UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended September 30, 2023

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

Commission File No. 001-39338

NUZEE, INC.

(exact name of registrant as specified in its charter)

Nevada

38-3849791

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

2865 Scott St. Suite 107, Vista, California 92081

(Address of principal executive offices)

Registrant’s telephone number, including area code — (760) 295-2408

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant (based on the price at which the registrant’s Common Stock was last sold as of March 31, 2023, the last business day of the most recently completed second fiscal quarter), was approximately $ 7,263,908.

As of January 11, 2024, there were outstanding 1,281,736 shares of the registrant’s Common Stock, $0.00001 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s definitive Proxy Statement to be filed in connection with its 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. The information in Part III hereof for the fiscal year ended September 30, 2023, will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

TABLE OF CONTENTS

PART I	4
ITEM 1. BUSINESS.	4
ITEM 1A. RISK FACTORS	14
ITEM 1B. UNRESOLVED STAFF COMMENTS	33
ITEM 2. PROPERTIES	33
ITEM 3. LEGAL PROCEEDINGS	33
ITEM 4. MINE SAFETY DISCLOSURES	34
PART II	35
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35
ITEM 6. [RESERVED]	35
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	41
ITEM 9A. CONTROLS AND PROCEDURES	41
ITEM 9B. OTHER INFORMATION	42
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	42
PART III	43
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.	43
ITEM 11. EXECUTIVE COMPENSATION.	43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.	43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	43
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	43
PART IV	44
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES	44
ITEM 16. FORM 10-K SUMMARY	45
SIGNATURES	46

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements, including, without limitation, in the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “target,” “seek,” “estimate,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding:

	●	our plans to obtain funding for our operations, including funding necessary to develop, manufacture and commercialize our products, provide our co-packing services, and to continue as a going concern;

	●	our expectation that our existing capital resources will be sufficient to fund our operations for at least the next three months and our expectation to need additional capital to fund our planned operations beyond that;

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

	●	our expectations regarding our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market;

	●	the impact to our business, including any supply chain interruptions, resulting from changes in general economic, business and political conditions, including changes in the financial markets and macroeconomic conditions resulting from a pandemic;

	●	the evolving coffee preferences of coffee consumers in North America and East Asia;

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

	●	our ability to compete with companies producing similar products or providing similar co-packing services;

	●	our ability to successfully achieve the anticipated results of strategic transactions;

	●	our expectation regarding our future co-packing revenues;

	●	our ability to develop or offer innovative new products and services, and expand our co-packing services to other products that are complementary to our current single serve coffee product offerings;

	●	our expectations regarding additional manufacturing, coffee roasting and co-packing capabilities to be provided through our manufacturing partners, as well as our manufacturing partners’ ability to successfully facilitate distribution efforts;

	●	our reliance on third-party roasters or manufacturing partners to roast coffee beans necessary to manufacture our products and to fulfill every aspect of our co-packing services;

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

	●	our ability to retain key management, sales and marketing personnel;

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

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

	●	the outcome of pending, threatened or future litigation;

	●	our financial performance; and

	●	our use of the net proceeds from our recent offering.

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.

Any forward-looking statements in this Report reflect our current views with respect to future events or to our future financial performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A below, titled “Risk Factors,” and discussed elsewhere in this Report and in our other reports filed with the SEC. Given these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise, except as required by law.

REFERENCES

As used in this Report: (i) the terms “we”, “us”, “our”, “NuZee” and the “Company” mean NuZee, Inc. and its subsidiaries, taken together; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

PART I

ITEM 1. BUSINESS.

Overview

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

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

We have also developed and sell NuZee branded single serve coffee products, including our flagship Coffee Blenders line of both single serve pour over coffee and coffee brew bag coffee products, which we believe offers consumers some of the best coffee available in a single serve application in the world. We have recently expanded our Coffee Blenders offerings to include a new Cold pressed latte product line that is available to purchase in Korea and online. We offer DRIPKIT pour over packs direct to consumers through our website, wholesale business-to-business to hospitality customers, and co-pack for coffee roasters.

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

What is single serve pour over coffee?

Single serve pour over coffee, or hand drip coffee, is a traditional and time-honored technique that pours hot water onto ground coffee with a prepacked coffee filter. Proponents of pour over coffee believe this method makes better coffee. Single serve pour over coffee uses the same brewing technique without a machine, with the coffee flowing straight into a cup using only hot water and the prepacked coffee filter.

What is coffee brew bag coffee?

We introduced our coffee brew bag, or tea-bag style coffee, in 2019. The brewing method is similar to brewing tea; put the coffee brew bag in a cup, add hot water and let it sit for approximately five minutes. This coffee brewing method is relatively new to North America and we believe has gained attention from roasters and end consumers who desire eco-friendlier alternatives to coffee pods and other types of single serve coffee. Our coffee brew bags are intended to be industrially compostable, allowing consumers to deposit the used coffee brew bag in the curbside compostable bins where available.

What is bagged coffee?

Bagged coffee is roasted whole bean or ground coffee, generally sold in 12 ounce to five pound bags. We recently agreed to begin producing bagged coffee in a 12 ounce format for one of our largest customers. We will also begin producing bagged coffees in a 12 ounce and two pound format for Stone Brewing under a licensing relationship. Bagged coffees are used in homes, offices and restaurant/hospitality settings to brew multiple cups of coffee simultaneously.

What is the Stone Brewing License Relationship?

Recently, we entered into a five-year global licensing agreement with Stone Brewing. Stone Brewing is the nation’s seventh largest craft brewery with products sold in all 50 states and internationally. We intend to build a strong direct-to-consumer business by marketing the coffee line to craft beverage customers on a dedicated website www.stoneroasting.com. We also intend to distribute Stone Brewing specialty coffee products through a wholesale network of natural grocery, traditional grocery and convenience store channels as well as office coffee and hotel brokers and distributors. In order to assist in building out the wholesale network, we engaged C.A. Fortune, a consumer brands agency, to spearhead sales and marketing efforts.

Under the Stone Brewing License Relationship, we will produce a full line of specialty products including DRIPKIT, single-serve brew bags and 12 ounce bagged coffees. The full line of products will be distributed both direct-to-consumer and through the wholesale network. The products will adopt the branding and flavor characteristics of three of Stone’s most popular brands. We will also periodically introduce new flavors to provide consumers the opportunity to try additional options under the Stone Brewing Coffee brand.

Revolutionizing the single serve coffee market in North America

We believe the typical coffee consumer is increasingly focused on the environmental impact of the product, as well as the taste and quality of the ingredients. We anticipate that traditional pod-based, single serve coffee will face increasing pressure given their heavy reliance on the use of plastics. In our view, consumer preferences in North America have evolved over the last decade to substantially mirror those of Japanese consumers, who have traditionally focused on the taste, eco-footprint and quality of ingredients.

We believe that the saturation of coffee pods in the North American market, coupled with changing tastes, provides our single serve coffee products with a substantial market opportunity in North America. Accordingly, we believe there are opportunities for growth in the North American market for our single serve pour over and coffee brew bag products. Our single serve coffee products also have a number of advantages over other single serve coffee alternatives:

	●	Our single serve coffee solutions are portable and do not require a machine for brewing. Therefore, the consumer investment required to enjoy our product is very minimal (as opposed to machine-based solutions). Single serve coffee products can easily travel and have a number of consume-later applications not available to machine-based solutions (camping, travel, office, etc.).

	●	We believe our product offerings are more hygienic than other, machine-based single serve alternatives. For example, the use of a machine requires cleaning and maintenance. If not periodically cleaned or if spent pods are not removed timely, this can lead to poor taste and bacterial growth.

	●	Our single serve coffee products allow consumers to brew only what they need, therefore allowing mindful, responsible consumption that can reduce food and water waste and leads to better coffee sustainability.

We seek to establish ourselves as the premier manufacturer of single serve coffee products for the North American market and to produce innovative coffee products that we believe will promote sustainability. We also seek to further expand our own brands of single serve coffee products for sale directly to end consumers in order to generate increased revenues and to help accelerate consumer adoption of these brewing formats. We believe that top tier brands that want to compete in the North American single serve coffee market will demand the highest levels of quality from their manufacturing partners. We further believe that we remain a commercial-scale leader in the single serve coffee market in North America as a result of our history of working with sophisticated packing equipment manufacturers, SQF Certification from the Safe Quality Food Institute, organic certification, our commitment to sustainability, operational knowledge and the co-packing arrangements we are continuing to develop with companies. As a result of our ongoing efforts, we feel we are well positioned to be a “go-to” coffee producer for companies offering single serve coffee products in the North American market.

We understand that as single serve pour over and coffee brew bag coffee products gain momentum in the North American market we will face increasing competition. However, (i) we have, and continue to develop, manufacturing expertise on increasingly complex and larger orders, (ii) we have experience dealing with companies of all sizes and their specific requirements (from small roasters to international companies) and (iii) we have SQF, organic and Kosher certification. We received SQF Certification from the Safe Quality Food Institute, which is a customary requirement to produce for large multi-national and international companies.

Our primary focus is the development of single serve coffee products in the North American market targeting the individual consumer for use at home and office or other settings that would benefit from single serve product offerings and positioning ourselves as the leading commercial-scale co-packer of single serve pour over and coffee brew bag coffee products. We also co-package other products, such as bagged coffees, that are complementary to our current single serve coffee product offerings and provide us with a deeper access to our customers.

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 our single serve pour over coffee products at our manufacturing facilities. We have also expanded our co-packing expertise and product offerings to coffee brew bag products, which we believe are gaining traction in the United States, as well as our DRIPKIT pour over products. Our goal is to continue to expand our product portfolio to raise our visibility, consumer awareness and brand profile.

Capitalizing on the existing bagged coffee market

Recently, we agreed to begin producing bagged coffee products in a 12 ounce format for one of our largest customers. The customer has a developed market and distribution network for both bagged coffees and coffee brew bag products. Expanding our existing relationship with this customer allows us to increase our manufacturing volume and efficiency by focusing on larger production runs. The customer has indicated to us that it expects continued growth in the single serve products and the bagged coffee purchases from us. We are continuing to explore additional product manufacturing opportunities with this customer as well as other customers.

We also entered into a five-year global licensing agreement with Stone Brewing to produce a full line of specialty products including DRIPKIT, single-serve brew bags and 12 ounce bagged coffees. Entering the bagged coffee market allows us to leverage our marketing, production and inventory investments across a wide product line while continuing to build our single serve market.

Our sources of revenue

Co-packing

We operate as a third-party contract packager for the finished goods of other major companies operating in the coffee beverage industry. Under these arrangements, our co-packing customers typically supply us with roasted, whole bean coffee that we package into single serve pour over and coffee brew bag coffee products according to their formulations and specifications. In addition, under our private label coffee development program, our team works directly with our co-packing customers in developing private labels of signature coffees. Under this program, our team of coffee experts works extensively with our co-packing customers to develop a coffee taste profile to their unique needs and then we source, roast (utilizing our third-party roasting or manufacturing partners), blend, pack (in either our traditional single serve pour over, DRIPKIT pour over or coffee brew bag coffee products), and package single serve coffee products to their exact specifications.

We currently focus on fostering co-packing arrangements with larger companies developing pour over and coffee brew bag coffee products, in addition to smaller scale, innovative companies that we believe are rapidly growing, as further described below. We believe that as our potential co-packing customers continue to realize that we have the experience co-packing for a variety of customer sizes, we will become the co-packer of choice. The standards required to co-pack for large international companies almost always meet or exceed the standards required to co-pack for any other customer. We also believe that as our co-packing customers’ competitors realize they have single serve pour over and coffee brew bag coffee solutions, they will be more motivated to develop their own such solutions and that will lead to increased co-packing opportunities for us.

In addition to larger companies, we package for smaller companies that we believe have significant growth potential. For example, we started packaging for a particular smaller company in 2017 and continue to do so today. This company started with smaller batch, single product offerings but over the years has meaningfully increased order sizes as well as the number of product offerings. We are continually looking for new and innovative companies with whom we may work and grow.

NuZee and DRIPKIT branded products

Although our primary focus is on the manufacture of single serve coffee products pursuant to co-packing arrangements with our co-packing clients, we have also developed high-quality NuZee branded single serve coffee products that, in addition to our DRIPKIT branded products, are sold directly to consumers. In addition to being available for direct sale to consumers, our NuZee and DRIPKIT branded products serve as samples that are provided to potential new co-packing customers to showcase our co-packing capabilities and production expertise.

Our NuZee branded products are from our perspective a ‘stepping-stone’ product for our co-packing customers that market high quality packaging and coffee. Sales of our NuZee branded products also help promote consumer adoption into the format and to educate coffee drinkers in the United States about this coffee format that is new to North America but widely known in East Asia.

In addition to our other NuZee branded products, our premium DRIPKIT pour over format features a large-size single serve pour over pack that sits on top of the cup and delivers in our view a barista-quality coffee experience. We offer DRIPKIT pour over packs direct to consumers through our website, wholesale business-to-business to hospitality customers, and co-pack for coffee roasters.

International operations

Korea

We established our Korean subsidiary in 2018. We are one of many producers of single serve pour over coffee products in Korea and do not have any exclusive rights for this region. Our strategy is to leverage our local relationships to secure large co-packing agreements for the markets in Korea, China and other Asian countries.

Latin America

In January 2020, we entered into a Joint Venture Agreement (the “JV Agreement”) with Industrias Marino, S.A. de C.V., a company incorporated under the laws of Mexico (“El Marino”), to form a joint venture in Mexico between us and El Marino in Mexico (“NuZee Latin America”). NuZee Latin America is organized under the laws of Mexico. To date, the primary activities in NuZee Latin America were the contribution of two machines, and start up and initial marketing and sales activities. Its primary business operations are intended to consist of the manufacture of single serve coffee products for sale in Mexico, Central and South America. The sales activities generated thus far are minimal.

Our customers and products

Our co-packing customers primarily include large and small size coffee roasters and food service companies. We intend to continue to pursue such co-packing arrangements in the future. We believe this customer interest is primarily due to (i) the saturation of machine based single serve coffee alternatives, (ii) increase in consumer requirements for eco-friendly packaging and (iii) our superior taste compared to other single serve coffee alternatives.

We also sell our NuZee and DRIPKIT branded products directly to consumers. Currently, Amazon and our Coffee Blenders website are our only established domestic retail channels for direct sales to consumers of NuZee branded products, and our DRIPKIT products are sold through our Dripkit website.

We plan to sell Stone Brewing licensed products both direct-to-consumer through a variety of channels and through a wholesale network.

Raw Materials

Under our co-packing arrangements, our co-packing customers typically supply us with roasted, whole bean coffee that we then produce and package into single serve pour over and coffee brew bag coffee products according to their formulations and specifications. In addition, in connection with the production of our NuZee and DRIPKIT branded products and specialty coffees that we have developed for co-packing customers under our private label coffee development program, we source and purchase green coffee from multiple green coffee suppliers, and from multiple regions around the world. After being sourced by us, the green coffee is then shipped to our roasting or manufacturing partners where the coffee is roasted and then shipped to us for grinding, blending, packing, and packaging. Maintaining a steady supply of roasted coffee beans from our co-packing customers is essential to our co-packing arrangements, and securing an adequate supply of green coffee is essential to our ability to manufacture NuZee and DRIPKIT branded products and to support the development of private labels for our co-packing customers under our private label development program. We have arrangements based on purchase orders in place with suppliers and partners for all components required to provide our co-packing services and deliver our NuZee and DRIPKIT branded products.

Our principal packaging materials include filters, foils, cartons, and craft master cases. We conduct business with multiple vendors of packaging materials on a purchase order basis.

Operational capacity

We currently lease manufacturing facilities in Vista, California and Seoul, Korea to produce our single serve pour over, coffee brew bag products, DripKit products and bagged coffees. In addition, we partner with other manufacturers to roast and package our products.

As a result of our capital investments since 2015, including our acquisition of packing equipment from manufacturers whom we believe are the global leaders for supplying such machines, we presently have the annual capacity to produce up to 150 million single serve coffee products (pour over or coffee brew bags) at our two manufacturing facilities, which we believe is sufficient to meet our current and anticipated manufacturing requirements. In addition, in May 2022, we announced a new partnership pursuant to which a manufacturing partner in Knoxville, Tennessee has agreed to provide us with additional manufacturing, coffee roasting and co-packing capabilities, and facilitate distribution efforts to the Eastern United States. Further, in March 2023, we entered into a manufacturing agreement with a California-based coffee roaster to expand the Company’s footprint on the West Coast.

Our executive office and administrative operations are now located in Vista and Carlsbad, California.

We own high-quality and sophisticated packing equipment developed by premier East Asian suppliers for pour over and coffee brew bag coffee production. We believe these manufacturers are the world leaders for supplying such machines. Nitrogen and air compression machinery is capable of handling expansion, which helps to minimize any ongoing related capital expenditures for such machinery as we expand.

In order to satisfy the demand for bagged coffee production for our largest customer as well as our new Stone Coffee brand product line, we will be investing in additional equipment to increase our capacity for bagged coffee production.

Distribution

For distribution of our single serve coffee products to our co-packing customers, we typically rely on the distribution networks of our co-packing customers, including freight companies and common carriers arranged by them. At the request of our co-packing customers, we may also utilize a freight broker for the distribution and delivery of our products according to our co-packing customers’ instructions. Our NuZee and DRIPKIT branded products as well as bagged coffee products are typically delivered by common carriers directly to each customer or by direct delivery in the case of our direct-to-consumer customers.

Competition

Prior to the success of coffee pods within the last two decades, coffee was primarily consumed at home and via traditional pot-based drip brewers and, to a lesser extent, instant coffee. Pot-based brewers are typically known for good quality coffee that produces multiple cups but are not well-suited for single serve alternatives. In recent years with the advent of coffee pods and increased coffee consumption outside the home, the North American market has been focused on speed and convenience. Coffee pods addressed the need for a single serve coffee solution that was viewed as superior to instant coffee. As coffee consumption has also moved outside the home in recent years, consumer preferences have also changed, leading to greater demand for higher quality coffee alternatives.

The beverage industry in general, and the coffee sector, is extremely competitive. The principal areas of competition include product, quality, convenience, price, packaging, development of new products and flavors, and marketing campaigns. Our Coffee Blenders, DRIPKIT and other NuZee branded products are competing directly with Green Mountain brands and other licensed brands, as well as third-parties in the single serve coffee category who have similar formats to our products. Green Mountain brands have enjoyed broad, well-established national distribution through well-funded advertising, and product awareness. Our Coffee Blenders, DRIPKIT and other NuZee branded products also compete generally with all hot liquid refreshments, including specialty coffees and teas. Companies and brands manufacturing these products generally have far greater financial, marketing, and distribution resources than we do.

Important factors that will affect our ability to compete successfully include functional delivery of our products and co-packing services, trade and consumer promotions, the development of new, unique functions in new and various packaging formats, attractive and unique promotions, branded product advertising, pricing, and the success of the distribution networks on which we rely.

We also compete to secure distributors who will agree to market our product over those of our competitors, provide stable and reliable distribution, and secure adequate shelf space in retail outlets and search placement in online stores.

Our competitive strengths

We believe that the following strengths contribute to our success:

●

Favorable industry trends benefit us. With changing consumer preferences over the last decade that include a greater demand for higher quality coffee alternatives as well as greater flexibility and convenience, we believe we provide a unique alternative to non-single serve drip products currently on the market. For example, we believe our single serve coffee products, including our traditional single serve pour over coffee products, DRIPKIT pour over products and coffee brew bag products, provide a premium alternative to other single serve coffee alternatives. Recent consumer trends are moving towards premium alternatives to existing mainstream products (i.e., gourmet burgers, craft beers, specialty sodas, organic supermarkets, etc.).

●

Significant production and operational experience in single serve coffee products. We have been producing single serve coffee products for over five years in increasing scale and complexity. We believe the process and equipment for producing single serve coffee products is complex, and a potential new entrant into our market would encounter a significant learning curve to reach our level of operational experience and expertise.

●

Co-packing agreements with large companies. We currently focus on fostering co-packing arrangements with larger companies developing single serve coffee products. We believe that as our potential co-packing customers continue to realize that we have the experience co-packing for a variety of customer sizes, we will become the co-packer of choice. The standards required to co-pack for large international companies almost always meet or exceed the standards required to co-pack for any other customer. We also believe that as our co-packing customers’ competitors realize they have single serve pour over and tea-bag style coffee solutions, they will be more motivated to develop their own such solutions and that will lead to increased co-packing opportunities for us.

●

Private Label Coffee and Co-Packing Private Label Programs. Under our Private Label Coffee Program, we offer our services primarily to non-coffee roaster customers pursuant to which our team works directly with them in developing private labels of signature coffees. Under this program, our team of coffee experts works extensively with our co-packing customers to develop a coffee taste profile to their unique needs and then we source, roast (utilizing our third party roasting or manufacturing partners), blend, pack (in either our traditional single serve pour over, DRIPKIT pour over or coffee brew bag coffee products), and package single serve coffee products to their exact specifications. Under our Co-Packing Private Label Program, coffee roasters that are incapable of packing single serve formats send us their coffee of choice, which we pack into our single serve formats on their behalf.

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SQF and other certifications. SQF Certification from the Safe Quality Food Institute can take up to a year and may require additional resources to obtain. Our existing SQF certification allows us to co-pack for large, diversified companies. These companies usually have very strict certification standards and will not outsource production to companies that do not meet the highest level of industry certifications. SQF certification requires us to meet very high quality and compliance standards for production and warehousing as well as chain of custody record keeping and supplier standards. We are also certified as organic and Kosher. In addition, we are committed to sustainability. Our single serve coffee products do not require a machine to prepare, and we use coffee brew bag filters intended to be industrially compostable, along with recyclable boxes.

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Our Korean subsidiary supports our U.S. operations. We have a manufacturing and sales office in Korea. Our strategy is to leverage our local relationships to secure large co-packing agreements for the markets in Korea, China and other Asian countries. We also source our manufacturing equipment and filters from East Asian companies. For example, our single serve coffee products are produced on packaging machines produced by leading manufacturers of packaging machines in Asia. We believe that having an office in Korea provides us with direct access to our key vendors that helps us to maintain such relationships as well as helps us operationally in our core U.S. market.

Our business strategy

We intend to achieve our mission and further grow our business by pursuing the following strategies:

	●	Continually grow our base of large national or international co-packing customers. In furtherance of our goal to become the “go-to” commercial coffee producer and preeminent partner for coffee companies seeking to enter into and grow within the single serve coffee market in North America, we focus on entering into co-packing agreements with large international companies, including co-packing arrangements pursuant to our private label coffee development program. We also intend to continue to educate and advocate for the development of pour over coffee products within the broader single serve category. We believe that, as the U.S. market continues to gain awareness of our traditional single serve pour over, DRIPKIT pour over and coffee brew bag coffee products, we will continue to grow our base of large domestic or international co-packing customers.

	●	Co-pack for smaller scale, innovative coffee customers that we believe are rapidly growing and capture their growth over time. In addition to co-packing for large domestic or international customers, we believe that select smaller scale, rapidly growing, innovative co-packing customers provide us with different opportunities versus larger customers. Large national roasters often look to these smaller scale customers for inspiration. We believe capturing these influential roasters would help us provide format visibility to the bigger roasters as well as influential consumers.

	●	Efficiently grow our manufacturing footprint and capacity, including by leveraging partnerships, in response to anticipated demand for co-packing. We intend to leverage our previously announced partnerships in Knoxville, Tennessee and California to provide us with additional manufacturing, coffee roasting and co-packing capabilities, and facilitate distribution efforts. With these partnerships, we expect to offer a holistic coffee supply and manufacturing program to our existing and new customers, including coffee roasting and non-single serve coffee product co-packing in addition to our other single serve coffee formats.

	●	Strategically grow and expand our international operations that align with our vision. We plan to strategically grow our current international operations as well as potentially expand internationally if this growth or expansion is strategic to our vision. We believe the Korean market, albeit competitive, still has significant growth potential as well as strong market acceptance for coffee and single serve pour overs. We have also formed a joint venture in Latin America.

Risks Associated with Our Business and History of Losses

We have incurred net losses since we commenced operations as NuZee, Inc. in 2013, including net losses of $8.75 million and $11.8 million for the years ended September 30, 2023 and 2022, respectively. As of September 30, 2023, our accumulated deficit was approximately $73.4 million. We expect to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset existing expenses. In the United States, we expect to incur additional losses as a result of the costs associated with operating as an exchange-listed public company.

Recent Developments

Entry into the existing bagged coffee market

Recently, we agreed to begin producing bagged coffee products in a 12 ounce format for one of our largest customers. The customer has a developed market and distribution network for both products. Expanding our existing relationship with this customer allows us to increase our manufacturing volume and efficiency by focusing on larger production runs. The customer has indicated to us that it expects continued growth in the single serve products and the bagged coffee purchases from us to increase over single serve purchase amounts. We are continuing to explore additional product manufacturing opportunities with this customer as well as other customers.

Intellectual Property

Trademarks

We currently own the following United States trademarks: “Coffee Blenders”, “Twin Peaks”, “Active Cup”, “Relax Cup”, “Think Cup”, “Nude Cup”, “Pine Ranch Coffee”, and “Dripkit”. We are also in the process of obtaining rights to the “Dripkit and Design,” “NuZee”, “NuZee Coffee (Stylized)”, “NuZee Coffee and Design”, and “COLDPRESSO” trademarks. We intend to continue growing our trademark portfolio in the United States with other related slogans and brands as new products are launched.

We further intend to expand our brand protections outside of the United States in line with our prospective international growth. As of the date of this Report, we have the following registered trademarks:

	●	Japan - “Coffee Blenders”; “Twin Peaks”; “Nuzee Coffee and Design”; “Active Cup”; “Nude Cup”; “Think Cup”; “Relax Cup”; “Lean Cup”

	●	Korea - “Twin Peaks”; “It’s Coffee Reimagined”; “Think Cup”; “Lean Cup”

	●	Canada – “NuZee Coffee and Design”; “NuZee”; “NuZee Coffee (Stylized)”

	●	Mexico - “NuZee”, “NuZee Coffee (Stylized)”, “NuZee Coffee and Design”; “It’s Coffee Reimagined”

We also have pending applications for “Dripkit (Words only)” and Design in Japan, Mexico, and Korea; and “Dripkit and Design” in Canada, Japan, and Korea.

Patents

We currently own the following patents relating to our DRIPKIT pour over product: (1) a U.S. design patent that protects the visual ornamental characteristics associated with the DRIPKIT pour over coffee apparatus design, which expires in November 2035; (2) a U.S. utility patent that covers utility patent features of the DRIPKIT portable drip apparatus, which expires in July 2038; and (3) one pending utility patent application that is a continuation patent application for pursuing broader/different utility patent features for the DRIPKIT portable drip apparatus, which is currently pending and awaiting examination. Patent rights (1) and (2) stem from the Acquisition of Dripkit in 2022.

We intend to aggressively protect, police and assert our intellectual property rights, including product designs, proprietary product research and concepts as well as our trademark portfolio. Although asserting our rights may result in a substantial cost to the Company, our management strongly believes that the protection of our intellectual property rights is a key component of our operating strategy.

Employees

As of September 30, 2023, we had a total of 18 employees in the United States and 15 employees in Korea, all of whom are full-time. In addition, at September 30, we employed 5 temporary employees in the United States, all of whom are involved in the packaging and shipping of products. None of our employees are represented by a labor organization or under any collective bargaining arrangements. We believe our relationships with our employees are good.

Our operations are overseen directly by management that engages our employees to carry on our business. Our management oversees all responsibilities in the areas of corporate administration, product development, marketing, and research. We may expand our current management to retain other skilled directors, officers, and employees with experience relevant to our business focus. Our management’s relationships will provide the foundation through which we expect to grow our business in the future. We believe that the skill sets of our core management team will be a primary asset in the development of our brands and trademarks.

Governmental Regulation

Our Coffee Blenders, DRIPKIT and other NuZee branded products are marketed and sold as conventional food or beverages for regulatory purposes. Such products are regulated by the FDA. Ingredients in such products must be approved food additives or “Generally Regarded as Safe”. We intend to work with ingredient suppliers, manufacturers, and other trade partners that are compliant with the laws and regulation enforced by the FDA. We have not received, nor are we aware of, any inquiries or other regulatory action from the FDA or any other governmental agency regarding our products and we believe we are in full compliance with all FDA regulations.

The advertising, distribution, labeling, production, safety, sale, and transportation in the United States of our products are subject to the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws, competition laws, federal, state and local workplace health and safety laws, various federal, state and local environmental protection laws, and various other federal, state and local statutes and regulations. We believe we are compliant with all applicable laws and regulations. We have not received and are not aware of any inquiries or other legal or regulatory actions from any entity.

Corporate Information

We were incorporated in 2011 in Nevada as Havana Furnishings, Inc. NuZee Co. Ltd. was incorporated in 2011. NuZee Co. Ltd. merged into Havana Furnishings, Inc. in 2013, at which time we changed our name to NuZee, Inc. Our principal executive and administrative offices are located at 2865 Scott St. Suite 107, Vista, California 92081, and our telephone number is (760) 295-2408.

On December 9, 2022, at a Special Meeting of Stockholders, our stockholders approved a proposal granting the board of directors of the Company (the “Board”) discretionary authority to file an amendment (the “Certificate of Amendment”) to the Company’s Articles of Incorporation, as amended (the “Articles”), which amends the Articles to add a Section 1A to effect a reverse stock split of the Company’s common stock, at any ratio from 1-for-10 to 1-for-50 at the Board’s discretion. On December 28, 2022, we completed a l-for-35 reverse stock split, which became effective on December 28, 2022 upon acceptance of the Company’s filing of an amendment to the Company’s Articles of Incorporation, as amended, with the Secretary of State of Nevada (the “ 2022 Reverse Stock Split”).

On September 20, 2022, Nasdaq notified us that, for 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until March 20, 2023, to regain compliance with the Bid Price Rule. In order to regain compliance, the bid price of our common stock must close at a price of at least $1.00 per share for a minimum of 10 consecutive trading days. As of the date of this Report, we regained compliance with the Bid Price Rule. The 2022 Reverse Stock Split decreased the total number of shares of our common stock outstanding and proportionately increased the market price of our common stock above $1.00 per share. Therefore, the 2022 Reverse Stock Split was an effective means for us to regain compliance with the Bid Price Rule.

On January 17, 2023, the Company received a letter from the Staff notifying the Company that the Staff has determined that for the last 10 consecutive business days, from December 29, 2022 to January 13, 2023, the closing bid price of the Company’s common stock had been at $1.00 per share or greater and that accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2).

In June 2020, our common stock commenced trading on the Nasdaq Capital Market under the symbol “NUZE.” Prior to that, our common stock was quoted on the OTCQB Marketplace under the same symbol.

We have two international subsidiaries in NuZee KOREA Ltd. (“NuZee KR”), and NuZee Investment Co., Ltd. (“NuZee INV”). NuZee KR and NuZee INV are wholly owned subsidiaries of the Company. We also have a joint venture in Mexico, as further discussed above.

Available Information

Our annual and quarterly reports, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at www.mynuzee.com as soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Report. Our corporate governance policies, ethics code and board of directors’ committee charters are posted under the Investor Relations section of the website. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.

ITEM 1A. RISK FACTORS

Risk Factor Summary

The risk factors summarized below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our common stock to decline. These risks are discussed more fully in the section titled “Risk Factors.” Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, the following:

	1.	We have a history of net losses. We expect to continue to incur net losses in the future and we may never generate sufficient revenue to achieve or sustain profitability.
	2.	Our independent auditor’s report for the fiscal year ended September 30, 2023 includes an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, and absent additional financing we may be unable to remain a going concern.
	3.	We expect to need to obtain additional capital to fund our existing operations and, if we are unable to obtain such financing, we may be unable to continue to operate as a going concern.
	4.	We have limited operating history, which may make it difficult to evaluate our current business and to forecast our future performance.
	5.	Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
	6.	A substantial portion of our sales are completed on a purchase order basis. Customers may issue fewer or smaller purchase orders than we expect under our co-packing or retail fulfillment arrangements or decide to delay or cancel orders, which could negatively impact our revenues.
	7.	Sales to a limited number of customers represent a significant portion of our net sales. The loss of a key customer and efforts by our customers to improve their profitability could reduce sales of NuZee branded products and revenues generated from our co-packing services and adversely affect our financial performance.
	8.	Continued innovation and the successful development and timely launch of new products and co-packing services are critical to our financial results and achievement of our growth strategy.
	9.	Our future financial results are difficult to predict, and failure to meet market expectations for our financial performance or any publicly announced guidance may cause the price of our stock to decline.
	10.	Increased competition, including as a result of industry consolidation, could hurt our businesses, and changes in the coffee, tea and beverage environment and retail landscape could impact our financial results.
	11.	Our business, growth and profitability depend on the performance of third-parties and our relationship with them, including third-party coffee roasters and manufacturing partners.
	12.	Interruption or increased costs of our supply chain and sales network, including a disruption in operations at any of our facilities, could affect our ability to manufacture or distribute products and could adversely affect our business and sales.
	13.	The loss of any member of our senior management team or our inability to attract and retain highly skilled personnel could have a material adverse effect on our business.
	14.	Because our management structure is not centralized, the management of our business operations may be more expensive and more difficult.
	15.	Increases in the cost or decreases in the availability of high-quality coffee beans or other commodities could have an adverse impact on our business and financial results. Additionally, price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines.
	16.	We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
	17.	Any failure by us to accurately forecast customer demand for our products and co-packing services, or to quickly adjust to forecast changes, could adversely affect our business and financial results.
	18.	We may not be able to adequately protect our intellectual property rights, and our competitors may be able to offer similar products and co-packing services, which would harm our competitive position. Additionally, we may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

SEC Form 10-K filed by NuZee Inc.