10-K: CIMG Inc. Faces Nasdaq Delisting Amidst Strategic Pivot to Maca Products and Continued Losses

CIMG Inc. is undergoing a significant business transformation, shifting focus to maca-infused food and beverages in Asia, but faces severe financial challenges including continued net losses and imminent Nasdaq delisting threats.

Summary

• CIMG Inc. (formerly Nuzee, Inc.) has rebranded and pivoted its business strategy from specialty coffee to the exclusive distribution and sales of maca-infused food and beverage products in Asia, securing rights from Jiangsu Kangduoyuan Beverage Co., Ltd.
• The company reported a net loss of $8.56 million for the fiscal year ended September 30, 2024, a slight improvement from $8.75 million in 2023.
• Accumulated deficit reached approximately $81.93 million as of September 30, 2024.
• Revenue for the fiscal year ended September 30, 2024, was $1.93 million, a decrease of 9.80% from $1.76 million in 2023.
• Gross profit improved significantly to $32,169 (1.69% gross margin) in 2024 from a gross loss of $(210,817) (-10.71% gross margin) in 2023, primarily due to reduced material and labor costs.
• Operating expenses decreased by 26.84% to $5.98 million in 2024 from $8.17 million in 2023, mainly due to lower labor and travel costs.
• The company is facing multiple Nasdaq listing deficiencies, including minimum bid price, late filing of its Annual Report on Form 10-K for FY2024 and Quarterly Report on Form 10-Q for Q1 2025, and has received a delist determination letter.
• CIMG Inc. has expanded its corporate structure by acquiring DZR Tech and Beijing Zhongyan in June 2024, establishing Singapore CIMG and Henan Zhongyan in early 2025, and acquiring Shanghai Huomao and Beijing Xilin in March-April 2025.
• The company has signed distribution contracts with multiple PRC-based companies, targeting sales of Maca-Noni at 25,000 uSmile PetroChina convenience stores, 400 Guangdong Petroleum Co., Ltd stores, 129 Chengdu Energy Gas Stations, and no fewer than 300 self-service vending machines within the next 12 months.
• The company completed several capital raises in 2024, including a $320,000 convertible note financing, a $1.5 million equity financing, and a $3.0 million equity financing, which helped it regain compliance with Nasdaq's stockholders' equity requirement.
• CIMG Inc. sold its wholly-owned subsidiaries, NuZee KOREA Ltd. and NuZee Investment Co., Ltd., in June 2024, resulting in a loss from disposition of discontinued operations of $3.64 million.

Sentiment

Score: 3

Explanation: The company is in a precarious financial position with continued significant net losses, a large accumulated deficit, and immediate threats of Nasdaq delisting due to multiple compliance failures and overdue filings. While the strategic pivot to maca products and recent capital raises offer some positive direction and liquidity, the severity of the current financial and regulatory challenges outweighs these, indicating high risk and instability.

Positives

• Successfully pivoted business strategy to focus on the growing maca-infused food and beverage market in Asia.
• Secured exclusive distribution and sales rights for all maca products from Jiangsu Kangduoyuan Beverage Co., Ltd., a leading maca production base in Asia.
• Established a global digital health and sales development business group, leveraging AI, neuroscience, and big data for marketing.
• Improved gross profit from a loss of $(210,817) in FY2023 to a profit of $32,169 in FY2024, indicating better cost management relative to sales.
• Reduced operating expenses by 26.84% in FY2024, demonstrating cost control efforts.
• Successfully raised significant capital through convertible notes and equity financings in 2024, addressing the Nasdaq stockholders' equity deficiency.
• Signed multiple distribution contracts in China, targeting a substantial expansion of the Maca-Noni product presence in convenience stores and vending machines.

Negatives

• Continued to incur substantial net losses, with $8.56 million in FY2024 and $8.75 million in FY2023.
• Accumulated deficit of approximately $81.93 million as of September 30, 2024, raising substantial doubt about the ability to continue as a going concern without additional financing.
• Revenue decreased by 9.80% in FY2024, indicating challenges in sales growth during the business transformation.
• Currently non-compliant with Nasdaq's minimum bid price requirement ($1.00 per share) and faces a deadline of July 14, 2025, to regain compliance.
• Received multiple notices from Nasdaq for failing to timely file its Annual Report on Form 10-K for FY2024 and Quarterly Report on Form 10-Q for Q1 2025.
• Received a delist determination letter from Nasdaq on June 27, 2025, with trading suspension scheduled for July 9, 2025, unless an appeal is successful.
• Incurred a significant loss of $3.64 million from the disposition of discontinued operations (NuZee KOREA Ltd. and NuZee Investment Co., Ltd.).
• Involved in ongoing legal proceedings, including the Kim Litigation (breach of contract, seeking $1.04 million in damages) and the Ex-Directors Lawsuit (unpaid fees and expenses exceeding $200,000).

Risks

• History of net losses and expectation to continue incurring losses, potentially never achieving or sustaining profitability.
• Need to obtain additional capital to fund operations beyond the next three months, with uncertainty of availability on favorable terms or at all.
• Limited operating history in the new business segment, making future performance difficult to predict.
• Ability to use net operating loss carryforwards may be subject to limitations under Section 382 of the Internal Revenue Code.
• Future financial results are difficult to predict, and failure to meet market expectations could cause stock price decline.
• Increased competition in the maca products industry from major international and local brands.
• Dependence on the performance and relationships with third-party suppliers and manufacturing partners for maca products and distribution.
• Potential interruption or increased costs in the supply chain and sales network.
• Loss of senior management team members or inability to attract and retain highly skilled personnel could adversely affect the business.
• Decentralized management structure may lead to increased expenses and communication delays.
• Expected inflationary pressure on cost structure, which may not be offset by price increases or could lead to sales volume declines.
• Inability to manage future growth effectively could hinder business strategy execution.
• Failure to accurately forecast customer demand for products could adversely affect business and financial results.
• Inability to adequately protect intellectual property rights, leading to competitors offering similar products.
• Risk of intellectual property infringement claims, which may be expensive to defend and disrupt business.
• Failure to comply with applicable transfer pricing and similar regulations could harm business and financial results.
• Changes in PRC government policies could significantly impact business in China.
• Uncertainty regarding CSRC or other mainland China governmental authority approvals for overseas securities issuance.
• Slowdown or adverse developments in the PRC economy may harm customers and demand for products.
• Worsening relations between the United States and China could reduce stock price.
• Future inflation in China may inhibit profitability of business in China.
• Fluctuation of the Renminbi may have a material adverse effect on investment.
• Restrictions on currency exchange may limit ability to receive and use revenue effectively from China.
• PRC subsidiary is subject to restrictions on making dividends and other payments to the parent company.
• Uncertainties with respect to the PRC legal system could have a material adverse effect.
• PRC's legal and judicial system may not adequately protect business and rights of foreign investors under special circumstances.
• Certain PRC regulations (M&A Rules, national security) may require complicated review and approval processes for acquisitions in China.
• PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent funding and expansion.
• Need to remit offering proceeds to China, which may be time-consuming and delay business benefit.
• Failure by PRC resident beneficial owners to comply with foreign exchange regulations could restrict profit distribution and investment activities.
• Potential fines due to insufficient payment of social insurance and housing fund for employees in China.
• Difficulties in protecting interests and exercising rights as a stockholder due to operations and officers/directors residing in China.
• Difficulties in protecting rights through United States courts due to assets and officers/directors located in China.
• Increases in labor costs in the PRC may adversely affect business and profitability.
• Risk of delisting from stock exchange under the Holding Foreign Companies Accountable Act if PCAOB cannot inspect auditors' work papers located in China.
• Subject to various PRC laws and obligations regarding cybersecurity and data protection, with potential for material adverse effects from non-compliance.
• Compliance with China's new Data Security Law, Cybersecurity Review Measures, and Personal Information Protection Law may entail significant expenses.
• Failure to comply with the Foreign Corrupt Practices Act could adversely affect business.
• Market price of common stock may be volatile, leading to potential loss of investment.
• No assurance of sustained active trading market for common stock.
• Nasdaq Capital Market may subsequently delist securities if ongoing listing standards are not met.
• Broad discretion in the use of net proceeds from recent offerings, which may not be used effectively.
• Significant costs and management time incurred as a public company for compliance initiatives.
• Inability to prevent or detect all errors or fraud, or to accurately and timely report financial results due to internal control weaknesses.
• Anti-takeover provisions in bylaws and Nevada law might discourage, delay, or prevent a change of control.
• No dividends paid on capital stock, and no anticipation of paying any in the foreseeable future.
• Claims for indemnification by directors and officers may reduce available funds.
• Product safety and quality concerns could negatively affect business.
• Inability to protect information systems against service interruption, data misappropriation, or security breaches.
• Changes in regulatory standards could adversely affect business.
• Employment litigation and unfavorable publicity could negatively affect future business.
• Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations.
• Currently pending, threatened, or future litigation or governmental proceedings could result in material adverse consequences.
• Future acquisitions and investments could impact business and financial condition.
• Ongoing geopolitical tensions around the world may have a material adverse effect on business, financial condition, and results of operations.

Future Outlook

The company plans to continue expanding its product offerings with a diverse range of maca-based products, including new functional food and beverage items. Geographic expansion is targeted within Asia (China, Southeast Asia) and potentially North America and Europe, supported by market research, localized marketing, and strategic partnerships. Efforts will focus on enhancing brand awareness through digital marketing, social media influencers, and sport champion collaborations, alongside strengthening distribution channels via e-commerce and retail partnerships. The company expects to incur additional losses due to sales and marketing expenses and public company operating costs, and anticipates needing additional capital to fund planned operations beyond the next twelve months.

Management Comments

• Optimistic in ability to achieve sales growth and enhance enterprise value through a comprehensive digital marketing strategy for maca products.
• Believe the company is fully capable of sustaining going concern condition for relevant operations and expansion with mitigation plans including recent capital raises and signed sales contracts.

Industry Context

CIMG Inc.'s strategic pivot from specialty coffee to maca-infused products aligns with the significant growth in the global natural and plant-based dietary supplements market. This shift positions the company to capitalize on increasing consumer awareness of health and wellness, particularly the rising demand for maca products in the wellness, beauty, and fitness industries. The global maca market is projected to exceed $106 million by 2037, with a compound annual growth rate (CAGR) exceeding 4.2% from 2025 to 2037. The company aims to differentiate itself through premium product quality, sustainability, fair trade practices, and innovative product offerings, competing with established brands like Maca Team, Maca-Root, Navitas Organics, Sunfood Superfoods, Sambazon, and FGO.

Comparison to Industry Standards

• The global maca market is projected to grow at a CAGR exceeding 4.2% from 2025 to 2037, with a predicted value exceeding $106 million by 2037. CIMG's entry into this market positions it within a growing segment.
• Competitors in the Asian maca product market include: Maca Team (known for organic maca powder, capsules, energy drinks from Peru), Maca-Root (emphasizes energy and stamina, strong customer base in Japan and China), Navitas Organics (leading organic superfoods brand with maca powder in Japan, South Korea, Southeast Asia), Sunfood Superfoods (specializes in high-quality, raw maca products in South Korea and Singapore), Sambazon (integrates maca into energy drinks with acai and green tea, available in Japan and Hong Kong), and FGO (premium organic maca powder in Japan, Hong Kong, Taiwan, targeting fitness and wellness consumers). CIMG aims to compete by focusing on premium quality, sustainability, and digital marketing.

Management Changes

Corporate Governance

Legal Proceedings

• Steeped Litigation: A complaint filed on January 27, 2023, alleging breach of a 2021 settlement agreement related to trademark infringement. Settled on January 16, 2024, with the company paying $500,000. Case dismissed on April 18, 2024.
• Curtin Litigation: A complaint filed on January 6, 2023, by a former employee alleging harassment, gender discrimination, retaliation, and wrongful termination. Compelled to arbitration on December 22, 2023. Settled on November 8, 2024, with the company paying $125,000. Case dismissed on December 6, 2024.
• Kim Litigation: A complaint filed on October 3, 2024, by Mr. Sooncha Kim alleging breach of a Convertible Note and Warrant Purchase Agreement, seeking specific performance and $1,041,216 in monetary damages. Company filed its answer on December 3, 2024. Mr. Kim's motion for preliminary injunction was denied on February 13, 2025. Discovery is ongoing.
• Ex-Directors Lawsuit: A complaint filed on March 10, 2025, by former directors seeking over $200,000 for unpaid directors' fees and expenses. Company's answer was due April 16, 2025, but a request for entry of default was filed on April 17, 2025. Negotiations are ongoing.

Related Party Transactions

• Mr. Sooncha Kim purchased 24,286 shares of Common Stock for approximately $697,000 in an underwritten public offering on August 10, 2022, pre-approved by the Board.
• Mr. Sooncha Kim purchased 46,800 shares of Common Stock and warrants for an aggregate of approximately $130,000 in a private placement in November 2023, pre-approved by the Board.
• The owner of METAVERSE INTELLIGENCE TECH LTD, a subsidiary director, paid an administrative fee of $7,500 on behalf of CIMG INC. as of September 30, 2024.
• During FY2024, relevant trading volume generated by CIMG Inc. with related parties was $326,721.
• During FY2023, NuZee KOREA Ltd. sold $648 worth of coffee products to Mystery Golf Ltd., a company owned by NuZee KOREA Ltd.'s chief executive officer.

Stakeholder Impact

• Shareholders: Face significant dilution from multiple capital raises, substantial risk of delisting from Nasdaq, and potential loss of investment due to continued net losses and accumulated deficit.
• Employees: Potential job insecurity due to ongoing financial challenges and business restructuring, though the company states relationships are good.
• Customers: Potential impact on product availability and service if financial instability or supply chain issues escalate, though the company is expanding distribution for new products.
• Creditors: Risk exposure due to the company's history of losses and need for additional financing, potentially impacting ability to service debt.
• Suppliers/Partners: Risk of disrupted relationships or delayed payments if the company's financial condition deteriorates further, though new distribution contracts indicate ongoing partnerships.

Next Steps

• File the Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as soon as possible, and in any event before July 7, 2025.
• Appeal Nasdaq's delist determination and request a hearing before a Nasdaq Hearings Panel by July 7, 2025, to present a plan for regaining compliance.
• Regain compliance with Nasdaq's minimum bid price requirement ($1.00 per share) by July 14, 2025, by having the closing bid price close at or above $1.00 for a minimum of 10 consecutive business days.
• File the Quarterly Report on Form 10-Q for the period ended December 31, 2024, on or before July 14, 2025.
• Continue to optimize office space and facilities to meet future needs.
• Expand product offerings to include new maca-based functional food and beverage items.
• Increase global presence, particularly in Asia (China, Southeast Asia) and explore opportunities in North America and Europe.
• Significantly increase marketing efforts through digital initiatives, social media influencers, and sport champion partnerships.
• Strengthen and diversify distribution channels, including e-commerce platforms and partnerships with retailers and international distributors.
• Continue to improve operational, financial, and management controls, as well as reporting systems and procedures.

Key Dates

Recommendation

CIMG Inc. is in a critical state, facing imminent delisting from Nasdaq due to multiple compliance failures, including a prolonged inability to meet minimum bid price requirements and severe delays in filing mandatory financial reports. The company has a history of substantial net losses and a significant accumulated deficit, raising serious going concern doubts. While the strategic pivot to maca products and recent capital raises provide some liquidity, the fundamental financial health remains weak, and the regulatory risks are paramount. The high uncertainty surrounding its continued listing on a major exchange, coupled with ongoing losses and legal proceedings, makes the stock a high-risk investment with a strong likelihood of further value erosion.

Keywords

Maca products, Functional beverages, Health supplements, Digital marketing, E-commerce, Distribution network, China market, Nasdaq listing, SEC filing, 10-K, Corporate governance, Financial performance, Risk factors, Capital raise, Delisting, Cybersecurity, PRC regulations, Consumer goods