Capital Avenue, Suite B, Plano, TX, 75074

(Address of principal executive offices) (zip code)

(760) 295-2408

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value	NUZE	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 16, 2021, the registrant had 17,820,390 shares of common stock outstanding.

Table of Contents

	Page
PART I
Item 1. Financial Statements	4
Consolidated Balance Sheets (unaudited)	4
Consolidated Statements of Operations (unaudited)	5
Consolidated Statements of Comprehensive Income (Loss) (unaudited)	6
Consolidated Statements of Stockholders’ Equity (unaudited)	7
Consolidated Statements of Cash Flows (unaudited)	8
Notes to Consolidated Financial Statements (unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22
PART II	23
Item 1. Legal Proceedings	23
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6. Exhibits	23
SIGNATURES	24

2

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

● our plans to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our products;

● the impact to our business from the COVID-19 global crisis;

● the evolving coffee preferences of North American coffee consumers;

● the size and growth of the markets for our products and services;

● our ability to compete with companies producing similar beverage products;

● our expectation that our existing capital resources will be sufficient to fund our operations for at least the next 12 months;

● regulatory developments in the U.S. and in non-U.S. countries;

● our ability to retain key management personnel;

● the scope of protection we are able to establish and maintain for intellectual property rights covering our products and technology;

● the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

● our ability to develop and maintain our corporate infrastructure, including our internal control over financial reporting;

● our ability to develop innovative new products; and

● our financial performance.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements in the section of our Annual Report on Form 10-K filed with the SEC on December 28, 2020 titled “Risk Factors” and sections of this report that describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.

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

3

Item 1. Financial Statements.

NuZee, Inc.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2021			September 30, 2020
ASSETS
Current assets:
Cash	$	12,704,257		$	4,398,545
Accounts receivable, net		320,030			195,610
Inventories, net		428,856			245,370
Prepaid expenses and other current assets		321,651			645,375
Total current assets		13,774,794			5,484,900
Property and equipment, net		807,848			1,668,348
Other assets:
Right-of-use asset - operating lease		449,250			652,197
Right-of-use asset - finance lease		-			105,825
Investments		179,238			183,314
Other assets		81,921			80,559
Total other assets		710,409			1,021,895
Total assets	$	15,293,051		$	8,175,143
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	81,318		$	49,778
Current portion of long-term loan payable		57,920			56,072
Current portion of lease liability - operating lease		162,674			263,678
Current portion of lease liability - finance lease		26,964			21,598
Accrued expenses		202,147			703,069
Deferred income		95,032			34,000
Other current liabilities		255,198			104,525
Total current liabilities		881,253			1,232,720
Non-current liabilities:
Lease liability - operating lease, net of current portion		303,599			395,713
Lease liability - finance lease, net of current portion		57,095			78,400
Loan payable - long term, net of current portion		14,590			56,845
Other noncurrent liabilities		22,435			21,707
		397,719			552,665
Total liabilities		1,278,972			1,785,385
Stockholders’ equity:
Common stock; 100,000,000 shares authorized, $0.00001 par value; 17,820,390 and 14,570,105 shares issued		178			146
Additional paid in capital		63,147,614			40,472,229
Accumulated deficit		(49,321,500	)		(34,272,778	)
Accumulated other comprehensive income		187,787			190,161
Total stockholders’ equity		14,014,079			6,389,758
Total liabilities and stockholders’ equity	$	15,293,051		$	8,175,143

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

4

NuZee, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Revenues	$	510,032		$	191,962		$	1,442,083		$	1,131,562
Cost of sales		413,446			331,039			1,352,843			1,250,904
Gross Profit (Loss)		96,586			(139,077	)		89,240			(119,342	)
Operating expenses		3,206,552			2,378,947			15,222,137			8,342,412
Loss from operations		(3,109,966	)		(2,518,024	)		(15,132,897	)		(8,461,754	)
Loss from investment in uncosolidated affiliate		(102	)		-			(4,077	)		-
Other income		47,909			25,523			101,623			28,504
Other expense		(1,280	)		(42,113	)		(2,093	)		(44,712	)
Interest expense		(3,603	)		(6,448	)		(11,278	)		(16,573	)
Net loss		(3,067,042	)		(2,541,062	)		(15,048,722	)		(8,494,535	)
Net income (loss) attributable to noncontrolling interest		-			1,356			-			(40,634	)
Net loss attributable to NuZee, Inc.	$	(3,067,042	)	$	(2,542,418	)	$	(15,048,722	)	$	(8,453,901	)
Basic and diluted loss per common share	$	(0.17	)	$	(0.18	)	$	(0.94	)	$	(0.62	)
Basic and diluted weighted average number of common stock outstanding		17,820,390			13,782,950			15,938,931			13,724,590

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

5

NuZee, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

							Noncontrolling
	NuZee, Inc.						Interests				Total
For the three months eneded June 30	2021			2020			2021		2020		2021			2020
Net income (loss)	$	(3,067,042	)	$	(2,542,418	)	$	-	$	1,356	$	(3,067,042	)	$	(2,541,062	)
Foreign currency translation		(7,854	)		10,209			-		530		(7,854	)		10,739
Total other comprehensive income (loss), net of tax		(7,854	)		10,209			-		530		(7,854	)		10,739
Comprehensive income (loss)	$	(3,074,896	)	$	(2,532,209	)	$	-	$	1,886	$	(3,074,896	)	$	(2,530,323	)

							Noncontrolling
	NuZee, Inc.						Interests					Total
For the nine months eneded June 30	2021			2020			2021		2020			2021			2020
Net loss	$	(15,048,722	)	$	(8,453,901	)	$	-	$	(40,634	)	$	(15,048,722	)	$	(8,494,535	)
Foreign currency translation		(2,374	)		(59,510	)		-		81,368			(2,374	)		21,858
Total other comprehensive income (loss), net of tax		(2,374	)		(59,510	)		-		81,368			(2,374	)		21,858
Comprehensive income (loss)	$	(15,051,096	)	$	(8,513,411	)	$	-	$	40,734		$	(15,051,096	)	$	(8,472,677	)

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

6

NuZee , Inc.

Consolidated Statements of Stockholders’ Equity

(unaudited)

										Accumulated
					Additional					other
	Common stock				paid-in		Accumulated			comprehensive
	Shares		Amount		capital		deficit			income			Total
Balance September 30, 2020		14,570,105	$	146	$	40,472,229	$	(34,272,778	)	$	190,161		$	6,389,758
Equity securities issued for cash		324,959		3		2,683,977		-			-			2,683,980
Stock option expense		-		-		4,507,298		-			-			4,507,298
Exercise of stock options		6,000		-		9,180		-			-			9,180
Other comprehensive gain		-		-		-		-			1,656			1,656
Net loss		-		-		-		(5,896,072	)		-			(5,896,072	)
Balance December 31, 2020		14,901,064	$	149	$	47,672,684	$	(40,168,850	)	$	191,817		$	7,695,800
Equity securities issued for cash		2,782,111		28		11,017,276		-			-			11,017,304
Common stock issued for compensation		137,215		1		870,999		-			-			871,000
Stock option expense		-		-		1,989,006		-			-			1,989,006
Other comprehensive gain		-		-		-		-			3,824			3,824
Net loss		-		-		-		(6,085,608	)		-			(6,085,608	)
Balance March 31, 2021		17,820,390	$	178	$	61,549,965	$	(46,254,458	)	$	195,641		$	15,491,326
Amortization of common stock issued for compensation		-		-		91,036		-			-			91,036
Stock option expense		-		-		1,506,613		-			-			1,506,613
Other comprehensive loss		-		-		-		-			(7,854	)		(7,854	)
Net loss		-		-		-		(3,067,042	)		-			(3,067,042	)
Balance June 30, 2021		17,820,390	$	178	$	63,147,614	$	(49,321,500	)	$	187,787		$	14,014,079

NuZee , Inc.

Consolidated Statements of Stockholders’ Equity

(unaudited)

													Accumulated
					Additional								other
	Common stock				paid-in		Accumulated			Noncontrolling			comprehensive
	Shares		Amount		capital		deficit			interest			loss			Total
Balance September 30, 2019		13,617,366	$	137	$	28,898,344	$	(24,795,687	)	$	102,903		$	(90,635	)	$	4,115,062
Equity securities issued for cash		111,738		1		1,994,522		-			-			-			1,994,523
Stock option expense		-		-		2,220,861		-			-			-			2,220,861
Other comprehensive gain		-		-		-		-			5,642			27,230			32,872
Net loss		-		-		-		(3,421,232	)		(11,021	)		-			(3,432,253	)
Balance December 31, 2019		13,729,104	$	138	$	33,113,727	$	(28,216,919	)	$	97,524		$	(63,405	)	$	4,931,065
Stock option expense		-		-		962,490		-			-			-			962,490
Other comprehensive gain / (loss)		-		-		-		-			75,196			(96,949	)		(21,753	)
Net loss		-		-		-		(2,490,251	)		(30,969	)		-			(2,521,220	)
Balance March 31, 2020		13,729,104	$	138	$	34,076,217	$	(30,707,170	)	$	141,751		$	(160,354	)	$	3,350,582
Equity securities issued for cash		700,000		7		4,648,167		-			-			-			4,648,174
Stock option expense		-		-		1,322,147		-			-			-			1,322,147
Other comprehensive gain		-		-		-		-			530			10,209			10,739
Net income (loss)		-		-		-		(2,542,418	)		1,356			-			(2,541,062	)
Balance June 30, 2020		14,429,104	$	145	$	40,046,531	$	(33,249,588	)	$	143,637		$	(150,145	)	$	6,790,580

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

7

NuZee, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended			Nine Months Ended
	June 30, 2021			June 30, 2020
Operating activities:
Net loss	$	(15,048,722	)	$	(8,494,535	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and Amortization		254,929			310,393
Noncash lease expense		215,397			101,505
Stock option expense		8,002,917			4,505,498
Property and equipment impairment		840,391			-
Inventory impairment		-			74,944
Common stock issued for compensation		962,036			-
Sales allowance		(11,562	)		3,835
Write-off of deferred offering costs		477,605			-
Loss on sale of assets		-			43,012
Loss from investment in uncosolidated afffiliate		4,076			-
Change in operating assets and liabilities:
Accounts receivable		(112,858	)		469,020
Accounts receivable - Related party		-			(118	)
Inventories		(183,486	)		151,067
Prepaid expense and other current assets		(141,018	)		(122,426	)
Other current assets - Related party		-			460
Other assets		(1,362	)		(41,767	)
Accounts payable		31,540			(199,763	)
Other non-current liabilities		728			7,144
Deferred revenue		61,032			-
Operating lease liabilities		(193,118	)		(83,063	)
Other current liabilities		150,673			-
Other current liabilities - related party		-			(704	)
Accrued expense and other current liabilities		(513,785	)		271,784
Net cash used in operating activities		(5,204,587	)		(3,003,714	)
Investing activities:
Cash paid for purchase of fixed assets, net		(141,445	)		(16,306	)
Proceeds from sales of equipment		-			110,000
Net cash provided by (used in) investing activities		(141,445	)		93,694
Financing activities:
Proceeds from exercise of options		9,180			-
Repayment of loans		(40,407	)		(75,816	)
Repayment of finance lease		(15,939	)		(14,039	)
Proceeds from issuance of equity securities, net of issuance costs		13,701,284			6,867,786
Net cash provided by financing activities		13,654,118			6,777,931
Effect of foreign exchange on cash and cash equivalents		(2,374	)		21,858
Net change in cash		8,305,712			3,889,769
Cash, beginning of period		4,398,545			1,326,040
Cash, end of period	$	12,704,257		$	5,215,809
Supplemental disclosure of cash flow information:
Cash paid for interest	$	11,278		$	16,573
Cash paid for taxes	$	7,044		$	800
Non-cash transactions
Recognition of right-of-use asset and lease liability upon adoption of ASU 2016-02	$	-		$	517,263
Recognition of right-of-use asset and lease liability during the period	$	-		$	217,674
Reclassification of common stock offering costs to additional paid in capital	$	-		$	1,150,989
Finance lease of equipment to pay off accounts payable	$	-		$	124,500
Contribution of machines to NuZee Latin America	$	-		$	160,000

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

8

NuZee, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2021

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements of NuZee, Inc. (together with its subsidiaries, referred to herein as the “Company”, “we” or “NuZee”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020 as filed with the SEC on December 28, 2020. 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, its wholly owned subsidiaries and its former majority owned subsidiary (which was sold as of September 28, 2020, as described below), which has a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated upon consolidation.

On September 28, 2020, the Company entered into a Stock Transfer Agreement with Eguchi Holdings Co., Ltd. (“EHCL”), pursuant to which the Company sold to EHCL for an aggregate sale price of approximately $34,000 all of its equity interests in its former majority-owned subsidiary, NuZee JAPAN Co., Ltd. (“NuZee JP”), representing 70% of the outstanding equity interests of NuZee JP.

The Company has two wholly owned international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”) and NuZee Investment Co., Ltd. (“NuZee INV”).

Stock Split

On October 28, 2019, we completed a l-for-3 reverse stock split, which became effective on November 12, 2019. All share and per share information included in these financial statements and notes thereto give effect to the reverse stock split.

Earnings per Share

Basic earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of June 30, 2021 and June 30, 2020, the total number of common stock equivalents was 8,289,864 and 1,725,000, respectively, comprised of stock options and warrants as of June 30, 2021 and entirely of stock options as of June 30, 2020. The Company incurred a net loss for the three and nine months ended June 30, 2021 and 2020, respectively, and therefore basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.

Capital Resources

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company has generated limited revenues from its principal operations, and there is no assurance of future revenues.

As of June 30, 2021, the Company had cash of $12,704,257. However, the Company has not attained profitable operations since inception.

Major Customers

In the nine months ended June 30, 2021 and 2020, revenue was primarily derived from major customers disclosed below.

Nine months ended June 30, 2021:

Customer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer WP	$	456,247		32	%	$	124,814		39	%

9

Nine months ended June 30, 2020:

C ustomer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer K	$	284,099		25	%	$	-		0	%
Customer WP	$	259,925		23	%	$	7,767		11	%
Customer J	$	188,574		17	%	$	175		0	%

Lease

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

The Company does a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company has one significant long-term operating lease for office and manufacturing space in Plano, Texas. The leased property in Plano, Texas, has a remaining lease term through June of 2024. The lease has an option to extend beyond the stated termination date, but exercise of this option is not probable. The Company did not apply the recognition requirements of ASC 842 to operating leases with a remaining lease term of 12 months or less.

The impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning October 1, 2020, through the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases are as follows:

	October 1, 2020
ROU Asset	$	652,197
Lease Liability	$	659,391

During the prior year analysis of leases, we determined to renew the office and manufacturing space in Vista, CA through January 31, 2022, which was previously scheduled to be vacated at June 30, 2020. Additionally, the Korean office and manufacturing space lease was extended through June 2022 and an apartment lease was signed through June 2022. Accordingly, we have added ROU assets and lease liabilities related to those leases at June 30, 2020.

The direct-leased property in Vista, California has a remaining lease term through January of 2022. The leased properties in both Korea and Vista, California have options to extend beyond the stated termination date, but exercise of these options are not probable. The sub-leased property in Vista, California, is leased month-to-month and has been calculated as a ROU Asset co-terminus with the direct-leased property.

In September 2020, we entered into an 18-month sublease effective October 1, 2020 reducing our space and term in Plano, Texas. Accordingly, this lease has been added to our right-of-use asset balance at September 30, 2020. This lease is for the Company’s principal executive office located at 1401 Capital Avenue, Suite B, Plano, Texas 75074.

Effective September 1, 2020, we converted our month-to-month sublease in Vista, California to a 17-month sublease ending January 31, 2022 which is co-terminus with our direct lease in Vista. The month-to-month sublease was recognized as a right-of-use asset in our June 30, 2020 analysis. The terms of the 17-month lease are similar to the terms used to value the right-of-use asset at June 30, 2020.

As of June 30, 2021, our operating leases had a weighted average remaining lease term of 1.9 years and a weighted-average discount rate of 5%. Other information related to our operating leases is as follows:

ROU Asset – October 1, 2020	$	652,197
Amortization during the period		(202,947	)
ROU Asset –June 30, 2021	$	449,250
Lease Liability – October 1, 2020	$	659,391
Amortization during the period		(193,118	)
Lease Liability – June 30, 2021	$	466,273

Lease Liability – Short-Term	$	162,674
Lease Liability – Long-Term		303,599
Lease Liability – Total	$	466,273

10

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of June 30, 2021:

Amounts due within 12 months of June 30,

2022	$	238,519
2023		126,091
2024		129,873
2025		-
2026		-
Total Minimum Lease Payments		494,483
Less Effect of Discounting		(28,210	)
Present Value of Future Minimum Lease Payments		466,273
Less Current Portion of Operating Lease Obligations		(162,674	)
Long-Term Operating Lease Obligations	$	303,599

On October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on certain packing equipment. The terms of this agreement require us to pay $2,987 per month for the next 60 months. As part of this agreement, Alliance Funding Group provided our equipment supplier with $124,540 for the purchase of this equipment. This transaction was accounted for as a financing lease. As of June 30, 2021, our financing lease had a remaining lease term of 3 years and a discount rate of 12.75%. The interest expense on finance lease liabilities for the nine months ended June 30, 2021 was $8,896.

The following summarizes ROU assets under finance leases at June 30, 2021:

ROU asset-finance lease at September 30, 2020	$	105,825
Impairment		(105,825	)
ROU asset-finance lease at June 30, 2021	$	-

The table below summarizes future minimum finance lease payments at June 30, 2021 for the 12 months ended June 30:

2022	$	33,113
2023		33,113
2024		33,113
2025		2,759
2026		-
Total Minimum Lease Payments		102,098
Amount representing interest		(18,039	)
Present Value of Minimum Lease Payments		84,059
Current Portion of Finance Lease Obligations		(26,965	)
Finance Lease Obligations, Less Current Portion	$	57,094

The Company leases office space with terms ranging from month to month to 61 months. Rent expense included in general and administrative expense for the nine months ended June 30, 2021 and 2020 was $251,164 and $251,207, respectively.

Cash and non cash activities associated with the leases for the nine months ended June 30, 2021 are as follows:

Operating cash outflows from operating leases:	$	215,046
Operating cash outflows from finance lease:	$	8,896
Financing cash outflows from finance lease:	$	15,939

In September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020 under favorable terms that are co-terminus with the original lease ending June 30, 2024. In the nine months ended June 30, 2021, we recognized sublease income of $59,439 pursuant to the sublease included in Other income on our financial statements. Future minimum lease payments to be received under that sublease as of June 30, 2021, for the 12 months ended June 30:

2022	$	122,364
2023		126,017
2024		129,835
2025		—
2026		—
Total	$	378,216

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Loans

On April 1, 2019, NuZee purchased a delivery van from Ford Motor Credit for $41,627. The Company paid $3,500 as a down payment and financed $38,127 for 60 months at a rate of 2.9%. The loan is secured by the van. The outstanding balance on the loan at June 30, 2021 and September 30, 2020, amounted to $22,304 and $27,916, respectively.

On February 15, 2019 NuZee KR entered into equipment financing for production equipment with ShinHan Bank for $60,563. On June 28, 2019 NuZee KR purchased additional equipment and increased the loan with ShinHan Bank by $86,518. The loan is secured by our production equipment at NuZee KR. The financing bears a term of 36 months at a rate of 4.33% per annum. Principal payments began in July of 2019. The outstanding balance on this loan at June 30, 2021 and September 30, 2020, amounted to $50,206 and $85,001, respectively.

The loan payments required for the next five remaining fiscal years are as follows:

	Ford Motor Credit		ShinHan Bank		Total
2021 (July – September 2021)	$	1,895	$	12,551
2022 (October 2021 – June 2022)		5,819		37,655
Total Current Portion	$	7,714	$	50,206	$	57,920
2022 (July – September 2022)	$	1,895	$	-
2023		7,947		-
2024		4,748		-
2025		-		-
Total LT Portion	$	14,590	$	-	$	14,590
Grand Total	$	22,304	$	50,206	$	72,510

Revenue Recognition

We determine revenue recognition through the following steps in accordance with FASB Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, which we adopted as of October 1, 2018 on a modified retrospective basis:

● identification of the contract, or contracts, with a customer;

● identification of the performance obligations in the contract;

● determination of the transaction price;

● allocation of the transaction price to the performance obligations in the contract; and

● recognition of revenue when, or as, we satisfy a performance obligation.

Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The adoption of Topic 606 did not have a material impact on our consolidated financial statements.

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Foreign Currency Translation

The financial position and results of operations of each of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of each such subsidiary have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity unless there is a sale or complete liquidation of the underlying foreign investment. Foreign currency translation adjustments comprising accumulated other comprehensive income (loss) amounted to $(2,374) and $(59,510) for the nine months ended June 30, 2021 and 2020, 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.

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, 2021 and September 30, 2020, the carrying value of inventory of $428,856 and $245,370 respectively, reflected on the consolidated balance sheets is net of this adjustment.

	June 30, 2021		September 30, 2020
Raw materials	$	327,411	$	176,231
Finished goods		101,445		69,139
Less – Inventory reserve		-		-
Total	$	428,856	$	245,370

Joint Venture

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

The Company accounts for NLA using the equity method of accounting since the management of day to day operations at NLA ultimately lies with the Company’s joint venture partner as the operations of NLA are based in its partners facilities and our partner appoints the Chairman of the joint Board. As of June 30, 2021, the only activity in NLA was the contribution of two machines as described above and other start up related activities. $4,077 of a loss was recognized under the equity method of accounting during the nine months ended June 30, 2021.

2. GEOGRAPHIC CONCENTRATION

The Company is organized in three geographical segments. The Company co-packs product for customers and produces and sells its products directly in North America and Korea. The Company has investor relations operations in Japan as a majority of our shareholders are based in Japan. In March of 2021, the Company wrote off $840,391 of assets in North America as these assets were deemed to be no longer useful for the current business operations. $105,825 of the impairment was related to the ROU asset and $734,566 was related to property and equipment. This write off is included in operating expenses on our consolidated statement of operations for the nine months June 30, 2021. These assets are co-packing equipment that have limited capabilities compared with other equipment the Company is currently utilizing. Since we have yet to utilize this equipment since it was delivered, we have determined their usefulness to our future operations is limited. Information about the Company’s geographic operations are as follows:

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Geographic Concentrations

	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Net Revenue:
North America	$	1,077,986	$	756,000
Japan		-		258,526
South Korea		364,097		117,036
	$	1,442,083	$	1,131,562

Property and equipment, net:		As of June 30, 2021		As of September 30, 2020
North America	$	573,631	$	1,422,575
Japan		1,808		2,813
South Korea		232,409		242,960
	$	807,848	$	1,668,348

3. RELATED PARTY TRANSACTIONS

For the nine months ended June 30, 2021, we sold $28,299 of materials to NLA.

4. ISSUANCE OF EQUITY SECURITIES

During the nine months ended June 30, 2021, the Company sold (i) 72,955 shares of common stock to Triton Funds LP in a registered public offering for aggregate net proceeds of $534,494 pursuant to a Common Stock Purchase Agreement dated as of October 26, 2020 and a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531), and (ii) 256,338 shares of common stock at $9.14 per share for aggregate net proceeds of $2,149,486 pursuant to Securities Act registration exemptions under Regulation S and/or Section 4(a)(2) of the Securities Act. In addition, as further described below, during the nine months ended June 30, 2021, the Company sold pursuant to an Underwriting Agreement dated as of March 19, 2021 and a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531) (i) 2,777,777 units (“Units”) in an underwritten registered public offering for aggregate net proceeds of $11,017,304 which includes the proceeds from the underwriter’s full exercise of their overallotment option with respect to the warrant component of the Units, as further described below, with each Unit consisting of (a) one share of our common stock, (b) one Series A warrant (each, a “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of our common stock with an initial exercise price of $4.50 per whole share, and (c) one Series B warrant (each, a “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of our common stock with an initial exercise price of $5.85 per whole share, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants. During the nine months ended June 30, 2021, 6,000 shares were issued upon the exercise of stock options. As part of this exercise, the Company received $9,180 in proceeds.

On January 11, 2021, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors granted to Shanoop Kothari, who was serving at the time as both the Company’s Chief Financial Officer and Chief Operating Officer, in connection with the Committee’s determination of Mr. Kothari’s annual compensation, an award of 152,215 restricted shares (the “Restricted Shares”) of the Company’s common stock under the NuZee, Inc. 2019 Stock Incentive Plan. The Restricted Shares vest as follows: (i) 50,739 Restricted Shares vested immediately (35,739 net shares were issued to Mr. Kothari following the forfeiture of 15,000 vested shares to cover taxes); (ii) 50,739 Restricted Shares vested on March 31, 2021; and (iii) 50,737 Restricted Shares were originally scheduled to vest on March 31, 2022 but are now scheduled to be accelerated to vest on Mr. Kothari’s Separation Date (as defined below) as further described in Note 6-Subsequent Events.

On March 11, 2021, we terminated our At Market Issuance Sales Agreement, dated September 1, 2020 (the “ATM Agreement”), with B. Riley Securities, Inc. (f/k/a/ B. Riley FBR, Inc.) and The Benchmark Company, LLC (collectively, the “Agents”), pursuant to which we could from time to time offer and sell up to an aggregate of $50.0 million of shares of our common stock through the Agents in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act. We did not sell any shares of common stock under the ATM Agreement. The Company’s consolidated statement of cash flows for the nine months ended June 30, 2021 includes stock issuance expenses of $477,605 in connection with the terminated ATM Agreement.

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5. STOCK OPTIONS AND WARRANTS

Options

During the nine months ended June 30, 2021, the Company issued 15,000 options to independent contractors, 1,369,938 options to independent Board members and 770,000 options to employees. For independent board members, these options shall vest and become exercisable over a period of 3 years, with 50% of the options vesting immediately and the remaining 50% vesting 25% on each of the first two anniversaries of the grant date. For independent contractors, these options shall vest and become exercisable over a period of 3 years, with 33% of the options vesting on each anniversary of the grant date. For employees, these options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of the grant date, or (ii) in the case of performance-based options (the “Performance-Based Options”), based on the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024. During the nine months ended June 30, 2021, the Company issued a total of 622,000 Performance-Based Options, which represents the maximum number of Performance-Based Options that may be earned if all performance milestones are achieved for the applicable performance periods.

The exercise price for the options ranged from $2.91 - $16.79 per share. The options 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 the Company’s historical stock performance. The expected term of options granted was determined using 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 nine months ended June 30, 2021:

For non-employees, employees and independent Board members	June 30, 2021
Risk-free interest rate		0.78 – 1.71	%
Expected option life		10 years
Expected volatility		300 - 311	%
Expected dividend yield		0.00	%
Exercise price	$	2.91 - $16.79

For the nine months ended June 30, 2021, 311,656 options were forfeited because of the termination of employment and conclusion of Board appointment. For the nine months ended June 30, 2021, 6,000 shares were issued upon the exercise of stock options.

The following table summarizes stock option activity for nine months ended June 30, 2021:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		1,620,667		$	5.74		7.3	$	19,112,118
Granted		2,154,938			5.87
Exercised		(6,000	)		1.53
Expired		-			-
Forfeited		(311,656	)		12.39
Outstanding at June 30, 2021		3,457,949		$	5.23		8.3	$	1,363,638
Exercisable at June 30, 2021		1,397,975		$	6.01		7.7	$	790,939

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 $8,002,917 for the nine months ended June 30, 2021. Unamortized option expense as of June 30, 2021, for all options outstanding amounted to $6,520,427. These costs are expected to be recognized over a weighted- average period of 1.5 years. The Company recognized stock option expenses of $4,505,498 for the nine months ended June 30, 2020.

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A summary of the status of the Company’s nonvested options as of June 30, 2021, is presented below:

Nonvested options

	Number of nonvested shares			Weighted average grant date fair value
Nonvested shares at September 30, 2020		762,917		$	10.60
Granted		2,154,938			5.87
Forfeited		(158,328	)		12.11
Vested		(699,554	)		7.59
Nonvested shares at June 30, 2021		2,059,973			6.56

Warrants

On June 23, 2020, as part of our agreement with Benchmark Company, LLC the underwriter of the Company’s June 2020 registered public offering of common stock, we issued 40,250 warrants to purchase our common stock at an exercise price of $9.00 a share. These warrants are exercisable on December 23, 2020 and expire on June 18, 2025.

On March 19, 2021, we entered into an underwriting agreement in connection with our registered public offering (the “Offering”) of (i) 2,777,777 units (the “Units”), at a price to the public of $4.50 per Unit, with each Unit consisting of (a) one share of our common stock, (b) one Series A Warrant, and (c) one Series B Warrant, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.

Each Series A Warrant entitles the registered holder to purchase one share of our common stock at an exercise price of $4.50 per share. Each Series B Warrant entitles the registered holder thereof to purchase one-half of a share of our common stock at an exercise price of $5.85 per whole share. These warrants have a term of 5 years.

The following table summarizes warrant activity for the nine months ended June 30, 2021:

	Number of Shares Issuable Upon Exercise of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		40,250	$	9.00		4.7	$	321,598
Issued		4,791,665		4.95
Exercised		-		-
Expired		-		-
Outstanding June 30, 2021		4,831,915	$	4.98		4.7		-
Exercisable at June 30, 2021		4,831,915	$	4.98		4.7	$	-

6. SUBSEQUENT EVENTS

Shanoop Kothari’s Resignation and Severance Agreement

On June 22, 2021, Shanoop Kothari notified the Company of his resignation as Chief Financial Officer. Mr. Kothari’s resignation will be effective as of August 16, 2021 (the “Separation Date”).

In connection with Mr. Kothari’s resignation, the Company entered into a Severance Agreement and General Release with Mr. Kothari on July 2, 2021 (the “Severance Agreement”). Pursuant to the Severance Agreement, Mr. Kothari’s 50,737 outstanding restricted shares of common stock were accelerated to vest on the Separation Date.

Appointment of Patrick Shearer as Chief Financial Officer and Issuance of Options

On July 2, 2021 (the “Commencement Date”), the Company appointed Patrick Shearer to be its new Chief Financial Officer, effective immediately.

In addition, pursuant to Mr. Shearer’s employment agreement, the Company granted to Mr. Shearer on the Commencement Date an award of options to purchase 200,000 shares of our common stock. Subject to Mr. Shearer’s continued employment, the options vest as follows: (i) 80,000 options shall vest upon the first anniversary of the Commencement Date; (ii) 60,000 options shall vest upon the second anniversary of the Commencement Date; and (iii) 60,000 options shall vest upon the third anniversary of the Commencement Date. The options have an exercise price of $3.12 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

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CEO Compensation

On July 2, 2021, the Compensation Committee approved a grant of nonqualified performance-based options (the “Options”) to Masateru Higashida, the Company’s President and Chief Executive Officer, to purchase 896,743 shares of the Company’s common stock, which represents the maximum number of Options that may be earned if all performance milestones are achieved, as further described below. The Options will vest, if at all, based on the extent to which the Company achieves certain performance objectives relating to our earnings before income taxes in each of the fiscal years ending September 30, 2022 (“fiscal year 2022”), September 30, 2023 (“fiscal year 2023”) and September 30, 2024 (“fiscal year 2024”). Pursuant to the award agreement, (i) 179,349 Options shall vest, if at all, in fiscal year 2022, (ii) 269,023 Options shall vest, if at all, in fiscal year 2023, and (iii) 448,371 Options shall vest, if at all, in fiscal year 2024, in each case based upon our achievement of a specified amount of earnings before income taxes in the respective fiscal year. The Options have an exercise price of $3.12 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. Also on July 2, 2021, the Compensation Committee awarded a deferred bonus of $75,000 payable to Mr. Higashida for his service to the Company in the prior fiscal year ended September 30, 2020.

Also on July 2, 2021, the Compensation Committee approved the parameters of the cash bonus for Mr. Higashida (the “Fiscal Year 2022 Cash Bonus”) for fiscal year 2022. Pursuant to Mr. Higashida’s Executive Employment Agreement dated as of August 15, 2017, the Compensation Committee established the relevant performance metrics and goals for determining the amount of the Fiscal Year 2022 Cash Bonus that Mr. Higashida would be entitled to receive, assuming achievement by the Company of the respective target and maximum performance levels under each metric established for fiscal year 2022. The Fiscal Year 2022 Cash Bonus, if any, payable to Mr. Higashida will be determined by the extent to which the Company achieves certain performance objectives relating to the Company’s net revenues and net cash provided by operating activities in fiscal year 2022, with a target Fiscal Year 2022 Cash Bonus opportunity of $105,000 and a maximum Fiscal Year 2022 Cash Bonus opportunity of $210,000. In addition, on July 2, 2021, the Compensation Committee approved an increase in the annual base salary payable to Mr. Higashida from $180,000 to $300,000, effective as of May 23, 2021.

Issuance of Options to New Employees

On July 29, 2021, the Company issued a total of 115,000 options to new employees, including 92,000 Performance-Based Options, which represents the maximum number of Performance-Based Options that may be earned if all performance milestones are achieved for the applicable performance periods, and 23,000 time-based options. These options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of each employee’s employment start date, or (ii) in the case of the Performance-Based Options, based on either (a) the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024, or (b) the employee’s achievement of certain performance milestones tied to adjusted gross sales established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2022, 2023 and 2024.

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

Overview

We are a specialty coffee company and, we believe, the leading single serve pour over coffee co-packer in the United States. Our mission is to leverage our position as a co-packer at the forefront of the North American single serve pour over coffee market to revolutionize the way single serve coffee is enjoyed in the United States. While the United States is our core market, we also have manufacturing and sales operations in Korea and a joint venture in Latin America.

We believe we are the only commercial-scale producer of single serve pour over coffee products within the North American market. We intend to leverage our position to be the commercial manufacturer of choice for major companies seeking to enter the single serve pour over coffee market in North America. We target existing, high-margin companies and are paid per-package based on the number of single serve pour over coffee products produced by us. Accordingly, we consider our business model to be a form of tolling arrangement, as we receive a fee for almost every single serve pour over coffee product our co-packing customers sell in the North American market. While we financially benefit from the success of our manufacturing customers through the sales of their respective single serve pour over coffee products, we are also able to avoid the risks associated with owning and managing the product and its related inventory.

Our primary focus is the development of single serve pour over coffee in the North American market targeting the individual consumer for use at home and office or other settings that would benefit from single serve pour over products, and positioning ourselves as the leading commercial-scale co-packer of single serve pour over coffee products. We may also consider co-packaging other products that are complementary to single serve pour over drip coffee and provide us with a deeper access to our customers, such as tea bag coffee. In addition, we are continually exploring potential strategic partnerships, co-ventures, and mergers, acquisitions, or other transactions with existing and future business partners to generate additional business, reduce manufacturing costs, expand into new markets, and further penetrate the markets in which we currently operate.

Since 2016, we have been primarily focused on single serve pour over coffee production. Over this time we have developed expertise in the operation of our sophisticated packing equipment and the related production of the single serve pour over product at both our Vista, California facility and at our production operations in Korea. We plan to carry over this expertise to our Plano, Texas manufacturing facility, which serves as our new single serve pour over co-packing hub and corporate headquarters to capture the location’s logistical advantages and lower cost structure.

In November 2020, we announced a strategic partnership with Farmer Brothers Co. (“FBC”) pursuant to which we may (but are not required to) place up to 50 co-packing machines in Farmer Brothers SQF-certified facility in Northlake, Texas. FBC intends to use the co-packing machines for the exclusive purpose of manufacturing certain of our products for us, our customers and certain of FBC’s customers. By pairing Farmer Brothers manufacturing and distribution capability with NuZee’s technical expertise and products with historic demand in Asia, the partnership is expected to accelerate the scale-up in the U.S. and efficient delivery of our products to coffee companies and branded businesses.

Impact of the COVID-19 Pandemic

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In the nine months ended June 30, 2021, as a result of the COVID-19 pandemic and responses to the outbreak, certain of our customers slowed or delayed purchases of our co-packing services or pour over coffee products, and we also believe that potential sales of our pour over coffee products to new or potential customers in the hospitality industry were adversely impacted. In addition, we have experienced delays in the submission and approval of custom artwork and packaging as well as the shipment to us of coffee for co-packing. We do not believe, however, that these delays had a significant effect on our business or results of operations to date. The COVID-19 crisis may have an adverse impact on our business and financial results going forward that we are not currently able to fully determine or quantify. The COVID-19 crisis may adversely affect the ability of our customers to pay for goods delivered on a timely basis, or at all. Any increase in the amount or deterioration in the collectability of accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital.

Geographic Concentration

Our operations are primarily split between two geographic areas: North America and Asia.

For the three months ended June 30, 2021, net revenues attributable to our operations in North America totaled $419,648 compared to $119,313 of net revenues attributable to our operations in North America for the three months ended June 30, 2020. For the nine months ended June 30, 2021, net revenues attributable to our operations in North America totaled $1,077,986 compared to $756,000 of net revenues attributable to our operations in North America for the nine months ended June 30, 2020. Additionally, as of June 30, 2021, $573,631 of our Property and equipment, net was attributable to our North American operations, compared to $1,422,575 attributable to our North American operations as of September 30, 2020. In March 2021, the Company wrote off $840,391 of assets in North America as these assets were deemed to be no longer useful for the current business operations. $105,825 of the impairment was related to the ROU asset and $734,566 was to property and equipment. This write off is included in operating expenses on our consolidated statement of operations for the nine months ended June 30, 2021. These assets are co-packing equipment that have limited capabilities compared with other equipment the Company is currently utilizing. Since we have yet to utilize this equipment since it was delivered, we have determined their usefulness to our future operations is limited.

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For the three months ended June 30, 2021, net revenues attributable to our operations in Asia totaled $90,383 compared to $72,649 of net revenues attributable to our operations in Asia during the three months ended June 30, 2020. For the nine months ended June 30, 2021, net revenues attributable to our operations in Asia totaled $364,097 compared to $375,562 of net revenues attributable to our operations in Asia during the nine months ended June 30, 2020. Additionally, as of June 30, 2021, $234,217 of our Property and equipment, net was attributable to our Asian operations, compared to $245,773 attributable to our Asian operations as of September 30, 2020.

Results of Operations

Comparison of three months ended June 30, 2021 and 2020:

Revenue

	Three months ended June 30,				Change
	2021		2020		Dollars		%
Revenue	$	510,032	$	191,962	$	318,070		166	%

For the three months ended June 30, 2021, our revenue increased by $318,070, or approximately 166%, compared with the three months ended June 30, 2020. This increase was primarily related to increased co-packing revenue partially offset by the impact from the sale of NuZee JP to Eguchi Holdings Co., Ltd. (“EHCL”) on September 28, 2020, as the results for the three months ended June 30, 2020 include revenues from NuZee JP while the results for the three months ended June 30, 2021 do not.

Cost of sales and gross margin

	Three months ended
	June 30,						Change
	2021			2020			Dollars		%
Cost of sales	$	413,446		$	331,039		$	82,407		25	%
Gross profit		96,586		($	139,077	)	$	235,663		169	%
Gross profit %		19	%		(72	)%

For the three months ended June 30, 2021, we incurred a total gross profit of $96,586, from sales of our products and co-packing services, compared to a total gross loss of ($139,077) for the three months ended June 30, 2020. The gross margin rate was 19% for the three months ended June 30, 2021, and (72%) for the three months ended June 30, 2020. This increase in margin was driven primarily by increased efficiencies resulting from additional experience in co-packing during the current year period compared to the prior year period. In the three months ended June 30, 2020, the Company incurred increased costs as it continued to scale up its co-packing operations.

19

Operating Expenses

	Three months ended
	June 30,				Change
	2021		2020		Dollars		%
Operating Expenses	$	3,206,552	$	2,378,947	$	827,605		35	%

For the three months ended June 30, 2021, the Company’s operating expenses totaled $3,206,552 compared to $2,378,947 for the three months ended June 30, 2020, representing a 35% increase. This increase is primarily attributable to an increase in stock-based compensation expense as well as increased operating expenses associated with greater staffing levels.

Net Loss

	Three months ended
	June 30,				Change
	2021		2020		Dollars		%
Net Loss attributable to NuZee, Inc.	$	3,067,042	$	2,542,418	$	524,624		21	%

For the three months ended June 30, 2021, we generated net loss attributable to NuZee, Inc. of $3,067,042 versus $2,542,418 for the three months ended June 30, 2020. This increase in net losses is primarily attributable to higher stock compensation expense and operating expenses.

Comparison of nine months ended June 30, 2021 and 2020:

Revenue

	Nine months ended
	June 30,				Change
	2021		2020		Dollars		%
Revenue	$	1,442,083	$	1,131,562	$	310,521		27	%

For the nine months ended June 30, 2021, our revenue increased by $310,521, or approximately 27%, compared with the nine months ended June 30, 2020. This increase was primarily related to increased co-packing revenues partially offset by the impact from the sale of NuZee JP to EHCL on September 28, 2020, as the results for the nine months ended June 30, 2020 include revenues from NuZee JP while the results for the nine months ended June 30, 2021 do not.

Cost of sales and gross margin

	Nine months ended
	June 30,						Change
	2021			2020			Dollars		%
Cost of sales	$	1,352,843		$	1,250,904		$	101,939		8	%
Gross profit	$	89,240		$	(119,342	)	$	208,582		175	%
Gross profit %		6	%		(11	)%

For the nine months ended June 30, 2021, we incurred a total gross profit of $89,240, from sales of our products and co-packing services, compared to a total gross loss of ($119,342) for the nine months ended June 30, 2020. The gross margin rate was 6% for the nine months ended June 30, 2021, and (11%) for the nine months ended June 30, 2020. This increase in margin was driven primarily by increased efficiencies resulting from additional experience in co-packing during the current year period compared to the prior year period. In the nine months ended June 30, 2020, the Company incurred increased costs as it continued to scale up its co-packing operations as well as a loss incurred on the close-out of certain inventory items for a particular customer.

20

Operating Expenses

	Nine months ended
	June 30,				Change
	2021		2020		Dollars		%
Operating Expenses	$	15,222,137	$	8,342,412	$	6,879,725		82	%

For the nine months ended June 30, 2021, the Company’s operating expenses totaled $15,222,137 compared to $8,342,412 for the nine months ended June 30, 2020, representing a 82% increase. This increase is primarily attributable to an increase in stock-based compensation expense as well as increased operating expenses associated with greater staffing levels.

Net Loss

	Nine months ended
	June 30,				Change
	2021		2020		Dollars		%.
Net Loss attributable to NuZee, Inc.	$	15,048,722	$	8,453,901	$	6,594,821		78	%

For the nine months ended June 30, 2021, we generated net loss attributable to NuZee, Inc. of $15,048,722 versus $8,453,901 for the nine months ended June 30, 2020. This increase in net losses is primarily attributable to higher stock compensation expense and operating expenses.

Liquidity and Capital Resources

Since our inception in 2011, we have incurred significant losses, and as of June 30, 2021, we had an accumulated deficit of approximately $49 million. We have not yet achieved profitability, and anticipate that we will continue to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset these expenses. We expect to incur additional losses as a result of the costs associated with operating as an exchange-listed public company in the future. To date, we have funded our operations primarily with proceeds from equity offerings.

Our principal use of cash is to fund our operations, which includes the commercialization of our pour over coffee products, the continuation of efforts to improve our products, administrative support of our operations and other working capital requirements.

We may need to raise additional funds to support our operating activities, and such funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders.

As of June 30, 2021, we had a cash balance of $12,704,257.

Summary of Cash Flows

	Nine Months Ended
	June 30,
	2021			2020
Cash used in operating activities	$	(5,204,587	)	$	(3,003,714	)
Cash provided by (used in) investing activities	$	(141,445	)	$	93,694
Cash provided by financing activities	$	13,654,118		$	6,777,931
Effect of foreign exchange on cash	$	(2,374	)	$	21,858
Net increase in cash	$	8,305,712		$	3,889,769

Operating Activities

We used $5,204,587 and $3,003,714 of cash in operating activities during the nine months ended June 30, 2021 and 2020, respectively, principally to fund our operating loss. This increase was primarily attributable to the increase in operating expenses associated with greater staffing levels and professional services expenses over the current fiscal year period.

21

Investing Activities

We used $141,445 of cash versus provided $93,694 of cash in investing activities during the nine months ended June 30, 2021 and 2020, respectively. Cash used in the current period was to fund the purchase of equipment versus in the prior period the cash provided was principally from the sales of equipment.

Financing Activities

Historically, we have funded our operations primarily through the issuance of our common stock.

Cash provided by financing activities increased to $13,654,118 for the nine months ended June 30, 2021 from $6,777,931 for the nine months ended June 30, 2020. The increase in cash provided by financing activities is primarily related to the increase in proceeds from the issuance of equity securities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is collected and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for our Company. In designing and evaluating our disclosure controls and procedures, management recognizes that no matter how well conceived and operated, disclosure controls and procedures can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

PART II.

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on December 28, 2020.

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

None.

Item 6. Exhibits

EXHIBIT NO.	DESCRIPTION
10.1	Employment Agreement, dated July 2, 2021, by and between NuZee, Inc. and Patrick Shearer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 7, 2021, SEC File Number 001-39338) (1)
10.2	Severance Agreement and General Release, dated July 2, 2021, by and between NuZee, Inc. and Shanoop Kothari (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 7, 2021, SEC File Number 001-39338) (1)
10.3	Form of Stock Option Agreement under the NuZee, Inc. 2019 Stock Incentive Plan (Performance-Based) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 7, 2021, SEC File Number 001-39338) (1)
31.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document***
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

(1) A management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 601(b)(10)(iii) of Regulation S-K

* Filed herewith.

** Furnished herewith.

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

23

SIGNATURES

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

Date:	August 16, 2021	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director
		By:	/s/ Patrick Shearer
			Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

24

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Masateru Higashida, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NuZee, Inc. for the quarter ended June 30, 2021;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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

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

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

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

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 16, 2021	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick Shearer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NuZee, Inc. for the quarter ended June 30, 2021;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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

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

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

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

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 16, 2021	NUZEE, INC.
		By:	/s/ Patrick Shearer
			Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NuZee, Inc. and its subsidiaries (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the Company’s Chief Executive Officer, Masateru Higashida, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 16, 2021	NUZEE, INC.
		By:	/s/ Masateru Higashida
			Masateru Higashida, Chief Executive Officer and President (Principal Executive Officer), Secretary, Treasurer, and Director

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NuZee, Inc. and its subsidiaries (the “Company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the Company’s Chief Financial Officer, Patrick Shearer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 16, 2021	NUZEE, INC.
		By:	/s/ Patrick Shearer
			Patrick Shearer, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

XML

Cover - shares	9 Months Ended
	Jun. 30, 2021	Aug. 16, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Current Fiscal Year End Date	--09-30
Entity File Number	001-39338
Entity Registrant Name	NUZEE, INC.
Entity Central Index Key	0001527613
Entity Tax Identification Number	38-3849791
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	1 401 Capital Avenue
Entity Address, Address Line Two	Suite B
Entity Address, City or Town	Plano
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75074
City Area Code	760
Local Phone Number	295-2408
Title of 12(b) Security	Common Stock, $0.00001 par value
Trading Symbol	NUZE
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		17,820,390

XML

Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2021	Sep. 30, 2020
Current assets:
Cash	$ 12,704,257	$ 4,398,545
Accounts receivable, net	320,030	195,610
Inventories, net	428,856	245,370
Prepaid expenses and other current assets	321,651	645,375
Total current assets	13,774,794	5,484,900
Property and equipment, net	807,848	1,668,348
Other assets:
Right-of-use asset - operating lease	449,250	652,197
Right-of-use asset - finance lease		105,825
Investments	179,238	183,314
Other assets	81,921	80,559
Total other assets	710,409	1,021,895
Total assets	15,293,051	8,175,143
Current liabilities:
Accounts payable	81,318	49,778
Current portion of long-term loan payable	57,920	56,072
Current portion of lease liability - operating lease	162,674	263,678
Current portion of lease liability - finance lease	26,964	21,598
Accrued expenses	202,147	703,069
Deferred income	95,032	34,000
Other current liabilities	255,198	104,525
Total current liabilities	881,253	1,232,720
Non-current liabilities:
Lease liability - operating lease, net of current portion	303,599	395,713
Lease liability - finance lease, net of current portion	57,095	78,400
Loan payable - long term, net of current portion	14,590	56,845
Other noncurrent liabilities	22,435	21,707
Total noncurrent liabilities	397,719	552,665
Total liabilities	1,278,972	1,785,385
Stockholders’ equity:
Common stock; 100,000,000 shares authorized, $0.00001 par value; 17,820,390 and 14,570,105 shares issued	178	146
Additional paid in capital	63,147,614	40,472,229
Accumulated deficit	(49,321,500)	(34,272,778)
Accumulated other comprehensive income	187,787	190,161
Total stockholders’ equity	14,014,079	6,389,758
Total liabilities and stockholders’ equity	$ 15,293,051	$ 8,175,143

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2021	Sep. 30, 2020
Statement of Financial Position [Abstract]
Common stock, shares authorized	100,000,000	100,000,000
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares issued	17,820,390	14,570,105

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenues	$ 510,032	$ 191,962	$ 1,442,083	$ 1,131,562
Cost of sales	413,446	331,039	1,352,843	1,250,904
Gross Profit (Loss)	96,586	(139,077)	89,240	(119,342)
Operating expenses	3,206,552	2,378,947	15,222,137	8,342,412
Loss from operations	(3,109,966)	(2,518,024)	(15,132,897)	(8,461,754)
Loss from investment in uncosolidated affiliate	(102)		(4,077)
Other income	47,909	25,523	101,623	28,504
Other expense	(1,280)	(42,113)	(2,093)	(44,712)
Interest expense	(3,603)	(6,448)	(11,278)	(16,573)
Net loss	(3,067,042)	(2,541,062)	(15,048,722)	(8,494,535)
Net income (loss) attributable to noncontrolling interest		1,356		(40,634)
Net loss attributable to NuZee, Inc.	$ (3,067,042)	$ (2,542,418)	$ (15,048,722)	$ (8,453,901)
Basic and diluted loss per common share	$ (0.17)	$ (0.18)	$ (0.94)	$ (0.62)
Basic and diluted weighted average number of common stock outstanding	17,820,390	13,782,950	15,938,931	13,724,590

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss	$ (3,067,042)	$ (2,541,062)	$ (15,048,722)	$ (8,494,535)
Foreign currency translation	(7,854)	10,739	(2,374)	21,858
Total other comprehensive income (loss), net of tax	(7,854)	10,739	(2,374)	21,858
Comprehensive income (loss)	(3,074,896)	(2,530,323)	(15,051,096)	(8,472,677)
Parent [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss	(3,067,042)	(2,542,418)	(15,048,722)	(8,453,901)
Foreign currency translation	(7,854)	10,209	(2,374)	(59,510)
Total other comprehensive income (loss), net of tax	(7,854)	10,209	(2,374)	(59,510)
Comprehensive income (loss)	(3,074,896)	(2,532,209)	(15,051,096)	(8,513,411)
Noncontrolling Interest [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net loss		1,356		(40,634)
Foreign currency translation		530		81,368
Total other comprehensive income (loss), net of tax		530		81,368
Comprehensive income (loss)		$ 1,886		$ 40,734

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total	Noncontrolling Interest [Member]
Beginning balance, value at Sep. 30, 2019	$ 137	$ 28,898,344	$ (24,795,687)	$ (90,635)	$ 4,115,062	$ 102,903
Beginning balance, shares at Sep. 30, 2019	13,617,366
Equity securities issued for cash	$ 1	1,994,522			1,994,523
Equity securities issued for cash, shares	111,738
Stock option expense		2,220,861			2,220,861
Other comprehensive gain				27,230	32,872	5,642
Net income (loss)			(3,421,232)		(3,432,253)	(11,021)
Ending balance, value at Dec. 31, 2019	$ 138	33,113,727	(28,216,919)	(63,405)	4,931,065	97,524
Ending balance, shares at Dec. 31, 2019	13,729,104
Beginning balance, value at Sep. 30, 2019	$ 137	28,898,344	(24,795,687)	(90,635)	4,115,062	102,903
Beginning balance, shares at Sep. 30, 2019	13,617,366
Other comprehensive gain					21,858	81,368
Net income (loss)					(8,494,535)	(40,634)
Ending balance, value at Jun. 30, 2020	$ 145	40,046,531	(33,249,588)	(150,145)	6,790,580	143,637
Ending balance, shares at Jun. 30, 2020	14,429,104
Beginning balance, value at Dec. 31, 2019	$ 138	33,113,727	(28,216,919)	(63,405)	4,931,065	97,524
Beginning balance, shares at Dec. 31, 2019	13,729,104
Stock option expense		962,490			962,490
Other comprehensive gain				(96,949)	(21,753)	75,196
Net income (loss)			(2,490,251)		(2,521,220)	(30,969)
Ending balance, value at Mar. 31, 2020	$ 138	34,076,217	(30,707,170)	(160,354)	3,350,582	141,751
Ending balance, shares at Mar. 31, 2020	13,729,104
Equity securities issued for cash	$ 7	4,648,167			4,648,174
Equity securities issued for cash, shares	700,000
Stock option expense		1,322,147			1,322,147
Other comprehensive gain				10,209	10,739	530
Net income (loss)			(2,542,418)		(2,541,062)	1,356
Ending balance, value at Jun. 30, 2020	$ 145	40,046,531	(33,249,588)	(150,145)	6,790,580	143,637
Ending balance, shares at Jun. 30, 2020	14,429,104
Beginning balance, value at Sep. 30, 2020	$ 146	40,472,229	(34,272,778)	190,161	6,389,758
Beginning balance, shares at Sep. 30, 2020	14,570,105
Equity securities issued for cash	$ 3	2,683,977			2,683,980
Equity securities issued for cash, shares	324,959
Stock option expense		4,507,298			4,507,298
Exercise of stock options		9,180			9,180
Exercise of stock options, shares	6,000
Other comprehensive gain				1,656	1,656
Net income (loss)			(5,896,072)		(5,896,072)
Ending balance, value at Dec. 31, 2020	$ 149	47,672,684	(40,168,850)	191,817	7,695,800
Ending balance, shares at Dec. 31, 2020	14,901,064
Beginning balance, value at Sep. 30, 2020	$ 146	40,472,229	(34,272,778)	190,161	$ 6,389,758
Beginning balance, shares at Sep. 30, 2020	14,570,105
Equity securities issued for cash, shares	256,338
Exercise of stock options, shares					6,000
Other comprehensive gain					$ (2,374)
Net income (loss)					(15,048,722)
Ending balance, value at Jun. 30, 2021	$ 178	63,147,614	(49,321,500)	187,787	14,014,079
Ending balance, shares at Jun. 30, 2021	17,820,390
Beginning balance, value at Dec. 31, 2020	$ 149	47,672,684	(40,168,850)	191,817	7,695,800
Beginning balance, shares at Dec. 31, 2020	14,901,064
Equity securities issued for cash	$ 28	11,017,276			11,017,304
Equity securities issued for cash, shares	2,782,111
Common stock issued for compensation	$ 1	870,999			871,000
Common stock issued for compensation, shares	137,215
Stock option expense		1,989,006			1,989,006
Other comprehensive gain				3,824	3,824
Net income (loss)			(6,085,608)		(6,085,608)
Ending balance, value at Mar. 31, 2021	$ 178	61,549,965	(46,254,458)	195,641	15,491,326
Ending balance, shares at Mar. 31, 2021	17,820,390
Amortization of common stock issued for compensation		91,036			91,036
Stock option expense		1,506,613			1,506,613
Other comprehensive gain				(7,854)	(7,854)
Net income (loss)			(3,067,042)		(3,067,042)
Ending balance, value at Jun. 30, 2021	$ 178	$ 63,147,614	$ (49,321,500)	$ 187,787	$ 14,014,079
Ending balance, shares at Jun. 30, 2021	17,820,390

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating activities:
Net loss	$ (15,048,722)	$ (8,494,535)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and Amortization	254,929	310,393
Noncash lease expense	215,397	101,505
Stock option expense	8,002,917	4,505,498
Property and equipment impairment	840,391
Inventory impairment		74,944
Common stock issued for compensation	962,036
Sales allowance	(11,562)	3,835
Write-off of deferred offering costs	477,605
Loss on sale of assets		43,012
Loss from investment in uncosolidated afffiliate	4,076
Change in operating assets and liabilities:
Accounts receivable	(112,858)	469,020
Accounts receivable - Related party		(118)
Inventories	(183,486)	151,067
Prepaid expense and other current assets	(141,018)	(122,426)
Other current assets - Related party		460
Other assets	(1,362)	(41,767)
Accounts payable	31,540	(199,763)
Other non-current liabilities	728	7,144
Deferred revenue	61,032
Operating lease liabilities	(193,118)	(83,063)
Other current liabilities	150,673
Other current liabilities - related party		(704)
Accrued expense and other current liabilities	(513,785)	271,784
Net cash used in operating activities	(5,204,587)	(3,003,714)
Investing activities:
Cash paid for purchase of fixed assets, net	(141,445)	(16,306)
Proceeds from sales of equipment		110,000
Net cash provided by (used in) investing activities	(141,445)	93,694
Financing activities:
Proceeds from exercise of options	9,180
Repayment of loans	(40,407)	(75,816)
Repayment of finance lease	(15,939)	(14,039)
Proceeds from issuance of equity securities, net of issuance costs	13,701,284	6,867,786
Net cash provided by financing activities	13,654,118	6,777,931
Effect of foreign exchange on cash and cash equivalents	(2,374)	21,858
Net change in cash	8,305,712	3,889,769
Cash, beginning of period	4,398,545	1,326,040
Cash, end of period	12,704,257	5,215,809
Supplemental disclosure of cash flow information:
Cash paid for interest	11,278	16,573
Cash paid for taxes	7,044	800
Non-cash transactions
Recognition of right-of-use asset and lease liability upon adoption of ASU 2016-02		517,263
Recognition of right-of-use asset and lease liability during the period		217,674
Reclassification of common stock offering costs to additional paid in capital		1,150,989
Finance lease of equipment to pay off accounts payable		124,500
Contribution of machines to NuZee Latin America		$ 160,000

XML

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

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. (together with its subsidiaries, referred to herein as the “Company”, “we” or “NuZee”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020 as filed with the SEC on December 28, 2020. 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, its wholly owned subsidiaries and its former majority owned subsidiary (which was sold as of September 28, 2020, as described below), which has a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated upon consolidation.

On September 28, 2020, the Company entered into a Stock Transfer Agreement with Eguchi Holdings Co., Ltd. (“EHCL”), pursuant to which the Company sold to EHCL for an aggregate sale price of approximately $34,000 all of its equity interests in its former majority-owned subsidiary, NuZee JAPAN Co., Ltd. (“NuZee JP”), representing 70% of the outstanding equity interests of NuZee JP.

The Company has two wholly owned international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”) and NuZee Investment Co., Ltd. (“NuZee INV”).

Stock Split

On October 28, 2019, we completed a l-for-3 reverse stock split, which became effective on November 12, 2019. All share and per share information included in these financial statements and notes thereto give effect to the reverse stock split.

Earnings per Share

Basic earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of June 30, 2021 and June 30, 2020, the total number of common stock equivalents was 8,289,864 and 1,725,000, respectively, comprised of stock options and warrants as of June 30, 2021 and entirely of stock options as of June 30, 2020. The Company incurred a net loss for the three and nine months ended June 30, 2021 and 2020, respectively, and therefore basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.

Capital Resources

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company has generated limited revenues from its principal operations, and there is no assurance of future revenues.

As of June 30, 2021, the Company had cash of $12,704,257. However, the Company has not attained profitable operations since inception.

Major Customers

In the nine months ended June 30, 2021 and 2020, revenue was primarily derived from major customers disclosed below.

Nine months ended June 30, 2021:

Customer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer WP	$	456,247		32	%	$	124,814		39	%

Nine months ended June 30, 2020:

C ustomer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer K	$	284,099		25	%	$	-		0	%
Customer WP	$	259,925		23	%	$	7,767		11	%
Customer J	$	188,574		17	%	$	175		0	%

Lease

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

The Company does a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company has one significant long-term operating lease for office and manufacturing space in Plano, Texas. The leased property in Plano, Texas, has a remaining lease term through June of 2024. The lease has an option to extend beyond the stated termination date, but exercise of this option is not probable. The Company did not apply the recognition requirements of ASC 842 to operating leases with a remaining lease term of 12 months or less.

The impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning October 1, 2020, through the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases are as follows:

	October 1, 2020
ROU Asset	$	652,197
Lease Liability	$	659,391

During the prior year analysis of leases, we determined to renew the office and manufacturing space in Vista, CA through January 31, 2022, which was previously scheduled to be vacated at June 30, 2020. Additionally, the Korean office and manufacturing space lease was extended through June 2022 and an apartment lease was signed through June 2022. Accordingly, we have added ROU assets and lease liabilities related to those leases at June 30, 2020.

The direct-leased property in Vista, California has a remaining lease term through January of 2022. The leased properties in both Korea and Vista, California have options to extend beyond the stated termination date, but exercise of these options are not probable. The sub-leased property in Vista, California, is leased month-to-month and has been calculated as a ROU Asset co-terminus with the direct-leased property.

In September 2020, we entered into an 18-month sublease effective October 1, 2020 reducing our space and term in Plano, Texas. Accordingly, this lease has been added to our right-of-use asset balance at September 30, 2020. This lease is for the Company’s principal executive office located at 1401 Capital Avenue, Suite B, Plano, Texas 75074.

Effective September 1, 2020, we converted our month-to-month sublease in Vista, California to a 17-month sublease ending January 31, 2022 which is co-terminus with our direct lease in Vista. The month-to-month sublease was recognized as a right-of-use asset in our June 30, 2020 analysis. The terms of the 17-month lease are similar to the terms used to value the right-of-use asset at June 30, 2020.

As of June 30, 2021, our operating leases had a weighted average remaining lease term of 1.9 years and a weighted-average discount rate of 5%. Other information related to our operating leases is as follows:

ROU Asset – October 1, 2020	$	652,197
Amortization during the period		(202,947	)
ROU Asset –June 30, 2021	$	449,250
Lease Liability – October 1, 2020	$	659,391
Amortization during the period		(193,118	)
Lease Liability – June 30, 2021	$	466,273

Lease Liability – Short-Term	$	162,674
Lease Liability – Long-Term		303,599
Lease Liability – Total	$	466,273

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of June 30, 2021:

Amounts due within 12 months of June 30,

2022	$	238,519
2023		126,091
2024		129,873
2025		-
2026		-
Total Minimum Lease Payments		494,483
Less Effect of Discounting		(28,210	)
Present Value of Future Minimum Lease Payments		466,273
Less Current Portion of Operating Lease Obligations		(162,674	)
Long-Term Operating Lease Obligations	$	303,599

On October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on certain packing equipment. The terms of this agreement require us to pay $2,987 per month for the next 60 months. As part of this agreement, Alliance Funding Group provided our equipment supplier with $124,540 for the purchase of this equipment. This transaction was accounted for as a financing lease. As of June 30, 2021, our financing lease had a remaining lease term of 3 years and a discount rate of 12.75%. The interest expense on finance lease liabilities for the nine months ended June 30, 2021 was $8,896.

The following summarizes ROU assets under finance leases at June 30, 2021:

ROU asset-finance lease at September 30, 2020	$	105,825
Impairment		(105,825	)
ROU asset-finance lease at June 30, 2021	$	-

The table below summarizes future minimum finance lease payments at June 30, 2021 for the 12 months ended June 30:

2022	$	33,113
2023		33,113
2024		33,113
2025		2,759
2026		-
Total Minimum Lease Payments		102,098
Amount representing interest		(18,039	)
Present Value of Minimum Lease Payments		84,059
Current Portion of Finance Lease Obligations		(26,965	)
Finance Lease Obligations, Less Current Portion	$	57,094

The Company leases office space with terms ranging from month to month to 61 months. Rent expense included in general and administrative expense for the nine months ended June 30, 2021 and 2020 was $251,164 and $251,207, respectively.

Cash and non cash activities associated with the leases for the nine months ended June 30, 2021 are as follows:

Operating cash outflows from operating leases:	$	215,046
Operating cash outflows from finance lease:	$	8,896
Financing cash outflows from finance lease:	$	15,939

In September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020 under favorable terms that are co-terminus with the original lease ending June 30, 2024. In the nine months ended June 30, 2021, we recognized sublease income of $59,439 pursuant to the sublease included in Other income on our financial statements. Future minimum lease payments to be received under that sublease as of June 30, 2021, for the 12 months ended June 30:

2022	$	122,364
2023		126,017
2024		129,835
2025		—
2026		—
Total	$	378,216

Loans

On April 1, 2019, NuZee purchased a delivery van from Ford Motor Credit for $41,627. The Company paid $3,500 as a down payment and financed $38,127 for 60 months at a rate of 2.9%. The loan is secured by the van. The outstanding balance on the loan at June 30, 2021 and September 30, 2020, amounted to $22,304 and $27,916, respectively.

On February 15, 2019 NuZee KR entered into equipment financing for production equipment with ShinHan Bank for $60,563. On June 28, 2019 NuZee KR purchased additional equipment and increased the loan with ShinHan Bank by $86,518. The loan is secured by our production equipment at NuZee KR. The financing bears a term of 36 months at a rate of 4.33% per annum. Principal payments began in July of 2019. The outstanding balance on this loan at June 30, 2021 and September 30, 2020, amounted to $50,206 and $85,001, respectively.

The loan payments required for the next five remaining fiscal years are as follows:

	Ford Motor Credit		ShinHan Bank		Total
2021 (July – September 2021)	$	1,895	$	12,551
2022 (October 2021 – June 2022)		5,819		37,655
Total Current Portion	$	7,714	$	50,206	$	57,920
2022 (July – September 2022)	$	1,895	$	-
2023		7,947		-
2024		4,748		-
2025		-		-
Total LT Portion	$	14,590	$	-	$	14,590
Grand Total	$	22,304	$	50,206	$	72,510

Revenue Recognition

We determine revenue recognition through the following steps in accordance with FASB Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, which we adopted as of October 1, 2018 on a modified retrospective basis:

● identification of the contract, or contracts, with a customer;

● identification of the performance obligations in the contract;

● determination of the transaction price;

● allocation of the transaction price to the performance obligations in the contract; and

● recognition of revenue when, or as, we satisfy a performance obligation.

Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The adoption of Topic 606 did not have a material impact on our consolidated financial statements.

Foreign Currency Translation

The financial position and results of operations of each of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of each such subsidiary have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity unless there is a sale or complete liquidation of the underlying foreign investment. Foreign currency translation adjustments comprising accumulated other comprehensive income (loss) amounted to $(2,374) and $(59,510) for the nine months ended June 30, 2021 and 2020, 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.

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, 2021 and September 30, 2020, the carrying value of inventory of $428,856 and $245,370 respectively, reflected on the consolidated balance sheets is net of this adjustment.

	June 30, 2021		September 30, 2020
Raw materials	$	327,411	$	176,231
Finished goods		101,445		69,139
Less – Inventory reserve		-		-
Total	$	428,856	$	245,370

Joint Venture

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

The Company accounts for NLA using the equity method of accounting since the management of day to day operations at NLA ultimately lies with the Company’s joint venture partner as the operations of NLA are based in its partners facilities and our partner appoints the Chairman of the joint Board. As of June 30, 2021, the only activity in NLA was the contribution of two machines as described above and other start up related activities. $4,077 of a loss was recognized under the equity method of accounting during the nine months ended June 30, 2021.

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GEOGRAPHIC CONCENTRATION

9 Months Ended

Jun. 30, 2021

Risks and Uncertainties [Abstract]

GEOGRAPHIC CONCENTRATION

2. GEOGRAPHIC CONCENTRATION

The Company is organized in three geographical segments. The Company co-packs product for customers and produces and sells its products directly in North America and Korea. The Company has investor relations operations in Japan as a majority of our shareholders are based in Japan. In March of 2021, the Company wrote off $840,391 of assets in North America as these assets were deemed to be no longer useful for the current business operations. $105,825 of the impairment was related to the ROU asset and $734,566 was related to property and equipment. This write off is included in operating expenses on our consolidated statement of operations for the nine months June 30, 2021. These assets are co-packing equipment that have limited capabilities compared with other equipment the Company is currently utilizing. Since we have yet to utilize this equipment since it was delivered, we have determined their usefulness to our future operations is limited. Information about the Company’s geographic operations are as follows:

Geographic Concentrations

	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Net Revenue:
North America	$	1,077,986	$	756,000
Japan		-		258,526
South Korea		364,097		117,036
	$	1,442,083	$	1,131,562

Property and equipment, net:		As of June 30, 2021		As of September 30, 2020
North America	$	573,631	$	1,422,575
Japan		1,808		2,813
South Korea		232,409		242,960
	$	807,848	$	1,668,348

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RELATED PARTY TRANSACTIONS

9 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

3. RELATED PARTY TRANSACTIONS

For the nine months ended June 30, 2021, we sold $28,299 of materials to NLA.

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ISSUANCE OF EQUITY SECURITIES

9 Months Ended

Jun. 30, 2021

Equity [Abstract]

ISSUANCE OF EQUITY SECURITIES

4. ISSUANCE OF EQUITY SECURITIES

During the nine months ended June 30, 2021, the Company sold (i) 72,955 shares of common stock to Triton Funds LP in a registered public offering for aggregate net proceeds of $534,494 pursuant to a Common Stock Purchase Agreement dated as of October 26, 2020 and a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531), and (ii) 256,338 shares of common stock at $9.14 per share for aggregate net proceeds of $2,149,486 pursuant to Securities Act registration exemptions under Regulation S and/or Section 4(a)(2) of the Securities Act. In addition, as further described below, during the nine months ended June 30, 2021, the Company sold pursuant to an Underwriting Agreement dated as of March 19, 2021 and a prospectus supplement to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-248531) (i) 2,777,777 units (“Units”) in an underwritten registered public offering for aggregate net proceeds of $11,017,304 which includes the proceeds from the underwriter’s full exercise of their overallotment option with respect to the warrant component of the Units, as further described below, with each Unit consisting of (a) one share of our common stock, (b) one Series A warrant (each, a “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of our common stock with an initial exercise price of $4.50 per whole share, and (c) one Series B warrant (each, a “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of our common stock with an initial exercise price of $5.85 per whole share, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants. During the nine months ended June 30, 2021, 6,000 shares were issued upon the exercise of stock options. As part of this exercise, the Company received $9,180 in proceeds.

On January 11, 2021, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors granted to Shanoop Kothari, who was serving at the time as both the Company’s Chief Financial Officer and Chief Operating Officer, in connection with the Committee’s determination of Mr. Kothari’s annual compensation, an award of 152,215 restricted shares (the “Restricted Shares”) of the Company’s common stock under the NuZee, Inc. 2019 Stock Incentive Plan. The Restricted Shares vest as follows: (i) 50,739 Restricted Shares vested immediately (35,739 net shares were issued to Mr. Kothari following the forfeiture of 15,000 vested shares to cover taxes); (ii) 50,739 Restricted Shares vested on March 31, 2021; and (iii) 50,737 Restricted Shares were originally scheduled to vest on March 31, 2022 but are now scheduled to be accelerated to vest on Mr. Kothari’s Separation Date (as defined below) as further described in Note 6-Subsequent Events.

On March 11, 2021, we terminated our At Market Issuance Sales Agreement, dated September 1, 2020 (the “ATM Agreement”), with B. Riley Securities, Inc. (f/k/a/ B. Riley FBR, Inc.) and The Benchmark Company, LLC (collectively, the “Agents”), pursuant to which we could from time to time offer and sell up to an aggregate of $50.0 million of shares of our common stock through the Agents in “at-the-market-offerings”, as defined in Rule 415 under the Securities Act. We did not sell any shares of common stock under the ATM Agreement. The Company’s consolidated statement of cash flows for the nine months ended June 30, 2021 includes stock issuance expenses of $477,605 in connection with the terminated ATM Agreement.

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STOCK OPTIONS AND WARRANTS

9 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

STOCK OPTIONS AND WARRANTS

5. STOCK OPTIONS AND WARRANTS

Options

During the nine months ended June 30, 2021, the Company issued 15,000 options to independent contractors, 1,369,938 options to independent Board members and 770,000 options to employees. For independent board members, these options shall vest and become exercisable over a period of 3 years, with 50% of the options vesting immediately and the remaining 50% vesting 25% on each of the first two anniversaries of the grant date. For independent contractors, these options shall vest and become exercisable over a period of 3 years, with 33% of the options vesting on each anniversary of the grant date. For employees, these options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of the grant date, or (ii) in the case of performance-based options (the “Performance-Based Options”), based on the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024. During the nine months ended June 30, 2021, the Company issued a total of 622,000 Performance-Based Options, which represents the maximum number of Performance-Based Options that may be earned if all performance milestones are achieved for the applicable performance periods.

The exercise price for the options ranged from $2.91 - $16.79 per share. The options 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 the Company’s historical stock performance. The expected term of options granted was determined using 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 nine months ended June 30, 2021:

For non-employees, employees and independent Board members	June 30, 2021
Risk-free interest rate		0.78 – 1.71	%
Expected option life		10 years
Expected volatility		300 - 311	%
Expected dividend yield		0.00	%
Exercise price	$	2.91 - $16.79

For the nine months ended June 30, 2021, 311,656 options were forfeited because of the termination of employment and conclusion of Board appointment. For the nine months ended June 30, 2021, 6,000 shares were issued upon the exercise of stock options.

The following table summarizes stock option activity for nine months ended June 30, 2021:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		1,620,667		$	5.74		7.3	$	19,112,118
Granted		2,154,938			5.87
Exercised		(6,000	)		1.53
Expired		-			-
Forfeited		(311,656	)		12.39
Outstanding at June 30, 2021		3,457,949		$	5.23		8.3	$	1,363,638
Exercisable at June 30, 2021		1,397,975		$	6.01		7.7	$	790,939

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 $8,002,917 for the nine months ended June 30, 2021. Unamortized option expense as of June 30, 2021, for all options outstanding amounted to $6,520,427. These costs are expected to be recognized over a weighted- average period of 1.5 years. The Company recognized stock option expenses of $4,505,498 for the nine months ended June 30, 2020.

A summary of the status of the Company’s nonvested options as of June 30, 2021, is presented below:

Nonvested options

	Number of nonvested shares			Weighted average grant date fair value
Nonvested shares at September 30, 2020		762,917		$	10.60
Granted		2,154,938			5.87
Forfeited		(158,328	)		12.11
Vested		(699,554	)		7.59
Nonvested shares at June 30, 2021		2,059,973			6.56

Warrants

On June 23, 2020, as part of our agreement with Benchmark Company, LLC the underwriter of the Company’s June 2020 registered public offering of common stock, we issued 40,250 warrants to purchase our common stock at an exercise price of $9.00 a share. These warrants are exercisable on December 23, 2020 and expire on June 18, 2025.

On March 19, 2021, we entered into an underwriting agreement in connection with our registered public offering (the “Offering”) of (i) 2,777,777 units (the “Units”), at a price to the public of $4.50 per Unit, with each Unit consisting of (a) one share of our common stock, (b) one Series A Warrant, and (c) one Series B Warrant, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.

Each Series A Warrant entitles the registered holder to purchase one share of our common stock at an exercise price of $4.50 per share. Each Series B Warrant entitles the registered holder thereof to purchase one-half of a share of our common stock at an exercise price of $5.85 per whole share. These warrants have a term of 5 years.

The following table summarizes warrant activity for the nine months ended June 30, 2021:

	Number of Shares Issuable Upon Exercise of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		40,250	$	9.00		4.7	$	321,598
Issued		4,791,665		4.95
Exercised		-		-
Expired		-		-
Outstanding June 30, 2021		4,831,915	$	4.98		4.7		-
Exercisable at June 30, 2021		4,831,915	$	4.98		4.7	$	-

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SUBSEQUENT EVENTS

9 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

6. SUBSEQUENT EVENTS

Shanoop Kothari’s Resignation and Severance Agreement

On June 22, 2021, Shanoop Kothari notified the Company of his resignation as Chief Financial Officer. Mr. Kothari’s resignation will be effective as of August 16, 2021 (the “Separation Date”).

In connection with Mr. Kothari’s resignation, the Company entered into a Severance Agreement and General Release with Mr. Kothari on July 2, 2021 (the “Severance Agreement”). Pursuant to the Severance Agreement, Mr. Kothari’s 50,737 outstanding restricted shares of common stock were accelerated to vest on the Separation Date.

Appointment of Patrick Shearer as Chief Financial Officer and Issuance of Options

On July 2, 2021 (the “Commencement Date”), the Company appointed Patrick Shearer to be its new Chief Financial Officer, effective immediately.

In addition, pursuant to Mr. Shearer’s employment agreement, the Company granted to Mr. Shearer on the Commencement Date an award of options to purchase 200,000 shares of our common stock. Subject to Mr. Shearer’s continued employment, the options vest as follows: (i) 80,000 options shall vest upon the first anniversary of the Commencement Date; (ii) 60,000 options shall vest upon the second anniversary of the Commencement Date; and (iii) 60,000 options shall vest upon the third anniversary of the Commencement Date. The options have an exercise price of $3.12 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements.

CEO Compensation

On July 2, 2021, the Compensation Committee approved a grant of nonqualified performance-based options (the “Options”) to Masateru Higashida, the Company’s President and Chief Executive Officer, to purchase 896,743 shares of the Company’s common stock, which represents the maximum number of Options that may be earned if all performance milestones are achieved, as further described below. The Options will vest, if at all, based on the extent to which the Company achieves certain performance objectives relating to our earnings before income taxes in each of the fiscal years ending September 30, 2022 (“fiscal year 2022”), September 30, 2023 (“fiscal year 2023”) and September 30, 2024 (“fiscal year 2024”). Pursuant to the award agreement, (i) 179,349 Options shall vest, if at all, in fiscal year 2022, (ii) 269,023 Options shall vest, if at all, in fiscal year 2023, and (iii) 448,371 Options shall vest, if at all, in fiscal year 2024, in each case based upon our achievement of a specified amount of earnings before income taxes in the respective fiscal year. The Options have an exercise price of $3.12 per share and will expire ten years from the grant date, unless terminated earlier as provided by the option agreements. Also on July 2, 2021, the Compensation Committee awarded a deferred bonus of $75,000 payable to Mr. Higashida for his service to the Company in the prior fiscal year ended September 30, 2020.

Also on July 2, 2021, the Compensation Committee approved the parameters of the cash bonus for Mr. Higashida (the “Fiscal Year 2022 Cash Bonus”) for fiscal year 2022. Pursuant to Mr. Higashida’s Executive Employment Agreement dated as of August 15, 2017, the Compensation Committee established the relevant performance metrics and goals for determining the amount of the Fiscal Year 2022 Cash Bonus that Mr. Higashida would be entitled to receive, assuming achievement by the Company of the respective target and maximum performance levels under each metric established for fiscal year 2022. The Fiscal Year 2022 Cash Bonus, if any, payable to Mr. Higashida will be determined by the extent to which the Company achieves certain performance objectives relating to the Company’s net revenues and net cash provided by operating activities in fiscal year 2022, with a target Fiscal Year 2022 Cash Bonus opportunity of $105,000 and a maximum Fiscal Year 2022 Cash Bonus opportunity of $210,000. In addition, on July 2, 2021, the Compensation Committee approved an increase in the annual base salary payable to Mr. Higashida from $180,000 to $300,000, effective as of May 23, 2021.

Issuance of Options to New Employees

On July 29, 2021, the Company issued a total of 115,000 options to new employees, including 92,000 Performance-Based Options, which represents the maximum number of Performance-Based Options that may be earned if all performance milestones are achieved for the applicable performance periods, and 23,000 time-based options. These options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of each employee’s employment start date, or (ii) in the case of the Performance-Based Options, based on either (a) the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024, or (b) the employee’s achievement of certain performance milestones tied to adjusted gross sales established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2022, 2023 and 2024.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

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, its wholly owned subsidiaries and its former majority owned subsidiary (which was sold as of September 28, 2020, as described below), which has a fiscal year end of September 30. All significant intercompany accounts, balances and transactions have been eliminated upon consolidation.

On September 28, 2020, the Company entered into a Stock Transfer Agreement with Eguchi Holdings Co., Ltd. (“EHCL”), pursuant to which the Company sold to EHCL for an aggregate sale price of approximately $34,000 all of its equity interests in its former majority-owned subsidiary, NuZee JAPAN Co., Ltd. (“NuZee JP”), representing 70% of the outstanding equity interests of NuZee JP.

The Company has two wholly owned international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”) and NuZee Investment Co., Ltd. (“NuZee INV”).

Stock Split

Stock Split

On October 28, 2019, we completed a l-for-3 reverse stock split, which became effective on November 12, 2019. All share and per share information included in these financial statements and notes thereto give effect to the reverse stock split.

Earnings per Share

Earnings per Share

Basic earnings per common share is equal to net earnings or loss divided by the weighted average of shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of June 30, 2021 and June 30, 2020, the total number of common stock equivalents was 8,289,864 and 1,725,000, respectively, comprised of stock options and warrants as of June 30, 2021 and entirely of stock options as of June 30, 2020. The Company incurred a net loss for the three and nine months ended June 30, 2021 and 2020, respectively, and therefore basic and diluted earnings per share for those periods are the same because all potential common equivalent shares would be antidilutive.

Capital Resources

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 generated limited revenues from its principal operations, and there is no assurance of future revenues.

As of June 30, 2021, the Company had cash of $12,704,257. However, the Company has not attained profitable operations since inception.

Major Customers

Major Customers

In the nine months ended June 30, 2021 and 2020, revenue was primarily derived from major customers disclosed below.

Nine months ended June 30, 2021:

Customer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer WP	$	456,247		32	%	$	124,814		39	%

Nine months ended June 30, 2020:

C ustomer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer K	$	284,099		25	%	$	-		0	%
Customer WP	$	259,925		23	%	$	7,767		11	%
Customer J	$	188,574		17	%	$	175		0	%

Lease

Lease

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

The Company does a quarterly analysis of leases to determine if there are any operating leases that require recognition under ASC 842. The Company has one significant long-term operating lease for office and manufacturing space in Plano, Texas. The leased property in Plano, Texas, has a remaining lease term through June of 2024. The lease has an option to extend beyond the stated termination date, but exercise of this option is not probable. The Company did not apply the recognition requirements of ASC 842 to operating leases with a remaining lease term of 12 months or less.

The impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning October 1, 2020, through the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases are as follows:

	October 1, 2020
ROU Asset	$	652,197
Lease Liability	$	659,391

During the prior year analysis of leases, we determined to renew the office and manufacturing space in Vista, CA through January 31, 2022, which was previously scheduled to be vacated at June 30, 2020. Additionally, the Korean office and manufacturing space lease was extended through June 2022 and an apartment lease was signed through June 2022. Accordingly, we have added ROU assets and lease liabilities related to those leases at June 30, 2020.

The direct-leased property in Vista, California has a remaining lease term through January of 2022. The leased properties in both Korea and Vista, California have options to extend beyond the stated termination date, but exercise of these options are not probable. The sub-leased property in Vista, California, is leased month-to-month and has been calculated as a ROU Asset co-terminus with the direct-leased property.

In September 2020, we entered into an 18-month sublease effective October 1, 2020 reducing our space and term in Plano, Texas. Accordingly, this lease has been added to our right-of-use asset balance at September 30, 2020. This lease is for the Company’s principal executive office located at 1401 Capital Avenue, Suite B, Plano, Texas 75074.

Effective September 1, 2020, we converted our month-to-month sublease in Vista, California to a 17-month sublease ending January 31, 2022 which is co-terminus with our direct lease in Vista. The month-to-month sublease was recognized as a right-of-use asset in our June 30, 2020 analysis. The terms of the 17-month lease are similar to the terms used to value the right-of-use asset at June 30, 2020.

As of June 30, 2021, our operating leases had a weighted average remaining lease term of 1.9 years and a weighted-average discount rate of 5%. Other information related to our operating leases is as follows:

ROU Asset – October 1, 2020	$	652,197
Amortization during the period		(202,947	)
ROU Asset –June 30, 2021	$	449,250
Lease Liability – October 1, 2020	$	659,391
Amortization during the period		(193,118	)
Lease Liability – June 30, 2021	$	466,273

Lease Liability – Short-Term	$	162,674
Lease Liability – Long-Term		303,599
Lease Liability – Total	$	466,273

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of June 30, 2021:

Amounts due within 12 months of June 30,

2022	$	238,519
2023		126,091
2024		129,873
2025		-
2026		-
Total Minimum Lease Payments		494,483
Less Effect of Discounting		(28,210	)
Present Value of Future Minimum Lease Payments		466,273
Less Current Portion of Operating Lease Obligations		(162,674	)
Long-Term Operating Lease Obligations	$	303,599

On October 9, 2019, the Company entered into a lease agreement with Alliance Funding Group which provided for a sale lease back on certain packing equipment. The terms of this agreement require us to pay $2,987 per month for the next 60 months. As part of this agreement, Alliance Funding Group provided our equipment supplier with $124,540 for the purchase of this equipment. This transaction was accounted for as a financing lease. As of June 30, 2021, our financing lease had a remaining lease term of 3 years and a discount rate of 12.75%. The interest expense on finance lease liabilities for the nine months ended June 30, 2021 was $8,896.

The following summarizes ROU assets under finance leases at June 30, 2021:

ROU asset-finance lease at September 30, 2020	$	105,825
Impairment		(105,825	)
ROU asset-finance lease at June 30, 2021	$	-

The table below summarizes future minimum finance lease payments at June 30, 2021 for the 12 months ended June 30:

2022	$	33,113
2023		33,113
2024		33,113
2025		2,759
2026		-
Total Minimum Lease Payments		102,098
Amount representing interest		(18,039	)
Present Value of Minimum Lease Payments		84,059
Current Portion of Finance Lease Obligations		(26,965	)
Finance Lease Obligations, Less Current Portion	$	57,094

The Company leases office space with terms ranging from month to month to 61 months. Rent expense included in general and administrative expense for the nine months ended June 30, 2021 and 2020 was $251,164 and $251,207, respectively.

Cash and non cash activities associated with the leases for the nine months ended June 30, 2021 are as follows:

Operating cash outflows from operating leases:	$	215,046
Operating cash outflows from finance lease:	$	8,896
Financing cash outflows from finance lease:	$	15,939

In September 2020, we subleased the space at 1700 Capital Avenue in Plano, Texas, effective October 1, 2020 under favorable terms that are co-terminus with the original lease ending June 30, 2024. In the nine months ended June 30, 2021, we recognized sublease income of $59,439 pursuant to the sublease included in Other income on our financial statements. Future minimum lease payments to be received under that sublease as of June 30, 2021, for the 12 months ended June 30:

2022	$	122,364
2023		126,017
2024		129,835
2025		—
2026		—
Total	$	378,216

Loans

Loans

On April 1, 2019, NuZee purchased a delivery van from Ford Motor Credit for $41,627. The Company paid $3,500 as a down payment and financed $38,127 for 60 months at a rate of 2.9%. The loan is secured by the van. The outstanding balance on the loan at June 30, 2021 and September 30, 2020, amounted to $22,304 and $27,916, respectively.

On February 15, 2019 NuZee KR entered into equipment financing for production equipment with ShinHan Bank for $60,563. On June 28, 2019 NuZee KR purchased additional equipment and increased the loan with ShinHan Bank by $86,518. The loan is secured by our production equipment at NuZee KR. The financing bears a term of 36 months at a rate of 4.33% per annum. Principal payments began in July of 2019. The outstanding balance on this loan at June 30, 2021 and September 30, 2020, amounted to $50,206 and $85,001, respectively.

The loan payments required for the next five remaining fiscal years are as follows:

	Ford Motor Credit		ShinHan Bank		Total
2021 (July – September 2021)	$	1,895	$	12,551
2022 (October 2021 – June 2022)		5,819		37,655
Total Current Portion	$	7,714	$	50,206	$	57,920
2022 (July – September 2022)	$	1,895	$	-
2023		7,947		-
2024		4,748		-
2025		-		-
Total LT Portion	$	14,590	$	-	$	14,590
Grand Total	$	22,304	$	50,206	$	72,510

Revenue Recognition

Revenue Recognition

We determine revenue recognition through the following steps in accordance with FASB Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, which we adopted as of October 1, 2018 on a modified retrospective basis:

● identification of the contract, or contracts, with a customer;

● identification of the performance obligations in the contract;

● determination of the transaction price;

● allocation of the transaction price to the performance obligations in the contract; and

● recognition of revenue when, or as, we satisfy a performance obligation.

Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The adoption of Topic 606 did not have a material impact on our consolidated financial statements.

Foreign Currency Translation

Foreign Currency Translation

The financial position and results of operations of each of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of each such subsidiary have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity unless there is a sale or complete liquidation of the underlying foreign investment. Foreign currency translation adjustments comprising accumulated other comprehensive income (loss) amounted to $(2,374) and $(59,510) for the nine months ended June 30, 2021 and 2020, 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.

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, 2021 and September 30, 2020, the carrying value of inventory of $428,856 and $245,370 respectively, reflected on the consolidated balance sheets is net of this adjustment.

	June 30, 2021		September 30, 2020
Raw materials	$	327,411	$	176,231
Finished goods		101,445		69,139
Less – Inventory reserve		-		-
Total	$	428,856	$	245,370

Joint Venture

Joint Venture

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

The Company accounts for NLA using the equity method of accounting since the management of day to day operations at NLA ultimately lies with the Company’s joint venture partner as the operations of NLA are based in its partners facilities and our partner appoints the Chairman of the joint Board. As of June 30, 2021, the only activity in NLA was the contribution of two machines as described above and other start up related activities. $4,077 of a loss was recognized under the equity method of accounting during the nine months ended June 30, 2021.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

SCHEDULE OF REVENUE BY MAJOR CUSTOMERS

In the nine months ended June 30, 2021 and 2020, revenue was primarily derived from major customers disclosed below.

Nine months ended June 30, 2021:

Customer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer WP	$	456,247		32	%	$	124,814		39	%

Nine months ended June 30, 2020:

C ustomer Name	Sales Amount		% of Total Revenue			Accounts Receivable Amount		% of Total Accounts Receivable
Customer K	$	284,099		25	%	$	-		0	%
Customer WP	$	259,925		23	%	$	7,767		11	%
Customer J	$	188,574		17	%	$	175		0	%

SCHEDULE OF ROU ASSETS AND LEASE LIABILITY

The impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning October 1, 2020, through the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases are as follows:

	October 1, 2020
ROU Asset	$	652,197
Lease Liability	$	659,391

SCHEDULE OF OTHER INFORMATION RELATED TO OPERATING LEASE

As of June 30, 2021, our operating leases had a weighted average remaining lease term of 1.9 years and a weighted-average discount rate of 5%. Other information related to our operating leases is as follows:

ROU Asset – October 1, 2020	$	652,197
Amortization during the period		(202,947	)
ROU Asset –June 30, 2021	$	449,250
Lease Liability – October 1, 2020	$	659,391
Amortization during the period		(193,118	)
Lease Liability – June 30, 2021	$	466,273

Lease Liability – Short-Term	$	162,674
Lease Liability – Long-Term		303,599
Lease Liability – Total	$	466,273

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of June 30, 2021:

Amounts due within 12 months of June 30,

2022	$	238,519
2023		126,091
2024		129,873
2025		-
2026		-
Total Minimum Lease Payments		494,483
Less Effect of Discounting		(28,210	)
Present Value of Future Minimum Lease Payments		466,273
Less Current Portion of Operating Lease Obligations		(162,674	)
Long-Term Operating Lease Obligations	$	303,599

SUMMARY OF ROU ASSETS UNDER FINANCE LEASES

The following summarizes ROU assets under finance leases at June 30, 2021:

ROU asset-finance lease at September 30, 2020	$	105,825
Impairment		(105,825	)
ROU asset-finance lease at June 30, 2021	$	-

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS FOR FINANCE LEASES

The table below summarizes future minimum finance lease payments at June 30, 2021 for the 12 months ended June 30:

2022	$	33,113
2023		33,113
2024		33,113
2025		2,759
2026		-
Total Minimum Lease Payments		102,098
Amount representing interest		(18,039	)
Present Value of Minimum Lease Payments		84,059
Current Portion of Finance Lease Obligations		(26,965	)
Finance Lease Obligations, Less Current Portion	$	57,094

SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES

Cash and non cash activities associated with the leases for the nine months ended June 30, 2021 are as follows:

Operating cash outflows from operating leases:	$	215,046
Operating cash outflows from finance lease:	$	8,896
Financing cash outflows from finance lease:	$	15,939

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS OF SUBLEASE

2022	$	122,364
2023		126,017
2024		129,835
2025		—
2026		—
Total	$	378,216

SCHEDULE OF LOAN PAYMENTS

The loan payments required for the next five remaining fiscal years are as follows:

	Ford Motor Credit		ShinHan Bank		Total
2021 (July – September 2021)	$	1,895	$	12,551
2022 (October 2021 – June 2022)		5,819		37,655
Total Current Portion	$	7,714	$	50,206	$	57,920
2022 (July – September 2022)	$	1,895	$	-
2023		7,947		-
2024		4,748		-
2025		-		-
Total LT Portion	$	14,590	$	-	$	14,590
Grand Total	$	22,304	$	50,206	$	72,510

SCHEDULE OF INVENTORY

	June 30, 2021		September 30, 2020
Raw materials	$	327,411	$	176,231
Finished goods		101,445		69,139
Less – Inventory reserve		-		-
Total	$	428,856	$	245,370

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GEOGRAPHIC CONCENTRATION (Tables)

9 Months Ended

Jun. 30, 2021

Risks and Uncertainties [Abstract]

SCHEDULE OF GEOGRAPHIC OPERATIONS

Geographic Concentrations

	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Net Revenue:
North America	$	1,077,986	$	756,000
Japan		-		258,526
South Korea		364,097		117,036
	$	1,442,083	$	1,131,562

Property and equipment, net:		As of June 30, 2021		As of September 30, 2020
North America	$	573,631	$	1,422,575
Japan		1,808		2,813
South Korea		232,409		242,960
	$	807,848	$	1,668,348

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STOCK OPTIONS AND WARRANTS (Tables)

9 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS FOR FAIR VALUE MEASUREMENT OF OPTIONS GRANTED

The Black-Scholes option pricing model was used with the following weighted average assumptions for options granted during the nine months ended June 30, 2021:

For non-employees, employees and independent Board members	June 30, 2021
Risk-free interest rate		0.78 – 1.71	%
Expected option life		10 years
Expected volatility		300 - 311	%
Expected dividend yield		0.00	%
Exercise price	$	2.91 - $16.79

SUMMARY OF STOCK OPTION ACTIVITY

The following table summarizes stock option activity for nine months ended June 30, 2021:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		1,620,667		$	5.74		7.3	$	19,112,118
Granted		2,154,938			5.87
Exercised		(6,000	)		1.53
Expired		-			-
Forfeited		(311,656	)		12.39
Outstanding at June 30, 2021		3,457,949		$	5.23		8.3	$	1,363,638
Exercisable at June 30, 2021		1,397,975		$	6.01		7.7	$	790,939

SUMMARY OF UNVESTED SHARES

A summary of the status of the Company’s nonvested options as of June 30, 2021, is presented below:

Nonvested options

	Number of nonvested shares			Weighted average grant date fair value
Nonvested shares at September 30, 2020		762,917		$	10.60
Granted		2,154,938			5.87
Forfeited		(158,328	)		12.11
Vested		(699,554	)		7.59
Nonvested shares at June 30, 2021		2,059,973			6.56

SCHEDULE OF WARRANT ACTIVITY

The following table summarizes warrant activity for the nine months ended June 30, 2021:

	Number of Shares Issuable Upon Exercise of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at September 30, 2020		40,250	$	9.00		4.7	$	321,598
Issued		4,791,665		4.95
Exercised		-		-
Expired		-		-
Outstanding June 30, 2021		4,831,915	$	4.98		4.7		-
Exercisable at June 30, 2021		4,831,915	$	4.98		4.7	$	-

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SCHEDULE OF REVENUE BY MAJOR CUSTOMERS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Product Information [Line Items]
Sales Amount	$ 510,032	$ 191,962	$ 1,442,083	$ 1,131,562
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Customer WP [Member]
Product Information [Line Items]
Sales Amount			$ 456,247	$ 259,925
Concentration risk percentage			32.00%	23.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Customer K [Member]
Product Information [Line Items]
Sales Amount				$ 284,099
Concentration risk percentage				25.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Customer J [Member]
Product Information [Line Items]
Sales Amount				$ 188,574
Concentration risk percentage				17.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer WP [Member]
Product Information [Line Items]
Concentration risk percentage			39.00%	11.00%
Accounts Receivable Amount	$ 124,814	7,767	$ 124,814	$ 7,767
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer K [Member]
Product Information [Line Items]
Concentration risk percentage				0.00%
Accounts Receivable Amount
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer J [Member]
Product Information [Line Items]
Concentration risk percentage				0.00%
Accounts Receivable Amount		$ 175		$ 175

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SCHEDULE OF ROU ASSETS AND LEASE LIABILITY (Details) - USD ($)	Jun. 30, 2021	Oct. 02, 2020	Sep. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU Asset	$ 449,250		$ 652,197
Lease Liability	$ 466,273		$ 659,391
Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU Asset		$ 652,197
Lease Liability		$ 659,391

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SCHEDULE OF OTHER INFORMATION RELATED TO OPERATING LEASE (Details) - USD ($)	9 Months Ended
	Jun. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
ROU Asset	$ 652,197
Amortization during the period	(202,947)
ROU Asset	449,250
Lease Liability	659,391
Amortization during the period	(193,118)
Lease Liability	466,273
Lease Liability - Short-Term	162,674	$ 263,678
Lease Liability - Long-Term	303,599	395,713
Lease Liability - Total	$ 466,273	$ 659,391

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SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES (Details) - USD ($)	Jun. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
2022	$ 238,519
2023	126,091
2024	129,873
2025
2026
Total Minimum Lease Payments	494,483
Less Effect of Discounting	(28,210)
Present Value of Future Minimum Lease Payments	466,273	$ 659,391
Less Current Portion of Operating Lease Obligations	(162,674)	(263,678)
Long-Term Operating Lease Obligations	$ 303,599	$ 395,713

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SUMMARY OF ROU ASSETS UNDER FINANCE LEASES (Details)	9 Months Ended
	Jun. 30, 2021 USD ($)
Lessor, Lease, Description [Line Items]
ROU asset-finance lease, beginning balance	$ 105,825
ROU asset-finance lease, ending balance
Finance Lease [Member]
Lessor, Lease, Description [Line Items]
ROU asset-finance lease, beginning balance	105,825
Impairment	(105,825)
ROU asset-finance lease, ending balance

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SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS FOR FINANCE LEASES (Details)	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
2022	$ 33,113
2023	33,113
2024	33,113
2025	2,759
2026
Total Minimum Lease Payments	102,098
Amount representing interest	(18,039)
Present Value of Minimum Lease Payments	84,059
Current Portion of Finance Lease Obligations	(26,965)
Finance Lease Obligations, Less Current Portion	$ 57,094

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SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES (Details)	9 Months Ended
	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
Operating cash outflows from operating leases:	$ 215,046
Operating cash outflows from finance lease:	8,896
Financing cash outflows from finance lease:	$ 15,939

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SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS OF SUBLEASE (Details)	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
2022	$ 122,364
2023	126,017
2024	129,835
2025
2026
Total	$ 378,216

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SCHEDULE OF LOAN PAYMENTS (Details)	Jun. 30, 2021 USD ($)
Summary of Investment Holdings [Line Items]
Total Current Portion	$ 57,920
Total LT Portion	14,590
Total	72,510
Ford Motor Credit [Member]
Summary of Investment Holdings [Line Items]
2021 (July – September 2021)	1,895
2022 (October 2021 – June 2022)	5,819
Total Current Portion	7,714
2022 (July – September 2022)	1,895
2023	7,947
2024	4,748
2025
Total LT Portion	14,590
Total	22,304
ShinHan Bank [Member]
Summary of Investment Holdings [Line Items]
2021 (July – September 2021)	12,551
2022 (October 2021 – June 2022)	37,655
Total Current Portion	50,206
2022 (July – September 2022)
2023
2024
2025
Total LT Portion
Total	$ 50,206

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SCHEDULE OF INVENTORY (Details) - USD ($)	Jun. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
Raw materials	$ 327,411	$ 176,231
Finished goods	101,445	69,139
Less – Inventory reserve
Total	$ 428,856	$ 245,370

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)								1 Months Ended	3 Months Ended				6 Months Ended	9 Months Ended
	Sep. 28, 2020	Sep. 01, 2020	Oct. 28, 2019	Oct. 09, 2019	Jun. 28, 2019	Apr. 02, 2019	Feb. 15, 2019	Sep. 30, 2020	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020	Jan. 09, 2020
Property, Plant and Equipment [Line Items]
Common stock issued value									$ 11,017,304	$ 2,683,980	$ 4,648,174	$ 1,994,523
Reverse stock split			l-for-3 reverse stock split
Common stock equivalents														8,289,864	1,725,000
Cash								$ 4,398,545					$ 12,704,257	$ 12,704,257
Financing lease remaining lease term													3 years	3 years
Financing lease discount rate													12.75%	12.75%
Interest expense on finance lease liabilities														$ 8,896
Sub lease, income														59,439
Foreign currency translation adjustment														(2,374)	$ (59,510)
Inventory								245,370					$ 428,856	428,856
Cash contribution														110,000
Loss from equity method investments														4,077
Ford Motor Credit [Member]
Property, Plant and Equipment [Line Items]
Debt outstanding								27,916					22,304	22,304
ShinHan Bank [Member]
Property, Plant and Equipment [Line Items]
Debt outstanding								$ 85,001					$ 50,206	$ 50,206
Vehicles [Member] | Ford Motor Credit [Member]
Property, Plant and Equipment [Line Items]
Purchase price						$ 41,627
Payment to purchase equipment						3,500
Financed amount						$ 38,127
Debt term						60 months
Interest rate						2.90%
General and Administrative Expense [Member]
Property, Plant and Equipment [Line Items]
Weighted average remaining lease term													61 months	61 months
Rent expense														$ 251,164	$ 251,207
Plano, Texas [Member]
Property, Plant and Equipment [Line Items]
Sublease description								In September 2020, we entered into an 18-month sublease effective October 1, 2020 reducing our space and term in Plano, Texas. Accordingly, this lease has been added to our right-of-use asset balance at September 30, 2020. This lease is for the Company’s principal executive office located at 1401 Capital Avenue, Suite B, Plano, Texas 75074.
Subease term								18 years
Vista, California [Member]
Property, Plant and Equipment [Line Items]
Sublease description		Effective September 1, 2020, we converted our month-to-month sublease in Vista, California to a 17-month sublease ending January 31, 2022 which is co-terminus with our direct lease in Vista. The month-to-month sublease was recognized as a right-of-use asset in our June 30, 2020 analysis. The terms of the 17-month lease are similar to the terms used to value the right-of-use asset at June 30, 2020.
Subease term		17 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Operating Lease, remaining lease term													12 months	12 months
Joint Venture Agreement [Member]
Property, Plant and Equipment [Line Items]
Machine carrying cost																$ 313,012
NuZee JAPAN Co., Ltd [Member] | Stock Transfer Agreement [Member]
Property, Plant and Equipment [Line Items]
Common stock issued value	$ 34,000
Equity percentage	70.00%
Alliance Funding Group [Member]
Property, Plant and Equipment [Line Items]
Payment of equipment on lease				$ 124,540
Alliance Funding Group [Member] | Lease Agreement [Member]
Property, Plant and Equipment [Line Items]
Payment of equipment on lease				$ 2,987
Weighted average remaining lease term				60 months
NuZee Korea Ltd [Member] | Equipment [Member] | ShinHan Bank [Member]
Property, Plant and Equipment [Line Items]
Financed amount							$ 60,563
Debt term							36 months
Interest rate							4.33%
Increase in debt					$ 86,518
Industrial Marino, S.A. de C.V. and NuZee Latin America, S.A. de C.V. [Member] | Joint Venture Agreement [Member]
Property, Plant and Equipment [Line Items]
Equity percentage																50.00%
NLA [Member]
Property, Plant and Equipment [Line Items]
Gain on investments													$ 160,000
Loss on investments													$ 43,012

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SCHEDULE OF GEOGRAPHIC OPERATIONS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Sep. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net Revenue	$ 510,032	$ 191,962	$ 1,442,083	$ 1,131,562
Property and equipment, net	807,848	1,668,348	807,848	1,668,348	$ 1,668,348
North America [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net Revenue			1,077,986	756,000
Property and equipment, net	573,631	1,422,575	573,631	1,422,575
JAPAN
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net Revenue				258,526
Property and equipment, net	1,808	2,813	1,808	2,813
KOREA, REPUBLIC OF
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net Revenue			364,097	117,036
Property and equipment, net	$ 232,409	$ 242,960	$ 232,409	$ 242,960

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GEOGRAPHIC CONCENTRATION (Details Narrative) - USD ($)	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Impairment on property and equipment	$ 840,391
North America [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Assets write off	840,391
Impairment on ROU assets	105,825
Impairment on property and equipment	$ 734,566

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RELATED PARTY TRANSACTIONS (Details Narrative)	9 Months Ended
	Jun. 30, 2021 USD ($)
NuZee Latin America [Member]
Related Party Transaction [Line Items]
Revenues from related parties	$ 28,299

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ISSUANCE OF EQUITY SECURITIES (Details Narrative) - USD ($)				3 Months Ended				9 Months Ended
	Mar. 19, 2021	Mar. 11, 2021	Jan. 11, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2021	Jun. 30, 2020	Jun. 23, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net proceeds from issuance common stock								$ 13,701,284	$ 6,867,786
Warrant exercise price										$ 9.00
Stock option exercised during period								6,000
Proceeds from stock option exercise								$ 9,180
Shanoop Kothari [Member] | 2019 Stock Incentive Plan [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stock award granted, during period			152,215
Vesting of shares, description			35,739 net shares were issued to Mr. Kothari following the forfeiture of 15,000 vested shares to cover taxes
Shanoop Kothari [Member] | 2019 Stock Incentive Plan [Member] | Vesting Immediately [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares vested during period			50,739
Shanoop Kothari [Member] | 2019 Stock Incentive Plan [Member] | Vest on March 31, 2021 [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares vested during period			50,739
Shanoop Kothari [Member] | 2019 Stock Incentive Plan [Member] | Vest on March 31, 2022 [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Number of shares vested during period			50,737
Stock Options [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stock option exercised during period								6,000
Proceeds from stock option exercise								$ 9,180
Underwritten, Over Allotment Option [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares sold during period	2,777,777
Net proceeds from public offering	$ 11,017,304
Issuance of warrants, description	2,777,777 units (“Units”) in an underwritten registered public offering for aggregate net proceeds of $11,017,304 which includes the proceeds from the underwriter’s full exercise of their overallotment option with respect to the warrant component of the Units, as further described below, with each Unit consisting of (a) one share of our common stock, (b) one Series A warrant (each, a “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of our common stock with an initial exercise price of $4.50 per whole share, and (c) one Series B warrant (each, a “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of our common stock with an initial exercise price of $5.85 per whole share, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.
ATM Agreement [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares sold during period		50,000,000.0
Stock issuance expense								$ 477,605
Common Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares issued during period, shares				2,782,111	324,959	700,000	111,738	256,338
Shares issued, price per share								$ 9.14
Net proceeds from issuance common stock								$ 2,149,486
Stock option exercised during period					6,000
Common Stock [Member] | Triton Funds LP [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares sold during period								72,955
Net proceeds from public offering								$ 534,494
Series A Warrant [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Warrant exercise price	$ 4.50
Series A Warrant [Member] | Underwritten, Over Allotment Option [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares sold during period	416,666
Series B Warrant [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Warrant exercise price	$ 5.85
Series B Warrant [Member] | Underwritten, Over Allotment Option [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Shares sold during period	416,666

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SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS FOR FAIR VALUE MEASUREMENT OF OPTIONS GRANTED (Details) - For Non-Employees and Indpendent Board [Member]	9 Months Ended
	Jun. 30, 2021 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate, minimum	0.78%
Risk-free interest rate, maximum	1.71%
Expected option life	10 years
Expected volatility, minimum	300.00%
Expected volatility, maximum	311.00%
Expected dividend yield	0.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 2.91
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price	$ 16.79

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SUMMARY OF STOCK OPTION ACTIVITY (Details)	9 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of Options Outstanding, Beginning | shares	1,620,667
Weighted Average Exercise Price Outstanding, Beginning | $ / shares	$ 5.74
Weighted Average Remaining Contractual Life (years) Stock Options Outstanding, Beginning	7 years 3 months 18 days
Aggregate Intrinsic Value Options Outstanding, Beginning | $	$ 19,112,118
Number of Options, Granted | shares	2,154,938
Weighted Average Exercise Price, Granted | $ / shares	$ 5.87
Number of Options, Exercised | shares	(6,000)
Weighted Average Exercise Price, Exercised | $ / shares	$ 1.53
Number of Options, Expired | shares
Weighted Average Exercise Price, Expired | $ / shares
Number of Options, Forfeited | shares	(311,656)
Weighted Average Exercise Price, Forfeited | $ / shares	$ 12.39
Number of Options Outstanding, Ending | shares	3,457,949
Weighted Average Exercise Price Outstanding, Ending | $ / shares	$ 5.23
Weighted Average Remaining Contractual Life (years) Stock Options Outstanding, Ending Balance	8 years 3 months 18 days
Aggregate Intrinsic Value Options Outstanding, Ending Balance | $	$ 1,363,638
Number of Options Exercisable | shares	1,397,975
Weighted Average Exercise Price, Exercisable | $ / shares	$ 6.01
Weighted Average Remaining Contractual Life (years) Stock Options, Exercisable	7 years 8 months 12 days
Aggregate Intrinsic Value Options, Exercisable | $	$ 790,939

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SUMMARY OF UNVESTED SHARES (Details)	9 Months Ended
	Jun. 30, 2021 $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of Nonvested Shares, Beginning | shares	762,917
Weighted Average Grant Date Fair Value Nonvested Shares Beginning | $ / shares	$ 10.60
Number of Nonvested Shares, Granted | shares	2,154,938
Weighted Average Grant Date Fair Value, Granted | $ / shares	$ 5.87
Number of Nonvested Shares, Forfeited | shares	(158,328)
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	$ 12.11
Number of Nonvested Shares, Vested | shares	(699,554)
Weighted Average Grant Date Fair Value, Vested | $ / shares	$ 7.59
Number of Nonvested Shares, Ending | shares	2,059,973
Weighted Average Grant Date Fair Value Nonvested Shares Ending | $ / shares	$ 6.56

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SCHEDULE OF WARRANT ACTIVITY (Details)	9 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of Warrants Outstanding, Beginning | shares	40,250
Weighted Average Exercise Price, Beginning | $ / shares	$ 9.00
Weighted Average Remaining Contractual Life (years) Stock Warrants, Beginning Balance	4 years 8 months 12 days
Aggregate Intrinsic Value Warrants Outstanding, Beginning | $	$ 321,598
Number of Warrants, Issued | shares	4,791,665
Weighted Average Exercise Price, Issued | $ / shares	$ 4.95
Number of Warrants, Exercised | shares
Weighted Average Exercise Price, Exercised | $ / shares
Number of Warrants, Expired | shares
Weighted Average Exercise Price, Expired | $ / shares
Number of Warrants Outstanding, Ending | shares	4,831,915
Weighted Average Exercise Price, Ending | $ / shares	$ 4.98
Weighted Average Remaining Contractual Life (years) Stock Warrants, Ending Balance	4 years 8 months 12 days
Aggregate Intrinsic Value Warrants Outstanding, Ending | $
Number of Warrants Exercisable | shares	4,831,915
Weighted Average Exercise Price, Exercisable | $ / shares	$ 4.98
Weighted Average Remaining Contractual Life (years) Stock Warrants, Exercisable	4 years 8 months 12 days
Aggregate Intrinsic Value Warrants, Exercisable | $

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STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($)			6 Months Ended	9 Months Ended
	Mar. 19, 2021	Jun. 23, 2020	Mar. 31, 2021	Jun. 30, 2021	Jun. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option vest and exercisable period				7 years 8 months 12 days
Shares issued				2,154,938
Stock option exercise price				$ 1.53
Options expiration term				10 years
Stock option forfeiture during period				311,656
Shares were issued upon the exercise of stock options				6,000
Warrant to purchase common stock		40,250
Warrant exercise price		$ 9.00
Warrants exercisable date		Dec. 23, 2020
Warrant expiration date		Jun. 18, 2025
Series A Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrant exercise price	$ 4.50
Warrants term	5 years
Series B Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrant exercise price	$ 5.85
Warrants term	5 years
Termination of Employment [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option forfeiture during period				311,656
Underwritten, Over Allotment Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of warrants, description	2,777,777 units (“Units”) in an underwritten registered public offering for aggregate net proceeds of $11,017,304 which includes the proceeds from the underwriter’s full exercise of their overallotment option with respect to the warrant component of the Units, as further described below, with each Unit consisting of (a) one share of our common stock, (b) one Series A warrant (each, a “Series A Warrant” and collectively, the “Series A Warrants”) to purchase one share of our common stock with an initial exercise price of $4.50 per whole share, and (c) one Series B warrant (each, a “Series B Warrant” and collectively, the “Series B Warrants” and together with the Series A Warrants, the “Warrants”) to purchase one-half share of our common stock with an initial exercise price of $5.85 per whole share, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.
Shares sold during period	2,777,777
Underwritten, Over Allotment Option [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of warrants, description	(i) 2,777,777 units (the “Units”), at a price to the public of $4.50 per Unit, with each Unit consisting of (a) one share of our common stock, (b) one Series A Warrant, and (c) one Series B Warrant, and (ii) 416,666 Series A Warrants and 416,666 Series B Warrants, each pursuant to the underwriter’s full exercise of their overallotment option with respect to such warrants.
Shares sold during period	2,777,777
Underwritten, Over Allotment Option [Member] | Series A Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares sold during period	416,666
Underwritten, Over Allotment Option [Member] | Series B Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares sold during period	416,666
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option exercise price				$ 2.91
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option exercise price				$ 16.79
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued				622,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option vest and exercisable period				1 year 6 months
Shares were issued upon the exercise of stock options				6,000
Stock option expenses				$ 8,002,917	$ 4,505,498
Unamortized option expense				$ 6,520,427
Independent Contractors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options issued to independent contractors				15,000
Stock option vest and exercisable period				3 years
Vesting percentage description				33% of the options vesting on each anniversary of the grant date.
Independent Board Members [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options issued to independent contractors				1,369,938
Stock option vest and exercisable period			3 years
Vesting percentage description				50% of the options vesting immediately and the remaining 50% vesting 25% on each of the first two anniversaries of the grant date.
Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options issued to independent contractors				770,000
Vesting percentage description				these options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of the grant date, or (ii) in the case of performance-based options (the “Performance-Based Options”), based on the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024.

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SUBSEQUENT EVENTS (Details Narrative) - USD ($)					9 Months Ended
	Jul. 29, 2021	Jul. 02, 2021	May 23, 2021	May 22, 2021	Jun. 30, 2021
Subsequent Event [Line Items]
Stock options, exercise price					$ 5.87
Options expiration period					10 years
Masateru Higashida, President and CEO [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Annual base salary			$ 300,000	$ 180,000
Subsequent Event [Member] | Shanoop Kothari [Member]
Subsequent Event [Line Items]
Outstanding restricted shares accelerated to vest		50,737
Subsequent Event [Member] | Mr.Shearer, CFO [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		200,000
Stock options, exercise price		$ 3.12
Options expiration period		10 years
Subsequent Event [Member] | Mr.Shearer, CFO [Member] | First Anniversary [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		80,000
Subsequent Event [Member] | Mr.Shearer, CFO [Member] | Second Anniversary [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		60,000
Subsequent Event [Member] | Mr.Shearer, CFO [Member] | Third Anniversary [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		60,000
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member]
Subsequent Event [Line Items]
Deferred bonus payable		$ 75,000
Cash bonus opportunity		105,000
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member] | Maximum [Member]
Subsequent Event [Line Items]
Cash bonus opportunity		$ 210,000
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		896,743
Stock options, exercise price		$ 3.12
Options expiration period		10 years
Vesting of shares, description		The Options will vest, if at all, based on the extent to which the Company achieves certain performance objectives relating to our earnings before income taxes in each of the fiscal years ending September 30, 2022 (“fiscal year 2022”), September 30, 2023 (“fiscal year 2023”) and September 30, 2024 (“fiscal year 2024”). Pursuant to the award agreement, (i) 179,349 Options shall vest, if at all, in fiscal year 2022, (ii) 269,023 Options shall vest, if at all, in fiscal year 2023, and (iii) 448,371 Options shall vest, if at all, in fiscal year 2024, in each case based upon our achievement of a specified amount of earnings before income taxes in the respective fiscal year.
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member] | 2022 [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		179,349
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member] | 2023 [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		269,023
Subsequent Event [Member] | Masateru Higashida, President and CEO [Member] | 2024 [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock		448,371
Subsequent Event [Member] | New Employees [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock	115,000
Vesting of shares, description		These options shall vest and become exercisable either (i) in the case of time-based options, as to 1/3 on each anniversary of each employee’s employment start date, or (ii) in the case of the Performance-Based Options, based on either (a) the Company’s achievement of certain performance milestones established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2021, 2022, 2023 and 2024, or (b) the employee’s achievement of certain performance milestones tied to adjusted gross sales established by the Compensation Committee for each fiscal year in the fiscal years ending September 30, 2022, 2023 and 2024.
Subsequent Event [Member] | New Employees [Member] | Nonqualified Performance-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock	92,000
Subsequent Event [Member] | New Employees [Member] | Time-based Options [Member]
Subsequent Event [Line Items]
Number of stock award granted for common stock	23,000