4. NOTES TO THE CONSOLIDATED IN FINANCIAL STATEMENTS

4.1 ACCOUNTS RECEIVABLE, NET

As of March 31,2026, the Company had gross accounts receivable of $1,387,947 ,net of an allowance for credit losses of $82.

As of September 30,2025, the Company’s accounts receivable totaled $55,258, net of an allowance for credit losses of $2,107.

SCHEDULE OF ACCOUNTS RECEIVABLES 

The movements in the allowance for credit losses are as follows:

SCHEDULE OF MOVEMENTS IN ALLOWANCE FOR CREDIT LOSSES

4.2 INVENTORIES, NET

Inventories, net consisted of the following:

SCHEDULE OF INVENTORY

The movements in the inventories write-down were as follows:

SCHEDULE OF MOVEMENTS IN INVENTORIES

4.3 PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of March 31,2026 and September 30, 2025 were comprised of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

4.4 PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of March 31, 2026 and September 30, 2025:

SCHEDULE OF PROPERTY AND EQUIPMENT

4.5 LEASES

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities for most lease arrangements. The Company adopted ASC 842 effective October 1, 2019.

The Company evaluates lease arrangements on a quarterly basis to determine whether such arrangements meet the definition of a lease and whether recognition of ROU assets and lease liabilities is required. The Company elected the short-term lease practical expedient for leases with a term of 12 months or less and no purchase option.

4.5.1 LEASES WITH RECOGNIZED ROU ASSETS AND LEASE LIABILITIES

Tuen Mun, Hong Kong – Office Space

The Company leases office space on San On Street, Tuen Mun, Hong Kong, under a lease term from December 18, 2024 to December 17, 2026, at a monthly rent of RMB 4,167 (approximately $603). As this lease represents a continuation and renewal of an existing lease and the combined non-cancellable term exceeds 12 months, the Company recognized right-of-use asset and lease liabilities for the lease as a single arrangement.

Wuxi, China – Office Space

Effective March 19, 2025, the Company entered into a lease for office space located at 83-102 and 83-103, Xishuidongcheng, Liangxi District, Wuxi, China. The lease requires annual rental payments of RMB 100,000 (approximately $14,466) and expires on March 18, 2027. Because the lease term exceeds 12 months, the Company recognized a right-of-use asset and corresponding lease liabilities related to this lease as of March 31, 2026.

4.5.2 SHORT TERM LEASES AND LOW VALUE LEASES

Boca Raton, Florida – Office Space

Effective October 10, 2025, the Company entered into a lease for office space located at 9127 Long Lake Palm Drive, Boca Raton, Florida 33496, with monthly rental payments of $2,500 through October 11, 2026. Because the lease term is 12 months or less, the Company elected the short-term lease practical expedient and, accordingly, did not recognize a right-of-use asset or lease liability related to this lease.

Henan, China – Office Space

The Company leases office space in Henan, China, with annual lease payments of approximately RMB 98,280 (approximately $14,217), payable in monthly installments of RMB 8,190 (approximately $1,185). The lease expires on August 14, 2026. Because the remaining lease term as of March 31, 2026 was less than 12 months, the Company elected the short-term lease practical expedient and did not recognize a right-of-use asset or lease liability related to this lease.

Henan, China – Warehouse Space

The Company leases warehouse space in Henan, China, with annual lease payments of approximately RMB 24,000 (approximately $3,472), payable in quarterly installments of RMB 6,000 (approximately $868). The lease expires on February 9, 2027.

Foshan, China – Office Space

The Company leases office space located at Room 904 (No.946), Building 3, No. 17 Jihua 6th Road, Zumiao Street, Chancheng District, Foshan, with a contractual lease term from January 20, 2026 to March 31, 2028, which includes a rent-free period from January 20, 2026 to January 31, 2026. The monthly rent is RMB 500 (approximately $72.33). As of June 30, 2026, the Company will not renew the lease upon expiration. Due to the low value of the underlying asset, the Company elected the low-value asset lease practical expedient and did not recognize a right-of-use asset or lease liability related to this lease. For six months ended March 31, 2026, the operating expenses recognized for the period amount to RMB 1,500 (approximately $217).

The Company leases office space located at Room 904 (No.947), Building 3, No. 17 Jihua 6th Road, Zumiao Street, Chancheng District, Foshan, with a contractual lease term from January 20, 2026 to March 31, 2028, which includes a rent-free period from January 20, 2026 to January 31, 2026. The monthly rent is RMB 500 (approximately $72.33). As of June 30, 2026, the Company will not renew the lease upon expiration. Due to the low value of the underlying asset, the Company elected the low-value asset lease practical expedient and did not recognize a right-of-use asset or lease liability related to this lease. For six months ended March 31, 2026, the operating expenses recognized for the period amount to RMB 1,500 (approximately $217).

As of March 31,2026, the Company’s operating leases had a weighted-average remaining lease term of one year and a weighted-average discount rate of 3%. Other information related to the Company’s operating leases is as follows:

SCHEDULE OF OTHER INFORMATION RELATED TO OPERATING LEASE

The following table summarizes the Company’s operating lease cost, short-term lease cost, and related cash flow information for the six months ended March 31,2026:

SCHEDULE OF CASH AND NON-CASH ACTIVITIES OF LEASES

4.6 INTANGIBLE ASSETS, NET

The following table summarizes the Company’s intangible assets as of March 31, 2026:

SCHEDULE OF INTANGIBLE ASSETS

The following table summarizes the Company’s intangible assets as of September 30, 2025:

The trademarks have been fully amortized using the accelerated amortization method as of September 30, 2025. Amortization expense for intangible assets with finite useful lives was $2,267 and $15,000 for the six months ended March 31, 2026 and 2025, respectively.

4.7 DIGITAL ASSETS

The Company’s digital assets consist solely of Bitcoin. Digital assets are measured at fair value, with changes in fair value recognized in earnings for each reporting period. As of March 31, 2026, the Company held 730 bitcoins, with a total value of $49,847,670.

The following table is a summary of the Company’s Bitcoin activities as of March 31, 2026:

SCHEDULE OF BITCOIN ACTIVITY

4.8 ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of March 31, 2026 and September 30, 2025 were as follows:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable

As of March 31, 2026, accounts payable totaled $1,770,730, comprising $353,256 of legacy payables incurred under previous management and $1,417,474 of payables arising from procurement activities.

Accrued expenses

As of March 31, 2026, accrued expenses totaled $1,141,143, primarily comprising accrued expenses related to Nuzee single-serving coffee and DRIPKIT products of $756,620 and employee compensation payable of $384,523.

The accrued expenses related to Nuzee single-serving coffee and DRIPKIT products primarily represent legacy expenses incurred under previous management and are treated in a manner consistent with other legacy accounts payable balances. These amounts continue to be recognized as accrued expenses as management is in the process of reviewing and resolving the related obligations in the ordinary course of business, and such balances remained payable as of March 31, 2026.

4.9 CONVERTIBLE NOTES

As of March 31, 2026 and September 30, 2025, the Company had outstanding unconverted convertible notes of approximately $1,614,729 and $1,838,041, respectively.

For the six months ended March 31,2026, $1,838,041 worth of convertible notes were converted into share of the Company’s Common Stock.

(a) Non-related party convertible notes

SCHEDULE OF CONVERTIBLE NOTES

All non-related party convertible notes outstanding as of March 31,2026 were fully converted into shares of the Company’s Common Stock on October 31, 2025.

(b) Related party convertible notes

SCHEDULE OF CONVERTIBLE NOTES

Key issuance and conversion events

August 20, 2024: The Company issued convertible notes with an aggregate principal amount of $1,300,000, of which $1,000,000 was subscribed by non-related parties and $300,000 by a related party. As of September 30, 2024, the Company recorded a fair value adjustment of $82,844 related to these notes.

October 31, 2024: All holders of the August 2024 convertible notes elected to convert their notes into an aggregate of 1,396,813 shares of Common Stock. The shares were registered pursuant to the Company’s Form S-1 filed on November 29, 2024.

December 12, 2024: The Company issued convertible notes with an aggregate principal amount of $10,000,000, of which $8,145,000 was subscribed by non-related parties and $1,855,000 by a related party.

February 11, 2025: The Company obtained shareholder approval for the issuance of shares underlying the notes and warrants.

March 18, 2025: the investors submitted their respective conversion notices, upon which the Company issued 19,457,618 shares of Common Stock to the investors.

August 21, 2025: The Company entered into a convertible bond purchase agreement with certain non-U.S. investors to issue convertible notes with an aggregate principal amount of $4,000,000, at a conversion price of $0.24 per share, subject to adjustment in accordance with the Notes.

During the year ended September 30, 2025, the non-related parties notes with a carrying value of $1,999,962 were converted into 8,333,333 shares of Common Stock.

October 30, 2025: The remaining related party notes of 8,333,333 shares were issued on October 31, 2025.

February 11, 2026: The Company entered into a convertible note and warrant purchase agreement with certain non-U.S. investors providing for the private placement of convertible promissory notes in the aggregate principal amount of $5,000,000 and warrants to purchase the Company’s shares of Common Stock in reliance on the registration exemptions of Regulation S. The Notes were issuable in two tranches, consisting of (i) an initial tranche in the aggregate principal amount of $1,600,000 and (ii) a second tranche in the aggregate principal amount of $3,400,000. The Notes bear interest at an annual rate of 7% and have a maturity date of August 12, 2027. On February 13, 2026, the Company completed the initial closing and issued Notes in the aggregate principal amount of $1,600,000 to these investors.

On March 21, 2026, in light of the Company’s delisting from The Nasdaq Stock Market LLC on March 6, 2026 and its current quotation on the OTC market, the Company entered into an Amended and Restated Convertible Note and Warrant Purchase Agreement with the investors, which amended and restated the February 11, 2026 purchase agreement. The parties acknowledged that only one closing occurred under the original agreement, namely the initial closing on February 13, 2026, and that no other closings shall occur. In connection with the amendment, the Company issued amendments to the original notes and amended and restated warrants to the investors. The amended notes provide that they are not convertible prior to stockholder approval and that the conversion price is subject to a floor price of $0.10 per share. The amended and restated warrants become exercisable only upon stockholder approval and may be exercised for cash only at an exercise price of $0.015 per share. The Company also agreed to file a registration statement on Form S-1 covering the resale of the shares issuable upon conversion of the amended notes and exercise of the amended and restated warrants.

The convertible notes were measured at fair value, with changes in fair value recognized in fair value variation in the consolidated statements of operations.

4.10 OTHER CURRENT LIABILITIES

As of March 31, 2026 and September 30, 2025, other current liabilities amounted to $3,108,336 and $22,250,590, respectively.

Other current liabilities consisted of the following:

SCHEDULE OF OTHER CURRENT LIABILITIES

Advance receipts for equity subscriptions are as follows: $129,662.80 for a share subscription by Mr. Sooncha Kim, $29,994.20 for a share subscription by Mr. Kenji Hashimoto.

The provision for liabilities related to directors’ litigation of $222,062 represents management’s estimate of costs associated with ongoing legal proceedings involving certain directors as of March 31, 2026.

The professional service fees payable of $2,089,798 relate to a financial advisory services agreement executed on July 1, 2025, between the Company and Sunflower Tech Limited, in connection with a Bitcoin-related asset transaction with a total transaction value of $55.0 million. Under the agreement, the advisory fee is calculated at 10% of the transaction value, amounting to $5.5 million. As of March 31, 2026 and September 30, 2025, the remaining payable balances of the Company were $2,089,798 and $3,663,269 respectively.

4.11 TAX PAYABLE

As of March 31, 2026 and September 30, 2025, taxes payable amounted to $2,432,118 and $1,314,686, respectively.

SCHEDULE OF TAX PAYABLE

4.12 OPERATING EXPENSES

For the six months ended March 31, 2026, the operating expenses were $3,417,780. This mainly included personnel costs of $1,347,033, sales and marketing expenses of $88,303, depreciation and amortization of $22,920, professional fees (including legal, audit, and consulting services) of $1,766,863, travel expenses of $85,586, office expenses of $71,794, bad debt loss of 1,891 and other operating expenses of $33,390.

For the six months ended March 31, 2025, the operating expenses were $2,270,435. This mainly includes personnel costs of $712,008, sales and marketing expenses of $46,152, depreciation and amortization of $100,924, professional services such as lawyers, auditors and consultants of $1,248,215, travel expenses of $72,947, office expenses of $52,480 and other expenses of $37,710.

4.13 OTHER INCOME

For the six months ended March 31, 2026, other income was $77,046, mainly derived from other business revenues.

For the six months ended March 31, 2025, the other income was $403,635. It is mainly because of the settlement and forgiveness of account payable.

4.14 OTHER EXPENSES

For the six months ended March 31, 2026, other expense was $7,323, primarily attributable to the cost expenditures corresponding to other income and other factors.

For the six months ended March 31, 2025, other expense totaled $50,320, primarily included financing expense and other factors.

4.15 INCOME TAX

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. No asset or liability for unrecognized tax benefits was recorded as of March 31, 2026 or September 30, 2025.

United States

CIMG Inc. and Wewin are incorporated in the United States and are subject to U.S. federal corporate income tax at a statutory rate of 21%. For the six months ended March 31, 2026, these entities did not generate taxable income; accordingly, no provision for U.S. federal income tax was recorded.

Hong Kong

DZR Tech Limited is incorporated in Hong Kong and is subject to Hong Kong Profits Tax under the two-tiered profits tax rates regime, whereby the first HK$2 million of assessable profits are taxed at 8.25%, and profits in excess of HK$2 million are taxed at 16.5%. DZR Tech Limited did not generate taxable income for the six months ended March 31,2026, and therefore no provision for Hong Kong profits tax was recorded.

People’s Republic of China

Beijing Zhongyan, Henan Zhongyan, Nuanyou, Beijing Xinmiao, Zhimeng, Zhutai, Shanghai Huomao, Beijing Xilin, Foshan Lintai and Foshan Dingyue are incorporated in the People’s Republic of China and are subject to enterprise income tax at a statutory rate of 25%. For small and low-profit enterprises, taxable income is calculated at a reduced rate of 25%, and the corporate income tax policy is paid at a rate of 20%. All entities did not generate taxable income for the six months ended March 31, 2026, accordingly, no provision for PRC enterprise income tax was recognized.

Schedule of Income Tax Expense (Benefit)

SCHEDULE OF INCOME TAX EXPENSE BENEFIT